FWDI

AdvisorShares Madrona International 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/FWDI.

September 2018 Portfolio Manager Review


During the month of September, international markets responded negatively to heightening economic sanctions between the U.S. and China and unstable trade negations regarding NAFTA.

FWDI underperformed the MSCI EAFE Index in September with a return of -0.61% in NAV while the benchmark returned 0.87%.


Source: Morningstar

Mounting trade tensions between the U.S. and China continued to place downward pressure on markets; however, successful NAFTA negotiations ending raised investor confidence. BP PLC (NYSE:BP) was a bright spot in FWDI’s portfolio returning 7.51% for September. BP’s returns are fueled by an 8.7% increase in oil price combined with BP being awarded 50% of Brazil’s Pau Brasil offshore oil fields. Another highlight in FWDI’s top ten holding is Ternium SA ADR (NYSE:TS) which delivered a 7.41% return for the month due to in part by the ability of Mexico’s newly elected President Lopez Obrador acting as a pivotal member for NAFTA’s successful negotiations.

FWDI was held back primarily because Silicon Motion Technology ADR (NYSE:SIMO) and Alibaba Group Holdings SA ADR (NYSE:BABA). SIMO produced a return of -8.83% while BABA’s returned -5.88% because of the downward pressure caused by U.S. and China trade disputes.

FWDB Holdings (as of 9/30/18) Portfolio Weight September Return (NAV)
ROYAL DUTCH SHELL-SPON ADR-A (RDS/A) 4.38% 4.46%
BP PLC-SPONS ADR (BP) 4.28% 7.51%
ROYAL DUTCH SHELL-SPON ADR-B (RDS/B) 4.26% 5.27%
SILICON MOTION TECHNOL-ADR (SIMO) 3.92% -8.83%
TERNIUM SA-SPONSORED ADR (TX) 3.77% 7.41%
TENARIS SA-ADR (TS) 3.67% -0.06%
VEON LTD (VEON) 3.55% 0.00%
ARCELORMITTAL-NY REGISTERED (MT) 3.52% 2.15%
EQUINOR ASA-SPON ADR (EQNR) 3.28% 9.43%
ALIBABA GROUP HOLDING-SP ADR (BABA) 2.96% -5.88%

Source: Morningstar

Returns for the month had a mixture of both positive and negative throughout FWDI, but we at Madrona are confident in the ability of investors to recognize and follow signals of the fundamental drivers that move sustainable appreciation. While U.S. unemployment rates fell to constant at 3.8% and global GDP continues to remain favorable, notably in the U.S. and China. EPS and revenue growth across the overall global equity marketplace nonetheless remain strong despite mounting concerns over trade disputes.

While risks of escalating economic sanctions between countries threaten future economic expansion, we believe that the historically healthy international business environment will be conducive to continued expansion. We believe investors should remain focused on the long-term growth from fundamentals that will promote continued appreciation. We look forward to the months to come and hope to continue our mission of generating globally-diversified returns for FWDI investors.

Respectfully,

The Madrona Funds Portfolio Management Team

Portfolio Manager of FWDI


July-August 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. To the extent that the Fund's investments are concentrated in a particular country or region, the Fund will be susceptible to loss due to adverse market, political, regulatory and geographic events. The Fund is subject to an increased risk of price volatility associated with emerging markets and negative impact due to currency exchange rate fluctuations. Other Fund risks include market risk, equity risk, large cap risk, early closing risk, liquidity risk, trading risk, foreign investment risk, and geographic concentration risk. See prospectus for details regarding 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:

MSCI EAFE Index is an unmanaged free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. One cannot invest directly in an index.

Forward Price To Earnings (Forward P/E) is a measure of the price-to-earnings ratio (P/E) using forecasted earnings for the P/E calculation. While the earnings used are just an estimate and are not as reliable as current earnings data, there is still benefit in estimated P/E analysis. The forecasted earnings used in the formula can either be for the next 12 months or for the next full-year fiscal period.

Forward PEG Ratio (price/earnings to growth ratio) is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share, and the company's expected growth. In general, the Forward P/E ratio is higher for a company with a higher growth rate. It is the opinion of Madrona Funds, LLC that using just the Forward P/E ratio would make high-growth companies appear overvalued relative to others. It is assumed that by dividing the Forward P/E ratio by the earnings growth rate, the resulting ratio is better for comparing companies with different growth rates. When calculating the weighted average forward PEG of the fund, data for any securities with negative or unavailable growth or earnings projections have been removed for calculation purposes. The forward PEG of each security is a tool used to determine whether the individual security is over or undervalued. The lower the forward PEG, the cheaper the security is relative to its projected earnings and growth.