Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
USCI > SEC Filings for USCI > Form 10-K on 10-Mar-2014All Recent SEC Filings

Show all filings for UNITED STATES COMMODITY INDEX FUNDS TRUST

Form 10-K for UNITED STATES COMMODITY INDEX FUNDS TRUST


10-Mar-2014

Annual Report


Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the financial statements and the notes thereto of the Trust included elsewhere in this annual report on Form 10-K.

Forward-Looking Information

This annual report on Form 10-K, including this "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains forward-looking statements regarding the plans and objectives of management for future operations. This information may involve known and unknown risks, uncertainties and other factors that may cause the Trust's actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe the Trust's future plans, strategies and expectations, are generally identifiable by use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend" or "project," the negative of these words, other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and the Trust cannot assure investors that the projections included in these forward-looking statements will come to pass. The Trust's actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors.

The Trust has based the forward-looking statements included in this annual report on Form 10-K on information available to it on the date of this annual report on Form 10-K, and the Trust assumes no obligation to update any such forward-looking statements. Although the Trust undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, investors are advised to consult any additional disclosures that the Trust may make directly to them or through reports that the Trust in the future files with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

Introduction

Each Trust Series is a commodity pool that issues shares representing fractional undivided beneficial interests in such Trust Series that may be purchased and sold on the NYSE Arca. The Trust Series are series of the Trust, a Delaware statutory trust formed on December 21, 2009.

United States Commodity Index Fund

USCI invests in Futures Contracts for commodities that are traded on the Futures Exchanges and, to a lesser extent, in order to comply with regulatory requirements or in view of market conditions, Other Commodity-Related Investments. Market conditions that USCF currently anticipates could cause USCI to invest in Other Commodity Related Investments would be those allowing USCI to obtain greater liquidity or to execute transactions with more favorable pricing.

The investment objective of USCI is for the daily changes in percentage terms of its shares' per share NAV to reflect the daily changes in percentage terms of the SDCI, less USCI's expenses. USCF does not intend to operate USCI in a fashion such that its per share NAV will equal, in dollar terms, the spot prices of the commodities underlying the Benchmark Component Futures Contracts that comprise the SDCI or the prices of any particular group of Futures Contracts. The SDCI is comprised of 14 Futures Contracts that are selected on a monthly basis from a list of 27 possible Futures Contracts. USCI invests first in the current Benchmark Component Futures Contracts and other Futures Contracts intended to replicate the return on the current Benchmark Component Futures Contracts and, thereafter may hold Futures Contracts in a particular commodity other than one specified as the Benchmark Component Futures Contract, or may hold Other Commodity-Related Investments that may fail to closely track the SDCI's total return movements. If USCI increases in size, and due to its obligations to comply with regulatory limits or due to other market pricing or liquidity factors, USCI may invest in Futures Contract months other than the designated month specified as the Benchmark Component Futures Contract, or in Other Commodity-Related Investments, which may have the effect of increasing transaction related expenses and may result in increased tracking error.

USCI seeks to achieve its investment objective by investing in Futures Contracts and Other Commodity-Related Investments such that daily changes in its per share NAV closely track the daily changes in the price of the SDCI. USCI's positions in Commodity Interests are rebalanced on a monthly basis in order to track the changing nature of the SDCI. If Futures Contracts relating to a particular commodity remain in the SDCI from one month to the next, such Futures Contracts are rebalanced to the 7.14% target weight. Specifically, on the Selection Date, it will be determined if a current Benchmark Component Futures Contract will be replaced by a new Futures Contract in either the same or different underlying commodity as a Benchmark Component Futures Contract for the following month, in which case USCI's investments would have to be changed accordingly. In order that USCI's trading does not unduly cause extraordinary market movements, and to make it more difficult for third parties to profit by trading based on market movements that could be expected from changes in the Benchmark Component Futures Contracts, USCI's investments typically are not rebalanced entirely on a single day, but rather typically rebalanced over a period of four days. After fulfilling the margin and collateral requirements with respect to its Commodity Interests, USCF invests the remainder of USCI's proceeds from the sale of shares in Treasuries or cash equivalents, and/or merely hold such assets in cash (generally in interest-bearing accounts). As of December 31, 2013, USCI held 2,409 Futures Contracts on the NYMEX, 2,943 Futures Contracts on the ICE Futures, 1,529 Futures Contracts on the CBOT, 1,128 Futures Contracts on the CME, 5,130 Futures Contracts on the LME and 434 Futures Contracts on the COMEX.

United States Copper Index Fund

CPER invests in Futures Contracts for commodities that are traded on the COMEX and, to a lesser extent, in order to comply with regulatory requirements or in view of market conditions, Other Copper-Related Investments. Market conditions that USCF currently anticipates could cause CPER to invest in Other Copper-Related Investments would be those allowing CPER to obtain greater liquidity or to execute transactions with more favorable pricing.

The investment objective of CPER is for the daily changes in percentage terms of its shares' per share NAV to reflect the daily changes in percentage terms of the SCITR, less CPER's expenses. USCF does not intend to operate CPER in a fashion such that its per share NAV will equal, in dollar terms, the spot prices of the commodities underlying the Benchmark Component Copper Futures Contracts that comprise the SCITR or the prices of any particular group of Futures Contracts. The SCITR is designed to reflect the performance of the investment returns form a portfolio of copper futures contracts. The SCITR is owned and maintained by SummerHaven Indexing and calculated and published by the NYSE Arca. The SCITR is comprised of either two or three Eligible Copper Futures Contracts that are selected on a monthly basis based on quantitative formulas relating to the prices of the Eligible Copper Futures Contracts developed by SummerHaven Indexing. The Eligible Copper Futures Contracts that at any given time make up the SCITR are referred to herein as "Benchmark Component Copper Futures Contracts."

CPER seeks to achieve its investment objective by investing to the fullest extent possible in the Benchmark Component Copper Futures Contracts. Then, if constrained by regulatory requirements or in view of market conditions, CPER will invest next in other Eligible Copper Futures Contracts, and finally to a lesser extent, in other exchange traded futures contracts that are economically identical or substantially similar to the Benchmark Component Copper Futures Contracts if one or more other Eligible Copper Futures Contracts is not available. When CPER has invested to the fullest extent possible in exchange-traded futures contracts, CPER may then invest in Other Copper-Related Investments. As of December 31, 2013, CPER held 27 Futures Contracts on the
COMEX.

United States Agriculture Index Fund

USAG invests in Futures Contracts for commodities that are traded on ICE Futures US, ICE Futures Canada, CBOT, KCBT and the CME, and to a lesser extent, in order to comply with regulatory requirements or in view of market conditions, Other Agriculture-Related Investments. Market conditions that USCF currently anticipates could cause USAG to invest in Other Agriculture-Related Investments would be those allowing USAG to obtain greater liquidity or to execute transactions with more favorable pricing.

The investment objective of USAG is for the daily changes in percentage terms of its shares' per share NAV to reflect the daily changes in percentage terms of the SDAI, less USAG's expenses. USCF does not intend to operate USAG in a fashion such that its per share NAV will equal, in dollar terms, the spot prices of the commodities underlying the Benchmark Component Futures Contracts that comprise the SDAI or the prices of any particular group of Futures Contracts. The SDAI is designed to reflect the performance of a diversified group of agricultural commodities. The SDAI is comprised of 14 Eligible Agriculture Futures Contracts that are selected on a monthly basis based on quantitative formulas developed by SummerHaven Indexing. The Eligible Agriculture Futures Contracts that at any given time make up the SDAI are referred to herein as "Benchmark Component Agriculture Futures Contracts."

USAG seeks to achieve its investment objective by investing to the fullest extent possible in Benchmark Component Agriculture Futures Contracts. Then, if constrained by regulatory requirements or in view of market conditions, USAG will invest next in other Eligible Agriculture Futures Contracts based on the same agricultural commodity as the futures contracts subject to such regulatory constraints or market conditions, and finally, to a lesser extent, in other exchange traded futures contracts that are economically identical or substantially similar to the Benchmark Component Agriculture Futures Contracts, if one or more Eligible Agriculture Futures Contracts is not available. When USAG has invested to the fullest extent possible in exchange-traded futures contracts, USAG may then invest in Other Agriculture-Related Interests. As of December 31, 2013, USAG held 29 Futures Contracts on the ICE Futures, 11 Futures Contracts on the CME, 1 Futures Contract on the KCBT and 27 Futures Contracts on the CBOT.

United States Metals Index Fund

USMI invests in Futures Contracts for commodities that are traded on the NYMEX, the LME and the COMEX, and to a lesser extent, in order to comply with regulatory requirements or in view of market conditions, Other Metals-Related Investments. Market conditions that USCF currently anticipates could cause USMI to invest in Other Agriculture-Related Investments would be those allowing USMI to obtain greater liquidity or to execute transactions with more favorable pricing.

The investment objective of USMI is for the daily changes in percentage terms of its shares' per share NAV to reflect the daily changes in percentage terms of the SDMI, less USMI's expenses. USCF does not intend to operate USMI in a fashion such that its per share NAV will equal, in dollar terms, the spot prices of the commodities underlying the Benchmark Component Futures Contracts that comprise the SDMI or the prices of any particular group of Futures Contracts. The SDMI is designed to reflect the performance of a diversified group of metals. The SDMI is comprised of 10 Eligible Metals Futures Contracts that are selected on a monthly basis based on quantitative formulas developed by SummerHaven Indexing. The Eligible Metals Futures Contracts that at any given time make up the SDMI are referred to herein as "Benchmark Component Metals Futures Contracts."

USMI seeks to achieve its investment objective by investing to the fullest extent possible in the Benchmark Component Metals Futures Contracts. Then, if constrained by regulatory requirements or in view of market conditions, USMI will invest next in other Eligible Metals Futures Contracts, and finally to a lesser extent, in other exchange traded futures contracts that are economically identical or substantially similar to the Benchmark Component Metals Futures Contracts if one or more other Eligible Metals Futures Contracts is not available. When USMI has invested to the fullest extent possible in exchange-traded futures contracts, USMI may then invest in other Eligible Metals Futures Contracts. As of December 31, 2013, USMI held 3 Futures Contracts on the NYMEX, 90 Futures Contracts on the LME and 12 Futures Contracts on the COMEX.

Regulation of Commodity Interests

The regulation of commodity interest trading in the United States and other countries is an evolving area of the law. The various statements made in this summary are subject to modification by legislative action and changes in the rules and regulations of the CFTC, the NFA, the SEC, the futures exchanges, clearing organizations and other regulatory bodies. Pending final resolution of all applicable regulatory requirements, some examples of how new rules and regulations could impact the Trust Series are discussed in "Item 1. Business" and "Item 1A. Risk Factors" in this annual report on Form 10-K.

Commodity Markets

Commodity Futures Price Movements

Year Ended December 31, 2013

As measured by the four major diversified commodity indexes listed below,
commodity futures prices exhibited a downward trend during the year ended
December 31, 2013. The table below compares the total returns of the SDCI to the
three major diversified commodity indexes over this time period.

SummerHaven Dynamic Commodity Index Total ReturnSM("SDCI")(1)           (2.77) %
S&P GSCI Commodity Index (GSCI®) Total Return(2)                        (1.22) %
Dow Jones-UBS Commodity Index Total ReturnSM(2)                         (9.52) %
Deutsche Bank Liquid Commodity Index-Optimum Yield  Total ReturnTM(2)   (9.02) %

(1) The inception date for the SummerHaven Dynamic Commodity Index Total ReturnSM is December 2009.
(2) Source: Bloomberg

The value of the SDCI as of January 1, 2013 was 1,726.55. As of December 31, 2013, the value of the SDCI was 1,678.73, down approximately 2.77% over the year.

The return of approximately (2.77)% on the SDCI listed above is a hypothetical return only and could not actually be achieved by an investor holding Futures Contracts due to the impact of trading costs and other expenses. USCI's per share NAV began the year at $58.45 and ended the year at $56.06 on December 31, 2013, a decrease of approximately 4.09% over the year. USCI's per share NAV reached its high for the year on February 5, 2013 at $60.48 and reached its low for the year on June 28, 2013 at $53.50. See "Tracking the SDCI" below for information about how expenses and income affect USCI's NAV.

Copper Markets

Copper Futures Price Movements

Year Ended December 31, 2013

As measured by the two major copper indexes, copper futures prices exhibited moderate a downward trend during the year ended December 31, 2013. The table below compares the total returns of the SCITR to the Dow Jones-UBS Copper Subindex Total Return over this time period.

SummerHaven Copper Index Total ReturnTM("SCITR")(1) (8.90) % Dow Jones-UBS Copper Subindex Total Return(2) (8.76) %

(1) The inception date for the SummerHaven Copper Index Total ReturnTM is November 2010.
(2) Source: Bloomberg

The value of the SCITR as of January 1, 2013 was 1,223.15. As of December 31, 2013, the value of the SCITR was 1,114.30, down approximately (8.90)% over the year.

The return of approximately (8.90)% on the SCITR listed above is a hypothetical return only and could not actually be achieved by an investor holding Futures Contracts due to the impact of trading costs and other expenses. CPER's per share NAV began the year at $25.43 and ended the year at $22.92 on December 31, 2013, a decrease of approximately 9.87% over the year. CPER's per share NAV reached its high for the year on February 1, 2013 at $26.38 and reached its low for the year on June 24, 2013 at $20.74. See "Tracking the SCITR" for information about how expenses and income affect CPER's NAV.

Agriculture Markets

Agriculture Futures Price Movements

Year Ended December 31, 2013

As measured by the four major agriculture indexes listed below, agriculture
futures prices exhibited moderate daily swings along with a downward trend
during the year ended December 31, 2013. The table below compares the total
returns of the SDAI to the three major agriculture indexes over this time
period.

SummerHaven Dynamic Agriculture Index Total ReturnSM("SDAI")(1) (10.12) %
S&P GSCI® Agriculture Index Total Return(2)                     (18.00) %
Dow Jones-UBS Agriculture Total Return Sub-indexSM(2)           (14.28) %
Deutsche Bank Liquid Commodity Index-Optimum Yield Agriculture
 ReturnTM(2)                                                    (20.55) %

(1) The inception date for the SummerHaven Dynamic Agriculture Index Total ReturnSM is September 2010.
(2) Source: Bloomberg

The value of the SDAI as of January 1, 2013 was 360.61. As of December 31, 2013, the value of the SDAI was 324.11, down approximately 10.12% over the year.

The return of approximately (10.12)% on the SDAI listed above is a hypothetical return only and could not actually be achieved by an investor holding Futures Contracts due to the impact of trading costs and other expenses. USAG's per share NAV began the year at $25.56 and ended the year at $22.79 on December 31, 2013, a decrease of approximately 10.84% over the period. USAG's per share NAV reached its high for the period on January 30, 2013 at $25.74 and reached its low for the period on August 6, 2013 at $22.71. See "Tracking the SDAI" below for information about how expenses and income affect USAG's per share NAV.

Metals Markets

Metals Futures Price Movements

Year Ended December 31, 2013

As measured by the four major metals indexes listed below, metals futures prices
exhibited moderate daily swings along with a downward trend during the year
ended December 31, 2013. The table below compares the total returns of the SDMI
to the three major metals indexes over this time period.

SummerHaven Metals Index Total ReturnSM("SDMI")(1)                      (16.00) %
Rogers International Commodity Index®-Metals Total Return(2)            (16.60) %
Dow Jones-UBS Industrial Metals Total Return Sub-indexSM(2)             (13.63) %
Deutsche Bank Liquid Commodity Index-Optimum Yield Industrials Metals
 Total ReturnTM(2)                                                      (11.21) %

(1) The inception date for the SummerHaven Metals Index Total ReturnSM is September 2010.
(2) Source: Bloomberg

The value of the SDMI as of January 1, 2013 was 865.68. As of December 31, 2013, the value of the SDMI was 727.17, down approximately 16.00% over the year.

The return of approximately (16.00)% on the SDMI listed above is a hypothetical return only and could not actually be achieved by an investor holding Futures Contracts due to the impact of trading costs and other expenses. USMI's per share NAV began the year at $26.47 and ended at $21.97 on December 31, 2013, a decrease of approximately 17.00% over the period. USMI's per share NAV reached its high for the period on February 5, 2013 at $27.66 and reached its low for the period on June 26, 2013 at $20.82. See "Tracking the SDMI" below for information about how expenses and income affect USMI's per share NAV.

Valuation of Futures Contracts and the Computation of the Per Share NAV

Each Trust Series' NAV is calculated once each NYSE Arca trading day. The per share NAV for a particular trading day is released after 4:00 p.m. New York time. Trading during the core trading session on the NYSE Arca typically closes at 4:00 p.m. New York time. The Trust Series' Administrator uses the closing prices on the relevant Futures Exchanges of the Applicable Benchmark Component Futures Contracts (determined at the earlier of the close of such exchange or 2:30 p.m. New York time) for the contracts held on the Futures Exchanges, but calculates or determines the value of all other investments of such Trust Series using market quotations, if available, or other information customarily used to determine the fair value of such investments.

Results of Operations

On July 30, 2010, USCI received a notice of effectiveness from the SEC for its registration of 50,000,000 shares on Form S-1 with the SEC. On August 10, 2010, USCI listed its shares on the NYSE Arca under the ticker symbol "USCI." USCI established its initial offering per share NAV by setting the price at $50.00 and issued 100,000 shares to the initial authorized purchaser, Merrill Lynch Professional Clearing Corp., in exchange for $5,000,000 in cash on August 10, 2010. USCI commenced investment operations on August 10, 2010 by purchasing Futures Contracts traded on the Futures Exchanges. 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, USCF purchased the initial Creation Basket from the initial Authorized Purchaser at the initial offering price. The $1,000 fee that would otherwise be charged to the Authorized Purchaser in connection with an order to create or redeem was waived in connection with the initial Creation Basket. USCF agreed not to resell the shares comprising such basket except that it may require the initial Authorized Purchaser to repurchase all of these shares at a per share price equal to USCI's per share NAV within five days following written notice from USCF, subject to the conditions that: (i) on the date of repurchase, the initial Authorized Purchaser must immediately redeem these shares in accordance with the terms of the Authorized Purchaser Agreement and (ii) immediately following such redemption at least 100,000 shares of USCI remain outstanding. USCF held such initial Creation Basket until September 3, 2010, at which time the initial Authorized Purchaser repurchased the shares comprising such basket in accordance with the specified conditions noted above. On September 14, 2011, USCF redeemed the 20 Sponsor Shares of USCI, and on September 19, 2011, USCF purchased five shares of USCI in the open market.

Since its initial offering of 50,000,000 shares, USCI has not registered any subsequent offerings of its shares. As of December 31, 2013, USCI had issued 13,650,020 shares, 9,150,000 of which were outstanding. As of December 31, 2013, there were 36,349,980 shares registered but not yet issued. More shares may have been issued by USCI than are outstanding due to the redemption of shares.

In connection with the Second Amended and Restated Trust Agreement dated November 10, 2010, USMI, USAG and CPER were designated as three additional series of the Trust. Following the designation of the additional series, an initial capital contribution of $3,000 was transferred from USCF to the Trust. On November 10, 2010, the Trust transferred $1,000 to each of USMI, USAG and CPER, which was deemed a capital contribution to each series. On November 14, 2011, USCF received 40 Sponsor Shares of CPER in exchange for the previously received capital contribution, representing a beneficial interest in CPER. On December 7, 2011, USCF redeemed the 40 Sponsor Shares of CPER and purchased 40 shares of CPER in the open market. On April 13, 2012, USCF received 40 Sponsor Shares of USAG in exchange for the previously received capital contribution, representing a beneficial interest in USAG. On June 28, 2012, USCF redeemed the 40 Sponsor shares of USAG and on October 3, 2012, purchased 5 shares of USAG on the open market. On June 19, 2012, USCF received 40 Sponsor Shares of USMI in exchange for the previously received capital contribution, representing a beneficial interest in USMI. On August 27, 2012, USCF redeemed the 40 Sponsor shares of USMI.

CPER, USAG and USMI received notice of effectiveness from the SEC for its registration of 30,000,000 CPER shares, 20,000,000 USAG shares and 20,000,000 USMI shares on September 6, 2011. The order to permit listing CPER, USMI and USAG on the NYSE Arca was received on October 20, 2011. On November 15, 2011, CPER listed its shares on the NYSE Arca under the ticker symbol "CPER." CPER established its initial offering per share NAV by setting the price at $25.00 and issued 100,000 shares to the initial authorized purchaser, Merrill Lynch Professional Clearing Corp., in exchange for $2,500,000 in cash on November 15, 2011. The $1,000 fee that would otherwise be charged to the Authorized Purchaser in connection with an order to create or redeem was waived in connection with the initial Creation Basket.

Since its initial offering of 30,000,000 shares, CPER has not registered any subsequent offerings of its shares. As of December 31, 2013, CPER had issued 200,040 shares, 100,000 of which were outstanding. As of December, 31, 2013, there were 29,799,960 shares registered but not yet issued. More shares may have been issued by CPER than are outstanding due to the redemption of shares.

On April 13, 2012, USAG listed its shares on the NYSE Arca under the ticker symbol "USAG." USAG established its initial per share NAV by setting the price at $25.00. On April 14, 2012, USCF purchased 2 initial Creation Baskets of USAG. In accordance with applicable requirements of Regulation M under the Securities Exchange Act of 1934, no Creation Baskets were offered to Authorized Purchasers nor were the shares listed on the NYSE Arca until five business days had elapsed from the date of USCF's purchase of the initial Creation Basket on April 4, 2012. The fee that would have otherwise been charged in connection with an order to create or redeem was waived in connection with the initial Creation Basket.

Since its initial offering of 20,000,000 shares, USAG has not registered any subsequent offerings of its shares. As of December 31, 2013, USAG had issued 200,040 shares, 100,000 of which were outstanding. As of December 31, 2013, there were 19,799,960 shares registered but not yet issued. More shares may have been issued by USAG than are outstanding due to the redemption of shares.

On June 19, 2012, USMI listed its shares on the NYSE Arca under the ticker symbol "USMI." USMI established its initial per share NAV by setting the price at $25.00. On June 11, 2012, USCF purchased two initial Creation Baskets of USMI. In accordance with applicable requirements of Regulation M under the Securities Exchange Act of 1934, no Creation Baskets were offered to Authorized Purchasers nor were the shares listed on the NYSE Arca until five business days had elapsed from the date of USCF's purchase of the initial Creation Basket on June 11, 2012. The fee that would have otherwise been charged in connection with an order to create or redeem was waived in connection with the initial Creation Basket. On August 29, 2012, USCF redeemed one of two initial Creation Baskets of USMI, leaving its holdings to 50,000 shares.

Since its initial offering of 20,000,000 shares, USMI has not registered any subsequent offerings of its shares. As of December 31, 2013, USMI had issued 150,040 shares, 100,000 of which were outstanding. As of December 31, 2013, there were 19,849,960 shares registered but not yet issued. More shares may have been issued by USMI than are outstanding due to the redemption of shares.

Unlike funds that are registered under the 1940 Act, shares that have been redeemed by the Trust Series cannot be resold. As a result, each Trust Series contemplates that additional offerings of its shares will be registered with the . . .

  Add USCI to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for USCI - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.