Semi-Annual Report December 31, 2018
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ADVISORSHARES TRUST 4800 Montgomery Lane Suite 150 Bethesda, Maryland 20814 www.advisorshares.com 1.877.843.3831 Semi-Annual Report December 31, 2018 Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the Fund’s shareholder reports will no longer be sent by mail, unless you specifi cally request paper copies of the reports from your fi nancial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notifi ed by mail each time a report is posted and provided with a website link to access the report. If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. Please contact your fi nancial intermediary to elect to receive shareholder reports and other communications electronically. You may elect to receive all future reports in paper free of charge. Please contact your fi nancial intermediary to continue receiving paper copies of your shareholder reports and for information about whether your election to receive reports in paper will apply to all funds held with your fi nancial intermediary. TABLE OF CONTENTS Letter from the CEO of AdvisorShares Investments, LLC . 1 Shareholder Expense Examples . 4 Schedules of Investments AdvisorShares Cornerstone Small Cap ETF (SCAP) . 7 AdvisorShares Dorsey Wright ADR ETF (AADR). 13 AdvisorShares Dorsey Wright Micro-Cap ETF (DWMC) . 15 AdvisorShares Dorsey Wright Short ETF (DWSH) . 19 AdvisorShares DoubleLine Value Equity ETF (DBLV) (formerly known as AdvisorShares Wilshire Buyback ETF) . 23 AdvisorShares Focused Equity ETF (CWS). 25 AdvisorShares Madrona Domestic ETF (FWDD) . 26 AdvisorShares Madrona Global Bond ETF (FWDB) . 30 AdvisorShares Madrona International ETF (FWDI) . 31 AdvisorShares New Tech and Media ETF (FNG) . 34 AdvisorShares Newfleet Multi-Sector Income ETF (MINC) . 35 AdvisorShares Pacific Asset Enhanced Floating Rate ETF (FLRT) . 47 AdvisorShares Ranger Equity Bear ETF (HDGE) . 53 AdvisorShares Sage Core Reserves ETF (HOLD) . 56 AdvisorShares STAR Global Buy-Write ETF (VEGA) . 62 AdvisorShares VICE ETF (ACT) . 63 Statements of Assets and Liabilities . 66 Statements of Operations . 70 Statements of Changes in Net Assets . 74 Financial Highlights . 81 Notes to Financial Statements . 100 Board Review of Investment Advisory and Sub-Advisory Agreements . 121 Supplemental Information . 124 A DVISORSHARES TRUST Letter from the CEO of AdvisorShares Investments, LLC December 31, 2018 (unaudited) In our annual report at the beginning of the fi scal year, I wrote how the rumblings of potential trade wars and rising interest rates have tended to overshadow the fi nancial news cycle and that depending on one’s outlook, an ominous cloud may seem lurking over the broader markets and the asset management industry. While cautionary signals surfaced, which eventually led witness to the U.S. equity market realizing its worst-performing month in over a decade to close out the calendar year, I also raised that another perspective could take a more optimistic viewpoint. That latter viewpoint—which aligns steadfastly with AdvisorShares long-term outlook—sees opportunities as an increasing amount of educational resources and tools using the best investment technology available today in the form of exchange-traded funds (ETFs) are available for investors to manage risk. Despite the equity market’s descent into bear market territory to conclude the calendar year, overall net assets into ETFs, including actively managed ETFs, continued their long-trending ascent. AdvisorShares has been long-committed to educating fi nancial advisors and the greater investing community on the benefi ts of active ETFs as well as delivering innovative strategies to help with portfolio diversifi cation in reaching long-term investment goals. As December wound down, two strategies particularly stood out as volatility surfaced among the equity marketplace: the AdvisorShares Ranger Equity Bear ETF (Ticker: HDGE) and the AdvisorShares Dorsey Wright Short ETF (Ticker: DWSH). HDGE, which is sub-advised by Ranger Alternative, became the fi rst actively managed, all-short ETF when it launched in January 2011. DWSH, which is sub-advised by Nasdaq Dorsey Wright, is a new all-short ETF that launched near the beginning of the fi scal year on July 11, 2018. HDGE employs a fundamental investment process rooted in forensic accounting while DWSH utilizes a variation of Dorsey Wright’s renowned core philosophy of relative strength investing, which involves buying securities that have appreciated in price more than the other securities in their investment universe and holding those securities until they exhibit sell signals. Conversely, DWSH identifi es and short sells securities that display the highest relative weakness from its domestic equity investment universe. Both HDGE and DWSH neither use leverage nor derivatives, which are unique attributes that provide a compelling alternative to inverse-geared ETFs. Both strategies can be used to mitigate portfolio volatility when used as part of a long/short domestic equity strategy. DWSH was also joined by the launch of the AdvisorShares Dorsey Wright Micro-Cap ETF (Ticker: DWMC) that coincided on July 11, 2018. Using Dorsey Wright’s widely-acclaimed relative strength investment approach, DWMC seeks long-term capital appreciation by investing in exchange-listed micro cap equities with suffi cient liquidity that have a market capitalization of less than $1 billion. A unique aspect of DWMC, adhering to Dorsey Wright’s management style, is that the ETF allows it winners to run, where equity holdings enter the portfolio representing the smallest-sized companies as they then work and grow to become future market leaders. Another interesting aspect of both DWSH and DWMC is that with Dorsey Wright’s well-established history and track record, both investment strategies represent fi rsts for their fi rm—and AdvisorShares is proud of our partnership and to deliver such innovative strategies in fully-transparent active ETFs. That partnership also includes offering the AdvisorShares Dorsey Wright ADR ETF (Ticker: AADR), an accomplished international equity strategy. A notable fund transition in sub-advisors also occurred during the fi rst half of the fi scal year as AdvisorShares was pleased to welcome DoubleLine to our portfolio manager line-up. On October 11, 2018, the AdvisorShares Wilshire Buyback ETF (Ticker: TTFS) was renamed the AdvisorShares DoubleLine Value Equity ETF and changed its ticker symbol to DBLV as DoubleLine assumed sub-advisor responsibilities of the fund. The ETF’s investment strategy changed from domestic equity buyback to a fundamental value equity strategy. DBLV is driven by a bottom-up, fundamental value process that invests both in classic value opportunities in companies with temporarily depressed earnings and in quality value opportunities in durable or disruptor franchises—high quality growth 1 ADVISORSHARES TRUST Letter from the CEO of AdvisorShares Investments, LLC (Continued) December 31, 2018 (unaudited) names with exceptional fundamentals that present a compelling case for value. DoubleLine’s investment strategy differentiates from other value equity offerings in the marketplace and is further accentuated by both its portfolio management expertise and the wider array of talent and resources their fi rm provides in navigating market and credit cycles. While growth as a whole has fared better than value over the course of the last decade, a compelling case can be made for value in the current, evolving market environment. We believe that DBLV shareholders will benefi t from DoubleLine’s portfolio management and we are pleased to now showcase their equity expertise in a fully transparent and operationally effi cient ETF. As transitions occurred in our active ETF suite, we also saw the closing of the AdvisorShares KIM Korea Equity ETF (Ticker: KOR). At the conclusion of the calendar year, AdvisorShares offered 16 actively managed ETFs with approximately $660 million in assets under management. While headwinds weighed on different markets and asset classes, we remain optimistic about the risk-adjusted value add that our portfolio managers can provide during different market cycles and environments. As new investment strategies emerge, other ETFs with established track records continue to highlight our product line-up. The AdvisorShares Newfl eet Multi-Sector Income ETF (Ticker: MINC) is sub-advised by Newfl eet Asset Management, a highly accomplished fi xed income manager well-known for their taxable bond strategies. MINC delivers a short duration, multi-sector mandate that can serve as a core, standalone investment strategy for a fi xed income allocation. MINC also carries a four-star Morningstar rating for its overall risk-adjusted performance history.1 The AdvisorShares Sage Core Reserves ETF (Ticker: HOLD) is an ultra-short duration fi xed income strategy sub-advised by Sage Advisory Services, which can provide an effi cient and scalable way to manage a cash allocation, especially in a rising rate environment. As we enter 2019 and the second half of the fi scal year, AdvisorShares remains committed to you, our shareholders, and I am always available to address any questions or concerns you may have. Our fi rm believes in transparency both in our investment strategies and in our communications, and we truly value your trust and continuous