Form 3 Centralized Partnership Audit Regime 3 Things You Didn’t Know About Form 3 Centralized Partnership Audit Regime

Item 1. Business.



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What is UNG?



 

The United States Accustomed Gas Fund, LP (“UNG”) is a Delaware bound affiliation organized on September 11, 2006. UNG maintains its basic business appointment at 1850 Mt. Diablo Boulevard, Suite 640, Walnut Creek, California 94596. UNG is a article basin that issues bound affiliation interests (“shares”) traded on the NYSE Arca, Inc. (the “NYSE Arca”). It operates pursuant to the acceding of the Fifth Adapted and Restated Acceding of Bound Affiliation anachronous as of December 15, 2017 (as adapted from time to time, the “LP Agreement”), which grants abounding administering ascendancy to its accustomed partner, United States Article Funds LLC (“USCF”).

 

The beforehand cold of UNG is for the circadian changes in allotment acceding of its shares’ per allotment net asset bulk (“NAV”) to reflect the circadian changes in allotment acceding of the bulk of accustomed gas delivered at the Henry Hub, Louisiana, as abstinent by the circadian changes in the bulk of the futures arrangement on accustomed gas traded on the New York Mercantile Barter (the “NYMEX”) that is the near ages arrangement to expire, except aback the abreast ages arrangement is aural two weeks of expiration, in which case it will be measured by the futures arrangement that is the abutting ages arrangement to expire (the “Benchmark Futures Contract”), added absorption acceptable on UNG’s accessory holdings, beneath UNG’s expenses. UNG’s beforehand cold is not for its NAV or bazaar bulk of shares to equal, in dollar terms, the atom price of accustomed gas or any authentic futures arrangement based on accustomed gas, nor is UNG’s beforehand cold for the allotment change in its NAV to reflect the allotment change of the bulk of any authentic futures arrangement as abstinent over a time aeon greater than one day.

 

USCF believes that it is not practical to administer the portfolio to accomplish such an beforehand ambition aback beforehand in Futures Affairs (as authentic below) and Added Natural Gas-Related Investments (as authentic below). UNG’s shares began trading on April 18, 2007. USCF is the accustomed accomplice of UNG and is amenable for the administering of UNG.

 

Who is USCF?

 

USCF is a distinct associate bound liability aggregation that was formed in the accompaniment of Delaware on May 10, 2005. USCF maintains its basic business appointment at 1850 Mt. Diablo Boulevard, Suite 640, Walnut Creek, California 94596. USCF is a wholly-owned accessory of Wainwright Holdings, Inc., a Delaware corporation (“Wainwright”), which is a wholly endemic accessory of Concierge Technologies, Inc. (publicly traded beneath the ticker CNCG) (“Concierge”). Mr. Nicholas D. Gerber (discussed below), alternating with assertive ancestors associates and assertive other shareholders, owns the majority of the shares in Concierge. Wainwright is a captivation aggregation that currently holds both USCF, as able-bodied as USCF Advisers LLC, an beforehand adviser registered beneath the Beforehand Advisers Act of 1940, as amended. USCF Advisers LLC serves as the beforehand adviser for the USCF SummerHaven SHPEN Base Armamentarium (“BUYN”), the USCF SummerHaven SHPEI Base Armamentarium (“BUY”) and USCF SummerHaven Dynamic Article Base Complete ReturnSM (“SDCI”), each a alternation of the USCF ETF Trust. USCF Advisers LLC additionally served as the beforehand adviser to the USCF Article Activity Fund, a alternation of the USCF Alternate Funds Trust, which asleep all of its assets and broadcast banknote pro rata to all complete shareholders in March 2019. USCF ETF Affirmation and USCF Alternate Funds Affirmation are registered beneath the Beforehand Aggregation Act of 1940, as amended (the “1940 Act”). The Lath of Advisers for the USCF ETF Affirmation and the USCF Alternate Funds Affirmation abide of different complete advisers than those complete admiral who serve on the Lath of Admiral of USCF. USCF is a associate of the National Futures Affiliation (the “NFA”) and registered as a article basin abettor (“CPO”) with the Commodity Futures Trading Bureau (the “CFTC”) on December 1, 2005 and as a swaps abutting on August 8, 2013.

 

USCF serves as accustomed accomplice of the United States Oil Fund, LP (“USO”), the United States 12 Ages Oil Fund, LP (“USL”), the United States Gasoline Fund, LP (“UGA”), the United States 12 Ages Accustomed Gas Fund, LP (“UNL”) and the United States Brent Oil Fund, LP (“BNO”). USCF advanced served as the accustomed accomplice for the United States Abbreviate Oil Fund, LP (“DNO”) and the United States Diesel-Heating Oil Fund, LP (“UHN”), both of which were asleep in 2018.

 

USCF is additionally the sponsor of the United States Article Base Armamentarium (“USCI”), the United States Copper Base Armamentarium (“CPER”), and the USCF Crescent Crypto Base Armamentarium (“XBET”), anniversary a alternation of the United States Article Base Funds Affirmation (“USCIFT”). XBET is currently in allotment and has not commenced operations. USCF advanced served as the sponsor for the United States Agronomics Base Armamentarium (“USAG”), which was asleep in 2018.

 

In addition, USCF is the sponsor of the USCF Funds Trust, a Delaware accustomed trust, and anniversary of its series, the United States 3x Oil Armamentarium (“USOU”) and the United States 3x Abbreviate Oil Armamentarium (“USOD”), which listed their shares on the NYSE Arca on July 20, 2017 beneath the ticker symbols “USOU” and “USOD”, respectively. Anniversary of USOU and USOD asleep all of its assets and distributed banknote pro rata to all complete shareholders in December 2019.

 

 

USO, UNG, UGA, UNL, USL, BNO, USCI and CPER are referred to collectively herein as the “Related Accessible Funds.”

 

The Accompanying Accessible Funds are accountable to advertisement requirements beneath the Antithesis Barter Act of 1934, as adapted (the “Exchange Act”). For added information about anniversary of the Accompanying Accessible Funds, investors in UNG may alarm 1.800.920.0259 or appointment www.uscfinvestments.com or the website of the Antithesis and Barter Bureau (“SEC”) at www.sec.gov.

 

USCF is adapted to appraise the credit blow of UNG to the futures bureau merchant (“FCM”), baby-sit the acquirement and bargain of UNG’s shares by certain accustomed purchasers (“Authorized Participants”), assay circadian positions and allowance requirements of UNG and manage UNG’s investments. USCF additionally pays the fees of ALPS Distributors, Inc. (“ALPS Distributors”), which serves as the business abettor for UNG (the “Marketing Agent”), and Brown Brothers Harriman & Co. (“BBH&Co.”), which serves as the ambassador (the “Administrator”) and the babysitter (the “Custodian”) for UNG.

 

Bound ally admission no adapted to elect USCF as the accustomed accomplice on an anniversary or any added continuing basis. If USCF voluntarily withdraws as accustomed partner, however, the holders of a majority of UNG’s outstanding shares (excluding for purposes of such affirmation shares owned, if any, by the abandoning USCF and its affiliates) may admission its successor. USCF may not be removed as accustomed accomplice except aloft approval by the acknowledging vote of the holders of at atomic 66 and 2/3 percent of UNG’s outstanding shares (excluding shares owned, if any, by USCF and its affiliates), accountable to the achievement of assertive altitude set alternating in the LP Agreement.

 

UNG has no controlling admiral or employees. Pursuant to the acceding of the LP Agreement, UNG’s diplomacy are managed by USCF.

 

The business and diplomacy of USCF are managed by a lath of admiral (the “Board”), which is comprised of four administering admiral (the “Management Directors”), anniversary of whom are additionally controlling admiral or advisers of USCF, and three complete admiral who accommodated the complete director requirements accustomed by the NYSE Arca Equities Rules and the Sarbanes-Oxley Act of 2002. The Administering Admiral admission the ascendancy to administer USCF pursuant to the acceding of the Sixth Adapted and Restated Bound Accountability Aggregation Acceding of USCF, dated as of May 15, 2015 (as adapted from time to time, the “LLC Agreement”). Through its Administering Directors, USCF manages the circadian operations of UNG. The Lath has an assay lath which is fabricated up of the three complete admiral (Gordon L. Ellis, Malcolm R. Fobes III and Peter M. Robinson). For added advice apropos to the assay committee, amuse see “Item 10. Directors, Controlling Admiral and Accumulated Governance – Assay Committee” in this anniversary abode on Anatomy 10-K.

 

How Does UNG Operate?

 

An beforehand in the shares provides a bureau for diversifying an investor’s portfolio or ambiguity acknowledgment to changes in accustomed gas prices. An beforehand in the shares allows both retail and institutional investors to calmly accretion this acknowledgment to the accustomed gas bazaar in a transparent, cost-effective manner.

 

 

The net assets of UNG abide primarily of investments in futures affairs for accustomed gas, awkward oil, diesel-heating oil, gasoline, and added petroleum-based fuels that are traded on the NYMEX, ICE Futures or added U.S. and adopted exchanges (collectively, “Futures Contracts”) and, to a bottom extent, in acclimation to accede with authoritative requirements or in appearance of bazaar conditions, Added Accustomed Gas-Related (as authentic below) investments such as cash-settled options on Futures Contracts, advanced affairs for accustomed gas, austere bandy contracts and non-exchange traded over-the-counter (“OTC”) affairs that are based on the bulk of accustomed gas, oil and other petroleum-based fuels, Futures Affairs and indices based on the aloft (collectively, “Other Accustomed Gas-Related Investments”). Bazaar altitude that USCF currently anticipates could anniversary UNG to beforehand in Added Accustomed Gas-Related Investments accommodate those accepting UNG to admission greater clamminess or to assassinate affairs with added favorable pricing. For accessibility and unless otherwise specified, Futures Affairs and Added Accustomed Gas-Related Investments collectively are referred to as “Natural Gas Interests” in this anniversary abode on Anatomy 10-K. UNG invests essentially the complete bulk of its assets in Futures Affairs while supporting such investments by captivation the amounts of its margin, accessory and added requirements apropos to these obligations in short-term obligations of the United States of two years or beneath (“Treasuries”), banknote and banknote equivalents. The circadian holdings of UNG are attainable on UNG’s website at www.uscfinvestments.com.

 

The beforehand cold of UNG is for the circadian changes in allotment acceding of its shares’ per allotment NAV to reflect the circadian changes in allotment acceding of the bulk of accustomed gas delivered at the Henry Hub, Louisiana, as abstinent by the circadian changes in the bulk of the futures contract on accustomed gas traded on the NYMEX that is the abreast ages arrangement to expire, except aback the abreast ages arrangement is aural two weeks of expiration, in which case it will be abstinent by the futures arrangement that is the abutting ages arrangement to expire (the “Benchmark Futures Contract”), added absorption acceptable on UNG’s accessory holdings, beneath UNG’s expenses. UNG’s investment cold is not for its NAV or bazaar bulk of shares to equal, in dollar terms, the atom bulk of accustomed gas or any particular futures arrangement based on accustomed gas, nor is UNG’s beforehand cold for the allotment change in its NAV to reflect the allotment change of the bulk of any authentic futures arrangement as abstinent over a time aeon greater than one day. UNG may beforehand in interests added than the Criterion Futures Arrangement to accede with accountability levels and position limits. For a abundant altercation of accountability levels and position limits, see “Item 1. Business – What are Futures Contracts?” beneath in this anniversary abode on Anatomy 10-K.

 

USCF employs a “neutral” investment activity in acclimation to clue changes in the bulk of the Criterion Futures Arrangement behindhand of whether the bulk goes up or goes down. UNG’s “neutral” beforehand activity is brash to admittance investors about to acquirement and advertise UNG’s shares for the purpose of beforehand alongside in accustomed gas in a cost-effective manner, and/or to admittance participants in the accustomed gas or added industries to barrier the blow of losses in their accustomed gas-related transactions. Accordingly, depending on the beforehand cold of an alone investor, the risks about associated with beforehand in accustomed gas and/or the risks circuitous in ambiguity may exist. In addition, an beforehand in UNG involves the blow that the circadian changes in the bulk of UNG’s shares, in allotment terms, will not accurately clue the circadian changes in the Criterion Futures Contract, in allotment terms, and that circadian changes in the Criterion Futures Contract, in allotment terms, will not carefully associate with circadian changes in the atom prices of accustomed gas, in allotment terms.

 

The Criterion Futures Arrangement is changed from the abreast ages arrangement to the abutting ages arrangement over a four-day period. Anniversary month, the Criterion Futures Arrangement changes starting at the end of the day on the date two weeks above-mentioned to cessation of the abreast ages arrangement for that month. During the aboriginal three canicule of the period, the applicative bulk of the Criterion Futures Arrangement is based on a accumulated of the abreast month arrangement and the abutting ages arrangement as follows: (1) day 1 consists of 75% of the again abreast ages contract’s bulk added 25% of the bulk of the abutting ages contract, disconnected by 75% of the abreast ages contract’s above-mentioned day’s bulk added 25% of the bulk of the abutting ages contract, (2) day 2 consists of 50% of the again abreast ages contract’s bulk added 50% of the price of the abutting ages contract, disconnected by 50% of the abreast ages contract’s above-mentioned day’s bulk added 50% of the bulk of the abutting ages contract, and (3) day 3 consists of 25% of the again abreast ages contract’s bulk added 75% of the bulk of the abutting ages contract, disconnected by 25% of the abreast ages contract’s above-mentioned day’s bulk added 75% of the bulk of the next ages contract. On day 4, the Criterion Futures Arrangement is the abutting ages arrangement to expire at that time and that arrangement remains the Criterion Futures Arrangement until the alpha of the afterward month’s change in the Criterion Futures Arrangement over a four-day period.

 

On anniversary day during the four-day period, USCF anticipates it will “roll” UNG’s positions in Accustomed Gas Interests by closing, or selling, a percentage of UNG’s positions in Accustomed Gas Interests and reinvesting the accretion from closing those positions in new Accustomed Gas Interests that reflect the change in the Criterion Futures Contract.

 

The advancing dates that the monthly four-day cycle aeon will arise are acquaint on UNG’s website at www.uscfinvestments.com, and are accountable to change without notice.

 

 

UNG’s complete portfolio composition is appear on its website anniversary business day that the NYSE Arca is attainable for trading. The website acknowledgment of portfolio holdings is fabricated circadian and includes, as applicable, the name and bulk of anniversary Accustomed Gas Interest, the specific types of Added Natural Gas-Related Investments and characteristics of such Added Accustomed Gas-Related Investments, the name and bulk of anniversary Treasury and banknote equivalent, and the bulk of banknote captivated in UNG’s portfolio. UNG’s website is about attainable at no charge. UNG’s assets acclimated for allowance and accessory are captivated in complete accounts pursuant to the Article Barter Act (the “CEA”) and CFTC regulations.

 

The shares issued by UNG may alone be purchased by Accustomed Participants and alone in blocks of 100,000 shares declared Conception Baskets. The bulk of the acquirement acquittal for a Conception Bassinet is according to the accumulated NAV of the shares in the Conception Basket. Similarly, alone Accustomed Participants may redeem shares and alone in blocks of 100,000 shares declared Accretion Baskets. The bulk of the accretion accretion for a Redemption Bassinet is according to the accumulated NAV of shares in the Accretion Basket. The acquirement bulk for Conception Baskets and the redemption bulk for Accretion Baskets are the complete NAV afflicted at the end of the business day aback a abode for a acquirement or redemption is accustomed by UNG. The NYSE Arca publishes an about per allotment NAV intra-day based on the above-mentioned day’s per allotment NAV and the accustomed bulk of the Criterion Futures Contract, but the bulk of Conception Baskets and Accretion Baskets is determined based on the complete per allotment NAV afflicted at the end of the day.

 

While UNG issues shares alone in Creation Baskets, shares are listed on the NYSE Arca and investors may acquirement and advertise shares at bazaar prices like any listed security.

 

What is UNG’s Beforehand Strategy?

 

In managing UNG’s assets, USCF does not use a abstruse trading arrangement that issues buy and advertise orders. USCF instead employs a quantitative alignment whereby each time a Conception Bassinet is sold, USCF purchases Accustomed Gas Interests, such as the Criterion Futures Contract, that admission an aggregate bazaar bulk that approximates the bulk of Treasuries and/or banknote accustomed aloft the arising of the Conception Basket.

 

By complete invested as absolutely as possible in Futures Affairs or Added Accustomed Gas-Related Investments, USCF believes that the circadian changes in allotment acceding in UNG’s per allotment NAV will abide to carefully clue the circadian changes in allotment acceding in the bulk of the Criterion Futures Contract. USCF believes that assertive arbitrage opportunities aftereffect in the bulk of the shares traded on the NYSE Arca carefully tracking the per allotment NAV of UNG. Additionally, Futures Affairs traded on the NYMEX admission carefully tracked the atom bulk of accustomed gas. Based on these accustomed interrelationships, USCF believes that the changes in the bulk of UNG’s shares traded on the NYSE Arca admission carefully tracked and will abide to carefully clue on a circadian abject the changes in the atom bulk of accustomed gas, on a percentage basis. For achievement abstracts apropos to UNG’s adeptness to clue its benchmark, see “Item 7. Management’s Discussion and Assay of Cyberbanking Activity and After-effects of Operations — Tracking UNG’s Benchmark” in this annual abode on Anatomy 10-K.

 

USCF endeavors to abode UNG’s trades in Futures Affairs and Added Accustomed Gas-Related Investments and contrarily administer UNG’s investments so that “A” will be aural plus/minus ten percent (10%) of “B,” where:

 

 

USCF believes that bazaar arbitrage opportunities will anniversary the circadian changes in UNG’s allotment bulk on the NYSE Arca to carefully clue the circadian changes in UNG’s per allotment NAV on a allotment basis. USCF added believes that the net aftereffect of these two accustomed relationships and the relationships declared aloft amid UNG’s per allotment NAV and the Criterion Futures Arrangement will be that the circadian changes in the price of UNG’s shares on the NYSE Arca on a allotment abject will carefully clue the circadian changes in the atom bulk of a barrel of accustomed gas on a allotment basis, added absorption acceptable on UNG’s accessory holdings, beneath UNG’s expenses. For performance abstracts apropos to UNG’s adeptness to clue its benchmark, see “Item 7. Management’s Altercation and Assay of Cyberbanking Activity and After-effects of Operations – Tracking UNG’s Benchmark” in this anniversary abode on Anatomy 10-K.

 

 

The specific Futures Affairs purchased depend on assorted factors, including a acumen by USCF as to the adapted about-face of UNG’s investments in futures affairs with anniversary to the ages of expiration, and the prevailing bulk animation of authentic contracts. While USCF has fabricated cogent investments in NYMEX Futures Contracts, for assorted reasons, including the adeptness to admission into the complete amount of acknowledgment to the accustomed gas market, position banned or added authoritative requirements absorbed UNG’s holdings, and market conditions, it may beforehand in futures affairs traded on added exchanges or beforehand in Added Accustomed Gas-Related Investments. To the admeasurement that UNG invests in Added Accustomed Gas-Related Investments, it would accent investments in affairs and instruments that are economically agnate to the Criterion Futures Contract, including austere swaps that amuse such criteria, and then, to a bottom extent, it would beforehand in added types of austere swaps and added contracts, instruments and non-cleared swaps, such as swaps in the OTC market. If UNG is adapted by law or regulation, or by one of its regulators, including a futures exchange, to abate its position in the Futures Affairs to the applicative position complete or to a defined accountability akin or if market altitude behest it would be added adapted to beforehand in Added Accustomed Gas-Related Investments, a abundant allocation of UNG’s assets could be invested in accordance with such antecedence in Added Accustomed Gas-Related Investments that are brash to replicate the acknowledgment on the Criterion Futures Contract. As UNG’s assets adeptness college levels, it is added able to beat position limits, accountability levels or added authoritative banned and, as a result, it is added able that it will beforehand in accordance with such antecedence in Added Accustomed Gas-Related Investments at such college levels. In addition, bazaar altitude that USCF currently anticipates could anniversary UNG to beforehand in Added Accustomed Gas-Related Investments accommodate those accepting UNG to admission greater clamminess or to assassinate affairs with added favorable pricing. See “Item 1. Business – Bolt Regulation” in this anniversary abode on Anatomy 10-K for a altercation of the abeyant appulse of acclimation on UNG’s adeptness to beforehand in OTC transactions and austere swaps.

 

USCF may not be able to absolutely beforehand UNG’s assets in the Futures Affairs accepting an accumulated abstract bulk absolutely according to UNG’s NAV. For example, as standardized contracts, the Futures Affairs are for a defined bulk of a authentic commodity, and UNG’s NAV and the accretion from the bargain of a Conception Bassinet are absurd to be an exact assorted of the amounts of those contracts. As a result, in such circumstances, UNG may be bigger able to accomplish the exact bulk of acknowledgment to changes in bulk of the Criterion Futures Arrangement through the use of Added Accustomed Gas-Related Investments, such as OTC affairs that admission bigger alternation with changes in bulk of the Benchmark Futures Contract.

 

UNG anticipates that to the admeasurement it invests in Futures Affairs added than affairs on accustomed gas (such as futures affairs for light, candied awkward oil, diesel-heating oil and added petroleum-based fuels) and Added Accustomed Gas-Related Investments, it will admission into assorted non-exchange-traded acquired affairs to barrier the concise bulk movements of such Futures Affairs and Added Accustomed Gas-Related Investments adjoin the accustomed Criterion Futures Contract.

 

USCF does not advanced absolution UNG’s Futures Affairs expire and demography commitment of the basal commodity. Instead, USCF closes complete positions, e.g., aback it changes the Criterion Futures Arrangement or Added Accustomed Gas-Related Investments or it contrarily determines it would be appropriate to do so and reinvests the accretion in new Futures Affairs or Added Accustomed Gas-Related Investments. Positions may additionally be closed out to accommodated orders for Accretion Baskets and in such case accretion for such baskets will not be reinvested.

 

What is the Accustomed Gas Bazaar and the Petroleum-Based Ammunition Market?

 

Accustomed Gas. Accustomed gas accounts for about a division of U.S. activity consumption. The bulk of accustomed gas is accustomed by the accumulation and abode altitude in the North American market, and added particularly, in the basic adorning centermost of the U.S. Gulf Coast. The accustomed gas bazaar essentially constitutes an auction, breadth the accomplished applicant wins the supply. Aback markets are “strong” (i.e., aback abode is high and/or accumulation is low), the applicant allegation be accommodating to pay a college exceptional to abduction the supply. Aback markets are “weak” (i.e., aback abode is low and/or accumulation is high), a applicant may admission not to outbid competitors, cat-and-mouse instead for later, possibly lower priced, supplies. Abode for accustomed gas by consumers, as able-bodied as agricultural, accomplishment and busline industries, determines all-embracing abode for accustomed gas. Back the precursors of artefact abode are affiliated to bread-and-butter activity, accustomed gas abode will tend to reflect bread-and-butter conditions. However, added factors such as acclimate decidedly admission accustomed gas demand.

 

 

The NYMEX is the world’s largest concrete article futures barter and the ascendant bazaar for the trading of activity and adored metals. The Criterion Futures Arrangement trades in units of 10,000 MMBtu and is based on commitment at the Henry Hub in Louisiana, the antecedent of 16 intra- and interstate accustomed gas activity systems that draw food from the region’s abounding gas deposits. The pipelines serve markets throughout the U.S. East Coast, the Gulf Coast, the Midwest, and up to the Canadian border. Because of the animation of accustomed gas prices, a alive abject bazaar has developed in the appraisement relationships amid the Henry Hub and added important accustomed gas market centers in the continental United States and Canada. The NYMEX makes attainable for trading a alternation of abject bandy futures contracts that are quoted as bulk differentials amid about 30 accustomed gas appraisement credibility and the Henry Hub. The abject contracts barter in units of 2,500 MMBtu on the New York Mercantile Barter ClearPort® trading platform. The New York Mercantile Exchange ClearPort® is an cyberbanking trading belvedere through which a slate of activity futures affairs are attainable for competitive trading. Affairs can additionally be consummated off-NYMEX and submitted to the NYMEX for allowance via the NYMEX ClearPort® clearing website as an barter of futures for physicals or an barter of futures for swaps transactions.

 

Light, Candied Awkward Oil. Light, sweet crudes are adopted by refiners because of their low sulfur agreeable and about aerial yields of high-value articles such as gasoline, abettor fuel, diesel-heating oil, and jet fuel. The bulk of light, candied awkward oil has historically apparent periods of cogent volatility.

 

Abode for petroleum articles by consumers, as able-bodied as agricultural, accomplishment and busline industries, determines abode for awkward oil by refiners. Back the precursors of artefact abode are affiliated to bread-and-butter activity, awkward oil abode will tend to reflect bread-and-butter conditions. However, added factors such as acclimate additionally admission artefact and awkward oil demand.

 

Awkward oil accumulation is bent by both bread-and-butter and political factors. Oil prices (along with conduct costs, availability of adorable affairs for drilling, taxes and technology, amid added factors) actuate assay and development spending, which admission achievement accommodation with a lag. In the abbreviate run, assembly decisions by the Alignment of Petroleum Exporting Countries (“OPEC”) additionally affect supply and prices. Oil consign embargoes and the accustomed conflicts in the Middle East represent added routes through which political developments move the market. It is not accessible to adumbrate the accumulated aftereffect of all or any accumulated of these factors.

 

Diesel-Heating Oil. Diesel-heating oil, additionally accustomed as No. 2 ammunition oil, accounts for 25% of the crop of a butt of awkward oil, the added better “cut” from oil afterwards gasoline. The diesel-heating Oil Futures Arrangement listed and traded on the NYMEX trades in units of 42,000 gallons (1,000 barrels) and is based on commitment in the New York harbor, the arch banknote bazaar center. The ICE Futures additionally offers a diesel-heating Oil Futures Arrangement which trades in units of 42,000 U.S. gallons (1,000 barrels). The diesel-heating Oil Futures Arrangement is cash-settled adjoin the prevailing bazaar bulk for diesel-heating oil delivered to the New York Harbor.

 

Gasoline. Gasoline is the largest distinct accumulated aesthetic artefact awash in the U.S. and accounts for about bisected of civic oil consumption. The gasoline futures contract listed and traded on the NYMEX trades in units of 42,000 gallons (1,000 barrels) and is based on commitment at petroleum products terminals in the New York harbor, the aloft East Coast trading centermost for imports and calm shipments from refineries in the New York anchorage breadth or from the Gulf Coast adorning centers. The bulk of gasoline has historically been volatile.

 

What are Futures Contracts?

 

Futures affairs are agreements between two parties. One affair agrees to buy a article such as accustomed gas from the added affair at a afterwards date at a bulk and quantity agreed aloft aback the arrangement is made. Futures Affairs are traded on futures exchanges, including the NYMEX. For example, the Criterion Futures Arrangement is traded on the NYMEX in units of 10,000 MMBtu. Futures Affairs traded on the NYMEX are priced by attic brokers and added barter associates both through an “open outcry” of offers to acquirement or advertise the contracts and through an electronic, screen-based arrangement that determines the bulk by analogous electronically offers to acquirement and sell. Added risks of beforehand in Futures Affairs are included in “Item 1A. Blow Factors” in this anniversary report on Anatomy 10-K.

 

Accountability Levels, Position Limits and Bulk Aberration Limits. Appointed arrangement markets (“DCMs”), such as the NYMEX and ICE Futures admission established accountability levels and position banned on the best net connected or net abbreviate futures affairs in article interests that any actuality or accumulation of bodies beneath accustomed trading ascendancy (other than as a hedge, which an beforehand by UNG is not) may hold, own or control. These levels and position banned administer to the futures affairs that UNG invests in to accommodated its beforehand objective. In accession to accountability levels and position limits, the NYMEX and ICE Futures additionally set circadian bulk aberration banned on futures contracts. The circadian bulk aberration complete establishes the best bulk that the bulk of a futures arrangement may vary either up or bottomward from the antecedent day’s acclimation price. Already the circadian bulk aberration complete has been accomplished in a authentic futures contract, no trades may be fabricated at a bulk aloft that limit.

 

 

The accountability levels for the Benchmark Futures Arrangement and added Futures Affairs traded on U.S.-based futures exchanges, such as the NYMEX, are not a anchored ceiling, but rather a alpha aloft which the NYMEX may exercise greater assay and ascendancy over an investor’s positions. The accustomed accountability akin for investments for any one-month in the Criterion Futures Arrangement is 6,000 contracts. In addition, the NYMEX imposes an accountability akin for all months of 12,000 net futures affairs for accustomed gas. In addition, the ICE Futures maintains the aforementioned accountability levels, position banned and ecology ascendancy for its accustomed gas arrangement as the NYMEX. If UNG and the Accompanying Accessible Funds beat these accountability levels for investments in the futures affairs for natural gas, the NYMEX and ICE Futures will adviser such acknowledgment and may ask for added advice on their activities, including the complete admeasurement of all positions, beforehand and trading strategy, and the admeasurement of clamminess assets of UNG and the Accompanying Public Funds. If accounted all-important by the NYMEX and/or ICE Futures, UNG could be ordered to abate its accumulated net futures contracts aback to the accountability level. As of December 31, 2019, UNG captivated 20,310 NYMEX accustomed gas Futures NG contracts. As of December 31, 2019, UNG did not ascendancy any Accustomed Gas Futures Affairs traded on the ICE Futures. UNG exceeded accountability levels of the NYMEX during the year assured December 31, 2019, aback it captivated a best of 20,310 accustomed gas Futures NG contracts, aloft both the “any” and “all” ages limits. No activity was taken by the NYMEX and UNG did not abate the cardinal of Futures Affairs captivated as a result. UNG exceeded accountability levels of ICE Futures during the year assured December 31, 2019, aback it captivated a best of 6,000 accustomed gas Futures LD1 H Contracts, aloft the “any” ages limit. No activity was taken by ICE Futures and UNG did not abate the cardinal of futures affairs captivated as a result.

 

Position banned adapt from accountability levels in that they represent anchored banned on the best cardinal of futures affairs that any actuality may ascendancy and cannot allow such banned to be exceeded afterwards authentic CFTC ascendancy to do so. In accession to accountability levels and position banned that may administer at any time, the NYMEX and ICE Futures appoint position banned on affairs captivated in the aftermost few canicule of trading in the abreast ages arrangement to expire. It is absurd that UNG will run up adjoin such position banned because UNG’s investment activity is to abutting out its positions and “roll” from the abreast ages arrangement to expire to the abutting ages contract during a four-day aeon alpha two weeks from cessation of the contract. For the year assured December 31, 2019, UNG did not beat position banned imposed by the NYMEX and ICE Futures.

 

The CFTC has proposed to admission banned on abstract positions in 25 concrete article futures and advantage affairs as able-bodied as swaps that are economically agnate to such affairs in the agriculture, activity and metals markets (the “Position Complete Rules”). The Position Complete Rules would, amid added things: analyze which affairs are accountable to abstract position limits; set thresholds that bind the admeasurement of abstract positions that a actuality may ascendancy in the atom month, added alone months, and all months combined; create an absolution for positions that accumulated bona fide ambiguity transactions; appoint responsibilities on DCMs and bandy beheading facilities (“SEFs”) to authorize position banned or, in some cases, position accountability rules; and administer to both futures and swaps aloft four accordant venues: OTC, DCMs, SEFs as able-bodied as assertive non-U.S. amid platforms. The CFTC’s aboriginal attempt at finalizing the Position Complete Rules, in 2011, was auspiciously challenged by bazaar participants in 2012 and, back then, the CFTC has re-proposed them and solicited comments from bazaar participants assorted times. At this time, it is cryptic how the Position Complete Rules may affect UNG, but the aftereffect may be abundant and adverse. By way of example, the Position Complete Rules may negatively appulse the adeptness of UNG to accommodated its beforehand objectives through banned that may arrest USCF’s adeptness to advertise additional Conception Baskets of UNG. See “The Article Absorption Markets-Commodities Regulation” in this anniversary abode on Anatomy 10-K for added information.

 

Until such time as the Position Complete Rules are adopted, the authoritative architectonics in aftereffect above-mentioned to the accepting of the Position Complete Rules will administer affairs in bolt and accompanying derivatives. Beneath that system, the CFTC enforces federal banned on belief in nine agricultural articles (e.g., corn, aureate and soy), while futures exchanges authorize and accomplish position banned and accountability levels for added agronomical products and assertive activity articles (e.g., oil and accustomed gas). As a result, UNG may be limited with anniversary to the admeasurement of its investments in any bolt accountable to these limits.

 

Beneath complete and afresh adopted CFTC regulations, for the purpose of position limits, a bazaar actor is about required, accountable to assertive attenuated exceptions, to accumulated all positions for which that actor controls the trading decisions with all positions for which that participant has a 10 percent or greater buying absorption in an anniversary or position, as able-bodied as the positions of two or added bodies acting pursuant to an authentic or adumbrated acceding or compassionate with that actor (the “Aggregation Rules”). The Aggregation Rules will additionally administer with anniversary to the Position Complete Rules if and aback such Position Complete Rules are adopted.

 

 

Bulk Volatility. The bulk volatility of Futures Affairs about has been historically greater than that for able antithesis such as stocks and bonds. Price animation about is greater circadian as adjoin to intra-day. Futures Affairs tend to be added airy than stocks and bonds because bulk movements for accustomed gas are added currently and anon afflicted by bread-and-butter factors for which accustomed abstracts is attainable and are traded by accustomed gas futures traders throughout the day. Because UNG invests a cogent allocation of its assets in Futures Contracts, the assets of UNG, and appropriately the prices of UNG shares, may be accountable to greater animation than traditional securities.

 

Marking-to-Market Futures Positions. Futures Affairs are apparent to bazaar at the end of anniversary trading day and the allowance adapted with anniversary to such affairs is adapted accordingly. This activity of marking-to-market is brash to anticipate losses from accumulating in any futures account. Therefore, if UNG’s futures positions admission beneath in value, UNG may be adapted to column “variation margin” to awning this decline. Alternatively, if UNG’s futures positions admission added in value, this admission will be credited to UNG’s account.

 

Why Does UNG Acquirement and Advertise Futures Contracts?

 

UNG’s beforehand cold is for the circadian changes in allotment acceding of its shares’ per allotment NAV to reflect the circadian changes in allotment acceding of the Criterion Futures Contract, beneath UNG’s expenses. UNG invests primarily in Futures Contracts. UNG seeks to admission its aggregate NAV about at all times the accumulated bazaar bulk of the Futures Affairs (or Added Accustomed Gas-Related Investments) it holds.

 

In affiliation with beforehand in Futures Affairs and Added Accustomed Gas-Related Investments, UNG holds Treasuries, banknote and/or banknote equivalents that serve as segregated assets acknowledging UNG’s positions in Futures Affairs and Added Accustomed Gas-Related Investments. For example, the purchase of a Futures Arrangement with a declared bulk of $10 actor would not crave UNG to pay $10 actor aloft entering into the contract; rather, alone a allowance deposit, about of 5% to 30% of the declared bulk of the Futures Contract, would be required. To secure its Futures Arrangement obligations, UNG would drop the adapted allowance with the FCM and would alone hold, through its Custodian, Treasuries, banknote and/or banknote equivalents in an bulk according to the antithesis of the accustomed bazaar bulk of the contract, which at the contract’s birth would be $10 actor bare the bulk of the allowance deposit, or $9.0 actor (assuming a 10% margin).

 

As a aftereffect of the foregoing, typically 5% to 30% of UNG’s assets are captivated as allowance in complete accounts with an FCM. In accession to the Treasuries and banknote it posts with the FCM for the Futures Affairs it owns, UNG may hold, through the Custodian, Treasuries, banknote and/or banknote equivalents that can be acquaint as added allowance or as added accessory to abutment its OTC contracts. UNG earns assets from the Treasuries and/or banknote equivalents that it purchases, and on the banknote it holds through the Babysitter or FCM. UNG anticipates that the earned assets will admission the NAV and bound partners’ basic accession accounts. UNG reinvests the acceptable income, holds it in cash, or uses it to pay its expenses. If UNG reinvests the acceptable income, it makes investments that are constant with its beforehand objective.

 

What are the Trading Behavior of UNG?

 

Liquidity

 

UNG invests alone in Futures Affairs and Added Accustomed Gas-Related Investments that, in the assessment of USCF, are traded in able accumulated to admittance the accessible taking and defalcation of positions in these cyberbanking interests and Added Accustomed Gas-Related Investments that, in the assessment of USCF, may be readily asleep with the aboriginal counterparty or through a third affair bold the position of UNG.

 

 

Atom Commodities

 

While the Futures Affairs traded can be physically settled, UNG does not intend to booty or accomplish concrete delivery. UNG may from time to time barter in Added Natural Gas-Related Investments, including affairs based on the atom bulk of accustomed gas.

 

Leverage

 

USCF endeavors to admission the bulk of UNG’s Treasuries, banknote and banknote equivalents, whether captivated by UNG or acquaint as allowance or added collateral, at all times about the accumulated bazaar bulk of its obligations beneath its Futures Affairs and Added Accustomed Gas-Related Investments. Article pools’ trading positions in futures affairs or added accompanying investments are about adapted to be anchored by the drop of margin funds that represent alone a baby allotment of a futures contract’s (or added article interest’s) complete market value. While USCF has not and does not intend to advantage UNG’s assets, it is not banned from accomplishing so beneath the LP Agreement.

 

Borrowings

 

Borrowings are not acclimated by UNG, unless UNG is adapted to borrow money in the blow of concrete delivery, if UNG trades in banknote commodities, or for concise needs created by abrupt redemptions.

 

OTC Derivatives (Including Spreads and Straddles)

 

In accession to Futures Contracts, there are additionally a cardinal of listed options on the Futures Affairs on the arch futures exchanges. These affairs activity investors and hedgers accession set of cyberbanking cartage to use in managing acknowledgment to the accustomed gas market. Consequently, UNG may purchase options on Futures Affairs on these exchanges in advancing its beforehand objective.

 

In accession to the Futures Affairs and options on the Futures Contracts, there additionally exists an alive non-exchange-traded bazaar in derivatives angry to accustomed gas. These derivatives affairs (also accustomed as OTC contracts) are usually entered into amid two parties in clandestine contracts. Unlike best of the exchange-traded Futures Affairs or exchange-traded options on the Futures Contracts, anniversary affair to such contract bears the acclaim blow of the added party, i.e., the blow that the added affair may not be able to accomplish its obligations beneath its contract. To abate the acclaim blow that arises in affiliation with such contracts, UNG will about admission into an agreement with anniversary counterparty based on the Adept Acceding appear by the All-embracing Swaps and Derivatives Association, Inc. (“ISDA”) that provides for the applique of its all-embracing acknowledgment to its counterparty.

 

USCF assesses or reviews, as appropriate, the creditworthiness of anniversary abeyant or complete counterparty to an OTC arrangement pursuant to guidelines accustomed by USCF’s Board.

 

UNG may admission into assertive transactions breadth an OTC basic is exchanged for a agnate futures arrangement (“Exchange for Accompanying Position” or “EFRP” transactions). In the best accustomed blazon of EFRP transaction entered into by UNG, the OTC basic is the acquirement or bargain of one or added baskets of UNG shares. These EFRP affairs may betrayal UNG to counterparty blow during the acting aeon amid the beheading of the OTC basic and the barter for a agnate futures contract. Generally, the counterparty blow from the EFRP transaction will abide alone on the day of execution.

 

UNG may administer spreads or straddles in its trading to abate the differences in its beforehand portfolio and its ambition of tracking the bulk of the Criterion Futures Contract. UNG would use a beforehand aback it chooses to booty accompanying connected and abbreviate positions in futures accounting on the aforementioned underlying asset, but with adapted commitment months.

 

During the reporting aeon of this anniversary abode on Anatomy 10-K, UNG bound its OTC activities to EFRP transactions.

 

 

Pyramiding

 

UNG has not and will not administer the technique, frequently accustomed as pyramiding, in which the charlatan uses abeyant profits on complete positions as aberration allowance for the acquirement or bargain of added positions in the aforementioned or accession article interest.

 

Who are the Anniversary Providers?

 

In its accommodation as the Babysitter for UNG, BBH&Co. holds UNG’s Treasuries, banknote and/or banknote equivalents pursuant to a careful agreement. BBH&Co. is additionally the abettor and alteration abettor for the shares. In addition, in its accommodation as Ambassador for UNG, BBH&Co. performs certain authoritative and accounting casework for UNG and prepares assertive SEC, NFA and CFTC letters on anniversary of UNG. USCF pays BBH&Co.’s fees for these services.

 

BBH&Co.’s arch business abode is 50 Column Appointment Square, Boston, MA 02110-1548. BBH&Co., a clandestine coffer founded in 1818, is neither a about held aggregation nor insured by the Federal Drop Allowance Corporation. BBH&Co. is accustomed to conduct a bartering cyberbanking business in accordance with the accoutrement of Article IV of the New York Accompaniment Cyberbanking Law, New York Cyberbanking Law §§160–181, and is accountable to regulation, supervision, and assay by the New York Accompaniment Department of Cyberbanking Services. BBH&Co. is additionally accountant to conduct a bartering cyberbanking business by the Commonwealths of Massachusetts and Pennsylvania and is subject to administering and assay by the cyberbanking admiral of those states.

 

UNG additionally employs ALPS Distributors as its business agent. USCF pays the Business Abettor an anniversary fee. In no blow may the accumulated advantage paid to the Marketing Abettor and any associate of USCF for distribution-related casework in affiliation with the alms of shares beat ten percent (10%) of the gross accretion of the offering.

 

ALPS Distributors’ principal business abode is 1290 Broadway, Suite 1100, Denver, CO 80203. ALPS Distributors is a broker-dealer registered with the SEC and is a associate of the Cyberbanking Industry Authoritative Ascendancy (“FINRA”) and Antithesis Abettor Protection Corporation.

 

On October 8, 2013, USCF entered into a Futures and Austere Derivatives Affairs Chump Anniversary Acceding with RBC Basic Markets, LLC (“RBC Capital” or “RBC”) to serve as UNG’s FCM, able October 10, 2013. This acceding requires RBC Basic to accommodate services to UNG, as of October 10, 2013, in affiliation with the acquirement and bargain of Accustomed Gas Futures Affairs and Added Accustomed Gas-Related Investments that may be purchased or awash by or through RBC Basic for UNG’s account. For the aeon October 10, 2013 and after, UNG pays RBC Basic commissions for alive and allowance trades on anniversary of UNG.

 

RBC Capital’s primary abode is 500 West Madison Street, Suite 2500, Chicago, Illinois 60661. Able October 10, 2013, RBC Basic became the futures clearing abettor for UNG. RBC Basic is registered in the United States with FINRA as a broker-dealer and with the CFTC as an FCM. RBC Capital is a associate of assorted U.S. futures and antithesis exchanges.

 

RBC Basic is a ample abettor banker subject to abounding adapted circuitous acknowledged and authoritative requirements. As a result, assertive of RBC Capital’s regulators may from time to time conduct investigations, admit administering affairs and/or admission into settlements with RBC Basic with anniversary to issues aloft in assorted investigations. RBC Basic complies absolutely with its regulators in all investigations actuality conducted and in all settlements it reaches. In addition, RBC Basic is and has been accountable to a array of civilian acknowledged claims in assorted jurisdictions, a array of acclimation agreements and a array of orders, awards and judgments fabricated adjoin it by courts and tribunals, both in absorption to such claims and investigations. RBC Basic complies absolutely with all settlements it alcove and all orders, awards and judgments fabricated adjoin it.

 

RBC Basic has been alleged as a defendant in assorted acknowledged actions, including arbitrations, chic accomplishments and added activity including those declared below, arising in affiliation with its activities. Assertive of the complete or threatened acknowledged accomplishments accommodate claims for abundant compensatory and/or castigating amercement or claims for accustomed amounts of damages. RBC Basic is additionally involved, in added reviews, investigations and affairs (both academic and informal) by authoritative and self-regulatory agencies apropos RBC Capital’s business, including amid added matters, accounting and operational matters, assertive of which may aftereffect in adverse judgments, settlements, fines, penalties, injunctions or added relief.

 

RBC Basic contests accountability and/or the bulk of amercement as adapted in anniversary awaiting matter. In appearance of the inherent adversity of admiration the aftereffect of such matters, decidedly in cases breadth claimants seek abundant or accustomed amercement or breadth investigations and affairs are in the aboriginal stages, RBC Basic cannot adumbrate the blow or ambit of loss, if any, accompanying to such matters; how or if such matters will be resolved; aback they will ultimately be resolved; or what the closing settlement, fine, amends or added relief, if any, adeptness be. Accountable to the foregoing, RBC Basic believes, based on accustomed adeptness and afterwards appointment with counsel, that the aftereffect of such awaiting affairs will not admission a complete adverse aftereffect on the circumscribed cyberbanking activity of RBC Capital.

 

 

On April 27, 2017, pursuant to an offer of settlement, a Console of the Chicago Lath of Barter Business Conduct Lath (“Panel”) activate that RBC Basic engaged in EFRP affairs which bootless to amuse the Rules of the Chicago Lath of Barter (the “Chicago Lath of Trade”) in one or added ways. Specifically, the Console activate that RBC Basic traders entered into EFRP trades in which RBC Basic accounts were on both abandon of the transactions. While the purpose of the affairs was to alteration positions amid the RBC Capital accounts, the Console activate that the abode in which the trades occurred abandoned the Chicago Lath of Trade’s prohibition on ablution trades. The Console activate that RBC Basic thereby abandoned CBOT Rules 534 and (legacy) 538.B. and C. In accordance with the acclimation offer, the Console ordered RBC Basic to pay a $175,000 fine. On October 1, 2019, the CFTC issued an acclimation filing and allowance accuse adjoin RBCCM for the aloft activity, as able-bodied as accompanying charges. The acclimation adapted that RBCCM cease and abandon from actionable the applicative regulations, pay a $5 actor civilian budgetary penalty, and accede with assorted conditions, including altitude apropos accessible statements and approaching cooperation with the CFTC.

 

On June 18, 2015, in affiliation with the Municipalities Continuing Acknowledgment Cooperation activity of the SEC, the SEC commenced and acclimatized an authoritative proceeding adjoin RBC Basic for adamant violations of Sections 17(a)(2) of the Antithesis Act of 1933, as adapted (“1933 Act”) afterwards the abutting self-reported instances in which it conducted bare due activity in assertive borough antithesis offerings and as a result, bootless to anatomy a reasonable abject for assertive the artlessness of assertive complete representations in official statements issued in affiliation with those offerings. RBC Basic paid a accomplished of $500,000.

 

RBC Basic and assertive affiliates were alleged as defendants in a accusation apropos to their role in affairs involving investments fabricated by a cardinal of Wisconsin school districts in assertive collateralized debt obligations. These affairs were additionally the accountable of a authoritative investigation, which was bound in 2011. RBC Basic accomplished a final acclimation with all parties in the civilian litigation, and the civilian activity against RBC Basic was absolved with ageism on December 6, 2016.

 

Alpha in 2015, accustomed chic actions were brought adjoin RBC Basic and/or Royal Coffer of Canada in the U.S., Canada and Israel. These accomplishments were anniversary brought against assorted adopted barter dealers and allege, amid added things, accommodating behavior in adopted barter trading. Assorted regulators are additionally administering inquiries apropos abeyant violations of law by a cardinal of banks and added entities, including RBC Capital, apropos adopted barter trading. In August 2018, the U.S. District Cloister entered a final acclimation acknowledging RBC Capital’s awaiting acclimation with chic plaintiffs. Assertive institutional plaintiffs autonomous out of accommodating in the acclimation and have brought their own claims. The Canadian chic accomplishments and one added U.S. activity that is purportedly brought on anniversary of different classes of plaintiffs additionally abide pending. Based on the facts currently known, it is not accessible at this time for us to predict the ultimate aftereffect of these investigations or affairs or the timing of their resolution.

 

On April 13, 2015, RBC Capital’s affiliate, Royal Coffer of Canada Affirmation Aggregation (Bahamas) Bound (“RBC Bahamas”), was answerable in France with complicity in tax fraud. RBC Bahamas believes that its accomplishments did not aperture French law and contested the allegation in the French court. The balloon of this bulk has assured and a acknowledgment was delivered on January 12, 2017, absolution the aggregation and the added defendants and on June 29, 2018, the French appellate cloister affirmed the acquittals. The acquittals are actuality appealed.

 

Assorted regulators and antagonism and administering authorities about the world, including in Canada, the United Kingdom, and the U.S., are administering investigations accompanying to assertive accomplished submissions fabricated by console banks in affiliation with the ambience of the U.S. dollar London interbank offered bulk (“LIBOR”). These investigations focus on allegations of bunco amid the banks that were on the console to accomplish submissions for assertive LIBOR rates. Royal Coffer of Canada, RBC Capital’s aberrant parent, is a associate of assertive LIBOR panels, including the U.S. dollar LIBOR panel, and has in the accomplished been the accountable of authoritative requests for information. In addition, Royal Coffer of Canada and added U.S. dollar console banks admission been alleged as defendants in clandestine lawsuits filed in the U.S. with anniversary to the ambience of LIBOR including a cardinal of chic activity lawsuits which admission been circumscribed afore the U.S. District Cloister for the Southern District of New York. The complaints in those clandestine lawsuits beforehand claims adjoin us and other console banks beneath assorted U.S. laws, including U.S. antitrust laws, the U.S. Article Barter Act, and accompaniment law. On February 28, 2018, the motion by the plaintiffs in the chic activity lawsuits to admission the chic certified was denied in affiliation to Royal Coffer of Canada. As such, unless that cardinal is antipodal on appeal, Royal Coffer of Canada is no best a actor in any pending chic action. Royal Coffer of Canada is still a affair to the assorted alone LIBOR actions. Based on the facts currently known, it is not accessible at this time for us to adumbrate the ultimate aftereffect of these investigations or affairs or the timing of their resolution.

form 1065 centralized partnership audit regime
 Centralized Partnership Audit Regime is in Effect: Koley ..

Centralized Partnership Audit Regime is in Effect: Koley .. | form 1065 centralized partnership audit regime

 

Thornburg Mortgage Inc. (“TMST”) and RBC Basic were parties to a adept repurchase acceding accomplished in September 2003 whereby TMST financed its acquirement of residential mortgage-backed securities. Aloft TMST’s absence during the cyberbanking crisis, RBC Basic admired TMST’s accessory at allegedly abandoned prices. Afterwards TMST’s defalcation filing, TMST’s trustee brought clothing adjoin RBC Capital in 2011 for aperture of contract. In 2015, TMST was awarded added than $45 actor in damages. RBC Basic has appealed. The appeals cloister set a conference agenda and accompanying ordered the parties to participate in a mediation. The parties afterwards reached an acceding to accomplish the matter; a motion to admission the acclimation was filed with the defalcation cloister on January 10, 2016 and accustomed on February 27, 2017.

 

 

On October 14, 2014, the Delaware Court of Chancery (the “Court of Chancery”) in a chic activity brought by aloft shareholders of Rural/Metro Corporation, captivated RBC Basic accountable for able and abetting a aperture of fiduciary assignment by three Rural/Metro directors, but did not accomplish an added accolade for attorney’s fees. A final acumen was entered on February 19, 2015 in the bulk of US$93 actor plus column acumen interest. RBC Basic appealed the Cloister of Chancery’s affirmation of accountability and breakthrough of damages, and the plaintiffs cross-appealed the cardinal on added attorneys’ fees. On November 30, 2015, the Delaware Supreme Court affirmed the Cloister of Chancery with anniversary to both the abode and cross-appeal. RBC Basic is allied with an investigation by the SEC apropos to this matter. In particular, the SEC arguable that RBC Basic acquired materially apocryphal and ambiguous information to be included in the proxy anniversary that Rural filed to accost actor approval for the bargain in abuse of breadth 14(A) of the Barter Act and Aphorism 14A-9 thereunder. On August 31, 2016, RBC Basic was ordered by the SEC to cease and abandon and paid $500,000 in disgorgement, added absorption of $77,759 and a civilian amends of $2 million.

 

Amuse see RBC Capital’s Anatomy BD, which is attainable on the FINRA BrokerCheck program, for added details.

 

RBC will act alone as allowance abettor for UNG and as such will be paid commissions for alive and allowance trades on anniversary of UNG. RBC has not anesthetized aloft the adequacy or accurateness of this anniversary abode on Anatomy 10-K. RBC will not act in any authoritative accommodation with anniversary to USCF or participate in the administering of USCF or UNG.

 

RBC is not affiliated with UNG or USCF. Therefore, neither USCF nor UNG believes that there are any conflicts of absorption with RBC or its trading principals arising from its acting as UNG’s FCM.

 

On January 14, 2019, USCF entered into agreements with BTIG, LLC to serve as UNG’s introducing broker. Beneath the agreements, BTIG, LLC accommodate casework to UNG in affiliation with the acquirement and bargain of Accustomed Gas Futures Affairs and Added Accustomed Gas-Related Investments that may be purchased or awash by or through RBC Basic for UNG’s account. RBC pays BTIG, LLC in affiliation with assertive trades on anniversary of UNG.

 

BTIG, LLC, whose arch abode is 600 Montgomery Street, Sixth Floor, San Francisco, CA, 94111, will act as an introducing abettor for UNG’s futures trading. BTIG is registered with the U.S. Antithesis and Barter Bureau as a broker-dealer, with the CFTC as an introducing broker, and is a associate of FINRA and added authoritative agencies and exchanges. In the accustomed beforehand of its adapted business activities, BTIG receives examinations, subpoenas, and inquiries from the authoritative organizations that baby-sit its assorted business activities. From January 2014 through December 2019, BTIG has not been circuitous in any complete litigation.

 

BTIG LLC is not affiliated with UNG or USCF. Therefore, neither USCF nor UNG believes that there will be any conflicts of absorption with BTIG, LLC or its trading principals arising from its acting as UNG’s introducing broker.

 

Currently, USCF does not administer commodity trading admiral for trading of UNG contracts. USCF currently does, however, administer SummerHaven Beforehand Management, LLC as a trading adviser for USCI and CPER. If, in the future, USCF does administer article trading admiral for UNG, it will admission each adviser based on arm’s-length negotiations and will accede the advisor’s experience, fees and reputation.

 

Fees of UNG

 

Fees and Advantage Arrangements with USCF and Non-Affiliated Anniversary Providers(1)

 

 

 

 

Advantage to USCF

 

 

Fees are afflicted on a circadian abject (accrued at 1/365 of the applicative allotment of complete net assets on that day) and paid on a anniversary basis. Complete net assets are calculated by demography the accustomed bazaar bulk of UNG’s complete assets and adding any liabilities.

 

Fees and Advantage Arrangements amid UNG and Non-Affiliated Anniversary Providers (4)

 

 

 

New York Mercantile Barter Licensing Fee (5) – 0.015% on all net assets.

 

 

Expenses Paid or Accrued by UNG from Birth through December 31, 2019 in dollar terms:

 

 

 

Expenses Paid or Accrued by UNG from Birth through December 31, 2019 as a Allotment of Boilerplate Circadian Net Assets:

 

 

 

 

Added Fees. UNG additionally pays the fees and costs associated with its assay expenses, tax accounting and advertisement requirements. These fees were approximately $802,400 for the budgetary year assured December 31, 2019. In addition, UNG is amenable for advantageous its allocation of the directors’ and officers’ accountability allowance for UNG and the Accompanying Accessible Funds and the fees and costs of the complete directors who additionally serve as assay lath associates of UNG and the Accompanying Accessible Funds organized as bound partnerships and, as of July 8, 2011, those Accompanying Accessible Funds organized as a alternation of a Delaware accustomed trust. UNG shares the fees and costs on a pro rata abject with anniversary Accompanying Accessible Fund, as declared above, based on the about assets of anniversary armamentarium computed on a daily basis. These fees and costs for the year assured December 31, 2019 were $556,951 for UNG and the Accompanying Accessible Funds. UNG’s allocation of such fees and costs for the year assured December 31, 2019 was $70,739.

 

Anatomy of Shares

 

Registered Form. Shares are issued in registered anatomy in accordance with the LP Agreement. The Ambassador has been appointed abettor and alteration agent for the purpose of appointment shares in certificated form. The Ambassador keeps a almanac of all bound ally and holders of the shares in certificated anatomy in the registry. USCF recognizes transfers of shares in certificated anatomy alone if done in accordance with the LP Agreement. The benign interests in such shares are captivated in book-entry anatomy through participants and/or accountholders in the Depository Affirmation Aggregation (“DTC”).

 

Book Entry. Alone certificates are not issued for the shares. Instead, shares are represented by one or added all-around certificates, which are deposited by the Administrator with DTC and registered in the name of Cede & Co., as appointee for DTC. The all-around certificates affirmation all of the shares outstanding at any time. Shareholders are bound to: (1) participants in DTC such as banks, brokers, dealers and affirmation companies (“DTC Participants”), (2) those who maintain, either anon or indirectly, a careful accord with a DTC Actor (“Indirect Participants”), and (3) those banks, brokers, dealers, affirmation companies and others who ascendancy interests in the shares through DTC Participants or Aberrant Participants, in anniversary case who amuse the requirements for transfers of shares. DTC Participants acting on anniversary of investors captivation shares through such participants’ accounts in DTC will chase the commitment practice applicative to antithesis able for DTC’s Same-Day Funds Acclimation System. Shares are accustomed to DTC Participants’ antithesis accounts afterward accepting of cancellation of payment.

 

DTC. DTC has brash UNG as follows: It is a bound purpose affirmation aggregation organized beneath the laws of the Accompaniment of New York and is a associate of the Federal Reserve System, a “clearing corporation” aural the acceptation of the New York Compatible Bartering Code and a “clearing agency” registered pursuant to the accoutrement of Breadth 17A of the Barter Act. DTC holds antithesis for DTC Participants and facilitates the approval and acclimation of affairs amid DTC Participants through cyberbanking book-entry changes in accounts of DTC Participants.

 

Calculating Per Allotment NAV

 

UNG’s per allotment NAV is calculated by:

 

 

The Ambassador calculates the per share NAV of UNG already anniversary NYSE Arca trading day. The per allotment NAV for a accustomed trading day is appear afterwards 4:00 p.m. New York time. Trading during the bulk trading affair on the NYSE Arca about closes at 4:00 p.m. New York time. The Ambassador uses the NYMEX closing bulk (determined at the beforehand of the abutting of the NYMEX or 2:30 p.m. New York time) for the Futures Contracts traded on the NYMEX, but calculates or determines the bulk of all added UNG investments (including Futures Affairs not traded on the NYMEX, Added Accustomed Gas-Related Investments and Treasuries) appliance bazaar quotations, if available, or added information commonly acclimated to actuate the fair bulk of such investments as of the beforehand of the abutting of the NYSE Arca or 4:00 p.m. New York time, in accordance with the accustomed Authoritative Bureau Acceding amid BBH&Co., UNG and USCF. “Other information” commonly acclimated in chargeless fair bulk includes advice consisting of bazaar abstracts in the accordant bazaar supplied by one or added third parties including, afterwards limitation, accordant rates, prices, yields, crop curves, volatilities, spreads, correlations or added bazaar abstracts in the accordant market; or advice of the types declared aloft from centralized sources if that information is of the aforementioned blazon acclimated by UNG in the accustomed beforehand of its business for the appraisal of agnate transactions. The information may accommodate costs of funding, to the admeasurement costs of allotment are not and would not be a basic of the added advice being utilized. Third parties bartering quotations or bazaar abstracts may include, afterwards limitation, dealers in the accordant markets, end-users of the accordant product, advice vendors, brokers and added sources of bazaar information.

 

 

In addition, in acclimation to accommodate updated advice apropos to UNG for use by investors and bazaar professionals, the NYSE Arca calculates and disseminates throughout the bulk trading affair on anniversary trading day an adapted apocalyptic armamentarium value. The apocalyptic armamentarium bulk is afflicted by using the above-mentioned day’s closing per allotment NAV of UNG as a abject and afterlight that bulk throughout the trading day to reflect changes in the best afresh appear barter bulk for the alive Futures Affairs on the NYMEX. The prices appear for those Futures Arrangement months are adapted based on the above-mentioned day’s beforehand cogwheel amid acclimation ethics for the accordant contract and the atom ages contract. In the blow that the atom ages arrangement is additionally the Criterion Futures Contract, the aftermost bargain price for that arrangement is not adjusted. The apocalyptic armamentarium bulk allotment abject broadcast during NYSE Arca bulk trading affair hours should not be beheld as an complete absolute time amend of the per allotment NAV, because the per allotment NAV is afflicted alone already at the end of anniversary trading day based aloft the accordant end of day ethics of UNG’s investments.

 

The apocalyptic armamentarium bulk is disseminated on a per allotment abject every 15 abnormal during accustomed NYSE Arca bulk trading affair hours of 9:30 a.m. New York time to 4:00 p.m. New York time. The accustomed trading hours of the NYMEX are 9:00 a.m. New York time to 2:30 p.m. New York time. This bureau that there is a gap in time at the alpha and the end of anniversary day during which UNG’s shares are traded on the NYSE Arca, but real-time NYMEX trading prices for Futures Affairs traded on the NYMEX are not available. During such gaps in time, the apocalyptic fund bulk will be afflicted based on the end of day bulk of such Futures Affairs from the NYMEX’s anon above-mentioned trading session. In addition, added Futures Contracts, Added Accustomed Gas-Related Investments and Treasuries captivated by UNG will be valued by the Administrator, appliance ante and credibility accustomed from client-approved third affair vendors (such as Reuters and WM Company) and adviser quotes. These investments will not be included in the apocalyptic armamentarium value.

 

The NYSE Arca disseminates the indicative armamentarium bulk through the accessories of CTA/CQ Aerial Speed Lines. In addition, the apocalyptic armamentarium bulk is appear on the NYSE Arca’s website and is attainable through on-line advice casework such as Bloomberg and Reuters.

 

Dissemination of the apocalyptic armamentarium value provides added advice that is not contrarily attainable to the accessible and is advantageous to investors and bazaar professionals in affiliation with the trading of UNG shares on the NYSE Arca. Investors and bazaar professionals are able throughout the trading day to analyze the bazaar bulk of UNG and the apocalyptic armamentarium value. If the bazaar bulk of UNG shares diverges significantly from the apocalyptic armamentarium value, bazaar professionals will admission an allurement to assassinate arbitrage trades. For example, if UNG appears to be trading at a abatement compared to the apocalyptic armamentarium value, a bazaar able could buy UNG shares on the NYSE Arca and advertise abbreviate Futures Contracts. Such arbitrage trades can bind the tracking amid the bazaar bulk of UNG and the indicative armamentarium bulk and appropriately can be benign to all bazaar participants.

 

Conception and Accretion of Shares

 

UNG creates and redeems shares from time to time, but alone in one or added Conception Baskets or Accretion Baskets. The conception and accretion of baskets are alone fabricated in barter for commitment to UNG or the administering by UNG of the bulk of Treasuries and any banknote represented by the baskets being created or redeemed, the bulk of which is based on the accumulated NAV of the cardinal of shares included in the baskets actuality created or adored bent afterwards 4:00 p.m. New York time on the day the acclimation to actualize or redeem baskets is appropriately received.

 

Accustomed Participants are the alone persons that may abode orders to actualize and redeem baskets. Accustomed Participants allegation be (1) registered broker-dealers or added securities bazaar participants, such as banks and added cyberbanking institutions, that are not adapted to annals as broker-dealers to engage in antithesis affairs as declared below, and (2) DTC Participants. To become an Accustomed Participant, a actuality allegation enter into an Accustomed Actor Acceding with USCF on anniversary of UNG (each such agreement, an “Authorized Actor Agreement”). The Accustomed Actor Acceding provides the procedures for the conception and accretion of baskets and for the commitment of the Treasuries and any banknote adapted for such creations and redemptions. The Accustomed Actor Acceding and the accompanying procedures absorbed thereto may be adapted by UNG, afterwards the accord of any bound accomplice or actor or Accustomed Participant. Authorized Participants pay UNG a $1,000 transaction fee for anniversary acclimation they abode to actualize or redeem one or added baskets. Accustomed Participants who accomplish deposits with UNG in barter for baskets admission no fees, commissions or added anatomy of advantage or attraction of any affectionate from either UNG or USCF, and no such actuality will admission any obligation or albatross to USCF or UNG to aftereffect any sale or resale of shares. As of December 31, 2019, 14 Accustomed Participants had entered into agreements with USCF on anniversary of UNG. During the year assured December 31, 2019, UNG issued 446 Conception Baskets and adored 285 Accretion Baskets.

 

 

Assertive Accustomed Participants are expected to be able of accommodating anon in the concrete accustomed gas bazaar and the accustomed gas futures market. In some cases, Authorized Participants or their affiliates may from time to time buy accustomed gas or advertise accustomed gas or Accustomed Gas Interests and may profit in these instances. USCF believes that the admeasurement and operation of the accustomed gas bazaar accomplish it absurd that an Accustomed Participant’s complete activities in the accustomed gas or antithesis markets will decidedly affect the bulk of accustomed gas, Accustomed Gas Interests, or the bulk of the shares.

 

Anniversary Accustomed Actor is required to be registered as a broker-dealer beneath the Barter Act and is a associate in able continuing with FINRA, or absolved from actuality or contrarily not adapted to be registered as a broker-dealer or a associate of FINRA, and able to act as a abettor or banker in the states or added jurisdictions breadth the attributes of its business so requires. Assertive Accustomed Participants may additionally be regulated beneath federal and accompaniment cyberbanking laws and regulations. Anniversary Accustomed Actor has its own set of rules and procedures, internal controls and advice barriers as it determines is adapted in ablaze of its own authoritative regime.

 

Beneath the Accustomed Actor Agreement, USCF, and UNG beneath bound circumstances, admission agreed to atone the Accustomed Participants adjoin assertive liabilities, including liabilities beneath the Antithesis Act, and to accord to the payments the Accustomed Participants may be adapted to accomplish in anniversary of those liabilities.

 

The afterward description of the procedures for the conception and accretion of baskets is alone a arbitrary and an abettor should accredit to the accordant accoutrement of the LP Acceding and the anatomy of Accustomed Actor Acceding for added detail, anniversary of which is congenital by advertence into this anniversary abode on Anatomy 10-K.

 

Conception Procedures

 

On any business day, an Accustomed Participant may abode an acclimation with the Business Abettor to actualize one or added baskets. For purposes of processing acquirement and accretion orders, a “business day” bureau any day added than a day aback any of the NYSE Arca, the NYMEX or the NYSE is broke for regular trading. Acquirement orders allegation be placed by 12:00 p.m. New York time or the abutting of accustomed trading on the NYSE Arca, whichever is earlier. The day on which the Business Abettor receives a authentic acquirement acclimation is referred to as the acquirement acclimation date.

 

By acceding a acquirement order, an Authorized Actor agrees to drop Treasuries, cash, or a accumulated of Treasuries and cash, as declared below. Above-mentioned to the delivery of baskets for a acquirement order, the Accustomed Actor allegation additionally admission alive to the Babysitter the non-refundable transaction fee due for the acquirement order. Accustomed Participants may not abjure a conception request, except as contrarily set alternating in the procedures in the Accustomed Actor Agreement.

 

The abode by which creations are made is dictated by the acceding of the Accustomed Actor Agreement. By acceding a acquirement order, an Accustomed Actor agrees to (1) drop Treasuries, banknote or a accumulated of Treasuries and banknote with the Custodian, and (2) if adapted by USCF in its sole discretion, admission into or align for a block trade, an barter for concrete or barter for swap, or any added OTC energy transaction (through itself or a appointed able broker) with UNG for the acquirement of a cardinal and blazon of futures contracts at the closing acclimation bulk for such affairs on the acquirement acclimation date. If an Accustomed Actor fails to consummate (1) and (2), the acclimation shall be cancelled. The cardinal and blazon of affairs defined shall be bent by USCF, in its sole discretion, to accommodated UNG’s beforehand cold and shall be purchased as a aftereffect of the Accustomed Participant’s purchase of shares.

 

 

Affirmation of Adapted Deposits

 

The complete drop adapted to actualize each bassinet (“Creation Bassinet Deposit”) is the bulk of Treasuries and/or banknote that is in the aforementioned admeasurement to the total assets of UNG (net of estimated accrued but contributed fees, costs and added liabilities) on the acquirement acclimation date as the number of shares to be created beneath the acquirement acclimation is in admeasurement to the complete cardinal of shares outstanding on the acquirement order dates. USCF determines, anon in its sole acumen or in appointment with the Administrator, the requirements for Treasuries and the bulk of cash, including the best able complete adeptness of a Treasury and accommodation of Treasury and banknote that may be included in deposits to actualize baskets. The Business Abettor will broadcast such requirements at the alpha of anniversary business day. The bulk of banknote drop adapted is the aberration amid the accumulated bazaar bulk of the Treasuries adapted to be included in a Conception Bassinet Drop as of 4:00 p.m. New York time on the date the acclimation to acquirement is appropriately accustomed and the complete adapted deposit.

 

Commitment of Adapted Deposits

 

An Accustomed Actor who places a acquirement acclimation is amenable for appointment to UNG’s anniversary with the Babysitter the adapted bulk of Treasuries and banknote by the end of the added business day afterward the acquirement acclimation date. Aloft cancellation of the drop amount, the Administrator directs DTC to acclaim the cardinal of baskets ordered to the Accustomed Participant’s DTC anniversary on the added business day afterward the acquirement acclimation date. The bulk and blow of commitment and buying of Treasuries until such Treasuries admission been accustomed by the Babysitter on anniversary of UNG shall be borne alone by the Accustomed Participant.

 

Because orders to acquirement baskets must be placed by 12:00 p.m., New York time, but the complete acquittal adapted to actualize a bassinet during the connected alms period will not be bent until afterwards 4:00 p.m. New York time on the date the acquirement acclimation is received, Accustomed Participants will not apperceive the complete bulk of the acquittal adapted to actualize a bassinet at the time they abide an assertive acquirement order for the basket. UNG’s per allotment NAV and the complete bulk of the acquittal adapted to actualize a bassinet could acceleration or abatement substantially amid the time an assertive acquirement acclimation is submitted and the time the bulk of the acquirement bulk in anniversary thereof is determined.

 

Bounce of Acquirement Orders

 

USCF acting by itself or through the Marketing Abettor shall admission the complete adapted but no obligation to adios a acquirement acclimation or a Conception Bassinet Drop if:

 

 

None of USCF, the Business Abettor or the Babysitter will be accountable for the bounce of any acquirement acclimation or Conception Bassinet Deposit.

 

Accretion Procedures

 

The procedures by which an Accustomed Participant can redeem one or added baskets mirror the procedures for the conception of baskets. On any business day, an Accustomed Participant may abode an acclimation with the Business Abettor to redeem one or added baskets. Accretion orders allegation be placed by 12:00 p.m. New York time or the abutting of accustomed trading on the NYSE Arca, whichever is earlier. A accretion acclimation so accustomed will be able on the date it is accustomed in satisfactory anatomy by the Business Abettor (“Redemption Acclimation Date”). The accretion procedures acquiesce Accustomed Participants to redeem baskets and do not baptize an alone actor to redeem any shares in an amount beneath than a Accretion Basket, or to redeem baskets added than through an Accustomed Participant.

 

 

 

 

By acceding a accretion order, an Authorized Actor agrees to bear the baskets to be adored through DTC’s book-entry arrangement to UNG, as declared below. Prior to the commitment of the accretion administering for a accretion order, the Accustomed Actor allegation additionally admission alive to UNG’s anniversary at the Babysitter the non-refundable transaction fee due for the accretion order. An Accustomed Actor may not withdraw a accretion order, except as contrarily set alternating in the procedures in the Accustomed Actor Agreement.

 

The abode by which redemptions are made is dictated by the acceding of the Accustomed Actor Agreement. By acceding a accretion order, an Accustomed Actor agrees to (1) bear the Accretion Bassinet to be adored through DTC’s book-entry arrangement to UNG’s anniversary with the Custodian not afterwards than 3:00 p.m. New York time on the added business day afterward the able date of the accretion acclimation (“Redemption Administering Date”), and (2) if adapted by USCF in its sole discretion, admission into or align for a block trade, an exchange for concrete or barter for swap, or any added OTC activity transaction (through itself or a appointed able broker) with UNG for the bargain of a cardinal and blazon of futures affairs at the closing acclimation bulk for such affairs on the Redemption Acclimation Date. If an Accustomed Actor fails to able (1) and (2) above, the acclimation shall be cancelled. The cardinal and type of affairs defined shall be bent by USCF, in its sole discretion, to accommodated UNG’s beforehand cold and shall be awash as a aftereffect of the Accustomed Participant’s bargain of shares.

 

Affirmation of Accretion Distribution

 

The accretion administering from UNG consists of a alteration to the redeeming Accustomed Actor of an bulk of Treasuries and/or banknote that is in the aforementioned admeasurement to the complete assets of UNG (net of estimated accrued but contributed fees, costs and added liabilities) on the date the acclimation to redeem is appropriately accustomed as the cardinal of shares to be adored beneath the accretion acclimation is in admeasurement to the complete cardinal of shares outstanding on the date the acclimation is received. USCF, anon or in appointment with the Administrator, determines the requirements for Treasuries and the amounts of cash, including the best able complete adeptness of a Treasury, and the accommodation of Treasuries and banknote that may be included in distributions to redeem baskets. The Business Abettor will broadcast an appraisal of the accretion administering per bassinet as of the alpha of anniversary business day.

 

Commitment of Accretion Distribution

 

The accretion administering due from UNG will be delivered to the Accustomed Actor by 3:00 p.m. New York time on the added business day afterward the redemption acclimation date if, by 3:00 p.m. New York time on such added business day, UNG’s DTC anniversary has been accustomed with the baskets to be redeemed. If UNG’s DTC anniversary has not been accustomed with all of the baskets to be adored by such time, the redemption administering will be delivered to the admeasurement of accomplished baskets received. Any butt of the accretion administering will be delivered on the abutting business day to the admeasurement of complete accomplished baskets accustomed if UNG receives the fee applicative to the extension of the accretion administering date which USCF may, from time to time, actuate and the complete baskets to be adored are credited to UNG’s DTC anniversary by 3:00 p.m. New York time on such abutting business day. Any added outstanding bulk of the redemption acclimation shall be cancelled. Pursuant to advice from USCF, the Babysitter will additionally be accustomed to bear the accretion distribution admitting that the baskets to be adored are not accustomed to UNG’s DTC anniversary by 3:00 p.m. New York time on the second business day afterward the accretion acclimation date if the Accustomed Actor has collateralized its obligation to bear the baskets through DTC’s book entry-system on such acceding as USCF may from time to time determine.

 

Abeyance or Bounce of Redemption Orders

 

USCF may, in its discretion, append the adapted of redemption, or adjourn the accretion acclimation date, (1) for any aeon during which the NYSE Arca or the NYMEX is broke added than accustomed weekend or anniversary closings, or trading on the NYSE Arca or the NYMEX is abeyant or restricted, (2) for any aeon during which an emergency exists as a aftereffect of which delivery, auctioning or appraisal of Treasuries is not reasonably practicable, or (3) for such added aeon as USCF determines to be all-important for the aegis of the bound ally or shareholders. For example, USCF may actuate that it is all-important to append redemptions to acquiesce for the alike defalcation of UNG’s assets at an adapted bulk to armamentarium a redemption. If USCF has adversity liquidating its positions, e.g., because of a market disruption blow in the futures markets, a abeyance of trading by the barter breadth the futures affairs are listed or an unanticipated adjournment in the defalcation of a position in an OTC contract, it may be adapted to append redemptions until such time as such affairs are rectified. None of USCF, the Business Agent, the Administrator, or the Babysitter will be accountable to any person or in any way for any blow or amercement that may aftereffect from any such abeyance or postponement.

 

 

Accretion orders allegation be fabricated in whole baskets. USCF will adios a accretion acclimation if the acclimation is not in able anatomy as declared in the Accustomed Actor Agreement or if the accomplishment of the order, in the assessment of its counsel, adeptness be unlawful. USCF may additionally adios a accretion acclimation if the cardinal of shares actuality adored would abate the complete outstanding shares to 100,000 shares (i.e., one basket) or less.

 

Conception and Accretion Transaction Fee

 

To atone UNG for its costs in connection with the conception and accretion of baskets, an Accustomed Actor is adapted to pay UNG a $1,000 transaction fee per order to actualize or redeem baskets, behindhand of the cardinal of baskets in such order. An acclimation may accommodate assorted baskets. The transaction fee may be reduced, added or contrarily afflicted by USCF. USCF shall acquaint DTC of any change in the transaction fee and will not apparatus any admission in the fee for the accretion of baskets until 30 canicule afterwards the date of the notice.

 

Tax Responsibility

 

Accustomed Participants are responsible for any alteration tax, sales or use tax, cast tax, recording tax, bulk added tax or agnate tax or authoritative allegation applicable to the conception or accretion of baskets, behindhand of whether or not such tax or allegation is imposed anon on the Authorized Participant, and accede to atone USCF and UNG if they are adapted by law to pay any such tax, calm with any applicable penalties, additions to tax and absorption thereon.

 

Accessory Bazaar Transactions

 

As noted, UNG creates and redeems shares from time to time, but alone in one or added Conception Baskets or Accretion Baskets. The conception and accretion of baskets are only fabricated in barter for commitment to UNG or the administering by UNG of the bulk of Treasuries and banknote represented by the baskets actuality created or redeemed, the bulk of which will be based on the accumulated NAV of the cardinal of shares included in the baskets actuality created or adored bent on the day the acclimation to actualize or redeem baskets is appropriately received.

 

As discussed above, Accustomed Participants are the alone bodies that may abode orders to actualize and redeem baskets. Accustomed Participants allegation be registered broker-dealers or added antithesis bazaar participants, such as banks and added cyberbanking institutions that are not adapted to annals as broker-dealers to appoint in antithesis transactions. An Accustomed Actor is beneath no obligation to actualize or redeem baskets, and an Authorized Actor is beneath no obligation to activity to the accessible shares of any baskets it does create. Accustomed Participants that do activity to the accessible shares from the baskets they actualize will do so at per-share alms prices that are accustomed to reflect, among added factors, the trading bulk of the shares on the NYSE Arca, the per allotment NAV of UNG at the time the Accustomed Participant purchased the Conception Baskets and the per allotment NAV of the shares at the time of the activity of the shares to the public, the supply of and abode for shares at the time of sale, and the clamminess of the Futures Arrangement bazaar and the bazaar for Added Natural Gas-Related Investments. The prices of shares offered by Accustomed Participants are accustomed to abatement amid UNG’s per share NAV and the trading bulk of the shares on the NYSE Arca at the time of sale. Shares initially absolute the aforementioned bassinet but offered by Accustomed Participants to the accessible at adapted times may admission adapted alms prices. An acclimation for one or added baskets may be placed by an Accustomed Actor on anniversary of assorted clients. Accustomed Participants who accomplish deposits with UNG in barter for baskets admission no fees, commissions or added anatomy of advantage or attraction of any affectionate from either UNG or USCF, and no such actuality has any obligation or albatross to USCF or UNG to aftereffect any bargain or resale of shares. Shares barter in the accessory bazaar on the NYSE Arca. Shares may barter in the accessory bazaar at prices that are lower or college about to their per allotment NAV. The bulk of the abatement or exceptional in the trading bulk about to the per allotment NAV may be influenced by assorted factors, including the cardinal of investors who seek to acquirement or advertise shares in the accessory bazaar and the liquidity of the Futures Affairs bazaar and the bazaar for Added Accustomed Gas-Related Investments. While the shares barter during the core trading affair on the NYSE Arca until 4:00 p.m. New York time, clamminess in the bazaar for Futures Affairs and Added Natural Gas-Related Investments may be bargain afterwards the abutting of the NYMEX at 2:30 p.m. New York time. As a result, during this time, trading spreads, and the consistent exceptional or discount, on the shares may widen.

 

 

Investments

 

USCF causes UNG to alteration the proceeds from the bargain of Conception Baskets to the Babysitter or added babysitter for trading activities. USCF will beforehand UNG’s assets in Futures Affairs and Added Accustomed Gas-Related Investments and investments in Treasuries, banknote and/or banknote equivalents. When UNG purchases a Futures Arrangement and assertive exchange-traded Added Accustomed Gas-Related Investments, UNG is adapted to deposit 5% to 30% with the affairs FCM on anniversary of the barter a allocation of the bulk of the arrangement or added absorption as aegis to ensure acquittal for the obligation beneath Accustomed Gas Interests at maturity. This drop is accustomed as antecedent margin. Counterparties in affairs in OTC Accustomed Gas Interests will about appoint agnate accessory requirements on UNG. USCF will beforehand the assets that abide afterwards allowance and accessory are acquaint in Treasuries, banknote and/or banknote equivalents accountable to these allowance and accessory requirements. USCF has sole ascendancy to actuate the allotment of assets that are:

 

 

Advancing allowance and accessory payments will about be adapted for both exchange-traded and OTC Accustomed Gas Interests based on changes in the bulk of the Natural Gas Interests. Furthermore, advancing accessory requirements with anniversary to OTC Accustomed Gas Interests are adjourned by the parties, and may be afflicted by all-embracing bazaar volatility, animation of the basal article or index, the adeptness of the counterparty to barrier its acknowledgment beneath a Accustomed Gas Absorption and anniversary party’s creditworthiness. In ablaze of the differing requirements for antecedent payments beneath exchange-traded and OTC Accustomed Gas Interests and the clashing attributes of advancing allowance and collateral payments, it is not accessible to appraisal what allocation of UNG’s assets will be acquaint as allowance or accessory at any given time. The Treasuries, banknote and banknote equivalents captivated by UNG will accumulated affluence that will be attainable to accommodated advancing margin and accessory requirements. All absorption assets will be acclimated for UNG’s benefit.

 

An FCM, counterparty, government agency or article barter could admission allowance or accessory requirements applicative to UNG to ascendancy trading positions at any time. Moreover, allowance is alone a aegis drop and has no address on the accumulation or blow abeyant for any positions held.

 

The assets of UNG acquaint as allowance for Futures Affairs are captivated in complete accounts pursuant to the CEA and CFTC regulations.

 

If UNG enters into a bandy agreement, UNG allegation column both accessory and complete amounts to its bandy counterparty(ies). The bulk of accessory UNG posts changes according to the amounts owed by UNG to its counterparty on a accustomed bandy transaction, while complete amounts are anchored amounts posted by UNG at the alpha of a bandy transaction. Accessory and complete amounts acquaint to bandy counterparties will be captivated by a third affair custodian.

 

The Article Absorption Markets

 

General

 

The CEA governs the acclimation of commodity absorption transactions, markets and intermediaries. The CEA provides for capricious degrees of acclimation of article absorption transactions depending upon: (1) the blazon of apparatus actuality traded (e.g., affairs for approaching delivery, forwards, options, swaps or spot contracts), (2) the blazon of article basal the apparatus (distinctions are fabricated amid instruments based on agricultural commodities, activity and metals bolt and cyberbanking commodities), (3) the attributes of the parties to the transaction (e.g., retail or able arrangement participant), (4) whether the transaction is entered into on a principal-to-principal or intermediated basis, (5) the blazon of bazaar on which the transaction occurs, and (6) whether the transaction is accountable to allowance through a allowance organization.

 

The activity and bargain of shares of UNG, as able-bodied as shares of anniversary Accompanying Accessible Fund, is registered beneath the Antithesis Act. UNG and the Accompanying Accessible Funds are subject to the requirements of the Antithesis Act, the Barter Act and the rules and regulations adopted thereunder, as administered by the SEC. Firms’ accord in the administering of shares is adapted as declared above, as able-bodied as by the self-regulatory association, FINRA.

 

 

Futures Contracts

 

A futures arrangement is a connected contract traded on, or accountable to the rules of, an barter that calls for the approaching commitment of a defined abundance and blazon of a commodity at a defined time and place. Futures affairs are traded on a advanced array of commodities, including agronomical products, bonds, banal indices, absorption rates, currencies, activity and metals. The admeasurement and acceding of futures affairs on a authentic commodity are identical and are not accountable to any negotiation, added than with anniversary to bulk and the cardinal of affairs traded between the client and seller.

 

The acknowledged obligations of a buyer or abettor may about be annoyed by demography or authoritative concrete commitment of the basal article or by authoritative an offsetting bargain or acquirement of an identical futures arrangement on the aforementioned or affiliated barter afore the appointed date of delivery. The difference amid the bulk at which the futures arrangement is purchased or awash and the bulk paid for the offsetting bargain or purchase, after allowance for allowance commissions, constitutes the accumulation or blow to the trader. Some futures contracts, such as banal index contracts, accomplish in banknote (reflecting the aberration amid the arrangement purchase/sale bulk and the arrangement acclimation price) rather than by commitment of the basal commodity.

 

In bazaar terminology, a banker who purchases a futures arrangement is connected in the bazaar and a banker who sells a futures arrangement is abbreviate in the market. Afore a banker closes out his connected or abbreviate position by an offsetting bargain or purchase, his outstanding affairs are accustomed as attainable trades or attainable positions. The accumulated bulk of attainable positions captivated by traders in a authentic arrangement is referred to as the attainable absorption in such contract.

 

Advanced Contracts

 

A advanced arrangement is a acknowledged obligation to acquirement or advertise a defined abundance of a article at or afore a defined date in the approaching at a defined bulk and, therefore, is economically agnate to a futures contract. Clashing futures contracts, however, advanced affairs are about traded in the OTC markets and are not connected contracts. Advanced affairs for a accustomed article are about attainable for assorted amounts and maturities and are accountable to alone acceding amid the parties involved. Moreover, about there is no complete means of offsetting or closing out a advanced arrangement by demography an offsetting position as one would a futures arrangement on a U.S. exchange. If a banker desires to abutting out a advanced arrangement position, he about will authorize an adverse position in the contract but will accomplish and admit the accumulation or blow on both positions accompanying on the commitment date. Thus, clashing in the futures arrangement bazaar breadth a banker who has anniversary positions will admit accumulation or blow immediately, in the advanced bazaar a trader with a position that has been anniversary at a accumulation will about not admission such accumulation until the commitment date, and additionally a banker with a position that has been anniversary at a blow will about not admission to pay money until the commitment date. Nevertheless, in some instances advanced affairs now accommodate a adapted of anniversary or banknote acclimation as an accession to authoritative or demography delivery of the basal commodity.

 

In general, the CFTC does not regulate the interbank and advanced adopted bill markets with anniversary to affairs in affairs amid assertive adult counterparties such as UNG or amid assertive adapted institutions and retail investors. Although U.S. banks are adapted in assorted bureau by the Federal Reserve Board, the Comptroller of the Bill and added U.S. federal and accompaniment cyberbanking officials, cyberbanking authorities do not adapt the advanced markets to the aforementioned admeasurement that the bandy markets are adapted by the CFTC and SEC.

 

Acclimation exempts both adopted exchange swaps and adopted barter assiduously from the analogue of “swap” and, by extension, assertive authoritative requirements applicative to swaps (such as allowance and margin). The absolution does not extend to added adopted barter derivatives, such as adopted barter options, bill swaps, and non-deliverable forwards.

 

While the U.S. government does not currently appoint any restrictions on the movements of currencies, it could admission to do so. The artifice or alleviation of barter controls in assorted jurisdictions could decidedly affect the bazaar for that and added jurisdictions’ currencies. Trading in the interbank bazaar additionally exposes UNG to a blow of absence back abortion of a coffer with which UNG had entered into a advanced contract would able aftereffect in a absence and appropriately possibly abundant losses to UNG.

 

 

Options on Futures Contracts

 

Options on futures affairs are standardized affairs traded on an exchange. An advantage on a futures arrangement gives the client of the advantage the right, but not the obligation, to booty a position at a defined bulk (the striking, strike, or exercise price) in the basal futures arrangement or underlying interest. The client of a alarm advantage acquires the right, but not the obligation, to acquirement or booty a connected position in the underlying interest, and the client of a put advantage acquires the right, but not the obligation, to advertise or booty a abbreviate position in the underlying interest.

 

The seller, or writer, of an advantage is answerable to booty a position in the basal absorption at a defined bulk adverse to the advantage client if the advantage is exercised. The abettor of a alarm advantage allegation angle accessible to booty a abbreviate position in the basal absorption at the bang bulk if the buyer should exercise the option. The abettor of a put option, on the added hand, allegation angle accessible to booty a connected position in the underlying absorption at the bang price.

 

A alarm advantage is said to be in-the-money if the bang bulk is beneath accustomed bazaar levels and out-of-the-money if the bang bulk is aloft accustomed bazaar levels. Conversely, a put advantage is said to be in-the-money if the bang bulk is aloft the accustomed bazaar levels and out-of-the-money if the strike bulk is beneath accustomed bazaar levels.

 

Options admission bound activity spans, usually angry to the commitment or acclimation date of the basal interest. Some options, however, expire decidedly in beforehand of such date. The acquirement bulk of an advantage is referred to as its premium, which consists of its built-in bulk (which is accompanying to the basal bazaar value) added its time value. As an advantage nears its cessation date, the time bulk shrinks and the market and built-in ethics move into parity. An advantage that is out-of-the-money and not anniversary by the time it expires becomes worthless. On assertive exchanges, in-the-money options are automatically acclimatized on their cessation date, but on others unexercised options artlessly become abandoned afterwards their cessation date.

 

Behindhand of how abundant the bazaar swings, the best an advantage client can lose is the advantage premium. The advantage client deposits his exceptional with his broker, and the money goes to the advantage seller. Advantage sellers, on the added hand, face risks agnate to participants in the futures markets. For example, back the abettor of a alarm advantage is assigned a abbreviate futures position if the advantage is exercised, his blow is the aforementioned as someone who initially awash a futures contract. Because no one can adumbrate absolutely how the bazaar will move, the advantage abettor typically posts allowance to authenticate his adeptness to accommodated any abeyant acknowledged obligations.

 

Options on Advanced Affairs or Commodities

 

Options on advanced affairs or commodities accomplish in a abode agnate to options on futures contracts. An advantage on a advanced arrangement or article gives the client of the advantage the right, but not the obligation, to booty a position at a defined bulk in the basal advanced arrangement or commodity. However, clashing options on futures contracts, options on advanced affairs or on bolt are alone adjourned contracts amid counterparties and are about traded in the OTC market. Therefore, options on advanced affairs and concrete commodities admission abounding of the aforementioned characteristics of advanced affairs with anniversary to offsetting positions and acclaim blow that are described above.

 

Bandy Contracts

 

Bandy affairs about absorb contracts amid two parties to barter a beck of payments computed by advertence to a abstract bulk and the bulk of the asset that is the accountable of the swap. Bandy affairs are principally traded off-exchange, although assertive bandy affairs are additionally being traded in cyberbanking trading accessories and austere through allowance organizations.

 

Swaps are usually entered into on a net basis, that is, the two acquittal streams are netted out in a banknote acclimation on the acquittal date or dates defined in the agreement, with the parties accepting or paying, as the case may be, alone the net bulk of the two payments. Swaps do not about involve the commitment of basal assets or principal. Accordingly, the blow of blow with anniversary to swaps is about bound to the net bulk of payments that the affair is contractually answerable to make. In some bandy affairs one or both parties may require accessory deposits from the counterparty to abutment that counterparty’s obligation beneath the bandy agreement. If the counterparty to such a bandy defaults, the blow of blow consists of the net bulk of payments that the affair is contractually advantaged to receive beneath any accessory deposits it is holding.

 

 

Some bandy affairs are austere through axial counterparties. “Clearing” refers to the activity by which a barter that is bilaterally accomplished by two parties is submitted to a axial allowance counterparty, via a allowance associate (i.e. an FCM), and replaced by two mirror swaps, with the axial allowance counterparty acceptable the counterparty to both of the antecedent parties to the swap. These transactions, accustomed as austere swaps, absorb two counterparties aboriginal accordant to the acceding of a bandy transaction, again appointment the transaction to a allowance abode that acts as the axial counterparty. Already accustomed by the allowance house, the aboriginal bandy transaction is terminated and replaced by two mirror trades for which the axial counterparty becomes the counterparty to anniversary of the aboriginal parties based aloft the barter acceding bent in the aboriginal transaction. In this abode anniversary alone bandy counterparty reduces its risk of blow due to counterparty abortion because the allowance abode acts as the counterparty to anniversary transaction.

 

Bolt Regulation

 

Futures exchanges in the United States are accountable to capricious degrees of acclimation beneath the CEA depending on whether such barter is a appointed arrangement market, absolved lath of barter or cyberbanking trading facility. Allowance organizations are additionally accountable to the CEA and the rules and regulations adopted thereunder and administered by the CFTC. The CFTC is the authoritative bureau answerable with albatross for regulation of futures exchanges and article absorption trading. The CFTC’s activity is to apparatus the CEA’s objectives of preventing bulk abetment and boundless belief and announcement alike and able article absorption markets. In addition, the various exchanges and allowance organizations themselves exercise authoritative and authoritative ascendancy over their associate firms.

 

The CFTC additionally regulates the activities of “commodity trading advisors” and “commodity basin operators” and the CFTC has adopted regulations with anniversary to assertive of such persons’ activities. Pursuant to its authority, the CFTC requires a CPO, such as USCF, to keep accurate, accustomed and alike annal with anniversary to anniversary basin it operates. The CFTC may suspend, adapt or abolish the registration of any apprentice for abortion to accede with CFTC rules or regulations. Suspension, brake or abortion of USCF’s allotment as a CPO would anticipate it, until such time (if any) as such allotment were to be reinstated, from managing, and adeptness aftereffect in the abortion of, UNG or the Accompanying Accessible Funds.

 

Beneath assertive circumstances, the CEA grants shareholders the adapted to convention a reparations proceeding afore the CFTC adjoin USCF (as a registered article basin operator), as able-bodied as those of their agnate advisers who are adapted to be registered beneath the CEA. Shareholders may additionally be able to beforehand a clandestine adapted of activity for assertive violations of the CEA.

 

Pursuant to ascendancy in the CEA, the NFA has been formed and registered with the CFTC as a registered futures association. The NFA is the alone self-regulatory association for bolt professionals added than the exchanges. As such, the NFA promulgates rules administering the conduct of article professionals and disciplines those professionals that do not accede with such standards. The CFTC has delegated to the NFA albatross for the allotment of article basin operators. USCF is a associate of the NFA. As a associate of the NFA, USCF is accountable to NFA standards apropos to fair barter practices, cyberbanking condition, and chump protection.

 

The CEA requires all FCMs, i.e. UNG’s allowance brokers, to accommodated and beforehand defined fettle and cyberbanking requirements, to admission chump funds from proprietary funds and anniversary alone for all customers’ funds and positions, and to beforehand defined books and annal attainable to assay by the agents of the CFTC. The CFTC has agnate ascendancy over introducing brokers, or bodies who accost or accept orders for article absorption trades but who do not admission allowance deposits for the beheading of trades. The CEA authorizes the CFTC to adapt trading by FCMs and by their admiral and directors, permits the CFTC to crave activity by exchanges in the event of bazaar emergencies, and establishes an authoritative activity beneath which barter may convention complaints for amercement arising from declared violations of the CEA.

 

The regulations of the CFTC and the NFA prohibit any representation by a actuality registered with the CFTC or by any associate of the NFA, that allotment with the CFTC, or associates in the NFA, in any anniversary indicates that the CFTC or the NFA, as the case may be, has accustomed or accustomed that actuality or that person’s trading affairs or objectives. The registrations and memberships of the parties declared in this arbitrary allegation not be advised as basic any such approval or endorsement. Likewise, no futures barter has accustomed or will accord any agnate approval or endorsement.

 

 

CFTC regulations crave added customer protections, blow administering programs, centralized ecology and controls, basic and clamminess standards, chump disclosures and auditing and assay programs for FCMs. These regulations are brash to allow greater assurances to bazaar participants that chump complete funds and anchored amounts are protected, barter are provided with adapted apprehension of the risks of futures trading and of the FCMs with which they may admission to do business, FCMs are ecology and managing risks in a able-bodied manner, the basic and clamminess of FCMs are able to aegis the connected operations, and the auditing and assay programs of the CFTC and the self-regulatory organizations are ecology the activities of FCMs in a absolute manner.

 

UNG’s investors are afforded prescribed rights for reparations beneath the CEA adjoin USCF (as a registered article basin operator), as able-bodied as its agnate employees who are adapted to be registered beneath the CEA. Investors may additionally be able to beforehand a clandestine adapted of activity for violations of the CEA. The CFTC has adopted rules implementing the acclimation accoutrement of the CEA, which accommodate that any actuality may file a complaint for a reparations accolade with the CFTC for abuse of the CEA adjoin a attic abettor or an FCM, introducing broker, article trading advisor, CPO, and their agnate associated persons.

 

The acclimation of article absorption trading in the United States and added countries is an evolving breadth of the law. Beneath are discussed several key authoritative items that are accordant to UNG. The assorted statements fabricated in this arbitrary are accountable to modification by aldermanic activity and changes in the rules and regulations of the CFTC, the NFA, the futures exchanges, allowance organizations and added authoritative bodies. In addition, with absorption to any added rules that the CFTC or SEC may admission in the future, the aftereffect of any such authoritative changes on UNG is absurd to predict, but it could be abundant and adverse.

 

Futures Affairs and Position Limits

 

The CFTC is about banned by statute from acclimation trading on non-U.S. futures exchanges and markets. The CFTC, however, has adopted regulations apropos to the marketing of non-U.S. futures affairs in the United States. These regulations admittance assertive affairs on non-U.S. exchanges to be offered and awash in the United States.

 

As discussed above, the CFTC has proposed to admission banned on abstract positions in 25 concrete article futures and advantage affairs as able-bodied as swaps that are economically agnate to such affairs in the agriculture, activity and metals markets. The Position Complete Rules would, amid added things: analyze which affairs are accountable to abstract position limits; set thresholds that bind the admeasurement of abstract positions that a actuality may ascendancy in the atom month, added alone months, and all months combined; actualize an absolution for positions that accumulated bona fide ambiguity transactions; appoint responsibilities on DCMs and SEFs to authorize position banned or, in some cases, position accountability rules; and administer to both futures and swaps aloft four accordant venues: OTC, DCMs, SEFs as able-bodied as certain non-U.S. amid platforms. The CFTC’s aboriginal attack at finalizing the Position Complete Rules, in 2011, was auspiciously challenged by bazaar participants in 2012 and, back then, the CFTC has re-proposed them and solicited comments from bazaar participants multiple times. At this time, it is cryptic how the Position Complete Rules may affect UNG, but the aftereffect may be abundant and adverse. By way of example, the Position Complete Rules may abnormally appulse the adeptness of UNG to accommodated its beforehand objectives through banned that may arrest USCF’s adeptness to advertise added Conception Baskets of UNG. See “The Article Absorption Markets-Commodities Regulation” in this anniversary abode on Anatomy 10-K for added information.

 

Until such time as the Position Complete Rules are adopted, the authoritative architectonics in aftereffect above-mentioned to the accepting of the Position Complete Rules will administer affairs in bolt and accompanying derivatives. Beneath that system, the CFTC enforces federal banned on belief in nine agronomical products (e.g., corn, aureate and soy), while futures exchanges authorize and accomplish position banned and accountability levels for other agronomical products and assertive activity articles (e.g., oil and accustomed gas). As a result, UNG may be bound with respect to the admeasurement of its investments in any bolt accountable to these limits.

 

Beneath complete and afresh adopted CFTC regulations, for the purpose of position limits, a bazaar actor is about required, accountable to assertive attenuated exceptions, to accumulated all positions for which that actor controls the trading decisions with all positions for which that participant has a 10 percent or greater buying absorption in an anniversary or position, as able-bodied as the positions of two or added bodies acting pursuant to an authentic or adumbrated acceding or compassionate with that participant. The Aggregation Rules will additionally administer with anniversary to the Position Complete Rules if and aback such Position Complete Rules are adopted.

 

 

Allowance Requirements

 

Futures and Austere Swaps

 

Aboriginal or antecedent allowance is the minimum bulk of funds that allegation be deposited by a article absorption banker with the trader’s abettor to admit and beforehand an attainable position in futures contracts. Aliment allowance is the bulk (generally beneath than the aboriginal margin) to which a trader’s anniversary may abatement afore he allegation bear added margin. A allowance drop is like a banknote achievement bond. It helps assure the trader’s achievement of the futures affairs that he or she purchases or sells.

 

Futures affairs are commonly bought and awash on antecedent allowance that represents a absolute baby allotment (ranging advancement from 5%) of the accumulated acquirement or sales bulk of the contract. Because of such low allowance requirements, bulk fluctuations occurring in the futures markets may create profits and losses that, in affiliation to the bulk invested, are greater than are accustomed in added forms of beforehand or speculation. As discussed below, adverse bulk changes in the futures arrangement may aftereffect in allowance requirements that abundantly beat the initial margin. In addition, the bulk of allowance adapted in affiliation with a authentic futures arrangement is set from time to time by the barter on which the arrangement is traded and may be adapted from time to time by the barter during the appellation of the contract.

 

Allowance firms, such as UNG’s clearing brokers, accustomed accounts for traders in article absorption affairs may not admission lower, and about crave higher, amounts of allowance as a bulk of activity to added assure themselves. The allowance brokers crave UNG to accomplish allowance deposits according to barter minimum levels for all article absorption contracts. This affirmation may be adapted from time to time in the clearing brokers’ discretion.

 

Allowance requirements are computed anniversary day by the accordant allowance alignment and a trader’s allowance broker. Aback the bazaar bulk of a authentic attainable commodity absorption position changes to a point breadth the allowance on drop does not amuse aliment allowance requirements, a allowance call is fabricated by the broker. With anniversary to trading by UNG, UNG (and not its investors personally) is accountable to allowance calls.

 

Finally, abounding aloft U.S. exchanges have anesthetized assertive cantankerous margining arrange involving procedures pursuant to which the futures and options positions captivated in an anniversary would, in the case of some accounts, be aggregated and allowance requirements would be adjourned on a portfolio basis, measuring the complete blow of the accumulated positions.

 

Options

 

Aback a banker purchases an option, there is no allowance requirement; however, the advantage exceptional allegation be paid in full. Aback a banker sells an option, on the added hand, he or she may be adapted to drop allowance in an bulk bent by the allowance requirements accustomed for the basal interest and, in addition, an bulk essentially according to the accustomed exceptional for the option. The allowance requirements imposed on the selling of options, although adapted to reflect the anticipation that out-of-the-money options will not be exercised, can in actuality be higher than those imposed in ambidextrous in the futures markets directly. Complicated allowance requirements administer to spreads and conversions, which are circuitous trading strategies in which a banker acquires a admixture of options positions and positions in the underlying interest.

 

OTC Swaps

 

In October 2015, the Appointment of the Comptroller of the Currency, the Lath of Governors of the Federal Reserve System, the FDIC, the Farm Acclaim Administration, and the Federal Housing Finance Bureau (each an “Agency” and, collectively, the “Agencies”) appropriately adopted final rules to authorize minimum allowance and basic requirements for registered bandy dealers, aloft bandy participants, security-based swap dealers, and aloft security-based bandy participants (“Swap Entities”) that are accountable to the administering of one of the Agencies (such entities, “Covered Bandy Entities”, and the collective final rules, the “Final Allowance Rules”).

 

 

The Final Allowance Rules will accountable non-cleared swaps and non-cleared security-based swaps amid Covered Bandy Entities and Bandy Entities, and amid Covered Bandy Entities and cyberbanking end users that admission complete swaps acknowledgment (i.e., an boilerplate circadian accumulated abstract of $8 billion or added in non-cleared swaps afflicted in accordance with the Final Allowance Rules), to a binding two-way minimum antecedent allowance requirement. The minimum bulk of the antecedent allowance adapted to be acquaint or calm would be either the bulk afflicted by the Covered Bandy Entity appliance a connected agenda set alternating as an addendum to the Final Allowance Rules, which provides the gross antecedent allowance (as a allotment of complete abstract exposure) for assertive asset classes, or an centralized allowance archetypal of the Covered Bandy Entity conforming to the requirements of the Final Allowance Rules that is accustomed by the Bureau accepting administering over the authentic Covered Swap Entity. The Final Allowance Rules specify the types of accessory that may be acquaint or calm as antecedent allowance for non-cleared swaps and non-cleared security-based swaps with cyberbanking end users (generally cash, assertive government, government-sponsored enterprise securities, assertive aqueous debt, assertive disinterestedness securities, assertive able about traded debt, and gold); and sets alternating haircuts for assertive accessory asset classes.

 

The Final Allowance Rules crave minimum aberration allowance to be exchanged circadian for non-cleared swaps and non-cleared security-based swaps amid Covered Bandy Entities and Bandy Entities and amid Covered Bandy Entities and all cyberbanking end-users (without absorption to the swaps acknowledgment of the particular cyberbanking end-user). The minimum aberration allowance bulk is the circadian mark-to-market change in the bulk of the bandy to the Covered Bandy Entity, demography into anniversary aberration allowance advanced acquaint or collected. For non-cleared swaps and security-based swaps amid Covered Bandy Entities and cyberbanking end-users, aberration allowance may be acquaint or calm in banknote or non-cash collateral that is advised able for antecedent allowance purposes. Aberration allowance is not accountable to allegory with an independent, third-party custodian, and may, if able by contract, be rehypothecated.

 

The antecedent allowance requirements of the Final Allowance Rules are actuality phased in over time, and the aberration allowance requirements of the Final Allowance Rules are currently in effect. UNG is not a Covered Bandy Entity beneath the Final Allowance Rules but it is a cyberbanking end-user. Accordingly, UNG is currently accountable to the aberration allowance requirements of the Final Allowance Rules. However, UNG does not admission complete swaps acknowledgment and, accordingly, UNG will not be accountable to the antecedent allowance requirements of the Final Allowance Rules.

 

The Dodd-Frank Wall Street Ameliorate and Consumer Aegis Act (the “Dodd-Frank Act”) adapted the CFTC and the SEC to admission their own allowance rules to administer to a limited cardinal of registered bandy dealers, security-based bandy dealers, aloft bandy participants, and aloft security-based bandy participants that are not accountable to the administering of one of the Agencies. On December 16, 2015 the CFTC accomplished its allowance rules, which are essentially the aforementioned as the Final Allowance Rules and admission the aforementioned accomplishing timeline. The SEC adopted allowance rules for security-based bandy dealers and aloft security-based bandy participants on June 21, 2019. The SEC’s allowance rules are generally accumbent with the Final Allowance Rules and the CFTC’s allowance rules, but they adapt in a few key respects apropos to timing for acquiescence and the abode in which antecedent allowance allegation be segregated. UNG does not currently appoint in security-based swap affairs and, therefore, the SEC’s allowance rules are not accustomed to administer to UNG.

 

Binding Trading and Allowance of Swaps

 

CFTC regulations crave that assertive swap affairs be accomplished on organized exchanges or “swap beheading facilities” and austere through adapted clearing organizations (“derivative allowance organizations” (“DCOs”)), if the CFTC mandates the axial clearing of a authentic chic of bandy and such bandy is “made attainable to trade” on a bandy beheading facility. Currently, swap dealers, aloft bandy participants, article pools, assertive clandestine funds and entities predominantly affianced in activities that are cyberbanking in attributes are adapted to assassinate on a bandy beheading facility, and clear, assertive absorption bulk swaps and index-based acclaim absence swaps. As a result, if UNG enters into an absorption bulk or index-based acclaim absence bandy that is accountable to these requirements, such bandy will be adapted to be accomplished on a bandy beheading adeptness and centrally cleared. Binding clearing and “made attainable to trade” determinations with anniversary to added types of swaps are accustomed in the future, and, aback finalized, could crave UNG to electronically assassinate and centrally bright assertive OTC instruments anon entered into and acclimatized on a bi-lateral basis. If a bandy is adapted to be cleared, antecedent and aberration allowance requirements are set by the accordant allowance organization, accountable to assertive authoritative requirements and guidelines. Added allowance may be required and captivated by UNG’s FCM.

 

 

Added Requirements for Swaps

 

In accession to the allowance requirements declared above, swaps that are not adapted to be austere and accomplished on a SEF but that are accomplished bilaterally are additionally subject to assorted requirements pursuant to CFTC regulations, including, amid added things, advertisement and recordkeeping requirements and, depending on the cachet of the counterparties, trading affidavit requirements and altercation resolution requirements.

 

Derivatives Regulations in Non-U.S. Jurisdictions

 

In accession to U.S. laws and regulations, UNG may be accountable to non-U.S. derivatives laws and regulations if it engages in futures and/or bandy affairs with non-U.S. persons. For example, UNG may be impacted by European laws and regulations to the admeasurement that it engages in futures affairs on European exchanges or derivatives affairs with European entities. Added jurisdictions appoint requirements applicative to futures and derivatives that are agnate to those imposed by the U.S., including position limits, margin, allowance and barter execution requirements.

 

SEC Reports

 

UNG makes available, chargeless of charge, on its website, its anniversary letters on Anatomy 10-K, its anniversary letters on Anatomy 10-Q, its accustomed letters on Anatomy 8-K and amendments to these letters filed or furnished pursuant to Breadth 13(a) or 15(d) of the Barter Act as anon as analytic accessible after these forms are filed with, or furnished to, the SEC. These letters are additionally attainable from the SEC through its website at: www.sec.gov.

 

CFTC Reports

 

UNG additionally makes attainable its anniversary reports and its anniversary letters adapted to be able and filed with the NFA beneath the CFTC regulations.

 

Bookish Property

 

USCF owns cast registrations for UNITED STATES NATURAL GAS FUND (U.S. Reg. No. 3407494) for “Fund beforehand casework in the acreage of accustomed gas Futures Contracts, cash-settled options on accustomed gas Futures Contracts, advanced affairs for accustomed gas, over-the-counter affairs based on the bulk of accustomed gas, and indices based on the foregoing,” in use back April 18, 2007, and UNG UNITED STATES NATURAL GAS FUND, LP (and Flame Design) (U.S. Reg. No. 4343873) for “Financial beforehand casework in the acreage of accustomed gas Futures Contracts, cash-settled options on accustomed gas Futures Contracts, advanced affairs for accustomed gas, over-the-counter transactions based on the bulk of accustomed gas, and indices based on the foregoing,” in use back September 30, 2012. USCF relies upon these trademarks through which it markets its casework and strives to body and beforehand cast acceptance in the bazaar and among accustomed and abeyant investors. So connected as USCF continues to use these trademarks to analyze its services, afterwards challenge from any third party, and appropriately maintains and renews the cast registrations beneath applicative laws, rules and regulations, it will abide to admission broad aegis for these trademarks beneath accustomed laws, rules and regulations.

 

USCF owns cast registrations for USCF (and Design) (U.S. Reg. No. 5127374) for “Fund beforehand services,” in use back April 10, 2016, USCF (U.S. Reg No. 5040755) for “Fund beforehand services,” in use back June 24, 2008, and INVEST IN WHAT’S REAL (U.S. Reg. No. 5450808) for “Fund beforehand services,” in use back April 2016. USCF relies aloft these trademarks and anniversary mark through which it markets its casework and strives to body and beforehand cast acceptance in the bazaar and amid accustomed and potential investors. So connected as USCF continues to use these trademarks to analyze its services, afterwards claiming from any third party, and appropriately maintains and renews the cast registrations beneath applicative laws, rules and regulations; it will abide to admission broad aegis for these trademarks beneath accustomed laws, rules and regulations. USCF has been accustomed two patents Nos. 7,739,186 and 8,019,675, for systems and methods for an barter traded armamentarium (ETF) that advance the bulk of one or added commodities.

 

Item 1A. Blow Factors.

 

The afterward blow factors should be apprehend in affiliation with the added advice included in this anniversary abode on Anatomy 10-K, including Management’s Discussion and Assay of Cyberbanking Activity and After-effects of Operations and UNG’s cyberbanking statements and the accompanying notes.

 

UNG’s beforehand cold is for the circadian allotment changes in the NAV per allotment to reflect the circadian allotment changes of the bulk of accustomed gas delivered at the Henry Hub, Louisiana, as abstinent by the circadian changes in the bulk of the Criterion Futures Contract, added absorption earned on UNG’s accessory holdings, beneath UNG’s expenses. UNG seeks to accomplish its beforehand cold by beforehand so that the boilerplate circadian allotment change in UNG’s NAV for any aeon of 30 alternating appraisal canicule will be aural plus/minus ten percent (10%) of the boilerplate circadian allotment change in the bulk of the Criterion Futures Arrangement over the aforementioned period. UNG’s beforehand activity is brash to accommodate investors with a cost-effective way to beforehand alongside in accustomed gas and to hedge adjoin movements in the atom bulk of accustomed gas. An beforehand in UNG involves beforehand blow agnate to a complete investment in Futures Affairs and Added Accustomed Gas-Related Investments, and alternation risk, or the blow that investors purchasing shares to barrier adjoin movements in the bulk of accustomed gas will admission an able barrier alone if the bulk they pay for their shares carefully correlates with the bulk of accustomed gas. In accession to beforehand blow and alternation risk, an beforehand in UNG involves tax risks, OTC risks and added risks.

 

Beforehand Risk

 

The NAV of UNG’s shares relates anon to the bulk of the Criterion Futures Affairs and added assets captivated by UNG and fluctuations in the prices of these assets could materially abnormally affect an beforehand in UNG’s shares.

 

The net assets of UNG abide primarily of investments in Futures Affairs and, to a bottom extent, in Added Accustomed Gas-Related Investments. The NAV of UNG’s shares relates anon to the bulk of these assets (less liabilities, including accrued but contributed expenses), which in about-face relates to the bulk of accustomed gas in the marketplace. Accustomed gas prices depend on local, bounded and all-around contest or altitude that affect accumulation and abode for accustomed gas.

 

Bread-and-butter conditions impacting accustomed gas. The abode for accustomed gas correlates carefully with accustomed bread-and-butter advance rates. The occurrence of recessions or added periods of low or abrogating bread-and-butter advance will about admission a complete adverse appulse on accustomed gas demand and appropriately may admission an adverse appulse on accustomed gas prices.

 

Added natural gas demand-related factors. Added factors that may affect the abode for accustomed gas and appropriately its price, accommodate technological improvements in activity efficiency; melancholia acclimate patterns, which affect the abode for accustomed gas associated with heating and cooling; added competitiveness of accession activity sources that admission so far about not been aggressive with accustomed gas afterwards the anniversary of government subsidies or mandates; and changes in technology or chump preferences that adapt ammunition choices, such as adjoin accession fueled vehicles.

 

Added natural gas supply-related factors. Accustomed gas prices additionally adapt depending on a cardinal of factors affecting supply. For example, added accumulation from the development of new accustomed gas sources and technologies to enhance accretion from complete sources tends to abate accustomed gas prices to the admeasurement such accumulation increases are not anniversary by able advance in demand. Similarly, increases in industry adorning or accomplishment accommodation may appulse the accumulation of accustomed gas. Accustomed gas accumulation levels can additionally be affected by factors that abate attainable supplies, such as accustomed disasters, disruptions in competitors’ operations, or unexpected dearth of administering channels that may agitate supplies. Technological change can additionally adapt the about costs for companies in the accustomed gas industry to find, produce, and carriage accustomed gas, which in turn, may affect the accumulation of and abode for accustomed gas.

 

Added factors impacting the accustomed gas market. The accumulation of and abode for accustomed gas may additionally be impacted by changes in interest rates, inflation, and added bounded or bounded bazaar conditions, as able-bodied as by the development of accession activity sources.

 

Bulk Volatility May Possibly Anniversary the Complete Blow of Your Investment. Futures affairs admission a aerial bulk of bulk airheadedness and are accountable to casual accelerated and abundant changes. Consequently, you could lose all or essentially all of your beforehand in UNG.

 

Changes to U.S. assessment and import/export regulations may admission a abrogating aftereffect on UNG’s developments.

 

There has been advancing altercation and commentary apropos abeyant cogent changes to U.S. barter policies, treaties and tariffs. The accustomed U.S. presidential administration, alternating with the U.S. Congress, has created cogent ambiguity about the approaching accord amid the United States and other countries with anniversary to barter policies, treaties and tariffs. These developments, or the acumen that any of them could occur, may admission a complete adverse aftereffect on all-around bread-and-butter altitude and the adherence of all-around awkward oil, generally. Any of these factors could abase bread-and-butter activity and could admission a complete adverse aftereffect on UNG’s business, cyberbanking activity and after-effects of operations, which in about-face would abnormally appulse UNG and its shareholders.

 

 

Ambiguity about presidential administration initiatives could abnormally appulse UNG’s business, cyberbanking activity and after-effects of operations.

 

The accustomed presidential administration has declared for cogent changes to U.S. trade, healthcare, immigration, adopted and government authoritative policy. Accordingly, there is cogent ambiguity with anniversary to legislation, acclimation and government activity at the federal level, as able-bodied as the accompaniment and bounded levels. Recent contest admission created astute ambiguity and alien new and difficult-to-quantify macroeconomic and political risks. There has been a agnate admission in the ambiguity surrounding absorption rates, inflation, foreign barter rates, barter volumes and budgetary and budgetary policy. To the admeasurement the U.S. Congress or the accustomed presidential administration accouterments changes to U.S. policy, those changes may impact, amid added things, the U.S. and all-around economy, all-embracing trade and relations, unemployment, immigration, accumulated taxes, healthcare, the U.S. authoritative environment, inflation, accumulation and demand for bolt (including awkward oil), and added areas. Although UNG cannot adumbrate the impact, if any, of these changes to UNG’s business, they could abnormally affect UNG’s business, cyberbanking condition, operating after-effects and banknote flows.

 

Bread-and-butter impacts due to Brexit.

 

In June 2016, the United Kingdom held a acclamation in which voters accustomed an avenue from the European Union (“Brexit”) and, afterward the Abode of Commons accepting anesthetized a Brexit accord on December 20, 2019, the U.K. formally larboard the European Union on January 31, 2020. The U.K. is currently in a alteration aeon until December 31, 2020, aback agreements surrounding barter and added aspects of the U.K.’s future accord with the European Union will charge to be finalized. Until such agreements are finalized, there will be political and bread-and-butter ambiguity in the United Kingdom and the European Union. In addition, the budgetary and budgetary behavior of adopted nations, such as Russia and China, may admission a astringent appulse on the accepted and U.S. article markets. Such disruptions could adversely appulse the bulk of UNG’s investments.

 

Because USCF anticipates it will “roll” UNG’s positions in Accustomed Gas Interests, it may be accountable to the abeyant abrogating appulse from rolling futures positions.

 

USCF anticipates it will “roll” UNG’s positions in Accustomed Gas Interests and, as a result, is accountable to risks accompanying to rolling. The acknowledged obligations of a client or abettor captivation a futures arrangement to cessation may about be annoyed by allowance in banknote as appointed in the arrangement specifications. Alternatively, futures affairs may be broke out above-mentioned to cessation by authoritative an offsetting bargain or acquirement of an identical futures arrangement on the aforementioned or affiliated barter afore the appointed date of settlement. Already this date is reached, the futures arrangement “expires.” As the futures affairs captivated by UNG abreast expiration, they are generally broke out and replaced by affairs with a afterwards expiration. This activity is referred to as “rolling.” UNG does not intend to ascendancy futures affairs through expiration, but instead to “roll” its positions.

 

Aback the bazaar for these affairs is such that the prices are college in the added abroad commitment months than in the nearer commitment months, the bargain during the course of the “rolling process” of the added adjacent arrangement would booty abode at a bulk that is lower than the bulk of the added abroad contract. This arrangement of college futures prices for best cessation futures affairs is about referred to as “contango.” Alternatively, aback the bazaar for these affairs is such that the prices are college in the nearer months than in the added distant months, the bargain during the beforehand of the “rolling process” of the added adjacent arrangement would booty abode at a price that is college than the bulk of the added abroad contract. This arrangement of college futures prices for beneath cessation futures affairs is referred to as “backwardation.”

 

The attendance of contango in assertive futures affairs at the time of rolling would be accustomed to abnormally affect UNG’s connected positions, and absolutely affect UNG’s abbreviate positions. Similarly, the attendance of backwardation in assertive futures affairs at the time of rolling such affairs would be accustomed to abnormally affect UNG’s abbreviate positions and absolutely affect UNG’s connected positions.

 

There admission been continued periods in which contango or backwardation has existed in the futures arrangement markets for assorted types of futures contracts, and such periods can be accustomed to activity in the future. These continued periods admission in the accomplished and can in the approaching anniversary cogent losses for UNG, and the periods can admission as abundant or added appulse over time than movements in the akin of UNG’s Criterion Futures Contract.

 

An beforehand in UNG may provide little or no about-face benefits. Thus, in a crumbling market, UNG may admission no assets to anniversary losses from added investments, and an abettor may ache losses on an beforehand in UNG while incurring losses with anniversary to added asset classes.

 

Historically, Futures Affairs and Other Accustomed Gas-Related Investments admission about been non-correlated to the achievement of added asset classes such as stocks and bonds. Non-correlation bureau that there is a low statistically authentic accord amid the achievement of futures and other article absorption transactions, on the one hand, and stocks or bonds, on the added hand.

 

 

However, there can be no affirmation that such non-correlation will abide during approaching periods. If, adverse to celebrated patterns, UNG’s achievement were to move in the aforementioned accustomed administration as the cyberbanking markets, investors will admission little or no about-face allowances from an investment in UNG’s shares. In such a case, UNG may admission no assets to anniversary losses from added investments, and investors may suffer losses on their beforehand in UNG at the aforementioned time they admission losses with anniversary to added investments.

 

Variables such as drought, floods, weather, embargoes, tariffs and added political contest may admission a aloft appulse on accustomed gas prices and accustomed gas-linked instruments, including Futures Affairs and Added Accustomed Gas-Related Investments, than on able securities. These added variables may actualize added beforehand risks that accountable UNG’s investments to greater animation than investments in able securities.

 

Non-correlation should not be confused with abrogating correlation, breadth the achievement of two asset classes would be adverse of anniversary other. There is no absolute evidence that the atom bulk of accustomed gas and prices of added cyberbanking assets, such as stocks and bonds, are abnormally correlated. In the absence of abrogating correlation, UNG cannot be accustomed to be automatically assisting during abortive periods for the stock market, or carnality versa.

 

Absolute achievement of UNG and the Criterion Futures Arrangement is not apocalyptic of approaching performance.

 

Accomplished achievement of UNG or the Benchmark Futures Arrangement is not necessarily apocalyptic of approaching results. Therefore, accomplished achievement of UNG or the Criterion Futures Contract should not be relied aloft in chief whether to buy shares of UNG.

 

Alternation Risk

 

Investors purchasing shares to barrier against movements in the bulk of accustomed gas will admission an able barrier alone if the bulk they pay for their shares carefully correlates with the bulk of accustomed gas. Beforehand in UNG’s shares for ambiguity purposes involves the afterward risks:

 

 

The bazaar bulk at which investors buy or advertise shares may be decidedly beneath or added than NAV.

 

UNG’s NAV per allotment will change throughout the day as fluctuations activity in the bazaar bulk of UNG’s portfolio investments. The accessible trading bulk at which an investor buys or sells shares during the day from their abettor may be adapted from the NAV of the shares. Bulk differences may relate primarily to accumulation and abode armament at assignment in the accessory trading bazaar for shares that are carefully accompanying to, but not identical to, the aforementioned armament influencing the prices of the accustomed gas and the Criterion Futures Arrangement at any point in time. USCF expects that corruption of assertive arbitrage opportunities by Accustomed Participants and their audience and barter will tend to cause the accessible trading bulk to clue NAV per allotment carefully over time, but there can be no affirmation of that.

 

The NAV of UNG’s shares may also be afflicted by non-concurrent trading hours amid the NYSE Arca and the assorted futures exchanges on which accustomed gas is traded. While the shares barter on the NYSE Arca from 9:30 a.m. to 4:00 p.m. Eastern Time, the trading hours for the futures exchanges on which accustomed gas trades may not necessarily accompany during all of this time. For example, while the shares barter on the NYSE Arca until 4:00 p.m. Eastern Time, clamminess in the accustomed gas bazaar will be bargain afterwards the abutting of the NYMEX at 2:30 p.m. Eastern Time. As a result, during periods aback the NYSE Arca is attainable and the futures exchanges on which accustomed gas is traded are closed, trading spreads and the consistent exceptional or abatement on the shares may widen and, therefore, admission the aberration between the bulk of the shares and the NAV of the shares.

 

Circadian allotment changes in UNG’s NAV may not associate with circadian allotment changes in the bulk of the Criterion Futures Contract.

 

It is accessible that the circadian percentage changes in UNG’s NAV per allotment may not carefully associate to circadian allotment changes in the bulk of the Criterion Futures Contract. Non-correlation may be attributable to disruptions in the bazaar for accustomed gas, the artifice of position or accountability banned by regulators or exchanges, or added amazing circumstances. As UNG approaches or alcove position banned with respect to the Criterion Futures Arrangement and added Futures Affairs or in appearance of bazaar conditions, UNG may activate beforehand in Other Accustomed Gas-Related Investments. In addition, UNG is not able to carbon absolutely the changes in the bulk of the Criterion Futures Arrangement because the complete acknowledgment generated by UNG is bargain by costs and transaction costs, including those incurred in connection with UNG’s trading activities, and added by absorption assets from UNG’s backing of Treasury securities. Tracking the Criterion Futures Arrangement requires trading of UNG’s portfolio with a appearance to tracking the Criterion Futures Contract over time and is abased aloft the abilities of USCF and its trading principals, amid added factors.

 

Circadian allotment changes in the price of the Criterion Futures Arrangement may not associate with circadian allotment changes in the atom bulk of accustomed gas.

 

The alternation amid changes in prices of the Criterion Futures Arrangement and the atom bulk of accustomed gas may at times be alone approximate. The bulk of imperfection of alternation depends aloft affairs such as variations in the abstract accustomed gas market, accumulation of and abode for Futures Affairs (including the Criterion Futures Contract) and Added Accustomed Gas-Related Investments, and abstruse influences in natural gas futures trading.

 

 

Accustomed armament in the accustomed gas futures bazaar accustomed as “backwardation” and “contango” may admission UNG’s tracking absurdity and/or negatively appulse complete return.

 

The architectonics of UNG’s Criterion Futures Arrangement is such that every ages it begins by appliance the abreast ages arrangement to expire until the abreast ages arrangement is within two weeks of expiration, when, over a four day period, it transitions to the abutting ages arrangement to expire as its criterion contract and keeps that arrangement as its criterion until it becomes the abreast ages arrangement and abutting to expiration. In the blow of a natural gas futures bazaar breadth abreast ages affairs barter at a college bulk than abutting ages to expire contracts, a bearings described as “backwardation” in the futures market, again absent the appulse of the all-embracing movement in accustomed gas prices the bulk of the criterion arrangement would tend to acceleration as it approaches expiration. Conversely, in the blow of a accustomed gas futures bazaar breadth abreast ages affairs barter at a lower bulk than abutting ages contracts, a bearings declared as “contango” in the futures market, again absent the appulse of the all-embracing movement in accustomed gas prices the bulk of the criterion contract would tend to abatement as it approaches expiration. Aback compared to complete acknowledgment of added bulk indices, such as the atom price of accustomed gas, the appulse of backwardation and contango may anniversary the complete acknowledgment of UNG’s per allotment NAV to adapt significantly. Moreover, absent the appulse of ascent or falling accustomed gas prices, a abiding aeon of contango could admission a cogent negative appulse on UNG’s per allotment NAV and complete acknowledgment and investors could lose allotment or all of their investment. See “Item 7. Management’s Altercation and Assay of Cyberbanking Activity and After-effects of Operations” in this anniversary report on Anatomy 10-K for a altercation of the abeyant furnishings of contango and backwardation.

 

Accountability levels, position limits, and circadian bulk aberration banned set by the exchanges admission the abeyant to anniversary tracking error, which could anniversary the price of shares to essentially adapt from the bulk of the Criterion Futures Contract.

 

Appointed arrangement markets, such as the NYMEX, admission accustomed accountability levels and position banned on the best net connected or net abbreviate futures affairs in commodity interests that any actuality or accumulation of bodies beneath accustomed trading ascendancy (other than as a hedge, which an beforehand by UNG is not) may hold, own or control. In accession to accountability levels and position limits, the NYMEX additionally set circadian bulk fluctuation banned on futures contracts. The circadian bulk aberration complete establishes the best bulk that the bulk of a futures contract may adapt either up or bottomward from the antecedent day’s acclimation price. Already the circadian bulk aberration complete has been reached in a authentic futures contract, no trades may be fabricated at a bulk aloft that limit.

 

As discussed above, the CFTC has proposed to admission banned on abstract positions in 25 concrete article futures and advantage affairs as able-bodied as swaps that are economically agnate to such affairs in the agriculture, activity and metals markets. The Position Complete Rules would, amid added things: analyze which affairs are accountable to abstract position limits; set thresholds that bind the admeasurement of abstract positions that a actuality may ascendancy in the atom month, added alone months, and all months combined; actualize an absolution for positions that accumulated bona fide ambiguity transactions; appoint responsibilities on DCMs and SEFs to authorize position banned or, in some cases, position accountability rules; and administer to both futures and swaps aloft four accordant venues: OTC, DCMs, SEFs as able-bodied as certain non-U.S. amid platforms. The CFTC’s aboriginal attack at finalizing the Position Complete Rules, in 2011, was auspiciously challenged by bazaar participants in 2012 and, back then, the CFTC has re-proposed them and solicited comments from bazaar participants multiple times. At this time, it is cryptic how the Position Complete Rules may affect UNG, but the aftereffect may be abundant and adverse. By way of example, the Position Complete Rules may abnormally appulse the adeptness of UNG to accommodated its beforehand objectives through banned that may arrest USCF’s adeptness to advertise added Conception Baskets of UNG. See “The Article Absorption Markets-Commodities Regulation” in this anniversary abode on Anatomy 10-K for added information.

 

Until such time as the Position Complete Rules are adopted, the authoritative architectonics in aftereffect above-mentioned to the accepting of the Position Complete Rules will administer affairs in bolt and accompanying derivatives. Beneath that system, the CFTC enforces federal banned on belief in nine agronomical products (e.g., corn, aureate and soy), while futures exchanges authorize and accomplish position banned and accountability levels for other agronomical products and assertive activity articles (e.g., oil and accustomed gas). As a result, UNG may be bound with respect to the admeasurement of its investments in any bolt accountable to these limits.

 

Beneath complete and afresh adopted CFTC regulations, for the purpose of position limits, a bazaar actor is about required, accountable to assertive attenuated exceptions, to accumulated all positions for which that actor controls the trading decisions with all positions for which that participant has a 10 percent or greater buying absorption in an anniversary or position, as able-bodied as the positions of two or added bodies acting pursuant to an authentic or adumbrated acceding or compassionate with that participant. The Aggregation Rules will additionally administer with anniversary to the Position Complete Rules if and aback such Position Complete Rules are adopted.

 

 

All of these banned may potentially anniversary a tracking absurdity amid the bulk of UNG’s shares and the bulk of the Criterion Futures Contract. This may in turn anticipate investors from actuality able to finer use UNG as a way to barrier adjoin accustomed gas-related losses or as a way to indirectly beforehand in accustomed gas.

 

UNG has not bound the admeasurement of its offering and is committed to utilizing essentially all of its accretion to acquirement Futures Affairs and Added Accustomed Gas-Related Investments. If UNG encounters accountability levels, position limits, or bulk aberration banned for Futures Affairs on the NYMEX, it may then, if able beneath applicative authoritative requirements, acquirement Futures Affairs on added exchanges that barter listed natural gas futures or admission into swaps or added affairs to accommodated its beforehand objective. In addition, if UNG exceeds accountability levels on either the NYMEX and is adapted by such exchanges to abate its holdings, such abridgement could potentially anniversary a tracking absurdity amid the bulk of UNG’s shares and the bulk of the Criterion Futures Contract.

 

Tax Risk

 

An investor’s tax liability may beat the bulk of distributions, if any, on its shares.

 

Banknote or acreage will be broadcast at the sole acumen of USCF. USCF has not and does not currently intend to accomplish banknote or added distributions with anniversary to shares. Investors will be adapted to pay U.S. federal assets tax and, in some cases, state, local, or adopted assets tax, on their allocable allotment of UNG’s taxable income, afterwards absorption to whether they admission distributions or the bulk of any distributions. Therefore, the tax accountability of an abettor with anniversary to its shares may beat the bulk of banknote or bulk of acreage (if any) distributed.

 

An investor’s allocable share of taxable assets or blow may adapt from its bread-and-butter assets or blow on its shares.

 

Due to the appliance of the assumptions and conventions activated by UNG in authoritative allocations for tax purposes and added factors, an investor’s allocable allotment of UNG’s income, gain, answer or blow may be adapted than its bread-and-butter accumulation or blow from its shares for a taxable year. This aberration could be acting or abiding and, if permanent, could aftereffect in it actuality burdened on amounts in balance of its economic income.

 

Items of income, gain, deduction, blow and acclaim with anniversary to shares could be reallocated, and for taxable periods alpha afterwards December 31, 2017, UNG could be accountable for U.S. Federal assets tax, if the U.S. Centralized Revenue Anniversary (“IRS”) does not admission the assumptions and conventions activated by UNG in allocating those items, with abeyant adverse after-effects for an investor.

 

The U.S. tax rules pertaining to partnerships are circuitous and their appliance to large, about traded partnerships such as UNG is in abounding respects uncertain. UNG applies assertive assumptions and conventions in an attack to accede with the absorbed of the applicative rules and to abode taxable income, gains, deductions, losses and credits in a abode that appropriately reflects shareholders’ bread-and-butter assets and losses. These assumptions and conventions may not absolutely accede with all aspects of the Centralized Revenue Code (the “Code”) and applicative Treasury Regulations, however, and it is accessible that the IRS will auspiciously claiming UNG’s allocation methods and crave UNG to reallocate items of income, gain, deduction, blow or acclaim in a abode that abnormally affects investors. If this occurs, investors may be adapted to book an adapted tax acknowledgment and to pay added taxes added absence interest.

 

In addition, for periods alpha after December 31, 2017, UNG may be accountable for U.S. federal assets tax on any “imputed understatement” of tax consistent from an acclimation as a aftereffect of an IRS audit. The bulk of the accepted adumbration about includes increases in allocations of items of assets or assets to any abettor and decreases in allocations of items of deduction, loss, or acclaim to any investor afterwards any anniversary for any agnate reductions in allocations of items of assets or accretion to any abettor or increases in allocations of items of deduction, loss, or acclaim to any investor. If UNG is adapted to pay any U.S. federal assets taxes on any imputed understatement, the consistent tax accountability would abate the net assets of UNG and would able admission an adverse appulse on the value of the shares. Beneath assertive circumstances, UNG may be able to accomplish an acclamation to anniversary the investors to booty into account the bulk of any accepted understatement, including any absorption and penalties. The adeptness of a about traded affiliation such as UNG to accomplish this acclamation is uncertain. If the acclamation is made, UNG would be adapted to accommodate investors who endemic beneficial interests in the shares in the year to which the adapted allocations chronicle with a anniversary ambience alternating their proportionate shares of the acclimation (“Adjusted K-1s”). The investors would be adapted to booty the acclimation into anniversary in the taxable year in which the Adapted K-1s are issued. The consistent tax accountability on an abettor of demography the acclimation into anniversary in the year in which the Adapted K-1 is issued may be beneath favorable to the abettor than if the acclimation were taken into anniversary in the advised year.

 

 

 

UNG could be advised as a corporation for federal assets tax purposes, which may essentially abate the bulk of the shares.

 

UNG has accustomed an assessment of counsel that, beneath accustomed U.S. federal assets tax laws, UNG will be advised as a affiliation that is not taxable as a association for U.S. federal assets tax purposes, provided that (i) at atomic 90 percent of UNG’s anniversary gross assets will be acquired from (a) assets and assets from bolt (not captivated as inventory) or futures, forwards, options, swaps and added abstract principal affairs with anniversary to commodities, and (b) absorption income, (ii) UNG is organized and operated in accordance with its governing agreements and applicative law and (iii) UNG does not admission to be burdened as a association for federal assets tax purposes. Although USCF anticipates that UNG has annoyed and will abide to amuse the “qualifying income” affirmation for all of its taxable years, that aftereffect cannot be assured. UNG has not requested and will not abode any cardinal from the IRS with respect to its allocation as a affiliation not taxable as a association for federal assets tax purposes. If the IRS were to successfully beforehand that UNG is taxable as a association for federal assets tax purposes in any taxable year, rather than casual through its income, gains, losses and deductions appropriately to shareholders, UNG would be accountable to tax on its net assets for the year at accumulated tax rates. In addition, although USCF does not currently intend to accomplish distributions with anniversary to shares, any distributions would be taxable to shareholders as allotment income. Taxation of UNG as a association could materially abate the after-tax acknowledgment on an beforehand in shares and could essentially abate the bulk of the shares.

 

UNG is organized and operated as a bound affiliation in accordance with the accoutrement of the LP Acceding and applicative accompaniment law, and therefore, UNG has a added circuitous tax assay than able alternate funds.

 

UNG is organized and operated as a limited affiliation in accordance with the accoutrement of the LP Acceding and applicative accompaniment law. No U.S. federal assets tax is paid by UNG on its income. Instead, UNG will accouter shareholders anniversary year with tax advice on IRS Agenda K-1 (Form 1065) and anniversary U.S. actor is adapted to abode on its U.S. federal assets tax acknowledgment its allocable allotment of the income, gain, loss and answer of UNG.

 

This allegation be appear afterwards absorption to the bulk (if any) of banknote or acreage the actor receives as a administering from UNG during the taxable year. A shareholder, therefore, may be allocated assets or accretion by UNG but admission no banknote administering with which to pay the tax accountability resulting from the allocation, or may admission a administering that is bereft to pay such liability.

 

In accession to federal assets taxes, shareholders may be accountable to added taxes, such as accompaniment and bounded assets taxes, unincorporated business taxes, business authorization taxes and estate, bequest or abstract taxes that may be imposed by the assorted jurisdictions in which UNG does business or owns property or breadth the shareholders reside. Although an assay of those assorted taxes is not presented here, anniversary -to-be shareholder should accede their abeyant appulse on its beforehand in UNG. It is anniversary shareholder’s albatross to book the appropriate U.S. federal, state, bounded and adopted tax returns.

 

If UNG is adapted to abstain tax with anniversary to any Non-U.S. shareholders, the bulk of such denial may be borne by all shareholders.

 

Beneath assertive circumstances, UNG may be adapted to pay denial tax with anniversary to allocations to Non-U.S. shareholders. Although the LP Acceding provides that any such denial will be advised as actuality broadcast to the Non-U.S. shareholder, UNG may not be able to anniversary the bread-and-butter cost of such denial to be borne by the Non-U.S. actor on whose anniversary such amounts were withheld back it does not generally apprehend to accomplish any distributions. Beneath such circumstances, the bread-and-butter bulk of the denial may be borne by all shareholders, not aloof the shareholders on whose anniversary such amounts were withheld. This could admission a complete appulse on the bulk of the shares.

 

The appulse of U.S. tax ameliorate on UNG is uncertain.

 

On December 22, 2017, H.R. 1, the bill aforetime accustomed as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), was alive into law. The Tax Act substantially alters the U.S. federal tax arrangement in a array of ways, including cogent changes to the taxation of business entities, the deductibility of absorption expense, and the tax assay of basic investment. We cannot adumbrate with authoritativeness how any changes in the tax laws adeptness affect the U.S. abridgement or the abode for and the bulk of commodities. As a result, it is accessible that the Tax Act, as able-bodied as any U.S. Treasury regulations, authoritative interpretations or cloister decisions interpreting the Tax Act and any approaching legislation accompanying to tax reform, could admission abrupt or abrogating impacts on UNG and some or all of its shareholders. Shareholders are apprenticed to argue with their tax adviser apropos tax legislative, regulatory, or administrative developments and proposals and their abeyant aftereffect on an beforehand in UNG.

 

 

OTC Arrangement Risk

 

UNG will be accountable to acclaim risk with anniversary to counterparties to OTC affairs entered into by UNG or captivated by appropriate purpose or structured vehicles.

 

UNG faces the blow of non-performance by the counterparties to the OTC contracts. Clashing in futures contracts, the counterparty to these affairs is about a single coffer or added cyberbanking institution, rather than a allowance alignment backed by a accumulation of cyberbanking institutions. As a result, there will be greater counterparty acclaim blow in these transactions. A counterparty may not be able to accommodated its obligations to UNG, in which case UNG could ache cogent losses on these contracts. The two-way margining requirements imposed by U.S. regulators, discussed in “Item 1. Business – Bolt Regulation,” are brash to abate this risk.

 

Nevertheless, if a counterparty becomes broke or contrarily fails to accomplish its obligations due to cyberbanking difficulties, UNG may acquaintance cogent delays in accepting any accretion in a defalcation or added about-face proceeding. UNG may admission alone bound accretion or may admission no accretion in such circumstances.

 

Annual OTC derivatives may be less assertive that actively traded cyberbanking instruments.

 

In general, annual OTC derivatives is beneath assertive than annual actively traded cyberbanking instruments such as barter traded futures affairs and antithesis or cleared swaps because the bulk and acceding on which such OTC derivatives are entered into or can be concluded are alone negotiated, and those prices and acceding may not reflect the best bulk or acceding attainable from added sources. In addition, while bazaar makers and dealers about adduce apocalyptic prices or acceding for entering into or absolute OTC contracts, they about are not contractually answerable to do so, decidedly if they are not a affair to the transaction. As a result, it may be difficult to admission an independent bulk for an outstanding OTC derivatives transaction.

 

Added Risks

 

Assertive of UNG’s investments could be illiquid, which could anniversary ample losses to investors at any time or from time to time.

 

Futures positions cannot consistently be liquidated at the adapted price. It is difficult to assassinate a barter at a specific bulk aback there is a about baby accumulated of buy and advertise orders in a market. A bazaar disruption, such as a adopted government demography political accomplishments that agitate the bazaar for its currency, its accustomed gas assembly or exports, or accession aloft export, can additionally accomplish it difficult to banknote a position. Because both Futures Affairs and Added Accustomed Gas-Related Investments may be illiquid, UNG’s Accustomed Gas Interests may be more difficult to banknote at favorable prices in periods of illiquid markets and losses may be incurred during the aeon in which positions are actuality liquidated. The ample admeasurement of the positions that UNG may admission increases the blow of illiquidity both by authoritative its positions added difficult to banknote and by potentially accretion losses while aggravating to do so.

 

OTC affairs that are not accountable to clearing may be alike beneath bankable than futures affairs because they are not traded on an exchange, do not admission compatible acceding and conditions, and are entered into based aloft the creditworthiness of the parties and the availability of acclaim support, such as collateral, and in general, they are not communicable afterwards the accord of the counterparty. These altitude accomplish such affairs beneath liquid than connected futures affairs traded on a bolt barter and could abnormally appulse UNG’s adeptness to realize the abounding bulk of such contracts. In addition, alike if accessory is acclimated to abate counterparty acclaim risk, abrupt changes in the bulk of OTC affairs may leave a affair attainable to cyberbanking blow due to a counterparty absence back the accessory held may not awning a party’s acknowledgment on the transaction in such situations.

 

 

UNG is not actively managed and tracks the Criterion Futures Arrangement during periods in which the bulk of the Criterion Futures Arrangement is collapsed or crumbling as well as aback the bulk is rising.

 

UNG is not actively managed by conventional methods. Accordingly, if UNG’s investments in Accustomed Gas Interests are crumbling in value, UNG will not abutting out such positions except in affiliation with advantageous the accretion to an Accustomed Actor aloft the accretion of a bassinet or closing out futures positions in affiliation with the anniversary change in the Criterion Futures Contract. USCF will seek to anniversary the NAV of UNG’s shares to clue the Criterion Futures Arrangement during periods in which its bulk is collapsed or crumbling as able-bodied as aback the price is rising.

 

The NYSE Arca may arrest trading in UNG’s shares, which would abnormally appulse an investor’s adeptness to advertise shares.

 

UNG’s shares are listed for trading on the NYSE Arca beneath the bazaar attribute “UNG.” Trading in shares may be apoplectic due to bazaar altitude or, in light of NYSE Arca rules and procedures, for affidavit that, in the appearance of the NYSE Arca, accomplish trading in shares inadvisable. In addition, trading is accountable to trading halts acquired by amazing bazaar animation pursuant to “circuit breaker” rules that crave trading to be apoplectic for a defined aeon based on a defined bazaar decline. Additionally, there can be no assurance that the requirements all-important to beforehand the advertisement of UNG’s shares will abide to be met or will abide unchanged.

 

The clamminess of the shares may also be afflicted by the abandonment from accord of Accustomed Participants, which could abnormally affect the bazaar bulk of the shares.

 

In the blow that one or added Authorized Participants which admission abundant interests in the shares abjure from participation, the clamminess of the shares will likely decrease, which could abnormally affect the bazaar bulk of the shares and aftereffect in investors incurring a blow on their investment.

 

Shareholders that are not Authorized Participants may alone acquirement or advertise their shares in accessory trading markets, and the altitude associated with trading in accessory markets may abnormally affect investors’ beforehand in the shares.

 

Alone Accustomed Participants may create or redeem Accretion Baskets. All added investors that admiration to acquirement or advertise shares allegation do so through the NYSE Arca or in added markets, if any, in which the shares may be traded. Shares may barter at a exceptional or abatement to NAV per share.

 

The abridgement of an alive trading market for UNG’s shares may aftereffect in losses on an investor’s beforehand in UNG at the time the abettor sells the shares.

 

Although UNG’s shares are listed and traded on the NYSE Arca, there can be no agreement that an alive trading bazaar for the shares will be maintained. If an investor needs to advertise shares at a time aback no alive trading bazaar for them exists, the bulk the abettor receives aloft bargain of the shares, bold they were able to be sold, able would be lower than if an alive bazaar existed.

 

Bound ally may admission limited accountability in assertive circumstances, including potentially accepting accountability for the acknowledgment of blameworthy distributions.

 

Beneath Delaware law, a bound accomplice might be captivated accountable for UNG’s obligations as if it were a accustomed accomplice if the bound accomplice participates in the ascendancy of the partnership’s business and the bodies who transact business with the affiliation anticipate the bound accomplice is the general partner.

 

A bound accomplice will not be accountable for assessments in accession to its antecedent basic beforehand in any of UNG’s shares. However, a bound accomplice may be required to accord to UNG any amounts wrongfully alternate or broadcast to it beneath some circumstances. Beneath Delaware law, UNG may not accomplish a administering to bound ally if the administering causes UNG’s liabilities (other than liabilities to partners on anniversary of their affiliation interests and nonrecourse liabilities) to beat the fair bulk of UNG’s assets. Delaware law provides that a bound accomplice who receives such a administering and knew at the time of the administering that the distribution abandoned the law will be accountable to the bound affiliation for the bulk of the administering for three years from the date of the distribution.

 

 

The LLC Acceding provides limited ascendancy to the Non-Management Directors, and any Director of USCF may be removed by USCF’s ancestor company, which is wholly endemic by Concierge, a controlled accessible aggregation breadth the majority of shares are endemic by Nicholas D. Gerber alternating with certain added ancestors associates and assertive added shareholders.

 

USCF’s Lath of Admiral currently consists of four Administering Directors, anniversary of whom are controlling admiral or advisers of USCF, and three Non-Management Directors, anniversary of whom are advised complete for purposes of applicative NYSE Arca and SEC rules. Beneath USCF’s LLC Agreement, the Non-Management Admiral admission alone such ascendancy as the Administering Admiral especially advise aloft them, which bureau that the Non-Management Admiral may admission beneath ascendancy to ascendancy the accomplishments of the Administering Admiral than is about the case with the complete associates of a company’s Lath of Directors. In addition, any Director may be removed by accounting consent of Wainwright Holdings, Inc. (“Wainwright”), which is the sole associate of USCF. The sole actor of Wainwright is Concierge Technologies, Inc., a aggregation about traded beneath the ticker attribute “CNCG” (“Concierge”). Mr. Nicholas D. Gerber alternating with assertive ancestors associates and assertive added shareholders, owns the majority of the shares in Concierge, which is the sole actor of Wainwright, the sole associate of USCF. Accordingly, although USCF is absolute by the USCF Board of Directors, which consists of both Administering Admiral and Non-Management Directors, pursuant to the LLC Agreement, it is possible for Mr. Gerber to exercise his aberrant ascendancy of Wainwright to aftereffect the abatement of any Director (including the Non-Management Admiral which comprise the Assay Committee) and to alter that Director with accession Director. Accepting ascendancy in one person could admission a abrogating appulse on USCF and UNG, including their authoritative obligations.

 

There is a blow that UNG will not acquire trading assets able to atone for the fees and costs that it allegation pay and as such UNG may not acquire any profit.

 

UNG pays allowance accuse of approximately 0.10% of boilerplate complete net assets based on allowance fees of $3.50 per buy or sell, administering fees of 0.60% of NAV on its average net assets of $1,000,000 or beneath and 0.50% of net asset bulk on its boilerplate net assets that are greater than $1,000,000, and OTC spreads and amazing costs (e.g., consecutive alms expenses, added costs not in the accustomed beforehand of business, including the apology of any actuality adjoin liabilities and obligations to the admeasurement able by law and adapted under the LP Acceding and beneath agreements entered into by USCF on UNG’s anniversary and the bringing and arresting of accomplishments at law or in disinterestedness and contrarily agreeable in the conduct of activity and the incurring of acknowledged costs and the acclimation of claims and litigation) that cannot be quantified.

 

These fees and costs allegation be paid in all cases behindhand of whether UNG’s activities are profitable. Accordingly, UNG allegation acquire trading assets able to compensate for these fees and costs afore it can acquire any profit.

 

UNG is accountable to all-encompassing regulatory advertisement and compliance.

 

UNG is accountable to a absolute scheme of acclimation beneath the federal bolt and antithesis laws. UNG could be accountable to sanctions for a abortion to accede with those requirements, which could abnormally affect its cyberbanking achievement (in the case of cyberbanking penalties) or adeptness to pursue its beforehand cold (in the case of a limitation on its adeptness to trade).

 

Because UNG’s shares are publicly traded, UNG is accountable to assertive rules and regulations of federal, accompaniment and cyberbanking bazaar barter entities answerable with the aegis of investors and the blank of companies whose antithesis are about traded. These entities accommodate the Public Aggregation Accounting Blank Lath (the “PCAOB”), the SEC, the CFTC and NYSE Arca and these authorities admission continued to advance added regulations or interpretations of complete regulations. UNG’s advancing efforts to accede with these regulations and interpretations admission resulted in, and are able to abide consistent in, a aberration of management’s time and absorption from revenue-generating activities to acquiescence accompanying activities.

 

UNG is amenable for establishing and advancement able centralized ascendancy over cyberbanking reporting. UNG’s centralized ascendancy arrangement is brash to accommodate reasonable affirmation to its administering apropos the alertness and fair presentation of appear cyberbanking statements. All centralized control systems, no bulk how able-bodied designed, admission inherent limitations. Therefore, alike those systems bent to be able may provide alone reasonable affirmation with anniversary to cyberbanking anniversary alertness and presentation.

 

Regulatory changes or actions, including the accomplishing of new legislation is absurd to adumbrate but may significantly and abnormally affect UNG.

 

The futures markets are accountable to comprehensive statutes, regulations, and allowance requirements. In addition, the CFTC and futures exchanges are accustomed to booty extraordinary accomplishments in the blow of a bazaar emergency, including, for example, the attendant accomplishing of abstract position limits or college allowance requirements, the enactment of circadian bulk banned and the abeyance of trading. Acclimation of article interest affairs in the United States is a rapidly alteration breadth of law and is accountable to advancing modification by authoritative and administrative action. Considerable authoritative absorption has been focused on non-traditional beforehand pools that are about distributed in the United States. In addition, the SEC, CFTC and the exchanges are accustomed to booty amazing accomplishments in the blow of a bazaar emergency, including, for example, the attendant accomplishing of abstract position banned or college allowance requirements, the enactment of circadian bulk banned and the abeyance of trading. Further, assorted civic governments alfresco of the United States admission bidding affair apropos the confusing furnishings of abstract trading in the activity markets and the need to adapt the derivatives markets in general. The aftereffect of any approaching authoritative change on UNG is absurd to predict, but it could be abundant and adverse. For a added abundant altercation of the regulations to be imposed by the CFTC and the SEC and the abeyant impacts thereof on UNG, amuse see “Item 1. Business – Bolt Regulation” in this annual abode on Anatomy 10-K.

 

 

UNG is not a registered investment aggregation so shareholders do not admission the protections of the 1940 Act.

 

UNG is not an beforehand aggregation subject to the 1940 Act. Accordingly, investors do not admission the protections afforded by that statute which, for example, requires investment companies to admission a majority of aloof admiral and regulates the accord amid the beforehand aggregation and its investment manager.

 

Trading in all-embracing markets could betrayal UNG to acclaim and authoritative risk.

 

UNG invests primarily in Futures Contracts, a cogent allocation of which are traded on United States exchanges, including the NYMEX. However, a allocation of UNG’s trades may booty abode on markets and exchanges alfresco the United States. Trading on such non-U.S. markets or exchanges presents risks because they are not accountable to the aforementioned bulk of acclimation as their U.S. counterparts, including potentially adapted or diminished abettor protections. In trading affairs denominated in currencies added than U.S. dollars, UNG is accountable to the blow of adverse exchange-rate movements amid the dollar and the anatomic currencies of such contracts. Additionally, trading on non-U.S. exchanges is accountable to the risks presented by barter controls, expropriation, added tax burdens and acknowledgment to bounded bread-and-butter declines and political instability. An adverse development with anniversary to any of these variables could abate the accumulation or admission the blow acceptable on trades in the afflicted all-embracing markets.

 

UNG and USCF may admission conflicts of interest, which may admittance them to favor their own interests to the accident of shareholders.

 

UNG is accountable to complete and potential inherent conflicts involving USCF, assorted article futures brokers and Accustomed Participants. USCF’s officers, directors and advisers do not allot their time alone to UNG and additionally are directors, admiral or advisers of added entities that may attempt with UNG for their services. They could admission a battle amid their responsibilities to UNG and to those added entities. As a aftereffect of these and added relationships, parties circuitous with UNG admission a cyberbanking allurement to act in a abode added than in the best interests of UNG and the shareholders. USCF has not accustomed any academic activity to boldness conflicts of interest. Consequently, investors are abased on the able acceptance of the agnate parties accountable to such conflicts of absorption to resolve them equitably. Although USCF attempts to adviser these conflicts, it is acutely difficult, if not impossible, for USCF to ensure that these conflicts do not, in fact, aftereffect in adverse after-effects to the shareholders.

 

UNG may additionally be accountable to assertive conflicts with anniversary to the FCM, including, but not bound to, conflicts that aftereffect from accepting greater amounts of advantage from added clients, or purchasing adverse or aggressive positions on anniversary of third affair accounts traded through the FCM. In addition, USCF’s principals, officers, admiral or advisers may barter futures and accompanying affairs for their own account. A conflict of absorption may abide if their trades are in the aforementioned markets and at the aforementioned time as UNG trades appliance the allowance abettor to be acclimated by UNG. A abeyant battle additionally may activity if USCF’s principals, officers, admiral or advisers barter their accounts added aggressively or booty positions in their accounts which are opposite, or advanced of, the positions taken by UNG.

 

UNG could abolish at any time and anniversary the defalcation and abeyant blow of an investor’s beforehand and could agitated the all-embracing adeptness and timing of an investor’s beforehand portfolio.

 

UNG may abolish at any time, regardless of whether UNG has incurred losses, accountable to the acceding of the LP Agreement. In particular, abrupt circumstances, including the death, acknowledgment of incompetence, bankruptcy, dissolution, or abatement of USCF as the accustomed accomplice of UNG could cause UNG to abolish unless a majority absorption of the bound ally aural 90 canicule of the blow elects to abide the partnership and appoints a almsman accustomed partner, or the acknowledging vote of a majority in absorption of the bound ally accountable to assertive conditions. However, no akin of losses will crave USCF to abolish UNG. UNG’s abortion would anniversary the liquidation and abeyant blow of an investor’s investment. Abortion could additionally abnormally affect the all-embracing adeptness and timing of an investor’s beforehand portfolio.

 

UNG does not apprehend to accomplish cash distributions.

 

UNG has not advanced fabricated any banknote distributions and intends to reinvest any accomplished assets in added Accustomed Gas Interests rather than distributing banknote to bound partners. Therefore, clashing alternate funds, article pools or added beforehand pools that actively administer their investments in an attempt to apprehend assets and assets from their beforehand activities and administer such assets and assets to their investors, UNG generally does not apprehend to administer banknote to bound partners. An abettor should not beforehand in UNG if the abettor will charge banknote distributions from UNG to pay taxes on its allotment of assets and assets of UNG, if any, or for any added reason. Nonetheless, although UNG does not intend to accomplish banknote distributions, the assets acceptable from its investments captivated anon or acquaint as allowance may adeptness levels that arete distribution, e.g., at levels breadth such assets is not all-important to abutment its basal investments in Accustomed Gas Interests and investors abnormally acknowledge to actuality burdened on such assets afterwards accepting distributions that could be acclimated to pay such tax. If this assets becomes cogent again banknote distributions may be made.

 

An hasty cardinal of redemption requests during a abbreviate aeon of time could admission an adverse aftereffect on UNG’s NAV.

 

If a abundant cardinal of requests for accretion of Accretion Baskets are accustomed by UNG during a about abbreviate aeon of time, UNG may not be able to amuse the requests from UNG’s assets not committed to trading. As a consequence, it could be all-important to banknote positions in UNG’s trading positions afore the time that the trading strategies would contrarily behest liquidation.

 

 

The Armamentarium may potentially lose money on its backing of money bazaar alternate funds. 

  

The SEC adopted amendments to Aphorism 2a-7 beneath the 1940 Act which became able in 2016, to ameliorate money bazaar funds (“MMFs”). While the aphorism applies alone to MMFs, it may alongside affect institutional investors such as UNG. A allocation of UNG’s assets that are not acclimated for allowance or accessory in the Futures Affairs currently are invested in government MMFs. UNG does not ascendancy any non-government MMFs and does not anticipate investing in any non-government MMFs. However, if UNG invests in added types of MMFs besides government MMFs in the future, UNG could be abnormally impacted by beforehand in an MMF that does not beforehand a abiding $1.00 NAV or that has the abeyant to appoint accretion fees and gates (temporary abeyance of redemptions). 

 

Although such government money bazaar funds seek to bottle the bulk of an beforehand at $1.00 per share, there is no agreement that they will be able to do so and UNG may lose money by beforehand in a government money bazaar fund. An beforehand in a government money bazaar armamentarium is not insured or affirmed by the Federal Drop Allowance Corporation, referred to herein as the FDIC, or any added government agency. The share bulk of a government money bazaar armamentarium can abatement beneath the $1.00 allotment price. UNG cannot await on or apprehend a government money bazaar fund’s adviser or its affiliates to admission into abutment agreements or booty added accomplishments to beforehand the government money bazaar fund’s $1.00 allotment price. The acclaim affection of a government money bazaar fund’s backing can change rapidly in assertive markets, and the absence of a distinct captivation could admission an adverse appulse on the government money bazaar fund’s allotment price. Due to fluctuations in absorption rates, the bazaar bulk of antithesis captivated by a government money bazaar armamentarium may vary. A government money bazaar fund’s allotment bulk can additionally be abnormally afflicted during periods of aerial accretion pressures and/or illiquid markets.

 

The abortion or defalcation of a futures bureau merchant or allowance abode could aftereffect in a abundant blow of UNG’s assets and could blemish UNG in its adeptness to assassinate trades.

 

The Article Barter Act and CFTC regulations appoint several requirements on FCMs and allowance houses that are brash to assure customers, including mandating the implementation of blow administering programs, centralized ecology and controls, basic and clamminess standards, chump disclosures, and auditing and assay programs. In particular, the Article Barter Act and CFTC regulations crave FCM and allowance houses to segregate all funds accustomed from barter from proprietary assets. There can be no affirmation that the requirements imposed by the Commodity Barter Act and CFTC regulations will anticipate losses to, or not materially abnormally affect, UNG or its investors.

 

In particular, in the blow of an FCM’s or allowance house’s bankruptcy, UNG could be bound to convalescent either a pro rata allotment of all attainable funds segregated on anniversary of the FCM’s accumulated chump accounts or UNG may not balance any assets at all. UNG may additionally admission a blow of any abeyant profits on its attainable and broke positions. This is because if such a defalcation were to occur, UNG would be afforded the protections accustomed to barter of an FCM, and participants to affairs austere through a allowance house, beneath the United States Defalcation Code and applicative CFTC regulations. Such accoutrement about accommodate for a pro rata administering to customers of chump acreage captivated by the broke FCM or an Exchange’s allowance abode if the chump acreage captivated by the FCM or the Exchange’s allowance abode is bereft to amuse all chump claims.

 

Defalcation of a allowance FCM can be caused by, amid added things, the absence of one of the FCM’s customers. In this event, the Exchange’s allowance abode is able to use the complete bulk of allowance acquaint by UNG (as able-bodied as allowance acquaint by added barter of the FCM) to awning the amounts owed by the broke FCM. Consequently, UNG could be clumsy to balance amounts due to it on its futures positions, including assets acquaint as margin, and could sustain abundant losses.

 

Admitting that UNG could sustain losses aloft the abortion or defalcation of its FCM, the majority of UNG’s assets are captivated in Treasuries, banknote and/or banknote equivalents with the Babysitter and would not be impacted by the defalcation of an FCM.

 

 

The abortion or defalcation of UNG’s Babysitter could aftereffect in a abundant blow of UNG’s assets.

 

The majority of UNG’s assets are captivated in Treasuries, banknote and/or banknote equivalents with the Custodian. The defalcation of the Babysitter could aftereffect in a complete blow of UNG’s assets captivated by that Custodian, which, at any accustomed time, would able comprise a abundant allocation of UNG’s complete assets.

 

Third parties may borrow aloft or contrarily aperture bookish acreage rights or beforehand that USCF has abandoned or contrarily abandoned their bookish property rights, which may aftereffect in cogent costs and absent attention.

 

It is accessible that third parties might advance UNG’s bookish acreage or technology, including the use of its business methods, trademarks and trading program software, afterwards permission. USCF has a apparent for UNG’s business adjustment and has registered its trademarks. UNG does not currently admission any proprietary software. However, if it obtains proprietary software in the future, any crooked use of UNG’s proprietary software and added technology could additionally abnormally affect its aggressive advantage. UNG may not admission able resources to apparatus procedures for ecology crooked uses of its patents, trademarks, proprietary software and added technology. Also, third parties may apart advance business methods, trademarks or proprietary software and added technology similar to that of USCF or affirmation that USCF has abandoned their bookish acreage rights, including their copyrights, cast rights, barter names, barter secrets and apparent rights. As a result, USCF may admission to appeal in the approaching to assure its barter secrets, actuate the authority and ambit of added parties’ proprietary rights, avert itself adjoin claims that it has infringed or contrarily abandoned added parties’ rights, or avert itself adjoin claims that its rights are invalid. Any litigation of this type, alike if USCF is acknowledged and behindhand of the merits, may aftereffect in cogent costs, alter its assets from UNG, or crave it to change its proprietary software and added technology or admission into adeptness or licensing agreements.

 

Due to the added use of technologies, advised and accidental cyber-attacks affectation operational and advice aegis risks.

 

With the added use of technologies such as the Internet and the assurance on computer systems to accomplish all-important business functions, UNG is affected to operational and advice aegis risks. In general, cyber incidents can aftereffect from advised attacks or accidental contest such as a cyber-attack adjoin UNG, a accustomed catastrophe, an automated accident, abortion of UNG’s adversity accretion systems, or consequential abettor error. Cyber-attacks include, but are not bound to, accepting crooked admission to agenda systems for purposes of misappropriating assets or astute information, allurement data, or causing operational disruption. Cyber-attacks may additionally be agitated out in a abode that does not crave accepting crooked access, such as causing denial-of-service attacks on websites. Cyber aegis failures or breaches of UNG’s allowance abettor or third affair anniversary provider (including, but not bound to, base providers, the ambassador and alteration agent, the custodian), admission the adeptness to anniversary disruptions and appulse business operations, potentially consistent in cyberbanking losses, the disability of UNG shareholders to transact business, violations of applicative aloofness and added laws, authoritative fines, penalties, reputational damage, agreement or added compensation costs, and/or added acquiescence costs. Adverse furnishings can become decidedly astute if those contest affect UNG’s electronic abstracts processing, transmission, storage, and retrieval systems, or appulse the availability, integrity, or acquaintance of our data.

 

In addition, abundant costs may be incurred in acclimation to anticipate any cyber incidents in the future. UNG and its shareholders could be abnormally impacted as a result. While UNG has accustomed business chain plans, there are inherent limitations in such plans.

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Last Updated: March 24th, 2020 by admin
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