News Column

NUVEEN DIVERSIFIED COMMODITY FUND - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations

August 7, 2014

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 shares of the Fund trade on the NYSE MKT under the ticker symbol "CFD". Prior to the initial public offering, the Fund was inactive except for matters relating to its organization and registration. The Fund's 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 Fund's 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 Fund's risk-adjusted total return. The Manager focuses on the Dow Jones-UBS Commodity Indexฎ ("DJ-UBSCI") (effective July 1, 2014, the name of the index changed to the Bloomberg Commodity Index) when evaluating the performance of the commodity futures, forwards, and options positions (the "commodity portfolio") in the Fund's portfolio.

Results of Operations

The Quarter Ended June 30, 2014-Fund Share Price

The Fund's shares traded on the NYSE MKT at a price of $16.26 on the close of business on June 30, 2014. This represents an increase of 2.39% in share price (not including an assumed reinvestment of distributions) from the $15.88 price at which the shares of the Fund traded on the close of business on March 31, 2014. The high and low intra-day share prices for the quarter were $16.51 (May 23, 2014) and $15.83 (April 2, 2014), respectively. During the quarter, the Fund declared distributions totaling $0.390 per share to shareholders, of which $0.130 was paid on July 1, 2014. The remainder was paid during the quarter. The Fund's cumulative total return on market value for the quarter, which assumes reinvestment of such distributions, was 4.87%. At June 30, 2014, shares of the Fund traded at a 11.63% discount to the Fund's net asset value of $18.40.

The Quarter Ended June 30, 2013-Fund Share Price

The Fund's shares traded on the NYSE MKT at a price of $17.07 on the close of business on June 28, 2013 (the last trading day of the quarter). This represents a decrease of 17.73% in share price (not including an assumed reinvestment of distributions) from the $20.75 price at which the shares of the Fund traded on the close of business on March 28, 2013 (the last trading day of the previous quarter). The high and low intra-day share prices

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for the quarter were $20.84 (April 1, 2013) and $16.54 (June 24, 2013), respectively. During the quarter, the Fund declared distributions totaling $0.435 per share to shareholders, of which $0.145 was paid on July 1, 2013. The remainder was paid during the quarter. The Fund's cumulative total return on market value for the quarter, which assumes reinvestment of such distributions, was -15.75%. At June 28, 2013 (the last trading day of the quarter), the shares of the Fund traded at a 7.78% discount to the Fund's net asset value of $18.51.

The Quarter Ended June 30, 2014-Net Assets of the Fund

The Fund's net assets decreased from $170.8 million at March 31, 2014, to $169.4 million at June 30, 2014, a decrease of $1.4 million. The decrease in the Fund's net assets was due to the Fund's distributions to shareholders of approximately $3.5 million exceeding the Fund's net income of $2.1 million.

The Fund generated net income of $2.1 million for the quarter ended June 30, 2014, resulting from net realized gains of $3.6 million, offset by expenses of $0.8 million and net unrealized depreciation of $0.7 million.

During the quarter ended June 30, 2014, the Fund's collateral investments generated interest income of $38,311, which represents 0.02% of average net assets for the quarter ended June 30, 2014.

The net asset value per share on June 30, 2014, was $18.40. This represents a decrease of 0.86% in net asset value (not including an assumed reinvestment of distributions) from the $18.56 net asset value as of March 31, 2014. 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 1.25% for the quarter ended June 30, 2014.

The Quarter Ended June 30, 2014-Overall Commodity Market Commentary

In the quarter ended June 30, 2014, the commodity markets contended with rising geopolitical risks as violence increased with attacks by the militant groups ISIS (Islamic State of Iraq and Syria) in Iraq and Boko Haram in Nigeria, moderating global weather conditions, and well-received efforts by the Chinese government to stimulate its economy through fiscal policy and market reforms.

The broad commodity market traded flat in the quarter ended June 30, 2014, returning 0.1%, as measured by the DJ-UBSCI. The DJ-UBSCI's best-performing group was industrial metals, followed by energy, precious metals, and livestock. Agriculture was the worst performer, with a double-digit loss. Foods and fibers also declined during the quarter.

Energy commodities represented 32.0% of the DJ-UBSCI at the end of the quarter, and were its most significant commodity group by weight. The group rose 4.4% for the quarter, with gains across all of the underlying energy commodities. Increasing violence in the Middle East and Africa raised the risk of future supply disruptions, which boosted crude oil prices over 6% for the quarter.

Agricultural commodities, as grouped by Gresham, made up 20.8% of the DJ-UBSCI at the end of the quarter. All of the agriculture commodities in the group ended the period lower, for an 11.2% decline for the group overall. Reports of accelerated plantings, abundant supply, and favorable weather weighed on prices for corn, wheat, and soybeans.

The industrial metals comprised 16.6% of the DJ-UBSCI at the end of the quarter. The group was up 8.5% for the quarter, fueled in part by proposed structural improvements to China's financial markets announced in May. Nickel registered the largest advance both in the group and in the DJ-UBSCI overall, as investors worried about supply availability from the two largest nickel miners, Indonesia and Russia.

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Precious metals commodities represented 15.8% of the DJ-UBSCI at the end of the quarter. Gold and silver prices ended the quarter higher following a rally late in June, leading to a 3.8% return for the group overall. The possibility of rising inflation helped lift the demand for these metals, as they are perceived to be inflation-protected assets. Platinum and palladium, which are included in the Fund's portfolio but not represented in the DJ-UBSCI, also gained during the quarter.

The commodities in the foods and fibers category, as grouped by Gresham, made up a combined 8.7% of the DJ-UBSCI at the end of the quarter. Cotton and sugar prices fell during the period, as more favorable growing conditions were expected to add to already plentiful inventories. Coffee also declined after June rains in Brazil helped mitigate the damage of a drought earlier in the year. The foods and fibers group lost 6.9% in the index during the quarter.

Livestock is the smallest group, comprising 6.1% of the DJ-UBSCI at the end of the quarter. Both feeder cattle (which is not represented in the DJ-UBSCI) and live cattle saw strong price appreciation on supply concerns during the quarter due to the bad winter weather which hampered breeding, weight gain, and slaughter rates of cattle. Lean hogs prices were volatile as a highly contagious pig virus continued to spread in the U.S., Canada, and Asia, fueling further supply worries.

The Quarter Ended June 30, 2014-Fund Commodity Portfolio Commentary

The Fund's commodity portfolio gained 1.69% for the quarter ended June 30, 2014, before considering the expenses of the Fund. The overall commodities market, as measured by the DJ-UBSCI, was up 0.1%. The Fund's total return on net asset value for the same period, which includes the effect of the Fund's expenses and the performance of the collateral portfolio and assumes reinvestment of the Fund's distributions, was 1.25%.

The Fund writes - that is, sells - covered call options on its portfolio's commodity futures, seeking to limit return volatility, and to provide cash flow to support the Fund's distributions. Gresham sells exchange-traded commodity call options on approximately 50% of the value of each of the Fund's 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 Fund's option-writing activity contributed positively to performance for the quarter and helped reduce the Fund's volatility versus the DJ-UBSCI, as measured by the standard deviation of return. Call options written on precious metals and natural gas expired out of the money, enabling the Fund to retain all of the premiums.

At the commodity group level, the Fund's commodity portfolio led the DJ-UBSCI on an absolute basis in livestock, energy, agriculture, and precious metals, but lagged the DJ-UBSCI in industrial metals and foods and fibers. On a weighted basis, the Fund's portfolio outperformed in all groups except industrial metals and precious metals.

The Fund's energy position, up 5.5%, outperformed the DJ-UBSCI, up 4.4%, primarily because of the Fund's higher weight (35.5%) in energy commodities. In particular, the Fund's significantly higher weight in crude oil, at 19.9% for the portfolio versus 15.4% for the index, was a key contributor to performance in the energy group.

Although the Fund's agriculture position declined 10.4%, it had a smaller loss than the DJ-UBSCI's position, which was down 11.2% during the period. The Fund, with a 17.5% weight in agriculture, had less exposure to the group's weak performance than the DJ-UBSCI, which had a 20.8% weight.

The Fund's industrial metals position was up 7.0%, but lagged the DJ-UBSCI's 8.5% increase. The Fund's nickel position was the main detractor, as the position was underweight relative to the DJ-UBSCI and therefore captured less of nickel's rally when options switched to in the money and were exercised.

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The Fund's precious metals position rose 4.0%, outperforming the DJ-UBSCI's 3.8% appreciation. But, on a weighted basis, the Fund slightly underperformed. Although the Fund's options strategy in precious metals and its exposure to platinum and palladium were positive for results during the quarter, the gain was offset by the Fund's lower weights in gold and silver, which detracted.

The foods and fibers group was down 7.0% in the Fund and down 6.9% in the DJ-UBSCI. The Fund's position underperformed primarily due to options that were assigned against the Fund. However, the Fund's sugar and cotton positions had positive relative performance because of the Fund's lower weightings in these commodities.

The Fund's livestock position was up 5.5%, compared to the 3.6% rise in the DJ-UBSCI's position, with outperformance largely driven by the Fund's exposure to feeder cattle and a modest gain from the Fund's higher weighting in live cattle.

The Quarter Ended June 30, 2013-Net Assets of the Fund and Commodity Market and Portfolio Commentary

The Fund's net assets decreased from $190.0 million as of March 31, 2013, to $170.7 million as of June 30, 2013, a decrease of $19.3 million. The decrease in the Fund's net assets was due to $9.7 million in net realized losses and $4.8 million in unrealized depreciation on the Fund's portfolio during the quarter, a net investment loss of $0.8 million, and $4.0 million of distributions declared to shareholders.

Commodity markets continued to struggle in the second quarter of 2013 and were heavily influenced by supply and demand fundamentals of individual markets. The broad commodity market fell consecutively in April, May, and June falling 9.5% overall as five of the six commodity groups tracked by the DJ-USBCI posted declines for the quarter.

Energy commodities represented 36.5% of the DJ-UBSCI at the end of the period and were broadly lower losing 8.5% in the quarter as weakening global demand put downward pressure on prices. Natural gas prices were especially weak, down 13.9% for the quarter and offsetting a significant advance during the first quarter. This decline was in response to reduced demand stemming from mild weather in the U.S. at the end of the quarter and reports of rebuilding of inventories.

Agricultural commodities (as composed in the Commodity Weightings table later in this Report) made up 21.8% of the DJ-UBSCI at the end of the period and were under pressure during the second quarter, losing 3.1% due to expectations of generous supplies for many markets, including corn and wheat. Corn and wheat fell as the U.S. Department of Agriculture increased its forecasts of crop sizes for the 2013/2014 season.

Industrial metals, which made up 16.0% of the DJ-UBSCI at the end of the period, fell 10.4% during the period. Slowing GDP growth in China, pointing to lower demand in global manufacturing and domestic construction, took all four industrial metals components of the DJ-UBSCI down. Most notably, nickel and copper experienced double digit declines.

Precious metals represented 11.8% of the DJ-UBSCI at the end of the period and were the worst performing group, down 25.5%. Selling pressures resulted in a 23.4% loss for gold and a 31.6% loss in silver for the second quarter. Precious metals prices fell in April on the news that the Central Bank of Cyprus might liquidate its gold reserves as part of its bailout settlement with the International Monetary Fund and the European Union. Gold and silver weakened further in May and June, stemming from the U.S. Federal Reserve's indication that it might begin to reduce its policy of quantitative easing.

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Foods and fibers, which made up 8.2% of the DJ-UBSCI at the end of the period, were down 8.4% as favorable weather for sugar and coffee growing raised expectations of surplus for the season in global markets coupled with a backdrop of weak demand pushed prices lower.

Livestock was the smallest group in the DJ-UBSCI, representing 5.7% at the end of the period. Livestock was the only group to post a gain for the quarter rising approximately 2.2%. Appreciation in lean hog prices was driven by seasonal strength in U.S. demand for summer grilling and reports in April and May of a virus affecting piglets that could impair breeding of the U.S. herd later in 2013.

In this challenging environment of downward price action, the Fund's commodity portfolio outperformed, falling 7.7% (before considering the expenses of the Fund or the performance of the collateral portfolio) vs. the 9.5% decline of the DJ-UBSCI. Relative to the DJ-UBSCI, the primary drivers of outperformance were in the energy and agriculture groups. The Fund's total return on net asset value for the quarter, which includes the effect of the Fund's expenses and the performance of the collateral portfolio and assumes the reinvestment of the Fund's distribution, was a loss of 8.09%.

Within energy, the portfolio's better relative results were mainly attributable to an underweight to natural gas, which retreated 13.9% as measured by the DJ-UBSCI. The portfolio had nearly half the exposure of the DJ-UBSCI in this commodity, a 6.5% weight vs. a 12.6% weight, respectively, leading to the better relative performance. Together, the Fund's portfolio lost 5.5% in energy commodities while the DJ-UBSCI fell 8.5% over the period.

The agriculture group was an area of both positive absolute performance and relative outperformance for the Fund's commodity portfolio. The Fund's portfolio gained approximately 0.2% in this group vs. the DJ-UBSCI's 3.1% loss. This was primarily driven by an underweight position, and better returns in corn for the Fund's commodity portfolio versus the DJ-UBSCI. The Fund's commodity portfolio was also overweight soybeans which rallied over the quarter on spotty crop conditions and increased demand from China. Options positions that expired without being exercised (meaning the Fund retained the premium received for selling those options) contributed to the better returns for the Fund as well.

The Fund's portfolio was overweight precious metals with a weighting of 13.1% versus the DJ-UBSCI weight of 11.8% using period ending weights, which detracted from relative performance versus the DJ-UBSCI given the strong declines in that commodity group. Industrial metals was also an area of underperformance mainly driven by an overweight position in the underperforming copper commodity.

During the quarter, most of the commodity portfolio's call options expired without being exercised. Depending on the contract and time period, this allowed the Fund to earn the entire call option premium without sacrificing any appreciation on the related futures contract, thereby offsetting some of the Fund's losses, or partially offsetting any losses on the related futures contract, and benefiting the Fund's overall performance. In certain cases during the quarter where the futures contract price appreciation was significant, the options the Fund wrote were exercised, which limited the Fund's full participation in that commodity contract's gains. In summary, the options program allowed the Fund to limit its volatility relative to its benchmark while also allowing the Fund to participate meaningfully in the appreciation in those commodity groups with strong price appreciation.

During the quarter ended June 30, 2013, the Fund's collateral investments generated interest income of $56,393, which represents 0.03% of average net assets for the quarter ended June 30, 2013.

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The net asset value per share on June 30, 2013, was $18.51. This represents a decrease of 10.15% in net asset value (not including an assumed reinvestment of distributions) from the $20.60 net asset value as of March 31, 2013. The Fund declared distributions of $0.435 per share during the quarter, of which $0.145 was paid on July 1, 2013. The remainder was paid during the quarter. When an assumed reinvestment of these distributions is taken into account, the cumulative total return for the Fund on net asset value was -8.09% for the quarter ended June 30, 2013.

The Fund generated a net loss of $15.3 million for the quarter ended June 30, 2013, resulting from interest income of $0.1 million, expenses of $0.9 million, net realized losses of $9.7 million, and net unrealized depreciation of $4.8 million.

The Six Months Ended June 30, 2014-Fund Share Price

The Fund's shares traded on the NYSE MKT at a price of $16.26 on the close of business on June 30, 2014. This represents an increase of 7.19% 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 six month period were $16.51 (May 23, 2014) and $14.93 (January 10, 2014), respectively. During the six month period, the Fund declared distributions totaling $0.780 per share to shareholders, of which $0.130 was paid on July 1, 2014. The remainder was paid during the period. The Fund's cumulative total return on market value for the six month period, which assumes reinvestment of such distributions, was 12.50%. At June 30, 2014, shares of the Fund traded at a 11.63% discount to the Fund's net asset value of $18.40.

The Six Months Ended June 30, 2013-Fund Share Price

The Fund's shares traded on the NYSE MKT at a price of $17.07 on the close of business on June 28, 2013 (the last trading day of the period). This represents a decrease of 14.52% in share price (not including an assumed reinvestment of distributions) from the $19.97 price at which the shares of the Fund traded on the close of business on December 31, 2012. The high and low intra-day share prices for the six month period were $22.09 (January 23, 2013) and $16.54 (June 24, 2013), respectively. During the six month period, the Fund declared distributions totaling $0.870 per share to shareholders, of which $0.145 was paid on July 1, 2013. The remainder was paid during the six month period. The Fund's cumulative total return on market value for the six month period, which assumes reinvestment of such distributions, was -10.62%. At June 28, 2013, (the last trading day of the period) the shares of the Fund traded at a 7.78% discount to the Fund's net asset value of $18.51.

The Six Months Ended June 30, 2014-Net Assets of the Fund

The Fund's net assets increased from $167.1 million at December 31, 2013, to $169.4 million at June 30, 2014, an increase of $2.3 million. The increase in the Fund's net assets was due to the Fund's net income of $9.4 million exceeding the distributions to shareholders of approximately $7.1 million.

The Fund generated net income of $9.4 million for the six month period ended June 30, 2014, resulting from net realized gains of $10.6 million and net unrealized appreciation of $0.3 million, offset by expenses of $1.5 million.

During the six month period ended June 30, 2014, the Fund's collateral investments generated interest income of $75,603, which represents 0.04% of average net assets for the six month period ended June 30, 2014.

The net asset value per share on June 30, 2014, was $18.40. This represents an increase of 1.38% 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 $0.780 per share during the six month period. When an assumed reinvestment of these distributions is taken into account, the cumulative total return for the Fund on net asset value was 5.75% for the six month period ended June 30, 2014.

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The Six Months Ended June 30, 2014 - Overall Commodity Market Commentary

A strong rally in the first quarter of 2014 was followed by a flat performance in the second quarter, resulting in a 7.1% gain in the broad commodity market for the six months ended June 30, 2014, as measured by the DJ-UBSCI. All six commodity groups had positive performance, led by livestock. Agriculture commodities had the smallest gain.

Energy commodities as a group returned 8.7% for the six month period, primarily driven by natural gas and crude oil. Demand for natural gas was unusually high during the first quarter due to the prolonged, frigid winter weather in the U.S., triggering a significant price rally. Crude oil prices rose strongly in the second quarter amid increasing geopolitical risks in the Middle East and Africa.

The agriculture group was up a modest 1.9% during the six month period. Robust appreciation in the first quarter, when corn and wheat inventories looked tighter, was largely offset by losses in the second quarter, as improving crop conditions were expected to add ample supply to already plentiful inventory.

The industrial metals group increased 3.5% during the six month period, led by a large rally in nickel. Indonesia's ban on mineral-ore exports, which was announced in January and remained in place throughout the rest of the period, prompted fears of nickel shortages. Additionally, investors were concerned of the potential impact of economic sanctions on Russia, the world's other main nickel producer.

Gold and silver both rose during the six month period, lifting the precious metals group by 9.4%. Both metals benefited from speculation that inflation may rise after the U.S. Federal Reserve exits its quantitative easing program, which is expected to happen in October 2014. Gold prices also surged on two technical rallies during the period.

The foods and fibers group, as grouped by Gresham, appreciated 12.9% in the six month period. Early in 2014, crop damage to Arabica coffee caused by record heat and drought in Brazil, the world's top Arabica producer and exporter, sent prices 51% higher in the first quarter. However, coffee prices eased in the second quarter as Brazil's coffee growing conditions improved.

Supply concerns drove the livestock group up 20.5% during the six month period. Contracts for live cattle and lean hogs increased 16.8% and 27.6%, respectively, as herd sizes were down in advance of summer's seasonally stronger demand. Cattle herds were weakened by the exceptionally cold winter, which impeded weight gain, increased feed costs, and slowed transport for slaughter. A pig virus epidemic that appeared in the U.S. in April 2013 continued to spread across the U.S. and into Canada and Asia.

The Six Months Ended June 30, 2014 - Fund Commodity Portfolio Commentary

The Fund's commodity portfolio gained 6.60% for the six months ended June 30, 2014, before considering the expenses of the Fund. The overall commodities market, as measured by the DJ-UBSCI, was up 7.1%. The Fund's total return on net asset value for the same period, which includes the effect of the Fund's expenses and the performance of the collateral portfolio and assumes reinvestment of the Fund's distributions, was 5.75%.

The Fund writes - that is, sells - covered call options on its portfolio's commodity futures, seeking to limit return volatility, and to provide cash flow to support the Fund's distributions. Gresham sells exchange-traded commodity call options on approximately 50% of the value of each of the Fund's commodity futures contracts, when those options are deemed to have sufficient trading volume and liquidity. The Fund receives cash premiums in return.

During the six month period, the Fund sold options on approximately 50% of the value of each commodity position. The Fund's option-writing activity detracted slightly from performance for the period, but premiums collected on other call options helped reduce the Fund's volatility versus the DJ-UBSCI, as measured by the standard deviation of return.

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At the commodity group level, the Fund's commodity portfolio outperformed the DJ-UBSCI on an absolute basis in precious metals and agriculture, but underperformed in the other four commodity groups for the six month period. On a weighted basis, the Fund's portfolio underperformed in industrial metals and foods and fibers.

In the energy group, the Fund's portfolio gained 8.6%, falling short of the DJ-UBSCI's 8.7% return. However, on a weighted basis, the Fund's energy position outperformed the DJ-UBSCI's. Gas oil, which is included in the Fund's portfolio but not part of the DJ-UBSCI, posted a loss for the six-month period. However, on a weighted performance basis, the negative impact of gas oil was minimized due to the Fund's small weighting in the contract, and was offset by strong results from the Fund's crude oil position.

The Fund's agriculture position was up 2.3% for the six month period, while the DJ-UBSCI agriculture positions, as grouped by Gresham, rose 1.9%. The Fund's underweight positions in corn and wheat were beneficial to relative performance, as these commodities saw declining performance during the period.

The Fund's industrial metals group underperformed the DJ-UBSCI's during the six month period, with a return of 2.6% for the Fund versus 3.5% for the index. Relative performance was dampened by the Fund's lower weighting in nickel, which advanced 36.1% in the DJ-UBSCI during the period, and in-the-money call options that were exercised against the Fund during the second quarter.

In the precious metals group, the Fund's portfolio posted a 10.3% gain during the six month period, outperforming the DJ-UBSCI's 9.4% increase. The Fund's portfolio benefited from strong-performing platinum and palladium contracts, which are not represented in the DJ-UBSCI.

The Fund's foods and fibers position, as grouped by Gresham, was the largest detractor from performance for the six month period, returning a modest 3.9% versus 12.9% for the DJ-UBSCI. Underperformance was primarily driven by the Fund's coffee position, which suffered because of a smaller exposure to Arabica coffee's first quarter rally and in-the-money call options that were exercised during the six-month period.

Performance in the livestock group was a relative detractor for the Fund's portfolio on an absolute basis, but had a nearly neutral impact on a weighted performance basis. The Fund was up 15.7% for the six month period, compared to 20.5% for the DJ-UBSCI, lagging primarily because of the Fund's underweight in lean hogs, which rallied strongly during the period. On a weighted basis, gains from the Fund's feeder cattle contracts, which are not in the DJ-UBSCI, helped offset less favorable performance from its lean hogs position.

The Six Months Ended June 30, 2013-Net Assets of the Fund and Commodity Market and Portfolio Commentary

The Fund's net assets decreased from $197.1 million as of December 31, 2012, to $170.7 million as of June 30, 2013, a decrease of $26.4 million. The decrease in the Fund's net assets was due to $12.7 million in net realized losses and $4.2 million in unrealized depreciation on the Fund's portfolio during the period, a net investment loss of $1.5 million, and $8.0 million of distributions declared to shareholders.

Commodities markets fell steadily during the first six months of 2013, and while rallies in January, March and late April limited the drop, the broad market ended down 10.5% for the period, as measured by the DJ-UBSCI, with each of the six commodity groups in the DJ-UBSCI losing ground during the first half of 2013.

Energy commodities represented 36.5% of the DJ-UBSCI at the end of the period. The group gained during the first quarter of the year, but weakened in the second quarter, giving up all of the first quarter gains, and falling 2.0% for the six month period. The only commodity in the group experiencing gains for the period was West Texas Intermediate ("WTI") crude oil, which rose 2.5%, as measured by the DJ-UBSCI. WTI crude was higher in the first quarter on a spurt of growth in the U.S. economy, and in the second quarter on early signs of a resolution to the large supply buildup resulting from growing domestic production in shale oil fields. Natural gas

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posted a loss of 1.0% for the first six months of 2013, as measured by the DJ-UBSCI, after an unseasonably cold late winter and early spring in the U.S. took prices up approximately 14%, it then sold off from a rebuilding of inventories in the second quarter.

Agricultural commodities (as composed in the Commodity Weightings table later in this Report) made up 21.8% of the DJ-UBSCI at the end of the period and experienced mixed results for the period. Overall, the group returned a loss of 6.1% for the period as measured by the DJ-UBSCI. Prices of both corn and wheat were lower on influential forecasts from the U.S. Department of Agriculture, issued at the end of March and again in June, on the likely abundance of the coming harvest. In contrast, soybeans and soybean meal moved higher on developments in the physical markets, namely shortages for current domestic consumption and exports to China.

Industrial metals, which made up 16.0% of the DJ-UBSCI at the end of the period, fell steadily through the first half of 2013, reflecting weak demand in the global manufacturing environment. The group experienced a loss of 17.4% for the period as measured by the DJ-UBSCI, with losses in all underlying components of the DJ-UBSCI.

Precious metals represented 11.8% of the DJ-UBSCI at the end of the period and were the weakest component of the DJ-UBSCI, down 29.6% during the first six months of 2013, driven by losses in gold and silver. Gold underperformed early in the period as investors sought opportunities in the rising equity markets, compounded by the mid-April bailout negotiations for Cyprus, when markets focused on the possibility that the Central Bank of Cyprus might liquidate a portion of its gold reserves. In mid-June, gold and silver experienced additional losses, when the U.S. Federal Reserve chairman suggested that a withdrawal from its quantitative easing program might begin in late 2013.

Foods and fibers, which made up 8.2% of the DJ-UBSCI at the end of the period, declined 11.4% over the period. Growing conditions for coffee and sugar have been favorable, particularly in Brazil, so that global stocks continue to increase driving most of the price decline.

Livestock, the smallest group in the DJ-UBSCI at the end of the period making up 5.7%, experienced gains in the second quarter of 2013, but were unable to overcome a weak first quarter and suffered a decline of 4.4% for the six month period, as measured by the DJ-UBSCI.

In this challenging environment of mostly falling prices over the first six months of 2013, the Fund's commodity portfolio outperformed its benchmark falling 8.9% (before considering the expenses of the Fund or the performance of the collateral portfolio) vs. the 10.5% decline of the DJ-UBSCI. The Fund's commodity portfolio outperformed relative to the index in five of the six commodity groups, most notably within the agriculture and foods and fibers, while underperforming in livestock. The Fund's total return on net asset value for the period, which includes the effect of the Fund's expenses and the performance of the collateral portfolio and assumes the reinvestment of the Fund's distributions, was a loss of 9.59%.

The Fund's commodity portfolio outperformed the DJ-UBSCI in every agricultural commodity with strong results across the board. The portfolio benefited from underweight positions in the falling markets of corn and soybean oil, as well as an overweight position in the rising soybean market, in comparison to the DJ-UBSCI. Additionally, while certain options positions were exercised against the Fund creating small losses, during the period the Fund generally benefited from its option activity in corn, soybeans, soybean meal and soybean oil.

The foods and fibers group within the Fund's commodity portfolio experienced a loss of approximately 9.7% during the six month period. Despite this loss, the Fund's portfolio performed better than the DJ-UBSCI where this group fell 11.4%. The Fund's commodity portfolio benefited from lower portfolio weightings than the index in coffee and sugar.

The Fund's commodity portfolio experienced a loss of approximately 5.5% in the livestock group, underperforming the DJ-UBSCI which lost 4.4%. The underperformance was mostly a result of the portfolio's position in feeder cattle, which lost approximately 11.5% and is not held in the DJ-UBSCI.

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During the period, most of the commodity futures portfolio's call options expired without being exercised. Depending on the contract and time period, this allowed the Fund to earn the entire call option premium without sacrificing any appreciation on the related futures contract, thereby offsetting some of the Fund's losses, or partially offsetting any losses on the related futures contract, and benefiting the Fund's overall performance. In certain cases during the period where the futures contract price appreciation was significant, the options the Fund wrote were exercised, which limited the Fund's full participation in that commodity contract's gains. In summary, the options program allowed the Fund to limit its volatility relative to its benchmark while also allowing the Fund to participate meaningfully in the appreciation in those commodity groups with strong price appreciation.

During the six month period ended June 30, 2013, the Fund's collateral investments generated interest income of $117,053, which represents 0.06% of average net assets for the six months ended June 30, 2013.

The net asset value per share on June 30, 2013, was $18.51. This represents a decrease of 13.42% in net asset value (not including an assumed reinvestment of distributions) from the $21.38 net asset value as of December 31, 2012. The Fund declared distributions of $0.870 per share during the six month period, of which $0.145 was paid on July 1, 2013. The remainder was paid during the period. When an assumed reinvestment of these distributions is taken into account, the cumulative total return for the Fund on net asset value was -9.59% for the six months ended June 30, 2013.

The Fund generated a net loss of $18.5 million for the six months ended June 30, 2013, resulting from interest income of $0.1 million, expenses of $1.7 million, net realized losses of $12.7 million, and net unrealized depreciation of $4.2 million.

Fund Total Returns

The following table presents selected total returns for the Fund as of June 30, 2014. Total returns based on market value and net asset value 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 per share at the end of the period for total returns based on market value, and at the ending net asset value per share at the end of the period for total returns based on net asset value.

Total Returns as of June 30, 2014 Cumulative Average Annual 3 Months Year to Date 1 Year Since Inception Market Value 4.87 % 12.50 % 4.94 % -3.15 % Net Asset Value 1.25 % 5.75 % 8.12 % 0.75 %



"Since inception" returns present performance for the period since the Fund's 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 Fund's projected or actual distribution rate is not a prediction of what the Fund's actual total returns will be over any specific future period.

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The Fund's ability to make distributions will depend on a number of factors, including, most importantly, the long-term total returns generated by the Fund's commodity investments and the gains generated through the Fund's options strategy. The Fund's 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 Fund's 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 Fund's 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 Fund's 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 Fund's assets.

As market conditions and portfolio performance may change, the rate of distributions on the shares and the Fund's distribution policy could change. The Manager reserves the right to change the Fund's distribution policy and the basis for establishing the rate of its monthly distributions, or may temporarily suspend or reduce distributions without a change in policy, at any time and may do so without prior notice to shareholders. The reduction or elimination of the Fund's distributions could have the effect of increasing the Manager's management fees.

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Commodity Weightings

The table below presents the composition of the Fund's TAP PLUSSM strategy (Gresham's long-only rules-based investment strategy, which uses futures and forward contracts to gain exposure to commodities and options to enhance the Fund's risk-adjusted total return) and the DJ-UBSCI as of June 30, 2014. The June 30, 2014 composition serves as a guide to how the composition of the Fund's TAP PLUSSM investment strategy compared to that of the DJ-UBSCI, a leading commodity market benchmark. Composition Commodity Group Commodity TAP PLUSSM DJ-UBSCI Energy Crude Oil 19.89 % 15.35 % Heating Oil 5.09 % 3.56 % Natural Gas 7.18 % 9.26 % Unleaded Gas 3.35 % 3.81 % 35.51 % 31.98 % Industrial Metals Aluminum 4.57 % 4.74 % Copper 8.72 % 6.73 % Nickel 2.16 % 2.73 % Zinc 1.47 % 2.37 % Lead 0.92 % 0.00 % 17.84 % 16.57 % Agriculturals Corn 4.17 % 6.66 % Soybean 5.43 % 4.86 % Wheat 4.00 % 4.26 % Soybean Meal 2.50 % 2.23 % Soybean Oil 1.37 % 2.75 % 17.47 % 20.76 % Precious Metals Gold 10.15 % 11.68 % Silver 2.92 % 4.15 % Platinum 0.79 % 0.00 % Palladium 0.45 % 0.00 % 14.31 % 15.83 % Foods and Fibers Cotton 1.15 % 1.29 % Sugar 2.03 % 4.18 % Coffee 1.71 % 3.26 % Cocoa 0.54 % 0.00 % 5.43 % 8.73 % Livestock Live Cattle 5.62 % 3.39 % Lean Hogs 2.37 % 2.74 % Feeder Cattle 1.45 % 0.00 % 9.44 % 6.13 % Total 100.00 % 100.00 %



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 Fund's commodity investments. The Fund's investment activity in futures contracts and writing commodity call

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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 Barclay's Capital Inc., the Fund's 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 Fund's 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 Fund's futures contracts.

The Fund's 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 Fund's shares trade on the NYSE MKT and shares are not redeemed by the Fund in the normal course of business (although the Manager may decide to do so at its discretion), thereby alleviating the need for the Fund to have liquidity available for possible shareholder redemptions. On December 21, 2011, the Fund announced the adoption of an open-market share repurchase program, pursuant to which it is authorized to repurchase an aggregate of up to 10% of its outstanding common shares in open-market transactions. 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 Manager's discretion. Refer to "Part II-Item 2. Unregistered Sales of Equity Securities and Use of Proceeds" in this Report for details of repurchase activity, if any, during the six months ended June 30, 2014.

The Fund is unaware of any other trends, demands, conditions or events that are reasonably likely to result in material changes to the Fund's 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 Fund's commitments to purchase commodities will be limited to the gross or face amount of the contracts held.

The Fund's 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 Fund's investments in options on commodity futures and forward contracts. The inherent uncertainty of the Fund's investments as well as the development of drastic market occurrences could ultimately lead to a loss of all, or substantially all, of investors' capital.

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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 Fund's 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 Fund's 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 Fund's 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 Fund's 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 Fund's cash. While these consist of eligible cash equivalents and high-quality short-term debt securities, like any investment, these too would be affected by any credit difficulties that might be experienced by their issuers.

Off-Balance Sheet Arrangements

As of June 30, 2014, the Fund has not utilized, nor does it expect to utilize in the future, special purpose entities to facilitate off-balance sheet financing arrangements and has no loan guarantee arrangements or off-balance sheet arrangements of any kind other than agreements entered into in the normal course of business, which may include indemnification provisions related to certain risks service providers undertake in performing services which are in the best interests of the Fund. While the Fund's exposure under such indemnification provisions cannot be estimated, these general business indemnifications are not expected to have a material impact on the Fund's financial position.

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Contractual Obligations

The Fund's 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 fixed percentage of the Fund's net assets. The custodian fee is primarily based on the Fund's assets and trading activity. The transfer agent fee is calculated based on the Fund's 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 Fund's 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 Fund's 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 changes 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 Fund's 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 Fund's net asset value, which may affect the values of the Fund's investments. In such circumstances, the Manager will determine a fair valuation for such investments that in its opinion is reflective of fair market value. • 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 Fund's Notes to Financial Statements in "Part 1-Item 1. Financial Statements" of this Report for the summary of significant accounting policies of the Fund.

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