
[Federal Register Volume 78, Number 244 (Thursday, December 19, 2013)]
[Notices]
[Pages 76867-76880]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-30179]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71076; File No. SR-NYSEArca-2013-116]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to Listing and Trading of Shares of 
AdvisorShares International Gold ETF; AdvisorShares Gartman Gold/Yen 
ETF; AdvisorShares Gartman Gold/British Pound ETF; and AdvisorShares 
Gartman Gold/Euro ETF Under NYSE Arca Equities Rule 8.600

December 13, 2013
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on November 29, 2013, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade shares of the following 
under NYSE Arca Equities Rule 8.600 (``Managed Fund Shares''): 
AdvisorShares International Gold ETF; AdvisorShares Gartman Gold/Yen 
ETF; AdvisorShares Gartman Gold/British Pound ETF; and AdvisorShares 
Gartman Gold/Euro ETF. The text of the proposed rule change is 
available on the Exchange's Web site at www.nyse.com, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade shares (the ``Shares'') of 
the following under NYSE Arca Equities Rule 8.600, which governs the 
listing and trading of Managed Fund Shares \4\:

[[Page 76868]]

AdvisorShares International Gold ETF (``International Gold ETF'') ; 
AdvisorShares Gartman Gold/Yen ETF (``Gold/Yen ETF''); AdvisorShares 
Gartman Gold/British Pound ETF (``Gold/British Pound ETF''); and 
AdvisorShares Gartman Gold/Euro ETF (``Gold/Euro ETF'') (collectively, 
the ``Funds''). The Gold/Yen ETF, Gold/British Pound ETF and Gold/Euro 
ETF are also referred to collectively herein as the ``Gartman Funds''.
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    \4\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1) (the ``1940 Act'') organized 
as an open-end investment company or similar entity that invests in 
a portfolio of securities selected by its investment adviser 
consistent with its investment objectives and policies. In contrast, 
an open-end investment company that issues Investment Company Units, 
listed and traded on the Exchange under NYSE Arca Equities Rule 
5.2(j)(3), seeks to provide investment results that correspond 
generally to the price and yield performance of a specific foreign 
or domestic stock index, fixed income securities index or 
combination thereof.
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    The Shares will be offered by AdvisorShares Trust (the ``Trust''), 
\5\ a statutory trust organized under the laws of the State of Delaware 
and registered with the Commission as an open-end management investment 
company.\6\ The investment adviser to the Funds will be AdvisorShares 
Investments, LLC (the ``Adviser''). Treesdale Partners, LLC (``Sub-
Adviser'') will be the Funds' sub-adviser. Foreside Fund Services, LLC 
(the ``Distributor'') will be the principal underwriter and distributor 
of the Funds' Shares. The Bank of New York Mellon (the 
``Administrator'') will serve as the administrator, custodian, transfer 
agent and fund accounting agent for the Funds.
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    \5\ The Trust is registered under the 1940 Act. On March 29, 
2013, the Trust filed with the Commission an amendment to its 
registration statement on Form N-1A under the Securities Act of 1933 
(15 U.S.C. 77a) (``Securities Act''), and under the 1940 Act 
relating to the Funds (File Nos. 333- and 811-) (``Registration 
Statement''). The description of the operation of the Trust and the 
Funds herein is based, in part, on the Registration Statement. In 
addition, the Commission has issued an order granting certain 
exemptive relief to the Trust under the 1940 Act. See Investment 
Company Act Release No. 29291 (May 28, 2010) (File No. 812-13677) 
(``Exemptive Order'').
    \6\ The Commission has approved listing and trading on the 
Exchange of a number of actively managed funds under Rule 8.600. 
See, e.g., Securities Exchange Act Release Nos. 63076 (October 12, 
2010), 75 FR 63874 (October 18, 2010) (SR-NYSEArca-2010-79) (order 
approving Exchange listing and trading of Cambria Global Tactical 
ETF); 63802 (January 31, 2011), 76 FR 6503 (February 4, 2011) (SR-
NYSEArca-2010-118) (order approving Exchange listing and trading of 
the SiM Dynamic Allocation Diversified Income ETF and SiM Dynamic 
Allocation Growth Income ETF); and 65468 (October 3, 2011), 76 FR 
62873 (October 11, 2011) (SR-NYSEArca-2011-51) (order approving 
Exchange listing and trading of TrimTabs Float Shrink ETF).
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    Commentary .06 to Rule 8.600 provides that, if the investment 
adviser to the investment company issuing Managed Fund Shares is 
affiliated with a broker-dealer, such investment adviser shall erect a 
``fire wall'' between the investment adviser and the broker-dealer with 
respect to access to information concerning the composition and/or 
changes to such investment company portfolio. In addition, Commentary 
.06 further requires that personnel who make decisions on the open-end 
fund's portfolio composition must be subject to procedures designed to 
prevent the use and dissemination of material nonpublic information 
regarding the open-end fund's portfolio.\7\ Commentary .06 to Rule 
8.600 is similar to Commentary .03(a)(i) and (iii) to NYSE Arca 
Equities Rule 5.2(j)(3); however, Commentary .06 in connection with the 
establishment of a ``fire wall'' between the investment adviser and the 
broker-dealer reflects the applicable open-end fund's portfolio, not an 
underlying benchmark index, as is the case with index-based funds. 
Neither the Adviser nor the Sub-Adviser is a broker-dealer or 
affiliated with a broker-dealer.
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    \7\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser and Sub-Adviser and their related 
personnel will be subject to the provisions of Rule 204A-1 under the 
Advisers Act relating to codes of ethics. This Rule requires 
investment advisers to adopt a code of ethics that reflects the 
fiduciary nature of the relationship to clients as well as 
compliance with other applicable securities laws. Accordingly, 
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with 
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under 
the Advisers Act makes it unlawful for an investment adviser to 
provide investment advice to clients unless such investment adviser 
has (i) adopted and implemented written policies and procedures 
reasonably designed to prevent violations, by the investment adviser 
and its supervised persons, of the Advisers Act and the Commission 
rules adopted thereunder; (ii) implemented, at a minimum, an annual 
review regarding the adequacy of the policies and procedures 
established pursuant to subparagraph (i) above and the effectiveness 
of their implementation; and (iii) designated an individual (who is 
a supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above.
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    In the event (a) the Adviser or Sub-Adviser becomes a registered 
broker-dealer or becomes newly affiliated with a broker-dealer, or (b) 
any new adviser or sub-adviser is a registered broker-dealer, or 
becomes affiliated with a broker-dealer, it will implement a fire wall 
with respect to its relevant personnel or its broker-dealer affiliate 
regarding access to information concerning the composition and/or 
changes to a portfolio, and will be subject to procedures designed to 
prevent the use and dissemination of material non-public information 
regarding such portfolio.
AdvisorShares International Gold ETF
Principal Investments
    According to the Registration Statement, the International Gold ETF 
will be considered a ``fund of funds'' that, under normal 
circumstances,\8\ will seek to achieve its investment objective by 
primarily taking long positions in other exchange-traded funds 
(``ETFs'') that offer diversified exposure to the international gold 
market.\9\ The Sub-Adviser will seek, as appropriate, to maintain a 
balanced allocation of the International Gold ETF's assets in ETFs in 
which it invests, which ETFs may be both affiliated and unaffiliated. 
The affiliated ETFs are the Gartman Funds. In addition, the Fund may 
seek to invest in long positions in exchange-traded notes (``ETNs''), 
\10\ closed-end funds \11\ and other exchange-traded products 
(``ETPs'', and, collectively with ETFs, ETNs and closed-end funds, 
``Underlying ETPs'') \12\ that offer diversified exposure to the 
international gold market. Under normal circumstances, the Fund will 
invest at least 80% of its total assets in such Underlying ETPs.
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    \8\ The term ``under normal circumstances'' includes, but is not 
limited to, the absence of adverse market, economic, political or 
other conditions, including extreme volatility or trading halts in 
the equities markets or the financial markets generally; operational 
issues causing dissemination of inaccurate market information; or 
force majeure type events such as systems failure, natural or man-
made disaster, act of God, armed conflict, act of terrorism, riot or 
labor disruption or any similar intervening circumstance.
    \9\ For purposes of this filing, ETFs include Investment Company 
Units (as described in NYSE Arca Equities Rule 5.2(j)(3)); Portfolio 
Depository Receipts (as described in NYSE Arca Equities Rule 8.100); 
and Managed Fund Shares (as described in NYSE Arca Equities Rule 
8.600). The ETFs in which a Fund will invest all will be listed and 
traded on national securities exchanges. The Funds will invest in 
the securities of ETFs registered under the 1940 Act consistent with 
the requirements of Section 12(d)(1) of the 1940 Act, or any rule, 
regulation or order of the Commission or interpretation thereof. The 
Funds will only make such investments in conformity with the 
requirements of Regulation M of the Internal Revenue Code of 1986, 
as amended (the ``Internal Revenue Code'').
    \10\ ETNs are securities listed and traded on the Exchange under 
NYSE Arca Equities Rule 5.2(j)(6) (``Index-Linked Securities''). 
ETNs are senior, unsecured unsubordinated debt securities issued by 
an underwriting bank that are designed to provide returns that are 
linked to a particular benchmark less investor fees. ETNs have a 
maturity date and, generally, are backed only by the 
creditworthiness of the issuer.
    \11\ A closed-end fund is a pooled investment vehicle that is 
registered under the 1940 Act and whose shares are listed and traded 
on U.S. national securities exchanges.
    \12\ For purposes of this filing, Underlying ETPs include Trust 
Issued Receipts (as described in NYSE Arca Equities Rule 8.200); 
Commodity-Based Trust Shares (as described in NYSE Arca Equities 
Rule 8.201); Currency Trust Shares (as described in NYSE Arca 
Equities Rule 8.202); Commodity Index Trust Shares (as described in 
NYSE Arca Equities Rule 8.203); and Trust Units (as described in 
NYSE Arca Equities Rule 8.500).
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    The Sub-Adviser's gold investment strategy will be an active 
investment strategy that expresses a long position in gold but 
diversifies the currencies in which the purchase is financed. The 
International Gold ETF will seek to

[[Page 76869]]

provide an accessible method by which an investor is able to express a 
view on the value of gold versus any one of a number of liquid 
currencies, including the U.S. dollar, the Japanese Yen, the European 
Euro, and the British Pound.
    The Sub-Adviser, in determining the International Gold ETF's 
investment allocation, will follow a proprietary investment process to 
assess the relative value of gold versus each of the currencies 
represented in the Underlying ETPs. In general, if the Sub-Adviser 
determines that the price of gold versus a particular currency offers 
an expected return that exceeds that offered by gold versus other 
currencies, the Underlying ETP that offers that exposure, all things 
being equal, will receive a larger allocation of the International Gold 
ETF's assets for investment. While the Sub-Adviser will actively 
determine the allocation of the International Gold ETF's investments 
among Underlying ETPs, the value of these investments may change on any 
day due to market fluctuations, thus altering such allocation.
    The Sub-Adviser will also consider the relative price volatility of 
gold versus each of the currencies represented within an Underlying ETP 
in making allocation decisions. In general, the higher the volatility 
of the price of gold versus a particular currency (defined as the 
standard deviation of historical daily returns), the lower the 
allocation of capital to that Underlying ETP.
    In managing the International Gold ETF, the Sub-Adviser will 
consider the asset size of the International Gold ETF, as well as 
liquidity conditions in both the Gartman Funds and Underlying ETP 
markets, in an effort to ensure best execution and minimize potential 
market disruption.
AdvisorShares Gartman Gold/Yen ETF
Principal Investments
    According to the Registration Statement, the Gold/Yen ETF will seek 
to provide positive returns by utilizing the Japanese Yen to invest its 
assets in the gold market. In seeking to achieve the Gold/Yen ETF's 
investment objective, the Sub-Adviser will invest the Gold/Yen ETF's 
assets in instruments that provide exposure to the international gold 
market utilizing the Japanese Yen. This strategy will provide an 
investment vehicle for investors who believe that the value of the 
Gold/Yen ETF's investments in gold purchased in Japanese Yen will 
appreciate. Accordingly, in managing the Gold/Yen ETF, the Sub-Adviser 
will use the Japanese Yen, obtained synthetically through the sale of 
either exchange-traded currency futures or ``over-the-counter'' 
(``OTC'') foreign exchange forward contracts, as the currency in which 
purchases of gold are made. This ``Gold Financed in Yen'' investment 
strategy will enable the Sub-Adviser to provide an alternate gold 
investment vehicle that seeks to reduce U.S. dollar exposure.
    The Gold/Yen ETF will seek to achieve its investment objective by 
investing directly (and not through the Gold/Yen ETF Subsidiary, as 
described below), under normal circumstances, at least 75% of its 
assets in cash and cash equivalents, plus ``currency-linked 
derivatives'' (consisting of exchange-traded Japanese Yen futures 
traded on the Chicago Mercantile Exchange (``CME''), Japanese Yen 
forward contracts, and currency (and not gold) swaps), with cash and 
cash equivalents comprising the majority of the Gold/Yen ETF's assets. 
Up to 25% of the Gold/Yen ETF's total assets will be invested in the 
Gold/Yen ETF Subsidiary, as described below. The distribution of the 
Gold/Yen ETF's investments in these currency-linked derivatives will be 
at the discretion of the Fund's Sub-Adviser. All of the Gold/Yen ETF's 
investments in these currency-linked derivatives will be backed by 
collateral of the Fund's assets, as required, and will be diversified 
across multiple (generally more than 5) counterparties. In addition, 
these currency-linked derivatives will be subject to the limits on 
leverage imposed by the 1940 Act. Through its investment in a wholly-
owned and controlled subsidiary organized outside the United States in 
the Cayman Islands (the ``Gold/Yen ETF Subsidiary''), the Gold/Yen ETF 
will obtain long exposure to the international gold market. Section 
18(f) of the 1940 Act and related Commission guidance limit the amount 
of leverage an investment company, and, in this case, the Gold/Yen ETF 
Subsidiary, can obtain.
    The Gold/Yen ETF may also invest in Underlying ETPs. The Sub-
Adviser will rebalance its positions in the Gold/Yen ETF and in the 
Gold/Yen ETF Subsidiary periodically as the value of gold relative to 
the value of the Japanese Yen fluctuates in international markets.
    The Gold/Yen ETF may invest directly and indirectly in foreign 
currencies. The Gold/Yen ETF may conduct foreign currency transactions 
on a spot (i.e., cash) or forward basis (i.e., by entering into forward 
contracts to purchase or sell foreign currencies). Currency 
transactions made on a spot basis are for cash at the spot rate 
prevailing in the currency exchange market for buying or selling 
currency. Forward contracts are customized transactions that require a 
specific amount of a currency to be delivered at a specific exchange 
rate on a specific date or range of dates in the future and can have 
substantial price volatility. Forward contracts are generally traded in 
an interbank market directly between currency traders (usually large 
commercial banks) and their customers.
    The Gold/Yen ETF, and certain Underlying ETPs in which the Gold/Yen 
ETF invests, may enter into swap agreements, including, but not limited 
to, total return swaps and index swaps. The Gold/Yen ETF may utilize 
swap agreements in an attempt to gain exposure to the asset in a market 
without actually purchasing the asset, or to hedge a position. Any 
swaps used will be cash collateralized as required.\13\
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    \13\ Each of the Gartman Funds will utilize cleared swaps if 
available, to the extent practicable and not enter into any swap 
agreement unless the Adviser believes that the other party to the 
transaction is creditworthy. The Sub-Adviser will evaluate the 
creditworthiness of counterparties on an ongoing basis. In addition 
to information provided by credit agencies, the Sub-Adviser's credit 
analysts will evaluate each approved counterparty using various 
methods of analysis, including company visits, earnings updates, the 
broker-dealer's reputation, past experience with the broker-dealer, 
market levels for the counterparty's debt and equity, the 
counterparty's liquidity and its share of market participation.
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    On a daily basis, the Sub-Adviser will evaluate the gold market to 
determine whether the exchange-traded markets or the OTC markets 
provide the Gold/Yen ETF with optimal investment opportunities. As part 
of its daily evaluation, the Sub-Adviser will utilize information from 
The Gartman Letter, a daily commentary on the global capital markets, 
including political, economic, and technical trends from both long-term 
and short-term perspectives.\14\ The Sub-Adviser will carefully 
consider the liquidity of the investment, the cost of executing the 
purchase or sale, and the

[[Page 76870]]

creditworthiness of the counterparty. Similarly, the Sub-Adviser will 
evaluate the market for the Japanese Yen to achieve the optimal 
duration at which to finance gold purchases for the Gold/Yen ETF. The 
Sub-Adviser will not participate in transactions in Japanese Yen where 
the maximum duration exceeds ninety days.
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    \14\ The Adviser has contracted with Gartman Capital Management, 
L.C. to provide the investment objectives of the Gartman Funds, to 
provide data to the Adviser and to permit the use of the Gartman 
name. Gartman Capital Management, L.C. is an affiliate of The 
Gartman Letter. The Gartman Letter is written by Dennis Gartman. For 
the services and license provided to the Gartman Funds, the Adviser 
will pay Gartman Capital Management, L.C. a fee from its legitimate 
profits and resources. Gartman Capital Management, L.C. and The 
Gartman Letter, L.C. will have no involvement in the day-to-day 
management of the Gartman Funds Gartman Capital Management, LC is 
neither a broker-dealer nor affiliated with a broker-dealer. In the 
event Gartman Capital Management, LC becomes a broker-dealer, or 
becomes newly affiliated with a broker-dealer, it will implement a 
fire wall with respect to such broker-dealer regarding access to 
information concerning the composition and/or changes to the 
applicable portfolio, and will be subject to procedures designed to 
prevent the use and dissemination of material non-public information 
regarding such portfolio.
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    In managing the Gold/Yen ETF, the Sub-Adviser will consider the 
asset size of the Gold/Yen ETF, as well as liquidity conditions in both 
the gold and currency markets, in an effort to ensure best execution 
and minimize potential market disruption.
    As discussed above, the Sub-Adviser will seek to gain additional 
exposure to gold through its investment in the Gold/Yen ETF Subsidiary. 
The Gold/Yen ETF's investment in the Gold/Yen ETF Subsidiary may not 
exceed 25% of the Gold/Yen ETF's total assets at each quarter end of 
the Gold/Yen ETF's fiscal year. The purpose of the Gold/Yen ETF's 
investment in the Gold/Yen ETF Subsidiary will be to provide the Gold/
Yen ETF with additional exposure to commodity returns within the limits 
of the federal tax requirements applicable to investment companies, 
such as the Gold/Yen ETF. The Gold/Yen ETF Subsidiary's investments in 
``commodity-linked derivative instruments'' (i.e., futures, forwards 
and swaps based on the price of gold) will be subject to limits on 
leverage imposed by the 1940 Act. Section 18(f) of the 1940 Act and 
related Commission guidance limit the amount of leverage an investment 
company, and in this case the Gold/Yen ETF Subsidiary, can obtain. 
Except as noted, references to the investment strategies and risks of 
the Gold/Yen ETF include the investment strategies and risks of the 
Gold/Yen ETF Subsidiary. The Gold/Yen ETF Subsidiary's shares will only 
be offered to the Gold/Yen ETF and the Gold/Yen ETF will not sell any 
shares of the Gold/Yen ETF Subsidiary to any other investors.
AdvisorShares Gartman Gold/British Pound ETF
Principal Investments
    According to the Registration Statement, the Gold/British Pound ETF 
will seek to provide positive returns by utilizing the British Pound 
(GBP) to invest its assets in the gold market. In seeking to achieve 
the Gold/British Pound ETF's investment objective, the Sub-Adviser will 
invest the Gold/British Pound ETF's assets in instruments that provide 
exposure to the international gold market utilizing the British Pound. 
This strategy will provide an investment vehicle for investors who 
believe that the value of the Gold/British Pound ETF's investments in 
gold purchased in British Pounds will appreciate. Accordingly, in 
managing the Gold/British Pound ETF, the Sub-Adviser will use the 
British Pound, obtained synthetically through the sale of either 
exchange-traded currency futures or OTC foreign exchange forward 
contracts, as the currency in which purchases of gold are made. This 
``Gold Financed in British Pounds'' investment strategy will enable the 
Sub-Adviser to provide an alternate gold investment vehicle that seeks 
to reduce U.S. dollar exposure.
    The Gold/British Pound ETF will seek to achieve its investment 
objective by investing directly (and not through the Gold/British Pound 
Subsidiary, as described below), under normal circumstances, at least 
75% of its assets in cash and cash equivalents, plus currency-linked 
derivatives (consisting of exchange-traded British Pound futures 
principally traded on the CME, British Pound forward contracts, and 
currency (and not gold) swaps), with cash and cash equivalents 
comprising the majority of the Gold/British Pound ETF's assets. Up to 
25% of the Gold/British Pound ETF's total assets will be invested in 
the Gold/British Pound ETF Subsidiary, as described below. The 
distribution of the Gold/British Pound ETF's investments in these 
currency-linked derivatives will be at the discretion of the Fund's 
Sub-Adviser. All of the Gold/British Pound ETF's investments in these 
currency-linked derivatives will be backed by collateral of the Fund's 
assets, as required, and will be diversified across multiple (generally 
more than 5) counterparties. In addition, these currency-linked 
derivatives will be subject to the limits on leverage imposed by the 
1940 Act. Through its investment in a wholly owned and controlled 
subsidiary organized outside the United States in the Cayman Islands 
(the ``Gold/British Pound ETF Subsidiary'') the Gold/British Pound ETF 
will obtain long exposure to the international gold market. Section 
18(f) of the 1940 Act and related Commission guidance limit the amount 
of leverage an investment company, and in this case, the Gold/British 
Pound ETF Subsidiary, can obtain.
    The Gold/British Pound ETF may also invest in Underlying ETPs. The 
Sub-Adviser will rebalance its positions in the Gold/British Pound ETF 
and in the Gold/British Pound ETF Subsidiary periodically as the value 
of gold relative to the value of the British Pound fluctuates in 
international markets.
    The Gold/British Pound ETF may invest directly, or indirectly, in 
foreign currencies. The Gold/British Pound ETF may conduct foreign 
currency transactions on a spot (i.e., cash) or forward basis (i.e., by 
entering into forward contracts to purchase or sell foreign 
currencies). Currency transactions made on a spot basis are for cash at 
the spot rate prevailing in the currency exchange market for buying or 
selling currency. Forward contracts are customized transactions that 
require a specific amount of a currency to be delivered at a specific 
exchange rate on a specific date or range of dates in the future and 
can have substantial price volatility. Forward contracts are generally 
traded in an interbank market directly between currency traders 
(usually large commercial banks) and their customers.
    The Gold/British Pound ETF, and certain Underlying ETPs in which 
the Gold/British Pound ETF invests, may enter into swap agreements, 
including, but not limited to, total return and index swaps. The Gold/
British Pound ETF may utilize swap agreements in an attempt to gain 
exposure to an asset in a market without actually purchasing the asset, 
or to hedge a position.\15\ Any swaps used will be cash collateralized 
as required.
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    \15\ See note 13, supra.
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    On a daily basis, the Sub-Adviser will evaluate the gold market to 
determine whether the exchange-traded markets or the OTC markets 
provide the Gold/British Pound ETF with optimal investment 
opportunities. As part of its daily evaluation, the Sub-Adviser will 
utilize information from The Gartman Letter, as referenced above. The 
Sub-Adviser will carefully consider the liquidity of the investment, 
the cost of executing the purchase or sale and the creditworthiness of 
the counterparty. Similarly, the Sub-Adviser will evaluate the market 
for the British Pound to achieve the optimal duration at which to 
finance gold purchases for the Gold/British Pound ETF. The Sub-Adviser 
will not participate in transactions in the British Pound where the 
maximum duration exceeds ninety days.
    In managing the Gold/British Pound ETF, the Sub-Adviser will 
consider the asset size of the Gold/British Pound ETF, as well as 
liquidity conditions in both the gold and currency markets, in an 
effort to ensure best execution and minimize potential market 
disruption.
    As discussed above, the Sub-Adviser will seek to gain additional 
exposure to gold through its investment in the Gold/British Pound ETF 
Subsidiary. The Gold/British Pound ETF's investment in

[[Page 76871]]

the Gold/British Pound ETF's Subsidiary may not exceed 25% of the Gold/
British Pound ETF's total assets at each quarter end of the Gold/
British Pound ETF's fiscal year. The purpose of the Gold/British Pound 
ETF's investment in the Gold/British Pound ETF Subsidiary will be to 
provide the Gold/British Pound ETF with additional exposure to 
commodity returns within the limits of the federal tax requirements 
applicable to investment companies, such as the Gold/British Pound ETF. 
The Gold/British Pound ETF Subsidiary's investments in commodity-linked 
derivative instruments (i.e., futures, forwards and swaps based on the 
price of gold) will be subject to limits on leverage imposed by the 
1940 Act. Section 18(f) of the 1940 Act and related Commission guidance 
limit the amount of leverage an investment company, and in this case 
the Gold/British Pound ETF Subsidiary, can obtain. Except as noted, 
references to the investment strategies and risks of the Gold/British 
Pound ETF include the investment strategies and risks of the Gold/
British Pound Subsidiary. The Gold/British Pound ETF Subsidiary's 
shares will only be offered to the Gold/British Pound ETF and the Gold/
British Pound ETF will not sell any shares of the Gold/British Pound 
Subsidiary to any other investors.
AdvisorShares Gartman Gold/Euro ETF
Principal Investments
    According to the Registration Statement, the Gold/Euro ETF will 
seek to provide positive returns by utilizing the European Union's Euro 
to invest its assets in the gold market. In seeking to achieve the 
Gold/Euro ETF's investment objective, the Sub-Adviser will invest the 
Gold/Euro ETF's assets in instruments that provide exposure to the 
international gold market utilizing the Euro. This strategy provides an 
investment vehicle for investors who believe that the value of the 
Gold/Euro ETF's investments in gold purchased in Euros will appreciate.
    Accordingly, in managing the Gold/Euro ETF, the Sub-Adviser will 
use the Euro, obtained synthetically through the sale of either 
exchange-traded currency futures or OTC foreign exchange forward 
contracts, as the currency in which purchases of gold are made. This 
``Gold Financed in Euro'' investment strategy will enable the Sub-
Adviser to provide an alternate gold investment vehicle that will seek 
to reduce U.S. dollar exposure.
    The Gold/Euro ETF will seek to achieve its investment objective by 
investing directly (and not through the Gold/Euro ETF Subsidiary, as 
described below), under normal circumstances, at least 75% of its 
assets in cash and cash equivalents, plus currency-linked derivatives 
(consisting of exchange-traded Euro futures traded on the CME, Euro 
forward contracts, and currency (and not gold) swaps), with cash and 
cash equivalents comprising the majority of the Gold/Euro ETF's assets. 
Up to 25% of the Gold/Euro ETF's assets will be invested in the Gold/
Euro ETF Subsidiary, as described below. The distribution of the Gold/
Euro ETF's investments in these currency-linked derivatives will be at 
the discretion of the Fund's Sub-Adviser. All of the Gold/Euro ETF's 
investments in these currency-linked derivatives will be backed by 
collateral of the Fund's assets, as required, and will be diversified 
across multiple (generally more than 5) counterparties. In addition, 
these currency-linked derivatives will be subject to the limits on 
leverage imposed by the 1940 Act. Through its investment in a wholly 
owned and controlled subsidiary organized outside the United States in 
the Cayman Islands (the ``Gold/Euro ETF Subsidiary''), the Gold/Euro 
ETF will obtain long exposure to the international gold market. The 
Gold/Euro ETF may also invest in Underlying ETPs. The Sub-Adviser will 
rebalance its positions in the Gold/Euro ETF and in the Gold/Euro ETF 
Subsidiary periodically as the value of gold relative to the value of 
the Euro fluctuates in international markets.
    The Gold/Euro ETF may invest directly and indirectly in foreign 
currencies. The Gold/Euro ETF may conduct foreign currency transactions 
on a spot (i.e., cash) or forward basis (i.e., by entering into forward 
contracts to purchase or sell foreign currencies). Currency 
transactions made on a spot basis are for cash at the spot rate 
prevailing in the currency exchange market for buying or selling 
currency. Forward contracts are customized transactions that require a 
specific amount of a currency to be delivered at a specific exchange 
rate on a specific date or range of dates in the future and can have 
substantial price volatility. Forward contracts are generally traded in 
an interbank market directly between currency traders (usually large 
commercial banks) and their customers.
    The Gold/Euro ETF, and certain Underlying ETPs in which the Gold/
Euro ETF invests, may enter into swap agreements, including, but not 
limited to, total return swaps and index swaps. The Gold/Euro ETF may 
utilize swap agreements in an attempt to gain exposure to an asset in a 
market without actually purchasing the asset, or to hedge a 
position.\16\ Any swaps used will be cash collateralized as required.
---------------------------------------------------------------------------

    \16\ See note 13, supra.
---------------------------------------------------------------------------

    On a daily basis, the Sub-Adviser will evaluate the gold market to 
determine whether the exchange-traded markets or the OTC markets 
provide the Gold/Euro ETF with optimal investment opportunities. As 
part of its daily evaluation, the Sub-Adviser will utilize information 
from The Gartman Letter, as referenced above. The Sub-Adviser will 
carefully consider the liquidity of the investment, the cost of 
executing the purchase or sale and the creditworthiness of the 
counterparty. Similarly, the Sub-Adviser will evaluate the market for 
Euros to achieve the optimal duration at which to finance gold 
purchases for the Gold/Euro ETF. The Sub-Adviser will not participate 
in transactions in the Euro where the maximum duration exceeds ninety 
days.
    In managing the Gold/Euro ETF, the Sub-Adviser will consider the 
asset size of the Gold/Euro ETF, as well as liquidity conditions in 
both the gold and currency markets, in an effort to ensure best 
execution and minimize potential market disruption.
    As discussed above, the Sub-Adviser seeks to gain additional 
exposure to gold through its investment in the Gold/Euro ETF 
Subsidiary. The Gold/Euro ETF's investment in the Gold/Euro ETF 
Subsidiary may not exceed 25% of the Gold/Euro ETF's total assets at 
each quarter end of the Gold/Euro ETF's fiscal year. The purpose of the 
Gold/Euro ETF's investment in the Gold/Euro ETF's Subsidiary will be to 
provide the Gold/Euro ETF with additional exposure to commodity returns 
within the limits of the federal tax requirements applicable to 
investment companies, such as the Gold/Euro ETF. The Gold/Euro ETF's 
Subsidiary's investments in commodity-linked derivative instruments 
(i.e., futures, forwards and swaps based on the price of gold) will be 
subject to limits on leverage imposed by the 1940 Act. Section 18(f) of 
the 1940 Act and related Commission guidance limit the amount of 
leverage an investment company, and in this case the Gold/Euro ETF 
Subsidiary, can obtain. Except as noted, references to the investment 
strategies and risks of the Gold/Euro ETF include the investment 
strategies and risks of the Gold/Euro ETF's Subsidiary. The Gold/Euro 
ETF Subsidiary's shares will only be offered to the Gold/Euro ETF and 
the Gold/Euro ETF will not sell any shares of the Gold/Euro Subsidiary 
to any other investors.

[[Page 76872]]

Other Investments
    In the absence of normal circumstances \17\, a Fund may have 
temporary defensive positions to respond to adverse market, economic, 
political or other conditions. A Fund may invest 100% of its total 
assets, without limitation, either directly or indirectly through 
Underlying ETPs, in debt securities and money market instruments, 
shares of other mutual funds, commercial paper, certificates of 
deposit, bankers' acceptances, U.S. government securities, repurchase 
agreements or bonds that are rated BBB or higher by Standard & Poor's 
Ratings Group (``S&P''). A Fund may be invested in this manner for 
extended periods, depending on the Sub-Adviser's assessment of market 
conditions.
---------------------------------------------------------------------------

    \17\ See note 8, supra.
---------------------------------------------------------------------------

    While each Fund's principal investments, under normal 
circumstances, will be as described above, a Fund may invest up to 20% 
of its assets in other investments, as described below.
    The International Gold ETF may invest directly and indirectly in 
foreign currencies. The International Gold ETF may invest in foreign 
currency transactions on a spot (i.e., cash) or forward basis (i.e., by 
entering into forward contracts to purchase or sell foreign 
currencies). Currency transactions made on a spot basis are for cash at 
the spot rate prevailing in the currency exchange market for buying or 
selling currency. Forward contracts are customized transactions that 
require a specific amount of a currency to be delivered at a specific 
exchange rate on a specific date or range of dates in the future and 
can have substantial price volatility. Forward contracts are generally 
traded in an interbank market directly between currency traders 
(usually large commercial banks) and their customers.
    The International Gold ETF, and certain Underlying ETPs in which 
the International Gold ETF invests, may enter into swap agreements, 
including, but not limited to, total return and index swaps, which will 
be expected to only be tied to the price of gold. The International 
Gold ETF may utilize swap agreements in an attempt to gain exposure to 
an asset in a market without actually purchasing the asset (in this 
case, gold), or to hedge a position.\18\ The International Gold Fund 
will utilize cleared swaps if available, to the extent practicable, and 
will not enter into any swap agreement unless the Adviser believes that 
the other party to the transaction is creditworthy.\19\ Any swaps used 
will be cash collateralized as required.
---------------------------------------------------------------------------

    \18\ See note 13, supra.
    \19\ See note 13, supra.
---------------------------------------------------------------------------

    The International Gold ETF may also invest a proportion of its 
assets in Underlying ETPs that do not offer diversified exposure to the 
international gold market.
    Periodically, with respect to the International Gold ETF, the Sub-
Adviser may decide to purchase downside market protection to hedge 
against the risk of a large downward movement in the price of gold, 
based on a proprietary assessment of the expected return from holding 
gold over a time horizon of generally no more than ninety days. The 
Sub-Adviser may implement this portion of its investment strategy by 
employing a number of option-based strategies using U.S. listed equity 
options with maturities of no more than 90 days. The Sub-Adviser may 
pay a premium to buy a put option tied to the price of gold, which 
should rise in value when the price of gold declines, thus protecting 
the value of the International Gold ETF in the event of a large 
downward movement in the price of gold. The Sub-Adviser also may employ 
a strategy of buying a put option tied to the price of gold and 
simultaneously selling a call option tied to the price of gold, known 
as a ``collar'' hedging strategy. Both options should increase in value 
as the price of gold declines, while the combination of the put and 
call options is intended to reduce the premium cost of the hedge 
transaction. However, writing gold options may limit the potential 
profit the International Gold ETF would earn if the price of gold 
rises. Regardless of the option-based strategy employed, the Sub-
Adviser will not utilize any strategy in which the value of the options 
sold exceeds the value of the International Gold ETF's portfolio 
investments, thereby limiting potential losses. The Sub-Adviser will 
utilize this option strategy only as a means to hedge its long position 
in gold.
    The Gold/British Pound ETF, Gold/Yen ETF, and Gold/Euro ETF may 
invest in ETFs that are primarily index-based ETFs that hold 
substantially all of their assets in securities representing a specific 
index. The Gold/British Pound ETF, Gold/Yen ETF, and Gold/Euro ETF also 
may invest in ETFs that are actively managed and may invest in closed-
end funds.
    While the Funds do not anticipate doing so, they may borrow money 
for investment purposes, a form of leverage. A Fund may also borrow 
money to facilitate management of a Fund's portfolio by enabling a Fund 
to meet redemption requests when the liquidation of portfolio 
instruments would be inconvenient or disadvantageous. Such borrowing 
will not be for investment purposes, will be repaid by a Fund promptly, 
and will be consistent with the requirements of the 1940 Act and the 
rules thereunder.
    At the discretion of the Adviser, the Funds may, but are not 
obligated to, enter into forward currency exchange contracts for 
hedging purposes to help reduce the risks and volatility caused by 
changes in foreign currency exchange rates.
    While the Funds do not expect to engage in currency hedging, they 
may (and certain of the Underlying ETPs in which the Funds invest may) 
use currency transactions in order to hedge the value of portfolio 
holdings denominated in particular currencies against fluctuations in 
relative value, including forward currency contracts, exchange-listed 
currency futures and currency options, exchange-listed and OTC options 
\20\ on currencies and currency swaps, and options on currency futures. 
The Funds may use futures contracts and related options for bona fide 
hedging; attempting to offset changes in the value of securities held 
or expected to be acquired or be disposed of; or other risk management 
purposes.\21\
---------------------------------------------------------------------------

    \20\ The Funds may trade put and call options on securities, 
securities indices and currencies, as the Sub-Adviser determines is 
appropriate in seeking a Fund's investment objective, and except as 
restricted by a Fund's investment limitations. A Fund may buy or 
sell no more than 10% of its net assets in put and call options on 
foreign currencies either on exchanges or in the OTC market. A put 
option on a foreign currency gives the purchaser of the option the 
right to sell a foreign currency at the exercise price until the 
option expires. A call option on a foreign currency gives the 
purchaser of the option the right to purchase the currency at the 
exercise price until the option expires.
    \21\ According to the Registration Statement, to the extent a 
Fund invests in futures, options on futures or other instruments 
subject to regulation by the Commodity Futures Trading Commission 
(``CFTC''), it will do so in compliance with CFTC regulations in 
effect from time to time and in accordance with such Fund's 
policies. To comply with recent changes to the CFTC regulations 
pertaining to registered investment companies that invest in 
derivatives regulated by the CFTC, such as futures contracts, the 
Funds expect to register with the CFTC as commodity pools and the 
Adviser expects to register with the CFTC as a commodity pool 
operator (``CPO'') prior to the Funds' commencement of operations. 
By registering with the CFTC, the Funds and the Adviser will be 
subject to regulation by the CFTC and the National Futures 
Association (``NFA''). The recent changes to CFTC regulations went 
into effect on December 31, 2012, but because the CFTC has not yet 
adopted regulations intended to ``harmonize'' the CFTC's regulation 
of newly registered investment companies with that of the 
Commission, the impact of registration on the Funds' operations is 
not yet known. Once the compliance obligations of the Funds under 
the CFTC's regulatory scheme are finalized, the Funds may consider 
modifying their principal investment strategies and structure by 
reducing substantially their investment in or exposure to derivative 
instruments subject to regulation by the CFTC in order to qualify 
for the exemption from CFTC regulation provided by CFTC Regulation 
4.5. Alternatively, the Funds may determine to continue to be 
subject to CFTC regulation and comply with all applicable 
requirements, including registration and disclosure requirements 
governing commodity pools under the Commodity Exchange Act 
(``CEA''). Compliance with the CFTC's additional regulatory 
requirements may increase a Fund's operating expenses.

---------------------------------------------------------------------------

[[Page 76873]]

    A Fund's or an Underlying ETP's dealings in forward currency 
contracts and other currency transactions such as futures, options on 
futures, options on currencies and swaps will be limited to hedging 
involving either specific transactions (``Transaction Hedging'' \22\) 
or portfolio positions (``Position Hedging'').\23\
---------------------------------------------------------------------------

    \22\ According to the Registration Statement, Transaction 
Hedging is entering into a currency transaction with respect to 
specific assets or liabilities of a Fund, or certain Underlying ETPs 
in which a Fund invests, which will generally arise in connection 
with the purchase or sale of its portfolio securities or the receipt 
of income therefrom. A Fund, or certain Underlying ETPs in which a 
Fund invests, may enter into Transaction Hedging out of a desire to 
preserve the U.S. dollar price of a security when it enters into a 
contract for the purchase or sale of a security denominated in a 
foreign currency.
    \23\ According to the Registration Statement, Position Hedging 
is entering into a currency transaction with respect to portfolio 
security positions denominated or generally quoted in that currency. 
A Fund, or certain Underlying ETPs in which a Fund invests, may use 
Position Hedging when the Adviser believes that the currency of a 
particular foreign country may suffer a substantial decline against 
the U.S. dollar. A Fund, or certain Underlying ETPs in which a Fund 
invests, may enter into a forward foreign currency contract to sell, 
for a fixed amount of dollars, the amount of foreign currency 
approximating the value of some or all of its portfolio securities 
denominated in such foreign currency. A Fund, or certain Underlying 
ETPs in which a Fund invests, will not enter into a transaction to 
hedge currency exposure to an extent greater, after netting all 
transactions intended wholly or partially to offset other 
transactions, than the aggregate market value (at the time of 
entering into the transaction) of the securities held in its 
portfolio that are denominated or generally quoted in or currently 
convertible into such currency, other than with respect to proxy 
hedging as described below.
---------------------------------------------------------------------------

    The Funds, or certain Underlying ETPs in which the Funds invest, 
may also cross-hedge currencies by entering into transactions to 
purchase or sell one or more currencies that are expected to decline in 
value relative to other currencies to which the Funds, or certain 
Underlying ETPs in which the Funds invest, have or in which the Funds, 
or certain Underlying ETPs in which the Funds invest, expect to have 
portfolio exposure.
    To reduce the effect of currency fluctuations on the value of 
existing or anticipated holdings of portfolio securities, a Fund, or 
certain of the Underlying ETPs in which a Fund invests, may also engage 
in proxy hedging. Proxy hedging is often used when the currency to 
which the portfolio of a Fund, or of an Underlying ETP in which a Fund 
invests, is exposed is difficult to hedge or to hedge against the 
dollar. Proxy hedging entails entering into a forward contract to sell 
a currency whose changes in value are generally considered to be linked 
to a currency or currencies in which some or all of a Fund's portfolio 
securities, or the portfolio securities of an Underlying ETP in which a 
Fund invests, are or are expected to be denominated, and to buy U.S. 
dollars. The amount of the contract would not exceed the value of a 
Fund's securities, or the securities and financial instruments held by 
the Underlying ETPs in which a Fund invests.
    The Funds currently do not intend to enter into forward currency 
contracts with a term of more than one year, or to engage in Position 
Hedging with respect to the currency of a particular country to more 
than the aggregate market value (at the time the hedging transaction is 
entered into) of its portfolio securities denominated in (or quoted in 
or currently convertible into or directly related through the use of 
forward currency contracts in conjunction with money market instruments 
to) that particular currency.
    The Funds may invest in performance indexed paper (``PIPs\SM\''). 
PIPs is U.S. dollar-denominated commercial paper the yield of which is 
linked to certain foreign exchange rate movements. The yield to the 
investor on PIPs is established at maturity as a function of spot 
exchange rates between the U.S. dollar and a designated currency as of 
or about that time (generally, the index maturity two days prior to 
maturity). The yield to the investor will be within a range stipulated 
at the time of purchase of the obligation, generally with a guaranteed 
minimum rate of return that is below, and a potential maximum rate of 
return that is above, market yields on U.S. dollar-denominated 
commercial paper, with both the minimum and maximum rates of return on 
the investment corresponding to the minimum and maximum values of the 
spot exchange rate two business days prior to maturity.
    The Funds, and certain Underlying ETPs in which the Funds invest, 
may invest in commercial paper. Commercial paper is a short-term 
obligation with a maturity ranging from one to 270 days issued by 
banks, corporations and other borrowers. Such investments are unsecured 
and usually discounted. To the extent a Fund invests in commercial 
paper, a Fund will seek to invest in commercial paper rated A-1 or A-2 
by S&P or Prime-1 or Prime-2 by Moody's Investors Service, Inc. 
(``Moody's'').
    The Funds, and certain of the Underlying ETPs in which the Funds 
invest, may invest in fixed income securities, as described below.
    The Funds, and certain Underlying ETPs in which the Funds invest, 
may seek to invest in debt securities, which are securities consisting 
of a certificate or other evidence of a debt (secured or unsecured) on 
which the issuing company or governmental body promises to pay the 
holder thereof a fixed, variable, or floating rate of interest for a 
specified length of time, and to repay the debt on the specified 
maturity date, as discussed above. Some debt securities, such as zero 
coupon bonds, do not make regular interest payments but are issued at a 
discount to their principal or maturity value. Debt securities include 
a variety of fixed income obligations, including, but not limited to, 
corporate debt securities, government securities, municipal securities, 
convertible securities, and mortgage-backed securities. Debt securities 
include investment-grade securities, non-investment-grade securities, 
and unrated securities.
    The Funds may invest in U.S. government securities. Securities 
issued or guaranteed by the U.S. government or its agencies or 
instrumentalities include U.S. Treasury securities, which are backed by 
the full faith and credit of the U.S. Treasury and which differ only in 
their interest rates, maturities, and times of issuance. U.S. Treasury 
bills have initial maturities of one year or less; U.S. Treasury notes 
have initial maturities of one to ten years; and U.S. Treasury bonds 
generally have initial maturities of greater than ten years.\24\
---------------------------------------------------------------------------

    \24\ Certain U.S. government securities are issued or guaranteed 
by agencies or instrumentalities of the U.S. government including, 
but not limited to, obligations of U.S. government agencies or 
instrumentalities such as the Federal National Mortgage Association 
(``Fannie Mae''), the Federal Home Loan Mortgage Corporation 
(``Freddie Mac''), the Government National Mortgage Association 
(``Ginnie Mae''), the Small Business Administration, the Federal 
Farm Credit Administration, the Federal Home Loan Banks, Banks for 
Cooperatives (including the Central Bank for Cooperatives), the 
Federal Land Banks, the Federal Intermediate Credit Banks, the 
Tennessee Valley Authority, the Export-Import Bank of the United 
States, the Commodity Credit Corporation, the Federal Financing 
Bank, the National Credit Union Administration and the Federal 
Agricultural Mortgage Corporation (``Farmer Mac'').
---------------------------------------------------------------------------

    The Funds, and certain Underlying ETPs in which the Funds invest, 
may invest in U.S. Treasury zero-coupon bonds. These securities are 
U.S. Treasury bonds which have been stripped of their unmatured 
interest

[[Page 76874]]

coupons, the coupons themselves, and receipts or certificates 
representing interests in such stripped debt obligations and coupons. 
Interest is not paid in cash during the term of these securities, but 
is accrued and paid at maturity.
    The Funds may invest in all grades of corporate debt securities 
including non-investment grade securities, as described below.
    The Funds, and certain Underlying ETPs in which the Funds invest, 
to the extent a Fund invests in non-investment grade debt securities, 
will seek to invest no more than 10% of a Fund's net assets in such 
debt securities. Non-investment-grade debt securities, also referred to 
as ``high yield securities'' or ``junk bonds,'' are debt securities 
that are rated lower than the four highest rating categories by a 
nationally recognized statistical rating organization (for example, 
lower than Baa3 by Moody's or lower than BBB by S&P or are determined 
to be of comparable quality by a Fund's Sub-Adviser.
    The Funds, and certain Underlying ETPs in which the Funds invest, 
may seek to invest in unrated debt securities. The creditworthiness of 
the issuer, as well as any financial institution or other party 
responsible for payments on the security, will be analyzed to determine 
whether to purchase unrated bonds.
    The Funds, and certain Underlying ETPs in which the Funds invest, 
will seek to invest no more than 10% of their net assets in asset-
backed and mortgaged-backed securities.
    The Funds, and certain of the Underlying ETPs in which the Funds 
invest, may invest in U.S. equity securities, including common stock, 
preferred stock, warrants, convertible securities, master limited 
partnerships and rights traded in the U.S. or on other registered 
exchanges.
    Each Fund may invest in issuers located outside the United States 
directly, or in financial instruments or Underlying ETPs that are 
indirectly linked to the performance of foreign issuers. Such financial 
instruments may be one of the following: American Depositary Receipts 
(``ADRs''), Global Depositary Receipts (``GDRs''), European Depositary 
Receipts (``EDRs''), International Depository Receipts (``IDRs''), 
``ordinary shares,'' and ``New York shares'' issued and traded in the 
U.S (collectively, ``Equity Financial Instruments'').\25\
---------------------------------------------------------------------------

    \25\ ADRs are U.S. dollar denominated receipts typically issued 
by U.S. banks and trust companies that evidence ownership of 
underlying securities issued by a foreign issuer. The underlying 
securities may not necessarily be denominated in the same currency 
as the securities into which they may be converted. The underlying 
securities are held in trust by a custodian bank or similar 
financial institution in the issuer's home country. The depositary 
bank may not have physical custody of the underlying securities at 
all times and may charge fees for various services, including 
forwarding dividends and interest and corporate actions. Generally, 
ADRs in registered form are equity securities designed for use in 
domestic securities markets and are traded on exchanges or OTC in 
the U.S. GDRs, EDRs, and IDRs are similar to ADRs in that they are 
certificates evidencing ownership of shares of a foreign issuer; 
however, GDRs, EDRs, and IDRs may be issued in bearer form and 
denominated in other currencies, and are generally designed for use 
in specific or multiple securities markets outside the U.S. EDRs, 
for example, are designed for use in European securities markets 
while GDRs are designed for use throughout the world. Ordinary 
shares are shares of foreign issuers that are traded abroad and on a 
U.S. exchange. New York shares are shares that a foreign issuer has 
allocated for trading in the U.S. ADRs, ordinary shares, and New 
York shares all may be purchased with and sold for U.S. dollars. 
ADRs may be sponsored or unsponsored, but unsponsored ADRs will not 
exceed 10% of a Fund's net assets. With respect to its investments 
in equity securities (including Equity Financial Instruments), each 
Fund will invest at least 90% of its assets invested in such equity 
securities in securities that trade in markets that are members of 
the Intermarket Surveillance Group (``ISG'') or are parties to a 
comprehensive surveillance sharing agreement with the Exchange. See 
note 40, infra.
---------------------------------------------------------------------------

    A Fund, and certain Underlying ETPs in which a Fund invests, may 
invest in hybrid instruments. According to the Registration Statement, 
a hybrid instrument is a type of potentially high-risk derivative that 
combines a traditional stock, bond, or commodity with an option or 
forward contract. An example of a hybrid instrument could be a bond 
issued by an oil company that pays a small base level of interest with 
additional interest that accrues in correlation with the extent to 
which oil prices exceed a certain predetermined level. Such a hybrid 
instrument would be a combination of a bond and a call option on oil. 
Generally, the principal amount, amount payable upon maturity or 
redemption, or interest rate of a hybrid is tied (positively or 
negatively) to the price of some security, commodity, currency or 
securities index or another interest rate or some other economic factor 
(each a ``benchmark''). The interest rate or (unlike most fixed income 
securities) the principal amount payable at maturity of a hybrid 
security may be increased or decreased, depending on changes in the 
value of the benchmark.
    Each Fund may invest in structured notes, which are debt 
obligations that also contain an embedded derivative component with 
characteristics that adjust the obligation's risk/return profile. 
Generally, the performance of a structured note will track that of the 
underlying debt obligation and the derivative embedded within it. Each 
Fund has the right to receive periodic interest payments from the 
issuer of the structured notes at an agreed-upon interest rate and a 
return of the principal at the maturity date.\26\
---------------------------------------------------------------------------

    \26\ In the case of structured notes on credit default swaps, a 
Fund, or the Underlying ETP in which a Fund invests, will also be 
subject to the credit risk of the corporate credits underlying the 
credit default swaps.
---------------------------------------------------------------------------

    The Funds may invest in the securities of exchange-traded pooled 
vehicles that are not investment companies and, thus, not required to 
comply with the provisions of the 1940 Act.\27\ The International Gold 
Fund may principally invest in these securities through Underlying ETPs 
while the other Funds (Gold/British Pound ETF, Gold/Yen ETF and Gold/
Euro ETF) may, but are not expected to, invest in these securities as 
non-principal investments. As a result, as a shareholder of such pooled 
vehicles, a Fund will not have all of the investor protections afforded 
by the 1940 Act. Such pooled vehicles may, however, be required to 
comply with the provisions of other federal securities laws, such as 
the Securities Act. These pooled vehicles typically hold currency or 
commodities, such as gold or oil, or other property that is itself not 
a security.
---------------------------------------------------------------------------

    \27\ Such securities include Trust Issued Receipts (as described 
in NYSE Arca Equities Rule 8.200); Commodity-Based Trust Shares (as 
described in NYSE Arca Equities Rule 8.201); Currency Trust Shares 
(as described in NYSE Arca Equities Rule 8.202); Commodity Index 
Trust Shares (as described in NYSE Arca Equities Rule 8.203); and 
Trust Units (as described in NYSE Arca Equities Rule 8.500).
---------------------------------------------------------------------------

    The Funds, and certain Underlying ETPs in which the Funds invest, 
may invest in exchange-traded shares of real estate investment trusts 
(``REITs''). REITs are pooled investment vehicles which invest 
primarily in real estate or real estate related loans. REITs are 
generally classified as equity REITs, mortgage REITs or a combination 
of equity and mortgage REITs.
    The Funds, and certain Underlying ETPs in which the Funds invest, 
may enter into repurchase agreements with financial institutions, which 
may be deemed to be loans. The Fund will follow certain procedures 
designed to minimize the risks inherent in such agreements. These 
procedures will include effecting repurchase transactions only with 
large, well-capitalized and well-established financial institutions 
whose condition will be continually monitored by the Sub-Adviser. In 
addition, the value of the collateral underlying the repurchase 
agreement will always be at least equal to the repurchase price, 
including any accrued interest earned on the repurchase agreement.

[[Page 76875]]

    The Funds, and certain Underlying ETPs in which the Funds invest, 
may enter into reverse repurchase agreements as part of a Fund's 
investment strategy. However, the Funds do not expect to engage, under 
normal circumstances, in reverse repurchase agreements with respect to 
more than 33\1/3\% of their respective assets. Reverse repurchase 
agreements involve sales by a Fund of portfolio assets concurrently 
with an agreement by a Fund to repurchase the same assets at a later 
date at a fixed price.
    The Funds may engage in short sales transactions in which a Fund 
sells a security it does not own. To complete such a transaction, a 
Fund must borrow or otherwise obtain the security to make delivery to 
the buyer. A Fund then is obligated to replace the security borrowed by 
purchasing the security at the market price at the time of replacement.
    The Funds may enter into time deposits and Eurodollar time 
deposits. The Funds, and certain of the Underlying ETPs in which the 
Funds invest, may invest in ``Time Deposits'', and specifically 
``Eurodollar Time Deposits''. Time Deposits are non-negotiable 
deposits, such as savings accounts or certificates of deposit, held by 
a financial institution for a fixed term with the understanding that 
the depositor can withdraw its money only by giving notice to the 
institution.
    The Funds, and certain Underlying ETPs in which the Funds invest, 
from time to time, in the ordinary course of business, may purchase 
securities on a when-issued or delayed-delivery basis (i.e., delivery 
and payment can take place between a month and 120 days after the date 
of the transaction). These securities are subject to market fluctuation 
and no interest accrues to the purchaser during this period.
    The Funds may not purchase or sell commodities or commodity 
contracts unless acquired as a result of ownership of securities or 
other instruments issued by persons that purchase or sell commodities 
or commodities contracts; but this shall not prevent a Fund from 
purchasing, selling and entering into financial futures contracts 
(including futures contracts on indices of securities, interest rates 
and currencies), options on financial futures contracts (including 
futures contracts on indices of securities, interest rates and 
currencies), warrants, swaps, forward contracts, foreign currency spot 
and forward contracts or other derivative instruments that are not 
related to physical commodities.
Other Restrictions
    A Fund may not, with respect to 75% of its total assets, purchase 
securities of any issuer (except securities issued or guaranteed by the 
U.S. government, its agencies or instrumentalities or shares of 
investment companies) if, as a result, more than 5% of its total assets 
would be invested in the securities of such issuer; or (ii) acquire 
more than 10% of the outstanding voting securities of any one issuer 
(and for purposes of this policy, the issuer of the underlying security 
will be deemed to be the issuer of any respective depositary 
receipt.)\28\
---------------------------------------------------------------------------

    \28\ The diversification standard is set forth in Section 
5(b)(1) of the 1940 Act.
---------------------------------------------------------------------------

    A Fund may not invest 25% or more of its total assets in the 
securities of one or more issuers conducting their principal business 
activities in the same industry or group of industries. This limitation 
does not apply to investments in securities issued or guaranteed by the 
U.S. government, its agencies or instrumentalities, or shares of 
investment companies. A Fund will not invest 25% or more of its total 
assets in any investment company that so concentrates.\29\
---------------------------------------------------------------------------

    \29\ See Form N-1A, Item 9. The Commission has taken the 
position that a fund is concentrated if it invests more than 25% of 
the value of its total assets in any one industry. See, e.g., 
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 
54241 (November 21, 1975).
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    Each Fund may invest up to an aggregate amount of 15% of its net 
assets in illiquid securities (calculated at the time of investment), 
including Rule 144A securities deemed illiquid by the Adviser,\30\ 
consistent with Commission guidance. Each Fund will monitor its 
portfolio liquidity on an ongoing basis to determine whether, in light 
of current circumstances, an adequate level of liquidity is being 
maintained, and will consider taking appropriate steps in order to 
maintain adequate liquidity if, through a change in values, net assets, 
or other circumstances, more than 15% of a Fund's net assets are vested 
in illiquid securities. Illiquid securities include securities subject 
to contractual or other restrictions on resale and other instruments 
that lack readily available markets as determined in accordance with 
Commission staff guidance.\31\
---------------------------------------------------------------------------

    \30\ In reaching liquidity decisions, the Adviser may consider 
the following factors: The frequency of trades and quotes for the 
security; the number of dealers wishing to purchase or sell the 
security and the number of other potential purchasers; dealer 
undertakings to make a market in the security; and the nature of the 
security and the nature of the marketplace in which it trades (e.g., 
the time needed to dispose of the security, the method of soliciting 
offers and the mechanics of transfer).
    \31\ The Commission has stated that long-standing Commission 
guidelines have required open-end funds to hold no more than 15% of 
their net assets in illiquid securities and other illiquid assets. 
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 
14618 (March 18, 2008), footnote 34. See also, Investment Company 
Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 
1970) (Statement Regarding ``Restricted Securities''); Investment 
Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 
20, 1992) (Revisions of Guidelines to Form N-1A). A fund's portfolio 
security is illiquid if it cannot be disposed of in the ordinary 
course of business within seven days at approximately the value 
ascribed to it by the fund. See Investment Company Act Release No. 
14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting 
amendments to Rule 2a-7 under the 1940 Act); Investment Company Act 
Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990) 
(adopting Rule 144A under the Securities Act of 1933).
---------------------------------------------------------------------------

    According to the Registration Statement, each Fund will seek to 
qualify for treatment as a Regulated Investment Company (``RIC'') under 
the Internal Revenue Code.\32\
---------------------------------------------------------------------------

    \32\ 26 U.S.C. 851.
---------------------------------------------------------------------------

    Each Fund's investments will be consistent with its investment 
objective and will not be used to enhance leverage. While a Fund may 
invest in inverse ETFs, a Fund will not invest in leveraged (e.g., 2X, 
-2X, 3X or -3X) ETFs.
Net Asset Value
    According to the Registration Statement, each Fund will calculate 
Net Asset Value (``NAV'') by: (i) Taking the current market value of 
its total assets; (ii) subtracting any liabilities; and (iii) dividing 
that amount by the total number of Shares owned by shareholders.
    In calculating NAV, a Fund will generally value its portfolio 
investments at market prices. In computing each Fund's NAV, a Fund's 
securities holdings will be valued based on their last readily 
available market price. Price information on listed securities and 
assets, including Underlying ETPs in which a Fund invests, will be 
taken from the exchange where the security or asset is primarily 
traded. Other portfolio securities and assets for which market 
quotations are not readily available or determined to not represent the 
current fair value will be valued based on fair value as determined in 
good faith by the Funds' Sub-Adviser in accordance with procedures 
adopted by a Fund's Board and in accordance with the 1940 Act. Because 
the International Gold ETF will invest primarily in Underlying ETPs 
with readily available pricing, it is expected that there will be 
limited circumstances in which the International Gold ETF would use 
fair value pricing--for example, if the exchange on which a portfolio 
security is principally traded closed early or if trading in a 
particular security was

[[Page 76876]]

halted during the day and did not resume prior to the time a Fund 
calculated its NAV.
    Each Fund will have an approved pricing matrix at the time of 
launch. The matrix will be based on pre-determined rules for pricing 
logic (such as mean) and valuation point (such as market close). Third 
party pricing sources will be used. For assets such as options, 
futures, and swaps, in general, Bloomberg will be the primary source 
and Reuters the secondary source.
    Spot currency transactions, hybrid instruments, and non-exchange-
traded derivatives, including forwards, swaps and certain options, will 
normally be valued on the basis of quotes obtained from brokers and 
dealers or pricing services using data reflecting the earlier closing 
of the principal markets for those assets. Prices obtained from 
independent pricing services use information provided by market makers 
or estimates of market values obtained from yield data relating to 
investments or securities with similar characteristics. Exchange-traded 
options will be valued at market closing price.
    Futures and options on futures will be valued at the settlement 
price determined by the applicable exchange.
    Unsponsored ADRs will be valued on the basis of the market closing 
price on the exchange where the stock of the foreign issuer that 
underlies the ADR is listed.
    Domestic and foreign fixed income securities generally trade in the 
OTC market rather than on a securities exchange. A Fund will generally 
value these portfolio securities by relying on independent pricing 
services. A Fund's pricing services will use valuation models or matrix 
pricing to determine current value. In general, pricing services use 
information with respect to comparable bond and note transactions, 
quotations from bond dealers or by reference to other securities that 
are considered comparable in such characteristics as rating, interest 
rate, maturity date, option adjusted spread models, prepayment 
projections, interest rate spreads and yield curves. Matrix price is an 
estimated price or value for a fixed-income security. Matrix pricing is 
considered a form of fair value pricing.
    The NAV per Share of a Fund will be computed by dividing the value 
of the net assets of a Fund (i.e., the value of its total assets less 
total liabilities) by the total number of Shares of a Fund outstanding, 
rounded to the nearest cent. Expenses and fees, including without 
limitation, the management, administration and distribution fees, will 
be accrued daily and taken into account for purposes of determining NAV 
per Share. The NAV per Share for a Fund will be calculated by the 
Administrator and determined as of the close of the regular trading 
session on the New York Stock Exchange (ordinarily 4:00 p.m., Eastern 
Time) on each day that such exchange is open.
Creation and Redemption of Shares
    According to the Registration Statement, the Funds will issue and 
redeem Shares on a continuous basis at the NAV only in a large 
specified number of Shares called a ``Creation Unit''. The Shares of 
the Funds will be ``created'' at their NAV by market makers, large 
investors and institutions only in block-size Creation Units of at 
least 25,000 Shares. A ``creator'' will enter into an authorized 
participant agreement with the Distributor or use a Depository Trust 
Company participant who has executed such a participant agreement. The 
consideration for purchase of a Creation Unit of each Fund generally 
will consist of an in-kind deposit of a designated portfolio of 
securities--the ``Deposit Securities''--per each Creation Unit 
constituting a substantial replication, or a representation, of the 
securities included in a Fund's portfolio and an amount of cash--the 
``Cash Component''. Together, the Deposit Securities and the Cash 
Component constitute the ``Fund Deposit,'' which represents the minimum 
initial and subsequent investment amount for a Creation Unit of a Fund. 
The Cash Component is an amount equal to the difference between the NAV 
of the Shares of a Fund (per Creation Unit) and the market value of the 
Deposit Securities. The Administrator, through the National Securities 
Clearing Corporation (``NSCC'') will, make available on each business 
day, immediately prior to the opening of business on the Exchange 
(currently 9:30 a.m., Eastern Time), the list of the names and the 
required number of each Deposit Security to be included in the current 
Fund Deposit (based on information at the end of the previous business 
day) for each Fund. Such Fund Deposit is applicable, subject to any 
adjustments, in order to effect creations of Creation Units of a Fund 
until such time as the next-announced composition of the Deposit 
Securities is made available.
    Shares may be redeemed only in Creation Units at their NAV next 
determined after receipt of a redemption request in proper form by a 
Fund through the Administrator and only on a business day. The Trust 
will not redeem Shares of a Fund in amounts less than Creation Units. 
Unless cash redemptions are available or specified for a Fund, the 
redemption proceeds for a Creation Unit generally will consist of 
``Fund Securities''--as announced by the Administrator on the business 
day of the request for redemption received in proper form--plus cash in 
an amount equal to the difference between the NAV of the Shares of a 
Fund being redeemed, as next determined after a receipt of a request in 
proper form, and the value of the Fund Securities, less a redemption 
transaction fee. The Administrator, through the NSCC, will make 
available immediately prior to the opening of business on the Exchange 
(currently 9:30 a.m., Eastern Time) on each business day, Fund 
Securities that will be applicable to redemption requests received in 
proper form on that day.
    The Trust reserves the right to offer an ``all cash'' option for 
creations and redemptions of Creation Units for a Fund.
    According to the Registration Statement, if it is not possible to 
effect deliveries of Fund Securities, the Trust may in its discretion 
exercise its option to redeem Shares of a Fund in cash, and the 
redeeming beneficial owner will be required to receive its redemption 
proceeds in cash. In addition, an investor may request a redemption in 
cash which a Fund may, in its sole discretion, permit.\33\ In either 
case, the investor will receive a cash payment equal to the NAV of its 
Shares based on the NAV of Shares of a Fund next determined after the 
redemption request is received in proper form (minus a redemption 
transaction fee and additional charge for requested cash redemptions, 
as described in the Registration Statement). A Fund may also, in its 
sole discretion, upon request of a shareholder, provide such redeemer a 
portfolio of securities which differs from the exact composition of the 
applicable Fund Securities but does not differ in NAV. Redemptions of 
Shares for Fund Securities will be subject to compliance with 
applicable federal and state securities laws and a Fund (whether or not 
it otherwise permits cash redemptions) reserves the right to redeem 
Creation Units for cash to the extent that a Fund could not lawfully 
deliver specific Fund Securities upon redemptions or could not do so 
without first registering Fund Securities under such laws. An 
authorized participant or an investor for which it is acting subject to 
a legal restriction with respect to a

[[Page 76877]]

particular stock included in Fund Securities applicable to the 
redemption of a Creation Unit may be paid an equivalent amount of cash.
---------------------------------------------------------------------------

    \33\ The Adviser represents that, to the extent the Trust 
effects the redemption of Shares in cash, such transactions will be 
effected in the same manner for all authorized participants.
---------------------------------------------------------------------------

Availability of Information
    The Funds' Web site (www.advisorshares.com), which will be publicly 
available prior to the public offering of Shares, will include a form 
of the prospectus for the Funds that may be downloaded. The Funds' Web 
site will include additional quantitative information updated on a 
daily basis, including, for each Fund, (1) daily trading volume, the 
prior business day's reported closing price, NAV and mid-point of the 
bid/ask spread at the time of calculation of such NAV (the ``Bid/Ask 
Price''),\34\ and a calculation of the premium and discount of the Bid/
Ask Price against the NAV, and (2) data in chart format displaying the 
frequency distribution of discounts and premiums of the daily Bid/Ask 
Price against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters. On each business day, before commencement 
of trading in Shares in the Core Trading Session on the Exchange, the 
Funds' Web site will disclose the Disclosed Portfolio that will form 
the basis for each Fund's calculation of NAV at the end of the business 
day.\35\
---------------------------------------------------------------------------

    \34\ The Bid/Ask Price of Shares of each Fund will be determined 
using the mid-point of the highest bid and the lowest offer on the 
Exchange as of the time of calculation of a Fund's NAV. The records 
relating to Bid/Ask Prices will be retained by a Fund and its 
service providers.
    \35\ Under accounting procedures followed by the Funds, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Accordingly, the Funds 
will be able to disclose at the beginning of the business day the 
portfolio that will form the basis for the NAV calculation at the 
end of the business day.
---------------------------------------------------------------------------

    On a daily basis, the Funds' Web site, or, if applicable, a Fund's 
Subsidiary's Web site) [sic] will disclose for each portfolio security 
and other financial instruments (e.g., futures, forwards, swaps) of 
each Fund and each Fund's Subsidiary, the following information: Ticker 
symbol (if applicable); name and, when available, the individual 
identifier (CUSIP) of the security and/or financial instrument; number 
of shares, if applicable, and dollar value of securities and financial 
instruments held in the portfolio; and percentage weighting of the 
security and financial instrument in the portfolio. The Web site 
information will be publicly available at no charge.
    In addition, a basket composition file (i.e., the Deposit 
Securities), which includes the security names and share quantities (as 
applicable) required to be delivered in exchange for Fund Shares, 
together with estimates and actual cash components, will be publicly 
disseminated daily prior to the opening of the NYSE via the NSCC. The 
basket will represent one Creation Unit of a Fund.
    Investors will also be able to obtain the Trust's Statement of 
Additional Information (``SAI''), a Fund's Shareholder Reports, and its 
Form N-CSR and Form N-SAR, filed twice a year. The Trust's SAI and 
Shareholder Reports will be available free upon request from the Trust, 
and those documents and the Form N-CSR and Form N-SAR may be viewed on-
screen or downloaded from the Commission's Web site at www.sec.gov. 
Information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. Information 
regarding the previous day's closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers. Quotation and last sale information for the 
Shares, Underlying ETPs, REITs, certain Equity Financial Instruments, 
pooled vehicles and other U.S. exchange-traded equities, will be 
available via the Consolidated Tape Association (``CTA'') high-speed 
line, and, for the underlying securities that are U.S. exchange-listed, 
will be available from the national securities exchange on which they 
are listed. Price information relating to non-U.S. exchange-traded 
Equity Financial Instruments will be available from major market data 
vendors or the foreign exchanges on which such securities are traded. 
Price information relating to fixed income securities will be available 
from major market data vendors. Information relating to futures and 
options on futures also will be available from the exchange on which 
such instruments are traded. Information relating to exchange-traded 
options will be available via the Options Price Reporting Authority. 
Quotation information from brokers and dealers or pricing services will 
be available for spot currency transactions, hybrid instruments, and 
non-exchange-traded derivatives, including forwards, swaps and certain 
options. In addition, the Portfolio Indicative Value, as defined in 
NYSE Arca Equities Rule 8.600 (c)(3), will be widely disseminated at 
least every 15 seconds during the Core Trading Session by one or more 
major market data vendors.\36\ The dissemination of the Portfolio 
Indicative Value, together with the Disclosed Portfolio, will allow 
investors to determine the value of the underlying portfolio of each 
Fund on a daily basis and will provide a close estimate of that value 
throughout the trading day.
---------------------------------------------------------------------------

    \36\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available 
Portfolio Indicative Values taken from CTA or other data feeds.
---------------------------------------------------------------------------

    Additional information regarding the Trust and the Shares, 
including investment strategies, risks, creation and redemption 
procedures, fees, portfolio holdings disclosure policies, distributions 
and taxes is included in the Registration Statement. All terms relating 
to the Funds that are referred to, but not defined in, this proposed 
rule change are defined in the Registration Statement.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Funds.\37\ Trading in Shares of the Funds 
will be halted if the circuit breaker parameters in NYSE Arca Equities 
Rule 7.12 have been reached. Trading also may be halted because of 
market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable. These may include: (1) The 
extent to which trading is not occurring in the securities and/or the 
financial instruments comprising the Disclosed Portfolio of the Funds; 
or (2) whether other unusual conditions or circumstances detrimental to 
the maintenance of a fair and orderly market are present. Trading in 
the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), 
which sets forth circumstances under which Shares of the Funds may be 
halted.
---------------------------------------------------------------------------

    \37\ See NYSE Arca Equities Rule 7.12.
---------------------------------------------------------------------------

Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. Eastern Time in 
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late 
Trading Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. As provided in 
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price 
variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than

[[Page 76878]]

$1.00 for which the MPV for order entry is $0.0001.
    The Shares of each Fund will conform to the initial and continued 
listing criteria under NYSE Arca Equities Rule 8.600. Consistent with 
NYSE Arca Equities Rule 8.600(d)(2)(B)(ii), the Adviser will implement 
and maintain, or be subject to, procedures designed to prevent the use 
and dissemination of material non-public information regarding the 
actual components of a Fund's portfolio. The Exchange represents that, 
for initial and/or continued listing, each Fund will be in compliance 
with Rule 10A-3 \38\ under the Act, as provided by NYSE Arca Equities 
Rule 5.3. A minimum of 100,000 Shares of each Fund will be outstanding 
at the commencement of trading on the Exchange. The Exchange will 
obtain a representation from the issuer of the Shares of each Fund that 
the NAV per Share will be calculated daily and that the NAV and the 
Disclosed Portfolio as defined in NYSE Arca Equities Rule 8.600(c)(2) 
will be made available to all market participants at the same time.
---------------------------------------------------------------------------

    \38\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by the Financial 
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange, 
which are designed to detect violations of Exchange rules and 
applicable federal securities laws.\39\ The Exchange represents that 
these procedures are adequate to properly monitor Exchange trading of 
the Shares in all trading sessions and to deter and detect violations 
of Exchange rules and applicable federal securities laws.
---------------------------------------------------------------------------

    \39\ FINRA surveils trading on the Exchange pursuant to a 
regulatory services agreement. The Exchange is responsible for 
FINRA's performance under this regulatory services agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    FINRA, on behalf of the Exchange, will communicate as needed 
regarding trading in the Shares, Underlying ETPs, exchange-listed 
equity securities (including Equity Financial Instruments), futures, 
options on futures, exchange-traded options, REITs, and pooled vehicles 
with other markets and other entities that are members of the ISG, and 
FINRA, on behalf of the Exchange, may obtain trading information 
regarding trading such securities and financial instruments from such 
markets and other entities. In addition, the Exchange may obtain 
information regarding trading in the Shares, Underlying ETPs, exchange-
listed equity securities (including Equity Financial Instruments), 
futures, options on futures, exchange-traded options, REITs, and pooled 
vehicles from markets and other entities that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement.\40\
---------------------------------------------------------------------------

    \40\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio for a Fund may trade on markets that are members 
of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.
---------------------------------------------------------------------------

    With respect to its investments in exchange-listed equity 
securities (including Equity Financial Instruments), a Fund will invest 
at least 90% of its assets invested in such equity securities in 
securities that trade in markets that are members of the ISG or are 
parties to a comprehensive surveillance sharing agreement with the 
Exchange.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit Holders in an Information Bulletin (``Bulletin'') 
of the special characteristics and risks associated with trading the 
Shares. Specifically, the Bulletin will discuss the following: (1) The 
procedures for purchases and redemptions of Shares in Creation Unit 
aggregations (and that Shares are not individually redeemable); (2) 
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence 
on its Equity Trading Permit Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (3) the risks 
involved in trading the Shares during the Opening and Late Trading 
Sessions when an updated Portfolio Indicative Value will not be 
calculated or publicly disseminated; (4) how information regarding the 
Portfolio Indicative Value is disseminated; (5) the requirement that 
Equity Trading Permit Holders deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; and (6) trading information.
    In addition, the Bulletin will reference that the Funds will be 
subject to various fees and expenses described in the Registration 
Statement. The Bulletin will discuss any exemptive, no-action, and 
interpretive relief granted by the Commission from any rules under the 
Act. The Bulletin will also disclose that the NAV for the Shares will 
be calculated after 4:00 p.m. Eastern Time each trading day.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \41\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \41\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Equities Rule 
8.600. Trading in the Shares will be subject to the existing trading 
surveillances, administered by FINRA on behalf of the Exchange, which 
are designed to detect violations of Exchange rules and applicable 
federal securities laws. Neither the Adviser, the Sub-Adviser, nor the 
Gartman Capital Management, L.C. is a broker-dealer or is affiliated 
with a broker-dealer. The Exchange represents that these procedures are 
adequate to properly monitor Exchange trading of the Shares in all 
trading sessions and to deter and detect violations of Exchange rules 
and applicable federal securities laws. FINRA, on behalf of the 
Exchange, will communicate as needed regarding trading in the Shares, 
Underlying ETPs, exchange-listed equity securities (including Equity 
Financial Instruments), futures, options on futures, exchange-traded 
options, REITs, and pooled vehicles with other markets and other 
entities that are members of the ISG, and FINRA, on behalf of the 
Exchange, may obtain trading information regarding trading such 
securities and financial instruments from such markets and other 
entities. In addition, the Exchange may obtain information regarding 
trading in the Shares, Underlying ETPs, Shares, Underlying ETPs, 
exchange-listed equity securities (including Equity Financial 
Instruments), futures, options

[[Page 76879]]

on futures, exchange-traded options, REITs, and pooled vehicles from 
markets and other entities that are members of ISG or with which the 
Exchange has in place a comprehensive surveillance sharing agreement. 
With respect to its investments in exchange-listed equity securities 
(including Equity Financial Instruments), a Fund will invest at least 
90% of its assets invested in such equity securities in securities that 
trade in markets that are members of the ISG or are parties to a 
comprehensive surveillance sharing agreement with the Exchange. The 
Funds, and certain Underlying ETPs in which the Funds invest, may seek 
to invest no more than 10% of its net assets in asset-backed and 
mortgaged-backed securities. A Fund may buy or sell no more than 10% of 
its net assets in put and call options on foreign currencies either on 
exchanges or in the OTC market. The Funds will utilize cleared swaps if 
available, to the extent practicable and not enter into any swap 
agreement unless the Adviser believes that the other party to the 
transaction is creditworthy. Any swaps used will be cash collateralized 
as required. The options in which the Funds invest all will be traded 
in the U.S. on registered exchanges and OTC. The Underlying ETPs and 
futures in which the Funds invest all will be traded and listed in the 
U.S. on registered exchanges. The Funds' investment in unsponsored ADRs 
will not exceed 10% of a Fund's assets. The Funds may not purchase or 
hold illiquid securities if, in the aggregate, more than 15% of its net 
assets would be invested in illiquid securities. A Fund's investments 
in non-investment-grade securities will be limited to 10% of a Fund's 
assets. While a Fund may invest in inverse ETFs, a Fund will not invest 
in leveraged (e.g., 2X, -2X, 3X or -3X) ETFs. A Fund's investments will 
be consistent with a Fund's investment objective and will not be used 
to enhance leverage.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the issuer of the 
Shares that the NAV per Share will be calculated daily and that the NAV 
and the Disclosed Portfolio will be made available to all market 
participants at the same time. In addition, a large amount of 
information will be publicly available regarding the Funds and the 
Shares, thereby promoting market transparency. Quotation and last sale 
information for the Shares, Underlying ETPs, REITs, certain Equity 
Financial Instruments, pooled vehicles and other U.S. exchange-traded 
equities, will be available via the CTA high-speed line, and, for the 
underlying securities that are U.S. exchange-listed, will be available 
from the national securities exchange on which they are listed. 
Information relating to futures and options on futures also will be 
available from the exchange on which such instruments are traded. 
Information relating to exchange-traded options will be available via 
the Options Price Reporting Authority. Quotation information from 
brokers and dealers or pricing services will be available for spot 
currency transactions, hybrid instruments, and non-exchange-traded 
derivatives, including forwards, swaps and certain options. In 
addition, the Portfolio Indicative Value will be widely disseminated by 
the Exchange at least every 15 seconds during the Core Trading Session. 
The Funds' Web site will include a form of the prospectus for the Funds 
that may be downloaded, as well as additional quantitative information 
updated on a daily basis. On each business day, before commencement of 
trading in Shares in the Core Trading Session on the Exchange, the 
Funds' Web site will disclose the Disclosed Portfolio that will form 
the basis for each Fund's calculation of NAV at the end of the business 
day. On a daily basis, the Funds' Web site, or, if applicable, a Fund's 
Subsidiary's Web site, will disclose for each portfolio security or 
other financial instrument of each Fund the following information: 
Ticker symbol, name and, when available, the individual identifier 
(CUSIP) of the security and/or financial instrument; number of shares 
or dollar value of securities and financial instruments held in the 
portfolio; and percentage weighting of the security and/or financial 
instrument in the portfolio. Moreover, prior to the commencement of 
trading, the Exchange will inform its Equity Trading Permit Holders in 
an Information Bulletin of the special characteristics and risks 
associated with trading the Shares. Trading in Shares of the Funds will 
be halted if the circuit breaker parameters in NYSE Arca Equities Rule 
7.12 have been reached or because of market conditions or for reasons 
that, in the view of the Exchange, make trading in the Shares 
inadvisable. Trading in the Shares will be subject to NYSE Arca 
Equities Rule 8.600(d)(2)(D), which sets forth circumstances under 
which Shares of a Fund may be halted. In addition, as noted above, 
investors will have ready access to information regarding the Funds' 
holdings, the Portfolio Indicative Value, the Disclosed Portfolio, and 
quotation and last sale information for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
additional types of actively-managed exchange-traded products that will 
enhance competition among market participants, to the benefit of 
investors and the marketplace. In addition, as noted above, investors 
will have ready access to information regarding the Funds' holdings, 
the Portfolio Indicative Value, the Disclosed Portfolio, and quotation 
and last sale information for the Shares.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change will facilitate the listing and trading of 
additional types of actively-managed exchange-traded products based on 
the price of gold and non-U.S. currencies that will enhance competition 
among market participants, to the benefit of investors and the 
marketplace.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days after 
publication (i) as the Commission may designate if it finds such longer 
period to be appropriate and publishes its reasons for so finding or 
(ii) as to which the self-regulatory organization consents, the 
Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule

[[Page 76880]]

change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2013-116 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NYSEArca-2013-116. 
This file number should be included on the subject line if email is 
used. To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for Web site 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street NE., Washington, DC 20549, on official business days between the 
hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be 
available for inspection and copying at the principal office of the 
Exchange. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSEArca-2013-116 and should be submitted on or before January 9, 2014.

For the Commission, by the Division of Trading and Markets, pursuant 
to delegated authority.\42\
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    \42\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-30179 Filed 12-18-13; 8:45 am]
BILLING CODE 8011-01-P


