Ultimate magazine theme for WordPress.

UNITED STATES GASOLINE FUND, LP Management’s Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

The following discussion should be read in conjunction with the condensed
financial statements and the notes thereto of the United States Gasoline Fund,
LP (“UGA”) included elsewhere in this quarterly report on Form 10-Q.

Forward-Looking Information

This quarterly report on Form 10-Q, 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 UGA’s actual results, performance
or achievements to be materially different from future results, performance or
achievements expressed or implied by any forward-looking statements. UGA
believes these factors include, but are not limited to, the following: changes
in inflation in the United States; movements in U.S. and foreign currencies;
market volatility in the oil markets and futures markets, in part attributable
to the COVID-19 pandemic, uncertainties associated with the impact from the
coronavirus (COVID-19) pandemic, including: its impact on the global and U.S.
capital markets and the global and U.S. economy, the length and duration of the
COVID-19 outbreak in the United States as well as worldwide and the magnitude of
the economic impact of that outbreak, the effect of the COVID-19 pandemic on
UGA’s business prospects, including its ability to achieve its objectives, and
the effect of the disruptions caused by the COVID-19 pandemic on our ability to
continue to effectively manage our business. Forward-looking statements, which
involve assumptions and describe UGA’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 UGA cannot assure investors that the projections included in
these forward-looking statements will come to pass. UGA’s actual results could
differ materially from those expressed or implied by the forward-looking
statements as a result of various factors.

UGA has based the forward-looking statements included in this quarterly report
on Form 10-Q on information available to it on the date of this quarterly report
on Form 10-Q, and UGA assumes no obligation to update any such forward-looking
statements. Although UGA 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 UGA may make directly to them or through reports that UGA files in the
future with the Securities and Exchange Commission (the “SEC”), including annual
reports on Form 10-K, quarterly reports on Form 10-Q and current reports on

Form
8-K.

Introduction

UGA, a Delaware limited partnership, is a commodity pool that issues shares that
may be purchased and sold on the NYSE Arca. The investment objective of UGA is
for the daily changes, in percentage terms, of its shares’ per share NAV to
reflect the daily changes, in percentage terms, of the spot price of gasoline
(also known as reformulated gasoline blendstock for oxygen blending, or “RBOB”,
for delivery to the New York harbor), as measured by the daily changes in the
price of the futures contract for gasoline traded on the NYMEX that is the near
month contract to expire, except when the near month contract is within two
weeks of expiration, in which case it will be the futures contract that is the
next month contract to expire (the “Benchmark Futures Contract”), plus interest
earned on UGA’s collateral holdings, less UGA’s expenses. “Near month contract”
means the next contract traded on the NYMEX due to expire. “Next month contract”
means the first contract traded on the NYMEX due to expire after the near month
contract. UGA seeks to achieve its investment objective by investing so that the
average daily percentage change in UGA’s NAV for any period of 30 successive
valuation days will be within plus/minus ten percent (10%) of the average daily
percentage change in the price of the Benchmark Futures Contract over the same
period.

UGA’s investment objective is not for its NAV or market price of shares to
equal, in dollar terms, the spot price of gasoline or any particular futures
contract based on gasoline, nor is UGA’s investment objective for the percentage
change in its NAV to reflect the percentage change of the price of any
particular futures contract as measured over a time period greater than one day.
The general partner of UGA, United States Commodity Funds LLC (“USCF”) believes
that it is not practical to manage the portfolio to achieve such an investment
goal when investing in Futures Contracts (as defined below) and Other
Gasoline-Related Investments (as defined below).

19

Table of Contents

UGA invests primarily in futures contracts for gasoline, crude oil, natural gas,
heating oil and other petroleum-based fuels that are traded on the NYMEX, ICE
Futures or other U.S. and foreign exchanges (collectively, “Futures Contracts”)
and to a lesser extent, in order to comply with regulatory requirements or in
view of market conditions, other gasoline-related investments such as
cash-settled options on Futures Contracts, forward contracts for gasoline,
cleared swap contracts and over-the-counter (“OTC”) swaps that are based on the
price of gasoline, crude oil and other petroleum-based fuels, Futures Contracts
and indices based on the foregoing (collectively, “Other Gasoline-Related
Investments”). For convenience and unless otherwise specified, Futures Contracts
and Other Gasoline-Related Investments collectively are referred to as “Gasoline
Interests” in quarterly report on Form 10-Q.

USCF believes that market arbitrage opportunities will cause daily changes in
UGA’s share price on the NYSE Arca on a percentage basis to closely track daily
changes in UGA’s per share NAV on a percentage basis. USCF further believes that
daily changes in prices of the Benchmark Futures Contract have historically
closely tracked the daily changes in spot prices of gasoline. USCF believes that
the net effect of these relationships will be that the daily changes in the
price of UGA’s shares on the NYSE Arca on a percentage basis will closely track,
the daily changes in the spot price of gasoline on a percentage basis, plus
interest earned on UGA’s collateral holdings, less UGA’s expenses.

UGA seeks to achieve its investment objective by investing so that the average
daily percentage change in UGA’s NAV for any period of 30 successive valuation
days will be within plus/minus ten percent (10%) of the average daily percentage
change in the price of the Benchmark Futures Contract over the same period.

On any valuation day, the Benchmark Futures Contract is the near month futures
contract for gasoline traded on the NYMEX unless the near month contract is
within two weeks of expiration in which case the Benchmark Futures Contract is
the next month contract for gasoline traded on the NYMEX. 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 SEC, FINRA, CFTC, the NFA, 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 UGA are discussed in “Item 1. Business” and “Item 1A.
Risk Factors” in this quarterly report on Form 10-Q.

Regulatory Disclosure

Accountability Levels, Position Limits and Price Fluctuation Limits. Designated
contract markets (“DCMs”), such as the NYMEX and ICE Futures, have established
accountability levels and position limits on the maximum net long or net short
futures contracts in commodity interests that any person or group of persons
under common trading control (other than as a hedge, which an investment by UGA
is not) may hold, own or control. These levels and position limits apply to the
futures contracts that UGA invests in to meet its investment objective. In
addition to accountability levels and position limits, the NYMEX and ICE Futures
also set daily price fluctuation limits on futures contracts. The daily price
fluctuation limit establishes the maximum amount that the price of a futures
contract may vary either up or down from the previous day’s settlement price.
Once the daily price fluctuation limit has been reached in a particular futures
contract, no trades may be made at a price beyond that limit.

The accountability levels for the Benchmark Futures Contract and other Futures
Contracts traded on U.S.-based futures exchanges, such as the NYMEX, are not a
fixed ceiling, but rather a threshold above which the NYMEX may exercise greater
scrutiny and control over an investor’s positions. The current accountability
level for investments for any one month in the Benchmark Futures Contract is
5,000 contracts. In addition, the NYMEX imposes an accountability level for all
months of 7,000 net futures contracts for investments in futures contracts for
gasoline. In addition, the ICE Futures maintains accountability levels, position
limits and monitoring authority for its unleaded gasoline futures contracts. If
UGA and the Related Public Funds (as defined below) exceed these accountability
levels for investments in the futures contract for gasoline, the NYMEX and ICE
Futures will monitor UGA’s and the Related Public Funds’ exposure and may ask
for further information on their activities including the total size of all
positions, investment and trading strategy, and the extent of liquidity
resources of UGA and the Related Public Funds. If deemed necessary by the NYMEX
and/or ICE Futures, UGA could be ordered to reduce its aggregate net position
back to the accountability level. As of June 30, 2021, UGA held 1,276 futures
contracts for gasoline traded on the NYMEX. As of June 30, 2021, UGA did not
hold any Futures Contracts traded on ICE Futures. For the six months ended June
30, 2021, UGA did not exceed any accountability levels on the NYMEX or ICE

Futures.

20

Table of Contents

Position limits differ from accountability levels in that they represent fixed
limits on the maximum number of futures contracts that any person may hold and
cannot allow such limits to be exceeded without express CFTC authority to do so.
In addition to accountability levels and position limits that may apply at any
time, the NYMEX and ICE Futures impose position limits on contracts held in the
last few days of trading in the near month contract to expire. It is unlikely
that UGA will run up against such position limits because UGA’s investment
strategy is to close out its positions and “roll” from the near month contract
to expire to the next month contract beginning two weeks from expiration of the
contract. For the six months ended June 30, 2021, UGA did not exceed any
position limits imposed by the NYMEX and ICE Futures.

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 SEC, Financial Industry Regulatory Authority
(“FINRA”), the CFTC, the NFA, 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 UGA
are discussed in “Item 1. Business” and “Item 1A. Risk Factors” in this
quarterly report on Form 10-Q.

Futures Contracts and Position Limits

The CFTC is generally prohibited by statute from regulating trading on non-U.S.
futures exchanges and markets. The CFTC, however, has adopted regulations
relating to the marketing of non-U.S. futures contracts in the United States.
These regulations permit certain contracts on non-U.S. exchanges to be offered
and sold in the United States.

On October 15, 2020, the CFTC approved the Position Limits Rule. The Position
Limits Rule establishes federal position limits for 25 core referenced futures
contracts (comprised of agricultural, energy and metals futures contracts),
futures and options linked to the core referenced futures contracts, and swaps
that are economically equivalent to the core referenced futures contracts. The
Position Limits Rule sets position limits for the spot month and non-spot month;
however, the non-spot month limits only apply in respect of the agricultural
futures contracts that are currently subject to position limits under Part 150
of the CFTC regulations (the “legacy agricultural contracts”). With respect to
regulatory oversight, the Position Limits Rule delegates authority to designated
contract markets and swap execution facilities to oversee certain aspects of the
position limits framework. In addition to setting the federal position limits,
the Position Limits Rule also provides several exemptions from such position
limits, including an expanded list of enumerated bona fide hedge exemptions and
certain spread exemptions. Further, the Position Limits Rule sets forth two
alternative processes for pursuing an exemption for non-enumerated hedge
positions. Other than for the legacy agricultural contracts, compliance with
the limits imposed by the Position Limits Rule will not be required until 2022,
except that economically equivalent swaps need not comply with the Position
Limits Rule until 2023.

The Benchmark Futures Contract will be subject to position limits under the
Position Limits Rule, and UNG’s trading does not qualify as an enumerated bona
fide hedge. Accordingly, the Position Limits Rule could negatively impact the
ability of UNG to meet its investment objective by inhibiting USCF’s ability to
effectively invest the proceeds from sales of Creation Baskets of UNG in
particular amounts and types of its permitted investments.

Until such time as compliance with the Position Limits Rule is required, the
regulatory architecture in effect prior to the adoption of the Position Limit
Rules will govern transactions in commodities and related derivatives. Under
that system, the CFTC enforces federal limits on speculation in the nine legacy
agricultural contracts, while futures exchanges establish and enforce position
limits and accountability levels for other agricultural products and certain
energy products (e.g., oil and natural gas).

Under existing CFTC regulations and the Position Limits Rule, for the purpose of
position limits, a market participant is generally required, subject to certain
narrow exceptions, to aggregate all positions for which that participant
controls the trading decisions with all positions for which that participant has
a 10% or greater ownership interest in an account or position, as well as the
positions of two or more persons acting pursuant to an express or implied
agreement or understanding with that market participant (the “Aggregation
Rules”).

21

Table of Contents

OTC Swaps

In October 2015, the Office of the Comptroller of the Currency, the Board of
Governors of the Federal Reserve System, the FDIC, the Farm Credit
Administration, and the Federal Housing Finance Agency (each an “Agency” and,
collectively, the “Agencies”) jointly adopted final rules to establish minimum
margin and capital requirements for registered swap dealers, major swap
participants, security-based swap dealers, and major security-based swap
participants (“Swap Entities”) that are subject to the jurisdiction of one of
the Agencies (such entities, “Covered Swap Entities”, and the joint final rules,
the “Final Margin Rules”).

The Final Margin Rules will subject non-cleared swaps and non-cleared
security-based swaps between Covered Swap Entities and Swap Entities, and
between Covered Swap Entities and financial end users that have material swaps
exposure (i.e., an average daily aggregate notional of $8 billion or more in
non-cleared swaps calculated in accordance with the Final Margin Rules), to a
mandatory two-way minimum initial margin requirement. The minimum amount of the
initial margin required to be posted or collected would be either the amount
calculated by the Covered Swap Entity using a standardized schedule set forth as
an appendix to the Final Margin Rules, which provides the gross initial margin
(as a percentage of total notional exposure) for certain asset classes, or an
internal margin model of the Covered Swap Entity conforming to the requirements
of the Final Margin Rules that is approved by the Agency having jurisdiction
over the particular Covered Swap Entity. The Final Margin Rules specify the
types of collateral that may be posted or collected as initial margin for
non-cleared swaps and non-cleared security-based swaps with financial end users
(generally cash, certain government, government-sponsored enterprise securities,
certain liquid debt, certain equity securities, certain eligible publicly traded
debt, and gold); and sets forth haircuts for certain collateral asset classes.

The Final Margin Rules require minimum variation margin to be exchanged daily
for non-cleared swaps and non-cleared security- based swaps between Covered Swap
Entities and Swap Entities and between Covered Swap Entities and all financial
end-users (without regard to the swaps exposure of the particular financial
end-user). The minimum variation margin amount is the daily mark- to-market
change in the value of the swap to the Covered Swap Entity, taking into account
variation margin previously posted or collected. For non-cleared swaps and
security-based swaps between Covered Swap Entities and financial end-users,
variation margin may be posted or collected in cash or non-cash collateral that
is considered eligible for initial margin purposes. Variation margin is not
subject to segregation with an independent, third-party custodian, and may, if
permitted by contract, be rehypothecated.

The initial margin requirements of the Final Margin Rules are being phased in
over time, and the variation margin requirements of the Final Margin Rules are
currently in effect. The Fund is not a Covered Swap Entity under the Final
Margin Rules, but it is a financial end-user. Accordingly, the Fund is currently
subject to the variation margin requirements of the Final Margin Rules. However,
the Fund does not have material swaps exposure and, accordingly, the Fund will
not be subject to the initial margin requirements of the Final Margin Rules.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank
Act”) required the CFTC and the SEC to adopt their own margin rules to apply to
a limited number of registered swap dealers, security-based swap dealers, major
swap participants, and major security-based swap participants that are not
subject to the jurisdiction of one of the Agencies. On December 16, 2015 the
CFTC finalized its margin rules, which are substantially the same as the Final
Margin Rules and have the same implementation timeline. The SEC adopted margin
rules for security-based swap dealers and major security-based swap participants
on June 21, 2019. The SEC’s margin rules are generally aligned with the Final
Margin Rules and the CFTC’s margin rules, but they differ in a few key respects
relating to timing for compliance and the manner in which initial margin must be
segregated. UGA does not currently engage in security-based swap transactions
and, therefore, the SEC’s margin rules are not expected to apply to UGA.

Mandatory Trading and Clearing of Swaps

CFTC regulations require that certain swap transactions be executed on organized
exchanges or “swap execution facilities” and cleared through regulated clearing
organizations (“derivative clearing organizations” (“DCOs”)), if the CFTC
mandates the central clearing of a particular class of swap and such swap is
“made available to trade” on a swap execution facility. Currently, swap dealers,
major swap participants, commodity pools, certain private funds and entities
predominantly engaged in activities that are financial in nature are required to
execute on a swap execution facility, and clear, certain interest rate swaps and
index-based credit default swaps. As a result, if UGA enters into an interest
rate or index-based credit default swap that is subject to these requirements,
such swap will be required to be executed on a swap execution facility and
centrally cleared. Mandatory clearing and “made available to trade”
determinations with respect to additional types of swaps may be issued in the
future, and, when finalized, could require UGA to electronically execute and
centrally clear certain OTC instruments presently entered into and settled on a
bi-lateral basis. If a swap is required to be cleared, initial and variation
margin requirements are set by the relevant clearing organization, subject to
certain regulatory requirements and guidelines. Additional margin may be
required and held by UGA’s FCM.

22

Table of Contents

Other Requirements for Swaps

In addition to the margin requirements described above, swaps that are not
required to be cleared and executed on a SEF but that are executed bilaterally
are also subject to various requirements pursuant to CFTC regulations,
including, among other things, reporting and recordkeeping requirements and,
depending on the status of the counterparties, trading documentation
requirements and dispute resolution requirements.

Derivatives Regulations in Non-U.S. Jurisdictions

In addition to U.S. laws and regulations, UGA may be subject to non-U.S.
derivatives laws and regulations if it engages in futures and/or swap
transactions with non-U.S. persons. For example, UGA may be impacted by European
laws and regulations to the extent that it engages in futures transactions on
European exchanges or derivatives transactions with European entities. Other
jurisdictions impose requirements applicable to futures and derivatives that are
similar to those imposed by the U.S., including position limits, margin,
clearing and trade execution requirements.

Money Market Funds

The SEC adopted amendments to Rule 2a-7 under the Investment Company Act of
1940, as amended (“1940 Act”), which became effective in 2016, to reform money
market funds (“MMFs”). While the rule applies only to MMFs, it may indirectly
affect institutional investors such as UGA. A portion of UGA’s assets that are
not used for margin or collateral in the Futures Contracts currently are
invested in government MMFs. UGA does not hold any non-government MMFs and does
not anticipate investing in any non- government MMFs. However, if UGA invests in
other types of MMFs besides government MMFs in the future, UGA could be
negatively impacted by investing in an MMF that does not maintain a stable $1.00
NAV or that has the potential to impose redemption fees and gates (temporary
suspension of redemptions).

Although such government MMFs seek to preserve the value of an investment at
$1.00 per share, there is no guarantee that they will be able to do so and UGA
may lose money by investing in a government MMF. An investment in a government
MMF is not insured or guaranteed by the Federal Deposit Insurance Corporation,
referred to herein as the FDIC, or any other government agency. The share price
of a government MMF can fall below the $1.00 share price. UGA cannot rely on or
expect a government MMF’s adviser or its affiliates to enter into support
agreements or take other actions to maintain the government MMF’s $1.00 share
price. The credit quality of a government MMF’s holdings can change rapidly in
certain markets, and the default of a single holding could have an adverse
impact on the government MMF’s share price. Due to fluctuations in interest
rates, the market value of securities held by a government MMF may vary. A
government MMF’s share price can also be negatively affected during periods of
high redemption pressures and/or illiquid markets.

Price Movements

Gasoline futures prices were volatile during the six months ended June 30, 2021.
The price of the Benchmark Futures Contract started the period at $1.4101 per
gallon. The high of the period was on June 24, 2021 when the price reached
$2.2800 per gallon. The low for the period was on January 4, 2021, which was
$1.3729 per gallon. The period ended with the Benchmark Futures Contract at
$2.2418 per gallon, an increase of approximately 58.98% over the period
(investors are cautioned that these represent prices for gasoline on a wholesale
basis and should not be directly compared to retail prices at a gasoline service
station). UGA’s per share NAV began the period at $24.29 and ended the period at
$35.86 on June 30, 2021, an increase of approximately 47.63% over the period.
The Benchmark Futures Contract prices listed above began with the February 2021
contracts and ended with the August 2021 contracts. An increase of approximately
58.98% on the Benchmark Futures Contract listed above is a hypothetical return
only and could not actually be achieved by an investor holding Futures
Contracts. An investment in Futures Contracts would need to be rolled forward
during the time period described in order to simulate such a result.
Furthermore, the change in the nominal price of these differing Futures
Contracts, measured from the start of the year to the end of the year, does not
represent the actual benchmark results that UGA seeks to track, which are more
fully described below in the section titled “Tracking UGA’s Benchmark.”

During the six months ended June 30, 2021, the gasoline futures market
alternated between periods of contango and backwardation as represented by the
front month gasoline futures contract and the next to expire gasoline futures
contact. During periods of contango, the price of the near month gasoline
Futures Contract was lower than the price of the next month gasoline Futures
Contract or contracts further away from expiration. On days when the market was
in backwardation, the price of the near month gasoline Futures Contract is
higher than the price of the next month gasoline Futures Contract, or contracts
further away from expiration. For a discussion of the impact of backwardation
and contango on total returns, see “Term Structure of Gasoline Prices and the
Impact on Total Returns” below.

23

Table of Contents

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

The per share NAV of UGA’s shares 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 Administrator uses the NYMEX closing
price (determined at the earlier of the close of the NYMEX or 2:30 p.m.New York
time) for the contracts held on the NYMEX, but calculates or determines the
value of all other UGA investments, including ICE Futures contracts or other
futures contracts, as of the earlier of the close of the NYSE Arca or 4:00 p.m.New York time.

Results of Operations and the Gasoline Market

Results of Operations. On February 26, 2008, UGA listed its shares on the AMEX
under the ticker symbol “UGA.” On that day, UGA established its initial offering
price at $50.00 per share and issued 300,000 shares to the initial Authorized
Participant in exchange for $15,001,000 in cash. As a result of the acquisition
of the AMEX by NYSE Euronext, UGA’s shares ceased trading on the AMEX and
commenced trading on the NYSE Arca on November 25, 2008.

As of June 30, 2021, UGA had issued 23,800,000 shares, 3,350,000 of which were
outstanding. As of June 30, 2021, there were 56,200,000 shares registered but
not yet issued. UGA has registered 80,000,000 shares since inception.

More shares may have been issued by UGA than are outstanding due to the
redemption of shares. Unlike funds that are registered under the 1940 Act,
shares that have been redeemed by UGA cannot be resold by UGA. As a result, UGA
contemplates that additional offerings of its shares will be registered with the
SEC in the future in anticipation of additional issuances and redemptions.

As of June 30, 2021, UGA had the following Authorized Participants: Citadel
Securities LLC, Citigroup Global Markets Inc., Credit Suisse Securities USA LLC,
Goldman Sachs & Co, JP Morgan Securities LLC, Merrill Lynch Professional
Clearing Corp., Morgan Stanley & Company Inc., RBC Capital Markets LLC, SG
Americas Securities LLC, and Virtu Americas LLC.

For the Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30,
2020

Six months ended Six months ended
June 30, 2021June 30, 2020

Average daily total net assets $ 109,099,112

$ 53,157,998
Dividend and interest income earned on Treasuries,
cash and/or cash equivalents

$ 18,158 $ 169,872
Annualized yield based on average daily total net
assets 0.03 % 0.64 %
Management fee $ 324,607

$ 158,602
Total fees and other expenses excluding management
fees

$ 191,955 $ 127,433
Total amount of the expense waiver $ 58,573 $ 87,782
Expenses before the allowance of the expense waiver $ 516,562 $ 286,035
Expenses after the allowance of the expense waiver $ 457,989 $ 198,253
Total commissions accrued to brokers $ 56,181 $ 65,351
Total commissions as annualized percentage of average
total net assets 0.10 % 0.25 %
Commissions accrued as a result of rebalancing $ 53,735 $ 54,587
Percentage of commissions accrued as a result of
rebalancing 95.65 % 83.53 %
Commissions accrued as a result of creation and
redemption activity $ 2,446 $ 10,764
Percentage of commissions accrued as a result of
creation and redemption activity 4.35

% 16.47 %

Portfolio Expenses. UGA’s expenses consist of investment management fees,
brokerage fees and commissions, certain offering costs, licensing fees,
registration fees, the fees and expenses of the independent directors of USCF
and expenses relating to tax accounting and reporting requirements. The
management fee that UGA pays to USCF is calculated as a percentage of the total
net assets of UGA. The fee is accrued daily and paid monthly.

Average interest rates earned on short-term investments held by UGA, including
cash, cash equivalents and Treasuries, were lower during the six months ended
June 30, 2021, compared to the six months ended June 30, 2020. As a result, the
amount of income earned by UGA as a percentage of average daily total net assets
was lower during the six months ended June 30, 2021, compared to the six months
ended June 30, 2020. To the degree that the aggregate yield is lower, the net
expense ratio, inclusive of income, will be higher.

24

Table of Contents

The increase in total fees and other expenses excluding management fees for the
six months ended June 30, 2021, compared to the six months ended June 30, 2020
was due primarily to an increase in total director fees and insurance.

The decrease in total commissions accrued to brokers for the six months ended
June 30, 2021, compared to the six months ended June 30, 2020, was due primarily
to a lower number of Gasoline Futures Contracts being held and traded.

For the Three Months Ended June 30, 2021 Compared to the Three Months Ended June
30, 2020

Three months ended Three months ended
June 30, 2021June 30, 2020

Average daily total net assets $ 118,570,634 $ 80,795,756
Dividend and interest income earned on
Treasuries, cash and/or cash equivalents $ 7,955 $ 70,199
Annualized yield based on average daily total net
assets 0.03 % 0.35 %
Management fee $ 177,369 $ 120,531
Total fees and other expenses excluding
management fees $ 119,748 $ 100,264
Total amount of the expense waiver $ 23,176 $ 70,132
Expenses before the allowance of the expense
waiver $ 297,117 $ 220,795
Expenses after the allowance of the expense
waiver $ 273,941 $ 150,663
Total commissions accrued to brokers $ 29,534 $ 52,231
Total commissions as annualized percentage of
average total net assets 0.10 % 0.26 %
Commissions accrued as a result of rebalancing $ 27,454 $ 44,209
Percentage of commissions accrued as a result of
rebalancing 92.96 % 84.64 %
Commissions accrued as a result of creation and
redemption activity $ 2,080 $ 8,022
Percentage of commissions accrued as a result of
creation and redemption activity 7.04 %

15.36 %

Portfolio Expenses. UGA’s expenses consist of investment management fees,
brokerage fees and commissions, certain offering costs, licensing fees,
registration fees, the fees and expenses of the independent directors of USCF
and expenses relating to tax accounting and reporting requirements. The
management fee that UGA pays to USCF is calculated as a percentage of the total
net assets of UGA. The fee is accrued daily and paid monthly.

Average interest rates earned on short-term investments held by UGA, including
cash, cash equivalents and Treasuries, were lower during the three months ended
June 30, 2021, compared to the three months ended June 30, 2020. As a result,
the amount of income earned by UGA as a percentage of average daily total net
assets was lower during the three months ended June 30, 2021, compared to the
three months ended June 30, 2020.

The increase in total fees and other expenses excluding management fees for the
three months ended June 30, 2021, compared to the three months ended June 30,
2020 was due primarily to an increase in expenses related to the increase in
total net assets.

The decrease in total commissions accrued to brokers for the three months ended
June 30, 2021, compared to the three months ended June 30, 2020, was due
primarily to a lower number of Gasoline Futures Contracts being held and traded.

25

Table of Contents

Tracking UGA’s Benchmark

USCF seeks to manage UGA’s portfolio such that changes in its average daily per
share NAV, on a percentage basis, closely track the daily changes in the average
price of the Benchmark Futures Contract, also on a percentage basis.
Specifically, USCF seeks to manage the portfolio such that over any rolling
period of 30-valuation days, the average daily change in UGA’s per share NAV is
within a range of 90% to 110% (0.9 to 1.1) of the average daily change in the
price of the Benchmark Futures Contract. As an example, if the average daily
movement of the price of the Benchmark Futures Contract for a particular
30-valuation day time period was 0.50% per day, USCF would attempt to manage the
portfolio such that the average daily movement of the per share NAV during that
same time period fell between 0.45% and 0.55% (i.e., between 0.9 and 1.1 of the
benchmark’s results). UGA’s portfolio management goals do not include trying to
make the nominal price of UGA’s per share NAV equal to the nominal price of the
current Benchmark Futures Contract or the spot price for gasoline. USCF believes
that it is not practical to manage the portfolio to achieve such an investment
goal when investing in Futures Contracts and Other Gasoline-Related Investments.

For the 30-valuation days ended June 30, 2021, the average daily change in the
Benchmark Futures Contract was 0.131%, while the average daily change in the per
share NAV of UGA over the same time period was 0.129%. The average daily
difference was (0.002)% (or (0.2) basis points, where 1 basis point equals 1/100
of 1)%, meaning that over this time period UGA’s NAV performed within the plus
or minus 10% range established as its benchmark tracking goal.

Since the commencement of the offering of UGA’s shares to the public on February
26, 2008 to June 30, 2021, the average daily change in the Benchmark Futures
Contract was 0.022%, while the average daily change in the per share NAV of UGA
over the same time period was 0.021%. The average daily difference was (0.001)%
(or (0.1) basis points, where 1 basis point equals 1/100 of 1%), meaning that
over this time period UGA’s NAV performed within the plus or minus 10% range
established as its benchmark tracking goal.

The following two graphs demonstrate the correlation between the changes in
UGA’s NAV and the changes in the Benchmark Futures Contract. The first graph
exhibits the daily changes in the last 30-valuation days ended June 30, 2021.
The second graph measures monthly changes since June 30, 2016 through June 30,
2021.

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

[[Image Removed: Graphic]]

26

Table of Contents

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

[[Image Removed: Graphic]]

An alternative tracking measurement of the return performance of UGA versus the
return of its Benchmark Futures Contract can be calculated by comparing the
actual return of UGA, measured by changes in its per share NAV, versus the
expected changes in its per share NAV under the assumption that UGA’s returns
had been exactly the same as the daily changes in its Benchmark Futures
Contract.

For the six months ended June 30, 2021, the actual total return of UGA as
measured by changes in its per share NAV was 47.63%. This is based on an initial
per share NAV of $24.29 as of December 31, 2020 and an ending per share NAV as
of June 30, 2021 of $35.86. During this time period, UGA made no distributions
to its shareholders. However, if UGA’s daily changes in its per share NAV had
instead exactly tracked the changes in the daily total return of the Benchmark
Futures Contract, UGA would have had an estimated per share NAV of $35.98 as of
June 30, 2021, for a total return over the relevant time period of 48.13%. The
difference between the actual per share NAV total return of UGA of 47.63% and
the expected total return based on the Benchmark Futures Contract of 48.13% was
a difference over the time period of (0.50)%, which is to say that UGA’s actual
total return underperformed its benchmark by that percentage. UGA incurs
expenses primarily composed of the management fee, brokerage commissions for the
buying and selling of futures contracts, and other expenses. The impact of these
expenses, offset by interest and dividend income, and net of positive or
negative execution, tends to cause daily changes in the per share NAV of UGA to
track slightly higher than daily changes in the price of the Benchmark Futures
Contract.

By comparison, for the six months ended June 30, 2020, the actual total return
of UGA as measured by changes in its per share NAV was (41.54)%. This was based
on an initial per share NAV of $32.31 as of December 31, 2019 and an ending per
share NAV as of June 30, 2020 of $18.89. During this time period, UGA made no
distributions to its shareholders. However, if UGA’s daily changes in its per
share NAV had instead exactly tracked the changes in the daily total return of
the Benchmark Futures Contract, UGA would have had an estimated per share NAV of
$18.85 as of June 30, 2020, for a total return over the relevant time period of
(41.66)%. The difference between the actual per share NAV total return of UGA of
(41.54)% and the expected total return based on the Benchmark Futures Contract
of (41.66)% was a difference over the time period of 0.12%, which is to say that
UGA’s actual total return outperformed its benchmark by that percentage. UGA
incurred expenses primarily composed of the management fee, brokerage
commissions for the buying and selling of futures contracts, and other expenses.
The impact of these expenses, offset by interest and dividend income, and net of
positive or negative execution, tended to cause daily changes in the per share
NAV of UGA to track slightly lower or higher than daily changes in the price of
the Benchmark Futures Contract.

There are currently three factors that have impacted or are most likely to
impact UGA’s ability to accurately track Benchmark Futures Contract.

27

Table of Contents

First, UGA may buy or sell its holdings in the then current Benchmark Futures
Contract at a price other than the closing settlement price of that contract on
the day during which UGA executes the trade. In that case, UGA may pay a price
that is higher, or lower, than that of the Benchmark Futures Contract, which
could cause the changes in the daily per share NAV of UGA to either be too high
or too low relative to the daily changes in the Benchmark Futures Contract.
During the six months ended June 30, 2021, USCF attempted to minimize the effect
of these transactions by seeking to execute its purchase or sale of the
Benchmark Futures Contract at, or as close as possible to, the end of the day
settlement price. However, it may not always be possible for UGA to obtain the
closing settlement price and there is no assurance that failure to obtain the
closing settlement price in the future will not adversely impact UGA’s attempt
to track the Benchmark Futures Contract.

Second, UGA incurs expenses primarily composed of the management fee, brokerage
commissions for the buying and selling of futures contracts, and other expenses.
The impact of these expenses tends to cause daily changes in the per share NAV
of UGA to track slightly lower than daily changes in the price of the Benchmark
Futures Contract. At the same time, UGA earns dividend and interest income on
its cash, cash equivalents and Treasuries. UGA is not required to distribute any
portion of its income to its shareholders and did not make any distributions to
shareholders during the six months ended June 30, 2021. Interest payments, and
any other income, were retained within the portfolio and added to UGA’s NAV.
When this income exceeds the level of UGA’s expenses for its management fee,
brokerage commissions and other expenses (including ongoing registration fees,
licensing fees and the fees and expenses of the independent directors of USCF),
UGA will realize a net yield that will tend to cause daily changes in the per
share NAV of UGA to track slightly higher than daily changes in the Benchmark
Futures Contract. If short-term interest rates rise above these levels, the
level of deviation created by the yield would increase. Conversely, if
short-term interest rates were to decline, the amount of error created by the
yield would decrease. When short-term yields drop to a level lower than the
combined expenses of the management fee and the brokerage commissions, then the
tracking error becomes a negative number and would tend to cause the daily
returns of the per share NAV to underperform the daily returns of the Benchmark
Futures Contract. USCF anticipates that interest rates may continue to stagnate
over the near future near historical lows. It is anticipated that fees and
expenses paid by UGA may be higher than interest earned by UGA. As such, USCF
anticipates that UGA could possibly underperform its benchmark so long as
interest earned is lower than the fees and expenses paid by UGA.

Third, UGA may hold Other Gasoline-Related Investments in its portfolio that may
fail to closely track the Benchmark Futures Contract’s total return movements.
In that case, the error in tracking the Benchmark Futures Contract could result
in daily changes in the per share NAV of UGA that are either too high, or too
low, relative to the daily changes in the Benchmark Futures Contract. During the
six months ended June 30, 2021, UGA did not hold any Other Gasoline-Related
Investments. If UGA increases in size, and due to its obligations to comply with
market conditions and regulatory limits, UGA may invest in Other
Gasoline-Related Investments which may have the effect of increasing transaction
related expenses and may result in increased tracking error.

Term Structure of Gasoline Futures Prices and the Impact on Total Returns.
Several factors determine the total return from investing in futures contracts.
One factor arises from “rolling” futures contracts that will expire at the end
of the current month (the “near” or “front” month contract) forward each month
prior to expiration. For a strategy that entails holding the near month
contract, the price relationship between that futures contract and the next
month futures contract will impact returns. For example, if the price of the
near month futures contract is higher than the next futures month contract (a
situation referred to as “backwardation”), then absent any other change, the
price of a next month futures contract tends to rise in value as it becomes the
near month futures contract and approaches expiration. Conversely, if the price
of a near month futures contract is lower than the next month futures contract
(a situation referred to as “contango”), then absent any other change, the price
of a next month futures contract tends to decline in value as it becomes the
near month futures contract and approaches expiration.

As an example, assume that the price of gasoline for immediate delivery, is
$1.50 per gallon, and the value of a position in the near month futures contract
is also $1.50. Over time, the price of gasoline will fluctuate based on a number
of market factors, including demand for oil relative to supply. The value of the
near month futures contract will likewise fluctuate in reaction to a number of
market factors. If an investor seeks to maintain a position in a near month
futures contract and not take delivery of physical gallons of gasoline, the
investor must sell the current near month futures contract as it approaches
expiration and invest in the next month futures contract. In order to continue
holding a position in the current near month futures contract, this “roll”
forward of the futures contract must be executed every month.

Contango and backwardation are natural market forces that have impacted the
total return on an investment in UGA’s shares during the past year relative to a
hypothetical direct investment in gasoline. In the future, it is likely that the
relationship between the market price of UGA’s shares and changes in the spot
prices of gasoline will continue to be impacted by contango and backwardation.
It is important to note that this comparison ignores the potential costs
associated with physically owning and storing gasoline, which could be
substantial.

28

Table of Contents

If the futures market is in backwardation, e.g., when the price of the near
month futures contract is higher than the price of the next month futures
contract, the investor would buy a next month futures contract for a lower price
than the current near month futures contract. Assuming the price of the next
month futures contract was $1.47 per gallon, or 2% cheaper than the $1.50 near
month futures contract, then, hypothetically, and assuming no other changes
(e.g., to either prevailing gasoline prices or the price relationship between
the spot price, the near month contract and the next month contract, and,
ignoring the impact of commission costs and the income earned on cash and/or
cash equivalents), the value of the $1.47 next month futures contract would rise
to $1.50 as it approaches expiration. In this example, the value of an
investment in the next month futures contract would tend to outperform the spot
price of gasoline. As a result, it would be possible for the new near month
futures contract to rise 12% while the spot price of gasoline may have risen a
lower amount, e.g., only 10%. Similarly, the spot price of gasoline could have
fallen 10% while the value of an investment in the futures contract might have
fallen another amount, e.g., only 8%. Over time, if backwardation remained
constant, this difference between the spot price and the futures contract price
would continue to increase.

If the futures market is in contango, an investor would be buying a next month
futures contract for a higher price than the current near month futures
contract. Again, assuming the near month futures contract is $1.50 per gallon,
the price of the next month futures contract might be $1.53 per gallon, or 2%
more expensive than the front month futures contract. Hypothetically, and
assuming no other changes, the value of the $1.53 next month futures contract
would fall to $1.50 as it approaches expiration. In this example, the value of
an investment in the second month would tend to underperform the spot price of
gasoline. As a result, it would be possible for the new near month futures
contract to rise only 10% while the spot price of gasoline may have risen a
higher amount, e.g., 12%. Similarly, the spot price of gasoline could have
fallen 10% while the value of an investment in the second month futures contract
might have fallen another amount, e.g., 12%. Over time, if contango remained
constant, this difference between the spot price and the futures contract price
would continue to increase.

The chart below compares the daily price of the near month gasoline futures
contract to the price of 13th month gasoline futures contract (i.e., a contract
one year forward) over the last 10 years. When the price of the near month
futures contract is higher than the price of the 13th month futures contract,
the market would be described as being in backwardation. When the price of the
near month futures contract is lower than the 13th month futures contract, the
market would be described as being in contango. Although the price of the near
month futures contract and the price of the 13th month futures contract tend to
move together, it can be seen that at times the near month futures contract
prices are higher than the 13th month futures contract prices (backwardation)
and, at other times, the near month futures contract prices are lower than the
13th month futures contract prices (contango).

29

Table of Contents

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

[[Image Removed: Graphic]]

An alternative way to view the same data is to subtract the dollar price of the
13th month gasoline futures contract from the dollar price of the near month
gasoline futures contract, as shown in the chart below. When the difference is
positive, the market is in backwardation. When the difference is negative, the
market is in contango. The gasoline market spent time in both backwardation and
contango during the last ten years. The chart below shows the results from
subtracting the next month contract price from the price of the near month
contract for the 10-year period between June 30, 2011 and June 30, 2021.
Investors will note that the near month gasoline futures contract spent time in
both backwardation and contango.

30

Table of Contents

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

[[Image Removed: Graphic]]

While the investment objective of UGA is not to have the market price of its
shares match, dollar for dollar, changes in the spot price of gasoline, contango
and backwardation have impacted the total return on an investment in UGA shares
during the past year relative to a hypothetical direct investment in gasoline.
For example, an investment in UGA shares made on December 31, 2020 and held June
30, 2021 increased based upon the changes in the NAV for UGA shares on those
days, by approximately 47.63%, while the spot price of gasoline for immediate
delivery during the same period decreased by 48.13% (note: this comparison
ignores seasonal factors and the potential costs associated with physically
owning and storing gasoline, which could be substantial). By comparison, an
investment in UGA shares made on December 31, 2019 and held to June 30, 2020
decreased based upon the changes in the NAV for UGA shares on those days, by
approximately (68.39)%, while the spot price of gasoline for immediate delivery
during the same period increased by (64.94)% (note: this comparison ignores the
potential costs associated with physically owning and storing gasoline, which
could be substantial).

31

Table of Contents

Periods of contango or backwardation do not materially impact UGA’s investment
objective of having the daily percentage changes in its per share NAV track the
daily percentage changes in the price of the Benchmark Futures Contract since
the impact of backwardation and contango tend to equally impact the daily
percentage changes in price of both UGA’s shares and the Benchmark Futures
Contract. It is impossible to predict with any degree of certainty whether
backwardation or contango will occur in the future. It is likely that both
conditions will occur during different periods.

Gasoline Market. During the six months ended June 30, 2021, front month gasoline
futures traded in a range between $1.3729 and $2.2800. Gasoline futures rose
58.98% from the end of 2020 through June 30, 2021, finishing the second quarter
of 2021 at $2.2418.

The simultaneous demand and supply shocks from the COVID-19 pandemic and
Saudi-Russia price war precipitated unparalleled risk and volatility in crude
oil markets during the first half of 2020. Global demand for crude oil plummeted
by as much as 30% in the spring of 2020 as workers around the world stopped
driving, airlines cut flight schedules, and companies suspended operations.
Meanwhile, U.S. crude oil supply reached 13 million barrels per day (mbd),
capping a period of almost continuous growth since 2016. To offset the seemingly
unstoppable U.S. production juggernaut, OPEC+ (a loose coalition between OPEC
and non-member nations such as Russia and Mexico) had maintained an uneasy
series of agreements to curtail their crude oil output in order to support crude
oil prices. However, in early March of 2020, Russia refused Saudi Arabia’s
proposal to extend cuts in response to the COVID-19 demand shock. The kingdom
retaliated with a massive production increase, launching an all-out price war in
the middle of a pandemic. Although the members of OPEC+ reached a
record-shattering agreement in mid-April of 2020, the implementation of new
supply cuts came too late to prevent crude oil prices from plummeting to
historic lows, culminating in a drop into negative territory for the May WTI
crude oil futures contract on April 20, 2020.

More recently, as economies reopened and OPEC+ supply cuts were absorbed by the
market, WTI crude oil prices rose from all-time lows in the spring of 2020 to
$48.52 per barrel on December 31, 2020. Prices continued rising during the first
half of 2021 to a high of $74.05 before finishing the second quarter at $73.47.
WTI crude oil inventories in the United States fell from a modern record of 541
mb in June 2020 to 445 mb in by the end of second quarter of 2021. Meanwhile
crude oil production in the United States declined below 10 mbd during the
second half of 2020 after peaking at over 13 mbd in March 2020. Production
topped 11.3 mbd by the end of June of 2021. Similarly, OPEC production declined
from over 30 mbd pre-COVID-19 to a pandemic low of 22.5 mbd before gradually
recovering to 26.5 mbd by June 2021. It is uncertain how quickly OPEC, Russia,
or the U.S. will return to pre-pandemic 2019 production levels. It is similarly
difficult to forecast when the recovery in demand will occur given the ongoing
threat posed by COVID-19 variants. While some market participants expect the
rise in crude oil prices to continue, several factors could impact the rise in
prices. First, supply from both the U.S. and OPEC has been rebounding. Second,
the majority of the demand recovery from the Covid-19 pandemic is now in the
rearview mirror. Third, any increased supply from Iran would likely surprise the
market as current expectations are for little to no progress in negotiations
between Iran and the U.S. On the other hand, inflation could continue to
increase, which would likely be a catalyst for ongoing crude oil price
increases. The full impact of the world’s response to the COVID-19 pandemic
still has not been determined. At this stage, it is impossible to predict
whether crude oil prices will rise, fall, or remain stable. High risk remains in
the oil markets until demand and supply are fully balanced and the full impact
of past, current, and future COVID-19 pandemic mitigation measures is known.

USCF believes that over both the medium-term and the long-term, changes in the
price of crude oil will exert the greatest influence on the price of refined
petroleum products such as gasoline. At the same time, there can be other
factors that, particularly in the short term, cause the price of gasoline to
rise (or fall), more (or less) than the price of crude oil. For example, higher
gasoline prices cause American consumers to reduce their gasoline consumption,
particularly during the high demand period of the summer driving season and
gasoline prices are impacted by the availability of refining capacity.
Furthermore, a slowdown or recession in the U.S. economy may have a greater
impact on U.S. gasoline prices than on global crude oil prices. As a result, it
is possible that changes in gasoline prices may not match the changes in crude
oil prices.

Unleaded Gasoline Price Movements in Comparison to Other Energy Commodities and
Investment Categories. USCF believes that investors frequently measure the
degree to which prices or total returns of one investment or asset class move up
or down in value in concert with another investment or asset class.
Statistically, such a measure is usually done by measuring the correlation of
the price movements of the two different investments or asset classes over some
period of time. The correlation is scaled between 1 and -1, where 1 indicates
that the two investment options move up or down in price or value together,
known as “positive correlation,” and -1 indicates that they move in completely
opposite directions, known as “negative correlation.” A correlation of 0 would
mean that the movements of the two are neither positively nor negatively
correlated, known as “non-correlation.” That is, the investment options
sometimes move up and down together and other times move in opposite directions.

For the ten-year time period between June 30, 2011 and June 30, 2021, the table
below compares the monthly movements of unleaded gasoline prices versus the
monthly movements of the prices of several other energy commodities, such as
natural gas, crude oil and

32

Table of Contents

diesel-heating oil, as well as several major non-commodity investment asset
classes, such as large cap U.S. equities, U.S. government bonds and global
equities. It can be seen that over this particular time period, the movement of
gasoline on a monthly basis was strongly correlated with crude oil and
diesel-heating oil, somewhat correlated with large cap U.S. equities and global
equities, uncorrelated with natural gas, and somewhat negatively correlated with
U.S. government bonds.

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

Gasoline – 10 Years
US Gov’t
Large Cap US Bonds Global Equities
Equities (S&P (BEUSG4 (FTSE World Unleaded
Correlation Matrix 10 Years 500) Index) Index) Crude Oil Heating Oil Natural Gas Gasoline
Large Cap US Equities (S&P
500) 1.000 (0.381) 0.967 0.471 0.366 0.161 0.546
US Gov’t Bonds (BEUSG4
Index) 1.000 (0.368) (0.330) (0.340) (0.082) (0.306)
Global Equities (FTSE World
Index) 1.000 0.509 0.428 0.137 0.574
Crude Oil 1.000 0.784 0.010 0.740
Heating Oil 1.000 0.018 0.678
Natural Gas 1.000 0.081
Unleaded Gasoline 1.000
Source: Bloomberg, NYMEX

The table below covers a more recent, but much shorter, range of dates than the
above table. Over the one year period ended June 30, 2021, gasoline was strongly
correlated with crude oil and diesel-heating oil, somewhat correlated with large
cap U.S. equities and global equities, and somewhat negatively correlated with
natural gas and U.S. government bonds.

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

Gasoline – 1 Year
US Gov’t
Large Cap US Bonds Global Equities
Equities (S&P (BEUSG4 (FTSE World Unleaded
Correlation Matrix 1 Year 500) Index) Index) Crude Oil Heating Oil Natural Gas Gasoline
Large Cap US Equities (S&P
500) 1.000 0.137 0.974 0.645 0.449 (0.081) 0.539
US Gov’t Bonds (BEUSG4
Index) 1.000 0.182 0.156 0.184 (0.099) (0.124)
Global Equities (FTSE World
Index) 1.000 0.719 0.578 (0.215) 0.608
Crude Oil 1.000 0.881 (0.286) 0.881
Heating Oil 1.000 (0.485) 0.845
Natural Gas 1.000 (0.390)
Unleaded Gasoline 1.000
Source: Bloomberg, NYMEX

Investors are cautioned that the historical price relationships between gasoline
and various other energy commodities, as well as other investment asset classes,
as measured by correlation may not be reliable predictors of future price
movements and correlation results. The results pictured above would have been
different if a different range of dates had been selected. USCF believes that
gasoline has historically not demonstrated a strong correlation with equities or
bonds over long periods of time. However, USCF also believes that in the future
it is possible that gasoline could have long term correlation results that
indicate prices of gasoline more closely track the movements of equities or
bonds. In addition, USCF believes that, when measured over time periods shorter
than ten years, there will always be some periods where the correlation of
gasoline to equities and bonds will be either more strongly positively
correlated or more strongly negatively correlated than the long term historical
results suggest.

The correlations between gasoline, crude oil, natural gas and diesel-heating oil
are relevant because USCF endeavors to invest UGA’s assets in Futures Contracts
and Other Gasoline-Related Investments so that daily changes in percentage terms
in UGA’s per share NAV correlate as closely as possible with daily changes in
percentage terms in the price of the Benchmark Futures Contract. If certain
other fuel-based commodity futures contracts do not closely correlate with the
gasoline Futures Contract, then their use could lead to greater tracking error.
As noted above, USCF also believes that the changes in percentage terms in the
price of the Benchmark Futures Contract will closely correlate with changes in
percentage terms in the spot price of gasoline.

33

Table of Contents

Critical Accounting Policies

Preparation of the condensed financial statements and related disclosures in
compliance with accounting principles generally accepted in the United States of
America requires the application of appropriate accounting rules and guidance,
as well as the use of estimates. UGA’s application of these policies involves
judgments and actual results may differ from the estimates used.

USCF has evaluated the nature and types of estimates that it makes in preparing
UGA’s condensed financial statements and related disclosures and has determined
that the valuation of its investments, which are not traded on a United States
or internationally recognized futures exchange (such as forward contracts and
OTC swaps) involves a critical accounting policy. The values which are used by
UGA for its Futures Contracts are provided by its commodity broker who uses
market prices when available, while OTC swaps are valued based on the present
value of estimated future cash flows that would be received from or paid to a
third party in settlement of these derivative contracts prior to their delivery
date and valued on a daily basis. In addition, UGA estimates interest and
dividend income on a daily basis using prevailing rates earned on its cash and
cash equivalents. These estimates are adjusted to the actual amount received on
a monthly basis and the difference, if any, is not considered material.

Liquidity and Capital Resources

UGA has not made, and does not anticipate making, use of borrowings or other
lines of credit to meet its obligations. UGA has met, and it is anticipated that
UGA will continue to meet, its liquidity needs in the normal course of business
from the proceeds of the sale of its investments, or from the Treasuries, cash
and/or cash equivalents that it intends to hold at all times. UGA’s liquidity
needs include: redeeming shares, providing margin deposits for its existing
Futures Contracts or the purchase of additional Futures Contracts and posting
collateral for its OTC swaps, if applicable, and payment of its expenses,
summarized below under “Contractual Obligations.”

UGA currently generates cash primarily from: (i) the sale of baskets consisting
of 50,000 shares (“Creation Baskets”) and (ii) income earned on Treasuries, cash
and/or cash equivalents. UGA has allocated substantially all of its net assets
to trading in Gasoline Interests. UGA invests in Gasoline Interests to the
fullest extent possible without being leveraged or unable to satisfy its current
or potential margin or collateral obligations with respect to its investments in
Futures Contracts and Other Gasoline-Related Investments. A significant portion
of UGA’s NAV is held in cash and cash equivalents that are used as margin and as
collateral for its trading in Gasoline Interests. The balance of the assets is
held in UGA’s account at its custodian bank and in investments in money market
funds and Treasuries at the FCMs. Income received from UGA’s investments in
money market funds and Treasuries is paid to UGA. During the six months ended
June 30, 2021, UGA’s expenses, pre and post expense waiver, exceeded the income
UGA earned and the cash earned from the sale of Creation Baskets and the
redemption of Redemption Baskets. During the six months ended June 30, 2021, UGA
used other assets to pay expenses. To the extent expenses exceed income, UGA’s
NAV will be negatively impacted.

UGA’s investments in Gasoline Interests may be subject to periods of illiquidity
because of market conditions, regulatory considerations and other reasons. For
example, most commodity exchanges limit the fluctuations in futures contracts
prices during a single day by regulations referred to as “daily limits.” During
a single day, no trades may be executed at prices beyond the daily limit. Once
the price of a futures contract has increased or decreased by an amount equal to
the daily limit, positions in the contracts can neither be taken nor liquidated
unless the traders are willing to effect trades at or within the specified daily
limit. Such market conditions could prevent UGA from promptly liquidating its
positions in Futures Contracts. During the six months ended June 30, 2021, UGA
did not purchase or liquidate any of its positions while daily limits were in
effect; however, UGA cannot predict whether such an event may occur in the
future.

Since the initial offering of shares, UGA has been responsible for expenses
relating to: (i) management fees, (ii) brokerage fees and commissions, (iii)
licensing fees for the use of intellectual property, (iv) ongoing registration
expenses in connection with offers and sales of its shares subsequent to the
initial offering, (v) other expenses, including tax reporting costs, (vi) fees
and expenses of the independent directors of USCF and (vii) other extraordinary
expenses not in the ordinary course of business.

UGA may terminate at any time, regardless of whether UGA has incurred losses,
subject to the terms of the LP Agreement. In particular, unforeseen
circumstances, including, but not limited to, (i) market conditions, regulatory
requirements, risk mitigation measures taken by UGA or third parties or
otherwise that would lead USL to determine that it could no longer foreseeably
meet its investment objective or that UGA’s aggregate net assets in relation to
its operating expenses or its margin or collateral requirements make the
continued operation of UGA unreasonable or imprudent, or (ii) adjudication of
incompetence, bankruptcy, dissolution, withdrawal or removal of USCF as the
general partner of UGA could cause UGA, to terminate unless a majority interest
of the limited partners within 90 days of the event elects to continue the
partnership and appoints a successor general partner, or the affirmative vote of
a majority in interest of the limited partners subject to certain conditions.
UGA’s termination would cause the liquidation and potential loss of an
investor’s investment. Termination could also negatively affect the overall
maturity and timing of an investor’s investment portfolio.

34

Table of Contents

Market Risk

Trading in Futures Contracts and Other Gasoline-Related Investments, such as
forwards, involves UGA entering into contractual commitments to purchase or sell
gasoline at a specified date in the future. The aggregate market value of the
contracts will significantly exceed UGA’s future cash requirements since UGA
intends to close out its open positions prior to settlement. As a result, UGA is
generally only subject to the risk of loss arising from the change in value of
the contracts. UGA considers the “fair value” of its derivative instruments to
be the unrealized gain or loss on the contracts. The market risk associated with
UGA’s commitments to purchase gasoline is limited to the aggregate market value
of the contracts held. However, should UGA enter into a contractual commitment
to sell gasoline, it would be required to make delivery of the gasoline at the
contract price, repurchase the contract at prevailing prices or settle in cash.
Since there are no limits on the future price of gasoline, the market risk to
UGA could be unlimited.

UGA’s exposure to market risk depends on a number of factors, including the
markets for gasoline, the volatility of interest rates and foreign exchange
rates, the liquidity of the Futures Contracts and Other Gasoline-Related
Investments markets and the relationships among the contracts held by UGA.
Drastic market occurrences could ultimately lead to the loss of all or
substantially all of an investor’s capital.

Credit Risk

When UGA enters into Futures Contracts and Other Gasoline-Related Investments,
it is exposed to the credit risk that the counterparty will not be able to meet
its obligations. The counterparty for the Futures Contracts traded on the NYMEX
and on most other futures exchanges is the clearinghouse associated with the
particular exchange. In general, in addition to margin required to be posted by
the clearinghouse in connection with cleared trades, clearinghouses are backed
by their members who may be required to share in the financial burden resulting
from the nonperformance of one of their members and, therefore, this additional
member support should significantly reduce credit risk. UGA is not currently a
member of any clearinghouse. Some foreign exchanges are not backed by their
clearinghouse members but may be backed by a consortium of banks or other
financial institutions. There can be no assurance that any counterparty,
clearinghouse, or their members or their financial backers will satisfy their
obligations to UGA in such circumstances.

USCF attempts to manage the credit risk of UGA by following various trading
limitations and policies. In particular, UGA generally posts margin and/or holds
liquid assets that are approximately equal to the market value of its
obligations to counterparties under the Futures Contracts and Other
Gasoline-Related Investments it holds. USCF has implemented procedures that
include, but are not limited to, executing and clearing trades only with
creditworthy parties and/or requiring the posting of collateral or margin by
such parties for the benefit of UGA to limit its credit exposure. An FCM, when
acting on behalf of UGA in accepting orders to purchase or sell Futures
Contracts on United States exchanges, is required by CFTC regulations to
separately account for and segregate as belonging to UGA, all assets of UGA
relating to domestic Futures Contracts trading. These FCMs are not allowed to
commingle UGA’s assets with their other assets. In addition, the CFTC requires
FCMs to hold in a secure account UGA’s assets related to foreign Futures
Contracts.

In the future, UGA may purchase OTC swaps, see”Item 3.Quantitative and
Qualitative Disclosures About Market Risk” in this quarterly report on Form 10-Q
for a discussion of OTC swaps.

As of June 30, 2021, UGA held cash deposits and investments in Treasuries and
money market funds in the amount of $115,897,640 with the custodian and FCMs.
Some or all of these amounts held by a custodian or an FCM, as applicable, may
be subject to loss should UGA’s custodian or FCMs, as applicable, cease
operations.

Off Balance Sheet Financing

As of June 30, 2021, UGA had no loan guarantee, credit support or other
off-balance sheet arrangements of any kind other than agreements entered into in
the normal course of business, which may include indemnification provisions
relating to certain risks that service providers undertake in performing
services which are in the best interests of UGA. While UGA’s exposure under
these indemnification provisions cannot be estimated, they are not expected to
have a material impact on UGA’s financial position.

Redemption Basket Obligation

In order to meet its investment objective and pay its contractual obligations
described below, UGA requires liquidity to redeem shares, which redemptions must
be in blocks of 50,000 shares called “Redemption Baskets.” UGA has to date
satisfied this obligation by paying from the cash or cash equivalents it holds
or through the sale of its Treasuries in an amount proportionate to the number
of shares being redeemed.

35

Table of Contents

Contractual Obligations

UGA’s primary contractual obligations are with USCF. In return for its services,
USCF is entitled to a management fee calculated daily and paid monthly as a
fixed percentage of UGA’s NAV, currently 0.60% of NAV on its average daily total
net assets.

USCF agreed to pay the start-up costs associated with the formation of UGA,
primarily its legal, accounting and other costs in connection with USCF’s
registration with the CFTC as a CPO and the registration and listing of UGA and
its shares with the SEC, FINRA and NYSE Arca (formerly, AMEX), respectively.
However, since UGA’s initial offering of shares, offering costs incurred in
connection with registering and listing additional shares of UGA have been
directly borne on an ongoing basis by UGA, and not by USCF.

USCF pays the fees of the Marketing Agent as well as BNY Mellon’s fees for
performing administrative, custodial, and transfer agency services. BNY Mellon’s
fees for performing administrative services include those in connection with the
preparation of UGA’s condensed financial statements and its SEC, NFA and CFTC
reports. USCF and UGA have also entered into a licensing agreement with the
NYMEX pursuant to which UGA and the Related Public Funds, other than BNO, USCI
and CPER, pay a licensing fee to the NYMEX. UGA also pays the fees and expenses
associated with its tax accounting and reporting requirements. USCF had
voluntarily agreed to pay certain expenses typically borne by UGA to the extent
that such expenses exceeded 0.15% (15 basis points) of UGA’s NAV, on an
annualized basis. USCF terminated such expense waiver as of April 30, 2021. This
voluntary expense waiver was in addition to those amounts USCF is contractually
obligated to pay as described in Note 4 to the Notes to Condensed Financial
Statements (Unaudited) in Item 1 of this quarterly report on Form 10-Q and
terminated on April 30, 2021.

USCF paid BBH&Co.’s fees for performing administrative services, including those
in connection with the preparation of UGA’s condensed financial statements and
its SEC, NFA and CFTC reports through May 31, 2020.

In addition to USCF’s management fee, UGA pays its brokerage fees (including
fees to an FCM), OTC dealer spreads, any licensing fees for the use of
intellectual property, and, subsequent to the initial offering, registration and
other fees paid to the SEC, FINRA, or other regulatory agencies in connection
with the offer and sale of shares, as well as legal, printing, accounting and
other expenses associated therewith, and extraordinary expenses. The latter are
expenses not incurred in the ordinary course of UGA’s business, including
expenses relating to the indemnification of any person against liabilities and
obligations to the extent permitted by law and under the LP Agreement, the
bringing or defending of actions in law or in equity or otherwise conducting
litigation and incurring legal expenses and the settlement of claims and
litigation. Commission payments to an FCM are on a contract-by-contract, or
round turn, basis. UGA also pays a portion of the fees and expenses of the
independent directors of USCF. See Note 3 to the Notes to Condensed Financial
Statements (Unaudited) in Item 1 of this quarterly report on Form 10-Q.

The parties cannot anticipate the amount of payments that will be required under
these arrangements for future periods, as UGA’s per share NAVs and trading
levels to meet its investment objective will not be known until a future date.
These agreements are effective for a specific term agreed upon by the parties
with an option to renew, or, in some cases, are in effect for the duration of
UGA’s existence. Either party may terminate these agreements earlier for certain
reasons described in the agreements.

As of June 30, 2021, UGA’s portfolio consisted of 1,276 RBOB Gasoline Futures RB
Contracts traded on the NYMEX. As of June 30, 2021, UGA did not hold any Futures
Contracts traded on the ICE Futures. For a list of UGA’s current holdings,
please see UGA’s website at www.uscfinvestments.com.

© Edgar Online, source Glimpses

Comments are closed.