UNITED STATES COMMODITY FUNDS LLC
Sponsor of the United States 3x Oil Fund
March 29, 2019
Dear United States 3x Oil Fund Investor,
Enclosed with this letter is your copy of the 2018 financial statements for the United States 3x Oil Fund (ticker symbol “USOU”), a series of the USCF Funds Trust (the “Trust”). The United States 3x Short Oil Fund (“USOD”), an additional series of the Trust, is also included in these statements. We have mailed this statement to all investors in USOU who held shares as of December 31, 2018 to satisfy our annual reporting requirement under federal commodities laws. In addition, we have enclosed a copy of the current United States Commodity Funds LLC (“USCF”) Privacy Policy applicable to USOU. Additional information concerning USOU’s 2018 results may be found by referring to the Trust’s Annual Report on Form 10-K (the “Form 10-K”), which has been filed with the U.S. Securities and Exchange Commission (the “SEC”). You may obtain a copy of the Form 10-K by going to the SEC’s website atwww.sec.gov, or by going to USCF’s website atwww.uscfinvestments.com. You may also call USCF at1-800-920-0259 to speak to a representative and request additional material, including a current USOU Prospectus.
USCF is the sponsor of USOU. USCF is also the general partner or sponsor and operator of several other commodity-based exchange-traded funds. These other funds are referred to in the attached financial statements and include:
| United States Oil Fund, LP | (ticker symbol:USO) | United States Brent Oil Fund, LP | (ticker symbol:BNO) |
| United States Natural Gas Fund, LP | (ticker symbol:UNG) | United States Commodity Index Fund | (ticker symbol:USCI) |
| United States 12 Month Oil Fund, LP | (ticker symbol:USL) | United States Copper Index Fund | (ticker symbol:CPER) |
| United States Gasoline Fund, LP | (ticker symbol:UGA) | United States 3x Short Oil Fund | (ticker symbol:USOD) |
| United States 12 Month Natural Gas Fund, LP | (ticker symbol:UNL) | ||
Information about these other funds is contained within the Form 10-K as well as in the current USOU Prospectus. Investors in USOU who wish to receive additional information about these other funds may do so by going to the USCF website atwww.uscfinvestments.com.
You may also call USCF at1-800-920-0259 to request additional information.
Thank you for your continued interest in USOU.
| Regards, | |
| /s/ John P. Love | |
| John P. Love | |
| President and Chief Executive Officer | |
| United States Commodity Funds LLC | |
*This letter is not an offer to buy or sell securities. Investment in USOU or any other funds should be made only after reading such fund’s prospectus. Please consult the relevant prospectus for a description of the risks and expenses involved in any such investment.
PRIVACY POLICY
UNITED STATES COMMODITY FUNDS LLC
Introduction
This document sets forth the Privacy Policy, adopted on December 6, 2008, as amended from time to time and most recently amended on June 23, 2017 of (i) the United States Commodity Funds LLC (the “Company”) (ii) each of the statutory trust for which the Company serves as sponsor, the United States Commodity Index Funds Trust (the “Index Funds Trust”) and the USCF Funds Trust (together with the Index Funds Trust, the “Trusts”), and (iii) each of the funds for which the Company serves as the general partner or as sponsor as set forth in Appendix A, which may be amended from time to time (each a “Fund” and together, the “Funds”), relating to the collection, maintenance and use of nonpublic personal information about the Funds’ investors, as required under federal legislation. The Company is a commodity pool operator registered with the Commodity Futures Trading Commission. This Privacy Policy covers the nonpublic personal information of investors who are individuals and who obtain financial products or services primarily for personal, family or household purposes.
Collection of Investor Information
In the course of doing business with Fund shareholders, the Company and the Trusts may collect or have access to nonpublic personal information about Fund shareholders. Shares of the Funds are registered in the name of Cede & Co., as nominee for the Depository Trust Company. However, the Company may collect or have access to personal information about Fund investors for certain purposes relating to the operation of the Funds, including for the distribution of certain required tax reports to investors. This information may include information received from investors and information about investors’ holdings and transactions in shares of the Funds.
“Nonpublic personal information” is personally identifiable financial information about Fund shareholders. For example, it includes Fund shareholders’ social security numbers, account balances, bank account information and investors’ holdings and transactions in shares of the Funds.
The Company, the Trusts and the Funds may collect this information from the following sources:
| · | Information about shareholder transactions with us and our service providers, or others; |
| · | Information we receive from consumer reporting agencies (including credit bureaus); |
| · | Information we may receive from shareholders. |
Disclosure of Nonpublic Personal Information
The Company, the Trusts and the Funds does not sell or rent investor information of the Funds. The Company, the Trusts and the Funds only disclose nonpublic personal information collected about Fund investors as permitted by law. For example, the Company, the Trusts and the Funds may disclose nonpublic personal information about Fund investors:
| · | To companies that act as service providers in connection with the administration and servicing of the Funds, which may include attorneys, accountants, auditors and other professionals; maintain shareholder accounts, and in connection with the servicing or processing of transactions of the Trusts or the Funds. |
| · | To government entities, in response to subpoenas, court orders, judicial process or to comply with laws or regulations; |
| · | To protect against fraud, unauthorized transactions (such as money laundering), claims or other liabilities, or to collect unpaid debts; and |
| · | When shareholders direct us to do so or consent to the disclosure, including authorization to disclose such information to persons acting in a fiduciary or representative capacity on behalf of the investor. |
Fund investors have no right to opt out of the disclosure by the Company, the Trusts or the Funds of non-public personal information under the circumstances described above.
Protection of Investor Information
The Company, the Trusts and the Funds holds Fund investor information in the strictest confidence. Accordingly, the Company’s policy is to require that all employees, financial professionals and companies providing services on its behalf keep client information confidential. In addition, access to nonpublic personal information about shareholders is limited to our employees and in some cases to third parties (for example, the service providers described above) as permitted by law.
The Company, the Trusts and the Funds maintains safeguards that comply with federal standards to protect investor information. The Company restricts access to the personal and account information of investors to those employees who need to know that information in the course of their job responsibilities. Third parties with whom the Company, the Trusts and the Funds share Fund investor information must agree to follow appropriate standards of security and confidentiality, which includes safeguarding such information physically, electronically and procedurally.
The privacy policy of the Company, the Trusts and the Funds applies to both current and former Fund investors. The Company, the Trusts and the Funds will only disclose nonpublic personal information about a former investor to the same extent as for a current Fund investor.
Changes to Privacy Policy
The Company, the Trusts and the Funds may make changes to this privacy policy in the future. The Company, the Trusts and the Funds will not make any change affecting Fund investors without first sending investors a revised privacy policy describing the change. In any case, the Company, the Trusts and the Funds will send Fund investors a current privacy policy at least once a year as long as they continue to be Fund investors.
APPENDIX A
UNITED STATES COMMODITY FUNDS LLC,
GENERAL PARTNER OF
UNITED STATES OIL FUND, LP
UNITED STATES NATURAL GAS FUND, LP
UNITED STATES 12 MONTH OIL FUND, LP
UNITED STATES GASOLINE FUND, LP
UNITED STATES 12 MONTH NATURAL GAS FUND, LP
UNITED STATES BRENT OIL FUND, LP
AND
SPONSOR OF
UNITED STATES COMMODITY INDEX FUND
UNITED STATES COPPER INDEX FUND
EACH A SERIES OF
UNITED STATES COMMODITY INDEX FUNDS TRUST
AND
SPONSOR OF
UNITED STATES 3X OIL FUND
UNITED STATES 3X SHORT OIL FUND
EACH A SERIES OF
USCF FUNDS TRUST
UNITED STATES COMMODITY FUNDS LLC
UNITED STATES COMMODITY FUNDS TRUST
USCF FUNDS TRUST
EACH OF THE FUNDS FOR WHICH THE COMPANY SERVES AS GENERAL PARTNER OR SPONSOR
Privacy Notice
| FACTS | WHAT DO UNITED STATES COMMODITY FUNDS LLC (THE “COMPANY”), THE UNITED STATES COMMODITY FUNDS TRUST AND THE USCF FUNDS TRUST (EACH A “TRUST” AND TOGETHER, THE “TRUSTS”) AND EACH OF THE FUNDS FOR WHICH THE COMPANY SERVES AS GENERAL PARTNER OR SPONSOR (EACH A “FUND” AND TOGETHER, THE “FUNDS”) DO WITH PERSONAL INFORMATION? |
| Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
| What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include: • Social Security number • account balances • account transactions • transaction history • wire transfer instructions • checking account information When you areno longer our customer, we continue to share your information as described in this notice. |
| How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons the Company and the Trusts choose to share; and whether you can limit this sharing. |
| Reasons we can share your personal information | Do we share? | Can you limit this sharing? |
For our everyday business purposes - such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No |
For our marketing purposes - to offer our products and services to you | No | We don’t share |
| For joint marketing with other financial companies | No | We don’t share |
For our affiliates’ everyday business purposes - information about your transactions and experiences | Yes | No |
For our affiliates’ everyday business purposes - information about your creditworthiness | No | We don’t share |
| For our affiliates to market to you | No | We don’t share |
| For non-affiliates to market to you | No | We don’t share |
Questions? Call 1-510-522-9600 or go towww.uscfinvestments.com
| ||
UNITED STATES COMMODITY FUNDS LLC SERVES AS GENERAL PARTNER OR SPONSOR Privacy Notice | |
| What we do | |
| How do the Company, the Trusts and the Funds protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings. |
| How do the Company, the Trusts and the Funds collect my personal information? | We collect your personal information, for example, when you ■ open an account ■ provide account information ■ give us your contact information ■ make a wire transfer ■ tell us where to send the money We also collect your information from others, such as credit bureaus, affiliates, or other companies. |
| Why can’t I limit all sharing? | Federal law gives you the right to limit only ■ sharing for affiliates’ everyday business purposes - information about your creditworthiness ■ affiliates from using your information to market to you ■ sharing for non-affiliates to market to you State laws and individual companies may give you additional rights to limit sharing. |
| Definitions | |
| Affiliates | Companies related by common ownership or control. They can be financial and non-financial companies. ■Our affiliates include companies which are subsidiaries of Wainwright Holdings, Inc., such as USCF Advisers LLC. |
| Non-affiliates | Companies not related by common ownership or control. They can be financial and non-financial companies. ■The Company, the Trusts and the Funds do not share with non-affiliates so they can market to you. |
| Joint marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you. ■The Company, the Trusts and the Funds do not conduct joint marketing. |
UNITED STATES 3x OIL FUND
FINANCIAL STATEMENTS
For the years ended December 31, 2018 and 2017
AFFIRMATION OF THE COMMODITY POOL OPERATOR
To the Shareholders of the United States 3x Oil Fund:
Pursuant to Rule 4.22(h) under the Commodity Exchange Act, the undersigned represents that, to the best of his knowledge and belief, the information contained in this Annual Report for the years ended December 31, 2018 and are accurate and complete.
By United States Commodity Funds LLC, as Sponsor of United States 3x Oil Fund
| By: | /s/ John P. Love | |
| John P. Love | ||
| President & Chief Executive Officer of United States Commodity Funds LLC | ||
 | |
| SPICER JEFFRIESLLP | |
| Certified PublicAccountants | |
| 4601 DTC BOULEVARD • SUITE700 | |
| DENVER, COLORADO80237 | |
| TELEPHONE: (303) 753-1959 | |
| FAX: (303)753-0338 | |
| www.spicerjeffries.com | |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Sponsor and Shareholders of
United States 3x Oil Fund, a series of the USCF Funds Trust
Opinions on the Financial Statements
We have audited the accompanying statements of financial condition of United States 3x Oil Fund (the “Fund”), a series of the USCF Funds Trust (the “Trust”) as of December 31, 2018 and 2017, including the schedule of investments as of December 31, 2018 and 2017, the related statements of operations, changes in capital, changes in shares outstanding and cash flows for the year ended December 31, 2018 and for the period from the commencement of operations (July 20, 2017) through December 31, 2017, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Fund and its Series as of December 31, 2018 and 2017, and the results of its operations and its cash flows for the year ended December 31, 2018 and for the period from the commencement of operations (July 20, 2017) through December 31, 2017, in conformity with accounting principles generally accepted in the United States ofAmerica.
Basis for Opinion
The Fund’s management is responsible for these financial statements. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund are not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinions.
We have served as the Trust’s auditor since 2017.
Denver, Colorado
March 26, 2019
| USCF Funds Trust | ||||||||
| Statements of Financial Condition | ||||||||
| At December 31, 2018 and 2017 | ||||||||
| United States 3x Oil Fund | ||||||||
| December 31, 2018 | December 31, 2017 | |||||||
| Assets | ||||||||
| Cash and cash equivalents (at cost $3,514,228 and $1,200,864, respectively) (Notes 2 and 6) | $ | 3,514,228 | $ | 1,200,864 | ||||
| Equity in trading accounts: | ||||||||
| Cash and cash equivalents (at cost $15,422,324 and $2,579,835, respectively) | 15,422,324 | 2,579,835 | ||||||
| Unrealized gain (loss) on open commodity futures contracts | (3,899,053 | ) | 703,240 | |||||
| Receivable for shares sold | 791,592 | — | ||||||
| Dividends receivable | 2,820 | — | ||||||
| Interest receivable | 4,127 | 2,708 | ||||||
| ETF transaction fees receivable | 317 | — | ||||||
| Other assets | — | 848 | ||||||
| Total assets | $ | 15,836,355 | $ | 4,487,495 | ||||
| Liabilities and Capital | ||||||||
| Management fees payable (Note 4) | $ | 9,129 | $ | 2,850 | ||||
| Brokerage commissions payable | 2,630 | — | ||||||
| Total liabilities | 11,759 | 2,850 | ||||||
| Commitments and Contingencies (Notes 4, 5 and 6) | ||||||||
| Capital | ||||||||
| Sponsor | 1,000 | 1,000 | ||||||
| Shareholders | 15,823,596 | 4,483,645 | ||||||
| Total Capital | 15,824,596 | 4,484,645 | ||||||
| Total liabilities and capital | $ | 15,836,355 | $ | 4,487,495 | ||||
| Shares outstanding | 1,000,040 | 100,040 | ||||||
| Net asset value per share | $ | 15.82 | $ | 44.83 | ||||
| Market value per share | $ | 16.30 | $ | 42.99 | ||||
See accompanying notes to financial statements.
| USCF Funds Trust | ||||||||
| Statements of Financial Condition | ||||||||
| At December 31, 2018 and 2017 | ||||||||
| United States 3x Short Oil Fund | ||||||||
| December 31, 2018 | December 31, 2017 | |||||||
| Assets | ||||||||
| Cash and cash equivalents (at cost $448,603 and $844,143, respectively) (Notes 2 and 6) | $ | 448,603 | $ | 844,143 | ||||
| Equity in trading accounts: | ||||||||
| Cash and cash equivalents (at cost $2,065,550 and $470,939, respectively) | 2,065,550 | 470,939 | ||||||
| Unrealized gain (loss) on open commodity futures contracts | 706,174 | (194,060 | ) | |||||
| Dividends receivable | 553 | — | ||||||
| Interest receivable | 1,170 | 576 | ||||||
| Other assets | — | 848 | ||||||
| Total assets | $ | 3,222,050 | $ | 1,122,446 | ||||
| Liabilities and Capital | ||||||||
| Management fees payable (Note 4) | $ | 1,858 | $ | 1,399 | ||||
| Brokerage commissions payable | 535 | — | ||||||
| Total liabilities | 2,393 | 1,399 | ||||||
| Commitments and Contingencies (Notes 4, 5 and 6) | ||||||||
| Capital | ||||||||
| Sponsor | 1,000 | 1,000 | ||||||
| Shareholders | 3,218,657 | 1,120,047 | ||||||
| Total Capital | 3,219,657 | 1,121,047 | ||||||
| Total liabilities and capital | $ | 3,222,050 | $ | 1,122,446 | ||||
| Shares outstanding | 250,040 | 100,040 | ||||||
| Net asset value per share | $ | 12.88 | $ | 11.21 | ||||
| Market value per share | $ | 12.52 | $ | 11.32 | ||||
See accompanying notes to financial statements.
| USCF Funds Trust | ||||||||
| Statements of Financial Condition | ||||||||
| At December 31, 2018 and 2017 | ||||||||
| USCF Funds Trust | ||||||||
| December 31, 2018 | December 31, 2017 | |||||||
| Assets | ||||||||
| Cash and cash equivalents (at cost $3,962,831 and $2,047,007, respectively) (Notes 2 and 6) | $ | 3,962,831 | $ | 2,047,007 | ||||
| Equity in trading accounts: | ||||||||
| Cash and cash equivalents (at cost $17,487,874 and $3,050,774, respectively) | 17,487,874 | 3,050,774 | ||||||
| Unrealized gain (loss) on open commodity futures contracts | (3,192,879 | ) | 509,180 | |||||
| Receivable for shares sold | 791,592 | — | ||||||
| Dividends receivable | 3,373 | — | ||||||
| Interest receivable | 5,297 | 3,284 | ||||||
| ETF transaction fees receivable | 317 | — | ||||||
| Other assets | — | 1,696 | ||||||
| Total assets | $ | 19,058,405 | $ | 5,611,941 | ||||
| Liabilities and Capital | ||||||||
| Management fees payable (Note 4) | $ | 10,987 | $ | 4,249 | ||||
| Brokerage commissions payable | 3,165 | — | ||||||
| Total liabilities | 14,152 | 4,249 | ||||||
| Commitments and Contingencies (Notes 4, 5 and 6) | ||||||||
| Capital | ||||||||
| Sponsor | 2,000 | 4,000 | ||||||
| Shareholders | 19,042,253 | 5,603,692 | ||||||
| Total Capital | 19,044,253 | 5,607,692 | ||||||
| Total liabilities and capital | $ | 19,058,405 | $ | 5,611,941 | ||||
| Shares outstanding | 1,250,080 | 200,080 | ||||||
See accompanying notes to financial statements.
| USCF Funds Trust Schedule of Investments At December 31, 2018 | ||||||||||||||||
| United States 3x Oil Fund | ||||||||||||||||
| Notional Amount | Number of Contracts | Value/ Unrealized Gain (Loss) on Open Commodity Contracts | % of Partners’ Capital | |||||||||||||
| Open Futures Contracts - Long | ||||||||||||||||
| United States Contracts | ||||||||||||||||
| NYMEX WTI Crude Oil Futures CL February 2019 contracts, expiring January 2019* | $ | 51,397,913 | 1,046 | $ | (3,899,053 | ) | (24.64 | ) | ||||||||
| Principal Amount | Market Value | |||||||||||||||
| Cash Equivalents | ||||||||||||||||
| United States Treasury Obligations | ||||||||||||||||
| U.S. Treasury Bills: | ||||||||||||||||
| 2.10%, 1/03/2019 | $ | 50,000 | $ | 49,994 | 0.32 | |||||||||||
| 2.10%, 1/10/2019 | 100,000 | 99,948 | 0.63 | |||||||||||||
| 2.15%, 1/24/2019 | 50,000 | 49,932 | 0.32 | |||||||||||||
| 2.19%, 2/14/2019 | 50,000 | 49,867 | 0.32 | |||||||||||||
| 2.20%, 2/21/2019 | 50,000 | 49,846 | 0.32 | |||||||||||||
| 2.24%, 2/28/2019 | 50,000 | 49,822 | 0.32 | |||||||||||||
| 2.38%, 3/07/2019 | 100,000 | 99,575 | 0.63 | |||||||||||||
| 2.28%, 3/14/2019 | 50,000 | 49,775 | 0.31 | |||||||||||||
| 2.33%, 3/21/2019 | 50,000 | 49,748 | 0.31 | |||||||||||||
| 2.34%, 3/28/2019 | 100,000 | 99,448 | 0.63 | |||||||||||||
| 2.37%, 4/04/2019 | 50,000 | 49,697 | 0.31 | |||||||||||||
| 2.42%, 4/18/2019 | 50,000 | 49,644 | 0.31 | |||||||||||||
| 2.46%, 5/02/2019 | 50,000 | 49,592 | 0.31 | |||||||||||||
| 2.47%, 5/09/2019 | 50,000 | 49,567 | 0.31 | |||||||||||||
| 2.50%, 5/23/2019 | 100,000 | 99,028 | 0.63 | |||||||||||||
| 2.49%, 5/30/2019 | 50,000 | 49,491 | 0.31 | |||||||||||||
| 2.51%, 6/06/2019 | 100,000 | 98,928 | 0.63 | |||||||||||||
| 2.49%, 6/27/2019 | 50,000 | 49,395 | 0.31 | |||||||||||||
| Total Treasury Obligations | 1,143,297 | 7.23 | ||||||||||||||
| United States - Money Market Funds | ||||||||||||||||
| Fidelity Investments Money Market Funds - Government Portfolio | 109,000 | 109,000 | 0.69 | |||||||||||||
| Goldman Sachs Financial Square Funds - Government Fund - Class FS | 1,950,000 | 1,950,000 | 12.32 | |||||||||||||
| Morgan Stanley Institutional Liquidity Funds - Government Portfolio | 260,000 | 260,000 | 1.64 | |||||||||||||
| Total Money Market Funds | 2,319,000 | 14.65 | ||||||||||||||
| Total Cash Equivalents | $ | 3,462,297 | 21.88 | |||||||||||||
| * | Collateral amounted to $15,422,324 on open futures contracts. |
See accompanying notes to financial statements.
| USCF Funds Trust Schedule of Investments At December 31, 2017 | ||||||||||||||||
| United States 3x Oil Fund | ||||||||||||||||
| Notional Amount | Number of Contracts | Value/ Unrealized Gain (Loss) on Open Commodity Contracts | % of Partners’ Capital | |||||||||||||
| Open Futures Contracts - Long | ||||||||||||||||
| United States Contracts | ||||||||||||||||
| NYMEX WTI Crude Oil Futures CL February 2018 contracts, expiring January 2018* | $ | 12,770,420 | 223 | $ | 703,240 | 15.68 | ||||||||||
| Principal Amount | Market Value | |||||||||||||||
| Cash Equivalents | ||||||||||||||||
| United States Treasury Obligations | ||||||||||||||||
| U.S. Treasury Bills: | ||||||||||||||||
| 1.12%, 2/15/2018 | $ | 50,000 | $ | 49,931 | 1.11 | |||||||||||
| 1.10%, 2/22/2018 | 50,000 | 49,921 | 1.11 | |||||||||||||
| 1.09%, 3/01/2018 | 50,000 | 49,911 | 1.11 | |||||||||||||
| 1.16%, 3/22/2018 | 50,000 | 49,872 | 1.11 | |||||||||||||
| 1.17%, 3/29/2018 | 50,000 | 49,859 | 1.11 | |||||||||||||
| 1.19%, 4/05/2018 | 100,000 | 99,691 | 2.22 | |||||||||||||
| 1.23%, 4/19/2018 | 50,000 | 49,818 | 1.11 | |||||||||||||
| 1.32%, 5/10/2018 | 50,000 | 49,765 | 1.11 | |||||||||||||
| 1.43%, 5/31/2018 | 50,000 | 49,704 | 1.11 | |||||||||||||
| 1.45%, 6/07/2018 | 50,000 | 49,686 | 1.11 | |||||||||||||
| 1.50%, 6/28/2018 | 100,000 | 99,263 | 2.22 | |||||||||||||
| Total Treasury Obligations | 647,421 | 14.43 | ||||||||||||||
| United States - Money Market Funds | ||||||||||||||||
| Fidelity Investments Money Market Funds - Government Portfolio | 500,000 | 500,000 | 11.15 | |||||||||||||
| Goldman Sachs Financial Square Funds - Government Fund - Class FS | 500,000 | 500,000 | 11.15 | |||||||||||||
| Total Money Market Funds | 1,000,000 | 22.30 | ||||||||||||||
| Total Cash Equivalents | $ | 1,647,421 | 36.73 | |||||||||||||
| * | Collateral amounted to $2,579,835 on open futures contracts. |
See accompanying notes to financial statements.
| USCF Funds Trust Schedule of Investments At December 31, 2018 | ||||||||||||||||
| United States 3x Short Oil Fund | ||||||||||||||||
| Notional Amount | Number of Contracts | Value/ Unrealized Gain (Loss) on Open Commodity Contracts | % of Partners’ Capital | |||||||||||||
| Open Futures Contracts - Short | ||||||||||||||||
| United States Contracts | ||||||||||||||||
| NYMEX WTI Crude Oil Futures CL February 2019 contracts, expiring January 2019* | (10,378,504 | ) | 213 | $ | 706,174 | 21.93 | ||||||||||
| Principal Amount | Market Value | |||||||||||||||
| Cash Equivalents | ||||||||||||||||
| United States Treasury Obligations | ||||||||||||||||
| U.S. Treasury Bills: | ||||||||||||||||
| 2.20%, 2/21/2019 | $ | 50,000 | $ | 49,845 | 1.55 | |||||||||||
| 2.37%, 4/04/2019 | 50,000 | 49,697 | 1.54 | |||||||||||||
| 2.47%, 5/09/2019 | 50,000 | 49,567 | 1.54 | |||||||||||||
| 2.50%, 5/23/2019 | 50,000 | 49,514 | 1.54 | |||||||||||||
| 2.51%, 6/06/2019 | 50,000 | 49,464 | 1.53 | |||||||||||||
| Total Treasury Obligations | 248,087 | 7.70 | ||||||||||||||
| United States - Money Market Funds | ||||||||||||||||
| Fidelity Investments Money Market Funds - Government Portfolio | 5,000 | 5,000 | 0.16 | |||||||||||||
| Goldman Sachs Financial Square Funds - Government Fund - Class FS | 300,000 | 300,000 | 9.32 | |||||||||||||
| Morgan Stanley Institutional Liquidity Funds - Government Portfolio | 40,000 | 40,000 | 1.24 | |||||||||||||
| Total Money Market Funds | 345,000 | 10.72 | ||||||||||||||
| Total Cash Equivalents | $ | 593,087 | 18.42 | |||||||||||||
| * | Collateral amounted to $2,065,550 on open futures contracts. |
See accompanying notes to financial statements.
| USCF Funds Trust Schedule of Investments At December 31, 2017 | ||||||||||||||||
| United States 3x Short Oil Fund | ||||||||||||||||
| Notional Amount | Number of Contracts | Value/ Unrealized Gain (Loss) on Open Commodity Contracts | % of Partners’ Capital | |||||||||||||
| Open Futures Contracts - Short | ||||||||||||||||
| United States Contracts | ||||||||||||||||
| NYMEX WTI Crude Oil Futures CL February 2018 contracts, expiring January 2018* | (3,129,040 | ) | 55 | $ | (194,060 | ) | (17.31 | ) | ||||||||
| Principal Amount | Market Value | |||||||||||||||
| Cash Equivalents | ||||||||||||||||
| United States Treasury Obligations | ||||||||||||||||
| U.S. Treasury Bills: | ||||||||||||||||
| 1.12%, 2/15/2018 | $ | 50,000 | $ | 49,931 | 4.46 | |||||||||||
| 1.10%, 2/22/2018 | 50,000 | 49,921 | 4.45 | |||||||||||||
| 1.09%, 3/01/2018 | 50,000 | 49,911 | 4.45 | |||||||||||||
| 1.16%, 3/22/2018 | 50,000 | 49,872 | 4.45 | |||||||||||||
| 1.17%, 3/29/2018 | 50,000 | 49,859 | 4.45 | |||||||||||||
| 1.19%, 4/05/2018 | 100,000 | 99,691 | 8.89 | |||||||||||||
| 1.23%, 4/19/2018 | 50,000 | 49,818 | 4.45 | |||||||||||||
| 1.32%, 5/10/2018 | 50,000 | 49,765 | 4.44 | |||||||||||||
| 1.43%, 5/31/2018 | 50,000 | 49,704 | 4.43 | |||||||||||||
| 1.45%, 6/07/2018 | 50,000 | 49,686 | 4.43 | |||||||||||||
| Total Treasury Obligations | 548,158 | 48.90 | ||||||||||||||
| United States - Money Market Funds | ||||||||||||||||
| Fidelity Investments Money Market Funds - Government Portfolio | 250,000 | 250,000 | 22.30 | |||||||||||||
| Goldman Sachs Financial Square Funds - Government Fund - Class FS | 290,000 | 290,000 | 25.87 | |||||||||||||
| Total Money Market Funds | 540,000 | 48.17 | ||||||||||||||
| Total Cash Equivalents | $ | 1,088,158 | 97.07 | |||||||||||||
| * | Collateral amounted to $470,939 on open futures contracts. |
See accompanying notes to financial statements.
| USCF Funds Trust | ||||||||
| Statements of Operations | ||||||||
| For the year ended December 31, 2018 and the period ended December 31, 2017* | ||||||||
| United States 3x Oil Fund | ||||||||
| Year ended December 31, 2018 | Period ended December 31, 2017* | |||||||
| Income | ||||||||
| Gain (loss) on trading of commodity futures contracts: | ||||||||
| Realized gain (loss) on closed futures contracts | $ | (6,453,505 | ) | $ | 1,290,712 | |||
| Change in unrealized gain (loss) on open futures contracts | (4,602,293 | ) | 703,240 | |||||
| Dividend income | 14,308 | — | ||||||
| Interest income** | 77,796 | 13,740 | ||||||
| ETF transaction fees | 6,919 | 1,000 | ||||||
| Total income (loss) | (10,956,775 | ) | 2,008,692 | |||||
| Expenses | ||||||||
| Management fees (Note 4) | 72,057 | 17,178 | ||||||
| Brokerage commissions | 42,681 | 7,869 | ||||||
| Total expenses | 114,738 | 25,047 | ||||||
| Net income (loss) | $ | (11,071,513 | ) | $ | 1,983,645 | |||
| Net income (loss) per share | $ | (29.01 | ) | $ | 19.83 | |||
| Net income (loss) per weighted average share | $ | (66.83 | ) | $ | 19.83 | |||
| Weighted average shares outstanding | 165,656 | 100,040 | ||||||
* Commencement of operations, July 20, 2017.
** Interest income does not exceed paid in kind of 5%.
See accompanying notes to financial statements.
| USCF Funds Trust | ||||||||
| Statements of Operations | ||||||||
| For the year ended December 31, 2018 and the period ended December 31, 2017* | ||||||||
| United States 3x Short Oil Fund | ||||||||
| Year ended December 31, 2018 | Period ended December 31, 2017* | |||||||
| Income | ||||||||
| Gain (loss) on trading of commodity futures contracts: | ||||||||
| Realized gain (loss) on closed futures contracts | $ | 335,535 | $ | (1,176,665 | ) | |||
| Change in unrealized gain (loss) on open futures contracts | 900,234 | (194,060 | ) | |||||
| Realized gain (loss) on short-term investments | (25 | ) | — | |||||
| Dividend income | 1,946 | — | ||||||
| Interest income** | 13,761 | 7,972 | ||||||
| ETF transaction fees | 640 | 1,000 | ||||||
| Total income (loss) | 1,252,091 | (1,361,753 | ) | |||||
| Expenses | ||||||||
| Management fees (Note 4) | 12,206 | 12,380 | ||||||
| Brokerage commissions | 8,980 | 5,820 | ||||||
| Total expenses | 21,186 | 18,200 | ||||||
| Net income (loss) | $ | 1,230,905 | $ | (1,379,953 | ) | |||
| Net income (loss) per share | $ | 1.67 | $ | (13.79 | ) | |||
| Net income (loss) per weighted average share | $ | 7.22 | $ | (13.79 | ) | |||
| Weighted average shares outstanding | 170,451 | 100,040 | ||||||
* Commencement of operations, July 20, 2017.
** Interest income does not exceed paid in kind of 5%.
See accompanying notes to financial statements.
| USCF Funds Trust | ||||||||
| Statements of Operations | ||||||||
| For the year ended December 31, 2018 and the period ended December 31, 2017* | ||||||||
| USCF Funds Trust | ||||||||
| Year ended December 31, 2018 | Period ended December 31, 2017* | |||||||
| Income | ||||||||
| Gain (loss) on trading of commodity futures contracts: | ||||||||
| Realized gain (loss) on closed futures contracts | $ | (6,117,970 | ) | $ | 114,047 | |||
| Change in unrealized gain (loss) on open futures contracts | (3,702,059 | ) | 509,180 | |||||
| Realized gain (loss) on short-term investments | (25 | ) | — | |||||
| Dividend income | 16,254 | — | ||||||
| Interest income** | 91,557 | 21,712 | ||||||
| ETF transaction fees | 7,559 | 2,000 | ||||||
| Total income (loss) | (9,704,684 | ) | 646,939 | |||||
| Expenses | ||||||||
| Management fees (Note 4) | 84,263 | 29,558 | ||||||
| Brokerage commissions | 51,661 | 13,689 | ||||||
| Total expenses | 135,924 | 43,247 | ||||||
| Net income (loss) | $ | (9,840,608 | ) | $ | 603,692 | |||
* Commencement of operations, July 20, 2017.
** Interest income does not exceed paid in kind of 5%.
See accompanying notes to financial statements.
| USCF Funds Trust | ||||||||||||
| Statements of Changes in Capital | ||||||||||||
| For the year ended December 31, 2018 and the period ended December 31, 2017* | ||||||||||||
| United States 3x Oil Fund | ||||||||||||
| Sponsor | Shareholders | Total | ||||||||||
| Balances, at July 20, 2017* | $ | — | $ | — | $ | — | ||||||
| Additions | 1,000 | 2,500,000 | 2,501,000 | |||||||||
| Net income (loss) | — | 1,983,645 | 1,983,645 | |||||||||
| Balances, at December 31, 2017 | 1,000 | 4,483,645 | 4,484,645 | |||||||||
| Additions | — | 22,411,464 | 22,411,464 | |||||||||
| Net income (loss) | — | (11,071,513 | ) | (11,071,513 | ) | |||||||
| Balances, at December 31, 2018 | $ | 1,000 | $ | 15,823,596 | $ | 15,824,596 | ||||||
| Statements of Changes in Shares Outstanding | ||||||||||||
| For the year ended December 31, 2018 and the period ended December 31, 2017* | ||||||||||||
| Sponsor | Shareholders | Total | ||||||||||
| Shares Outstanding, at July 20, 2017* | — | — | — | |||||||||
| Additions | 40 | 100,000 | 100,040 | |||||||||
| Redemptions | — | — | — | |||||||||
| Shares Outstanding, at December 31, 2017 | 40 | 100,000 | 100,040 | |||||||||
| Additions | — | 900,000 | 900,000 | |||||||||
| Redemptions | — | — | — | |||||||||
| Shares Outstanding, at December 31, 2018 | 40 | 1,000,000 | 1,000,040 | |||||||||
| Net Asset Value Per Share: | ||||||||||||
| At July 20, 2017* | $ | 25.00 | ||||||||||
| At December 31, 2017 | $ | 44.83 | ||||||||||
| At December 31, 2018 | $ | 15.82 | ||||||||||
* Commencement of operations, July 20, 2017.
See accompanying notes to financial statements.
| USCF Funds Trust | ||||||||||||
| Statements of Changes in Capital | ||||||||||||
| For the year ended December 31, 2018 and the period ended December 31, 2017* | ||||||||||||
| United States 3x Short Oil Fund | ||||||||||||
| Sponsor | Shareholders | Total | ||||||||||
| Balances, at July 20, 2017* | $ | — | $ | — | $ | — | ||||||
| Additions | 1,000 | 2,500,000 | 2,501,000 | |||||||||
| Net income (loss) | — | (1,379,953 | ) | (1,379,953 | ) | |||||||
| Balances, at December 31, 2017 | 1,000 | 1,120,047 | 1,121,047 | |||||||||
| Additions | — | 1,240,145 | 1,240,145 | |||||||||
| Redemptions | — | (372,440 | ) | (372,440 | ) | |||||||
| Net income (loss) | — | 1,230,905 | 1,230,905 | |||||||||
| Balances, at December 31, 2018 | $ | 1,000 | $ | 3,218,657 | $ | 3,219,657 | ||||||
| Statements of Changes in Shares Outstanding | ||||||||||||
| For the year ended December 31, 2018 and the period ended December 31, 2017* | ||||||||||||
| Sponsor | Shareholders | Total | ||||||||||
| Shares Outstanding, at July 20, 2017* | — | — | — | |||||||||
| Additions | 40 | 100,000 | 100,040 | |||||||||
| Redemptions | — | — | — | |||||||||
| Shares Outstanding, at December 31, 2017 | 40 | 100,000 | 100,040 | |||||||||
| Additions | — | 200,000 | 200,000 | |||||||||
| Redemptions | — | (50,000 | ) | (50,000 | ) | |||||||
| Shares Outstanding, at December 31, 2018 | 40 | 250,000 | 250,040 | |||||||||
| Net Asset Value Per Share: | ||||||||||||
| At July 20, 2017* | $ | 25.00 | ||||||||||
| At December 31, 2017 | $ | 11.21 | ||||||||||
| At December 31, 2018 | $ | 12.88 | ||||||||||
* Commencement of operations, July 20, 2017.
See accompanying notes to financial statements.
| USCF Funds Trust | ||||||||||||
| Statements of Changes in Capital | ||||||||||||
| For the year ended December 31, 2018 and the period ended December 31, 2017* | ||||||||||||
| USCF Funds Trust | ||||||||||||
| Sponsor | Shareholders | Total | ||||||||||
| Balances, at July 20, 2017* | $ | — | $ | — | $ | — | ||||||
| Additions | 4,000 | 5,000,000 | 5,004,000 | |||||||||
| Net income (loss) | — | 603,692 | 603,692 | |||||||||
| Balances, at December 31, 2017 | 4,000 | 5,603,692 | 5,607,692 | |||||||||
| Additions | — | 23,651,609 | 23,651,609 | |||||||||
| Redemptions | (2,000 | ) | (372,440 | ) | (374,440 | ) | ||||||
| Net income (loss) | — | (9,840,608 | ) | (9,840,608 | ) | |||||||
| Balances, at December 31, 2018 | $ | 2,000 | $ | 19,042,253 | $ | 19,044,253 | ||||||
| Statements of Changes in Shares Outstanding | ||||||||||||
| For the year ended December 31, 2018 and the period ended December 31, 2017* | ||||||||||||
| Sponsor | Shareholders | Total | ||||||||||
| Shares Outstanding, at July 20, 2017* | — | — | — | |||||||||
| Additions | 80 | 200,000 | 200,080 | |||||||||
| Redemptions | — | — | — | |||||||||
| Shares Outstanding, at December 31, 2017 | 80 | 200,000 | 200,080 | |||||||||
| Additions | — | 1,100,000 | 1,100,000 | |||||||||
| Redemptions | — | (50,000 | ) | (50,000 | ) | |||||||
| Shares Outstanding, at December 31, 2018 | 80 | 1,250,000 | 1,250,080 | |||||||||
* Commencement of operations, July 20, 2017.
See accompanying notes to financial statements.
| USCF Funds Trust | ||||||||
| Statements of Cash Flows | ||||||||
| For the year ended December 31, 2018 and the period ended December 31, 2017* | ||||||||
| United States 3x Oil Fund | ||||||||
| Year ended December 31, 2018 | Period ended December 31, 2017* | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | (11,071,513 | ) | $ | 1,983,645 | |||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Unrealized (gain) loss on open futures contracts | 4,602,293 | (703,240 | ) | |||||
| (Increase) decrease in dividends receivable | (2,820 | ) | — | |||||
| (Increase) decrease in interest receivable | (1,419 | ) | (2,708 | ) | ||||
| (Increase) decrease in ETF transaction fees receivable | (317 | ) | — | |||||
| (Increase) decrease in other assets | 848 | (848 | ) | |||||
| Increase (decrease) in management fees payable | 6,279 | 2,850 | ||||||
| Increase (decrease) in brokerage commissions payable | 2,630 | — | ||||||
| Net cash provided by (used in) operating activities | (6,464,019 | ) | 1,279,699 | |||||
| Cash Flows from Financing Activities: | ||||||||
| Addition of shares | 21,619,872 | 2,501,000 | ||||||
| Redemption of shares | — | — | ||||||
| Net cash provided by (used in) financing activities | 21,619,872 | 2,501,000 | ||||||
| Net Increase (Decrease) in Cash and Cash Equivalents | 15,155,853 | 3,780,699 | ||||||
| Total Cash, Cash Equivalents and Equity in Trading Accounts, beginning of period | 3,780,699 | — | ||||||
| Total Cash, Cash Equivalents and Equity in Trading Accounts, end of period | $ | 18,936,552 | $ | 3,780,699 | ||||
| Components of Cash and Cash Equivalents: | ||||||||
| Cash and Cash Equivalents | $ | 3,514,228 | $ | 1,200,864 | ||||
| Equity in Trading Accounts: | ||||||||
| Cash and Cash Equivalents | 15,422,324 | 2,579,835 | ||||||
| Total Cash, Cash Equivalents and Equity in Trading Accounts | $ | 18,936,552 | $ | 3,780,699 | ||||
*Commencement of operations, July 20, 2017.
See accompanying notes to financial statements.
| USCF Funds Trust | ||||||||
| Statements of Cash Flows | ||||||||
| For the year ended December 31, 2018 and the period ended December 31, 2017* | ||||||||
| United States 3x Short Oil Fund | ||||||||
| Year ended December 31, 2018 | Period ended December 31, 2017* | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | 1,230,905 | $ | (1,379,953 | ) | |||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Unrealized (gain) loss on open futures contracts | (900,234 | ) | 194,060 | |||||
| (Increase) decrease in dividends receivable | (553 | ) | — | |||||
| (Increase) decrease in interest receivable | (594 | ) | (576 | ) | ||||
| (Increase) decrease in other assets | 848 | (848 | ) | |||||
| Increase (decrease) in management fees payable | 459 | 1,399 | ||||||
| Increase (decrease) in brokerage commissions payable | 535 | — | ||||||
| Net cash provided by (used in) operating activities | 331,366 | (1,185,918 | ) | |||||
| Cash Flows from Financing Activities: | ||||||||
| Addition of shares | 1,240,145 | 2,501,000 | ||||||
| Redemption of shares | (372,440 | ) | — | |||||
| Net cash provided by (used in) financing activities | 867,705 | 2,501,000 | ||||||
| Net Increase (Decrease) in Cash and Cash Equivalents | 1,199,071 | 1,315,082 | ||||||
| Total Cash, Cash Equivalents and Equity in Trading Accounts, beginning of period | 1,315,082 | — | ||||||
| Total Cash, Cash Equivalents and Equity in Trading Accounts, end of period | $ | 2,514,153 | $ | 1,315,082 | ||||
| Components of Cash and Cash Equivalents: | ||||||||
| Cash and Cash Equivalents | $ | 448,603 | $ | 844,143 | ||||
| Equity in Trading Accounts: | ||||||||
| Cash and Cash Equivalents | 2,065,550 | 470,939 | ||||||
| Total Cash, Cash Equivalents and Equity in Trading Accounts | $ | 2,514,153 | $ | 1,315,082 | ||||
*Commencement of operations, July 20, 2017.
See accompanying notes to financial statements.
| USCF Funds Trust | ||||||||
| Statements of Cash Flows | ||||||||
| For the year ended December 31, 2018 and the period ended December 31, 2017* | ||||||||
| USCF Funds Trust | ||||||||
| Year ended December 31, 2018 | Period ended December 31, 2017* | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | (9,840,608 | ) | $ | 603,692 | |||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||
| Unrealized (gain) loss on open futures contracts | 3,702,059 | (509,180 | ) | |||||
| (Increase) decrease in dividends receivable | (3,373 | ) | — | |||||
| (Increase) decrease in interest receivable | (2,013 | ) | (3,284 | ) | ||||
| (Increase) decrease in ETF transaction fees receivable | (317 | ) | — | |||||
| (Increase) decrease in other assets | 1,696 | (1,696 | ) | |||||
| Increase (decrease) in management fees payable | 6,738 | 4,249 | ||||||
| Increase (decrease) in brokerage commissions payable | 3,165 | — | ||||||
| Net cash provided by (used in) operating activities | (6,132,653 | ) | 93,781 | |||||
| Cash Flows from Financing Activities: | ||||||||
| Addition of shares | 22,860,017 | 5,004,000 | ||||||
| Redemption of shares | (374,440 | ) | — | |||||
| Net cash provided by (used in) financing activities | 22,485,577 | 5,004,000 | ||||||
| Net Increase (Decrease) in Cash and Cash Equivalents | 16,352,924 | 5,097,781 | ||||||
| Total Cash, Cash Equivalents and Equity in Trading Accounts, beginning of period | 5,097,781 | — | ||||||
| Total Cash, Cash Equivalents and Equity in Trading Accounts, end of period | $ | 21,450,705 | $ | 5,097,781 | ||||
| Components of Cash and Cash Equivalents: | ||||||||
| Cash and Cash Equivalents | $ | 3,962,831 | $ | 2,047,007 | ||||
| Equity in Trading Accounts: | ||||||||
| Cash and Cash Equivalents | 17,487,874 | 3,050,774 | ||||||
| Total Cash, Cash Equivalents and Equity in Trading Accounts | $ | 21,450,705 | $ | 5,097,781 | ||||
*Commencement of operations, July 20, 2017.
See accompanying notes to financial statements.
USCF Funds Trust
Notes to Financial Statements
For the year ended December 31, 2018 and the period ended December 31, 2017
NOTE 1 — ORGANIZATION AND BUSINESS
The USCF Funds Trust (the “Trust”) is a Delaware statutory trust formed on March 2, 2016. The Trust is a series trust formed pursuant to the Delaware Statutory Trust Act. United States 3x Oil Fund (“USOU”) and United States 3x Short Oil Fund (“USOD”) are both series of the Trust. Two other series: REX S&P MLP Fund (“RMLP”), and REX S&P MLP Inverse Fund (“MLPD”, together with RMLP, the “REX Funds”)) never commenced operations and filed to withdraw from registration on March 30, 2018. USOU and USOD are commodity pools that continuously issue common shares of beneficial interest that may be purchased and sold on NYSE Arca Equities, Inc. stock exchange (“NYSE Arca”). USOU and USOD each referred to as the “Fund” and collectively referred to herein as the “Funds” or the “Trust Series.” The Trust and the Funds operate pursuant to the Trust’s Amended and Restated Declaration of Trust and Trust Agreement (the “Trust Agreement”), dated as of June 23, 2017. The sole trustee of the Trust is Wilmington Trust Company, National Association, a national banking association, with its principal place of business in the State of Delaware (the “Trustee”). The Trust and the Funds are managed and operated by the United States Commodity Funds, LLC (“USCF” or the “Sponsor”). USCF is a limited liability company formed in Delaware on May 10, 2005, that is registered as a commodity pool operator (“CPO”) with the Commodity Futures Trading Commission (“CFTC”) and is a member of the National Futures Association (“NFA”).
The Sponsor has the power and authority to establish and designate one or more series, or funds, and to issue shares thereof, from time to time as it deems necessary or desirable. The Sponsor also has the exclusive power to fix and determine the relative rights and preferences as between the shares of any series as to right of redemption, special and relative rights as to dividends and other distributions and on liquidation, conversion rights, and conditions under which the series shall have separate voting rights or no voting rights. The term for which the Trust will exist commenced on the date of the filing of the Certificate of Trust, and the Trust and any Fund will exist in perpetuity, unless earlier terminated in accordance with the provisions of the Trust Agreement. Each Fund is separate from all other Funds created as series of the Trust in respect of the assets and liabilities allocated to that Fund and each Fund represents a separate investment portfolio of the Trust. Separate and distinct records must be maintained for each Fund and the assets associated with a Fund shall be held in such separate and distinct records (directly or indirectly, including a nominee or otherwise) and accounted for in such separate and distinct records separately from the assets of any other Fund.
The Trustee is not affiliated with the Sponsor. The Trustee will accept legal service of process on the Trust in the State of Delaware and will make certain filings under the Delaware Statutory Trust Act. The Trustee’s duties and liabilities with respect to the offering of Shares and the management of the Trust are limited to its express obligations under the Trust Agreement and the Trustee does not owe any other duties to the Trust, the Sponsor or the shareholders of any Fund.
The Sponsor, is also the general partner of the United States Oil Fund, LP (“USO”), the United States Natural Gas Fund, LP (“UNG”), the United States 12 Month Oil Fund, LP (“USL”), the United States Gasoline Fund, LP (“UGA”) and the United States Diesel-Heating Oil Fund, LP (“UHN”), which listed their limited partnership shares on the American Stock Exchange (the “AMEX”) under the ticker symbols “USO” on April 10, 2006, “UNG” on April 18, 2007, “USL” on December 6, 2007, “UGA” on February 26, 2008 and “UHN” on April 9, 2008, respectively. As a result of the acquisition of the AMEX by NYSE Euronext, each of USO’s, UNG’s, USL’s, UGA’s and UHN’s shares commenced trading on the NYSE Arca on November 25, 2008. USCF is also the general partner of the United States Short Oil Fund, LP (“DNO”), the United States 12 Month Natural Gas Fund, LP (“UNL”) and the United States Brent Oil Fund, LP (“BNO”), which listed their limited partnership shares on the NYSE Arca under the ticker symbols “DNO” on September 24, 2009, “UNL” on November 18, 2009 and “BNO” on June 2, 2010, respectively. USCF is also the sponsor of the United States Commodity Index Fund (“USCI”), the United States Copper Index Fund (“CPER”), the United States Agriculture Index Fund (“USAG”), and the USCF Canadian Crude Oil Index Fund (“UCCO”), each a series of the United States Commodity Index Funds Trust. USCI, CPER and USAG listed their shares on the NYSE Arca under the ticker symbols “USCI” on August 10, 2010, “CPER” on November 15, 2011 and “USAG” on April 13, 2012, respectively. UCCO was in registration and had not commenced operations. UCCO filed to withdraw from registration on December 19, 2018.
On August 7, 2018, the Board of Directors of USCF authorized and approved the closing and liquidation for each of USAG, DNO and UHN together with a plan of liquidation for each of USAG, DNO and UHN. Each of the United States Commodity Index Funds Trust (“USCIFT”), of which USAG is a series, DNO and UHN filed a current report on Form 8-K dated August 8, 2018 with the SEC that included, as an exhibit, the press release, the applicable plan of liquidation, and, in the case of DNO and UHN, a copy of the notice of required withdrawal from the limited partnership sent to shareholders. In addition, each of USAG, DNO and UHN filed a prospectus supplement with the SEC dated August 8, 2018.
The liquidation date for each of USAG, DNO and UHN was September 12, 2018 and the proceeds of the liquidation were sent to all remaining shareholders of USAG, DNO and UHN, respectively, on or about September 13, 2018, with a subsequent distribution of additional liquidation proceeds sent to UHN shareholders on or about September 18, 2018. Each of USAG, DNO and UHN also filed a post-effective amendment to the registration statement with the SEC to terminate the offering of registered and unsold shares of USAG, DNO and UHN, respectively, and the NYSE Arca filed Forms 25 to effect the withdrawal of the listings for shares of each of USAG, DNO and UHN.
On September 4, 2018, the Trust, and USOD, a series of the Trust, received a notice from the NYSE Arca, notifying the Trust that USOD is not in compliance with the requirement under Rule 8.200E(d)(2)(c) that USOD meet the NYSE Arca’s continued listing standard to maintain a market value of not less than $1,000,000. USOD received an initial six-month period (the “Cure Period”) to regain compliance with Rule 8.200E(d)(2)(c), after the Trust submitted, and NYSE Arca accepted, a written response describing USOD’s plan to cure the deficiency during the Cure Period. To regain compliance during the Cure Period, USOD was required to demonstrate that it had a market value of $1,000,000 or more for thirty or more trading days. On November 21, 2018, USOD received a notice from NYSE Arca that it had regained compliance with NYSE Arca’s continued listing standard by maintaining a market value of not less than $1,000,000 for thirty or more trading days.
USOD remained in compliance from such date through December 31, 2018. However, there can be no assurance that USOD will be able to regain compliance with the market value requirement or otherwise maintain compliance with the other NYSE Arca listing requirements. See“Item 1A. Risk Factors - Other Risks” - “NYSE Arca may halt trading in the Fund’s shares, which would adversely impact an investor’s ability to sell shares” and “A Fund could terminate at any time and cause the liquidation and potential loss of an investor’s investment and could upset the overall maturity and timing of an investor’s investment portfolio” in the Registrant’s Annual Report on Form 10-K for the period ended December 31, 2018.
All funds listed previously, other than DNO, UHN and USAG, are referred to collectively herein as the “Related Public Funds”.
Effective as of July 20, 2017, each of USOU and USOD issued shares to certain authorized purchasers (“Authorized Participants”) by offering baskets consisting of 50,000 shares (“Creation Baskets”) through ALPS Distributors, Inc., as the marketing agent (the “Marketing Agent”). The purchase price for a Creation Basket of USOU or USOD, as applicable, is based upon the net asset value (“NAV”) of a share of USOU or USOD, as applicable, calculated shortly after the close of the core trading session on the NYSE Arca on the day the order to create the basket is properly received.
Authorized Participants pay USOU and USOD, as applicable, a transaction fee equal to 0.04% of total NAV of the Creation Baskets for each order placed to create one or more Creation Baskets or to redeem one or more baskets (“Redemption Baskets”), consisting of 50,000 shares. The transaction fee may be waived, reduced, increased or otherwise changed by USCF. Shares may be purchased or sold on a nationally recognized securities exchange in smaller increments than a Creation Basket or Redemption Basket. Shares purchased or sold on a nationally recognized securities exchange are not purchased or sold at the per share NAV of each Fund but rather at market prices quoted on such exchange.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as detailed in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification. Each series of the Trust is an investment company and follows the accounting and reporting guidance in FASB Topic 946.
The Trust financial statements included its respective series of funds financial statements including USOU, USOD and the REX Funds through December 31, 2017. For reporting commencing with the March 31, 2018 reporting period, and in conjunction with the termination of the REX Funds on March 30, 2018 the REX Funds financial statements have not been included, but are included in the overall Trust financial statements for the applicable reporting periods.
Revenue Recognition
Commodity futures contracts, forward contracts, physical commodities and related options are recorded on the trade date. All such transactions are recorded on the identified cost basis and marked to market daily. Unrealized gains or losses on open contracts are reflected in the statements of financial condition and represent the difference between the original contract amount and the market value (as determined by exchange settlement prices for futures contracts and related options and cash dealer prices at a predetermined time for forward contracts, physical commodities, and their related options) as of the last business day of the year or as of the last date of the financial statements. Changes in the unrealized gains or losses between periods are reflected in the statements of operations. The Funds earn income on funds held at the custodian or a futures commission merchant (“FCM”) at prevailing market rates earned on such investments.
Brokerage Commissions
Brokerage commissions on all open commodity futures contracts are accrued on a full-turn basis.
Income Taxes
The Funds are not subject to federal income taxes; each investor reports his/her allocable share of income, gain, loss deductions or credits on his/her own income tax return.
In accordance with U.S. GAAP, each Fund is required to determine whether a tax position is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any tax related appeals or litigation processes, based on the technical merits of the position. Each Fund files an income tax return in the U.S. federal jurisdiction and may file income tax returns in various U.S. states. None of the Trust Series is subject to income tax return examinations by major taxing authorities for years before 2017 (commencement of operations). The tax benefit recognized is measured as the largest amount of benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. De-recognition of a tax benefit previously recognized results in each Trust Series recording a tax liability that reduces net assets. However, each Trust Series’ conclusions regarding this policy may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analysis of and changes to tax laws, regulations and interpretations thereof. Each Trust Series recognizes interest accrued related to unrecognized tax benefits and penalties related to unrecognized tax benefits in income tax fees payable, if assessed. No interest expense or penalties have been recognized as of and for the year ended December 31, 2018 for any Trust Series.
Creations and Redemptions
Authorized Participants may purchase Creation Baskets or redeem Redemption Baskets only in blocks of 50,000 shares at a price equal to the NAV of the shares calculated shortly after the close of the core trading session on the NYSE Arca on the day the order is placed.
The Funds receive or pay the proceeds from shares sold or redeemed within two business days after the trade date of the purchase or redemption. The amounts due from Authorized Participants are reflected in the Funds’ statements of financial condition as receivable for shares sold and amounts payable to Authorized Participants upon redemption are reflected as payable for shares redeemed.
For USOU or USOD, Authorized Participants pay a transaction fee equal to 0.04% of total NAV of baskets to the Fund for each order placed to create one or more Creation Baskets or to redeem one or more Redemption Baskets. The transaction fee may be waived, reduced, increased or otherwise changed by USCF.
Trust Capital and Allocation of Income and Losses
The Trust is treated as a partnership for tax purposes. Profit or loss shall be allocated among the shareholders of each Trust Series in proportion to the number of shares each investor holds as of the close of each month. USCF may revise, alter or otherwise modify this method of allocation as described in the Trust Agreement.
Calculation of Per Share NAV
USOU and USOD Funds’ per share NAV is calculated on each NYSE Arca trading day by taking the current market value of its total assets, subtracting any liabilities and dividing that amount by the total number of shares outstanding. The Funds use the closing price for the contracts on the relevant exchange on that day to determine the value of contracts held on such exchange. The NAV for a normal trading day is released after 4:00 p.m. Eastern time (“E.T.”). For futures contracts and options traded on exchanges, USOU and USOD’s administrator (the “Administrator”) use the closing or settlement price published by the applicable exchange or, in the case of a market disruption, the last traded price before settlement. In the case of the Benchmark Oil Futures Contract, the NYMEX closing price (determined at the earlier of the close of the NYMEX or 2:30 p.m. E.T.) for the contracts traded on the NYMEX is used. Other investments’ values for purposes of determining the NAV for each of USOU and USOD, including Treasuries, cash equivalents (other than money market funds), cleared and non-cleared swaps, forwards, options and swaps are calculated by the Administrator using market quotations and market data, if available, or other information customarily used to determine the fair value of such investments as of the earlier of the close of the NYSE Arca or 4:00 p.m. E.T. Money market funds are valued at their end of day NAV.
Net Income (Loss) Per Share
Net income (loss) per share is the difference between the per share NAV at the beginning of each period and at the end of each period. The weighted average number of shares outstanding was computed for purposes of disclosing net income (loss) per weighted average share. The weighted average shares are equal to the number of shares outstanding at the end of the period, adjusted proportionately for shares added and redeemed based on the amount of time the shares were outstanding during such period. As of December 31, 2018, USCF held 40 shares of each of USOU and USOD.
Offering Costs
Offering costs incurred in connection with the registration of additional shares of any Trust Series after the initial registration of shares of such Trust Series are borne by each respective Trust Series. These costs include registration fees paid to regulatory agencies and all legal, accounting, printing and other expenses associated with such offerings. These costs are accounted for as a deferred charge and thereafter amortized to expense over twelve months on a straight-line basis or a shorter period if warranted.
Cash Equivalents
Cash equivalents include money market funds and overnight deposits or time deposits with original maturity dates of six months or less.
Reclassification
Certain amounts in the accompanying financial statements were reclassified to conform to the current presentation.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires USCF to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of the revenue and expenses during the reporting period. Actual results may differ from those estimates and assumptions.
NOTE 3 - TRUST SERIES
Pursuant to the Trust Agreement, four series have been designated as series of the Trust. Following the designation of the Funds as a series of the Trust, an initial capital contribution of $1,000 was made to each respective Fund by the Sponsor and deemed an initial contribution of capital to each respective Fund. The Sponsor contributed an aggregate of $4,000 to the Trust, $1,000 on March 31, 2016 for RMLP, $1,000 on April 15, 2016 for MLPD, $1,000 on June 20, 2017 for USOU and $1,000 on June 20, 2017 for USOD. As of December 31, 2018, RMLP and MLPD were no longer in registration. In connection with the commencement of trading for USOU and USOD under each Fund’s ticker, and the initial offering of shares, USCF received 40 Sponsor Shares of each of USOU and USOD in exchange for the previously received capital contribution, representing a beneficial ownership interest in each Fund. As of December 31, 2018, USCF held 40 shares of each of USOU and USOD.
On July 19, 2017, the Trust received a notice of effectiveness from the U.S. Securities and Exchange Commission (the “SEC”) for its registration of 30,000,000 shares of USOU and 30,000,000 shares of USOD on Form S-1 with the SEC. The order to permit listing of USOU and USOD shares on the NYSE Arca was received on July 20, 2017. On July 20, 2017, USOU and USOD listed their shares on the NYSE Arca under the ticker symbols “USOU” and “USOD,” respectively. USOU and USOD established their initial per share NAV by setting the price at $25.00. In order to satisfy NYSE Arca listing standards that at least 100,000 shares be outstanding at the beginning of the trading day on the NYSE Arca, on July 20, 2017, each Fund issued 100,000 shares to the initial Authorized Participant, RBC Capital Markets, LLC in exchange for $2,500,000 for USOU and $2,500,000 for USOD. Each of USOU and USOD also commenced investment operations on July 20, 2017 by purchasing Futures Contracts traded on the Futures Exchanges.
Investment Objective of the Funds
USOU
USOU’s shares trade on the NYSE Arca. The investment objective of USOU is for the daily changes in percentage terms of its shares’ per share net asset value (“NAV”) to reflect three times (3x) the daily change in percentage terms of the price of a specified short-term futures contract on light, sweet crude oil (the “Benchmark Oil Futures Contract”) less USOU’s expenses. To achieve this objective, USCF endeavors to have the notional value of USOU’s aggregate exposure to the Benchmark Oil Futures Contract at the close of each trading day approximately equal to 300% of its NAV. USOU seeks a return that is 300% of the return of the Benchmark Oil Futures Contract for a single day and does not seek to achieve its stated investment objective over a period of timegreater than one day. The pursuit of daily leveraged investment goals means that the return of USOU for a period longer than a full trading day may have no resemblance to 300% of the return of the Benchmark Oil Futures Contract for a period of longer than a full trading day because the aggregate return of USOU is the product of the series of each trading day’s daily returns.
USOU’s shares began trading on July 20, 2017. As of December 31, 2018, USOU held 1,046 Futures Contracts on the New York Mercantile Exchange (“NYMEX”), totaling 1,046 futures contracts.
USOD
USOD’s shares trade on the NYSE Arca. The investment objective of USOD is for the daily changes in percentage terms of its shares’ per share net asset value (“NAV”) to reflect three times the inverse (-3x) of the daily change in percentage terms of the price of a specified short-term futures contract on light, sweet crude oil (the “Benchmark Oil Futures Contract”) less USOD’s expenses. To achieve this objective, USCF endeavors to have the notional value of USOD’s aggregate short exposure to the Benchmark Oil Futures Contract at the close of each trading day approximately equal to 300% of its NAV. USOD seeks a return that is -300% of the return of the Benchmark Oil Futures Contract for a single day and does not seek to achieve its stated investment objective over a period of timegreater than one day. The pursuit of daily inverse leveraged investment goals means that the return of USOD for a period longer than a full trading day may have no resemblance to -300% of the return of the Benchmark Oil Futures Contract for a period of longer than a full trading day because the aggregate return of USOD is the product of the series of each trading day’s daily returns.
USOD’s shares began trading on July 20, 2017. As of December 31, 2018, USOD held 213 Futures Contracts on the NYMEX, totaling 213 futures contracts.
On September 4, 2018, the Trust, and USOD, a series of the Trust, received a notice from the NYSE Arca, notifying the Trust that USOD is not in compliance with the requirement under Rule 8.200E(d)(2)(c) that USOD meet the NYSE Arca’s continued listing standard to maintain a market value of not less than $1,000,000. USOD received an initial six-month period (the “Cure Period”) to regain compliance with Rule 8.200E(d)(2)(c), after the Trust submitted, and NYSE Arca accepted, a written response describing USOD’s plan to cure the deficiency during the Cure Period. To regain compliance during the Cure Period, USOD was required to demonstrate that it had a market value of $1,000,000 or more for thirty or more trading days. On November 21, 2018, USOD received a notice from NYSE Arca that it had regained compliance with NYSE Arca’s continued listing standard by maintaining a market value of not less than $1,000,000 for thirty or more trading days.
USOD remained in compliance from such date through December 31, 2018. However, there can be no assurance that USOD will be able to regain compliance with the market value requirement or otherwise maintain compliance with the other NYSE Arca listing requirements. See“Item 1A. Risk Factors - Other Risks” - “NYSE Arca may halt trading in the Fund’s shares, which would adversely impact an investor’s ability to sell shares” and “A Fund could terminate at any time and cause the liquidation and potential loss of an investor’s investment and could upset the overall maturity and timing of an investor’s investment portfolio” in the Registrant’s Annual Report on Form 10-K for the period ended December 31, 2018.
Trading Advisor and Trustee
The Trustee accepts service of legal process on the Trust in the State of Delaware and makes certain filings under the Delaware Statutory Trust Act. The
Trustee does not owe any other duties to the Trust, USCF or the shareholders.
NOTE 4 — FEES PAID BY THE FUND AND RELATED PARTY TRANSACTIONS
USCF Management Fee
Under the Trust Agreement, USCF is responsible for investing the assets of USOU and USOD (together the “Trust Series”) in accordance with the objectives and policies of USOU or USOD, as applicable. In addition, USCF has arranged for one or more third parties to provide administrative, custody, accounting, transfer agency and other necessary services to the Trust Series. For these services, each Fund is obligated to pay USCF a fee, which is paid monthly, equal to: from July 20, 2017 to November 14, 2017, 1.35% and 1.65%, respectively for USOU and USOD per annum of average daily total net assets, and commencing on November 15, 2017, 0.95% for each USOU and USOD per annum of average daily total net assets of each of USOU or USOD, as applicable.
Trustee Fee
The Trustee is the Delaware trustee of the Trust. In connection with the Trustee’s services to the Trust, USCF is responsible for paying the Trustee’s annual fee in the amount of $3,000.
Ongoing Registration Fees and Other Offering Expenses
The Trust Series pay (a) the applicable Management Fee payable to USCF, discussed above, (b) brokerage fees, futures commission merchant fees and other fees and commissions incurred in connection with the trading activities of the Fund, (c) any costs and expenses related to registration of additional shares of the Fund, and (d) all other expenses allocated to the Fund by USCF in consultation with REX MLPshares, LLC, as may be disclosed from time to time. During the year ended December 31, 2018 and the period from commencement of operations on July 20, 2017 to December 31, 2017, the Trust Series did not incur registration fees or other offering expenses.
Independent Directors’ and Officers’ Expenses
The Sponsor is responsible for paying its portion of the directors’ and officers’ liability insurance for the Funds and the fees and expenses of the independent directors who also serve as audit committee members of the Funds. The directors also serve as the directors, and for the independent directors as audit committee members, of the Related Public Funds and the other Funds that are series of the Trust. The Sponsor shares the fees and expenses on a pro rata basis with each Related Public Fund, as described above, based on the relative asset value of the Funds to the total Related Public Fund’s asset value computed on a daily basis. These fees and expenses for the year ended December 31, 2018 amounted to be a total of $521,689 for the Funds and the Related Public Funds. USOU’s portion of such fees and expenses for the year ended December 31, 2018 was $0 and USOD’s portion of such fees and expenses for the year ended December 31, 2018 was $0. For the period ended December 31, 2017, these fees and expenses were $536,375 for the Funds and the Related Public Funds. USOU’s portion of such fees and expenses for the period ended December 31, 2017 was $0 and USOD’s portion of such fees and expenses for the period ended December 31, 2017 was $0.
Licensing Fees
REX MLP shares, LLC licenses certain intellectual property rights to USCF and certain of the Funds.
Investor Tax Reporting Cost
The fees and expenses associated with the Funds’ audit expenses and tax accounting and reporting requirements are paid by the Sponsor. These costs are estimated to be $0 for the year ended December 31, 2018 for USOU and USOD. Tax reporting costs fluctuate between years due to the number of shareholders during any given year.
Other Expenses and Fees
In addition to the fees described above, each Active Fund pays all brokerage fees and other expenses in connection with the operation of such Active Fund, excluding costs and expenses paid by USCF as outlined inNote 5 – Contracts and Agreements below.
NOTE 5 — CONTRACTS AND AGREEMENTS
Marketing Agent Agreement
The Sponsor and the Trust, each on its own behalf and on behalf of the Funds, are party to a marketing agent agreement, dated as of July 14, 2017, as amended from time to time, with the Marketing Agent, whereby the Marketing Agent provides certain marketing services for the Funds as outlined in the agreement. The fee of the Marketing Agent, which is borne by the Sponsor, is equal to 0.06% on the assets of USOU and USOD up to $3 billion and 0.04% on the assets of USOU and USOD in excess of $3 billion. In no event may the aggregate compensation paid to the Marketing Agent and any affiliate of the Sponsor for distribution-related services exceed 10% of the gross proceeds of each Funds’ offering.
The above fee does not include website construction and development, which are also borne by the Sponsor.
Brown Brothers Harriman & Co. Agreements
The Sponsor and the Trust, on its own behalf and on behalf of the Funds, are also party to a custodian agreement, dated July 7, 2017, as amended from time to time, with Brown Brothers Harriman & Co. (“BBH&Co.”), whereby BBH&Co. holds investments on behalf of the Trust Series. The Sponsor pays the fees of the custodian, which are determined by the parties from time to time. In addition, the Sponsor and the Trust, on its own behalf and on behalf of the Funds, are party to an administrative agency agreement, dated July 7, 2017, as amended from time to time, with BBH&Co., whereby BBH&Co. acts as the administrative agent, transfer agent and registrar for the Funds. The Sponsor also pays the fees of BBH&Co. for its services under such agreement and such fees are determined by the parties from time to time.
Currently, the Sponsor pays BBH&Co. for its services, in the foregoing capacities, a minimum amount of $75,000 annually for its custody, fund accounting and fund administration services rendered to the Related Public Funds, as well as a $20,000 annual fee for its transfer agency services. In addition, the Sponsor pays BBH&Co. an asset-based charge of (a) 0.06% for the first $500 million of the Related Public Funds’ combined net assets, (b) 0.0465% for the Related Public Funds’ combined net assets greater than $500 million but less than $1 billion, and (c) 0.035% once the Related Public Funds’ combined net assets exceed $1 billion. The annual minimum amount will not apply if the asset-based charge for all accounts in the aggregate exceeds $75,000. The Sponsor also pays BBH&Co. transaction fees ranging from $7 to $15 per transaction.
Brokerage and Futures Commission Merchant Agreements
On July 6, 2017, the Trust entered into a futures commission merchant agreement with RBC to serve as the FCM for each Fund. The agreement with RBC requires it to provide services to each Fund in connection with the purchase and sale of Oil Futures Contracts and Other Oil-Related Investments that may be purchased and sold by or through RBC Capital for each Fund’s account. In accordance with the agreement, RBC Capital charges each Fund commissions of approximately $7 to $8 per round-turn trade, including applicable exchange, clearing and NFA fees for Oil Futures Contracts and options on Oil Futures Contracts. Such fees include those incurred when purchasing Oil Futures Contracts and options on Oil Futures Contracts when a Fund issues shares as a result of a Creation Basket, as well as fees incurred when selling Oil Futures Contracts and options on Oil Futures Contracts when a Fund redeems shares as a result of a Redemption Basket. Such fees are also incurred when Oil Futures Contracts and options on Oil Futures Contracts are purchased or redeemed for the purpose of rebalancing the portfolio. Each Fund also incurs commissions to brokers for the purchase and sale of Oil Futures Contracts, Other Oil-Related Investments or short-term obligations of the United States of two years or less (“Treasuries”).
USOU
| For the Year Ended December 31, 2018 | For the Period from Commencement of Operations on July 20, 2017 to December 31, 2017* | |||||||
| Total commissions accrued to brokers | $ | 42,681 | $ | 7,869 | ||||
| Total commissions as annualized percentage of average total net assets | 0.56 | % | 0.55 | % | ||||
| Commissions accrued as a result of rebalancing | $ | 39,609 | $ | 7,371 | ||||
| Percentage of commissions accrued as a result of rebalancing | 92.80 | % | 93.67 | % | ||||
| Commissions accrued as a result of creation and redemption activity | $ | 3,072 | $ | 498 | ||||
| Percentage of commissions accrued as a result of creation and redemption activity | 7.20 | % | 6.33 | % | ||||
*Commencement of operations, July 20, 2017.
The increase in total commissions accrued to brokers for the year ended December 31, 2018, compared to the period from commencement of operations on July 20, 2017 to December 31, 2017, was due primarily to a higher number of contracts held and traded. However, there can be no assurance that commission costs and portfolio turnover will not cause commission expenses to rise in future quarters.
USOD
| For the Year Ended December 31, 2018 | For the Period from Commencement of Operations on July 20, 2017 to December 31, 2017* | |||||||
| Total commissions accrued to brokers | $ | 8,980 | $ | 5,820 | ||||
| Total commissions as annualized percentage of average total net assets | 0.70 | % | 0.71 | % | ||||
| Commissions accrued as a result of rebalancing | $ | 8,452 | $ | 5,313 | ||||
| Percentage of commissions accrued as a result of rebalancing | 94.12 | % | 91.29 | % | ||||
| Commissions accrued as a result of creation and redemption activity | $ | 528 | $ | 507 | ||||
| Percentage of commissions accrued as a result of creation and redemption activity | 5.88 | % | 8.71 | % | ||||
* Commencement of operations, July 20, 2017.
The increase in total commissions accrued to brokers for the year ended December 31, 2018, compared to the period from commencement of operations on July 20, 2017 to December 31, 2017, was due primarily to a higher number of contracts held and traded. However, there can be no assurance that commission costs and portfolio turnover will not cause commission expenses to rise in future quarters.
Other Fund Service Providers
The Sponsor has entered into an agreement with REX MLPshares, LLC (“REX”), a single member limited liability company that was formed in the state of Delaware on December 3, 2015. REX is a wholly-owned subsidiary of REX Shares, LLC, a Delaware limited liability company (“REX Shares”). Pursuant to the agreement between the Sponsor and REX, REX will assist the Sponsor with the development and launch of each respective Fund and provide certain ongoing services. REX also licenses certain intellectual property rights to the Sponsor and certain of the Funds. REX does not make investment decisions for the Sponsor, the Trust or the Funds and is not involved in the day-to-day operations or maintenance of the Funds.
NOTE 6 — FINANCIAL INSTRUMENTS, OFF-BALANCE SHEET RISKS AND CONTINGENCIES
The Trust Series may engage in the trading of futures contracts, options on futures contracts, cleared swaps and OTC swaps (collectively, “derivatives”). The Trust Series are exposed to both market risk, which is the risk arising from changes in the market value of the contracts, and credit risk, which is the risk of failure by another party to perform according to the terms of a contract.
The Trust Series may enter into futures contracts, options on futures contracts and cleared swaps to gain exposure to changes in the value of an underlying commodity. A futures contract obligates the seller to deliver (and the purchaser to accept) the future delivery of a specified quantity and type of a commodity at a specified time and place. Some futures contracts may call for physical delivery of the asset, while others are settled in cash. The contractual obligations of a buyer or seller may generally be satisfied by taking or making physical delivery of the underlying commodity or by making an offsetting sale or purchase of an identical futures contract on the same or linked exchange before the designated date of delivery. Cleared swaps are agreements that are eligible to be cleared by a clearinghouse, e.g., ICE Clear Europe, and provide the efficiencies and benefits that centralized clearing on an exchange offers to traders of futures contracts, including credit risk intermediation and the ability to offset positions initiated with different counterparties.
The purchase and sale of futures contracts, options on futures contracts and cleared swaps require margin deposits with an FCM. Additional deposits may be necessary for any loss on contract value. The Commodity Exchange Act requires an FCM to segregate all customer transactions and assets from the FCM’s proprietary activities.
Futures contracts, options on futures contracts and cleared swaps involve, to varying degrees, elements of market risk (specifically commodity price risk) and exposure to loss in excess of the amount of variation margin. The face or contract amounts reflect the extent of the total exposure each of the Trust Series has in the particular classes of instruments. Additional risks associated with the use of futures contracts are an imperfect correlation between movements in the price of the futures contracts and the market value of the underlying securities and the possibility of an illiquid market for a futures contract. Buying and selling options on futures contracts exposes investors to the risks of purchasing or selling futures contracts.
All of the futures contracts held by USOU and USOD through December 31, 2018 were exchange-traded. The risks associated with exchange-traded contracts are generally perceived to be less than those associated with OTC swaps since, in OTC swaps, a party must rely solely on the credit of its respective individual counterparties. However, in the future, if any of the Funds were to enter into non-exchange traded contracts, it would be subject to the credit risk associated with counterparty non-performance. The credit risk from counterparty non-performance associated with such instruments is the net unrealized gain, if any, on the transaction. The Funds have credit risk under its futures contracts since the sole counterparty to all domestic and foreign futures contracts is the clearinghouse for the exchange on which the relevant contracts are traded. In addition, the Funds bear the risk of financial failure by the clearing broker.
The Trust Series’ cash and other property, such as Treasuries, deposited with an FCM are considered commingled with all other customer funds, subject to the FCM’s segregation requirements. In the event of an FCM’s insolvency, recovery may be limited to a pro rata share of segregated funds available. It is possible that the recovered amount could be less than the total of cash and other property deposited. The insolvency of an FCM could result in the complete loss of each of the Funds’ assets posted with that FCM; however, the majority of the Funds’ assets are held in investments in Treasuries, cash and/or cash equivalents with the Funds’ custodian and would not be impacted by the insolvency of an FCM. The failure or insolvency of the Funds’ custodian, however, could result in a substantial loss of the Funds’ assets.
The Sponsor invests a portion of the Trust Series’ cash in money market funds that seek to maintain a stable per share NAV. The Trust Series are exposed to any risk of loss associated with an investment in such money market funds. As of December 31, 2018, USOU and USOD held investments in money market funds in the amounts of $2,319,000 and $345,000, respectively. As of December 31, 2017, USOU and USOD held investments in money market funds in the amounts of $1,000,000 and $540,000, respectively. USOU and USOD also hold cash deposits with its custodian. Pursuant to a written agreement with BBH&Co., uninvested overnight cash balances are swept to offshore branches of U.S. regulated and domiciled banks located in Toronto, Canada; London, United Kingdom; Grand Cayman, Cayman Islands; and Nassau, Bahamas; which are subject to U.S. regulation and regulatory oversight. As of December 31, 2018 and December 31, 2017, USOU held cash deposits and investments in Treasuries in the amounts of $16,617,552 and $2,780,699, respectively, with the custodian and FCM. As of December 31, 2018 and December 31, 2017, USOD held cash deposits and investments in Treasuries in the amounts of $2,169,153 and $775,082, respectively, with the custodian and FCM. Some or all of these amounts may be subject to loss should USOU’s or USOD’s custodian and/or FCM cease operations.
For derivatives, risks arise from changes in the market value of the contracts. Theoretically, the Trust Series are exposed to market risk equal to the value of futures contracts purchased and unlimited liability on such contracts sold short. As both a buyer and a seller of options, the Trust Series pay or receive a premium at the outset and then bear the risk of unfavorable changes in the price of the contract underlying the option.
The Trust Series’ policy is to continuously monitor its exposure to market and counterparty risk through the use of a variety of financial, position and credit exposure reporting controls and procedures. In addition, the Trust Series have a policy of requiring review of the credit standing of each broker or counterparty with which it conducts business.
The financial instruments held by the Trust Series are reported in its statements of financial condition at market or fair value, or at carrying amounts that approximate fair value, because of their highly liquid nature and short-term maturity.
NOTE 7 – FINANCIAL HIGHLIGHTS
The following tables present per share performance data and other supplemental financial data for USOU and USOD for the year ended December 31, 2018 and the period from commencement of operations on July 20, 2017 to December 31, 2017 for the shareholders. This information has been derived from information presented in the financial statements.
USOU
| Year ended December 31, 2018 | For the Period from Commencement of Operations on July 20, 2017 to December 31, 2017* | |||||||
| Per Share Operating Performance: | ||||||||
| Net asset value, beginning of period | $ | 44.83 | $ | 25.00 | ||||
| Total income (loss) | (28.32 | ) | 20.08 | |||||
| Total expenses | (0.69 | ) | (0.25 | ) | ||||
| Net increase (decrease) in net asset value | (29.01 | ) | 19.83 | |||||
| Net asset value, end of period | $ | 15.82 | $ | 44.83 | ||||
| Total Return | (64.71 | )% | 79.32 | % | ||||
| Ratios to Average Net Assets | ||||||||
| Total income (loss) | (144.45 | )% | 63.41 | % | ||||
| Management fees | 0.95 | %** | 1.21 | %*** | ||||
| Expenses excluding management fees | 0.56 | % | 0.55 | %*** | ||||
| Net income (loss) | (145.97 | )% | 62.62 | % | ||||
* Commencement of operations, July 20, 2017.
**Effective November 15, 2017, USCF permanently lowered the management fee to 0.95% (95 basis points) per annum of average daily total net assets for USOU.
***Annualized.
USOD
| Year ended December 31, 2018 | For the Period from Commencement of Operations on July 20, 2017 to December 31, 2017* | |||||||
| Per Share Operating Performance: | ||||||||
| Net asset value, beginning of period | $ | 11.21 | $ | 25.00 | ||||
| Total income (loss) | 1.79 | (13.61 | ) | |||||
| Total expenses | (0.12 | ) | (0.18 | ) | ||||
| Net increase (decrease) in net asset value | 1.67 | (13.79 | ) | |||||
| Net asset value, end of period | $ | 12.88 | $ | 11.21 | ||||
| Total Return | 14.90 | % | (55.16 | )% | ||||
| Ratios to Average Net Assets | ||||||||
| Total income (loss) | 97.45 | % | (74.49 | )% | ||||
| Management fees | 0.95 | %** | 1.51 | %*** | ||||
| Expenses excluding management fees | 0.70 | % | 0.71 | %*** | ||||
| Net income (loss) | 95.80 | % | (75.48 | )% | ||||
* Commencement of operations, July 20, 2017.
**Effective November 15, 2017, USCF permanently lowered the management fee to 0.95% (95 basis points) per annum of average daily total net assets for USOD.
*** Annualized.
Total returns are calculated based on the change in value during the period. An individual shareholder’s total return and ratio may vary from the above total returns and ratios based on the timing of contributions to and withdrawals from each Trust Series.
NOTE 8 – QUARTERLY FINANCIAL DATA (Unaudited)
The following summarized (unaudited) quarterly financial information presents the results of operations and other data for the three-month periods ended March 31, June 30, September 30 and December 31, 2018 and September 30 and December 31, 2017.
USOU
| First Quarter 2018 | Second Quarter 2018 | Third Quarter 2018 | Fourth Quarter 2018 | |||||||||||||
| Total Income (Loss) | $ | 1,017,751 | $ | 2,322,542 | $ | 1,573,176 | $ | (15,870,244 | ) | |||||||
| Total Expenses | 18,414 | 21,048 | 28,860 | 46,416 | ||||||||||||
| Net Income (Loss) | $ | 999,337 | $ | 2,301,494 | $ | 1,544,316 | $ | (15,916,660 | ) | |||||||
| Net Income (Loss) per Share | $ | 9.99 | $ | 23.00 | $ | 2.77 | $ | (64.77 | ) | |||||||
| Third Quarter 2017* | Fourth Quarter 2017* | |||||||
| Total Income (Loss) | $ | 512,497 | $ | 1,496,195 | ||||
| Total Expenses | 10,415 | 14,632 | ||||||
| Net Income (Loss) | $ | 502,082 | $ | 1,481,563 | ||||
| Net Income (Loss) per Share | $ | 5.02 | $ | 14.81 | ||||
* Commencement of operations, July 20, 2017.
USOD
| First Quarter 2018 | Second Quarter 2018 | Third Quarter 2018 | Fourth Quarter 2018 | |||||||||||||
| Total Income (Loss) | $ | (347,145 | ) | $ | (454,209 | ) | $ | (140,980 | ) | $ | 2,194,425 | |||||
| Total Expenses | 5,291 | 3,556 | 3,204 | 9,135 | ||||||||||||
| Net Income (Loss) | $ | (352,436 | ) | $ | (457,765 | ) | $ | (144,184 | ) | $ | 2,185,290 | |||||
| Net Income (Loss) per Share | $ | (3.01 | ) | $ | (3.29 | ) | $ | (0.73 | ) | $ | 8.70 | |||||
| Third Quarter 2017* | Fourth Quarter 2017* | |||||||
| Total Income (Loss) | $ | (640,360 | ) | $ | (721,393 | ) | ||
| Total Expenses | 10,681 | 7,519 | ||||||
| Net Income (Loss) | $ | (651,041 | ) | $ | (728,912 | ) | ||
| Net Income (Loss) per Share | $ | (6.51 | ) | $ | (7.28 | ) | ||
* Commencement of operations, July 20, 2017.
NOTE 9 — FAIR VALUE OF FINANCIAL INSTRUMENTS
The Trust and the Trust Series value their investments in accordance with Accounting Standards Codification 820 – Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurement. The changes to past practice resulting from the application of ASC 820 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurement. ASC 820 establishes a fair value hierarchy that distinguishes between: (1) market participant assumptions developed based on market data obtained from sources independent of the Trust and the Trust Series (observable inputs) and (2) the Trust’s and the Trust Series’ own assumptions about market participant assumptions developed based on the best information available under the circumstances (unobservable inputs). The three levels defined by the ASC 820 hierarchy are as follows:
Level I – Quoted prices (unadjusted) in active markets foridenticalassets or liabilities that the reporting entity has the ability to access at the measurement date.
Level II – Inputs other than quoted prices included within Level I that are observable for the asset or liability, either directly or indirectly. Level II assets include the following: quoted prices forsimilarassets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).
Level III – Unobservable pricing input at the measurement date for the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available.
In some instances, the inputs used to measure fair value might fall within different levels of the fair value hierarchy. The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest input level that is significant to the fair value measurement in its entirety.
| The following table summarizes the valuation of USOU’s securities at December 31, 2018 using the fair value hierarchy: | ||||||||||||||||
| At December 31, 2018 | Total | Level I | Level II | Level III | ||||||||||||
| Short-Term Investments | $ | 3,462,297 | $ | 3,462,297 | $ | — | $ | — | ||||||||
| Exchange-Traded Futures Contracts | ||||||||||||||||
| United States Contracts | (3,899,053 | ) | (3,899,053 | ) | — | — | ||||||||||
During the year ended December 31, 2018, there were no transfers between Level I and Level II.
| The following table summarizes the valuation of USOU’s securities at December 31, 2017 using the fair value hierarchy: | ||||||||||||||||
| At December 31, 2017 | Total | Level I | Level II | Level III | ||||||||||||
| Short-Term Investments | $ | 1,647,421 | $ | 1,647,421 | $ | — | $ | — | ||||||||
| Exchange-Traded Futures Contracts | ||||||||||||||||
| United States Contracts | 703,240 | 703,240 | — | — | ||||||||||||
During the period from commencement of operations on July 20, 2017 to December 31, 2017, there were no transfers between Level I and Level II.
| The following table summarizes the valuation of USOD’s securities at December 31, 2018 using the fair value hierarchy: | ||||||||||||||||
| At December 31, 2018 | Total | Level I | Level II | Level III | ||||||||||||
| Short-Term Investments | $ | 593,087 | $ | 593,087 | $ | — | $ | — | ||||||||
| Exchange-Traded Futures Contracts | ||||||||||||||||
| United States Contracts | 706,174 | 706,174 | — | — | ||||||||||||
During the year ended December 31, 2018, there were no transfers between Level I and Level II.
| The following table summarizes the valuation of USOD’s securities at December 31, 2017 using the fair value hierarchy: | ||||||||||||||||
| At December 31, 2017 | Total | Level I | Level II | Level III | ||||||||||||
| Short-Term Investments | $ | 1,088,158 | $ | 1,088,158 | $ | — | $ | — | ||||||||
| Exchange-Traded Futures Contracts | ||||||||||||||||
| United States Contracts | (194,060 | ) | (194,060 | ) | — | — | ||||||||||
During the period from commencement of operations on July 20, 2017 to December 31, 2017, there were no transfers between Level I and Level II.
The Trust and the Funds have adopted the provisions of Accounting Standards Codification 815 – Derivatives and Hedging, which require presentation of qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts and gains and losses on derivatives.
Fair Value of Derivative Instruments Held by USOU
| Derivatives not Accounted for as Hedging Instruments | Statements of Financial Condition Location | Fair Value At December 31, 2018 | Fair Value At December 31, 2017 | |||||||
| Futures - Commodity Contracts | Assets | $ | (3,899,053 | ) | $ | 703,240 | ||||
Fair Value of Derivative Instruments Held by USOD
| Derivatives not Accounted for as Hedging Instruments | Statements of Financial Condition Location | Fair Value At December 31, 2018 | Fair Value At December 31, 2017 | |||||||
| Futures - Commodity Contracts | Assets | $ | 706,174 | $ | (194,060 | ) | ||||
| The Effect of Derivative Instruments on the Statements of Operations of USOU | ||||||||||||||||||
| For the year ended December 31, 2018 | For the period from commencement of operations on July 20, 2017 to December 31, 2017* | |||||||||||||||||
| Derivatives not Accounted for as Hedging Instruments | Location of Gain (Loss) on Derivatives Recognized in Income | Realized Gain (Loss) on Derivatives Recognized in Income | Change in Unrealized Gain (Loss) on Derivatives Recognized in Income | Realized Gain (Loss) on Derivatives Recognized in Income | Change in Unrealized Gain (Loss) on Derivatives Recognized in Income | |||||||||||||
| Futures - Commodity Contracts | Realized gain (loss) on closed positions | $ | (6,453,505 | ) | $ | 1,290,712 | ||||||||||||
| Change in unrealized gain (loss) on open positions | $ | (4,602,293 | ) | $ | 703,240 | |||||||||||||
* Inception date, July 20, 2017.
| The Effect of Derivative Instruments on the Statements of Operations of USOD | ||||||||||||||||||
| For the year ended December 31, 2018 | For the period from commencement of operations on July 20, 2017 to December 31, 2017* | |||||||||||||||||
| Derivatives not Accounted for as Hedging Instruments | Location of Gain (Loss) on Derivatives Recognized in Income | Realized Gain (Loss) on Derivatives Recognized in Income | Change in Unrealized Gain (Loss) on Derivatives Recognized in Income | Realized Gain (Loss) on Derivatives Recognized in Income | Change in Unrealized Gain (Loss) on Derivatives Recognized in Income | |||||||||||||
| Futures - Commodity Contracts | Realized gain (loss) on closed positions | $ | 335,535 | $ | (1,176,665 | ) | ||||||||||||
| Change in unrealized gain (loss) on open positions | $ | 900,234 | $ | (194,060 | ) | |||||||||||||
* Inception date, July 20, 2017.
NOTE 10 – RECENT ACCOUNTING PRONOUNCEMENTS
In August 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2015-14, Revenue from Contracts with Customers, modifying ASU 2014-09. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This standard became effective for fiscal years beginning after December 15, 2017, and interim periods within those annual periods. There were no material impacts to the Fund’s financial statements upon adoption.
New Accounting Pronouncements
In November 2016, the FASB issued Accounting Standards Update No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” (“ASU 2016-18”), which amends ASC 230 to provide guidance on the classification and presentation of changes in restricted cash and restricted cash equivalents on the statement of cash flows. The ASU is effective for annual periods beginning after December 15, 2017, and interim periods within those annual periods. At this time, management has evaluated the implications of these changes on the financial statements and adopted with no material impact.
NOTE 11 – SUBSEQUENT EVENTS
The Trust and each Trust Series have performed and evaluated the need for disclosure and/or adjustments resulting from subsequent events through the date the financial statements were issued. This evaluation did not result in any subsequent events that necessitated disclosures and/or adjustments.