Item 1.
|
Financial Statements
|
NUVEEN DIVERSIFIED COMMODITY FUND
STATEMENTS OF FINANCIAL CONDITION
At September 30, 2013 (Unaudited) and December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013
|
|
|
December 31, 2012
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Short-term investments, at value
(cost $151,740,078 and $170,455,110)
|
|
$
|
151,793,207
|
|
|
$
|
170,486,289
|
|
Deposits with brokers
|
|
|
24,736,503
|
|
|
|
31,490,459
|
|
Unrealized appreciation on futures contracts
|
|
|
2,128,793
|
|
|
|
2,671,325
|
|
Other assets
|
|
|
1,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
178,659,519
|
|
|
|
204,648,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
Call options written, at value (premiums received $875,299 and $974,047, respectively)
|
|
|
429,030
|
|
|
|
536,013
|
|
Unrealized depreciation on futures contracts
|
|
|
3,226,629
|
|
|
|
6,454,358
|
|
Payable for distributions
|
|
|
1,198,501
|
|
|
|
|
|
Accrued expenses:
|
|
|
|
|
|
|
|
|
Management fees
|
|
|
181,527
|
|
|
|
210,988
|
|
Independent Committee fees
|
|
|
12,518
|
|
|
|
20,123
|
|
Other
|
|
|
323,452
|
|
|
|
284,683
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
5,371,657
|
|
|
|
7,506,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS CAPITAL
|
|
|
|
|
|
|
|
|
Paid-in capital, unlimited number of shares authorized, 9,219,240 shares issued and outstanding at September 30, 2013 and
December 31, 2012
|
|
|
219,835,071
|
|
|
|
219,835,071
|
|
Accumulated undistributed earnings (deficit)
|
|
|
(46,547,209
|
)
|
|
|
(22,693,163
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders capital (Net assets)
|
|
|
173,287,862
|
|
|
|
197,141,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders capital
|
|
$
|
178,659,519
|
|
|
$
|
204,648,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net assets
|
|
$
|
173,287,862
|
|
|
$
|
197,141,908
|
|
|
|
|
Shares outstanding
|
|
|
9,219,240
|
|
|
|
9,219,240
|
|
|
|
|
|
|
|
|
|
|
Net asset value per share outstanding (net assets divided by shares outstanding)
|
|
$
|
18.80
|
|
|
$
|
21.38
|
|
|
|
|
|
|
|
|
|
|
Market value per share outstanding
|
|
$
|
16.55
|
|
|
$
|
19.97
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial
statements.
3
SCHEDULE
NUVEEN DIVERSIFIED COMMODITY FUND
SCHEDULE OF INVESTMENTS (Unaudited)
September 30, 2013
Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
Amount (000)
|
|
|
Description
|
|
Coupon
|
|
|
Maturity
|
|
|
Ratings
(1)
|
|
|
Value
|
|
|
|
|
|
Short-Term Investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and Agency Obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 16,000
|
|
|
U.S. Treasury Bills
|
|
|
0.000
|
%
|
|
|
12/12/13
|
|
|
|
Aaa
|
|
|
$
|
15,999,600
|
|
|
14,300
|
|
|
U.S. Treasury Bills
|
|
|
0.000
|
%
|
|
|
1/09/14
|
|
|
|
Aaa
|
|
|
|
14,299,700
|
|
|
15,000
|
|
|
U.S. Treasury Bills
|
|
|
0.000
|
%
|
|
|
2/06/14
|
|
|
|
Aaa
|
|
|
|
14,999,205
|
|
|
11,900
|
|
|
U.S. Treasury Bills
|
|
|
0.000
|
%
|
|
|
3/06/14
|
|
|
|
Aaa
|
|
|
|
11,899,227
|
|
|
15,500
|
|
|
U.S. Treasury Bills
|
|
|
0.000
|
%
|
|
|
4/03/14
|
|
|
|
Aaa
|
|
|
|
15,497,427
|
|
|
15,500
|
|
|
U.S. Treasury Bills
|
|
|
0.000
|
%
|
|
|
5/01/14
|
|
|
|
Aaa
|
|
|
|
15,496,125
|
|
|
12,000
|
|
|
U.S. Treasury Bills
|
|
|
0.000
|
%
|
|
|
5/29/14
|
|
|
|
Aaa
|
|
|
|
11,996,400
|
|
|
15,500
|
|
|
U.S. Treasury Bills
|
|
|
0.000
|
%
|
|
|
6/26/14
|
|
|
|
Aaa
|
|
|
|
15,493,939
|
|
|
17,000
|
|
|
U.S. Treasury Bills
|
|
|
0.000
|
%
|
|
|
7/24/14
|
|
|
|
Aaa
|
|
|
|
16,991,262
|
|
|
9,000
|
|
|
U.S. Treasury Bills
|
|
|
0.000
|
%
|
|
|
8/21/14
|
|
|
|
Aaa
|
|
|
|
8,993,925
|
|
|
8,000
|
|
|
U.S. Treasury Bills
|
|
|
0.000
|
%
|
|
|
9/18/14
|
|
|
|
Aaa
|
|
|
|
7,993,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 149,700
|
|
|
Total U.S. Government And Agency Obligations
(cost $149,606,833)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
149,659,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase Agreements
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ 2,133
|
|
|
Repurchase Agreement with State Street Bank, dated 9/30/13, repurchase price $2,133,245, collateralized by $2,175,000 U.S. Treasury Notes, 0.875%, due 2/28/17, value
$2,179,296
|
|
|
0.000
|
%
|
|
|
10/01/13
|
|
|
|
N/A
|
|
|
$
|
2,133,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Repurchase Agreements (cost $2,133,245)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,133,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Short-Term Investments (cost $151,740,078)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
151,793,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in Derivatives
Futures Contracts outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
Group
|
|
Contract
|
|
Contract
Position
(2)
|
|
|
Contract
Expiration
|
|
|
Number
of
Contracts
(3)
|
|
|
Notional
Amount
at
Value
(3)
|
|
|
Unrealized
Appreciation
(Depreciation)
|
|
Energy
|
|
Crude Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Brent Crude Oil Futures Contract
|
|
|
Long
|
|
|
|
November 2013
|
|
|
|
122
|
|
|
$
|
13,221,140
|
|
|
$
|
(132,605
|
)
|
|
|
ICE Brent Crude Oil Futures Contract
|
|
|
Long
|
|
|
|
December 2013
|
|
|
|
3
|
|
|
|
322,290
|
|
|
|
(30
|
)
|
|
|
ICE Brent Crude Oil Futures Contract
|
|
|
Long
|
|
|
|
January 2014
|
|
|
|
48
|
|
|
|
5,113,920
|
|
|
|
(100,310
|
)
|
|
|
NYMEX Crude Oil Futures Contract
|
|
|
Long
|
|
|
|
November 2013
|
|
|
|
171
|
|
|
|
17,498,430
|
|
|
|
(22,640
|
)
|
|
|
NYMEX Crude Oil Futures Contract
|
|
|
Long
|
|
|
|
December 2013
|
|
|
|
4
|
|
|
|
407,600
|
|
|
|
|
|
|
|
NYMEX Crude Oil Futures Contract
|
|
|
Long
|
|
|
|
January 2014
|
|
|
|
24
|
|
|
|
2,427,600
|
|
|
|
(58,620
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Crude Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(314,205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Heating Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Gas Oil Futures Contract
|
|
|
Long
|
|
|
|
November 2013
|
|
|
|
26
|
|
|
|
2,371,200
|
|
|
|
(104,275
|
)
|
|
|
NYMEX NY Harbor ULSD Futures Contract
|
|
|
Long
|
|
|
|
November 2013
|
|
|
|
51
|
|
|
|
6,364,953
|
|
|
|
(174,070
|
)
|
|
|
NYMEX NY Harbor ULSD Futures Contract
|
|
|
Long
|
|
|
|
January 2014
|
|
|
|
7
|
|
|
|
871,416
|
|
|
|
(46,360
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Heating Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(324,705
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX Natural Gas Futures Contract
|
|
|
Long
|
|
|
|
November 2013
|
|
|
|
273
|
|
|
|
9,718,800
|
|
|
|
(117,538
|
)
|
|
|
NYMEX Natural Gas Futures Contract
|
|
|
Long
|
|
|
|
December 2013
|
|
|
|
6
|
|
|
|
223,740
|
|
|
|
|
|
|
|
NYMEX Natural Gas Futures Contract
|
|
|
Long
|
|
|
|
January 2014
|
|
|
|
55
|
|
|
|
2,107,050
|
|
|
|
(70,650
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Natural Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(188,188
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
NUVEEN DIVERSIFIED COMMODITY FUND
SCHEDULE OF INVESTMENTS (Continued) (Unaudited)
September 30, 2013
Investments in Derivatives (Continued)
Futures Contracts outstanding (Continued):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
Group
|
|
Contract
|
|
Contract
Position
(2)
|
|
|
Contract
Expiration
|
|
|
Number
of
Contracts
(3)
|
|
|
Notional
Amount
at
Value
(3)
|
|
|
Unrealized
Appreciation
(Depreciation)
|
|
Energy
|
|
Unleaded Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(continued)
|
|
NYMEX Gasoline RBOB Futures Contract
|
|
|
Long
|
|
|
|
November 2013
|
|
|
|
45
|
|
|
$
|
4,967,298
|
|
|
$
|
(122,485
|
)
|
|
|
NYMEX Gasoline RBOB Futures Contract
|
|
|
Long
|
|
|
|
January 2014
|
|
|
|
10
|
|
|
|
1,094,520
|
|
|
|
(53,495
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Unleaded Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(175,980
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,003,078
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Metals
|
|
Aluminum
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LME Primary Aluminum Futures Contract
|
|
|
Long
|
|
|
|
October 2013
|
|
|
|
170
|
|
|
|
7,676,562
|
|
|
|
174,250
|
|
|
|
LME Primary Aluminum Futures Contract
|
|
|
Long
|
|
|
|
November 2013
|
|
|
|
2
|
|
|
|
91,250
|
|
|
|
|
|
|
|
LME Primary Aluminum Futures Contract
|
|
|
Short
|
|
|
|
October 2013
|
|
|
|
(1
|
)
|
|
|
(45,156
|
)
|
|
|
(413
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Aluminum
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
173,837
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Copper
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEC Copper Futures Contract
|
|
|
Long
|
|
|
|
December 2013
|
|
|
|
75
|
|
|
|
6,230,625
|
|
|
|
30,637
|
|
|
|
CEC Copper Futures Contract
|
|
|
Long
|
|
|
|
March 2014
|
|
|
|
20
|
|
|
|
1,666,500
|
|
|
|
16,900
|
|
|
|
LME Copper Futures Contract
|
|
|
Long
|
|
|
|
October 2013
|
|
|
|
44
|
|
|
|
8,014,875
|
|
|
|
385,825
|
|
|
|
LME Copper Futures Contract
|
|
|
Short
|
|
|
|
October 2013
|
|
|
|
(1
|
)
|
|
|
(182,156
|
)
|
|
|
(4,856
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Copper
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
428,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nickel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LME Nickel Futures Contract
|
|
|
Long
|
|
|
|
October 2013
|
|
|
|
26
|
|
|
|
2,167,698
|
|
|
|
38,610
|
|
|
|
LME Nickel Futures Contract
|
|
|
Short
|
|
|
|
October 2013
|
|
|
|
(1
|
)
|
|
|
(83,373
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Nickel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zinc
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LME Zinc Futures Contract
|
|
|
Long
|
|
|
|
October 2013
|
|
|
|
48
|
|
|
|
2,265,600
|
|
|
|
63,394
|
|
|
|
LME Zinc Futures Contract
|
|
|
Short
|
|
|
|
October 2013
|
|
|
|
(1
|
)
|
|
|
(47,200
|
)
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Zinc
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lead
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LME Lead Futures Contract
|
|
|
Long
|
|
|
|
October 2013
|
|
|
|
27
|
|
|
|
1,415,644
|
|
|
|
4,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Industrial Metals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
708,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculturals
|
|
Corn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CBOT Corn Futures Contract
|
|
|
Long
|
|
|
|
December 2013
|
|
|
|
351
|
|
|
|
7,748,325
|
|
|
|
(694,581
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Soybean
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CBOT Soybean Futures Contract
|
|
|
Long
|
|
|
|
November 2013
|
|
|
|
125
|
|
|
|
8,017,187
|
|
|
|
140,188
|
|
|
|
CBOT Soybean Futures Contract
|
|
|
Long
|
|
|
|
January 2014
|
|
|
|
20
|
|
|
|
1,285,000
|
|
|
|
(50,800
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Soybean
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
89,388
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wheat
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CBOT Wheat Futures Contract
|
|
|
Long
|
|
|
|
December 2013
|
|
|
|
105
|
|
|
|
3,562,125
|
|
|
|
177,437
|
|
|
|
CBOT Wheat Futures Contract
|
|
|
Long
|
|
|
|
March 2014
|
|
|
|
7
|
|
|
|
240,450
|
|
|
|
(1,488
|
)
|
|
|
KCBT Wheat Futures Contract
|
|
|
Long
|
|
|
|
December 2013
|
|
|
|
105
|
|
|
|
3,882,375
|
|
|
|
178,413
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Wheat
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
354,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
NUVEEN DIVERSIFIED COMMODITY FUND
SCHEDULE OF INVESTMENTS (Continued) (Unaudited)
September 30, 2013
Investments in Derivatives (Continued)
Futures Contracts outstanding (Continued):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
Group
|
|
Contract
|
|
Contract
Position
(2)
|
|
|
Contract
Expiration
|
|
|
Number
of
Contracts
(3)
|
|
|
Notional
Amount
at
Value
(3)
|
|
|
Unrealized
Appreciation
(Depreciation)
|
|
Agriculturals
|
|
Soybean Meal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(continued)
|
|
CBOT Soybean Meal Futures Contract
|
|
|
Long
|
|
|
|
December 2013
|
|
|
|
78
|
|
|
$
|
3,162,120
|
|
|
$
|
290,520
|
|
|
|
CBOT Soybean Meal Futures Contract
|
|
|
Long
|
|
|
|
January 2014
|
|
|
|
9
|
|
|
|
362,970
|
|
|
|
(9,870
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Soybean Meal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
280,650
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Soybean Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CBOT Soybean Oil Futures Contract
|
|
|
Long
|
|
|
|
December 2013
|
|
|
|
97
|
|
|
|
2,392,020
|
|
|
|
(371,053
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Agriculturals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(341,234
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Precious Metals
|
|
Gold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEC Gold Futures Contract
|
|
|
Long
|
|
|
|
December 2013
|
|
|
|
126
|
|
|
|
16,720,200
|
|
|
|
(130,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Silver
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEC Silver Futures Contract
|
|
|
Long
|
|
|
|
December 2013
|
|
|
|
45
|
|
|
|
4,884,300
|
|
|
|
(700,550
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Platinum
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX Platinum Futures Contract
|
|
|
Long
|
|
|
|
January 2014
|
|
|
|
19
|
|
|
|
1,341,780
|
|
|
|
(26,320
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Palladium
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX Palladium Futures Contract
|
|
|
Long
|
|
|
|
December 2013
|
|
|
|
11
|
|
|
|
799,865
|
|
|
|
(21,945
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Precious Metals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(878,815
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foods and Fibers
|
|
Cotton
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Cotton Futures Contract
|
|
|
Long
|
|
|
|
December 2013
|
|
|
|
50
|
|
|
|
2,180,250
|
|
|
|
2,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sugar
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Sugar Futures Contract
|
|
|
Long
|
|
|
|
March 2014
|
|
|
|
171
|
|
|
|
3,474,173
|
|
|
|
101,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coffee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Coffee C Futures Contract
|
|
|
Long
|
|
|
|
December 2013
|
|
|
|
24
|
|
|
|
1,023,300
|
|
|
|
(103,725
|
)
|
|
|
LIFFE Coffee Robusta Futures Contract
|
|
|
Long
|
|
|
|
November 2013
|
|
|
|
42
|
|
|
|
689,640
|
|
|
|
(107,950
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Coffee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(211,675
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cocoa
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Cocoa Futures Contract
|
|
|
Long
|
|
|
|
December 2013
|
|
|
|
27
|
|
|
|
712,800
|
|
|
|
62,030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Foods and Fibers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(45,834
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
Live Cattle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CME Live Cattle Futures Contract
|
|
|
Long
|
|
|
|
October 2013
|
|
|
|
154
|
|
|
|
7,875,560
|
|
|
|
134,296
|
|
|
|
CME Live Cattle Futures Contract
|
|
|
Long
|
|
|
|
December 2013
|
|
|
|
15
|
|
|
|
791,850
|
|
|
|
14,390
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Live Cattle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
148,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lean Hogs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CME Lean Hog Futures Contract
|
|
|
Long
|
|
|
|
October 2013
|
|
|
|
80
|
|
|
|
2,943,200
|
|
|
|
252,043
|
|
|
|
CME Lean Hog Futures Contract
|
|
|
Long
|
|
|
|
December 2013
|
|
|
|
37
|
|
|
|
1,282,050
|
|
|
|
18,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Lean Hogs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
270,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Feeder Cattle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CME Feeder Cattle Futures Contract
|
|
|
Long
|
|
|
|
November 2013
|
|
|
|
18
|
|
|
|
1,486,800
|
|
|
|
41,822
|
|
|
|
CME Feeder Cattle Futures Contract
|
|
|
Long
|
|
|
|
January 2014
|
|
|
|
6
|
|
|
|
492,000
|
|
|
|
1,825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Feeder Cattle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Livestock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
462,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Futures Contracts outstanding
|
|
|
|
|
|
|
|
|
|
|
2,975
|
|
|
$
|
173,231,166
|
|
|
$
|
(1,097,836
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6
NUVEEN DIVERSIFIED COMMODITY FUND
SCHEDULE OF INVESTMENTS (Continued) (Unaudited)
September 30, 2013
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 2013
|
|
|
|
(85
|
)
|
|
$
|
118.5
|
|
|
$
|
(4,250
|
)
|
|
|
ICE Brent Crude Oil Futures Options
|
|
|
December 2013
|
|
|
|
(2
|
)
|
|
|
115.0
|
|
|
|
(1,220
|
)
|
|
|
NYMEX Crude Oil Futures Options
|
|
|
October 2013
|
|
|
|
(98
|
)
|
|
|
112.0
|
|
|
|
(4,900
|
)
|
|
|
NYMEX Crude Oil Futures Options
|
|
|
November 2013
|
|
|
|
(2
|
)
|
|
|
110.0
|
|
|
|
(1,140
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Crude Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,510
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Heating Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX NY Harbor ULSD Futures Options
|
|
|
October 2013
|
|
|
|
(39
|
)
|
|
|
3.2
|
|
|
|
(5,405
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX Natural Gas Futures Options
|
|
|
October 2013
|
|
|
|
(167
|
)
|
|
|
3,850.0
|
|
|
|
(50,100
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unleaded Gas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NYMEX Gasoline RBOB Futures Options
|
|
|
October 2013
|
|
|
|
(27
|
)
|
|
|
29,600.0
|
|
|
|
(4,763
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Energy
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(71,778
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Metals
|
|
Aluminum
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LME Primary Aluminum Futures
Options
(4)
|
|
|
October 2013
|
|
|
|
(85
|
)
|
|
|
1,900.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Copper
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LME Copper Futures Options
(4)
|
|
|
October 2013
|
|
|
|
(43
|
)
|
|
|
7,500.0
|
|
|
|
(140
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nickel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LME Nickel Futures Options
(4)
|
|
|
October 2013
|
|
|
|
(13
|
)
|
|
|
14,750.0
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Zinc
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LME Zinc Futures Options
(4)
|
|
|
October 2013
|
|
|
|
(24
|
)
|
|
|
1,975.0
|
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lead
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LME Lead Futures Options
(4)
|
|
|
October 2013
|
|
|
|
(14
|
)
|
|
|
2,200.0
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Industrial Metals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(154
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Agriculturals
|
|
Corn
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CBOT Corn Futures Options
|
|
|
November 2013
|
|
|
|
(175
|
)
|
|
|
520.0
|
|
|
|
(8,750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Soybean
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CBOT Soybean Futures Options
|
|
|
October 2013
|
|
|
|
(73
|
)
|
|
|
1,440.0
|
|
|
|
(7,300
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wheat
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CBOT Wheat Futures Options
|
|
|
November 2013
|
|
|
|
(56
|
)
|
|
|
690.0
|
|
|
|
(53,900
|
)
|
|
|
KCBT Wheat Futures Options
|
|
|
November 2013
|
|
|
|
(52
|
)
|
|
|
750.0
|
|
|
|
(54,275
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Wheat
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(108,175
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Soybean Meal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CBOT Soybean Meal Futures Options
|
|
|
November 2013
|
|
|
|
(44
|
)
|
|
|
430.0
|
|
|
|
(31,900
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Soybean Oil
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CBOT Soybean Oil Futures Options
|
|
|
November 2013
|
|
|
|
(48
|
)
|
|
|
510.0
|
|
|
|
(432
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Agriculturals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(156,557
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Precious Metals
|
|
Gold
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEC Gold Futures Options
|
|
|
November 2013
|
|
|
|
(63
|
)
|
|
|
1,435.0
|
|
|
|
(60,480
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
NUVEEN DIVERSIFIED COMMODITY FUND
SCHEDULE OF INVESTMENTS (Continued) (Unaudited)
September 30, 2013
Investments in Derivatives (Continued)
Call Options Written outstanding (Continued):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity
Group
|
|
Contract
|
|
Contract
Expiration
|
|
|
Number
of
Contracts
|
|
|
Strike
Price
|
|
|
Value
|
|
Precious Metals
|
|
Silver
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(continued)
|
|
CEC Silver Futures Options
|
|
|
November 2013
|
|
|
|
(23
|
)
|
|
$
|
2,800.0
|
|
|
$
|
(8,510
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Precious Metals
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(68,990
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foods and Fibers
|
|
Cotton
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Cotton Futures Options
|
|
|
November 2013
|
|
|
|
(25
|
)
|
|
|
96.0
|
|
|
|
(4,875
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sugar
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Sugar Futures Options
|
|
|
February 2014
|
|
|
|
(85
|
)
|
|
|
19.0
|
|
|
|
(44,744
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Coffee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Coffee C Futures Options
|
|
|
November 2013
|
|
|
|
(21
|
)
|
|
|
135.0
|
|
|
|
(1,732
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cocoa
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ICE Cocoa Futures Options
|
|
|
November 2013
|
|
|
|
(14
|
)
|
|
|
2,500.0
|
|
|
|
(22,680
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Foods and Fibers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(74,031
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
Live Cattle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CME Live Cattle Futures Options
|
|
|
October 2013
|
|
|
|
(103
|
)
|
|
|
130.0
|
|
|
|
(2,060
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lean Hogs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CME Lean Hogs Futures Options
|
|
|
October 2013
|
|
|
|
(59
|
)
|
|
|
90.0
|
|
|
|
(55,460
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Livestock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(57,520
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Call Options Written outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(premiums received $875,299)
|
|
|
|
|
|
|
(1,440
|
)
|
|
|
|
|
|
$
|
(429,030
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
NUVEEN DIVERSIFIED COMMODITY FUND
SCHEDULE OF INVESTMENTS (Continued) (Unaudited)
September 30, 2013
|
|
|
(1)
|
|
Ratings: Using the highest of Standard & Poors Group, Moodys Investors 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)
|
|
Total number of contracts and notional amount at value includes the net effect of LME short futures positions.
|
(4)
|
|
For fair value measurement disclosure purposes, these Call Options Written are classified as Level 2. See Notes to Financial Statements, Note 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
|
NY Harbor ULSD
|
|
New York Harbor Ultra-Low Sulfur Diesel
|
NYMEX
|
|
New York Mercantile Exchange
|
RBOB
|
|
Reformulated Gasoline Blendstock for Oxygen Blending
|
See accompanying notes to financial statements.
9
NUVEEN DIVERSIFIED COMMODITY FUND
STATEMENTS OF OPERATIONS (Unaudited)
For the Three Months Ended September 30, 2013 and September 30, 2012
and the Nine Months Ended September 30, 2013 and September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Investment Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
43,001
|
|
|
$
|
60,753
|
|
|
$
|
160,054
|
|
|
$
|
183,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Investment Income
|
|
|
43,001
|
|
|
|
60,753
|
|
|
|
160,054
|
|
|
|
183,931
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management fees
|
|
|
554,419
|
|
|
|
648,984
|
|
|
|
1,721,258
|
|
|
|
1,968,995
|
|
Brokerage commissions
|
|
|
23,526
|
|
|
|
32,317
|
|
|
|
97,537
|
|
|
|
116,255
|
|
Custodian fees and expenses
|
|
|
33,893
|
|
|
|
26,476
|
|
|
|
89,827
|
|
|
|
85,521
|
|
Offering costs
|
|
|
|
|
|
|
108,554
|
|
|
|
|
|
|
|
108,554
|
|
Independent Committee fees and expenses
|
|
|
12,518
|
|
|
|
30,500
|
|
|
|
39,642
|
|
|
|
86,861
|
|
Professional fees
|
|
|
138,028
|
|
|
|
169,176
|
|
|
|
376,365
|
|
|
|
387,079
|
|
Shareholder reporting expenses
|
|
|
59,529
|
|
|
|
42,709
|
|
|
|
110,499
|
|
|
|
113,797
|
|
Other expenses
|
|
|
6,877
|
|
|
|
6,451
|
|
|
|
23,773
|
|
|
|
17,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
828,790
|
|
|
|
1,065,167
|
|
|
|
2,458,901
|
|
|
|
2,884,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)
|
|
|
(785,789
|
)
|
|
|
(1,004,414
|
)
|
|
|
(2,298,847
|
)
|
|
|
(2,700,925
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain (loss) from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
|
949
|
|
|
|
140
|
|
|
|
2,228
|
|
|
|
(512
|
)
|
Futures contracts
|
|
|
(1,050,382
|
)
|
|
|
12,753,981
|
|
|
|
(16,242,645
|
)
|
|
|
(4,185,595
|
)
|
Call options written
|
|
|
1,136,064
|
|
|
|
918,562
|
|
|
|
3,586,076
|
|
|
|
5,154,736
|
|
Change in net unrealized appreciation (depreciation) of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
|
39,863
|
|
|
|
20,588
|
|
|
|
21,950
|
|
|
|
(7,588
|
)
|
Futures contracts
|
|
|
6,928,496
|
|
|
|
4,533,122
|
|
|
|
2,685,197
|
|
|
|
12,243,692
|
|
Call options written
|
|
|
(54,483
|
)
|
|
|
(20,858
|
)
|
|
|
8,235
|
|
|
|
(1,730,403
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net realized gain (loss) and change in net unrealized appreciation (depreciation)
|
|
|
7,000,507
|
|
|
|
18,205,535
|
|
|
|
(9,938,959
|
)
|
|
|
11,474,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
6,214,718
|
|
|
$
|
17,201,121
|
|
|
$
|
(12,237,806
|
)
|
|
$
|
8,773,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per weighted-average share
|
|
$
|
0.67
|
|
|
$
|
1.87
|
|
|
$
|
(1.33
|
)
|
|
$
|
0.95
|
|
Weighted-average shares outstanding
|
|
|
9,219,240
|
|
|
|
9,219,240
|
|
|
|
9,219,240
|
|
|
|
9,219,472
|
|
See
accompanying notes to financial statements.
10
NUVEEN DIVERSIFIED COMMODITY FUND
STATEMENTS OF CHANGES IN SHAREHOLDERS CAPITAL
For the Nine Months Ended September 30, 2013 (Unaudited) and the Year Ended December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2013
|
|
|
Year Ended
December 31, 2012
|
|
Shareholders capitalbeginning of period
|
|
$
|
197,141,908
|
|
|
$
|
214,180,129
|
|
Issuance of shares, net of offering costs
|
|
|
|
|
|
|
|
|
Repurchase of shares
|
|
|
|
|
|
|
(203,766
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in shareholders capital resulting from operations:
|
|
|
|
|
|
|
|
|
Net investment income (loss)
|
|
|
(2,298,847
|
)
|
|
|
(3,626,137
|
)
|
Net realized gain (loss) from:
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
|
2,228
|
|
|
|
(425
|
)
|
Futures contracts
|
|
|
(16,242,645
|
)
|
|
|
(5,031,471
|
)
|
Call options written
|
|
|
3,586,076
|
|
|
|
7,166,083
|
|
Change in net unrealized appreciation (depreciation) of:
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
|
21,950
|
|
|
|
(1,266
|
)
|
Futures contracts
|
|
|
2,685,197
|
|
|
|
1,138,797
|
|
Call options written
|
|
|
8,235
|
|
|
|
(438,556
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
(12,237,806
|
)
|
|
|
(792,975
|
)
|
|
|
|
|
|
|
|
|
|
Distributions to shareholders
|
|
|
(11,616,240
|
)
|
|
|
(16,041,480
|
)
|
|
|
|
|
|
|
|
|
|
Shareholders capitalend of period
|
|
$
|
173,287,862
|
|
|
$
|
197,141,908
|
|
|
|
|
|
|
|
|
|
|
Sharesbeginning of period
|
|
|
9,219,240
|
|
|
|
9,229,040
|
|
Issuance of shares
|
|
|
|
|
|
|
|
|
Repurchase of shares
|
|
|
|
|
|
|
(9,800
|
)
|
|
|
|
|
|
|
|
|
|
Sharesend of period
|
|
|
9,219,240
|
|
|
|
9,219,240
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to financial
statements.
11
NUVEEN DIVERSIFIED COMMODITY FUND
STATEMENTS OF CASH FLOWS (Unaudited)
For the Nine Months Ended September 30, 2013 and September 30, 2012
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
2013
|
|
|
2012
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(12,237,806
|
)
|
|
$
|
8,773,405
|
|
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
|
|
|
|
|
|
|
|
|
Purchases of short-term investments
|
|
|
(455,899,511
|
)
|
|
|
(1,133,582,615
|
)
|
Proceeds from sales and maturities of short-term investments
|
|
|
474,776,712
|
|
|
|
1,130,385,341
|
|
Premiums received for call options written
|
|
|
3,983,067
|
|
|
|
6,650,363
|
|
Cash paid for call options written
|
|
|
(495,739
|
)
|
|
|
(1,373,715
|
)
|
Amortization (Accretion)
|
|
|
(159,941
|
)
|
|
|
766,431
|
|
(Increase) Decrease in:
|
|
|
|
|
|
|
|
|
Deposits with brokers
|
|
|
6,753,956
|
|
|
|
14,572,769
|
|
Interest receivable
|
|
|
|
|
|
|
561,049
|
|
Other assets
|
|
|
(1,016
|
)
|
|
|
88,449
|
|
Increase (Decrease) in:
|
|
|
|
|
|
|
|
|
Accrued management fees
|
|
|
(29,461
|
)
|
|
|
(13,497
|
)
|
Accrued independent committee fees
|
|
|
(7,605
|
)
|
|
|
|
|
Accrued other expenses
|
|
|
38,769
|
|
|
|
45,876
|
|
Net realized (gain) loss from:
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
|
(2,228
|
)
|
|
|
512
|
|
Call options written
|
|
|
(3,586,076
|
)
|
|
|
(5,154,736
|
)
|
Change in net unrealized (appreciation) depreciation of:
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
|
(21,950
|
)
|
|
|
7,588
|
|
Futures contracts
|
|
|
(2,685,197
|
)
|
|
|
(12,243,692
|
)
|
Call options written
|
|
|
(8,235
|
)
|
|
|
1,730,403
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
10,417,739
|
|
|
|
11,213,931
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Cash paid for shares repurchased
|
|
|
|
|
|
|
(519,611
|
)
|
Cash distributions paid to shareholders
|
|
|
(10,417,739
|
)
|
|
|
(10,694,320
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(10,417,739
|
)
|
|
|
(11,213,931
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
|
|
|
|
|
|
Cashbeginning of period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cashend of period
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to financial statements.
12
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited)
September 30, 2013
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 Investments), is a
Delaware limited liability company registered as a commodity pool operator 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 (the 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 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 its affiliate, 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.
The Manager has selected its affiliate, Nuveen Asset Management, LLC (Nuveen Asset Management or the
Collateral Sub-advisor), to manage the Funds collateral invested in cash equivalents, U.S. government securities and other 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, U.S. government securities and other short-term, high grade debt securities.
|
13
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
September 30, 2013
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 presentation of Unrealized appreciation and depreciation on futures contracts on the Statements of Financial
Condition has been reclassified to conform to the September 30, 2013 presentation.
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, 2012.
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 execution of a futures contract, the Fund is obligated to deposit cash or eligible securities, also known as initial margin, into an
account at its clearing broker. Generally investments in futures contracts also obligate the investor and the clearing broker to settle monies on a daily basis representing changes in the prior days mark-to-market of the open contracts.
If the investor has unrealized appreciation the clearing broker would credit the investors account with an amount equal to appreciation and conversely if the investor has unrealized depreciation the clearing broker would debit the investors account
with an amount equal to depreciation. These daily cash settlements are also known as variation margin. In lieu of posting variation margin daily, the Fund has deposited cash with the clearing broker, generally representing approximately
twice the required initial margin to cover the initial margin and the daily changes in the market value of its futures investments. Cash held by the clearing broker to cover both 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 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.
14
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
September 30, 2013
2. Summary of Significant Accounting Policies (Continued)
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.
The average number of futures contracts outstanding during the nine months ended
September 30, 2013 and the fiscal year ended December 31, 2012 was as follows:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2013
|
|
|
Year Ended
December 31, 2012
|
|
Average number of futures contracts outstanding*
|
|
|
3,128
|
|
|
|
3,518
|
|
|
|
|
|
|
|
|
|
|
*
|
The average number of contracts is calculated based on the outstanding number of contracts at the beginning of the fiscal year and at the end of each quarter within the
current fiscal year.
|
Refer to Note 3
Derivative Instruments and Hedging Activities within these Notes to Financial Statements 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, 2013 and the fiscal year ended December 31, 2012, the Fund wrote call options on futures contracts.
The Fund did not purchase options on futures or forward contracts during the nine months ended September 30, 2013 and the fiscal year
ended December 31, 2012. 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.
15
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
September 30, 2013
2. Summary of Significant Accounting Policies (Continued)
Transactions in call options written were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2013
|
|
|
Year Ended
December 31, 2012
|
|
|
|
Number of
Contracts
|
|
|
Premiums
Received
|
|
|
Number of
Contracts
|
|
|
Premiums
Received
|
|
Outstanding, beginning of period
|
|
|
1,537
|
|
|
$
|
974,047
|
|
|
|
1,657
|
|
|
$
|
1,428,047
|
|
Options written
|
|
|
8,046
|
|
|
|
3,983,067
|
|
|
|
12,756
|
|
|
|
8,160,238
|
|
Options terminated in closing purchase transactions
|
|
|
(4,412
|
)
|
|
|
(2,204,496
|
)
|
|
|
(6,408
|
)
|
|
|
(3,529,781
|
)
|
Options expired
|
|
|
(2,809
|
)
|
|
|
(1,416,832
|
)
|
|
|
(4,686
|
)
|
|
|
(3,614,858
|
)
|
Options exercised
|
|
|
(922
|
)
|
|
|
(460,487
|
)
|
|
|
(1,782
|
)
|
|
|
(1,469,599
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, end of the period
|
|
|
1,440
|
|
|
$
|
875,299
|
|
|
|
1,537
|
|
|
$
|
974,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The average number of call options written outstanding during the nine months ended September 30, 2013 and the
fiscal year ended December 31, 2012 was as follows:
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, 2013
|
|
|
Year Ended
December 31, 2012
|
|
Average number of call options written outstanding*
|
|
|
1,471
|
|
|
|
1,627
|
|
|
|
|
|
|
|
|
|
|
*
|
The average number of contracts is calculated based on the outstanding number of contracts at the beginning of the fiscal year and at the end of each quarter within the
current fiscal year.
|
Refer to Note 3 Derivative Instruments and Hedging Activities within these Notes to
Financial Statements for further details on options activity.
Forward Contracts
The Fund may enter into forward contracts but did not make any such investments during the nine months ended September 30, 2013 and
the fiscal year ended December 31, 2012. 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.
16
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
September 30, 2013
2. Summary of Significant Accounting Policies (Continued)
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.
Netting Agreements
In the ordinary course of business, the Fund has entered into transactions subject to enforceable master repurchase agreements or other similar arrangements (netting agreements). Generally,
the right to offset in netting agreements allows the Fund to offset any exposure to a specific counterparty with any collateral received or delivered to that counterparty based on the terms of the agreements. The Fund manages its cash collateral and
securities collateral on a counterparty basis. As of September 30, 2013 and December 31, 2012, the Fund was not invested in any portfolio securities or derivatives, other than the repurchase agreements further described below, that are
subject to netting agreements.
Repurchase Agreements
In connection with transactions in repurchase agreements, it is the Funds policy that its custodian take possession of the
underlying collateral securities, the fair value of which exceeds the principal amount of the repurchase transaction, including accrued interest, at all times. If the counterparty defaults, and the fair value of the collateral declines, realization
of the collateral may be delayed or limited.
The following table presents the repurchase agreements for the Fund, presented on
the Statements of Financial Condition and recognized as a component of Short-term investments, at value, that are subject to netting agreements as of the end of the reporting period, and the collateral delivered related to those
repurchase agreements.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013
|
|
|
|
Counterparty
|
|
|
Short-Term
Investments, at
Value
|
|
|
Collateral Pledged
(From)
Counterparty*
|
|
|
Net
Exposure
|
|
Repurchase Agreements
|
|
|
State Street Bank
|
|
|
$
|
2,133,245
|
|
|
$
|
(2,133,245
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
Counterparty
|
|
|
Short-Term
Investments, at
Value
|
|
|
Collateral Pledged
(From)
Counterparty*
|
|
|
Net
Exposure
|
|
Repurchase Agreements
|
|
|
State Street Bank
|
|
|
$
|
583,450
|
|
|
$
|
(583,450
|
)
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
As of September 30, 2013 and December 31, 2012, the value of the collateral pledged from the counterparty exceeded the value of the repurchase agreements. Refer to
the Schedule of Investments as of the end of each reporting period for details on the repurchase agreements.
|
17
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
September 30, 2013
2. Summary of Significant Accounting Policies (Continued)
Collateral Investments
Currently, approximately 15% of the Funds net assets are committed to secure the Funds futures contract positions. These
assets are placed in a commodity futures account maintained by the Funds clearing broker, and are held in high-quality instruments permitted under CFTC regulations.
The Funds 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, U.S. government securities and other high-quality short-term debt securities with final terms not exceeding one year at the time of investment. The collateral portfolios debt
securities (other than U.S. government securities) are rated at the highest applicable rating as determined by at least one nationally recognized statistical rating organization, or if unrated, judged by the Collateral
Sub-advisor
to be of comparable quality.
Investment Valuation
Commodity futures contracts and options on commodity futures 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 agency discount notes and U.S. Treasury bills, 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, 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
18
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
September 30, 2013
2. Summary of Significant Accounting Policies (Continued)
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).
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, 2013 and December 31, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Short-Term Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and Agency Obligations
|
|
$
|
|
|
|
$
|
149,659,962
|
|
|
$
|
|
|
|
$
|
149,659,962
|
|
Repurchase Agreements
|
|
|
|
|
|
|
2,133,245
|
|
|
|
|
|
|
|
2,133,245
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts*
|
|
|
(1,097,836
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,097,836
|
)
|
Call Options Written**
|
|
|
(428,876
|
)
|
|
|
(154
|
)
|
|
|
|
|
|
|
(429,030
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(1,526,712
|
)
|
|
$
|
151,793,053
|
|
|
$
|
|
|
|
$
|
150,266,341
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Short-Term Investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government and Agency Obligations
|
|
$
|
|
|
|
$
|
169,902,839
|
|
|
$
|
|
|
|
$
|
169,902,839
|
|
Repurchase Agreements
|
|
|
|
|
|
|
583,450
|
|
|
|
|
|
|
|
583,450
|
|
Derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Futures Contracts*
|
|
|
(3,783,033
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,783,033
|
)
|
Call Options Written**
|
|
|
(502,586
|
)
|
|
|
(33,427
|
)
|
|
|
|
|
|
|
(536,013
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(4,285,619
|
)
|
|
$
|
170,452,862
|
|
|
$
|
|
|
|
$
|
166,167,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Represents net unrealized appreciation (depreciation) as reported in the Schedule of Investments as of the end of each reporting period.
|
**
|
Refer to the Schedule of Investments as of the end of each reporting period for breakdown of Call Options Written classified as Level 2.
|
The Manager is responsible for the Funds valuation process and has delegated daily oversight of the process to the Managers
Valuation Committee. The Valuation Committee, pursuant to its valuation policies and procedures, is responsible for making fair value determinations, evaluating the effectiveness of the Funds pricing policies, and reporting to the
Managers senior management. The Valuation Committee is aided in its efforts by the Managers Securities Valuation Team, which is responsible for administering the daily valuation process and applying fair value methodologies as approved
by the Valuation Committee. When determining the reliability of independent pricing services for investments owned by the Fund, the Valuation Committee, among other things, conducts due diligence reviews of the pricing services and monitors the
quality of security prices received through various testing reports conducted by the Securities Valuation Team.
19
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
September 30, 2013
2. Summary of Significant Accounting Policies (Continued)
For each portfolio instrument that has been fair valued pursuant to the Valuation
Committees policies, the fair value price is compared against the last available and next available market quotations. The Valuation Committee reviews the results of such testing and fair valuation occurrences are reported to the
Managers senior management.
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 discounts for financial reporting purposes, is
recorded on an accrual basis.
Brokerage Commissions and Fees
The Fund pays 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 its commodity trading activities.
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 2011 and 2012 in connection
with the planned offering were recorded as a deferred charge and recognized as a component of Other assets on the Statements of Financial Condition during the fiscal year ended December 31, 2011. Due to adverse market conditions the
offering did not take place and the Fund withdrew the
Form S-1
filing during October 2012. As a
20
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
September 30, 2013
2. Summary of Significant Accounting Policies (Continued)
result, the costs incurred by the Fund were expensed in 2012 since they would not benefit the Fund in a future offering and the Manager reimbursed the Fund for half of such costs. These costs are
recognized as Offering costs on the Statements of Operations.
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. Among other factors, the Manager seeks to establish a distribution
rate that roughly corresponds to its projections of the total return that could reasonably be expected to be generated by the Fund over an extended period of time. In the event that the amount of income earned or capital gains realized by the Fund
is not sufficient to cover the Funds distributions, the Fund may be required to liquidate investments to fund distributions at times or on terms that are disadvantageous to the Fund and its shareholders. As market conditions and portfolio
performance may change, the rate of distribution on the shares and the Funds distribution policy could change. The Manager reserves the right to change the Funds distribution policy and the basis for establishing the rate of the
Funds 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 believes the risk of loss to be remote.
Financial Instrument Risk
The Fund utilizes 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, 2013 and December 31, 2012, the financial instruments held by the Fund were 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. 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 options on commodity futures and forward contracts. The
21
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
September 30, 2013
2. Summary of Significant Accounting Policies (Continued)
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 is the possibility that a loss may occur due to failure of a counterparty performing according to the
terms of the forwards, futures and option contracts. 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 commodity markets have volatility risk.
The commodity markets have experienced periods of extreme volatility. General market uncertainty and consequent repricing risk have led to market
imbalances of sellers and buyers, which in turn have resulted in significant reductions in values of a variety of commodities. Similar future market conditions may result in rapid and substantial valuation increases or decreases in the Funds
holdings. In addition, volatility in the commodity and securities markets may directly and adversely affect the setting of distribution rates on the Funds shares.
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.
The following tables present the fair value of all derivative instruments held by the Fund as of
September 30, 2013 and December 31, 2012, the location of these instruments on the Statements of Financial Condition and the primary underlying risk exposure.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2013
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
|
|
$
|
2,128,793
|
|
|
Unrealized depreciation on futures contracts
|
|
$
|
3,226,629
|
|
Commodity
|
|
Options
|
|
|
|
|
|
|
|
Call options written, at value
|
|
|
429,030
|
|
Total
|
|
|
|
|
|
$
|
2,128,793
|
|
|
|
|
$
|
3,655,659
|
|
|
|
|
|
|
|
|
December 31, 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
|
|
$
|
2,671,325
|
|
|
Unrealized depreciation on futures contracts
|
|
$
|
6,454,358
|
|
Commodity
|
|
Options
|
|
|
|
|
|
|
|
Call options written, at value
|
|
|
536,013
|
|
Total
|
|
|
|
|
|
$
|
2,671,325
|
|
|
|
|
$
|
6,990,371
|
|
*
|
Amounts have been reclassified to conform to the current presentation.
|
22
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
September 30, 2013
3. Derivative Instruments and Hedging Activities (Continued)
The following table presents the amount of net realized gain (loss) and change in net
unrealized appreciation (depreciation) recognized on derivative instruments on the Statements of Operations and the primary underlying risk exposure.
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Risk Exposure
|
|
Nine Months Ended
September 30, 2013
|
|
|
Nine Months Ended
September 30, 2012
|
|
Net realized gain (loss) from:
|
|
|
|
|
|
|
|
|
Futures contracts
|
|
$
|
(16,242,645
|
)
|
|
$
|
(4,185,595
|
)
|
Call options written
|
|
|
3,586,076
|
|
|
|
5,154,736
|
|
Change in net unrealized appreciation (depreciation) of:
|
|
|
|
|
|
|
|
|
Futures contracts
|
|
$
|
2,685,197
|
|
|
$
|
12,243,692
|
|
Call options written
|
|
|
8,235
|
|
|
|
(1,730,403
|
)
|
4. Related Parties
The Manager, the Commodity Sub-advisor 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 pays 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
are compensated for their services to the Fund from the management fees paid to the Manager, and the Fund does not reimburse the Manager for those fees.
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, 2013
|
|
|
Year Ended
December 31,
2012
|
|
Shares repurchased
|
|
|
|
|
|
|
9,800
|
|
|
|
|
|
|
|
|
|
|
Weighted average price per share repurchased
|
|
$
|
|
|
|
$
|
20.77
|
|
|
|
|
|
|
|
|
|
|
23
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
September 30, 2013
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, 2013 and the three and nine months ended September 30, 2012. 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, 2013
|
|
|
September 30, 2012
|
|
|
September 30, 2013
|
|
|
September 30, 2012
|
|
Net Asset Value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value per share
beginning of period
|
|
$
|
18.51
|
|
|
$
|
21.43
|
|
|
$
|
21.38
|
|
|
$
|
23.21
|
|
Net investment income (loss)
|
|
|
(.09
|
)
|
|
|
(.11
|
)
|
|
|
(.25
|
)
|
|
|
(.29
|
)
|
Net realized and unrealized gain (loss)
|
|
|
0.77
|
|
|
|
1.98
|
|
|
|
(1.07
|
)
|
|
|
1.25
|
|
Distributions
|
|
|
(0.39
|
)
|
|
|
(.44
|
)
|
|
|
(1.26
|
)
|
|
|
(1.31
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net asset value per shareend of period
|
|
$
|
18.80
|
|
|
$
|
22.86
|
|
|
$
|
18.80
|
|
|
|
22.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market Value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value per sharebeginning of period
|
|
$
|
17.07
|
|
|
$
|
20.40
|
|
|
$
|
19.97
|
|
|
$
|
20.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value per shareend of period
|
|
$
|
16.55
|
|
|
$
|
22.02
|
|
|
$
|
16.55
|
|
|
$
|
22.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratios to Average Net Assets:
(a)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (loss)
|
|
|
(1.77
|
)%
|
|
|
(1.93
|
)%
|
|
|
(1.67
|
)%
|
|
|
(1.71
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
1.87
|
%
|
|
|
2.05
|
%
|
|
|
1.79
|
%
|
|
|
1.83
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Returns:
(b)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on Net Asset Value
|
|
|
3.66
|
%
|
|
|
8.74
|
%
|
|
|
(6.29
|
)%
|
|
|
4.29
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on Market Value
|
|
|
(0.78
|
)%
|
|
|
10.12
|
%
|
|
|
(11.33
|
)%
|
|
|
15.13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
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 or otherwise, 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 commenced operations on September 27, 2010, with its initial public offering. 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, and 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.
Results of Operations
The Quarter Ended September 30,
2013Fund Share Price
The Funds shares traded on the NYSE MKT at a price of $16.55 on the close of business on
September 30, 2013. This represents a decrease of 3.05% in share price (not including an assumed reinvestment of distributions) from the $17.07 price at which the shares of the Fund traded on the close of business on June 28, 2013 (the
last trading day of the previous quarter). The high and low intra-day share prices for the quarter were $17.60 (September 10, 2013) and $16.04 (August 8, 2013), respectively. During the quarter, the Fund declared distributions totaling $0.390 per
share to shareholders, of which $0.130 was paid on October 1, 2013. The remainder was paid during the quarter. The Funds cumulative total return on market value for the quarter, which assumes reinvestment of such distributions, was
-0.78%. At September 30, 2013, the shares of the Fund traded at a 11.97% discount to the Funds net asset value of $18.80.
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
25
of business on June 29, 2012 (the last trading day of the previous quarter). 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 Funds cumulative total return
on market value for the quarter, which assumes reinvestment of such distributions, 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, 2013Net Assets of the Fund
The Funds net assets increased from $170.7 million as of June 30, 2013, to $173.3 million as of September 30, 2013, an
increase of $2.6 million. The increase in the Funds net assets was due to $0.1 million in net realized gains and $6.9 million in net unrealized appreciation on the Funds portfolio during the quarter, a net investment loss of $0.8
million, and $3.6 million of distributions to shareholders.
During the quarter ended September 30, 2013, the Funds
collateral investments generated interest income of $43,001, which represents 0.02% of average net assets for the quarter ended September 30, 2013.
The net asset value per share on September 30, 2013, was $18.80. This represents an increase of 1.57% in net asset value (not including an assumed reinvestment of distributions) from the $18.51 net
asset value as of June 30, 2013. The Fund declared distributions totaling $0.390 per share during the quarter. When an assumed reinvestment of these distributions is taken into account, the cumulative total return for the Fund on net asset
value was 3.66% for the quarter ended September 30, 2013.
The Fund generated a net gain of $6.2 million for the quarter
ended September 30, 2013, resulting from expenses of $0.8 million, net realized gains of $0.1 million, and net unrealized appreciation of $6.9 million.
The Quarter Ended September 30, 2013Overall Commodity Market Commentary
Commodity markets were influenced by two major themes during the third quarter of 2013, the anticipation of an earlier-than-expected reduction in the pace of the U.S. Federal Reserves asset
purchases (known as quantitative easing or QE) and the escalation of geopolitical tension in the Middle East. The broad commodity market rose 2.1% for the quarter, as measured by the DJ-UBSCI. The strongest performing group was precious metals,
followed by industrial metals, energy, and livestock. The foods and fibers group was relatively flat, and agriculture fell during the quarter.
Energy commodities represented 36.7% of the DJ-UBSCI at the end of the quarter, and were its most significant commodity group by weight. The prices of both Brent and West Texas Intermediate (WTI) crude
oil rallied during the quarter as geopolitical turmoil in the Middle East threatened supplies. Heating oil and gasoline also rose. Natural gas, however, declined amid robust inventories and mild weather forecasts.
Agricultural commodities, as grouped by Gresham, made up 20.4% of the DJ-UBSCI at the end of the quarter. As in the second quarter, corn
prices continued to be pressured by expectations for a supply glut as the harvest peaked in the third quarter. Soybean oil also saw declining prices because of high surplus and low demand. In contrast, soybean prices were lifted by concerns about
poor crop conditions and low 2012 supply.
Industrial metals represented 16.5% of the DJ-UBSCI at the end of the quarter. All
of the industrial metals advanced during the quarter, led by copper. Robust demand is expected from China, which pledged to increase infrastructure spending and recently posted better economic data. The continuation of QE and improving unemployment
data in the U.S. also supported coppers gain.
Precious metals represented 12.6% of the DJ-UBSCI at the end of the
quarter. Near-term spot prices indicated high demand for physical gold, at levels not seen since 1999. Individuals in Asian and Middle Eastern
26
countries have been buying physical gold for jewelry and coins/bars, and the perception of gold as a safe haven for investors during times of economic uncertainty further contributed
to golds advance. Silver prices also strengthened, and in fact outperformed gold in August, benefiting from increasing Asian demand and large inflows into silver-oriented exchange traded funds.
Foods and fibers, as grouped by Gresham, made up a combined 8.3% of the DJ-UBSCI at the end of the quarter. Although cotton and sugar had
positive performance for the quarter, it was almost entirely offset by weakness in coffee. Coffee remained in a bear market since mid-May due to ample supply amid favorable crop conditions.
Livestock was the smallest group, comprising 5.6% of the DJ-UBSCI at the end of the quarter. Demand during the summer grilling season and
concerns about supply shortages buoyed lean hog prices. Live cattle prices rallied in August after Tyson Foods and other food producers discontinued the use of a cattle feed supplement designed to speed weight gain, fueling concerns that declining
cattle weights could potentially hurt beef supplies.
The Quarter Ended September 30, 2013Fund Commodity Portfolio
Commentary
The Funds commodity portfolio returned approximately 4.0% (before considering the expenses of the Fund or
the performance of the collateral portfolio), outperforming the DJ-UBSCI, which returned 2.1% for the quarter. The Funds total return on net asset value for the quarter, which includes the effect of the Funds expenses, the performance of
the collateral portfolio and assumes the reinvestment of the Funds distributions, was a gain of 3.66%. At the commodity group level, the Fund outperformed the DJ-UBSCI on an absolute basis in energy, agriculturals, foods and fibers, industrial
metals, and livestock, but underperformed the DJ-UBSCI in precious metals.
The Fund writesthat is, sellscovered
options on its commodity futures, seeking to limit return volatility, and to provide cash flow for the Funds distributions. Gresham sells exchange-traded commodity call options on approximately 50% of the value of each of the Funds
commodity futures contracts, when those contracts are deemed to have sufficient trading volume and liquidity. The Fund receives cash for the related premiums. The Funds option-writing activity benefitted Fund performance for the quarter as
most of the contracts written went unexercised. For the quarter ended September 30, 2013, the Funds option program helped to contribute to the commodity portfolios lower volatility when compared to the DJ-UBSCI, as measured by the
standard deviation of return.
The Funds energy positions gained approximately 5.1% versus the DJ-UBSCIs 2.8%. On
a weighted basis, a larger weight in crude oil, which rose during the period, and a smaller weight in natural gas, which fell, drove the Funds outperformance over the DJ-UBSCI. Detracting slightly from relative performance were options
positions in WTI that were exercised.
The Funds agricultural positions fell approximately 1.9%, while the
DJ-UBSCIs were down nearly 4.0%. The Funds smaller weightings in both corn and soybean oil aided outperformance on a weighted basis. Additionally, the Funds corn position benefited from better contract selection and more
advantageous timing in rolling some of its futures contracts, as well as the collection of option premiums on contracts that expired without being exercised.
In industrial metals, the Fund was up approximately 5.3%, compared to the DJ-UBSCI positions 4.3% return. The Funds performance in this group was aided by its options strategy, as none of the
options written were exercised.
The Funds precious metals positions returned approximately 8.5% versus the
DJ-UBSCIs 9.0%, in part because the Funds silver options were exercised, which detracted from absolute Fund performance in silver. However, the Fund slightly outperformed the DJ-UBSCI on a weighted basis, as the Fund held a 13.7% weight
in the group and the DJ-UBSCI held 12.6%. This relative overweight provided the Fund with greater exposure to the groups overall gain.
27
The Fund outperformed the DJ-UBSCI in foods and fibers, gaining approximately 3.1% versus
the
DJ-UBSCIs
0.9%. The Funds underweight to coffee was the main driver of outperformance for the group.
The Funds livestock positions, up approximately 4.2%, also outpaced the DJ-UBSCIs, up 2.6%. On a weighted basis, the Fund slightly outperformed the DJ-UBSCI, as the Funds larger
weighting amplified the positive effect of a rising market.
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 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.
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
28
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, which represents 0.03% of average net assets for the quarter ended
September 30, 2012.
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 totaling $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 an assumed reinvestment of these distributions is 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 a net gain 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.
The Nine Months Ended September 30, 2013Fund Share Price
The
Funds shares traded on the NYSE MKT at a price of $16.55 on the close of business on September 30, 2013. This represents a decrease of 17.13% in share price (not including an assumed reinvestment of
29
distributions) from the $19.97 price at which the shares of the Fund traded on the close of business on December 31, 2012. The high and low intra-day share prices for the nine month period
were $22.09 (January 23, 2013) and $16.04 (August 8, 2013), respectively. During the nine month period, the Fund declared distributions totaling $1.260 per share to shareholders, of which $0.130 was paid on October 1, 2013. The remainder was
paid during the nine month period. The Funds cumulative total return on market value for the nine month period, which assumes reinvestment of such distributions, was -11.33%. At September 30, 2013, the shares of the Fund traded at a
11.97% discount to the Funds net asset value of $18.80.
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 Funds cumulative total return on market value for the
nine month period, which assumes reinvestment of such distributions, 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, 2013Net Assets of the Fund
The Funds net assets decreased from $197.1 million as of December 31, 2012, to $173.3 million as of September 30, 2013, a
decrease of $23.8 million. The decrease in the Funds net assets was due to $12.6 million in net realized losses and $2.7 million in unrealized appreciation on the Funds portfolio during the period, a net investment loss of $2.3 million,
and $11.6 million of distributions declared to shareholders.
During the nine month period ended September 30, 2013, the
Funds collateral investments generated interest income of $160,054, which represents 0.09% of average net assets for the nine month period ended September 30, 2013.
The net asset value per share on September 30, 2013, was $18.80. This represents a decrease of 12.07% in net asset value (not including an assumed reinvestment of distributions) from the $21.38 net
asset value as of December 31, 2012. The Fund declared distributions totaling $1.260 per share during the nine month period. When an assumed reinvestment of these distributions is taken into account, the cumulative total return for the Fund on
net asset value was -6.29% for the nine month period ended September 30, 2013.
The Fund generated a net loss of $12.2
million for the nine month period ended September 30, 2013, resulting from interest income of $0.2 million, expenses of $2.5 million, net realized losses of $12.6 million, and net unrealized appreciation of $2.7 million.
The Nine Months Ended September 30, 2013Overall Commodity Market Commentary
The calendar year began on a positive note for the broad commodity market, but prices turned volatile amid global economic uncertainty,
geopolitical tensions in the Middle East and North Africa, and speculation about the timing of the U.S. Federal Reserves QE tapering. In the DJ-UBSCI, declines in the first and second quarters
(-1.2%
and
-9.5%,
respectively) overwhelmed a slight gain (2.1%) in the third quarter, for an overall loss of 8.6% for the nine-month period ended September 30, 2013. The precious metals, industrials metals, foods and
fibers, agriculture and livestock groups fell during the nine month period, while energy appreciated slightly.
30
Energy commodities represented 36.7% of the DJ-UBSCI at the end of the nine month period,
and were its most significant commodity group by weight. Losses in natural gas, heating oil, and gasoline (RBOB) offset gains in crude oil, resulting in an overall 0.77% return for the energy group.
Agricultural commodities, as grouped by Gresham, made up 20.4% of the DJ-UBSCI at the end of the nine month period. Soybean and soybean
meal rose during the period, but corn, wheat, and soybean oil had much larger declines. Agriculturals lost 9.9% for the period.
Industrial metals represented 16.5% of the DJ-UBSCI at the end of the nine month period and declined 13.9%, as slowing demand,
particularly from China, put downward pressure on the prices of aluminum, copper, nickel, and zinc.
Precious metals
represented 12.6% of the DJ-UBSCI at the end of the nine month period. The group posted the weakest performance in the DJ-UBSCI, falling 23.3%. Gold and silver prices fell for most of the period, with demand for perceived safe haven
investments diminishing, but rallied in the third quarter as demand appeared to re-accelerate.
Foods and fibers, as grouped
by Gresham, made up a combined 8.3% of the DJ-UBSCI at the end of the nine month period. Coffee and sugar contracts led the group lower, despite a gain in cotton. The group as a whole fell 10.5%.
Livestock is the smallest group, comprising 5.6% of the DJ-UBSCI at the end of the nine month period. Rising supply early in the year
depressed prices for lean hogs and live and feeder cattle, but stronger summer demand and concerns about tightening supply buoyed prices in the second and third quarters. Against this backdrop, livestock declined 1.9% for the period.
The Nine Months Ended September 30, 2013Fund Commodity Portfolio Commentary
The Fund lost approximately 5.3% for the nine month period (before considering the expenses of the Fund or the performance of the
collateral portfolio), outperforming the DJ-UBSCI, which fell 8.6%. The Funds total return on net asset value for the quarter, which includes the effect of the Funds expenses, the performance of the collateral portfolio, and assumes the
reinvestment of the Funds distributions, was a loss of 6.29%. At the commodity group level, the Fund outperformed the DJ-UBSCI on an absolute basis in all six groups.
The Fund writesthat is, sellscovered options on its commodity futures, seeking to limit return volatility, and to provide cash flow for the Funds distributions. Gresham sells
exchange-traded commodity call options on approximately 50% of the value of each of the Funds commodity futures contracts, when those contracts are deemed to have sufficient trading volume and liquidity. The fund receives cash for the related
premiums. The Funds option-writing activity benefitted fund performance for the period as most of the contracts written went unexercised. For the nine month period ended September 30, 2013, the Funds option program helped to contribute
to the commodity portfolios lower volatility when compared to the DJ-UBSCI, as measured by the standard deviation of return.
The Funds energy group positions rose approximately 4.3% during the nine month period versus the
DJ-UBSCIs
increase of 0.8%. A smaller weight in the
natural gas position, which declined during the period, contributed the most to weighted performance. An overweight in crude oil, which rallied, also added to relative outperformance on a weighted basis.
Agricultural holdings were down approximately 4.5% in the Fund during the nine month period, losing less than the 9.4% decline in the
DJ-UBSCI. Although the Funds corn and wheat positions had negative absolute performance, a smaller weight in these contracts aided relative performance. This group had the largest contribution to outperformance.
31
In industrial metals, the Funds positions fell approximately 12.0% during the nine
month period compared to the DJ-UBSCIs 13.9% loss. Smaller relative weights in nickel and zinc, which suffered price pressure during the first half of the year, were beneficial to relative performance.
Precious metals were down approximately 21.3% in the Fund and 23.3% in the DJ-UBSCI and contributed to absolute losses for the nine month
period. However, the group had a minimal impact on relative performance.
The Funds foods and fibers positions declined
approximately 6.9% during the nine month period, while the DJ-UBSCI dropped 10.5%. The Fund had less exposure to weak performance in coffee and sugar than the
DJ-UBSCI,
which bolstered relative performance.
In the livestock group, the Funds positions lost approximately 1.5% and the DJ-UBSCI fell 1.9% during the nine month
period. While an overweight position in lean hogs added to performance, live and feeder cattle positions detracted, making the overall effect of the group on relative weighted performance almost neutral.
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 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 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
32
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 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, which represents 0.09% of average net assets for the nine month period ended September 30, 2012.
33
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 an assumed reinvestment of these distributions is taken into account, the cumulative total return for the Fund on net asset value was 4.29% for the nine month
period 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.
Fund Total Returns
The following table presents selected total returns for the Fund as of September 30, 2013. Total returns based on market value and net asset 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative
|
|
|
Annualized
|
|
|
|
3 Month
|
|
|
Year to Date
|
|
|
1 Year
|
|
|
Since Inception
|
|
Market Value
|
|
|
-0.78
|
%
|
|
|
-11.33
|
%
|
|
|
-17.84
|
%
|
|
|
-5.69
|
%
|
Net Asset Value
|
|
|
3.66
|
%
|
|
|
-6.29
|
%
|
|
|
-10.59
|
%
|
|
|
-0.46
|
%
|
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.
Distributions
The Fund makes regular monthly distributions to its shareholders stated in terms of a fixed cents per share distribution rate. The Manager seeks to establish a distribution rate that, among other factors,
roughly corresponds to its projections of the total return that could reasonably be expected to be generated by the Fund over an extended period of time. The Funds projected or actual distribution rate is not a prediction of what the
Funds actual total returns will be over any specific future period.
The Funds ability to make distributions will
depend on a number of factors, including, most importantly, the long-term total returns generated by the Funds commodity investments and the gains generated through the Funds options strategy. The Funds actual financial performance
will likely vary significantly from month-to-month and from year-to-year, and there may be periods, perhaps of extended durations of up to several years, when the distribution rate exceeds the Funds actual total returns. In the event that the
amount of income earned or capital gains realized by the Fund is not sufficient to cover the Funds distributions, the Fund may be required to liquidate investments to fund distributions at times or on terms that could be disadvantageous to the
Fund and its shareholders.
Because the Funds investment performance since its inception has been negative, the Fund has
effectively been drawing upon its assets to meet payments prescribed by its distribution policy. The Fund also has paid fees and expenses that have also been drawn from the Funds assets.
34
As market conditions and portfolio performance may change, the rate of distributions on the
shares and the Funds distribution policy could change. The Manager reserves the right to change the Funds 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. The reduction or elimination of the Funds distributions could have the effect of increasing the Managers management fees. As
disclosed in a press release dated July 1, 2013, the Manager has reduced the Funds distribution rate effective with the distribution payable on August 1, 2013.
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, 2013.
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
|
|
Commodity Group
|
|
Commodity
|
|
TAP PLUS
SM
|
|
|
DJ-UBSCI
|
|
Energy
|
|
Crude Oil
|
|
|
22.51
|
%
|
|
|
17.02
|
%
|
|
|
Heating Oil
|
|
|
5.55
|
%
|
|
|
3.78
|
%
|
|
|
Natural Gas
|
|
|
6.96
|
%
|
|
|
12.30
|
%
|
|
|
Unleaded Gas
|
|
|
3.50
|
%
|
|
|
3.56
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38.52
|
%
|
|
|
36.66
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Industrial Metals
|
|
Aluminum
|
|
|
4.46
|
%
|
|
|
4.74
|
%
|
|
|
Copper
|
|
|
9.08
|
%
|
|
|
7.15
|
%
|
|
|
Nickel
|
|
|
1.20
|
%
|
|
|
1.98
|
%
|
|
|
Zinc
|
|
|
1.28
|
%
|
|
|
2.59
|
%
|
|
|
Lead
|
|
|
0.82
|
%
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16.84
|
%
|
|
|
16.46
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Agriculturals
|
|
Corn
|
|
|
4.47
|
%
|
|
|
4.94
|
%
|
|
|
Soybean
|
|
|
5.37
|
%
|
|
|
5.53
|
%
|
|
|
Wheat
|
|
|
4.44
|
%
|
|
|
4.69
|
%
|
|
|
Soybean Meal
|
|
|
2.03
|
%
|
|
|
2.81
|
%
|
|
|
Soybean Oil
|
|
|
1.38
|
%
|
|
|
2.45
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17.69
|
%
|
|
|
20.42
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Precious Metals
|
|
Gold
|
|
|
9.66
|
%
|
|
|
9.49
|
%
|
|
|
Silver
|
|
|
2.82
|
%
|
|
|
3.06
|
%
|
|
|
Platinum
|
|
|
0.77
|
%
|
|
|
0.00
|
%
|
|
|
Palladium
|
|
|
0.46
|
%
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13.71
|
%
|
|
|
12.55
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Foods and Fibers
|
|
Cotton
|
|
|
1.26
|
%
|
|
|
2.21
|
%
|
|
|
Sugar
|
|
|
2.00
|
%
|
|
|
4.07
|
%
|
|
|
Coffee
|
|
|
0.99
|
%
|
|
|
2.01
|
%
|
|
|
Cocoa
|
|
|
0.41
|
%
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4.66
|
%
|
|
|
8.29
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Livestock
|
|
Live Cattle
|
|
|
5.00
|
%
|
|
|
3.55
|
%
|
|
|
Lean Hogs
|
|
|
2.44
|
%
|
|
|
2.07
|
%
|
|
|
Feeder Cattle
|
|
|
1.14
|
%
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8.58
|
%
|
|
|
5.62
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
35
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 currently expects to post approximately 15% of its net assets in a margin account with Barclays Capital Inc., the Funds clearing broker, to cover its futures contracts; the remaining assets are held by the
Fund in a separate collateral pool managed by the Collateral Sub-advisor. The Fund believes the higher allocation to initial margin will provide a significant buffer to accommodate variations in the required margin posting that may result from
market volatility, potential gains and losses on the contracts, and changes in margin rules, and will minimize the frequency of cash transfers from the Funds other collateral pool to meet variation margin requirements. 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 cash equivalents, U.S. government securities and other short-term, high grade debt securities. 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 December 21, 2011, the Fund announced the adoption of an open-market share repurchase program, pursuant to which it 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, if any, during the
nine months ended September 30, 2013.
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
36
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 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 Fund
attempts to minimize market risks, and the Commodity Sub-advisor attempts to minimize credit risks, by abiding 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 limit 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 counterparties the Commodity Sub-advisor believes are creditworthy;
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Limiting the amount of margin or premium required for any one commodity contract or all commodity 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, is required by Commodity
Futures Trading Commission (CFTC) regulations to separately account for and segregate all assets of the Fund relating to domestic futures investments. A commodity broker is not allowed to commingle such assets with other assets of the
commodity broker. In addition, CFTC regulations also require a commodity broker, when acting as the Funds futures commission merchant, to hold in a secured account the assets of the Fund related to foreign commodity futures
investments and not commingle such assets with assets of 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, 2013, 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
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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 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 primarily based on the Funds assets and trading activity. The transfer agent fee is calculated based on the Funds total number of registered accounts. Commission
payments to the commodity broker are on a contract-by-contract or round-turn 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 futures contracts, options contracts, and short-term, high grade debt instruments, all of which
are recorded on a trade date basis and recognized at fair value in the financial statements, 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) and changes in unrealized appreciation (depreciation) on open positions are determined on a specific identification basis and
recognized in the Statements of Operations during the period in which the contract is closed or the changes occur, respectively.
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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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Refer to note 2 of the Funds Notes to Financial Statements in Part
1Item 1. Financial Statements of this Report for the summary of significant accounting policies of the Fund.
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