Attached files
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EXCEL - IDEA: XBRL DOCUMENT - Nuveen Diversified Commodity Fund | Financial_Report.xls |
EX-31.1 - EX-31.1 - Nuveen Diversified Commodity Fund | d901808dex311.htm |
EX-32.2 - EX-32.2 - Nuveen Diversified Commodity Fund | d901808dex322.htm |
EX-32.1 - EX-32.1 - Nuveen Diversified Commodity Fund | d901808dex321.htm |
EX-31.2 - EX-31.2 - Nuveen Diversified Commodity Fund | d901808dex312.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2015
Or
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 001-34879
Nuveen Diversified Commodity Fund
(Exact name of registrant as specified in its charter)
Delaware | 27-2048014 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
333 West Wacker Drive Chicago Illinois |
60606 | |
(Address of principal executive offices) | (Zip Code) |
(877) 827-5920
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated file, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ¨ | Accelerated filer | x | |||||
Non-accelerated filer | ¨ | (Do not check if smaller reporting company) | Smaller reporting company | ¨ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of May 5, 2015, the registrant had 9,047,040 shares outstanding.
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
2
Table of Contents
PART 1. FINANCIAL INFORMATION
Item 1. | Financial Statements |
NUVEEN DIVERSIFIED COMMODITY FUND
SCHEDULE OF INVESTMENTS (Unaudited)
March 31, 2015
Investments
Principal Amount (000) |
Description | Coupon | Maturity | Ratings(1) | Value | |||||||||||||||
Short-Term Investments | ||||||||||||||||||||
U.S. Government and Agency Obligations | ||||||||||||||||||||
$11,000 | U.S. Treasury Bills | 0.000 | % | 4/02/15 | Aaa | $ | 11,000,000 | |||||||||||||
18,000 | U.S. Treasury Bills | 0.000 | % | 4/30/15 | Aaa | 17,999,460 | ||||||||||||||
18,700 | U.S. Treasury Bills | 0.000 | % | 5/28/15 | Aaa | 18,699,046 | ||||||||||||||
5,500 | U.S. Treasury Bills | 0.000 | % | 6/25/15 | Aaa | 5,499,807 | ||||||||||||||
18,000 | U.S. Treasury Bills | 0.000 | % | 7/23/15 | Aaa | 17,997,732 | ||||||||||||||
8,000 | U.S. Treasury Bills | 0.000 | % | 9/17/15 | Aaa | 7,996,248 | ||||||||||||||
2,000 | U.S. Treasury Bills | 0.000 | % | 10/15/15 | Aaa | 1,998,604 | ||||||||||||||
6,000 | U.S. Treasury Bills | 0.000 | % | 11/12/15 | Aaa | 5,994,186 | ||||||||||||||
1,500 | U.S. Treasury Bills | 0.000 | % | 12/10/15 | Aaa | 1,498,235 | ||||||||||||||
6,000 | U.S. Treasury Bills | 0.000 | % | 3/03/16 | Aaa | 5,986,662 | ||||||||||||||
|
|
|
|
|||||||||||||||||
$94,700 | Total U.S. Government and Agency Obligations (cost $94,664,233) |
$ | 94,669,980 | |||||||||||||||||
|
|
|
|
|||||||||||||||||
Repurchase Agreements | ||||||||||||||||||||
$1,506 | Repurchase Agreement with State Street Bank, dated 3/31/15, repurchase price $1,505,768, collateralized by $1,485,000 U.S. Treasury Notes, 2.250%, due 11/15/24, value $1,536,975 | 0.000 | % | 4/01/15 | N/A | $ | 1,505,768 | |||||||||||||
|
|
|
|
|||||||||||||||||
Total Repurchase Agreements (cost $1,505,768) | 1,505,768 | |||||||||||||||||||
|
|
|||||||||||||||||||
Total Short-Term Investments (cost $96,170,001) | $ | 96,175,748 | ||||||||||||||||||
|
|
|
Investments in Derivatives
Futures Contracts outstanding:
Commodity Group |
Contract | Contract Position(2) |
Contract Expiration |
Number
of Contracts(3) |
Notional at Value(3) |
Unrealized Appreciation (Depreciation)(4) |
||||||||||||||||
Energy | Crude Oil | |||||||||||||||||||||
ICE Brent Crude Oil Futures Contract | Long | May 2015 | 103 | $ | 5,676,330 | $ | (292,678 | ) | ||||||||||||||
ICE Brent Crude Oil Futures Contract | Long | July 2015 | 100 | 5,708,000 | (409,430 | ) | ||||||||||||||||
NYMEX Crude Oil Futures Contract | Long | May 2015 | 153 | 7,282,800 | (404,460 | ) | ||||||||||||||||
NYMEX Crude Oil Futures Contract | Long | July 2015 | 79 | 4,011,620 | (244,430 | ) | ||||||||||||||||
|
|
|
||||||||||||||||||||
Total Crude Oil | (1,350,998 | ) | ||||||||||||||||||||
|
|
|
||||||||||||||||||||
Natural Gas | ||||||||||||||||||||||
NYMEX Natural Gas Futures Contract | Long | May 2015 | 156 | 4,118,400 | (259,460 | ) | ||||||||||||||||
NYMEX Natural Gas Futures Contract | Long | July 2015 | 116 | 3,191,160 | (198,090 | ) | ||||||||||||||||
|
|
|
||||||||||||||||||||
Total Natural Gas | (457,550 | ) | ||||||||||||||||||||
|
|
|
||||||||||||||||||||
Heating Oil | ||||||||||||||||||||||
ICE Low Sulphur Gasoil Futures Contract | Long | May 2015 | 63 | 3,301,200 | (106,075 | ) | ||||||||||||||||
NYMEX NY Harbor ULSD Futures Contract | Long | May 2015 | 44 | 3,156,384 | 51,384 | |||||||||||||||||
|
|
|
||||||||||||||||||||
Total Heating Oil | (54,691 | ) | ||||||||||||||||||||
|
|
|
3
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
SCHEDULE OF INVESTMENTS (Continued) (Unaudited)
March 31, 2015
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)(4) |
||||||||||||||||
Energy | Unleaded Gas | |||||||||||||||||||||
(continued) | NYMEX Gasoline RBOB Futures Contract | Long | May 2015 | 45 | $ | 3,345,300 | $ | (55,764 | ) | |||||||||||||
NYMEX Gasoline RBOB Futures Contract | Long | July 2015 | 12 | 879,430 | (47,582 | ) | ||||||||||||||||
|
|
|
||||||||||||||||||||
Total Unleaded Gas | (103,346 | ) | ||||||||||||||||||||
|
|
|
||||||||||||||||||||
Total Energy | (1,966,585 | ) | ||||||||||||||||||||
|
|
|
||||||||||||||||||||
Industrial Metals |
Copper | |||||||||||||||||||||
COMEX Copper Futures Contract | Long | May 2015 | 57 | 3,904,500 | 209,112 | |||||||||||||||||
COMEX Copper Futures Contract | Long | July 2015 | 20 | 1,371,250 | 12,375 | |||||||||||||||||
LME Copper Futures Contract | Long | April 2015 | 35 | 5,306,437 | 196,438 | |||||||||||||||||
|
|
|
||||||||||||||||||||
Total Copper | 417,925 | |||||||||||||||||||||
|
|
|
||||||||||||||||||||
Aluminum | ||||||||||||||||||||||
LME Primary Aluminum Futures Contract | Long | April 2015 | 65 | 2,904,281 | 4,469 | |||||||||||||||||
LME Primary Aluminum Futures Contract | Long | May 2015 | 65 | 2,891,281 | (133,281 | ) | ||||||||||||||||
LME Primary Aluminum Futures Contract | Short | May 2015 | (1 | ) | (44,481 | ) | 794 | |||||||||||||||
|
|
|
||||||||||||||||||||
Total Aluminum | (128,018 | ) | ||||||||||||||||||||
|
|
|
||||||||||||||||||||
Nickel | ||||||||||||||||||||||
LME Nickel Futures Contract | Long | April 2015 | 27 | 2,000,376 | (242,532 | ) | ||||||||||||||||
|
|
|
||||||||||||||||||||
Zinc | ||||||||||||||||||||||
LME Zinc Futures Contract | Long | April 2015 | 37 | 1,917,988 | 43,244 | |||||||||||||||||
|
|
|
||||||||||||||||||||
Lead | ||||||||||||||||||||||
LME Lead Futures Contract | Long | April 2015 | 13 | 593,206 | 22,831 | |||||||||||||||||
LME Lead Futures Contract | Long | May 2015 | 12 | 546,075 | (22,125 | ) | ||||||||||||||||
|
|
|
||||||||||||||||||||
Total Lead | 706 | |||||||||||||||||||||
|
|
|
||||||||||||||||||||
Total Industrial Metals | 91,325 | |||||||||||||||||||||
|
|
|
||||||||||||||||||||
Agriculturals | Soybean | |||||||||||||||||||||
CBOT Soybean Futures Contract | Long | May 2015 | 99 | 4,817,588 | (61,850 | ) | ||||||||||||||||
CBOT Soybean Futures Contract | Long | July 2015 | 25 | 1,222,187 | (42,563 | ) | ||||||||||||||||
|
|
|
||||||||||||||||||||
Total Soybean | (104,413 | ) | ||||||||||||||||||||
|
|
|
||||||||||||||||||||
Wheat | ||||||||||||||||||||||
CBOT Wheat Futures Contract | Long | May 2015 | 78 | 1,995,825 | (31,938 | ) | ||||||||||||||||
KCBT Wheat Futures Contract | Long | May 2015 | 71 | 1,985,338 | 18,825 | |||||||||||||||||
|
|
|
||||||||||||||||||||
Total Wheat | (13,113 | ) | ||||||||||||||||||||
|
|
|
||||||||||||||||||||
Corn | ||||||||||||||||||||||
CBOT Corn Futures Contract | Long | May 2015 | 205 | 3,856,563 | (183,825 | ) | ||||||||||||||||
|
|
|
||||||||||||||||||||
Soybean Meal | ||||||||||||||||||||||
CBOT Soybean Meal Futures Contract | Long | May 2015 | 81 | 2,647,080 | 32,150 | |||||||||||||||||
CBOT Soybean Meal Futures Contract | Long | July 2015 | 8 | 260,160 | 1,040 | |||||||||||||||||
|
|
|
||||||||||||||||||||
Total Soybean Meal | 33,190 | |||||||||||||||||||||
|
|
|
||||||||||||||||||||
Soybean Oil | ||||||||||||||||||||||
CBOT Soybean Oil Futures Contract | Long | May 2015 | 53 | 966,402 | (54,828 | ) | ||||||||||||||||
CBOT Soybean Oil Futures Contract | Long | July 2015 | 10 | 183,720 | (9,480 | ) | ||||||||||||||||
|
|
|
||||||||||||||||||||
Total Soybean Oil | (64,308 | ) | ||||||||||||||||||||
|
|
|
||||||||||||||||||||
Total Agriculturals | (332,469 | ) | ||||||||||||||||||||
|
|
|
4
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
SCHEDULE OF INVESTMENTS (Continued) (Unaudited)
March 31, 2015
Investments in Derivatives (Continued)
Futures Contracts outstanding (Continued):
Commodity Group |
Contract | Contract Position(2) |
Contract Expiration |
Number
of Contracts(3) |
Notional at Value(3) |
Unrealized Appreciation (Depreciation)(4) |
||||||||||||||||
Precious Metals | Gold | |||||||||||||||||||||
CEC Gold Futures Contract | Long | June 2015 | 85 | $ | 10,057,200 | $ | (99,450 | ) | ||||||||||||||
|
|
|
||||||||||||||||||||
Silver | ||||||||||||||||||||||
CEC Silver Futures Contract | Long | May 2015 | 36 | 2,987,640 | 4,860 | |||||||||||||||||
|
|
|
||||||||||||||||||||
Platinum | ||||||||||||||||||||||
NYMEX Platinum Futures Contract | Long | July 2015 | 16 | 914,720 | 28,325 | |||||||||||||||||
|
|
|
||||||||||||||||||||
Palladium | ||||||||||||||||||||||
NYMEX Palladium Futures Contract | Long | June 2015 | 7 | 514,710 | (34,958 | ) | ||||||||||||||||
|
|
|
||||||||||||||||||||
Total Precious Metals | (101,223 | ) | ||||||||||||||||||||
|
|
|
||||||||||||||||||||
Livestock | Live Cattle | |||||||||||||||||||||
CME Live Cattle Futures Contract | Long | April 2015 | 72 | 4,646,160 | 296,739 | |||||||||||||||||
CME Live Cattle Futures Contract | Long | June 2015 | 41 | 2,498,130 | 91,883 | |||||||||||||||||
|
|
|
||||||||||||||||||||
Total Live Cattle | 388,622 | |||||||||||||||||||||
|
|
|
||||||||||||||||||||
Lean Hogs | ||||||||||||||||||||||
CME Lean Hog Futures Contract | Long | June 2015 | 107 | 3,244,240 | (22,860 | ) | ||||||||||||||||
|
|
|
||||||||||||||||||||
Feeder Cattle | ||||||||||||||||||||||
CME Feeder Cattle Futures Contract | Long | May 2015 | 18 | 1,952,100 | 141,750 | |||||||||||||||||
|
|
|
||||||||||||||||||||
Total Livestock | 507,512 | |||||||||||||||||||||
|
|
|
||||||||||||||||||||
Foods and Fibers | Sugar | |||||||||||||||||||||
ICE Sugar Futures Contract | Long | May 2015 | 117 | 1,563,307 | (380,999 | ) | ||||||||||||||||
ICE Sugar Futures Contract | Long | July 2015 | 32 | 432,230 | (37,453 | ) | ||||||||||||||||
ICE White Sugar Futures Contract | Long | May 2015 | 10 | 177,700 | (16,775 | ) | ||||||||||||||||
ICE White Sugar Futures Contract | Long | August 2015 | 5 | 87,725 | (2,565 | ) | ||||||||||||||||
|
|
|
||||||||||||||||||||
Total Sugar | (437,792 | ) | ||||||||||||||||||||
|
|
|
||||||||||||||||||||
Coffee | ||||||||||||||||||||||
ICE Coffee C Futures Contract | Long | May 2015 | 34 | 1,694,475 | (375,150 | ) | ||||||||||||||||
LIFFE Coffee Robusta Futures Contract | Long | May 2015 | 20 | 345,800 | (48,310 | ) | ||||||||||||||||
|
|
|
||||||||||||||||||||
Total Coffee | (423,460 | ) | ||||||||||||||||||||
|
|
|
||||||||||||||||||||
Cotton | ||||||||||||||||||||||
ICE Cotton Futures Contract | Long | May 2015 | 61 | 1,924,550 | 40,380 | |||||||||||||||||
|
|
|
||||||||||||||||||||
Cocoa | ||||||||||||||||||||||
ICE Cocoa Futures Contract | Long | May 2015 | 27 | 728,730 | (38,851 | ) | ||||||||||||||||
|
|
|
||||||||||||||||||||
Total Foods and Fibers | (859,723 | ) | ||||||||||||||||||||
|
|
|
||||||||||||||||||||
Total Futures Contracts outstanding | 2,519 | $ | 113,765,817 | $ | (2,661,163 | ) | ||||||||||||||||
|
|
|
|
|
|
|
5
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
SCHEDULE OF INVESTMENTS (Continued) (Unaudited)
March 31, 2015
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 | May 2015 | (101 | ) | $ | 63.00 | $ | (10,100 | ) | ||||||||||
NYMEX Crude Oil Futures Options | April 2015 | (58 | ) | 56.00 | (6,380 | ) | ||||||||||||
NYMEX Crude Oil Futures Options | April 2015 | (58 | ) | 51.00 | (42,920 | ) | ||||||||||||
|
|
|
||||||||||||||||
Total Crude Oil | (59,400 | ) | ||||||||||||||||
|
|
|
||||||||||||||||
Natural Gas | ||||||||||||||||||
NYMEX Natural Gas Futures Options | April 2015 | (68 | ) | 3,000.00 | (11,560 | ) | ||||||||||||
NYMEX Natural Gas Futures Options | April 2015 | (68 | ) | 2,900.00 | (21,080 | ) | ||||||||||||
|
|
|
||||||||||||||||
Total Natural Gas | (32,640 | ) | ||||||||||||||||
|
|
|
||||||||||||||||
Heating Oil |
||||||||||||||||||
NYMEX NY Harbor ULSD Futures Options | April 2015 | (44 | ) | 1.91 | (23,839 | ) | ||||||||||||
|
|
|
||||||||||||||||
Unleaded Gas | ||||||||||||||||||
NYMEX Gasoline RBOB Futures Options | April 2015 | (29 | ) | 19,500.00 | (25,212 | ) | ||||||||||||
|
|
|
||||||||||||||||
Total Energy | (141,091 | ) | ||||||||||||||||
|
|
|
||||||||||||||||
Industrial Metals |
Copper |
|||||||||||||||||
LME Copper Futures Options (5) | April 2015 | (35 | ) | 6,200.00 | (341 | ) | ||||||||||||
|
|
|
||||||||||||||||
Aluminum | ||||||||||||||||||
LME Primary Aluminum Futures Options (5) | April 2015 | (65 | ) | 1,875.00 | | |||||||||||||
|
|
|
||||||||||||||||
Nickel |
||||||||||||||||||
LME Nickel Futures Options (5) | April 2015 | (12 | ) | 14,750.00 | | |||||||||||||
LME Nickel Futures Options (5) | April 2015 | (2 | ) | 15,250.00 | | |||||||||||||
|
|
|
||||||||||||||||
Total Nickel | | |||||||||||||||||
|
|
|
||||||||||||||||
Zinc |
||||||||||||||||||
LME Zinc Futures Options (5) | April 2015 | (19 | ) | 2,150.00 | | |||||||||||||
|
|
|
||||||||||||||||
Lead |
||||||||||||||||||
LME Lead Futures Options (5) | April 2015 | (13 | ) | 1,850.00 | (647 | ) | ||||||||||||
|
|
|
||||||||||||||||
Total Industrial Metals | (988 | ) | ||||||||||||||||
|
|
|
||||||||||||||||
Agriculturals |
Soybean |
|||||||||||||||||
CBOT Soybean Futures Options | April 2015 | (35 | ) | 1,070.00 | (1,094 | ) | ||||||||||||
CBOT Soybean Futures Options | April 2015 | (27 | ) | 1,080.00 | (675 | ) | ||||||||||||
|
|
|
||||||||||||||||
Total Soybean | (1,769 | ) | ||||||||||||||||
|
|
|
||||||||||||||||
Wheat |
||||||||||||||||||
CBOT Wheat Futures Options | April 2015 | (8 | ) | 610.00 | (1,250 | ) | ||||||||||||
CBOT Wheat Futures Options | April 2015 | (39 | ) | 565.00 | (4,144 | ) | ||||||||||||
CBOT Wheat Futures Options | April 2015 | (27 | ) | 595.00 | (6,919 | ) | ||||||||||||
|
|
|
||||||||||||||||
Total Wheat | (12,313 | ) | ||||||||||||||||
|
|
|
||||||||||||||||
Corn | ||||||||||||||||||
CBOT Corn Futures Options | April 2015 | (103 | ) | 415.00 | (4,506 | ) | ||||||||||||
|
|
|
6
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
SCHEDULE OF INVESTMENTS (Continued) (Unaudited)
March 31, 2015
Investments in Derivatives (Continued)
Call Options Written outstanding (Continued):
Commodity Group |
Contract | Contract Expiration |
Number of Contracts |
Strike Price |
Value | |||||||||||||
|
||||||||||||||||||
Agriculturals |
Soybean Meal |
|||||||||||||||||
(continued) |
CBOT Soybean Meal Futures Options | April 2015 | (44 | ) | $ | 360.00 | $ | (3,300 | ) | |||||||||
|
|
|
||||||||||||||||
Soybean Oil | ||||||||||||||||||
CBOT Soybean Oil Futures Options | April 2015 | (31 | ) | 340.00 | (465 | ) | ||||||||||||
|
|
|
||||||||||||||||
Total Agriculturals | (22,353 | ) | ||||||||||||||||
|
|
|
||||||||||||||||
Precious Metals |
Gold | |||||||||||||||||
CEC Gold Futures Options | May 2015 | (21 | ) | 1,250.00 | (12,810 | ) | ||||||||||||
CEC Gold Futures Options | May 2015 | (22 | ) | 1,285.00 | (5,940 | ) | ||||||||||||
|
|
|
||||||||||||||||
Total Gold | (18,750 | ) | ||||||||||||||||
|
|
|
||||||||||||||||
Silver | ||||||||||||||||||
CEC Silver Futures Options | April 2015 | (18 | ) | 1,800.00 | (7,290 | ) | ||||||||||||
|
|
|
||||||||||||||||
Total Precious Metals | (26,040 | ) | ||||||||||||||||
|
|
|
||||||||||||||||
Livestock |
Live Cattle | |||||||||||||||||
CME Live Cattle Futures Options | April 2015 | (72 | ) | 162.00 | (13,680 | ) | ||||||||||||
|
|
|
||||||||||||||||
Lean Hogs | ||||||||||||||||||
CME Lean Hogs Futures Options | June 2015 | (53 | ) | 84.00 | (20,140 | ) | ||||||||||||
|
|
|
||||||||||||||||
Total Livestock | (33,820 | ) | ||||||||||||||||
|
|
|
||||||||||||||||
Foods and Fibers |
Sugar | |||||||||||||||||
ICE Sugar Futures Options | April 2015 | (85 | ) | 16.00 | (952 | ) | ||||||||||||
|
|
|
||||||||||||||||
Coffee | ||||||||||||||||||
ICE Coffee C Futures Options | April 2015 | (20 | ) | 185.00 | (75 | ) | ||||||||||||
|
|
|
||||||||||||||||
Cotton | ||||||||||||||||||
ICE Cotton Futures Options | April 2015 | (15 | ) | 64.00 | (4,200 | ) | ||||||||||||
ICE Cotton Futures Options | April 2015 | (15 | ) | 65.00 | (2,475 | ) | ||||||||||||
|
|
|
||||||||||||||||
Total Cotton | (6,675 | ) | ||||||||||||||||
|
|
|
||||||||||||||||
Cocoa | ||||||||||||||||||
ICE Cocoa Futures Options | April 2015 | (13 | ) | 3,000.00 | (130 | ) | ||||||||||||
|
|
|
||||||||||||||||
Total Foods and Fibers | (7,832 | ) | ||||||||||||||||
|
|
|
||||||||||||||||
Total Call Options Written outstanding (premiums received $709,622) | (1,220 | ) | $ | (232,124 | ) | |||||||||||||
|
|
|
|
|
7
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
SCHEDULE OF INVESTMENTS (Continued) (Unaudited)
March 31, 2015
(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 include the net effect of LME short futures positions, when applicable. | |
(4) | The gross unrealized appreciation (depreciation) on futures contracts is $1,196,599 and $(3,857,762), respectively. | |
(5) | For fair value measurement disclosure purposes, these Call Options Written are classified as Level 2. See Notes to Financial Statements, Note 2Summary 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 | |
COMEX | Commodities Exchange, Inc. | |
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.
8
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
STATEMENTS OF FINANCIAL CONDITION
At March 31, 2015 (Unaudited) and December 31, 2014
March 31, 2015 | December 31, 2014 | |||||||
ASSETS | ||||||||
Short-term investments, at value |
$ |
96,175,748 |
|
$ | 113,737,383 | |||
Deposits with brokers |
21,965,397 | 21,197,009 | ||||||
Unrealized appreciation on futures contracts |
1,196,599 | 633,319 | ||||||
Other assets |
11,301 | | ||||||
|
|
|
|
|||||
Total assets |
$ | 119,349,045 | $ | 135,567,711 | ||||
|
|
|
|
|||||
LIABILITIES | ||||||||
Call options written, at value |
$ | 232,124 | $ | 296,907 | ||||
Unrealized depreciation on futures contracts |
3,857,762 | 11,470,952 | ||||||
Payable for distributions |
931,845 | | ||||||
Accrued expenses: |
||||||||
Management fees |
123,446 | 138,599 | ||||||
Independent Committee fees |
12,279 | 13,103 | ||||||
Other |
333,485 | 450,146 | ||||||
|
|
|
|
|||||
Total liabilities |
5,490,941 | 12,369,707 | ||||||
|
|
|
|
|||||
SHAREHOLDERS CAPITAL | ||||||||
Paid-in capital, unlimited number of shares authorized, 9,047,040 shares issued and outstanding at March 31, 2015 and December 31, 2014 |
217,646,428 | 217,646,428 | ||||||
Accumulated undistributed earnings (deficit) |
(103,788,324 | ) | (94,448,424 | ) | ||||
|
|
|
|
|||||
Total shareholders capital (Net assets) |
113,858,104 | 123,198,004 | ||||||
|
|
|
|
|||||
Total liabilities and shareholders capital |
$ | 119,349,045 | $ | 135,567,711 | ||||
|
|
|
|
|||||
Net assets |
$ | 113,858,104 | $ | 123,198,004 | ||||
Shares outstanding |
9,047,040 | 9,047,040 | ||||||
|
|
|
|
|||||
Net asset value per share outstanding |
$ | 12.59 | $ | 13.62 | ||||
|
|
|
|
|||||
Market value per share outstanding |
$ | 11.90 | $ | 12.83 | ||||
|
|
|
|
See accompanying notes to financial statements.
9
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
STATEMENTS OF OPERATIONS (Unaudited)
For the Three Months Ended March 31, 2015 and March 31, 2014
Three Months Ended March 31, | ||||||||
2015 | 2014 | |||||||
Investment Income: |
||||||||
Interest |
$ | 25,959 | $ | 37,292 | ||||
|
|
|
|
|||||
Total investment income |
25,959 | 37,292 | ||||||
|
|
|
|
|||||
Expenses: |
||||||||
Management fees |
363,800 | 521,250 | ||||||
Brokerage commissions |
33,568 | 30,049 | ||||||
Custodian fees and expenses |
26,640 | 23,295 | ||||||
Independent Committee fees and expenses |
11,455 | 13,048 | ||||||
Professional fees |
123,017 | 124,439 | ||||||
Shareholder reporting expenses |
34,551 | 32,806 | ||||||
Other expenses |
6,078 | 6,252 | ||||||
|
|
|
|
|||||
Total expenses |
599,109 | 751,139 | ||||||
|
|
|
|
|||||
Net investment income (loss) |
(573,150 | ) | (713,847 | ) | ||||
|
|
|
|
|||||
Net realized gain (loss) from: |
||||||||
Short-term investments |
1,145 | 17 | ||||||
Futures contracts |
(15,565,740 | ) | 5,942,505 | |||||
Call options written |
1,834,913 | 1,001,725 | ||||||
Change in net unrealized appreciation (depreciation) of: |
||||||||
Short-term investments |
4,555 | (2,343 | ) | |||||
Futures contracts |
8,176,470 | 1,744,000 | ||||||
Call options written |
(178,288 | ) | (693,116 | ) | ||||
|
|
|
|
|||||
Net realized gain (loss) and change in net unrealized appreciation (depreciation) |
(5,726,945 | ) | 7,992,788 | |||||
|
|
|
|
|||||
Net income (loss) |
$ | (6,300,095 | ) | $ | 7,278,941 | |||
|
|
|
|
|||||
Net income (loss) per weighted-average share |
$ | (0.70 | ) | $ | 0.79 | |||
Weighted-average shares outstanding |
9,047,040 | 9,206,940 |
See accompanying notes to financial statements.
10
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
STATEMENTS OF CHANGES IN SHAREHOLDERS CAPITAL
For the Three Months Ended March 31, 2015 (Unaudited) and the Year Ended December 31, 2014
Three Months Ended March 31, 2015 |
Year Ended
December 31, 2014 |
|||||||
Shareholders capitalbeginning of period |
$ | 123,198,004 | $ | 167,146,684 | ||||
Repurchase of shares |
| (2,001,984 | ) | |||||
|
|
|
|
|||||
Net increase (decrease) in shareholders capital resulting from operations: |
||||||||
Net investment income (loss) |
(573,150 | ) | (2,746,661 | ) | ||||
Net realized gain (loss) from: |
||||||||
Short-term investments |
1,145 | 547 | ||||||
Futures contracts |
(15,565,740 | ) | (16,873,345 | ) | ||||
Call options written |
1,834,913 | 3,826,262 | ||||||
Change in net unrealized appreciation (depreciation) of: |
||||||||
Short-term investments |
4,555 | (20,004 | ) | |||||
Futures contracts |
8,176,470 | (12,716,647 | ) | |||||
Call options written |
(178,288 | ) | 908,317 | |||||
|
|
|
|
|||||
Net income (loss) |
(6,300,095 | ) | (27,621,531 | ) | ||||
|
|
|
|
|||||
Distributions to shareholders |
(3,039,805 | ) | (14,325,165 | ) | ||||
|
|
|
|
|||||
Shareholders capitalend of period |
$ | 113,858,104 | $ | 123,198,004 | ||||
|
|
|
|
|||||
Sharesbeginning of period |
9,047,040 | 9,206,940 | ||||||
Repurchase of shares |
| (159,900 | ) | |||||
|
|
|
|
|||||
Sharesend of period |
9,047,040 | 9,047,040 | ||||||
|
|
|
|
See accompanying notes to financial statements.
11
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
STATEMENTS OF CASH FLOWS (Unaudited)
For the Three Months Ended March 31, 2015 and March 31, 2014
Three Months Ended March 31, | ||||||||
2015 | 2014 | |||||||
Cash flows from operating activities: |
||||||||
Net income (loss) |
$ | (6,300,095 | ) | $ | 7,278,941 | |||
Adjustments to reconcile net income (loss) to net cash provided by |
||||||||
Purchases of U.S. government and agency obligations |
(5,986,236 | ) | (43,960,909 | ) | ||||
Proceeds from sales and maturities of U.S. government and agency obligations |
23,999,877 | 39,699,997 | ||||||
Proceeds from (purchases of) repurchase agreements, net |
(420,347 | ) | (1,054,200 | ) | ||||
Premiums received for call options written |
1,774,828 | 1,358,642 | ||||||
Cash paid for call options written |
(182,986 | ) | (471,831 | ) | ||||
Amortization (accretion) of short-term investments |
(25,959 | ) | (37,293 | ) | ||||
(Increase) decrease in: |
||||||||
Deposits with brokers |
(768,388 | ) | 1,844,192 | |||||
Other assets |
(11,301 | ) | (11,300 | ) | ||||
Increase (decrease) in: |
||||||||
Accrued management fees |
(15,153 | ) | 3,409 | |||||
Accrued Independent Committee fees |
(824 | ) | 13,049 | |||||
Other accrued expenses |
(116,661 | ) | (67,072 | ) | ||||
Net realized (gain) loss from: |
||||||||
Short-term investments |
(1,145 | ) | (17 | ) | ||||
Call options written |
(1,834,913 | ) | (1,001,725 | ) | ||||
Change in net unrealized (appreciation) depreciation of: |
||||||||
Short-term investments |
(4,555 | ) | 2,343 | |||||
Futures contracts |
(8,176,470 | ) | (1,744,000 | ) | ||||
Call options written |
178,288 | 693,116 | ||||||
|
|
|
|
|||||
Net cash provided by (used in) operating activities |
2,107,960 | 2,545,342 | ||||||
|
|
|
|
|||||
Cash flows from financing activities: |
||||||||
Cash paid for shares repurchased |
| (151,538 | ) | |||||
Cash distributions paid to shareholders |
(2,107,960 | ) | (2,393,804 | ) | ||||
|
|
|
|
|||||
Net cash provided by (used in) financing activities |
(2,107,960 | ) | (2,545,342 | ) | ||||
|
|
|
|
|||||
Net increase (decrease) in cash |
| | ||||||
Cashbeginning of period |
| | ||||||
|
|
|
|
|||||
Cashend of period |
$ | | $ | | ||||
|
|
|
|
See accompanying notes to financial statements.
12
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Unaudited)
March 31, 2015
1. Organization
Fund Information
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.
Investment Adviser
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-adviser), 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 adviser 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-adviser), 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.
Proposed Conversion to ETF Structure
On December 19, 2014, the Fund issued a press release announcing that the Manager had approved a plan to convert the Fund (the Conversion) into an open-end exchange-traded fund (ETF). The Conversion will only become effective upon satisfaction of several conditions, including the receipt of shareholder and regulatory approvals. Shareholders will vote on the Conversion at the Funds annual meeting of shareholders, originally scheduled for March 31, 2015, but adjourned until May 15, 2015, to permit additional solicitation of votes. The Fund is not currently, and after the Conversion will not be, a mutual fund or any other type of investment company within the meaning of 1940 Act. Until the Conversion occurs, the Fund will continue to operate as currently structured.
Investment Objectives and Principal Investment Strategies
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 principal 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; |
13
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
March 31, 2015
1. Organization (Continued)
| An integrated program of writing commodity call options designed to enhance the risk-adjusted total return of the Funds commodity investments (TAP® and this options strategy are collectively referred to as TAP PLUSSM); and |
| A collateral portfolio of cash equivalents, U.S. government securities and other short-term, high grade debt securities. |
2. Summary of Significant Accounting Policies
The Fund follows accounting and reporting guidance under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946 Financial Services-Investment Companies. The following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements in accordance with accounting principles generally accepted in the United States (U.S. GAAP).
The accompanying unaudited financial statements were prepared in accordance with U.S. GAAP for interim financial information and with the instructions for Form 10-Q and the rules and regulations of the SEC. In the opinion of management, all material adjustments, consisting only of normal recurring adjustments, considered necessary for a fair statement of the interim period financial statements have been made. Interim period results are not necessarily indicative of results for a full-year period. These financial statements and the notes thereto should be read in conjunction with the Funds financial statements included in the Funds Annual Report on Form 10-K for the year ended December 31, 2014.
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 Fund has unrealized appreciation the clearing broker would credit the Funds account with an amount equal to appreciation and conversely if the Fund has unrealized depreciation the clearing broker would debit the Funds 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
14
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
March 31, 2015
2. Summary of Significant Accounting Policies (Continued)
on the Statements of Financial Condition and Change in net unrealized appreciation (depreciation) of futures contracts on the Statements of Operations. When the contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract on the closing date and the value of the contract when originally entered into, which is recognized as a component of Net realized gain (loss) from futures contracts on the Statements of Operations.
The Fund expects to invest only in long futures contracts. Some short futures positions may arise in futures contracts traded on the London Metal Exchange (LME) solely as the result of closing existing long LME futures positions. For every short LME futures contract outstanding, the Fund had previously entered into a long futures contract. The LME Clearing House is the counterparty for both the long and short positions.
Risks of investments in commodity futures contracts include possible adverse movement in the price of the commodities underlying the contracts, the possibility that there may not be a liquid secondary market for the contracts and the possibility that a change in the value of the contract may not correlate with a change in the value of the underlying commodities.
The average number of futures contracts outstanding during the three months ended March 31, 2015 and fiscal year ended December 31, 2014 was as follows:
Three Months Ended March 31, 2015 |
Year Ended December 31, 2014 |
|||||||
Average number of futures contracts outstanding* |
2,552 | 2,764 | ||||||
|
|
|
|
* | The average number of contracts is calculated based on the number of contracts outstanding at the beginning of the fiscal year and at the end of each quarter within the current fiscal year. |
Refer to Note 3Derivative Instruments and Hedging Activities within these Notes to Financial Statements for further details on futures contracts 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 three months ended March 31, 2015 and fiscal year ended December 31, 2014, the Fund wrote call options on futures contracts.
The Fund did not purchase options on futures or forward contracts during the three months ended March 31, 2015 and fiscal year ended December 31, 2014. The purchase of options involves the risk of loss of all or part of
15
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
March 31, 2015
2. Summary of Significant Accounting Policies (Continued)
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.
Transactions in call options written during the three months ended March 31, 2015 and fiscal year ended December 31, 2014 were as follows:
Three Months Ended March 31, 2015 |
Year Ended December 31, 2014 |
|||||||||||||||
Number of Contracts |
Premiums Received |
Number of Contracts |
Premiums Received |
|||||||||||||
Outstanding, beginning of period |
1,257 | $ | 952,693 | 1,377 | $ | 777,236 | ||||||||||
Options written |
2,815 | 1,774,828 | 9,114 | 5,003,593 | ||||||||||||
Options terminated in closing purchase transactions |
(1,887 | ) | (1,409,681 | ) | (4,006 | ) | (1,970,074 | ) | ||||||||
Options expired |
(782 | ) | (518,556 | ) | (3,848 | ) | (2,173,528 | ) | ||||||||
Options exercised |
(183 | ) | (89,662 | ) | (1,380 | ) | (684,534 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Outstanding, end of the period |
1,220 | $ | 709,622 | 1,257 | $ | 952,693 | ||||||||||
|
|
|
|
|
|
|
|
The average number of call options written outstanding during the three months ended March 31, 2015 and fiscal year ended December 31, 2014 was as follows:
Three Months Ended March 31, 2015 |
Year Ended December 31, 2014 |
|||||||
Average number of call options written outstanding* |
1,239 | 1,338 | ||||||
|
|
|
|
* | 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 3Derivative 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 since its commencement of operations on September 27, 2010. 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.
16
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
March 31, 2015
2. Summary of Significant Accounting Policies (Continued)
Forward contracts are, in general, not cleared or guaranteed by a third party. The Fund may collateralize forward commodity contracts with cash and/or certain securities as indicated on its Statements of Financial Condition or Schedule of Investments, when applicable, and such collateral is held for the benefit of the counterparty in a segregated account at the custodian to protect the counterparty against non-payment by the Fund. In the event of a default by the counterparty, the Fund will seek return of this collateral and may incur certain costs exercising its right with respect to the collateral.
The Fund remains subject to credit risk with respect to the amount it expects to receive from counterparties, as those amounts are not similarly collateralized by the counterparty. If a counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, the Fund may experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding. The Fund may obtain only limited recovery or may obtain no recovery in such circumstances.
Participants in trading foreign exchange forward contracts often do not require margin deposits, but rely upon internal credit limitations and their judgments regarding the creditworthiness of their counterparties.
The Fund will enter into forward contracts only with large, well-capitalized and well-established financial institutions. The creditworthiness of each of the firms which is a party to a forward contract is monitored by the Manager.
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 March 31, 2015 and December 31, 2014, 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 tables present the repurchase agreements for the Fund, presented on the Statements of Financial Condition as of March 31, 2015 and December 31, 2014, and recognized as a component of Short-term investments, at value, that are subject to netting agreements as of the end of each reporting period, and the collateral delivered related to those repurchase agreements.
March 31, 2015 | ||||||||||||||||
Counterparty | Short-Term Investments, at Value |
Collateral Pledged (From) Counterparty* |
Net Exposure |
|||||||||||||
Repurchase Agreements |
State Street Bank | $ | 1,505,768 | $ | (1,505,768 | ) | $ | | ||||||||
|
|
|
|
|
|
17
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
March 31, 2015
2. Summary of Significant Accounting Policies (Continued)
December 31, 2014 | ||||||||||||||||
Counterparty | Short-Term Investments, at Value |
Collateral Pledged (From) Counterparty* |
Net Exposure |
|||||||||||||
Repurchase Agreements |
State Street Bank | $ | 1,085,421 | $ | (1,085,421 | ) | $ | | ||||||||
|
|
|
|
|
|
* | As of March 31, 2015 and December 31, 2014, the value of the collateral pledged from the counterparty exceeded the value of the repurchase agreements. The value of the collateral pledged from the counterparty as of March 31, 2015 and December 31, 2014 was $1,536,975 and $1,113,007, respectively. |
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-adviser. 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-adviser 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.
18
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
March 31, 2015
2. Summary of Significant Accounting Policies (Continued)
Fair Value Measurements
Fair value is defined as the price that the Fund would receive upon selling an investment or transferring a liability in an orderly transaction to an independent buyer in the principal or most advantageous market for the investment. A three-tier hierarchy is used to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability. Observable inputs are based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability. Unobservable inputs are based on the best information available in the circumstances. The following is a summary of the three-tier hierarchy of valuation inputs.
Level 1Inputs are unadjusted and prices are determined by quoted prices in active markets for identical securities.
Level 2Prices are determined using other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3Prices are determined using significant unobservable inputs (including managements assumptions in determining the fair value of investments).
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 March 31, 2015 and December 31, 2014:
March 31, 2015 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Short-Term Investments: |
||||||||||||||||
U.S. Government and Agency Obligations |
$ | | $ | 94,669,980 | $ | | $ | 94,669,980 | ||||||||
Repurchase Agreements |
| 1,505,768 | | 1,505,768 | ||||||||||||
Investments in Derivatives: |
||||||||||||||||
Futures Contracts* |
(2,661,163 | ) | | | (2,661,163 | ) | ||||||||||
Call Options Written** |
(231,136 | ) | (988 | ) | | (232,124 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | (2,892,299 | ) | $ | 96,174,760 | $ | | $ | 93,282,461 | |||||||
|
|
|
|
|
|
|
|
19
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
March 31, 2015
2. Summary of Significant Accounting Policies (Continued)
December 31, 2014 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Short-Term Investments: |
||||||||||||||||
U.S. Government and Agency Obligations |
$ | | $ | 112,651,962 | $ | | $ | 112,651,962 | ||||||||
Repurchase Agreements |
| 1,085,421 | | 1,085,421 | ||||||||||||
Investments in Derivatives: |
||||||||||||||||
Futures Contracts* |
(10,837,633 | ) | | | (10,837,633 | ) | ||||||||||
Call Options Written |
(296,775 | ) | (132 | ) | | (296,907 | ) | |||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | (11,134,408 | ) | $ | 113,737,251 | $ | | $ | 102,602,843 | |||||||
|
|
|
|
|
|
|
|
* | Represents the net unrealized appreciation (depreciation) of futures contracts as reported on the Statements of Financial Condition. |
** | Refer to the Schedule of Investments for a breakdown of call options written classified as Level 2, which is comprised of the Funds call options written on the LME. |
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.
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.
20
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
March 31, 2015
2. Summary of Significant Accounting Policies (Continued)
Income Taxes
No provision for federal, state, and local income taxes has been made in the accompanying financial statements because the Fund has elected to be classified as a partnership for U.S. federal income tax purposes. Each owner of the Funds shares will be required to take into account its allocable share of the Funds income, gains, losses, deductions and other items for the Funds taxable year.
For all open tax years and all major taxing jurisdictions, the Manager of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Open tax years are those that are open for examination by taxing authorities (i.e., generally the last four tax year ends and the interim tax period since then). Furthermore, the Manager of the Fund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Expense Recognition
All expenses of the Fund are recognized on an accrual basis. The Fund pays all routine and extraordinary costs and expenses of its operations, brokerage expenses, custody fees, transfer agent expenses, professional fees, expenses of preparing, printing and distributing reports, notices, information statements, proxy statements, reports to governmental agencies, and taxes, if any.
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
21
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
March 31, 2015
2. Summary of Significant Accounting Policies (Continued)
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 March 31, 2015 and December 31, 2014, 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 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.
22
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
March 31, 2015
3. Derivative Instruments and Hedging Activities (Continued)
The following tables present the fair value of all derivative instruments held by the Fund as of March 31, 2015 and December 31, 2014, the location of these instruments on the Statements of Financial Condition and the primary underlying risk exposure.
March 31, 2015 |
||||||||||||||
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 | $ | 1,196,599 | Unrealized depreciation on futures contracts | $ | 3,857,762 | |||||||
Commodity |
Options | | | Call options written, at value | 232,124 | |||||||||
Total |
$ | 1,196,599 | $ | 4,089,886 |
December 31, 2014 |
||||||||||||||
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 |
$ |
633,319 |
|
Unrealized depreciation on futures contracts |
$ | 11,470,952 | ||||||
Commodity |
Options | | | Call options written, at value | 296,907 | |||||||||
Total |
$ | 633,319 | $ | 11,767,859 |
The following table presents the amount of net realized gain (loss) and change in net unrealized appreciation (depreciation) recognized on derivative instruments during the three months ended March 31, 2015 and March 31, 2014, the location of these instruments on the Statements of Operations and the primary underlying risk exposure.
Commodity Risk Exposure | Three Months Ended March 31, 2015 |
Three Months Ended March 31, 2014 |
||||||
Net realized gain (loss) from: |
||||||||
Futures contracts |
$ | (15,565,740 | ) | $ | 5,942,505 | |||
Call options written |
1,834,913 | 1,001,725 | ||||||
Change in net unrealized appreciation (depreciation) of: |
||||||||
Futures contracts |
$ | 8,176,470 | $ | 1,744,000 | ||||
Call options written |
(178,288) | (693,116 | ) |
23
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
March 31, 2014
4. Related Parties
The Manager, the Commodity Sub-adviser and the Collateral Sub-adviser 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 represents 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-adviser and the Collateral Sub-adviser. Both the Commodity Sub-adviser and the Collateral Sub-adviser 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, pursuant to which it was authorized to repurchase up to 10% of its outstanding common shares (approximately 920,000 shares) in open-market transactions at the Managers discretion.
Transactions in share repurchases during the three months ended March 31, 2015 and fiscal year ended December 31, 2014, were as follows:
Three Months Ended March 31, 2015 |
Year Ended
December 31, 2014 |
|||||||
Shares repurchased |
| 159,900 | ||||||
|
|
|
|
|||||
Weighted average price per share repurchased |
| $ | 12.50 | |||||
|
|
|
|
|||||
Weighted average discount per share repurchased |
| 18.14 | % | |||||
|
|
|
|
24
Table of Contents
NUVEEN DIVERSIFIED COMMODITY FUND
NOTES TO FINANCIAL STATEMENTS (Continued) (Unaudited)
March 31, 2015
6. Financial Highlights
The following financial highlights relate to investment performance and operations for a Fund share outstanding during the three months ended March 31, 2015 and March 31, 2014. 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 are 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 March 31, | ||||||||
2015 | 2014 | |||||||
Net Asset Value: |
||||||||
Net asset value per sharebeginning of period |
$ | 13.62 | $ | 18.15 | ||||
Net investment income (loss) |
(0.06 | ) | (0.08 | ) | ||||
Net realized and unrealized gain (loss) |
(0.63 | ) | 0.88 | |||||
Distributions |
(0.34 | ) | (0.39 | ) | ||||
|
|
|
|
|||||
Net asset value per shareend of period |
$ | 12.59 | $ | 18.56 | ||||
|
|
|
|
|||||
Market Value: |
||||||||
Market value per sharebeginning of period |
$ | 12.83 | $ | 15.17 | ||||
|
|
|
|
|||||
Market value per shareend of period |
$ | 11.90 | $ | 15.88 | ||||
|
|
|
|
|||||
Ratios to Average Net Assets:(a) |
||||||||
Net investment income (loss) |
(1.97 | )% | (1.71 | )% | ||||
|
|
|
|
|||||
Expenses |
2.06 | % | 1.80 | % | ||||
|
|
|
|
|||||
Total Returns:(b) |
||||||||
Based on Net Asset Value |
(5.13 | )% | 4.44 | % | ||||
|
|
|
|
|||||
Based on Market Value |
(4.66 | )% | 7.27 | % | ||||
|
|
|
|
(a) | Annualized. |
(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.
25
Table of Contents
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-adviser) and Nuveen Asset Management, LLC (Nuveen Asset Management or the Collateral Sub-adviser) 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 public offering. The Funds shares trade on the NYSE MKT 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 writes commodity call options seeking to enhance the Funds risk-adjusted total return. The Manager focuses on the Bloomberg Commodity Index (BCOM) when evaluating the performance of the commodity futures, forwards, and options positions (the commodity portfolio) in the Funds portfolio.
Proposed Conversion to ETF Structure
On December 19, 2014, the Fund issued a press release announcing that the Manager had approved a plan to convert the Fund (the Conversion) into an open-end exchange-traded fund (ETF). The Conversion will only become effective upon satisfaction of several conditions, including the receipt of shareholder and regulatory approvals. Shareholders will vote on the Conversion at the Funds annual meeting of shareholders, originally scheduled for March 31, 2015, but adjourned until May 15, 2015, to permit additional solicitation of votes. The Fund is not currently, and after the Conversion will not be, a mutual fund or any other type of investment company within the meaning of 1940 Act. Until the Conversion occurs, the Fund will continue to operate as currently structured. In connection with seeking shareholder approval of the Conversion, the Fund has filed with the Securities and Exchange Commission (SEC) a proxy statement and other solicitation materials which contain important information about the Conversion. The proxy statement and other solicitation material filed by the Fund are available, free of charge, on the SECs website at www.sec.gov.
26
Table of Contents
Results of Operations
The Quarter Ended March 31, 2015 Fund Share Price
The Funds shares traded on the NYSE MKT at a price of $11.90 on the close of business on March 31, 2015. This represents a decrease of 7.25% in share price (not including an assumed reinvestment of distributions) from the $12.83 price at which the shares of the Fund traded on the close of business on December 31, 2014. The high and low intra-day share prices for the quarter were $13.00 (January 15, 2015) and $11.52 (March 18, 2015), respectively. During the quarter, the Fund declared distributions totaling $0.336 per share to shareholders, of which $0.103 was paid on April 1, 2015. 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 -4.66%. At March 31, 2015, shares of the Fund traded at a 5.48% discount to the Funds net asset value of $12.59 per share.
The Quarter Ended March 31, 2014 Fund Share Price
The Funds shares traded on the NYSE MKT at a price of $15.88 on the close of business on March 31, 2014. This represents an increase of 4.68% in share price (not including an assumed reinvestment of distributions) from the $15.17 price at which the shares of the Fund traded on the close of business on December 31, 2013. The high and low intra-day share prices for the quarter were $16.46 (February 25, 2014) and $14.93 (January 10, 2014), respectively. During the quarter, the Fund declared distributions totaling $0.390 per share to shareholders, of which $0.130 was paid on April 1, 2014. 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 7.27%. At March 31, 2014, shares of the Fund traded at a 14.44% discount to the Funds net asset value of $18.56 per share.
The Quarter Ended March 31, 2015 Net Assets of the Fund
The Funds net assets decreased from $123.2 million at December 31, 2014, to $113.9 million at March 31, 2015, a decrease of $9.3 million. The decrease in the Funds net assets was due to a net loss of $6.3 million, in addition to $3.0 million of distributions to shareholders.
The Fund generated a net loss of $6.3 million for the quarter ended March 31, 2015, resulting from change in net unrealized appreciation of $8.0 million, offset by net realized losses of $13.7 million, and total expenses of $0.6 million.
During the quarter ended March 31, 2015, the Funds collateral investments generated interest income of $25,959, which represents 0.02% of average net assets for the quarter ended March 31, 2015.
The net asset value per share on March 31, 2015, was $12.59. This represents a decrease of 7.56% in net asset value (not including an assumed reinvestment of distributions) from the $13.62 net asset value as of December 31, 2014. The Fund declared distributions totaling $0.336 per share to shareholders 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 -5.13% for the quarter ended March 31, 2015.
The Quarter Ended March 31, 2014 Net Assets of the Fund
The Funds net assets increased from $167.1 million at December 31, 2013, to $170.8 million at March 31, 2014, an increase of $3.7 million. The increase in the Funds net assets was due to $6.9 million in net realized gains and $1.1 million in net unrealized appreciation on the Funds portfolio during the quarter, a net investment loss of $0.7 million, and $3.6 million of distributions to shareholders.
27
Table of Contents
During the quarter ended March 31, 2014, the Funds collateral investments generated interest income of $37,292, which represents 0.02% of average net assets for the quarter ended March 31, 2014.
The net asset value per share on March 31, 2014, was $18.56. This represents an increase of 2.26% in net asset value (not including an assumed reinvestment of distributions) from the $18.15 net asset value as of December 31, 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 4.44% for the quarter ended March 31, 2014.
The Fund generated a net income of $7.3 million for the quarter ended March 31, 2014, resulting from total expenses of $0.7 million, net realized gains of $6.9 million, and net unrealized appreciation of $1.1 million.
The Quarter Ended March 31, 2015 Overall Commodity Market Commentary
The broad commodity market, as measured by the BCOM, fell 5.9% for the three-month period, with all commodity groups except precious metals ending the period lower.
The largest group by weight, energy commodities represented 33.2% of the BCOM at the end of the period. All energy commodities except unleaded gasoline traded lower over the period, collectively down 8.2%. Crude oil continued to reel from the Organization of Petroleum Exporting Countries (OPEC) decision at year-end to maintain production levels despite falling prices, as well as expectations for weakening global demand amid a strong U.S. dollar and weak economic data in China and Europe. Natural gas prices also suffered amid plentiful supply as a result of record production and softer demand expectations driven by mild weather forecasts. Unleaded gas and heating oil fared slightly better, as a U.S. refinery strike in February and cold weather hampered refining capacity. Lower gas prices also bolstered consumer demand in the U.S., China and India.
Agricultural commodities, as grouped by Gresham, made up 21.9% of the BCOM at the end of the period. The group fell 7.5% over the period, with all agriculture commodities declining. Wheat fell 12.6% and was the weakest performer in the group, dragged down by its sensitivity to the strong U.S. dollar, which makes foreign crop prices cheaper in comparison. Corn prices fell 7.2% on news that U.S. stockpiles and spring planting estimates were larger than analysts expected.
The commodities in the industrial metals group comprised 16.7% of the BCOM at the end of the period. Concerns about Chinas economic slowdown and the rallying U.S. dollar continued to hamper the sector, which ended the period down 5.3%.
The precious metals group represented 16.5% of the BCOM at the end of the period. Gold prices were volatile, topping $1,300 per ounce in January, then falling below $1,150 in mid-March, and advancing in the final weeks of the period to end close to where they started. Silver, however, was one of the few commodities in the BCOM with a positive return for the period. As with gold, silver prices rose early in the period, and a short-covering rally in March in which traders drove prices higher as they bought back contracts to cover open short positions, which helped silver rise 6.1% for the period.
Foods and fibers commodities, as grouped by Gresham, made up a combined 6.7% of the BCOM at the end of the period. Sugar and Arabica coffee, which are predominantly produced in Brazil, experienced sharp sell-offs as growing conditions were expected to improve with favorable weather forecasts and as weakness in the Brazilian currency encourages exports, which could further contribute to global supply gluts. Cocoa futures, which the Fund holds but the BCOM does not, also lost value amid waning chocolate demand, especially in the emerging markets, and an expected bumper crop in the Ivory Coast. In contrast, cotton prices rallied on the back of strong U.S. export sales and lower expected plantings in the U.S.
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Livestock is the smallest group, comprising 5.1% of the BCOM at the end of the quarter. Lean hogs were the worst-performing contract in the BCOM, plunging 23.7% during the quarter. Supply continued to outpace demand for several reasons. U.S. exports slackened, due to the stronger U.S. dollar and a port strike in California that created a bottleneck for sales to Asia. Meanwhile, a seasonal increase in a fatal pig virus did not materialize as expected, and cheaper feed costs resulting from weaker grain prices continued to encourage farmers to bulk up their hogs.
The Quarter Ended March 31, 2014 Overall Commodity Market Commentary
The broad commodity market rose 7.0% in the first quarter, as measured by the BCOM. Foods and fibers led the positive performance, followed by livestock and agriculture. Precious metals and energy had modest gains, while industrial metals was the weakest performer, posting a loss for the quarter.
Energy commodities represented 30.7% of the BCOM at the end of the period, and were its most significant commodity group by weight. The group rose 4.2% for the period, led by natural gas. Demand for residential heating remained high as a polar vortex kept most of the United States in colder than usual temperatures during the period. Crude oil had a small gain overall, with less volatility than in the fourth quarter of 2013. West Texas Intermediate (WTI) was up, but Brent crude fell slightly on fear of supply disruptions amid geopolitical tensions.
Agricultural commodities, as grouped by Gresham, made up 24.6% of the BCOM at the end of the period. All agriculture commodities were up for the period, resulting in a 14.8% gain for the group overall. The U.S. Department of Agriculture forecasted lower plantings and strong export sales of corn, bolstering corn prices. Wheat prices increased on concerns about damage to the winter crops from cold, dry weather in the United States. Wheat supplies were also threatened by shipping delays in Canada, reduced exports from South America, and the crisis in Ukraine (the sixth largest wheat exporter).
The commodities in foods and fibers, as grouped by Gresham, made up a combined 9.0% of the BCOM at the end of the period. The group rose 21.3%, with all foods and fibers commodities advancing during the quarter. Coffee was the best performer in both the group and the BCOM overall, posting a 58.2% return. Concerns about scorched crops, amid record heat and drought in Brazil, boosted coffee and sugar prices.
The industrial metals comprised 15.0% of the BCOM at the end of the period and were the weakest performing group, down 4.6% for the period. Nickel led performance in the sector, rallying in January on news of a mineral ore export ban by Indonesia, which supplies nearly 20% of the worlds nickel, and again in March on speculation of supply disruptions from Russia. Copper, however, was the worst performer in the industrial metals group and the BCOM as a whole. Copper prices fell to a 44-month low late in the first quarter when Chinas first domestic corporate bond default sparked fears that credit tightening would shutter copper demand.
Precious metals commodities represented 15.1% of the BCOM at the end of the period. The group rose 5.4% for the period. Gold and silver were up, as were platinum and palladium (neither of which are represented in the BCOM but are traded in the Fund). At the beginning of the year, gold was trading near $1,200, a psychologically important level to technical analysts who believed it was signaling a change in the price trend. This contributed to golds rally during the first quarter. In addition, investors fled emerging market currencies for perceived safe-haven assets, the U.S. Federal Reserve maintained stimulus friendly comments, and physical gold continued to be in demand from Asia and the Middle East, all of which supported gold prices.
Livestock is the smallest group, comprising 5.7% of the BCOM at the end of the period. Both live cattle and lean hogs performed well during the first quarter, contributing to the livestock groups 16.4% return. Prices for both contracts were affected by supply issues: lean hogs continued to suffer from a highly infectious virus, and weight gain, slaughter, and feed costs for live cattle were all adversely affected by the harsh winter. Feeder cattle, which the Fund includes but the BCOM doesnt, posted a small gain as well.
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The Quarter Ended March 31, 2015 Fund Commodity Portfolio Commentary
The Funds commodity portfolio declined 4.7% for the three-month period, before considering the expenses of the Fund. The overall commodities market, as measured by the BCOM, was down 5.9%. The Funds total return on net asset value for the same period, which includes the effect of the Funds expenses and the performance of the collateral portfolio and assumes reinvestment of the Funds distributions, was -5.13%.
The Fund writesthat is, sellscovered call options on its portfolios commodity futures, seeking to limit return volatility, and to provide cash flow to support the Funds distributions. Gresham sells exchange-traded commodity call options on up to 50% of the value of each of the Funds commodity futures contracts, when those options are deemed to have sufficient trading volume and liquidity. The Fund receives cash premiums in return.
During the quarter, the Fund sold options on approximately 50% of the value of each commodity position. Overall, the Funds option-writing activity contributed positively to performance for the period and helped reduce the Funds volatility versus the BCOM, as measured by the standard deviation of return. Call options written on the Funds agriculture, foods and fibers, and livestock positions expired out of the money, helping the Funds comparative performance against the BCOM.
At the commodity group level, relative to the BCOM, the Funds commodity portfolio benefited from energy, agriculture, foods and fibers, and industrial metals, while precious metals detracted from relative performance and livestock had a neutral impact.
In the energy group, the Fund was down 6.7% versus the BCOMs 8.2% drop. The Funds natural gas position drove relative outperformance in the energy group. The Fund benefited from a lower weighting in natural gas, the higher premiums collected from writing natural gas options in a higher volatility environment, and favorable contract selection. However, relative gains were somewhat tempered by crude oil, heating oil, and gasoline options that went in the money and were exercised during the period. Heightened price volatility in heating oil and gasoline futures also helped the Fund gain larger premiums on options sold on those contracts, which was additive to performance.
The Funds agriculture position lost 5.3%, while the BCOMs tumbled 7.5%. The Funds overall underweight in the group, and particularly in corn and wheat, helped relative performance. Additionally, all of the Funds agriculture options expired out of the money, further improving the Funds performance relative to the BCOM.
In the industrial metals group, the Fund declined 4.5% and the BCOM lost 5.3%. Copper contributed the most to the Funds better relative performance in the sector. The Funds more diversified copper position, comprised of both LME and COMEX contracts, outperformed the Indexs copper position, which only has COMEX exposure. However, the Fund was hurt by aluminum options that went in the money during the quarter and were exercised against it.
The Funds precious metals position was up 0.8%, trailing the BCOMs 1.3% return for the group. Gold options that were exercised against the Fund detracted from its relative performance. Additionally, despite the Funds outperformance in silver, its underweight to the commodity during the period hurt its performance relative to the BCOM.
The foods and fibers group, driven by declines in sugar and coffee, was the worst performing group in both the Fund and the BCOM for the quarter, down 11.8% and 13.7%, respectively. The Funds relative performance benefited primarily from the options strategy, particularly in coffee and sugar, where the Fund wrote call options on a greater share of its contracts. While the Fund typically sells call options on approximately 50% of the value of each commodity contract seeking to reduce risk, in some instances the Fund writes calls on a higher value of a contract to cover a separate contract position within the same commodity type, that may have a relatively illiquid options market. In this case, the Robusta coffee and white sugar (London-traded) options markets lacked
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sufficient liquidity, and therefore the Fund wrote additional Arabica coffee and NY-traded sugar calls to cover its Robusta coffee and white sugar positions. All of the foods and fibers options sold expired out of the money during the quarter, benefitting the Funds relative performance against the BCOM.
The Funds livestock position declined 7.5%, and the BCOMs fell 9.8%. Live cattle contributed positively to the Funds relative returns, bolstered by favorable contract selection, a higher weighting than the BCOM, and the options strategy. As with coffee and sugar, the Fund wrote calls on a higher value of the live cattle position to cover its feeder cattle position, given the insufficient liquidity in the feeder cattle options market. The Funds relative overweight in lean hogs was disadvantageous to relative performance in a period of falling prices, offsetting the benefits of the cattle positions.
The Quarter Ended March 31, 2014 Fund Commodity Portfolio Commentary
The Funds commodity portfolio returned 4.8% for the three-month period (before considering the expenses of the Fund or the performance of the collateral portfolio). The Fund underperformed the BCOM, which returned 7.0% for the same period. The Funds total return on net asset value for the same period, which includes the effect of the Funds expenses, the performance of the collateral portfolio, and assumes reinvestment of the Funds distributions to shareholders, was 4.44%.
The Fund writesthat is, sellscovered call options on its portfolios commodity futures, seeking to limit return volatility, and to provide cash flow to support the Funds distributions. Gresham sells exchange-traded commodity call options on up to approximately 50% of the value of each of the Funds commodity futures contracts, when those options are deemed to have sufficient trading volume and liquidity. The Fund receives cash premiums in return. During the quarter, the Fund sold options on approximately 50% of the value of each commodity position. The Funds option-writing activity hurt performance in the period. Call options written on coffee, natural gas, lean hogs and live cattle expired in the money, limiting the Funds full participation in these contracts gains. However, premium retention on other call options did help reduce the Funds volatility versus the BCOM, as measured by the standard deviation of return.
The Fund outperformed the BCOM in precious metals, but underperformed in all other commodity groups. Below is a discussion of each of the commodity groups and the factors that contributed to the performance.
In the energy group, the Fund advanced 3.0%, while the BCOM rose 4.2% for the period. As natural gas prices rallied, the Funds underweight detracted from performance relative to the BCOM, as did options positions in natural gas. A larger weighting in Brent crude also hurt the Funds relative returns, as Brent finished the quarter slightly lower.
The Funds agriculture position gained 14.2%, slightly below the BCOMs 14.8% return. The Funds lower weighting in corn relative to the BCOM dampened relative performance. The Funds wheat position also detracted on a weighted basis, as losses from an underweight in Chicago Board of Trade (CBOT) wheat offset a small gain from an overweight in Kansas City wheat.
The Funds foods and fibers position appreciated 11.8% versus the BCOMs 21.4% rise. Relative underperformance was driven by the Funds smaller exposure to Arabica coffee and in-the-money call options that were exercised during the period.
In industrial metals, the Funds position declined 4.1% and the BCOMs fell 4.6% during the period. Weighting differences in copper drove the Funds relative underperformance, as the Funds higher weight was disadvantageous in a sinking market.
The Funds precious metals group advanced 6.1%, beating the BCOMs 5.4% gain. The Fund benefited from collecting option premiums on contracts that expired without being exercised.
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The livestock group appreciated 9.6% for the Fund and 16.4% for the BCOM. The Funds underperformance was primarily driven by lean hog and live cattle call options that went in the money when prices for both contracts rallied. However, on a weighted basis, the Funds live cattle position only slightly detracted from relative performance as an overweight was beneficial to relative performance.
Fund Total Returns
The following table presents selected total returns for the Fund and BCOM as of March 31, 2015. Market value and net asset value total returns are based on the change in market value and net asset value, respectively, for a share during the period presented. The total returns presented assume the reinvestment of distributions at market value on the distribution payment date for returns based on market value, and at net asset value on the distribution payment date for returns based on net asset 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 market price at the end of the period for total returns based on market value, and at the net asset value at the end of the period for total returns based on net asset value.
Total Returns as of March 31, 2015 | ||||||||||||
Cumulative | Average Annual | |||||||||||
3 Months | 1 Year | Since Inception | ||||||||||
Market Value |
-4.66 | % | -16.52 | % | -7.44 | % | ||||||
Net Asset Value |
-5.13 | % | -25.29 | % | -5.93 | % | ||||||
BCOM |
-5.94 | % | -27.04 | % | -7.50 | % |
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 not been sufficient to cover the distributions made, 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.
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
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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. Effective with the distribution paid on March 2, 2015, the Funds distribution rate was reduced from $0.130 per share to $0.103 per share.
Commodity Weightings
The table below presents the composition of the Funds TAP PLUSSM 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 BCOM as of March 31, 2015. The March 31, 2015 composition serves as a guide to how the composition of the Funds TAP PLUSSM investment strategy compared to that of the BCOM, a leading commodity market benchmark.
Composition | ||||||||||
Commodity Group |
Commodity |
TAP PLUSSM | BCOM | |||||||
Energy |
Crude Oil | 19.93 | % | 15.96 | % | |||||
Natural Gas | 6.43 | % | 8.33 | % | ||||||
Heating Oil | 5.68 | % | 3.96 | % | ||||||
Unleaded Gas | 3.71 | % | 4.91 | % | ||||||
|
|
|
|
|||||||
35.75 | % | 33.16 | % | |||||||
|
|
|
|
|||||||
Industrial Metals |
Copper | 9.29 | % | 7.74 | % | |||||
Aluminum | 5.06 | % | 4.74 | % | ||||||
Nickel | 1.76 | % | 1.74 | % | ||||||
Zinc | 1.69 | % | 2.43 | % | ||||||
Lead | 1.00 | % | 0.00 | % | ||||||
|
|
|
|
|||||||
18.80 | % | 16.65 | % | |||||||
|
|
|
|
|||||||
Agriculturals |
Soybean | 5.31 | % | 5.41 | % | |||||
Wheat | 3.50 | % | 4.13 | % | ||||||
Corn | 3.39 | % | 7.11 | % | ||||||
Soybean Meal | 2.56 | % | 2.62 | % | ||||||
Soybean Oil | 1.01 | % | 2.67 | % | ||||||
|
|
|
|
|||||||
15.77 | % | 21.94 | % | |||||||
|
|
|
|
|||||||
Precious Metals |
Gold | 8.84 | % | 12.03 | % | |||||
Silver | 2.63 | % | 4.44 | % | ||||||
Platinum | 0.80 | % | 0.00 | % | ||||||
Palladium | 0.45 | % | 0.00 | % | ||||||
|
|
|
|
|||||||
12.72 | % | 16.47 | % | |||||||
|
|
|
|
|||||||
Livestock |
Live Cattle | 6.28 | % | 3.16 | % | |||||
Lean Hogs | 2.85 | % | 1.92 | % | ||||||
Feeder Cattle | 1.72 | % | 0.00 | % | ||||||
|
|
|
|
|||||||
10.85 | % | 5.08 | % | |||||||
|
|
|
|
|||||||
Foods and Fibers |
Sugar | 1.99 | % | 3.33 | % | |||||
Coffee | 1.79 | % | 1.74 | % | ||||||
Cotton | 1.69 | % | 1.63 | % | ||||||
Cocoa | 0.64 | % | 0.00 | % | ||||||
|
|
|
|
|||||||
6.11 | % | 6.70 | % | |||||||
|
|
|
|
|||||||
Total |
100.00 | % | 100.00 | % | ||||||
|
|
|
|
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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 10% to 25% 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-adviser. 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 as of the authorization date in open-market transactions. On March 6, 2014, the Fund reauthorized its share repurchase program, pursuant to which it may repurchase up to 10% of its outstanding common shares as of the reauthorization date (approximately 920,000 shares) in open-market transactions, at the Managers discretion. 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 three months ended March 31, 2015.
The Fund is unaware of any other trends, demands, conditions or events that are reasonably likely to result in material changes to the Funds liquidity needs.
Because the Fund invests in commodity futures contracts, its capital is at risk from changes in the value of these contracts (market risk) or the inability of clearing brokers or counterparties to perform under the terms of the contracts (credit risk).
Market Risk
Investing in commodity futures and forward contracts involves the Fund entering into contractual commitments to purchase or sell a particular commodity at a specified date and price. The market risk associated with the Funds commitments to purchase commodities will be limited to the gross or face amount of the contracts held.
The Funds exposure to market risk may be influenced by a number of factors, including changes in international balances of payments and trade, currency devaluations and revaluations, changes in interest and foreign currency
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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-adviser 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-adviser implements procedures which include, but are not limited to:
| Employing the options strategy to limit directional risk (although there is no guarantee that the Funds options strategy will be successful); |
| Executing and clearing trades only with counterparties the Commodity Sub-adviser believes are creditworthy; |
| Limiting the amount of margin or premium required for any one commodity contract or all commodity contracts combined; and |
| Generally limiting transactions to contracts which are traded in sufficient volume to permit the efficient taking and liquidating of positions. |
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 cash equivalents, U.S. government securities and other short-term, high-grade 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 March 31, 2015, the Fund has not utilized, nor does it expect to utilize in the future, special purpose entities to facilitate off-balance sheet financing arrangements and has no loan guarantee arrangements or off-balance sheet arrangements of any kind other than agreements entered into in the normal course of business,
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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-adviser, the Commodity Sub-adviser, 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 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:
| 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. |
| 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 change in net unrealized appreciation (depreciation). |
| 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. |
| 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. |
| 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. |
| Market quotations for exchange-traded commodity futures and forward contracts and options on commodity futures and forward contracts may not be readily available as a result of significant events, which can include, but are not limited to: trading halts or suspensions, market disruptions, or the absence of market makers willing to make a market in such instruments. In addition, events may occur after the close of the market, but prior to the determination of the Funds net asset value, which may affect the values of the Funds investments. In such circumstances, the Manager will determine a fair valuation for such investments that in its opinion is reflective of fair market value. |
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| Realized gains (losses) on closed positions 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. |
| Interest income, which reflects the amortization of premiums and includes accretion of discounts for financial reporting purposes, is recorded on an accrual basis. |
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.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Quantitative Disclosure
The Fund is exposed to commodity price risk through the futures and forward contracts and the options on futures and forward contracts that the Fund invests in as part of its investment strategy. These instruments have been entered into for trading purposes. The following table provides information about the Funds futures contracts and options on futures contracts, which are sensitive to changes in commodity prices, as of March 31, 2015. 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 held by the Fund, the Fund had previously entered into a long futures contract. As of March 31, 2015, the Fund has not invested in forward contracts.
Futures Contracts
Commodity |
Contract |
Contract Position |
Contract Expiration |
Number of Contracts |
Valuation Price |
Contract Multiplier |
Notional Amount at Value |
|||||||||||||||||
Energy |
Crude Oil | |||||||||||||||||||||||
ICE Brent Crude Oil Futures Contract | Long | May 2015 | 103 | $ | 55.1100 | 1,000 | $ | 5,676,330 | ||||||||||||||||
ICE Brent Crude Oil Futures Contract | Long | July 2015 | 100 | 57.0800 | 1,000 | 5,708,000 | ||||||||||||||||||
NYMEX Crude Oil Futures Contract | Long | May 2015 | 153 | 47.6000 | 1,000 | 7,282,800 | ||||||||||||||||||
NYMEX Crude Oil Futures Contract | Long | July 2015 | 79 | 50.7800 | 1,000 | 4,011,620 | ||||||||||||||||||
Natural Gas | ||||||||||||||||||||||||
NYMEX Natural Gas Futures Contract | Long | May 2015 | 156 | 2.6400 | 10,000 | 4,118,400 | ||||||||||||||||||
NYMEX Natural Gas Futures Contract | Long | July 2015 | 116 | 2.7510 | 10,000 | 3,191,160 | ||||||||||||||||||
Heating Oil | ||||||||||||||||||||||||
ICE Low Sulphur Gasoil Futures Contract | Long | May 2015 | 63 | 524.0000 | 100 | 3,301,200 | ||||||||||||||||||
NYMEX NY Harbor ULSD Futures Contract | Long | May 2015 | 44 | 1.7080 | 42,000 | 3,156,384 | ||||||||||||||||||
Unleaded Gas | ||||||||||||||||||||||||
NYMEX Gasoline RBOB Futures Contract | Long | May 2015 | 45 | 1.7700 | 42,000 | 3,345,300 | ||||||||||||||||||
NYMEX Gasoline RBOB Futures Contract | Long | July 2015 | 12 | 1.7449 | 42,000 | 879,430 | ||||||||||||||||||
Industrial Metals |
Copper | |||||||||||||||||||||||
COMEX Copper Futures Contract | Long | May 2015 | 57 | 2.7400 | 25,000 | 3,904,500 | ||||||||||||||||||
COMEX Copper Futures Contract | Long | July 2015 | 20 | 2.7425 | 25,000 | 1,371,250 | ||||||||||||||||||
LME Copper Futures Contract | Long | April 2015 | 35 | 6,064.4994 | 25 | 5,306,437 | ||||||||||||||||||
Aluminum | ||||||||||||||||||||||||
LME Primary Aluminum Futures Contract | Long | April 2015 | 65 | 1,787.2498 | 25 | 2,904,281 | ||||||||||||||||||
LME Primary Aluminum Futures Contract | Long | May 2015 | 65 | 1,779.2498 | 25 | 2,891,281 | ||||||||||||||||||
LME Primary Aluminum Futures Contract | Short | May 2015 | (1 | ) | 1,779.2400 | 25 | (44,481 | ) | ||||||||||||||||
Nickel | ||||||||||||||||||||||||
LME Nickel Futures Contract | Long | April 2015 | 27 | 12,348.0000 | 6 | 2,000,376 | ||||||||||||||||||
Zinc | ||||||||||||||||||||||||
LME Zinc Futures Contract | Long | April 2015 | 37 | 2,073.5005 | 25 | 1,917,988 | ||||||||||||||||||
Lead | ||||||||||||||||||||||||
LME Lead Futures Contract | Long | April 2015 | 13 | 1,825.2492 | 25 | 593,206 | ||||||||||||||||||
LME Lead Futures Contract | Long | May 2015 | 12 | 1,820.2500 | 25 | 546,075 |
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Futures Contracts (Continued)
Commodity |
Contract |
Contract Position |
Contract Expiration |
Number of Contracts |
Valuation Price |
Contract Multiplier |
Notional Amount at Value |
|||||||||||||||||
Agriculturals |
Soybean | |||||||||||||||||||||||
CBOT Soybean Futures Contract | Long | May 2015 | 99 | $ | 9.7325 | 5,000 | $ | 4,817,588 | ||||||||||||||||
CBOT Soybean Futures Contract | Long | July 2015 | 25 | 9.7775 | 5,000 | 1,222,187 | ||||||||||||||||||
Wheat | ||||||||||||||||||||||||
CBOT Wheat Futures Contract | Long | May 2015 | 78 | 5.1175 | 5,000 | 1,995,825 | ||||||||||||||||||
KCBT Wheat Futures Contract | Long | May 2015 | 71 | 5.5925 | 5,000 | 1,985,338 | ||||||||||||||||||
Corn | ||||||||||||||||||||||||
CBOT Corn Futures Contract | Long | May 2015 | 205 | 3.7625 | 5,000 | 3,856,563 | ||||||||||||||||||
Soybean Meal | ||||||||||||||||||||||||
CBOT Soybean Meal Futures Contract | Long | May 2015 | 81 | 326.8000 | 100 | 2,647,080 | ||||||||||||||||||
CBOT Soybean Meal Futures Contract | Long | July 2015 | 8 | 325.2000 | 100 | 260,160 | ||||||||||||||||||
Soybean Oil | ||||||||||||||||||||||||
CBOT Soybean Oil Futures Contract | Long | May 2015 | 53 | 0.3039 | 60,000 | 966,402 | ||||||||||||||||||
CBOT Soybean Oil Futures Contract | Long | July 2015 | 10 | 0.3062 | 60,000 | 183,720 | ||||||||||||||||||
Precious Metals |
Gold | |||||||||||||||||||||||
CEC Gold Futures Contract | Long | June 2015 | 85 | 1,183.2000 | 100 | 10,057,200 | ||||||||||||||||||
Silver | ||||||||||||||||||||||||
CEC Silver Futures Contract | Long | May 2015 | 36 | 16.5980 | 5,000 | 2,987,640 | ||||||||||||||||||
Platinum | ||||||||||||||||||||||||
NYMEX Platinum Futures Contract | Long | July 2015 | 16 | 1,143.4000 | 50 | 914,720 | ||||||||||||||||||
Palladium | ||||||||||||||||||||||||
NYMEX Palladium Futures Contract | Long | June 2015 | 7 | 735.3000 | 100 | 514,710 | ||||||||||||||||||
Livestock |
Live Cattle | |||||||||||||||||||||||
CME Live Cattle Futures Contract | Long | April 2015 | 72 | 64.5300 | 1,000 | 4,646,160 | ||||||||||||||||||
CME Live Cattle Futures Contract | Long | June 2015 | 41 | 60.9300 | 1,000 | 2,498,130 | ||||||||||||||||||
Lean Hogs | ||||||||||||||||||||||||
CME Lean Hog Futures Contract | Long | June 2015 | 107 | 30.3200 | 1,000 | 3,244,240 | ||||||||||||||||||
Feeder Cattle | ||||||||||||||||||||||||
CME Feeder Cattle Futures Contract | Long | May 2015 | 18 | 108.4500 | 1,000 | 1,952,100 | ||||||||||||||||||
Foods and Fibers |
Sugar | |||||||||||||||||||||||
ICE Sugar Futures Contract | Long | May 2015 | 117 | 0.1193 | 112,000 | 1,563,307 | ||||||||||||||||||
ICE Sugar Futures Contract | Long | July 2015 | 32 | 0.1206 | 112,000 | 432,230 | ||||||||||||||||||
ICE White Sugar Futures Contract | Long | May 2015 | 10 | 17.7700 | 1,000 | 177,700 | ||||||||||||||||||
ICE White Sugar Futures Contract | Long | August 2015 | 5 | 17.5450 | 1,000 | 87,725 | ||||||||||||||||||
Coffee | ||||||||||||||||||||||||
ICE Coffee C Futures Contract | Long | May 2015 | 34 | 49.8375 | 1,000 | 1,694,475 | ||||||||||||||||||
LIFFE Coffee Robusta Futures Contract | Long | May 2015 | 20 | 17.2900 | 1,000 | 345,800 | ||||||||||||||||||
Cotton | ||||||||||||||||||||||||
ICE Cotton Futures Contract | Long | May 2015 | 61 | 0.6310 | 50,000 | 1,924,550 | ||||||||||||||||||
Cocoa | ||||||||||||||||||||||||
ICE Cocoa Futures Contract | Long | May 2015 | 27 | 26.9900 | 1,000 | 728,730 |
Commodity Call Options Written
Commodity |
Contract |
Contract Expiration |
Number of Contracts |
Strike Price |
Value | |||||||||||
Energy |
Crude Oil | |||||||||||||||
ICE Brent Crude Oil Futures Options | May 2015 | (101 | ) | $ | 63.00 | $ | (10,100 | ) | ||||||||
NYMEX Crude Oil Futures Options | April 2015 | (58 | ) | 56.00 | (6,380 | ) | ||||||||||
NYMEX Crude Oil Futures Options | April 2015 | (58 | ) | 51.00 | (42,920 | ) | ||||||||||
Natural Gas | ||||||||||||||||
NYMEX Natural Gas Futures Options | April 2015 | (68 | ) | 3,000.00 | (11,560 | ) | ||||||||||
NYMEX Natural Gas Futures Options | April 2015 | (68 | ) | 2,900.00 | (21,080 | ) | ||||||||||
Heating Oil | ||||||||||||||||
NYMEX NY Harbor ULSD Futures Options | April 2015 | (44 | ) | 1.91 | (23,839 | ) | ||||||||||
Unleaded Gas | ||||||||||||||||
NYMEX Gasoline RBOB Futures Options | April 2015 | (29 | ) | 19,500.00 | (25,212 | ) |
38
Table of Contents
Commodity Call Options Written (Continued)
Commodity |
Contract |
Contract Expiration |
Number of Contracts |
Strike Price |
Value | |||||||||||
Industrial Metals |
Copper | |||||||||||||||
LME Copper Futures Options | April 2015 | (35 | ) | $ | 6,200.00 | $ | (341 | ) | ||||||||
Aluminum | ||||||||||||||||
LME Primary Aluminum Futures Options | April 2015 | (65 | ) | 1,875.00 | | |||||||||||
Nickel | ||||||||||||||||
LME Nickel Futures Options | April 2015 | (12 | ) | 14,750.00 | | |||||||||||
LME Nickel Futures Options | April 2015 | (2 | ) | 15,250.00 | | |||||||||||
Zinc | ||||||||||||||||
LME Zinc Futures Options | April 2015 | (19 | ) | 2,150.00 | | |||||||||||
Lead | ||||||||||||||||
LME Lead Futures Options | April 2015 | (13 | ) | 1,850.00 | (647 | ) | ||||||||||
Agriculturals |
Soybean | |||||||||||||||
CBOT Soybean Futures Options | April 2015 | (35 | ) | 1,070.00 | (1,094 | ) | ||||||||||
CBOT Soybean Futures Options | April 2015 | (27 | ) | 1,080.00 | (675 | ) | ||||||||||
Wheat | ||||||||||||||||
CBOT Wheat Futures Options | April 2015 | (8 | ) | 610.00 | (1,250 | ) | ||||||||||
CBOT Wheat Futures Options | April 2015 | (39 | ) | 565.00 | (4,144 | ) | ||||||||||
CBOT Wheat Futures Options | April 2015 | (27 | ) | 595.00 | (6,919 | ) | ||||||||||
Corn | ||||||||||||||||
CBOT Corn Futures Options | April 2015 | (103 | ) | 415.00 | (4,506 | ) | ||||||||||
Soybean Meal | ||||||||||||||||
CBOT Soybean Meal Futures Options | April 2015 | (44 | ) | 360.00 | (3,300 | ) | ||||||||||
Soybean Oil | ||||||||||||||||
CBOT Soybean Oil Futures Options | April 2015 | (31 | ) | 340.00 | (465 | ) | ||||||||||
Precious Metals |
Gold | |||||||||||||||
CEC Gold Futures Options | May 2015 | (21 | ) | 1,250.00 | (12,810 | ) | ||||||||||
CEC Gold Futures Options | May 2015 | (22 | ) | 1,285.00 | (5,940 | ) | ||||||||||
Silver | ||||||||||||||||
CEC Silver Futures Options | April 2015 | (18 | ) | 1,800.00 | (7,290 | ) | ||||||||||
Livestock |
Live Cattle | |||||||||||||||
CME Live Cattle Futures Options | April 2015 | (72 | ) | 162.00 | (13,680 | ) | ||||||||||
Lean Hogs | ||||||||||||||||
CME Lean Hogs Futures Options | June 2015 | (53 | ) | 84.00 | (20,140 | ) | ||||||||||
Foods and Fibers |
Sugar | |||||||||||||||
ICE Sugar Futures Options | April 2015 | (85 | ) | 16.00 | (952 | ) | ||||||||||
Coffee | ||||||||||||||||
ICE Coffee C Futures Options | April 2015 | (20 | ) | 185.00 | (75 | ) | ||||||||||
Cotton | ||||||||||||||||
ICE Cotton Futures Options | April 2015 | (15 | ) | 64.00 | (4,200 | ) | ||||||||||
ICE Cotton Futures Options | April 2015 | (15 | ) | 65.00 | (2,475 | ) | ||||||||||
Cocoa | ||||||||||||||||
ICE Cocoa Futures Options | April 2015 | (13 | ) | 3,000.00 | (130 | ) |
CBOT | Chicago Board of Trade | |
CEC | Commodities Exchange Center | |
CME | Chicago Mercantile Exchange | |
COMEX | Commodities Exchange, Inc. | |
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 |
The Fund also invests the assets held as collateral for its investments in commodity futures and forward contracts in cash equivalents, U.S. government securities, and other short-term, high-grade debt securities, which exposes the Fund to interest rate risk. These instruments are deemed to be entered into for non-trading purposes, with an emphasis on current income, liquidity and preservation of capital. As of March 31, 2015, the Fund held U.S. Treasury bills worth $94,669,980 with a total par value of $94,700,000 and a repurchase agreement worth $1,505,768.
39
Table of Contents
Qualitative Disclosure
The Funds primary trading risk exposure is commodity price risk, which affects the futures contracts and options on futures contracts in which the Fund invests. There are numerous uncertainties, contingencies and risks associated with these investments (as discussed in Part IItem 1A. Risk Factors in the Funds annual report on Form 10-K for the year ended December 31, 2014 and Part IIItem 1A. Risk Factors in the Funds subsequent quarterly reports on Form 10-Q, filed with the SEC) which include, but are not limited to, government interventions, defaults and expropriations, adverse weather conditions, commodity supply factors, illiquid markets, the emergence of dominant fundamental factors, political upheavals, changes in historical price relationships, an influx of new market participants, and increased regulation. Investors may lose all or substantially all of their investment in the Fund.
The Fund invests in a diversified portfolio of commodity futures and forward contracts to obtain broad exposure to all principal groups in the global commodity markets, thereby limiting its exposure to the commodity price risk of any one futures contract or any specific commodity group. To further help manage commodity price risk, the Fund uses its options strategy in an attempt to enhance the Funds risk-adjusted total returns. In up markets, the portion of the Fund on which call options have been sold will forego potential appreciation in the value of the underlying contracts to the extent the price of those contracts exceeds the exercise price of options written plus the premium collected by writing the call options. In flat or sideways markets, the portion of the Fund on which call options have been sold will generate current gains from the premium collected by writing the call options. In down markets, the Fund will experience declines in the value of the underlying contracts to the extent that the amount of the decline in the value of the underlying contracts exceeds the option premium collected by writing the call options. There can be no assurance that the Funds options strategy will be successful. The Funds risk-adjusted returns over any particular period may be positive or negative.
The Funds primary non-trading risk exposures are interest rate risk and credit risk related to the collateral portfolio. Interest rate risk is mitigated by the short-term nature of the collateral portfolios debt securities. Credit risk is mitigated by the fact that 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 (NRSRO) or, if unrated, judged by the Collateral Sub-adviser to be of comparable quality.
Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of the principal executive officer and principal financial officer of the Manager of the Fund, the Manager has evaluated the effectiveness of the Funds disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act). Based upon that evaluation, the principal executive officer and principal financial officer concluded that the Funds disclosure controls and procedures were effective as of the end of the period covered by this Report to provide reasonable assurance that information required to be disclosed in the reports that the Fund files or submits to the SEC under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to the management of the Manager as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There were no changes in the Funds internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the reporting period covered by this Report that have materially affected, or are reasonably likely to materially affect, the Funds internal control over financial reporting.
40
Table of Contents
PART II. OTHER INFORMATION
Item 1. | Legal Proceedings |
None.
Item 1A. | Risk Factors |
There have been no changes to the Risk Factors since last reported on Part I, Item 1A of the Funds annual report on Form 10-K dated December 31, 2014, filed with the SEC.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
a) None.
b) The Fund did not issue new shares within the three month period ended on March 31, 2015.
c) On December 21, 2011, the Fund adopted an open-market share repurchase program, pursuant to which it was authorized to repurchase up to 10% of its outstanding common shares (approximately 920,000 shares) in open-market transactions at the Managers discretion. On March 6, 2014, the Fund reauthorized its share repurchase program, pursuant to which it may repurchase up to 10% of its outstanding common shares as of the reauthorization date (approximately 920,000 shares). No shares have been repurchased during the fiscal year to date period ended March 31, 2015. A cumulative total of 220,000 shares have been repurchased through the repurchase program described above. No shares have been repurchased outside of the program described.
Item 3. | Defaults Upon Senior Securities |
None.
Item 4. | Mine Safety Disclosures |
Not applicable.
Item 5. | Other Information |
None.
41
Table of Contents
Item 6. | Exhibits |
4.1 | Second Amended and Restated Trust Agreement of the Fund. (1) | |
31.1 | Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 | Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101.INS | XBRL Instance Document. | |
101.SCH | XBRL Taxonomy Extension Schema Document. | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document. |
(1) | Filed on March 30, 2012 as an exhibit to Registrants Form 8-K dated March 30, 2012 and incorporated by reference herein. |
42
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, State of Illinois, on May 7, 2015.
Nuveen Diversified Commodity Fund | ||||
By: | Nuveen Commodities Asset Management, LLC, its Manager | |||
By: /s/ William Adams IV |
||||
President (Principal Executive Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Nuveen Commodities Asset Management, LLC
Manager of Registrant
/s/ William Adams IV |
||
President (Principal Executive Officer) May 7, 2015 | ||
/s/ Stephen D. Foy |
||
Chief Financial Officer (Principal Financial and Accounting Officer) May 7, 2015 |
43