Item 1.
|
Financial Statements
|
NUVEEN DIVERSIFIED COMMODITY FUND
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
|
December 31, 2011
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Short-term investments, at value (cost $178,024,839 and $175,594,508, respectively)
|
|
$
|
178,049,696
|
|
|
$
|
175,626,953
|
|
Deposits with brokers
|
|
|
29,621,008
|
|
|
|
44,193,777
|
|
Interest receivable
|
|
|
|
|
|
|
561,049
|
|
Unrealized appreciation on futures contracts, net
|
|
|
7,321,862
|
|
|
|
|
|
Other assets
|
|
|
112,296
|
|
|
|
200,745
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
215,104,862
|
|
|
|
220,582,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Call options written, at value (premiums received $1,549,959 and $1,428,047, respectively)
|
|
|
2,403,772
|
|
|
|
551,457
|
|
Unrealized depreciation on futures contracts, net
|
|
|
|
|
|
|
4,921,830
|
|
Payable for:
|
|
|
|
|
|
|
|
|
Distributions
|
|
|
1,336,790
|
|
|
|
|
|
Shares repurchased
|
|
|
|
|
|
|
315,845
|
|
Accrued expenses:
|
|
|
|
|
|
|
|
|
Management fees
|
|
|
216,137
|
|
|
|
229,634
|
|
Other
|
|
|
429,505
|
|
|
|
383,629
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
4,386,204
|
|
|
|
6,402,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS CAPITAL
|
|
|
|
|
|
|
|
|
Paid-in capital, unlimited number of shares authorized, 9,219,240 shares issued and outstanding at September 30, 2012 and
9,229,040 shares issued and outstanding at December 31, 2011
|
|
|
219,835,071
|
|
|
|
220,038,837
|
|
Accumulated undistributed earnings (deficit)
|
|
|
(9,116,413
|
)
|
|
|
(5,858,708
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders capital (Net assets)
|
|
|
210,718,658
|
|
|
|
214,180,129
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders capital
|
|
$
|
215,104,862
|
|
|
$
|
220,582,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets
|
|
$
|
210,718,658
|
|
|
$
|
214,180,129
|
|
|
|
|
Shares outstanding
|
|
|
9,219,240
|
|
|
|
9,229,040
|
|
|
|
|
|
|
|
|
|
|
Net asset value per share outstanding (net assets divided by shares outstanding)
|
|
$
|
22.86
|
|
|
$
|
23.21
|
|
|
|
|
|
|
|
|
|
|
Market value per share outstanding
|
|
$
|
22.02
|
|
|
$
|
20.30
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to financial statements.
3
SCHEDULE
NUVEEN DIVERSIFIED COMMODITY FUND
SCHEDULE OF INVESTMENTS
September 30, 2012
(Unaudited)
Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
Amount (000)
|
|
Description
|
|
Coupon
|
|
|
Maturity
|
|
|
Ratings
(1)
|
|
|
Value
|
|
|
|
Short-Term Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and Agency Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 25,000
|
|
Federal Home Loan Mortgage Corporation
|
|
|
0.000
|
%
|
|
|
5/31/13
|
|
|
|
Aaa
|
|
|
$
|
24,978,175
|
|
19,000
|
|
Federal Home Loan Mortgage Corporation
|
|
|
0.000
|
%
|
|
|
7/26/13
|
|
|
|
Aaa
|
|
|
|
18,977,998
|
|
20,000
|
|
Federal National Mortgage Association
|
|
|
0.000
|
%
|
|
|
11/30/12
|
|
|
|
Aaa
|
|
|
|
19,999,000
|
|
20,000
|
|
Federal National Mortgage Association
|
|
|
0.000
|
%
|
|
|
6/28/13
|
|
|
|
Aaa
|
|
|
|
19,980,520
|
|
25,000
|
|
U.S. Treasury Bills
|
|
|
0.000
|
%
|
|
|
11/15/12
|
|
|
|
Aaa
|
|
|
|
24,997,725
|
|
10,000
|
|
U.S. Treasury Bills
|
|
|
0.000
|
%
|
|
|
12/20/12
|
|
|
|
Aaa
|
|
|
|
9,998,170
|
|
10,000
|
|
U.S. Treasury Bills
|
|
|
0.000
|
%
|
|
|
2/07/13
|
|
|
|
Aaa
|
|
|
|
9,996,330
|
|
15,000
|
|
U.S. Treasury Bills
|
|
|
0.000
|
%
|
|
|
5/30/13
|
|
|
|
Aaa
|
|
|
|
14,984,955
|
|
17,000
|
|
U.S. Treasury Bills
|
|
|
0.000
|
%
|
|
|
6/27/13
|
|
|
|
Aaa
|
|
|
|
16,980,654
|
|
15,000
|
|
U.S. Treasury Bills
|
|
|
0.000
|
%
|
|
|
7/25/13
|
|
|
|
Aaa
|
|
|
|
14,980,845
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
176,000
|
|
Total U.S. Government And Agency Obligations (cost $175,849,515)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
175,874,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase Agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,175
|
|
Repurchase Agreement with State Street Bank, dated 9/28/12, repurchase price $2,175,326, collateralized by $2,215,000 U.S. Treasury Notes, 0.375%, due 4/15/15, value
$2,223,266
|
|
|
0.010
|
%
|
|
|
10/01/12
|
|
|
|
N/A
|
|
|
|
2,175,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Repurchase Agreements (cost $2,175,324)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,175,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Short-Term Investments (cost $178,024,839)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
178,049,696
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in Derivatives
Futures Contracts outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Group
|
|
Contract
|
|
Contract
Position
(2)
|
|
|
Contract
Expiration
|
|
|
Number
of
Contracts
|
|
|
Notional
Amount
at Value
|
|
|
Unrealized
Appreciation
(Depreciation)
|
|
Energy
|
|
Crude Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Brent Crude Oil Futures Contract
|
|
|
Long
|
|
|
|
November 2012
|
|
|
|
57
|
|
|
$
|
6,406,230
|
|
|
$
|
(110,580
|
)
|
|
|
ICE Brent Crude Oil Futures Contract
|
|
|
Long
|
|
|
|
January 2013
|
|
|
|
56
|
|
|
|
6,212,080
|
|
|
|
(202,740
|
)
|
|
|
NYMEX Crude Oil Futures Contract
|
|
|
Long
|
|
|
|
November 2012
|
|
|
|
191
|
|
|
|
17,608,290
|
|
|
|
(1,219,292
|
)
|
|
|
NYMEX Crude Oil Futures Contract
|
|
|
Long
|
|
|
|
January 2013
|
|
|
|
85
|
|
|
|
7,905,000
|
|
|
|
(478,960
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Crude Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,011,572
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Heating Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Gas Oil Futures Contract
|
|
|
Long
|
|
|
|
November 2012
|
|
|
|
27
|
|
|
|
2,631,150
|
|
|
|
(61,525
|
)
|
|
|
NYMEX Heating Oil Futures Contract
|
|
|
Long
|
|
|
|
November 2012
|
|
|
|
45
|
|
|
|
5,970,888
|
|
|
|
169,342
|
|
|
|
NYMEX Heating Oil Futures Contract
|
|
|
Long
|
|
|
|
January 2013
|
|
|
|
15
|
|
|
|
1,969,065
|
|
|
|
(12,125
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Heating Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX Natural Gas Futures Contract
|
|
|
Long
|
|
|
|
November 2012
|
|
|
|
227
|
|
|
|
7,536,400
|
|
|
|
513,319
|
|
|
|
NYMEX Natural Gas Futures Contract
|
|
|
Long
|
|
|
|
January 2013
|
|
|
|
123
|
|
|
|
4,633,410
|
|
|
|
488,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Natural Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,001,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
NUVEEN DIVERSIFIED COMMODITY FUND
SCHEDULE OF INVESTMENTS (Continued)
September 30, 2012
(Unaudited)
Investments in Derivatives (Continued)
Futures Contracts outstanding (Continued):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Group
|
|
Contract
|
|
Contract
Position
(2)
|
|
|
Contract
Expiration
|
|
|
Number
of
Contracts
|
|
|
Notional
Amount
at Value
|
|
|
Unrealized
Appreciation
(Depreciation)
|
|
Energy
(continued)
|
|
Unleaded Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX Gasoline RBOB Futures Contract
|
|
|
Long
|
|
|
|
November 2012
|
|
|
|
46
|
|
|
$
|
5,641,633
|
|
|
$
|
432,558
|
|
|
|
NYMEX Gasoline RBOB Futures Contract
|
|
|
Long
|
|
|
|
January 2013
|
|
|
|
18
|
|
|
|
2,065,543
|
|
|
|
(29,215
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Unleaded Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
403,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(510,638
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Metals
|
|
Aluminum
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LME Primary Aluminum Futures Contract
|
|
|
Long
|
|
|
|
October 2012
|
|
|
|
95
|
|
|
|
4,961,969
|
|
|
|
398,406
|
|
|
|
LME Primary Aluminum Futures Contract
|
|
|
Long
|
|
|
|
November 2012
|
|
|
|
95
|
|
|
|
4,997,594
|
|
|
|
464,375
|
|
|
|
LME Primary Aluminum Futures Contract
|
|
|
Long
|
|
|
|
January 2013
|
|
|
|
45
|
|
|
|
2,382,750
|
|
|
|
(87,188
|
)
|
|
|
LME Primary Aluminum Futures Contract
|
|
|
Short
|
|
|
|
November 2012
|
|
|
|
(45
|
)
|
|
|
(2,367,281
|
)
|
|
|
89,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Aluminum
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
864,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Copper
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEC Copper Futures Contract
|
|
|
Long
|
|
|
|
December 2012
|
|
|
|
72
|
|
|
|
6,764,400
|
|
|
|
619,025
|
|
|
|
CEC Copper Futures Contract
|
|
|
Long
|
|
|
|
March 2013
|
|
|
|
37
|
|
|
|
3,483,550
|
|
|
|
101,075
|
|
|
|
LME Copper Futures Contract
|
|
|
Long
|
|
|
|
October 2012
|
|
|
|
50
|
|
|
|
10,266,250
|
|
|
|
745,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Copper
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,465,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nickel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LME Nickel Futures Contract
|
|
|
Long
|
|
|
|
October 2012
|
|
|
|
30
|
|
|
|
3,319,020
|
|
|
|
462,240
|
|
|
|
LME Nickel Futures Contract
|
|
|
Long
|
|
|
|
January 2013
|
|
|
|
16
|
|
|
|
1,776,000
|
|
|
|
161,550
|
|
|
|
LME Nickel Futures Contract
|
|
|
Short
|
|
|
|
October 2012
|
|
|
|
(15
|
)
|
|
|
(1,659,510
|
)
|
|
|
(161,010
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Nickel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
462,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zinc
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LME Zinc Futures Contract
|
|
|
Long
|
|
|
|
October 2012
|
|
|
|
57
|
|
|
|
2,951,887
|
|
|
|
295,688
|
|
|
|
LME Zinc Futures Contract
|
|
|
Short
|
|
|
|
October 2012
|
|
|
|
(1
|
)
|
|
|
(51,788
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Zinc
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
295,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lead
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LME Lead Futures Contract
|
|
|
Long
|
|
|
|
October 2012
|
|
|
|
33
|
|
|
|
1,877,494
|
|
|
|
278,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Industrial Metals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,366,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculturals
|
|
Corn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CBOT Corn Futures Contract
|
|
|
Long
|
|
|
|
December 2012
|
|
|
|
285
|
|
|
|
10,776,563
|
|
|
|
(1,009,787
|
)
|
|
|
CBOT Corn Futures Contract
|
|
|
Long
|
|
|
|
March 2013
|
|
|
|
38
|
|
|
|
1,443,050
|
|
|
|
(16,188
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Corn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,025,975
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
NUVEEN DIVERSIFIED COMMODITY FUND
SCHEDULE OF INVESTMENTS (Continued)
September 30, 2012
(Unaudited)
Investments in Derivatives (Continued)
Futures Contracts outstanding (Continued):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Group
|
|
Contract
|
|
Contract
Position
(2)
|
|
|
Contract
Expiration
|
|
|
Number
of
Contracts
|
|
|
Notional
Amount
at Value
|
|
|
Unrealized
Appreciation
(Depreciation)
|
|
Agriculturals
(continued)
|
|
Soybean
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CBOT Soybean Futures Contract
|
|
|
Long
|
|
|
|
November 2012
|
|
|
|
117
|
|
|
$
|
9,365,850
|
|
|
$
|
1,258,072
|
|
|
|
CBOT Soybean Futures Contract
|
|
|
Long
|
|
|
|
January 2013
|
|
|
|
28
|
|
|
|
2,243,850
|
|
|
|
119,625
|
|
|
|
CBOT Soybean Futures Contract
|
|
|
Long
|
|
|
|
March 2013
|
|
|
|
27
|
|
|
|
2,111,737
|
|
|
|
53,950
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Soybean
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,431,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wheat
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CBOT Wheat Futures Contract
|
|
|
Long
|
|
|
|
December 2012
|
|
|
|
78
|
|
|
|
3,519,750
|
|
|
|
44,800
|
|
|
|
CBOT Wheat Futures Contract
|
|
|
Long
|
|
|
|
March 2013
|
|
|
|
15
|
|
|
|
684,188
|
|
|
|
2,925
|
|
|
|
KCBT Wheat Futures Contract
|
|
|
Long
|
|
|
|
December 2012
|
|
|
|
91
|
|
|
|
4,220,125
|
|
|
|
134,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Wheat
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
182,032
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Soybean Meal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CBOT Soybean Meal Futures Contract
|
|
|
Long
|
|
|
|
December 2012
|
|
|
|
65
|
|
|
|
3,164,850
|
|
|
|
509,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Soybean Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CBOT Soybean Oil Futures Contract
|
|
|
Long
|
|
|
|
December 2012
|
|
|
|
85
|
|
|
|
2,685,660
|
|
|
|
143,795
|
|
|
|
CBOT Soybean Oil Futures Contract
|
|
|
Long
|
|
|
|
March 2013
|
|
|
|
6
|
|
|
|
192,312
|
|
|
|
(12,546
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Soybean Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
131,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Agriculturals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,228,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Precious Metals
|
|
Gold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEC Gold Futures Contract
|
|
|
Long
|
|
|
|
December 2012
|
|
|
|
130
|
|
|
|
23,060,700
|
|
|
|
2,386,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Silver
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEC Silver Futures Contract
|
|
|
Long
|
|
|
|
December 2012
|
|
|
|
47
|
|
|
|
8,125,595
|
|
|
|
843,415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Platinum
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX Platinum Futures Contract
|
|
|
Long
|
|
|
|
January 2013
|
|
|
|
20
|
|
|
|
1,669,300
|
|
|
|
15,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Palladium
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX Palladium Futures Contract
|
|
|
Long
|
|
|
|
December 2012
|
|
|
|
13
|
|
|
|
833,040
|
|
|
|
71,925
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Precious Metals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,316,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foods and Fibers
|
|
Cotton
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Cotton Futures Contract
|
|
|
Long
|
|
|
|
December 2012
|
|
|
|
81
|
|
|
|
2,861,325
|
|
|
|
(14,199
|
)
|
|
|
ICE Cotton Futures Contract
|
|
|
Long
|
|
|
|
March 2013
|
|
|
|
26
|
|
|
|
931,840
|
|
|
|
(43,605
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cotton
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(57,804
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sugar
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Sugar Futures Contract
|
|
|
Long
|
|
|
|
March 2013
|
|
|
|
288
|
|
|
|
6,586,675
|
|
|
|
(76,036
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
NUVEEN DIVERSIFIED COMMODITY FUND
SCHEDULE OF INVESTMENTS (Continued)
September 30, 2012
(Unaudited)
Investments in Derivatives (Continued)
Futures Contracts outstanding (Continued):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Group
|
|
Contract
|
|
Contract
Position
(2)
|
|
|
Contract
Expiration
|
|
|
Number
of
Contracts
|
|
|
Notional
Amount
at Value
|
|
|
Unrealized
Appreciation
(Depreciation)
|
|
Foods and Fibers
(continued)
|
|
Coffee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Coffee C Futures Contract
|
|
|
Long
|
|
|
|
December 2012
|
|
|
|
52
|
|
|
$
|
3,383,250
|
|
|
$
|
123,582
|
|
|
|
LIFFE Coffee Robusta Futures Contract
|
|
|
Long
|
|
|
|
November 2012
|
|
|
|
63
|
|
|
|
1,374,660
|
|
|
|
71,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Coffee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cocoa
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Cocoa Futures Contract
|
|
|
Long
|
|
|
|
December 2012
|
|
|
|
47
|
|
|
|
1,182,520
|
|
|
|
38,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Foods and Fibers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
Live Cattle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CME Live Cattle Futures Contract
|
|
|
Long
|
|
|
|
December 2012
|
|
|
|
160
|
|
|
|
7,980,800
|
|
|
|
(121,270
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lean Hogs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CME Lean Hog Futures Contract
|
|
|
Long
|
|
|
|
December 2012
|
|
|
|
116
|
|
|
|
3,422,000
|
|
|
|
(25,690
|
)
|
|
|
CME Lean Hog Futures Contract
|
|
|
Long
|
|
|
|
February 2013
|
|
|
|
7
|
|
|
|
224,700
|
|
|
|
1,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Lean Hogs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(24,150
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Feeder Cattle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CME Feeder Cattle Futures Contract
|
|
|
Long
|
|
|
|
November 2012
|
|
|
|
24
|
|
|
|
1,732,200
|
|
|
|
(33,363
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Livestock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(178,783
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Futures Contracts outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,321,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
NUVEEN DIVERSIFIED COMMODITY FUND
SCHEDULE OF INVESTMENTS (Continued)
September 30, 2012
(Unaudited)
Investments in Derivatives (Continued)
Call Options Written outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Group
|
|
Contract
|
|
Contract
Expiration
|
|
|
Number
of
Contracts
|
|
|
Strike
Price
|
|
|
Value
|
|
Energy
|
|
Crude Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Brent Crude Oil Futures Options
|
|
|
November 2012
|
|
|
|
(57
|
)
|
|
$
|
124.5
|
|
|
$
|
(5,700
|
)
|
|
|
|
|
|
|
|
|
NYMEX Crude Oil Futures Options
|
|
|
October 2012
|
|
|
|
(138
|
)
|
|
|
107.0
|
|
|
|
(15,180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Crude Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,880
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Heating Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX Heating Oil Futures Options
|
|
|
October 2012
|
|
|
|
(40
|
)
|
|
|
3.4
|
|
|
|
(29,568
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX Natural Gas Futures Options
|
|
|
October 2012
|
|
|
|
(175
|
)
|
|
|
3,200.0
|
|
|
|
(379,750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unleaded Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX Gasoline RBOB Futures Options
|
|
|
October 2012
|
|
|
|
(32
|
)
|
|
|
31,200.0
|
|
|
|
(49,459
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(479,657
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Metals
|
|
Aluminum
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LME Primary Aluminum Futures
Options
(3)
|
|
|
October 2012
|
|
|
|
(95
|
)
|
|
|
2,000.0
|
|
|
|
(214,819
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Copper
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LME Copper Futures Options
(3)
|
|
|
October 2012
|
|
|
|
(50
|
)
|
|
|
8,300.0
|
|
|
|
(53,525
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nickel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LME Nickel Futures Options
(3)
|
|
|
October 2012
|
|
|
|
(15
|
)
|
|
|
17,000.0
|
|
|
|
(129,660
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zinc
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LME Zinc Futures Options
(3)
|
|
|
October 2012
|
|
|
|
(28
|
)
|
|
|
1,950.0
|
|
|
|
(85,484
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lead
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LME Lead Futures Options
(3)
|
|
|
October 2012
|
|
|
|
(17
|
)
|
|
|
2,125.0
|
|
|
|
(64,341
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Industrial Metals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(547,829
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculturals
|
|
Corn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CBOT Corn Futures Options
|
|
|
November 2012
|
|
|
|
(162
|
)
|
|
|
940.0
|
|
|
|
(24,300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Soybean
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CBOT Soybean Futures Options
|
|
|
October 2012
|
|
|
|
(84
|
)
|
|
|
1,520.0
|
|
|
|
(399,525
|
)
|
|
|
|
|
|
|
|
|
CBOT Soybean Futures Options
|
|
|
October 2012
|
|
|
|
(2
|
)
|
|
|
1,780.0
|
|
|
|
(738
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Soybean
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(400,263
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wheat
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CBOT Wheat Futures Options
|
|
|
November 2012
|
|
|
|
(46
|
)
|
|
|
1,050.0
|
|
|
|
(23,575
|
)
|
|
|
|
|
|
|
|
|
KCBT Wheat Futures Options
|
|
|
November 2012
|
|
|
|
(46
|
)
|
|
|
1,050.0
|
|
|
|
(30,187
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Wheat
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(53,762
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
NUVEEN DIVERSIFIED COMMODITY FUND
SCHEDULE OF INVESTMENTS (Continued)
September 30, 2012
(Unaudited)
Investments in Derivatives (Continued)
Call Options Written outstanding (Continued):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Group
|
|
Contract
|
|
Contract
Expiration
|
|
|
Number
of
Contracts
|
|
|
Strike
Price
|
|
|
Value
|
|
Agriculturals
(continued)
|
|
Soybean Meal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CBOT Soybean Meal Futures Options
|
|
|
November 2012
|
|
|
|
(33
|
)
|
|
$
|
450.0
|
|
|
$
|
(140,580
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Soybean Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CBOT Soybean Oil Futures Options
|
|
|
November 2012
|
|
|
|
(46
|
)
|
|
|
545.0
|
|
|
|
(26,634
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Agriculturals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(645,539
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Precious Metals
|
|
Gold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEC Gold Futures Options
|
|
|
November 2012
|
|
|
|
(65
|
)
|
|
|
1,760.0
|
|
|
|
(343,200
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Silver
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEC Silver Futures Options
|
|
|
November 2012
|
|
|
|
(23
|
)
|
|
|
3,525.0
|
|
|
|
(146,740
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Precious Metals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(489,940
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foods and Fibers
|
|
Cotton
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Cotton Futures Options
|
|
|
November 2012
|
|
|
|
(31
|
)
|
|
|
740.0
|
|
|
|
(18,445
|
)
|
|
|
|
|
|
|
|
|
ICE Cotton Futures Options
|
|
|
November 2012
|
|
|
|
(23
|
)
|
|
|
780.0
|
|
|
|
(4,945
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Cotton
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,390
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sugar
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Sugar Futures Options
|
|
|
February 2013
|
|
|
|
(144
|
)
|
|
|
222.5
|
|
|
|
(111,283
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coffee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Coffee C Futures Options
|
|
|
November 2012
|
|
|
|
(37
|
)
|
|
|
182.5
|
|
|
|
(57,304
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cocoa
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Cocoa Futures Options
|
|
|
November 2012
|
|
|
|
(23
|
)
|
|
|
2,600.0
|
|
|
|
(13,110
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Foods and Fibers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(205,087
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
Live Cattle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CME Live Cattle Futures Options
|
|
|
December 2012
|
|
|
|
(98
|
)
|
|
|
131.0
|
|
|
|
(19,600
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lean Hogs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CME Lean Hogs Futures Options
|
|
|
December 2012
|
|
|
|
(62
|
)
|
|
|
81.0
|
|
|
|
(16,120
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Livestock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(35,720
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Call Options Written outstanding (premiums received $1,549,959)
|
|
|
|
|
|
|
(1,572
|
)
|
|
|
|
|
|
$
|
(2,403,772
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
NUVEEN DIVERSIFIED COMMODITY FUND
SCHEDULE OF INVESTMENTS (Continued)
September 30, 2012
(Unaudited)
|
|
|
(1)
|
|
Ratings: Using the highest of Standard & Poors Group, Moodys Investor Service, Inc. or Fitch, Inc. rating.
|
(2)
|
|
The Fund expects to invest only in long futures contracts. Some short futures positions arise in futures contracts traded on the London Metal Exchange (LME) solely as
the result of closing existing long LME futures positions. For every short LME futures contract outstanding, the Fund had previously entered into a long LME futures contract. The London Clearing House is the counterparty for both the long and short
position.
|
(3)
|
|
For fair value measurement disclosure purposes, these Call Options Written are categorized as Level 2. See Notes to Financial Statements, Footnote 2 Summary of
Significant Accounting Policies, Investment Valuation and Fair Value Measurements for more information.
|
N/A
|
|
Not applicable.
|
CBOT
|
|
Chicago Board of Trade
|
CEC
|
|
Commodities Exchange Center
|
CME
|
|
Chicago Mercantile Exchange
|
ICE
|
|
Intercontinental Exchange
|
KCBT
|
|
Kansas City Board of Trade
|
LIFFE
|
|
London International Financial Futures Exchange
|
LME
|
|
London Metal Exchange
|
NYMEX
|
|
New York Mercantile Exchange
|
RBOB
|
|
Reformulated Gasoline Blendstock for Oxygen Blending
|
See
accompanying notes to financial statements.
10
NUVEEN DIVERSIFIED COMMODITY FUND
STATEMENTS OF OPERATIONS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
Investment Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
60,753
|
|
|
$
|
60,406
|
|
|
$
|
183,931
|
|
|
$
|
244,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Income
|
|
|
60,753
|
|
|
|
60,406
|
|
|
|
183,931
|
|
|
|
244,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees
|
|
|
648,984
|
|
|
|
756,870
|
|
|
|
1,968,995
|
|
|
|
2,316,276
|
|
Brokerage commissions
|
|
|
32,317
|
|
|
|
32,331
|
|
|
|
116,255
|
|
|
|
117,607
|
|
Custodians fees and expenses
|
|
|
26,476
|
|
|
|
29,729
|
|
|
|
85,521
|
|
|
|
65,171
|
|
Offering costs
|
|
|
108,554
|
|
|
|
|
|
|
|
108,554
|
|
|
|
|
|
Trustees fees and expenses
|
|
|
30,500
|
|
|
|
31,334
|
|
|
|
86,861
|
|
|
|
91,959
|
|
Professional fees
|
|
|
169,176
|
|
|
|
172,616
|
|
|
|
387,079
|
|
|
|
310,811
|
|
Shareholder reporting expense
|
|
|
42,709
|
|
|
|
10,794
|
|
|
|
113,797
|
|
|
|
121,099
|
|
Other expenses
|
|
|
6,451
|
|
|
|
1,454
|
|
|
|
17,794
|
|
|
|
20,701
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
1,065,167
|
|
|
|
1,035,128
|
|
|
|
2,884,856
|
|
|
|
3,043,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)
|
|
|
(1,004,414
|
)
|
|
|
(974,722
|
)
|
|
|
(2,700,925
|
)
|
|
|
(2,799,362
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain (loss) from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
|
140
|
|
|
|
10,912
|
|
|
|
(512
|
)
|
|
|
21,811
|
|
Futures contracts
|
|
|
12,753,981
|
|
|
|
(4,910,124
|
)
|
|
|
(4,185,595
|
)
|
|
|
13,120,358
|
|
Call options written
|
|
|
918,562
|
|
|
|
1,508,609
|
|
|
|
5,154,736
|
|
|
|
6,866,119
|
|
Change in net unrealized appreciation (depreciation) of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
|
20,588
|
|
|
|
13,013
|
|
|
|
(7,588
|
)
|
|
|
5,427
|
|
Futures contracts
|
|
|
4,533,122
|
|
|
|
(20,252,466
|
)
|
|
|
12,243,692
|
|
|
|
(43,208,750
|
)
|
Call options written
|
|
|
(20,858
|
)
|
|
|
693,216
|
|
|
|
(1,730,403
|
)
|
|
|
3,057,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain (loss) and change in net unrealized appreciation (depreciation)
|
|
|
18,205,535
|
|
|
|
(22,936,840
|
)
|
|
|
11,474,330
|
|
|
|
(20,137,740
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
17,201,121
|
|
|
$
|
(23,911,562
|
)
|
|
$
|
8,773,405
|
|
|
$
|
(22,937,102
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per weighted-average share
|
|
$
|
1.87
|
|
|
$
|
(2.58
|
)
|
|
$
|
0.95
|
|
|
$
|
(2.48
|
)
|
Weighted-average shares outstanding
|
|
|
9,219,240
|
|
|
|
9,267,040
|
|
|
|
9,219,472
|
|
|
|
9,267,040
|
|
See
accompanying notes to financial statements.
11
NUVEEN DIVERSIFIED COMMODITY FUND
STATEMENTS OF CHANGES IN SHAREHOLDERS CAPITAL
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2012
|
|
|
Year Ended
December 31, 2011
|
|
Shareholders capitalbeginning of period
|
|
$
|
214,180,129
|
|
|
$
|
247,757,748
|
|
Repurchase of shares
|
|
|
(203,766
|
)
|
|
|
(748,433
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in shareholders capital resulting from operations:
|
|
|
|
|
|
|
|
|
Net investment income (loss)
|
|
|
(2,700,925
|
)
|
|
|
(3,612,955
|
)
|
Net realized gain (loss) from:
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
|
(512
|
)
|
|
|
21,761
|
|
Futures contracts
|
|
|
(4,185,595
|
)
|
|
|
(2,120,418
|
)
|
Call options written
|
|
|
5,154,736
|
|
|
|
10,035,572
|
|
Change in net unrealized appreciation (depreciation) of:
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
|
(7,588
|
)
|
|
|
4,506
|
|
Futures contracts
|
|
|
12,243,692
|
|
|
|
(23,776,469
|
)
|
Call options written
|
|
|
(1,730,403
|
)
|
|
|
2,741,582
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
8,773,405
|
|
|
|
(16,706,421
|
)
|
|
|
|
|
|
|
|
|
|
Distributions to shareholders
|
|
|
(12,031,110
|
)
|
|
|
(16,122,765
|
)
|
|
|
|
|
|
|
|
|
|
Shareholders capitalend of period
|
|
$
|
210,718,658
|
|
|
$
|
214,180,129
|
|
|
|
|
|
|
|
|
|
|
Sharesbeginning of period
|
|
|
9,229,040
|
|
|
|
9,267,040
|
|
Issuance of shares
|
|
|
|
|
|
|
|
|
Repurchase of shares
|
|
|
(9,800
|
)
|
|
|
(38,000
|
)
|
|
|
|
|
|
|
|
|
|
Sharesend of period
|
|
|
9,219,240
|
|
|
|
9,229,040
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to financial statements.
12
NUVEEN DIVERSIFIED COMMODITY FUND
STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2012
|
|
|
2011
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
8,773,405
|
|
|
$
|
(22,937,102
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
|
|
|
|
|
|
|
|
|
Purchases of short-term investments
|
|
|
(1,133,582,615
|
)
|
|
|
(1,758,367,206
|
)
|
Proceeds from sales and maturities of short-term investments
|
|
|
1,130,385,341
|
|
|
|
1,772,511,338
|
|
Premiums paid for call options written
|
|
|
(1,373,715
|
)
|
|
|
(850,717
|
)
|
Premiums received for call options written
|
|
|
6,650,363
|
|
|
|
7,750,883
|
|
Amortization (Accretion)
|
|
|
766,431
|
|
|
|
1,285,249
|
|
(Increase) Decrease in:
|
|
|
|
|
|
|
|
|
Deposits with brokers
|
|
|
14,572,769
|
|
|
|
(20,912,080
|
)
|
Interest receivable
|
|
|
561,049
|
|
|
|
(859,094
|
)
|
Other assets
|
|
|
88,449
|
|
|
|
(98,332
|
)
|
Increase (Decrease) in:
|
|
|
|
|
|
|
|
|
Accrued management fees
|
|
|
(13,497
|
)
|
|
|
(12,995
|
)
|
Accrued other expenses
|
|
|
45,876
|
|
|
|
(18,290
|
)
|
Net realized (gain) loss from:
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
|
512
|
|
|
|
(21,811
|
)
|
Call options written
|
|
|
(5,154,736
|
)
|
|
|
(6,866,119
|
)
|
Change in net unrealized (appreciation) depreciation of:
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
|
7,588
|
|
|
|
(5,427
|
)
|
Futures contracts
|
|
|
(12,243,692
|
)
|
|
|
43,208,750
|
|
Call options written
|
|
|
1,730,403
|
|
|
|
(3,057,295
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
11,213,931
|
|
|
|
10,749,752
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Cash paid for shares repurchased
|
|
|
(519,611
|
)
|
|
|
|
|
Cash distributions to shareholders
|
|
|
(10,694,320
|
)
|
|
|
(10,749,768
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(11,213,931
|
)
|
|
|
(10,749,768
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
|
|
|
|
(16
|
)
|
Cashbeginning of period
|
|
|
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
Cashend of period
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to financial statements.
13
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS
September 30,
2012
(Unaudited)
1. Organization
The Nuveen Diversified Commodity Fund (the Fund) was organized as a Delaware statutory trust on December 7,
2005, to operate as a commodity pool. Nuveen Commodities Asset Management, LLC, the Funds manager (NCAM or the Manager), a wholly-owned subsidiary of Nuveen Investments, Inc. (Nuveen), is a Delaware limited
liability company registered as a commodity pool operator and commodity trading advisor with the Commodity Futures Trading Commission (the CFTC) and is a member of the National Futures Association (the NFA). The Fund
commenced operations on September 27, 2010, with its initial public offering. The Fund operates pursuant to a Second Amended and Restated Trust Agreement dated as of March 30, 2012 (Trust Agreement). The Funds shares represent
units of fractional undivided beneficial interest in, and ownership of, the Fund. The Funds shares trade on the NYSE MKT (formerly known as NYSE Amex) under the ticker symbol CFD. The Fund is not a mutual fund, a closed-end fund,
or any other type of investment company within the meaning of the Investment Company Act of 1940, as amended, and is not subject to regulation thereunder.
The Manager has selected Gresham Investment Management LLC (Gresham LLC), acting through its Near Term Active division (in that capacity, Gresham or the Commodity
Sub-advisor), to manage the Funds commodity investment strategy and its options strategy. Gresham LLC is a Delaware limited liability company, the successor to Gresham Investment Management, Inc., formed in July 1992. Gresham LLC is
registered with the CFTC as a commodity trading advisor and commodity pool operator, is a member of the NFA and is registered with the Securities and Exchange Commission (the SEC) as an investment adviser. On December 31, 2011, Nuveen
completed its acquisition of a 60% stake in Gresham LLC. As part of the acquisition, Gresham LLCs management and investment teams will maintain a significant minority ownership stake in the firm, and will continue to operate independently
while leveraging the strengths of Nuveens shared resources.
The Manager has selected Nuveen Asset Management, LLC
(Nuveen Asset Management or the Collateral Sub-advisor), an affiliate of the Manager, to serve as the Funds Collateral Sub-advisor, investing the Funds collateral in short-term, high grade debt securities. Nuveen
Asset Management is a Delaware limited liability company and is registered with the SEC as an investment adviser.
The Funds investment objective is to generate higher risk-adjusted total return than leading commodity market benchmarks. Risk-adjusted total return refers to the income and capital appreciation
generated by a portfolio (the combination of which equals its total return) per unit of risk taken, with such risk measured by the volatility of the portfolios total returns over a specific period of time. In pursuing its investment objective,
the Fund invests directly in a diversified portfolio of commodity futures, forward and options contracts to obtain broad exposure to all principal groups in the global commodity markets. The Funds investment strategy has three elements:
|
|
|
An actively managed portfolio of commodity futures and forward contracts utilizing Greshams proprietary Tangible Asset Program
®
, or TAP
®
, a long-only rules-based commodity investment strategy designed to maintain consistent, fully collateralized exposure to commodities as an asset class;
|
|
|
|
An integrated program of writing commodity call options designed to enhance the risk-adjusted total return of the Funds commodity investments
(TAP
®
and the options strategy are collectively referred to as TAP PLUS
SM
); and
|
|
|
|
A collateral portfolio of cash equivalents and short-term, high grade debt securities.
|
14
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2012
(Unaudited)
2. Summary of Significant Accounting Policies
The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial
statements in accordance with accounting principles generally accepted in the United States (U.S. GAAP).
The
accompanying unaudited financial statements were prepared in accordance with U.S. GAAP for interim financial information and with the instructions for Form 10-Q and the rules and regulations of the SEC. In the opinion of management, all material
adjustments, consisting only of normal recurring adjustments, considered necessary for a fair statement of the interim period financial statements have been made. Interim period results are not necessarily indicative of results for a full-year
period. These financial statements and the notes thereto should be read in conjunction with the Funds financial statements included in the Funds Annual Report on Form 10-K for the year ended December 31, 2011.
Basis of Accounting
The accompanying financial statements have been prepared in conformity with U.S. GAAP. The preparation of financial statements in
conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the
reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
Futures Contracts
The Fund invests in commodity futures contracts. Upon entering into a futures contract, the Fund is required to deposit with the broker an amount of cash or liquid securities equal to a specified dollar
amount per contract. This is known as the initial margin. Cash held by the broker to cover initial margin requirements on open futures contracts is recognized as Deposits with brokers on the Statements of Financial Condition.
During the period the futures contract is open, changes in the value of the contract are recognized as an unrealized gain or loss by marking-to-market on a daily basis to reflect the changes in market value of the contract, which are
recognized as a component of Unrealized appreciation or depreciation on futures contracts, net on the Statements of Financial Condition and Change in net unrealized appreciation (depreciation) of futures contracts on the
Statements of Operations. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract on the closing date and the value of the contract when originally entered into, which is
recognized as a component of Net realized gain (loss) from futures contracts on the Statements of Operations.
The
Fund expects to invest only in long futures contracts. Some short futures positions may arise in futures contracts traded on the London Metal Exchange (LME) solely as the result of closing existing long LME futures positions. For every
short LME futures contract outstanding, the Fund had previously entered into a long futures contract. The LME Clearing House is the counterparty for both the long and short positions.
Risks of investments in commodity futures contracts include possible adverse movement in the price of the commodities underlying the
contracts, the possibility that there may not be a liquid secondary market for the contracts and the possibility that a change in the value of the contract may not correlate with a change in the value of the underlying commodities.
15
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2012
(Unaudited)
2. Summary of Significant Accounting Policies (Continued)
The average number of futures contracts outstanding during the nine months ended
September 30, 2012 and the fiscal year ended December 31, 2011, was 3,517 and 3,636, respectively.
Refer to Footnote 3
Derivative Instruments and Hedging Activities for further details on futures contract activity.
Options Contracts
The Fund may write (sell) and purchase options on commodity futures and forward contracts to enhance the Funds risk-adjusted total
return. When the Fund writes an option, an amount equal to the premium received is recognized as a component of Call options written, at value on the Statements of Financial Condition and is subsequently adjusted to reflect the current
value of the written option until the option expires or the Fund enters into a closing purchase transaction. The changes in value of the options written during the reporting period are recognized as a component of Change in net unrealized
appreciation (depreciation) of call options written on the Statements of Operations. When an option is exercised or expires, or the Fund enters into a closing purchase transaction, the difference between the net premium received and any amount
paid at expiration or on executing a closing purchase transaction is recognized as a component of Net realized gain (loss) from call options written on the Statements of Operations. The Fund, as writer of an option, has no control over
whether the underlying instrument may be sold (called) and as a result bears the risk of an unfavorable change in the market value of the instrument underlying the written option. There is also the risk the Fund may not be able to enter into a
closing transaction because of an illiquid market. During the nine months ended September 30, 2012 and the fiscal year ended December 31, 2011, the Fund wrote call options on futures contracts.
The purchase of options involves the risk of loss of all or part of the cash paid for the options (the premium). The market risk
associated with purchasing options is limited to the premium paid. The counterparty credit risk of purchasing options, however, needs to take into account the current value of the option, as this is the performance expected from the counterparty.
The Fund did not purchase options on futures or forward contracts during the nine months ended September 30, 2012 or the fiscal year ended December 31, 2011.
Transactions in call options written were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2012
|
|
|
Year Ended
December 31, 2011
|
|
|
|
Number of
Contracts
|
|
|
Premiums
Received
|
|
|
Number of
Contracts
|
|
|
Premiums
Received
|
|
Outstanding, beginning of period
|
|
|
1,657
|
|
|
$
|
1,428,047
|
|
|
|
1,813
|
|
|
$
|
1,629,313
|
|
Options written
|
|
|
10,176
|
|
|
|
6,650,363
|
|
|
|
13,702
|
|
|
|
10,798,390
|
|
Options terminated in closing purchase transactions
|
|
|
(6,359
|
)
|
|
|
(3,774,682
|
)
|
|
|
(9,895
|
)
|
|
|
(8,022,605
|
)
|
Options expired and exercised
|
|
|
(3,902
|
)
|
|
|
(2,753,769
|
)
|
|
|
(3,963
|
)
|
|
|
(2,977,051
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, end of the period
|
|
|
1,572
|
|
|
$
|
1,549,959
|
|
|
|
1,657
|
|
|
$
|
1,428,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The average number of outstanding call option contracts written during the nine months ended September 30, 2012 and
the fiscal year ended December 31, 2011, was 1,650 and 1,712, respectively.
Refer to Footnote 3 Derivative
Instruments and Hedging Activities for further details on options activity.
16
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2012
(Unaudited)
2. Summary of Significant Accounting Policies (Continued)
Forward Contracts
The Fund may enter into forward contracts. A forward contract is an agreement between two parties to purchase or sell a specified quantity
of a commodity at or before a specified date in the future at a specified price. Forward contracts are typically traded in the over-the-counter (OTC) markets and all details of the contract are negotiated between the counterparties to
the agreement. Accordingly, the forward contracts are valued by reference to the contracts traded in the OTC markets.
The
contractual obligations of a buyer or seller may generally be satisfied by taking or making physical delivery of the underlying commodity, establishing an opposite position in the contract and recognizing the profit or loss on both positions
simultaneously on the delivery date or, in some instances, paying a cash settlement before the designated date of delivery. The forward contracts are adjusted by the daily fluctuation of the underlying commodity or currency and any gains or losses
are recognized on the Statements of Operations as unrealized appreciation or depreciation until the contract settlement date.
Forward contracts are, in general, not cleared or guaranteed by a third party. The Fund may collateralize forward commodity contracts with
cash and/or certain securities as indicated on its Statements of Financial Condition or Schedule of Investments, when applicable, and such collateral is held for the benefit of the counterparty in a segregated account at the custodian to protect the
counterparty against non-payment by the Fund. In the event of a default by the counterparty, the Fund will seek return of this collateral and may incur certain costs exercising its right with respect to the collateral.
The Fund remains subject to credit risk with respect to the amount it expects to receive from counterparties, as those amounts are not
similarly collateralized by the counterparty. If a counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, the Fund may experience significant delays in obtaining any recovery in a bankruptcy or
other reorganization proceeding. The Fund may obtain only limited recovery or may obtain no recovery in such circumstances.
Participants in trading foreign exchange forward contracts often do not require margin deposits, but rely upon internal credit limitations
and their judgments regarding the creditworthiness of their counterparties.
The Fund will enter into forward contracts only
with large, well-capitalized and well-established financial institutions. The creditworthiness of each of the firms which is a party to a forward contract is monitored by the Manager. The Fund did not enter into any forward contracts during the nine
months ended September 30, 2012 or the fiscal year ended December 31, 2011.
Collateral Investments
Currently, in the normal course of business, approximately 15% of the Funds assets are committed to secure the Funds futures
and forward contract positions. These assets are placed in a commodity futures account maintained by the Funds clearing broker, and are held in cash equivalents and high-quality short-term debt securities.
The remaining assets are held in a separate collateral investment account managed by the Collateral Sub-advisor. The Funds assets
held in the separate collateral account are invested in cash equivalents and high-quality short-term debt securities with final terms not exceeding one year at the time of investment. These collateral investments are rated at the applicable highest
short-term or long-term debt or deposit rating or money market fund rating as determined by at least one nationally recognized statistical rating organization (NRSRO), or if unrated, are judged by the Collateral Sub-advisor to be of
comparable quality.
17
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2012
(Unaudited)
2. Summary of Significant Accounting Policies (Continued)
Investment Valuation
Commodity futures and forward contracts and options on commodity futures and forward contracts traded on an exchange will be valued at the
final settlement price or official closing price as determined by the principal exchange on which the instruments are traded as supplied by independent pricing services. These investments are generally classified as Level 1 for fair value
measurement purposes. OTC commodity futures and forward contracts and options on commodity futures and forward contracts not traded on an exchange will be valued, in order of hierarchy, by independent pricing services, price quotations obtained from
counterparty broker-dealers, or through fair valuation methodologies as determined by the Manager. These investments are generally classified as Level 2. Additionally, events may occur after the close of the market, but prior to the determination of
the Funds net asset value, that may affect the values of the Funds investments. In such circumstances, the Manager will determine a fair valuation for such investments that in its opinion is reflective of fair market value. These
investments are generally classified as Level 2 or Level 3 depending on the priority of the significant inputs.
Prices of
fixed-income securities, including, but not limited to, highly rated zero coupon fixed-income securities and U.S. Treasury bills, issued with maturities of one year or less, are provided by a pricing service approved by the Funds Manager.
These securities are generally classified as Level 2. The pricing service establishes a securitys fair value using methods that may include consideration of the following: yields or prices of investments of comparable quality, type of issue,
coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligors credit
characteristics considered relevant. These securities are generally classified as Level 2 or Level 3 depending on the priority of the significant inputs.
Repurchase agreements are valued at contract amount plus accrued interest, which approximates market value. These securities are generally classified as Level 2.
Fair Value Measurements
Fair value is defined as the price that the Fund would receive upon selling an investment or transferring a liability in an orderly
transaction to an independent buyer in the principal or most advantageous market for the investment. A three-tier hierarchy is used to maximize the use of observable market data and minimize the use of unobservable inputs and to establish
classification of fair value measurements for disclosure purposes. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability. Observable inputs are based on market data obtained from sources
independent of the reporting entity. Unobservable inputs reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are based on the best information
available in the circumstances. The following is a summary of the three-tier hierarchy of valuation inputs.
Level 1Inputs are unadjusted and prices are determined by quoted prices in active markets for identical
securities.
Level 2Prices are determined using other significant observable inputs (including
quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3Prices are determined using significant unobservable inputs (including managements assumptions
in determining the fair value of investments).
18
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2012
(Unaudited)
2. Summary of Significant Accounting Policies (Continued)
The inputs or methodologies used for valuing securities are not an indication of the
risks associated with investing in those securities. The following is a summary of the Funds fair value measurements as of September 30, 2012 and December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2012
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Short-Term Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and Agency Obligations
|
|
$
|
|
|
|
$
|
175,874,372
|
|
|
$
|
|
|
|
$
|
175,874,372
|
|
Repurchase Agreements
|
|
|
|
|
|
|
2,175,324
|
|
|
|
|
|
|
|
2,175,324
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts*
|
|
|
7,321,862
|
|
|
|
|
|
|
|
|
|
|
|
7,321,862
|
|
Call Options Written**
|
|
|
(1,855,943
|
)
|
|
|
(547,829
|
)
|
|
|
|
|
|
|
(2,403,772
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,465,919
|
|
|
$
|
177,501,867
|
|
|
$
|
|
|
|
$
|
182,967,786
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Short-Term Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and Agency Obligations
|
|
$
|
|
|
|
$
|
174,425,536
|
|
|
$
|
|
|
|
$
|
174,425,536
|
|
Repurchase Agreements
|
|
|
|
|
|
|
1,201,417
|
|
|
|
|
|
|
|
1,201,417
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts*
|
|
|
(4,921,830
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,921,830
|
)
|
Call Options Written**
|
|
|
(548,427
|
)
|
|
|
(3,030
|
)
|
|
|
|
|
|
|
(551,457
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(5,470,257
|
)
|
|
$
|
175,623,923
|
|
|
$
|
|
|
|
$
|
170,153,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Represents net unrealized appreciation (depreciation) as reported in the Schedule of Investments.
|
**
|
Refer to the Schedule of Investments for breakdown of Call Options Written classified as Level 2.
|
Investment Transactions
Investment transactions are recorded on a trade date basis. Realized gains and losses from investment transactions are determined on the
specific identification method, which is the same for federal income tax purposes.
Investment Income
Interest income, which reflects the amortization of premiums and includes accretion of discount for financial reporting purposes, is
recorded on an accrual basis.
Brokerage Commissions and Fees
The Fund pays its respective brokerage commissions, including applicable clearing costs, exchange fees, NFA fees, give-up fees, pit
brokerage fees and other transaction-related fees and expenses, incurred in connection with trading activities for the Funds investment in CFTC regulated investments.
19
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2012
(Unaudited)
2. Summary of Significant Accounting Policies (Continued)
Income Taxes
No provision for federal, state, and local income taxes has been made in the accompanying financial statements because the Fund has elected to be classified as a partnership for U.S. federal income tax
purposes. Each owner of the Funds shares will be required to take into account its allocable share of the Funds income, gains, losses, deductions and other items for the Funds taxable year.
For all open tax years and all major taxing jurisdictions, the Manager of the Fund has concluded that there are no significant uncertain
tax positions that would require recognition in the financial statements. Open tax years are those that are open for examination by taxing authorities (i.e., generally the last four tax year ends and the interim tax period since then). Furthermore,
the Manager of the Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Expense Recognition
All expenses of the Fund are recognized on an accrual basis. The Fund pays all routine and extraordinary costs and expenses of its
operations, brokerage expenses, custody fees, transfer agent expenses, professional fees, expenses of preparing, printing and distributing reports, notices, information statements, proxy statements, reports to governmental agencies, and taxes, if
any.
Offering Costs
During April 2011, the Fund filed a Registration Statement on Form S-1 with the SEC to register additional shares of the Fund for future issuance. Costs incurred by the Fund in connection with a future
offering were recorded as a deferred charge, which are recognized as a component of Other assets on the Statements of Financial Condition. Due to market conditions the offering has not taken place. During September 2012, the Manager
concluded that some of the costs incurred by the Fund should be expensed since they would not benefit the Fund in a future offering. These costs are recognized as Offering costs on the Statements of Operations.
Custodian Fee Credit
The Fund has an arrangement with its custodian bank, State Street Bank and Trust Company, whereby certain custodian fees and expenses are
reduced by net credits earned on the Funds cash on deposit. Such deposit arrangements are an alternative to overnight investments. Credits for cash balances may be offset by charges for any days on which the Fund overdraws its account at the
custodian bank.
Calculation of Net Asset Value
The net asset value per share of the Fund on any given day is computed by dividing the value of all assets of the Fund (including any
accrued interest), less all liabilities (including accrued expenses and distributions declared but unpaid), by the total number of shares outstanding.
Distributions
The Fund intends to make regular monthly distributions to its shareholders (stated in terms of a fixed cents per share distribution rate) based on the past and projected performance of the Fund. Among
other factors, the
20
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2012
(Unaudited)
2. Summary of Significant Accounting Policies (Continued)
Fund seeks to establish a distribution rate that roughly corresponds to the Managers projections of the total return that could reasonably be expected to be generated by the Fund over an
extended period of time. Each monthly distribution is not solely dependent on the amount of income earned or capital gains realized by the Fund, and such distributions may from time to time represent a return of capital and may require that the Fund
liquidate investments. As market conditions and portfolio performance may change, the rate of distribution on the shares and the Funds distribution policy could change. The Fund reserves the right to change its distribution policy and the
basis for establishing the rate of its monthly distributions, or may temporarily suspend or reduce distributions without a change in policy, at any time and may do so without prior notice to shareholders.
Distributions to shareholders are recorded on the ex-dividend date.
Commitments and Contingencies
Under the Funds organizational documents, the Manager, Wilmington Trust Company (the Funds Delaware trustee) and the
Managers Independent Committee members are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, in the normal course of business, the Fund enters into contracts that provide general
indemnifications to other parties. The Funds maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or
losses pursuant to these contracts and expects the risk of loss to be immaterial.
Financial Instrument Risk
In the normal course of its business, the Fund is party to financial instruments with off-balance sheet risk. The term off-balance
sheet risk refers to an unrecorded potential liability that, even though it does not appear on the Statements of Financial Condition, may result in a future obligation or loss. The financial instruments used by the Fund are commodity futures
and options, whose values are based upon an underlying asset and generally represent future commitments that have a reasonable possibility of being settled in cash or through physical delivery. As of September 30, 2012 and December 31, 2011,
the financial instruments held by the Fund are traded on an exchange and are standardized contracts.
Market risk is the
potential for changes in the value of the financial instruments traded by the Fund due to market changes, including fluctuations in commodity prices. In entering into futures contracts, there exists a market risk that such futures contracts may be
significantly influenced by adverse market conditions, resulting in such futures contracts being less valuable. If the markets should move against all of the futures contracts at the same time, the Fund could experience substantial losses.
Credit risk is the possibility that a loss may occur due to failure of a counterparty to perform according to the terms of the
forwards, futures and option contracts. Credit risk with respect to exchange-traded instruments is reduced to the extent that an exchange or clearing organization acts as a counterparty to the transactions. The Funds risk of loss in the event
of counterparty default is typically limited to the amounts recognized on the Statements of Financial Condition and not represented by the contract or notional amounts of the instruments.
21
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2012
(Unaudited)
3. Derivative Instruments and Hedging Activities
The Fund records derivative instruments at fair value, with changes in fair value recognized on the Statements of
Operations. For additional information on the derivative instruments in which the Fund invested during and at the end of the reporting period, refer to the Schedule of Investments and Footnote 2 Summary of Significant Accounting Policies.
The following tables present the fair value of all derivative instruments held by the Fund, the location of these instruments
on the Statements of Financial Condition and the primary underlying risk exposure.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
2012
Location on the Statements of Financial Condition
|
|
Underlying
Risk Exposure
|
|
Derivative
Instrument
|
|
Asset Derivatives
|
|
|
Liability Derivatives
|
|
|
|
Location
|
|
Value
|
|
|
Location
|
|
Value
|
|
|
|
Commodity
|
|
Futures Contracts
|
|
Unrealized appreciation on futures contracts, net*
|
|
$
|
11,037,181
|
|
|
|
|
$
|
|
|
Commodity
|
|
Futures Contracts
|
|
Unrealized appreciation on futures contracts, net*
|
|
|
(3,715,319
|
)
|
|
|
|
|
|
|
Commodity
|
|
Options
|
|
|
|
|
|
|
|
Call options written, at value
|
|
|
(2,403,772
|
)
|
Total
|
|
|
|
|
|
$
|
7,321,862
|
|
|
|
|
$
|
(2,403,772
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
2011
Location on the Statements of Financial Condition
|
|
Underlying
Risk Exposure
|
|
Derivative
Instrument
|
|
Asset Derivatives
|
|
|
Liability Derivatives
|
|
|
|
Location
|
|
Value
|
|
|
Location
|
|
Value
|
|
|
|
Commodity
|
|
Futures Contracts
|
|
|
|
$
|
|
|
|
Unrealized depreciation on futures contracts, net*
|
|
$
|
(7,771,315
|
)
|
Commodity
|
|
Futures Contracts
|
|
|
|
|
|
|
|
Unrealized depreciation on futures contracts, net*
|
|
|
2,849,485
|
|
Commodity
|
|
Options
|
|
|
|
|
|
|
|
Call options written, at value
|
|
|
(551,457
|
)
|
Total
|
|
|
|
|
|
$
|
|
|
|
|
|
$
|
(5,473,287
|
)
|
*
|
Value represents cumulative gross unrealized appreciation (depreciation) of futures contracts as reported in the Schedule of Investments and not the Deposits with
brokers or the Unrealized appreciation (depreciation) on futures contracts, net as presented on the Statements of Financial Condition.
|
The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation
(depreciation) recognized on derivative instruments and the primary underlying risk exposure.
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Risk Exposure
|
|
Nine Months Ended
September 30, 2012
|
|
|
Year Ended
December 31, 2011
|
|
Net realized gain (loss) from:
|
|
|
|
|
|
|
|
|
Futures contracts
Call options written
|
|
$
|
(4,185,595
5,154,736
|
)
|
|
$
|
(2,120,418
10,035,572
|
)
|
Change in net unrealized appreciation (depreciation) of:
|
|
|
|
|
|
|
|
|
Futures contracts
Call options written
|
|
$
|
12,243,692
(1,730,403
|
)
|
|
$
|
(23,776,469
2,741,582
|
)
|
22
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2012
(Unaudited)
4. Related Parties
The Manager, the Commodity Sub-advisor (as of December 31, 2011) and the Collateral Sub-advisor are considered to be
related parties to the Fund.
For the services and facilities provided by the Manager, the Fund has agreed to pay the Manager
an annual management fee, payable monthly, based on the Funds average daily net assets, according to the following schedule:
|
|
|
|
|
Average Daily Net Assets
|
|
Management Fee
|
|
For the first $500 million
|
|
|
1.250
|
%
|
For the next $500 million
|
|
|
1.225
|
|
For the next $500 million
|
|
|
1.200
|
|
For the next $500 million
|
|
|
1.175
|
|
For net assets over $2 billion
|
|
|
1.150
|
|
Average daily net assets means the total assets of the Fund, minus the sum of its total liabilities.
The Manager and the Fund have entered into sub-advisory agreements with the Commodity Sub-advisor and the Collateral
Sub-advisor. Both the Commodity Sub-advisor and Collateral Sub-advisor (collectively, the Sub-advisors) are compensated for their services to the Fund from the management fees paid to the Manager.
5. Share Repurchase Program
On December 21, 2011, the Fund adopted an open-market share repurchase program allowing the Fund to repurchase an
aggregate of up to 10% of its outstanding common shares (approximately 920,000 shares) in open-market transactions at the Managers discretion.
Transactions in share repurchases were as follows:
|
|
|
|
|
|
|
|
|
|
|
Nine Months
Ended
September 30, 2012
|
|
|
Year Ended
December 31, 2011
|
|
Shares repurchased
|
|
|
(9,800
|
)
|
|
|
(38,000
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average price per share repurchased
|
|
$
|
20.77
|
|
|
$
|
19.68
|
|
|
|
|
|
|
|
|
|
|
23
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2012
(Unaudited)
6. Financial Highlights
The following financial highlights relate to investment performance and operations for a Fund share outstanding during
the three and nine months ended September 30, 2012 and the three and nine months ended September 30, 2011. The Net Asset Value presentation is calculated using average daily shares outstanding. The Ratios to Average Net Assets are calculated using
average daily net assets and have been annualized for periods less than a full fiscal year. The Total Returns at Net Asset Value and Market Value are based on the change in net asset value and market value, respectively, for a share during the
period. An investors return and ratios will vary based on the timing of purchasing and selling Fund shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30, 2012
|
|
|
September 30, 2011
|
|
|
September 30, 2012
|
|
|
September 30, 2011
|
|
Net Asset Value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value per share
beginning of period
|
|
$
|
21.43
|
|
|
$
|
25.97
|
|
|
$
|
23.21
|
|
|
$
|
26.74
|
|
Net investment income (loss)
|
|
|
(.11
|
)
|
|
|
(.10
|
)
|
|
|
(.29
|
)
|
|
|
(.30
|
)
|
Net realized and unrealized gain (loss)
|
|
|
1.98
|
|
|
|
(2.47
|
)
|
|
|
1.25
|
|
|
|
(2.17
|
)
|
Distributions
|
|
|
(.44
|
)
|
|
|
(.44
|
)
|
|
|
(1.31
|
)
|
|
|
(1.31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value per shareend of period
|
|
$
|
22.86
|
|
|
$
|
22.96
|
|
|
|
22.86
|
|
|
$
|
22.96
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value per sharebeginning of period
|
|
$
|
20.40
|
|
|
$
|
26.25
|
|
|
$
|
20.30
|
|
|
$
|
25.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value per shareend of period
|
|
$
|
22.02
|
|
|
$
|
20.52
|
|
|
$
|
22.02
|
|
|
$
|
20.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to Average Net Assets:
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)
|
|
|
(1.93
|
)%
|
|
|
(1.61
|
)%
|
|
|
(1.71
|
)%
|
|
|
(1.51
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
2.05
|
%
|
|
|
1.71
|
%
|
|
|
1.83
|
%
|
|
|
1.64
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Returns:
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on Net Asset Value
|
|
|
8.74
|
%
|
|
|
(10.05
|
)%
|
|
|
4.29
|
%
|
|
|
(9.83
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on Market Value
|
|
|
10.12
|
%
|
|
|
(20.39
|
)%
|
|
|
15.13
|
%
|
|
|
(16.39
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(b)
|
Total Return Based on Net Asset Value is the combination of changes in net asset value per share and the assumed reinvestment of distributions, if any, at net asset
value per share on the distribution payment date. The last distribution declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the net asset value per share at the end of
the period. Total returns are not annualized.
|
Total Return Based on Market Value is the combination of changes in
the market price per share and the assumed reinvestment of distributions, if any, at the ending market price per share on the distribution payment date. The last distribution declared in the period, which is typically paid on the first business
day of the following month, is assumed to be reinvested at the ending market price per share at the end of the period. Total returns are not annualized.
7. Subsequent Events
On October 5, 2012, the fund withdrew its Registration Statement on Form S-1 with the SEC to register additional shares
of the Fund for future issuance.
24
Item 2.
|
Managements Discussion and Analysis of Financial Condition and Results of Operations
|
This information should be read in conjunction with the financial statements and notes to financial statements included in Item 1 of
Part I of this Quarterly Report (the Report). The discussion and analysis includes forward-looking statements that generally relate to future events or future performance. In some cases, you can identify forward-looking statements by
terminology such as may, will, should, expect, plan, anticipate, believe, estimate, predict, potential or the negative of these
terms or other comparable terminology. These forward-looking statements are based on information currently available to Nuveen Commodities Asset Management, LLC (NCAM or the Manager), Gresham Investment Management LLC and its
Near Term Active division (such division referred to herein as Gresham or the Commodity Sub-advisor) and Nuveen Asset Management, LLC (Nuveen Asset Management or the Collateral Sub-advisor) and are
subject to a number of risks, uncertainties and other factors, both known and unknown, that could cause the actual results, performance, prospects or opportunities of the Nuveen Diversified Commodity Fund (the Fund) to differ materially
from those expressed in, or implied by, these forward-looking statements.
You should not place undue reliance on any
forward-looking statements. Except as expressly required by the federal securities laws, the Fund and the Manager undertake no obligation to publicly update or revise any forward-looking statements or the risks, uncertainties or other factors
described in this Report, as a result of new information, future events or changed circumstances or for any other reason after the date of this Report.
Introduction
The Fund is a commodity pool which
was organized as a Delaware statutory trust on December 7, 2005, and completed its initial public offering on September 30, 2010. The shares of the Fund trade on the NYSE MKT (formerly known as the NYSE Amex) under the ticker symbol
CFD. The Funds investment objective is to generate higher risk-adjusted total return than leading commodity market benchmarks. In pursuing its investment objective, the Fund invests directly in a diversified portfolio of commodity
futures and forward contracts to obtain broad exposure to all principal groups in the global commodity markets. The Fund is unleveraged, and the Funds commodity contract positions are fully collateralized with cash equivalents, U.S. government
securities, and other short-term, high grade debt securities. The Fund also writes commodity call options seeking to enhance the Funds risk-adjusted total return. The Manager focuses on the Dow Jones-UBS Commodity Index
®
(DJ-UBSCI) when evaluating the performance of the commodity futures, forwards, and options positions
(the commodity portfolio) in the Funds portfolio against the overall commodity market.
Results of Operations
The Quarter Ended September 30, 2012Fund Share Price
The Funds shares traded on the NYSE MKT at a price of $22.02 on the close of business on September 28, 2012 (the last trading day of the period). This represents an increase of 7.94% in share
price (not including an assumed reinvestment of distributions) from the $20.40 price at which the shares of the Fund traded on the close of business on June 29, 2012 (the last trading day of the previous fiscal period). The high and low
intra-day share prices for the quarter were $23.25 (September 24, 2012) and $20.20 (July 2, 2012), respectively. During the quarter, the Fund declared distributions totaling $0.435 per share to shareholders, of which $0.145 was paid on
October 1, 2012. The remainder was paid during the quarter. The cumulative total return on market value for the Fund, including the assumed reinvestment of distributions during the period, for the quarter ended September 30, 2012 was
10.12%. At September 28, 2012, the shares of the Fund traded at a 3.67% discount to the Funds net asset value of $22.86.
The
Quarter Ended September 30, 2011Fund Share Price
The Funds shares traded on the NYSE MKT at a price of
$20.52 on the close of business on September 30, 2011. This represented a decrease of 21.83% in share price (not including an assumed reinvestment of
25
distributions) from the $26.25 price at which the shares of the Fund traded on the close of business on June 30, 2011. The high and low share prices for the quarter were $27.39 (July 7,
2011) and $20.41 (September 30, 2011), respectively. During the quarter, the Fund declared distributions totaling $0.435 per share to shareholders, of which $0.145 was paid on October 3, 2011. The remainder was paid during the quarter. The
cumulative total return on market value for the Fund, including the assumed reinvestment of distributions during the period, for the quarter ended September 30, 2011 was -20.39%. At September 30, 2011, the shares of the Fund traded at a
10.63% discount to the Funds net asset value of $22.96.
The Quarter Ended September 30, 2012Net Assets of the Fund
The Funds net assets increased from $197.5 million as of June 30, 2012, to $210.7 million as of
September 30, 2012, an increase of $13.2 million. The increase in the Funds net assets was due to $13.7 million in net realized gains and $4.5 million in unrealized appreciation on the Funds commodity portfolio during the quarter, a
net investment loss of $1.0 million, and $4.0 million of distributions declared to shareholders.
The Funds commodity
and options portfolio gained approximately 9.0% during the quarter before considering the expenses of the Fund. The overall commodities market, as measured by the DJ-UBSCI, rose 9.7% during the quarter. The index rose during each month of the
quarter, with the bulk of gains recorded in July. Commodity performance continued to be driven by investor uncertainty over the global economic outlook, although anticipation of a third round of quantitative easing by the U.S. Federal Reserve and
apparent progress on solving the European debt crisis lifted some commodity markets at the end of the quarter. The effects of the severe drought across the United States also impacted a number of commodity markets, primarily agriculturals, livestock
and natural gas.
In aggregate, the Funds commodity portfolio underperformed the DJ-UBSCI by approximately 0.7% for the
quarter, before considering the expenses of the Fund. With respect to the different commodities groups, the Funds commodity portfolio outperformed the DJ-UBSCI for the quarter in energy, industrial metals, livestock, and foods and fibers, and
underperformed the DJ-UBSCI in agriculturals and precious metals.
Agricultural commodities were generally strong for the
third quarter, as the continuing severe drought reduced expected crop production and yields, thus tightening supplies. Grains prices made large gains in July and August, but moderated in September. Corn, soybeans and wheat gained 19%, 12% and 17%,
respectively, within the DJ-UBSCI. For the agricultural group, the Fund returned approximately 7.1%, versus 13.7% for the DJ-UBSCI. Within the agricultural commodity group, the Funds options writing hindered the Funds performance
when compared to the DJ-UBSCI.
Energy commodities also showed strength in the third quarter, up 12% as a group in the
DJ-UBSCI. Crude oil and refined products gained from concerns over several potential threats to near-term supplies including political tensions in the Middle East, production shortfalls in the North Sea, and refinery outages in the
United States from hurricanes and accidents. Natural gas gained in the quarter, benefiting from the hot summer weather and the consequent strong demand for gas to produce electricity for air conditioning. The Fund held larger portfolio
allocations than the DJ-UBSCI to all energy commodities except natural gas. For the energy group, the Fund portfolio returned approximately 12.8%, versus 11.9% for the DJ-UBSCI.
Industrial metals experienced large gains during the quarter: aluminum rose 9%, copper rose 7%, and nickel and zinc each gained 10% in
the DJ-UBSCI. Although weak performers earlier in the year, industrial metals rose on expectations of an improved global economy resulting from monetary easing by the Federal Reserve. The Funds portfolio weighting in industrial metals is
slightly lower than that of the DJ-UBSCI, but the Fund was able to retain premiums on options positions and therefore outperformed for the third quarter. For the industrial metals group, the Fund portfolio returned approximately 9.6%, versus 8.6%
for the DJ-UBSCI.
26
Livestock commodities were volatile during the third quarter. They rose early in the period
with grain prices, as the market expected ranchers to pass along the increased costs. Later in the quarter, however, because of higher feeding costs, farmers began to bring livestock to market early, increasing short-term supplies and sending prices
lower. Lean hogs were down 11% in the quarter, and live cattle prices were lower by approximately 3% in the DJ-UBSCI. For the overall livestock group, the Fund portfolio lost approximately 3.9%, compared to a loss of 5.8% for the DJ-UBSCI.
The precious metals group in the DJ-UBSCI gained 13.4% in the third quarter, primarily driven by a gain of almost 25% in
silver and a gain in gold of slightly more than 10%. Prices rose in anticipation of monetary easing by the U.S. Federal Reserve. For the precious metals group, the Fund portfolio returned approximately 13.3%, versus 13.4% for the DJ-UBSCI.
Foods and fibers were off for the quarter by 3% in the DJ-UBSCI, primarily on a 6% drop in sugar, which weakened on forecasts
that the sugar cane crop in Brazil would be larger than expected due to a favorable turn in the weather. Due to portfolio weights in coffee and cocoa contracts traded in the London International Financial Futures Exchange (LIFFE), which
are not part of the DJ-UBSCI, the Fund outperformed the DJ-UBSCI in foods and fibers for the third quarter. For the food and fibers group, the Funds portfolio lost approximately 0.2%, versus a loss of 3.3% for the DJ-UBSCI.
The commodity call option component of the portfolio had mixed results over the period. Even though the Fund lost some of the upside on
positions that were called, it served to limit the volatility of the overall portfolio. The Commodity Sub-advisor utilizes a quantitatively-driven strategy to set the call option strike prices it writes (sells) at various levels out of the money.
Typically, when a call options strike price is further out of the money, a greater upside potential remains, although this benefit can be offset by a smaller premium for selling the options.
During the quarter, a portion of the commodity portfolios options expired without being exercised, which benefited the Funds
performance. This allowed the Fund to earn the call option premium, offsetting some of the losses experienced in the futures positions, and in some cases, depending on the contract and time period, without sacrificing any appreciation. For example,
with respect to crude oil (WTI), out-of-the-money options with high relative premiums helped the portfolios performance. Heating oil and copper options also earned premiums offsetting futures losses. However, among the agricultural commodity
group, the Funds options writing limited the upside capture. This is illustrated by corn as prices rose approximately 19% in the quarter in the DJ-UBSCI, but the performance of the Funds corn position was approximately 7% over the same
period, reflecting the negative impact of forgone futures contract appreciation as the option contracts were exercised. That is, the premiums received on the options contracts were less than the foregone upside of the futures positions. For the
Funds commodity portfolio overall, the increased volatility in third quarter drove higher premiums for option writing.
During the quarter ended September 30, 2012, the Funds collateral investments generated interest income of $60,753.
The net asset value per share on September 30, 2012, was $22.86. This represents an increase of 6.67% in net asset value
(not including the effect of reinvesting distributions) from the $21.43 net asset value as of June 30, 2012. The Fund declared distributions of $0.435 per share during the quarter, of which $0.145 was paid on October 1, 2012. The remainder
was paid during the quarter. When these distributions are taken into account, the cumulative total return for the Fund on net asset value was 8.74% for the quarter ended September 30, 2012.
The Fund generated net income of $17.2 million for the quarter ended September 30, 2012, resulting from interest income of $0.1
million, net expenses of $1.1 million, net realized gains of $13.7 million, and net unrealized appreciation of $4.5 million.
27
The Quarter Ended September 30, 2011Net Assets of the Fund
The Funds net assets decreased from $240.7 million at June 30, 2011, to $212.7 million at September 30, 2011, a decrease
of $28.0 million. The decrease in the Funds net assets was due to $3.4 million in net realized losses and an increase of $19.6 million in the change in net unrealized depreciation on the Funds commodity portfolio during the quarter, a
net investment loss of $1.0 million, and $4.0 million of distributions declared to shareholders.
The Funds commodity
and options portfolio fell approximately 9.9% during the quarter before considering the expenses of the Fund. The overall commodities market, as measured by the DJ-UBSCI, fell 11.3% during the quarter. Commodity markets had a volatile quarter with
gains generated in July and August being overshadowed by losses in September. Commodity performance was driven by a lack of confidence in the overall market and macro level events, such as the continuing sovereign debt crisis in Europe that plagued
the majority of markets in the third quarter.
Even in this environment, two of the six principal commodity groups in the
Funds and the DJ-UBSCIs commodity portfolios increased in the third quarter of 2011. The increases came mainly from livestock, which experienced an increase of approximately 6%, and within that group its holding of lean hogs and live
cattle, which posted positive returns of approximately 11% and 5%, respectively. Gold had an increase of approximately 7% and helped the precious metals group post a small positive return for the quarter, despite losses in other precious metals such
as silver. The most significant decline came from the industrial metals group, which experienced a decline of approximately 22%, with all of its individual commodities losing over 21%, with the exception of aluminum, which was down approximately
16%. Energies, foods and fibers and agriculturals also decreased approximately 12%, 8% and 7%, respectively. When compared to its benchmark, the portfolio outperformed the DJ-UBSCI by approximately 1.4% for the quarter, before considering the
expenses of the Fund, due to the Funds commodity weighting differences and trading strategy. Three of the six commodity groups in which the Fund trades outperformed the benchmark, led by the portfolios investments in energy commodities,
which outperformed the DJ-UBSCI mainly due to the underweight in natural gas, along with the inclusion of Brent crude oil, which is held by the Fund but not held in the DJ-UBSCI. The Funds investments in the agricultural group also
outperformed the DJ-UBSCI, mostly due to the Funds smaller allocation to corn, soybeans, and soybean oil. Precious metals and foods and fibers slightly underperformed when compared to the DJ-UBSCI, but industrial metals had a more significant
underperformance due to the Fund being overweight on copper.
The commodity call option component of the portfolio was
generally successful over the period as it served to limit volatility without significant impact on the commodity futures contracts. The Commodity Sub-advisor utilizes a quantitatively driven strategy to set the call option strike prices it writes
(sells) at various levels out-of-the money. Typically, the more out-of-the-money a written call option strike price is, the more upside potential remains, though this is balanced by less premium received for selling the options. During the quarter,
several of the commodity portfolios options expired without being exercised. This allowed the Fund to earn the call option premium offsetting some of the losses experienced in the futures positions and without sacrificing any appreciation
depending on the contract and time period, which benefited the Funds performance. In certain cases earlier in the quarter where the futures price appreciation was significant, such as corn and silver, the options the Fund wrote were exercised,
which limited the Funds full participation in that commodity contracts gains. In July, while silver futures prices rose approximately 15%, the commodity portfolios futures and options performance was approximately 13% over the same
period, reflecting the impact of the forgone futures contract appreciation due to the option contracts being in-the-money. In total for the quarter, across all of the commodity and options holdings, the Funds commodity portfolio outperformed
the DJ-UBSCI by approximately 1.4% while experiencing less volatility.
During the quarter ended September 30, 2011, the
Funds collateral investments generated interest income of $60,406.
28
The net asset value per share on September 30, 2011, was $22.96. This represents a
decrease of 11.59% in net asset value (not including the effect of reinvesting distributions) from the $25.97 net asset value as of June 30, 2011. The Fund declared distributions of $0.435 per share during the quarter, of which $0.145 was paid
on October 3, 2011. The remainder was paid during the quarter. When these distributions are taken into account, the cumulative total return for the Fund on net asset value was -10.05% for the quarter ended September 30, 2011.
The Fund generated a net loss of $23.9 million for the quarter ended September 30, 2011, resulting from interest income of $0.1
million being offset by net expenses of $1.0 million, net realized losses of $3.4 million, and an increase in the change in net unrealized depreciation of $19.6 million.
The Nine Months Ended September 30, 2012Fund Share Price
The
Funds shares traded on the NYSE MKT at a price of $22.02 on the close of business on September 28, 2012 (the last trading day of the period). This represents an increase of 8.47% in share price (not including an assumed reinvestment of
distributions) from the $20.30 price at which the shares of the Fund traded on the close of business on December 30, 2011 (the last trading day of the previous fiscal period). The high and low intra-day share prices for the nine month
period were $24.98 (March 22, 2012) and $19.16 (June 1, 2012), respectively. During the nine month period, the Fund declared distributions totaling $1.305 per share to shareholders, of which $0.145 was paid on October 1, 2012. The
remainder was paid during the nine month period. The cumulative total return on market value for the Fund, including the assumed reinvestment of distributions, for the nine month period ended September 30, 2012, was 15.13%. As of
September 28, 2012, the shares of the Fund traded at a 3.67% discount to the Funds net asset value of $22.86.
The Nine Months
Ended September 30, 2011Fund Share Price
The Funds shares traded on the NYSE MKT at a price of $20.52 on
the close of business on September 30, 2011. This represented a decrease of 20.47% in share price (not including an assumed reinvestment of distributions) from the $25.80 price at which the shares of the Fund traded on the close of business on
December 31, 2010. The high and low share prices for the nine month period were $29.40 (April 29, 2011) and $20.41 (September 30, 2011), respectively. During the nine month period, the Fund declared distributions totaling $1.305 per share to
shareholders, of which $0.145 was paid on October 3, 2011. The remainder was paid during the period. The cumulative total return on market value for the Fund including the assumed reinvestment of distributions during the nine month period ended
September 30, 2011 was -16.39%. At September 30, 2011, the shares of the Fund traded at a 10.63% discount to the Funds net asset value of $22.96.
The Nine Months Ended September 30, 2012Net Assets of the Fund
The Funds net assets decreased from $214.2 million as of December 31, 2011, to $210.7 million as of September 30, 2012, a
decrease of $3.5 million. The decrease in the Funds net assets was due to $0.9 million in net realized gains and $10.5 million in unrealized appreciation on the Funds commodity portfolio during the period, a net investment loss of $2.7
million, $12.0 million of distributions declared to shareholders and a $0.2 million decrease in net assets due to share repurchases.
The Funds commodity portfolio and options portfolio gained approximately 5.8% during the first nine months of 2012, before considering the expenses of the Fund. The overall commodities market, as
measured by the DJ-UBSCI, gained 5.6%. Commodities markets generally rose during January and February 2012, but fell from March through May on investors concerns over the global economic outlook. Beginning in June, extreme heat throughout the
United States and other parts of the world boosted prices, particularly in the agricultural group, while geopolitical tensions and supply disruption lifted prices in the energy group.
In aggregate, the Funds commodity portfolio outperformed the DJ-UBSCI by approximately 0.22% for the first nine months of 2012,
before considering the expenses of the Fund. With respect to commodities groups, the
29
Funds commodity portfolio outperformed the DJ-UBSCI in energy, industrial metals, livestock, and foods and fibers, and underperformed the DJ-UBSCI in agriculturals and precious metals.
Agricultural commodities made small gains in the first quarter of 2012, but prices weakened through June as early crop
forecasts called for ideal growing conditions and record production. In July and August, however, severe drought gripped much of the United States, threatening the years harvest and driving prices of corn and soybeans to record levels. As the
growing season progressed, the production outlook improved, especially for soybeans, which benefited from late season rains. Soybeans gained 40% in the nine month period, and corn and wheat each gained 29% in the DJ-UBSCI. The Fund underperformed
the DJ-UBSCI in those commodities due to losses on option positions, but added value with an allocation to soybean meal, which is not included in the DJ-UBSCI. The Funds portfolio returned approximately 21.5% in the agricultural group, while
the DJ-UBSCI returned 28.6%.
In energy, prices fell from the start of 2012 through mid-June, on concerns over a decrease in
the demand for oil and refined products from a global economic slowdown, as well as growing crude oil inventories and natural gas production in the United States. Crude oil prices reversed in mid-June, however, on fears that political actions in the
Middle East might constrain global oil supplies. Additionally, in the United States, gasoline prices gained on refinery shutdowns, both planned and unplanned, and natural gas prices rose due to increased demand from power generation companies. WTI
crude oil prices fell 10% in the nine month period, while Brent crude rose 7%, as measured by the DJ-UBSCI. Also, natural gas prices fell 22% for the period overall, while gasoline prices were up 26% in the DJ-UBSCI. The Fund held a larger portfolio
allocation than the DJ-UBSCI in all energy commodities except natural gas, and thus outperformed the benchmark. The Funds portfolio gained 0.03% in the energy group, while the DJ-UBSCI lost 4.4%.
Prices of industrial metals lost ground from the start of 2012 through mid-June on a poor outlook for industrial production. The group
turned around in late August, rallying in anticipation of the benefits to global industrial production of further monetary easing by central banks. Performance of individual commodities was mixed, with aluminum off 1%, while copper and zinc were up
8% and 12%, respectively, in the DJ-UBSCI. The Funds portfolio returned 6.3% in the industrial metals group, while the DJ-UBSCI returned 4.4%.
Livestock prices were volatile throughout the nine month period, fluctuating during the first half of the year following the trend of grain prices, reflecting expectations of falling feed costs and a
generous supply of cattle and hogs later in the year. However, from July on, the severe drought and higher actual feed costs forced many ranchers to send their herds to market early, pulling prices back. For the first three quarters of 2012, prices
of lean hogs, feeder cattle and live cattle all were off, and the livestock group lost 8% in price, as measured by the DJ-UBSCI. The Fund had a greater allocation to livestock than the DJ-UBSCI, but outperformed the benchmark through its profits on
options positions. In particular, the Funds options on lean hogs added significant value in the third quarter. The Funds portfolio lost approximately 5.4% in the livestock group, while the DJ-UBSCI lost 7.9%.
Precious metals in the DJ-UBSCI advanced 15% for the nine month period, with a 23% gain in silver and a 12% rise in gold. The group
experienced sharp gains in January and February, which were reversed through the second half of July. Between then and the end of the third quarter, precious metals gained on anticipation of monetary easing by the U.S. Federal Reserve and other
central banks. The Funds portfolio returned approximately 14.5% in the precious metals group, while the DJ-UBSCI returned 14.6%.
All food and fiber commodities in the DJ-UBSCI benchmark experienced losses for 2012s first nine months, with cotton falling 17%, sugar 9%, and coffee 27% in the DJ-UBSCI. Prices fell steadily
through mid-June, and after staging a one-month rally, resumed their decline. Cotton prices were weak on concerns over global economic growth, while coffee and sugar prices were off due to larger-than-expected crops, as well as a slowdown in demand.
For the commodities in the DJ-UBSCI, the Fund holds approximately equal allocations. However, the portfolio also holds positions in LIFFE-traded coffee and cocoa. Neither is included in the DJ-UBSCI, and both experienced gains
30
for the nine month period, providing the Fund with an outperformance for the foods and fibers group. In addition the Funds option writing strategy added value in coffee traded in the
Intercontinental Exchange (ICE). The Funds portfolio lost approximately 10.9% in the foods and fibers group, while the DJ-UBSCI lost 16.7%.
During the first nine months of 2012, several of the Funds commodity portfolios options expired without being exercised. This allowed the Fund to earn the call option premium, and offset some
of the losses experienced in the futures positions without sacrificing any appreciation, benefiting the Funds performance. The option writing was most beneficial in the energy group, where option premiums helped cushion losses experienced in
both crude oil and natural gas positions. In certain cases, such as corn and soybeans, where the futures price appreciation was significant, the options which the Fund had written were exercised, thereby limiting the Funds full participation
in those commodity contracts gains. In total, across all of the commodity and options holdings, the Funds portfolio outperformed the DJ-UBSCI by approximately 0.22% before considering the expenses of the Fund, while experiencing less
volatility.
During the nine month period ended September 30, 2012, the Funds collateral investments generated
interest income of $183,931.
The net asset value per share as of September 30, 2012, was $22.86. This represents a
decrease of 1.51% in net asset value (not including the effect of reinvesting distributions) from the $23.21 net asset value as of December 31, 2011. The Fund declared distributions of $1.305 per share during the nine month period, of which
$0.145 was paid on October 1, 2012. The remainder was paid during the period. When these distributions are taken into account, the cumulative total return for the Fund on net asset value was 4.29% for the nine months ended September 30,
2012.
The Fund generated a net gain of $8.8 million for the nine month period ended September 30, 2012, resulting from
interest income of $0.2 million, net expenses of $2.9 million, net realized gains of $1.0 million, and net unrealized appreciation of $10.5 million.
The Nine Months Ended September 30, 2011Net Assets of the Fund
The Funds net assets decreased from $247.8 million at December 31, 2010, to $212.7 million at September 30, 2011, a
decrease of $35.1 million. The decrease in the Funds net assets was due to the realization of $20.0 million in gains from the Funds commodity portfolio during the period, offset by an increase of $40.2 million in the change in net
unrealized depreciation of the Funds commodity portfolio, a net investment loss of $2.8 million, and $12.1 million of distributions declared to shareholders.
The Funds commodity portfolio fell approximately 9.0% during the nine month period before considering the expenses of the Fund. The overall commodities market, as measured by the DJ-UBSCI, decreased
13.7%. Concerns in the second quarter of 2011 carried over into the third, especially in September. Specifically, continued uncertainty regarding Europes sovereign debt troubles and the future of global economic growth remain unresolved and,
as such, have created a market driven by headlines and uncertainty.
For the nine month period, four of the six principal
commodity groups in the DJ-UBSCI and the Funds commodity portfolio declined. Both livestock, driven by lean hogs and feeder cattle, and precious metals, driven by gold, however, increased by approximately 5% and 4%, respectively. Industrial
metals experienced a decrease of approximately 23% of its value, driven in large part by decreases of approximately 28% and 27% in the value of the Funds nickel and copper holdings, respectively. Agriculturals experienced a decrease of
approximately 16% due to a loss of approximately 27% in wheat and a loss in both soybean meal and soybean oil of approximately 16%. Energies and foods and fibers experienced a decrease of approximately 8% and 2%, respectively, during the period. For
the nine month period, the Funds commodity portfolio outperformed the DJ-UBSCI benchmark in four of the six commodity groups, with industrial metals having flat performance and precious metals being the sole underperformer driven by holdings
in gold and silver, which underperformed when compared to the DJ-UBSCI. The commodity portfolios holdings in the energy group had the largest
31
outperformance when compared to the DJ-UBSCI (by approximately 3.3%), largely due to the Funds smaller allocation to natural gas and the inclusion of Brent crude oil, which is not currently
held in the DJ-UBSCI portfolio. The commodity portfolios positions in soybeans, Chicago and Kansas City wheat, and sugar also contributed to the Funds outperformance of the DJ-UBSCI in the agricultural and foods and fibers group.
The commodity call option component of the investment strategy used by the Commodity Sub-advisor was generally successful
over the period as it served to limit volatility without sacrificing significant appreciation in the commodity futures contracts. The Commodity Sub-advisor utilizes a quantitatively driven strategy to set the call option strike prices it writes
(sells) at various levels out-of-the money. Typically, the more out-of-the-money a written call option strike price is, the more upside potential remains, though this is balanced by less premium received for selling the options. During the nine
month period, several of the commodity portfolios options expired without being exercised. This allowed the Fund to earn the call option premium, offsetting some of the losses experienced in the futures positions, without sacrificing any
appreciation depending on the contract and time period, which benefited the Funds performance. In certain cases where the futures price appreciation was significant the options the Fund wrote were exercised, which limited the Funds full
participation in that commodity contracts gains. In total, across all of the commodity and options holdings, the Funds commodity portfolio outperformed the DJ-UBSCI by approximately 4.6% before considering the expenses of the Fund, while
experiencing less volatility.
During the nine month period ended September 30, 2011, the Funds collateral
investments generated interest income of $244,262.
The net asset value per share on September 30, 2011, was $22.96. This
represents a decrease of 14.14% in net asset value (not including the effect of reinvesting distributions) from the $26.74 net asset value as of December 31, 2010. During the nine month period, the Fund declared distributions totaling $1.305
per share to shareholders, of which $0.145 was paid on October 3, 2011. The remainder was paid during the period. When these distributions are taken into account, the cumulative total return for the Fund on net asset value was -9.83% for the
nine month period ended September 30, 2011.
The Fund generated a net loss of $22.9 million for the nine month period
ended September 30, 2011, resulting from interest income of $0.2 million, offset by net expenses of $3.0 million, net realized gains of $20.0 million, and an increase in the change in net unrealized depreciation of $40.1 million.
Fund Total Returns
The following table presents selected total returns for the Fund as of September 30, 2012. Total returns based on net asset value and market value are based on the change in net asset value and
market value, respectively, for a share during the period presented. The total returns presented assume the reinvestment of distributions at net asset value on the distribution payment date for returns based on net asset value, and at market value
on the distribution payment date for returns based on market value. The last distribution declared in the period, which is typically paid on the first business day of the following month, is assumed to be reinvested at the net asset value per share
at the end of the period for total returns based on net asset value, and at the ending market price per share at the end of the period for total returns based on market value.
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Cumulative
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Average Annual
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1 Month
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3 Month
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6 Month
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9 Month
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1 Year
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Since Inception
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Market Value
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2.19
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%
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10.12
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%
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-0.60
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%
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15.13
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%
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16.23
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%
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1.01
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%
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Net Asset Value
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1.34
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%
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8.74
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%
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0.95
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%
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4.29
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%
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7.37
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%
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4.99
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%
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Since inception returns present performance for the period since the Funds commencement
of operations on September 27, 2010.
Returns represent past performance, which is no guarantee of future performance.
32
Commodity Weightings
The table below presents the composition of the Funds TAP PLUS
SM
strategy (Greshams long-only rules-based investment strategy,
which uses futures and forward contracts to gain exposure to commodities and options to enhance the Funds risk-adjusted total return) and the DJ-UBSCI as of September 30, 2012. This table serves as a guide to how the composition of the
Funds TAP PLUS
SM
investment strategy compared to
that of the DJ-UBSCI, a leading commodity market benchmark.
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Composition
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Commodity Group
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Commodity
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TAP PLUS
SM
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DJ-UBSCI
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Energy
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Crude Oil
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18.06
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%
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13.19
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%
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Heating Oil
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5.01
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%
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3.36
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%
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Natural Gas
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5.77
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%
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10.83
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%
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Unleaded Gas
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3.65
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%
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3.37
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%
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32.49
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%
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30.75
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%
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Industrial Metals
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Aluminum
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4.73
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%
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5.65
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%
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Copper
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9.72
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%
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7.28
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%
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Nickel
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1.63
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%
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2.38
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%
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Zinc
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1.37
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%
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3.31
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%
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Lead
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0.89
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%
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0.00
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%
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18.34
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%
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18.62
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%
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Agriculturals
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Corn
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5.80
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%
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7.02
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%
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Soybean
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6.50
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%
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8.80
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%
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Wheat
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3.99
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%
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6.42
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%
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Soybean Meal
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1.50
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%
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0.00
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%
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Soybean Oil
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1.36
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%
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3.28
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%
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19.15
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%
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25.52
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%
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Precious Metals
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Gold
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10.93
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%
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10.20
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%
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Silver
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3.85
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%
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3.16
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%
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Platinum
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0.79
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%
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0.00
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%
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Palladium
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0.39
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%
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0.00
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%
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15.96
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%
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13.36
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%
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Foods and Fibers
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Cotton
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1.80
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%
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1.41
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%
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Sugar
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3.12
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%
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3.11
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%
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Coffee
|
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2.25
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%
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1.91
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%
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Cocoa
|
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0.56
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%
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0.00
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%
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|
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|
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|
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7.73
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%
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6.43
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%
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|
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Livestock
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Live Cattle
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3.78
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%
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3.57
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%
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Lean Hogs
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1.73
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%
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1.75
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%
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Feeder Cattle
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|
0.82
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%
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0.00
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%
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|
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|
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|
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6.33
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%
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5.32
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%
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Total
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|
|
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100.00
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%
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100.00
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%
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33
Liquidity and Capital Resources
The Fund pursues its investment objective by taking long positions in commodity futures contracts and writing commodity call options as
part of an integrated program designed to enhance the risk-adjusted total return of the Funds commodity investments. The Funds investment activity in futures contracts and writing commodity call options does not require a significant
outlay of capital. The Fund does not intend to utilize leverage and its commodity contract positions are fully collateralized. Ordinary expenses and distributions are met by cash on hand, although distributions may at times consist of return of
capital and may require that the Fund liquidate investments. The Fund earns interest on its continuing investments in U.S. government securities and other short-term, high grade debt securities with any remaining cash balance on deposit with the
custodian earning custody fee credits. The Fund also generates cash from the premiums it receives when writing call options on the Funds futures contracts.
The Funds investments in commodity futures contracts and options on commodity futures contracts may be subject to periods of illiquidity because of market conditions, regulatory considerations and
other reasons. For example, commodity exchanges limit fluctuations in certain commodity futures contract prices during a single day by regulations referred to as daily limits. During a single day, no trades may be executed at prices
beyond the daily limit. Once the price of a futures contract for a particular commodity has increased or decreased by an amount equal to the daily limit, positions in the futures contract can neither be taken nor liquidated unless the traders are
willing to effect trades at or within the limit. Commodity futures prices have occasionally moved to the daily limit for several consecutive days with little or no trading. Such market conditions could prevent the Fund from promptly liquidating its
commodity futures positions.
The Funds shares trade on the NYSE MKT and shares are not redeemed by the Fund in the
normal course of business (although the Manager may decide to do so at its discretion), thereby alleviating the need for the Fund to have liquidity available for possible shareholder redemptions. On April 15, 2011, the Fund filed a Registration
Statement on Form S-1 with the Securities and Exchange Commission (SEC) to register additional shares of the Fund for future issuance. On June 8, 2011, the Fund filed Pre-Effective Amendment No.1 to Form S-1 with the SEC. On October 5,
2012, the Fund withdrew the S-1 filing. On December 21, 2011 the Fund announced the adoption of an open-market share repurchase program, whereby the Fund is authorized to repurchase an aggregate of up to 10% of its outstanding common shares in
open-market transactions. Refer to Part IIItem 2. Unregistered Sales of Equity Securities and Use of Proceeds in this Report for details of repurchase activity during the nine months ended September 30, 2012.
The Fund is unaware of any other trends, demands, conditions or events that are reasonably likely to result in material changes to the
Funds liquidity needs.
Because the Fund invests in commodity futures contracts, its capital is at risk from changes in
the value of these contracts (market risk) or the inability of clearing brokers or counterparties to perform under the terms of the contracts (credit risk).
Market Risk
Investing in commodity futures and forward contracts
involves the Fund entering into contractual commitments to purchase or sell a particular commodity at a specified date and price. The market risk associated with the Funds commitments to purchase commodities will be limited to the gross or
face amount of the contracts held.
The Funds exposure to market risk may be influenced by a number of factors,
including changes in international balances of payments and trade, currency devaluations and revaluations, changes in interest and foreign currency exchange rates, price volatility of commodity futures and forwards contracts and market liquidity,
weather, geopolitical events and other factors. These factors also affect the Funds investments in
34
options on commodity futures and forward contracts. The inherent uncertainty of the Funds investments as well as the development of drastic market occurrences could ultimately lead to a
loss of all or substantially all of investors capital.
Credit Risk
The Fund may be exposed to credit risk from its investments in commodity futures and forward contracts and options on commodity futures
and forward contracts resulting from the clearing house associated with a particular exchange failing to meet its obligations to the Fund. In general, clearing houses are backed by their corporate members who may be required to share in the
financial burden resulting from the nonperformance of one of their members, which should significantly reduce this credit risk. In cases where the clearing house is not backed by the clearing members (i.e., as in some foreign exchanges), it may be
backed by a consortium of banks or other financial institutions. There can be no assurance that any counterparty, clearing member or clearing house will meet its obligations to the Fund.
The Funds investment strategy attempts to moderate market risks, and the Commodity Sub-advisor attempts to minimize credit risks,
by requiring the Fund to abide by various investment limitations and policies, which include limiting margin accounts, investing only in liquid markets and permitting the use of stop-loss orders. The Commodity Sub-advisor implements procedures which
include, but are not limited to:
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|
|
Employing the options strategy to reduce directional risk (although there is no guarantee that the Funds options strategy will be successful);
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|
|
Executing and clearing trades only with creditworthy counterparties;
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|
|
Limiting the amount of margin or premium required for any one commodity contract or all commodities contracts combined; and
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|
|
Generally limiting transactions to contracts which are traded in sufficient volume to permit the efficient taking and liquidating of positions.
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A commodity broker, when acting as the Funds futures commission merchant in accepting orders for the
purchase or sale of domestic commodity futures contracts, is required by Commodity Futures Trading Commission (CFTC) regulations to separately account for, and segregate as belonging to the Fund, all assets of the Fund relating to
domestic futures investments. A commodity broker is not allowed to commingle such assets with other assets of, or held by, the commodity broker. In addition, CFTC regulations also require a commodity broker, when acting as the Funds futures
commission merchant, to hold in a separate account the assets of the Fund related to foreign commodity futures investments and not commingle such assets with other assets of, or held by, the commodity broker.
If the Fund purchases over-the-counter (OTC) commodity put options, the Fund will be exposed to credit risk that the
counterparty to the contract will not meet its obligations. In cases where the Fund purchases OTC commodity put options with a counterparty, the sole recourse of the Fund will be the financial resources of the counterparty to the transaction since
there is no clearing house to assume the obligations of the counterparty.
As it relates to the Funds assets held as
collateral for its investments in commodity futures and forwards contracts, there is credit risk present in the securities used to invest the Funds cash. While these consist of eligible cash equivalents and high-quality short-term debt
securities, like any investment, these too would be affected by any credit difficulties that might be experienced by their issuers.
Off-Balance Sheet Arrangements
As of September 30, 2012, the Fund has not utilized, nor does it expect to utilize in the future, special purpose entities to facilitate off-balance sheet financing arrangements and has no loan
guarantee arrangements or off-balance sheet arrangements of any kind other than agreements entered into in the normal course of business, which may include indemnification provisions related to certain risks service providers undertake in performing
35
services which are in the best interests of the Fund. While the Funds exposure under such indemnification provisions cannot be estimated, these general business indemnifications are not
expected to have a material impact on the Funds financial position.
Contractual Obligations
The Funds contractual obligations are with the Manager, the Collateral Sub-advisor, the Commodity Sub-advisor, the custodian, the
transfer agent, the commodity broker and, to the extent that the Fund enters into OTC transactions, dealers. Management fee payments made to the Manager are calculated as a fixed percentage of the Funds net assets. The custodian fee is
calculated based on the Funds assets and trading activity. The transfer agent fee is calculated based on the total number of registered accounts. Commission payments to the commodity broker are on a contract-by-contract basis, and payments to
forward contract dealers are usually based on a fee or percentage of the notional value of the contract. The Manager cannot anticipate the amount of payments that will be required under these arrangements for future periods, as these payments are
based on figures which are not known until a future date. Additionally, these agreements may be terminated by either party for various reasons.
Critical Accounting Policies
The Funds critical accounting policies are as follows:
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Preparation of the financial statements and related disclosures in conformity with accounting principles generally accepted in the United States
requires the application of appropriate accounting rules and guidance, as well as the use of estimates and assumptions. The Funds application of these policies involves judgments and actual results may differ from the estimates used.
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The Fund holds a significant portion of its assets in options and futures contracts, and high quality debt instruments, all of which are recorded on a
trade date basis and at fair value, with changes in fair value reported on the Statements of Operations as changes in net unrealized appreciation (depreciation).
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|
The use of fair value to measure financial instruments, with related unrealized appreciation (depreciation) recognized in earnings in each period, is
fundamental to the Funds financial statements.
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|
The fair value of a financial instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date.
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|
Generally, commodity futures and forward contracts and options on commodity futures and forward contracts traded on an exchange will be valued at the
final settlement price or official closing price as determined by the principal exchange on which the instruments are traded as supplied by independent pricing services. OTC commodity futures and forward contracts and options on commodity futures
and forward contracts not traded on an exchange will be valued, in order of hierarchy, by independent pricing services, price quotations obtained from counterparty broker-dealers, or through fair valuation methodologies as determined by the Manager.
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Market quotations for exchange-traded commodity futures and forward contracts and options on commodity futures and forward contracts may not be readily
available as a result of significant events, which can include, but are not limited to: trading halts or suspensions, market disruptions, or the absence of market makers willing to make a market in such instruments. In addition, events may occur
after the close of the market, but prior to the determination of the Funds net asset value, which may affect the values of the Funds investments. In such circumstances, the Manager will determine a fair valuation for such investments
that in its opinion is reflective of fair market value.
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|
Realized gains (losses) on investment transactions are determined on a specific identification basis and recognized in the Statements of Operations in
the period in which they occur.
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|
Interest income, which reflects the amortization of premiums and includes accretion of discounts for financial reporting purposes, is recorded on an
accrual basis.
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36