FWDB

AdvisorShares Madrona Global Bond ETF

Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. Returns less than one year are not annualized. For the fund’s most recent month end performance, please click www.advisorshares.com/fund/FWDB.

June 2018 Portfolio Manager Review


In June, long-term yields fell while short-term yields rose as the Federal Reserve raised rates despite inflation receding in what is known as a flattening yield curve. While this instance of flattening may not indicate impending recession, it may well signal that the Fed may be raising rates in excess to the point where it may threaten economic growth. However, underlying business fundamentals such as corporate earnings and macroeconomic indicators continued to remain strong.

For the month of June, FWDB outperformed its benchmark, the Bloomberg Barclays US Aggregate Bond Index, with a return of 0.01 % in NAV while the benchmark returned -0.12%.


Source: Morningstar

Exhibit 1

FWDB provides exposure to thousands of bonds across the investable bond universe, it is important to recognize broader macroeconomic factors that affect bonds to understand the attribution behind performance.

Convertible bonds have attributes of bonds and both common shares, and in a high rate environment, convertibles can at times profit amidst uncertainty. However, this month our holdings in convertibles closed in red with CWB, 13.1% of our portfolio, returned with a -0.35% NAV return as global trade tensions continued.

Emerging markets took a hit this month, as a selloff in emerging markets was prompted by higher U.S. rates, a stronger dollar, and heightening trade tensions around the world. Our holdings in EMCB, 11.5% of the portfolio, and PCY, 2.8% of the portfolio weighed down returns on account of these macro factors.

FWDB Holdings (as of 6/30/18) Portfolio Weight June Return (NAV)
PowerShares Fundamental InvGr CorpBd ETF (NYSE ARCA: PFIG) 17.70% -0.32%
SPDR® Blmbg Barclays Convert Secs ETF (NYSE ARCA: CWB) 13.11% -0.35%
PowerShares Financial Preferred ETF (NYSE ARCA: PGF) 11.86% 0.82%
AdvisorShares Peritus High Yield ETF (NYSE ARCA: HYLD) 11.74% 0.60%
WisdomTree Emerging Markets Corp Bd ETF (NASDAQ: EMCB) 11.53% -0.24%
PowerShares Senior Loan portfolio (NASDAQ: BKLN) 7.80% 0.04%
Vanguard Mortgage-Backed Secs ETF (NASDAQ: VMBS) 6.92% 0.08%
PowerShares Variable Rate Preferred ETF (NYSE ARCA: VRP) 4.88% 0.40%
PowerShares Taxable Municipal Bond ETF (NYSE ARCA: BAB) 3.93% 0.22%
Vanguard Interm-Term Trs ETF (NASDAQ: VGIT) 2.97% 0.07%
PowerShares National AMT-Free MuniBd ETF (NASDAQ: PZA) 2.96% 0.03%
PowerShares Emerging Markets Sov Dbt ETF (NYSE ARCA: PCY) 2.83% -1.44%

Source: Morningstar

Exhibit 2

For the month of June, no trades were made to reallocate the FWDB portfolio

Looking forward, we expect the Fed to carry out its plans of gradual rate hikes. With continued strength in corporate earnings across the board, we project further appreciation in FWDB in the months to come despite risks of the Fed’s rate action running into potentially excessive territory. We do not believe the flattening yield curve of this month warrants genuine worries of impending recession, but we are also watching to see if future economic activity may be slowed as a result of rate activity. It is our intent that exposure to large segments of the investable bond universe will give suitable exposure and diversification that investors can benefit from in the months to come, and we are excited for future growth within our portfolio.                                                      

Respectfully,

The Madrona Funds Portfolio Management Team

Portfolio Manager of FWDB


April 2018 Commentary

Before investing you should carefully consider the Fund’s investment objectives, risks, charges and expenses. This and other information is in the prospectus and summary prospectus which can be obtained by visiting www.advisorshares.com. Please read the prospectus and summary prospectus carefully before you invest. Foreside Fund Services, LLC, distributor.

There is no guarantee that the Fund will achieve its investment objective. An investment in the Fund is subject to risk, including the possible loss of principal amount invested. ETNs have a maturity date and generally, are backed only by the creditworthiness of the issuer. The value of an ETN may be influenced by time to maturity, level of supply and demand for the ETN, volatility and lack of liquidity in the underlying market (e.g., the commodities market), changes in applicable interest rates, and changes in the issuer's credit rating and economic, legal, political or geographic events that affect the market. Other Fund risks include market risk, equity risk, early closing risk, liquidity risk and trading risk. The Fund will be subject to the risks associated the Underlying ETFs’ or ETP’s investments such as commodity risk, concentration risk, credit risk, fixed income risk, high yield risk, income risk, interest rate risk, and investment risk.

Shares are bought and sold at market price (closing price) not NAV and are not individually redeemed from the Fund. Market price returns are based on the midpoint of the bid/ask spread at 4:00 pm Eastern Time (when NAV is normally determined), and do not represent the return you would receive if you traded at other times. Holdings and allocations are subject to risks and to change.

The views in this commentary are those of the portfolio manager and may not reflect his views on the date this material is distributed or anytime thereafter. These views are intended to assist shareholders in understanding their investments and do not constitute investment advice.

Definitions:

Bloomberg Barclays Capital Aggregate Bond Index measures the performance of the U.S. investment grade bond market. One cannot invest directly in an index.

Yield is the income return on an investment. This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment's cost, its current market value or its face value.

30-Day SEC Yield (Standardized Yield) is an annualized yield that is calculated by dividing the investment income earned by the Fund less expenses over the most recent 30-day period by the current maximum offering price.

Subsidized Yield reflects fee waivers and/or expense reimbursements recorded by the Fund during the period. Without waivers and/or reimbursements, yields would be reduced.

Unsubsidized Yield does not adjust for any fee waivers and/or expense reimbursements in effect. If the Fund does not incur any fee waivers and/or expense reimbursements during the period, the 30-Day Subsidized Yield and 30-Day Unsubsidized Yield will be identical.