Company Quick10K Filing
United States Natural Gas Fund
Price1.00 EPS-34,845,904
Shares-0 P/E-0
MCap-0 P/FCF0
Net Debt-294 EBIT35
TEV-294 TEV/EBIT-8
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-08-07
10-Q 2020-03-31 Filed 2020-05-08
10-K 2019-12-31 Filed 2020-03-13
10-Q 2019-09-30 Filed 2019-11-08
10-Q 2019-06-30 Filed 2019-08-08
10-Q 2019-03-31 Filed 2019-05-09
10-K 2018-12-31 Filed 2019-03-13
10-Q 2018-09-30 Filed 2018-11-08
10-Q 2018-06-30 Filed 2018-08-08
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-31 Filed 2018-02-28
10-Q 2017-09-30 Filed 2017-11-06
10-Q 2017-06-30 Filed 2017-08-07
10-Q 2017-03-31 Filed 2017-05-05
10-K 2016-12-31 Filed 2017-02-24
10-Q 2016-09-30 Filed 2016-11-07
10-Q 2016-06-30 Filed 2016-08-05
10-Q 2016-03-31 Filed 2016-05-04
10-K 2015-12-31 Filed 2016-02-26
10-Q 2015-09-30 Filed 2015-11-06
10-Q 2015-06-30 Filed 2015-08-05
10-Q 2015-03-31 Filed 2015-05-07
10-K 2014-12-31 Filed 2015-03-02
10-Q 2014-09-30 Filed 2014-11-10
10-Q 2014-06-30 Filed 2014-08-11
10-Q 2014-03-31 Filed 2014-05-12
10-K 2013-12-31 Filed 2014-02-28
10-Q 2013-09-30 Filed 2013-11-12
10-Q 2013-06-30 Filed 2013-08-09
10-Q 2013-03-31 Filed 2013-05-10
10-K 2012-12-31 Filed 2013-02-27
10-Q 2012-09-30 Filed 2012-11-09
10-Q 2012-06-30 Filed 2012-08-09
10-Q 2012-03-31 Filed 2012-05-10
10-K 2011-12-31 Filed 2012-02-29
10-Q 2011-09-30 Filed 2011-11-09
10-Q 2011-06-30 Filed 2011-08-09
10-Q 2011-03-31 Filed 2011-05-10
10-K 2010-12-31 Filed 2011-03-01
10-Q 2010-09-30 Filed 2010-11-09
10-Q 2010-06-30 Filed 2010-08-09
10-Q 2010-03-31 Filed 2010-05-10
10-K 2009-12-31 Filed 2010-03-01
8-K 2020-08-26 Regulation FD, Exhibits
8-K 2020-07-28 Regulation FD, Exhibits
8-K 2020-06-26 Regulation FD, Exhibits
8-K 2020-06-09
8-K 2020-05-28
8-K 2020-05-27
8-K 2020-04-28
8-K 2020-03-30
8-K 2020-03-27
8-K 2020-03-24
8-K 2020-03-20
8-K 2020-02-20
8-K 2020-01-28
8-K 2019-12-19
8-K 2019-11-25
8-K 2019-10-25
8-K 2019-09-25
8-K 2019-08-23
8-K 2019-07-29
8-K 2019-06-25
8-K 2019-05-28
8-K 2019-04-29
8-K 2019-04-01
8-K 2019-03-29
8-K 2019-03-26
8-K 2019-02-26
8-K 2019-01-28
8-K 2018-12-21
8-K 2018-11-29
8-K 2018-10-30
8-K 2018-09-27
8-K 2018-08-27
8-K 2018-07-30
8-K 2018-06-21
8-K 2018-05-23
8-K 2018-04-27
8-K 2018-03-29
8-K 2018-03-28
8-K 2018-02-28
8-K 2018-01-30
8-K 2018-01-04

UNG 10Q Quarterly Report

Part I. Financial Information
Item 1. Condensed Financial Statements.
Note 1 - Organization and Business
Note 2 - Summary of Significant Accounting Policies
Note 3 - Fees Paid By The Fund and Related Party Transactions
Note 4 - Contracts and Agreements
Note 5 - Financial Instruments, Off - Balance Sheet Risks and Contingencies
Note 6 - Financial Highlights
Note 7 - Fair Value of Financial Instruments
Note 8 - Recent Accounting Pronouncements
Note 9 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II. Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 ung-20200630xex31d1.htm
EX-31.2 ung-20200630xex31d2.htm
EX-32.1 ung-20200630xex32d1.htm
EX-32.2 ung-20200630xex32d2.htm

United States Natural Gas Fund Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
1.31.00.80.50.30.02012201420172020
Assets, Equity
0.20.10.0-0.1-0.2-0.32014201620182020
Rev, G Profit, Net Income
0.30.20.0-0.1-0.3-0.42012201420172020
Ops, Inv, Fin

0.250001376227--12-312020Q2false0001376227ung:PriorToReverseSplitMember2017-12-252018-01-040001376227us-gaap:LimitedPartnerMember2020-06-300001376227us-gaap:GeneralPartnerMember2020-06-300001376227us-gaap:LimitedPartnerMember2020-03-310001376227us-gaap:LimitedPartnerMember2019-12-310001376227us-gaap:LimitedPartnerMember2019-06-300001376227us-gaap:GeneralPartnerMember2019-06-300001376227us-gaap:LimitedPartnerMember2019-03-310001376227us-gaap:LimitedPartnerMember2018-12-310001376227srt:ScenarioForecastMember2020-01-012020-12-310001376227ung:UnitedStatesNaturalGasMembersrt:ScenarioForecastMember2020-01-012020-12-310001376227ung:FundTrustsMembersrt:ScenarioForecastMember2020-01-012020-12-310001376227us-gaap:LimitedPartnerMember2020-04-012020-06-300001376227us-gaap:LimitedPartnerMember2020-01-012020-06-300001376227us-gaap:LimitedPartnerMember2019-04-012019-06-300001376227us-gaap:LimitedPartnerMember2019-01-012019-06-300001376227ung:UnitedStatesContractsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:ForeignExchangeFutureMember2020-06-300001376227ung:UnitedStatesContractsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeFutureMember2020-06-300001376227ung:UnitedStatesContractsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:ForeignExchangeFutureMember2020-06-300001376227us-gaap:FairValueInputsLevel3Memberus-gaap:ShortTermInvestmentsMember2020-06-300001376227us-gaap:FairValueInputsLevel2Memberus-gaap:ShortTermInvestmentsMember2020-06-300001376227us-gaap:FairValueInputsLevel1Memberus-gaap:ShortTermInvestmentsMember2020-06-300001376227ung:UnitedStatesContractsMemberus-gaap:ForeignExchangeFutureMember2020-06-300001376227us-gaap:ShortTermInvestmentsMember2020-06-300001376227ung:UnitedStatesContractsMemberus-gaap:FairValueInputsLevel3Memberus-gaap:ForeignExchangeFutureMember2019-12-310001376227ung:UnitedStatesContractsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:ForeignExchangeFutureMember2019-12-310001376227ung:UnitedStatesContractsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:ForeignExchangeFutureMember2019-12-310001376227us-gaap:FairValueInputsLevel3Memberus-gaap:ShortTermInvestmentsMember2019-12-310001376227us-gaap:FairValueInputsLevel2Memberus-gaap:ShortTermInvestmentsMember2019-12-310001376227us-gaap:FairValueInputsLevel1Memberus-gaap:ShortTermInvestmentsMember2019-12-310001376227ung:UnitedStatesContractsMemberus-gaap:ForeignExchangeFutureMember2019-12-310001376227us-gaap:ShortTermInvestmentsMember2019-12-310001376227ung:UsTreasuryBillsSixtySixMemberus-gaap:USTreasurySecuritiesMemberus-gaap:CashEquivalentsMember2020-01-012020-06-300001376227ung:UsTreasuryBillsSixtySevenMemberus-gaap:USTreasurySecuritiesMemberus-gaap:CashEquivalentsMember2020-01-012020-06-300001376227ung:UsTreasuryBillsSixtyNineMemberus-gaap:USTreasurySecuritiesMemberus-gaap:CashEquivalentsMember2020-01-012020-06-300001376227ung:UsTreasuryBillsSixtyEightMemberus-gaap:USTreasurySecuritiesMemberus-gaap:CashEquivalentsMember2020-01-012020-06-300001376227ung:UsTreasuryBillsSeventyTwoMemberus-gaap:USTreasurySecuritiesMemberus-gaap:CashEquivalentsMember2020-01-012020-06-300001376227ung:UsTreasuryBillsSeventyThreeMemberus-gaap:USTreasurySecuritiesMemberus-gaap:CashEquivalentsMember2020-01-012020-06-300001376227ung:UsTreasuryBillsSeventyOneMemberus-gaap:USTreasurySecuritiesMemberus-gaap:CashEquivalentsMember2020-01-012020-06-300001376227ung:UsTreasuryBillsSeventyMemberus-gaap:USTreasurySecuritiesMemberus-gaap:CashEquivalentsMember2020-01-012020-06-300001376227ung:UsTreasuryBillsSeventyFourMemberus-gaap:USTreasurySecuritiesMemberus-gaap:CashEquivalentsMember2020-01-012020-06-300001376227ung:UsTreasuryBillsSeventyFiveMemberus-gaap:USTreasurySecuritiesMemberus-gaap:CashEquivalentsMember2020-01-012020-06-300001376227country:USung:NYMEXNaturalGasFuturesContractsMemberung:OpenCommodityFuturesContractsLongMember2020-06-300001376227ung:RbcU.s.GovernmentMoneyMarketFundInstitutionalShareClassMemberus-gaap:MoneyMarketFundsMemberus-gaap:CashEquivalentsMember2020-06-300001376227ung:GoldmanSachsFinancialSquareFundsGovernmentFundClassFsMemberus-gaap:MoneyMarketFundsMemberus-gaap:CashEquivalentsMember2020-06-300001376227ung:FidelityInvestmentsMoneyMarketFundsGovernmentPortfolioMemberus-gaap:MoneyMarketFundsMemberus-gaap:CashEquivalentsMember2020-06-300001376227us-gaap:CommodityContractMemberus-gaap:FutureMember2020-01-012020-06-300001376227us-gaap:CommodityContractMemberus-gaap:FutureMember2019-01-012019-06-300001376227ung:TradesNecessitatedByCreationAndRedemptionActivityMember2020-01-012020-06-300001376227ung:RebalancingInvestmentsTransactionMember2020-01-012020-06-300001376227ung:TradesNecessitatedByCreationAndRedemptionActivityMember2019-01-012019-06-300001376227ung:RebalancingInvestmentsTransactionMember2019-01-012019-06-300001376227us-gaap:AssetsTotalMemberus-gaap:CommodityContractMemberus-gaap:FutureMember2020-01-012020-06-300001376227us-gaap:AssetsTotalMemberus-gaap:CommodityContractMemberus-gaap:FutureMember2019-01-012019-12-3100013762272007-04-012007-04-180001376227ung:UnitedStatesOilFundLimitedPartnershipMember2020-01-012020-06-300001376227ung:UnitedStatesOilFundLimitedPartnershipMember2019-01-012019-06-300001376227ung:RbcU.s.GovernmentMoneyMarketFundInstitutionalShareClassMembercountry:USus-gaap:MoneyMarketFundsMemberus-gaap:CashEquivalentsMember2020-06-300001376227ung:UsTreasuryBillsSixtySixMemberus-gaap:USTreasurySecuritiesMemberus-gaap:CashEquivalentsMember2020-06-300001376227ung:UsTreasuryBillsSixtySevenMemberus-gaap:USTreasurySecuritiesMemberus-gaap:CashEquivalentsMember2020-06-300001376227ung:UsTreasuryBillsSixtyNineMemberus-gaap:USTreasurySecuritiesMemberus-gaap:CashEquivalentsMember2020-06-300001376227ung:UsTreasuryBillsSixtyEightMemberus-gaap:USTreasurySecuritiesMemberus-gaap:CashEquivalentsMember2020-06-300001376227ung:UsTreasuryBillsSeventyTwoMemberus-gaap:USTreasurySecuritiesMemberus-gaap:CashEquivalentsMember2020-06-300001376227ung:UsTreasuryBillsSeventyThreeMemberus-gaap:USTreasurySecuritiesMemberus-gaap:CashEquivalentsMember2020-06-300001376227ung:UsTreasuryBillsSeventyOneMemberus-gaap:USTreasurySecuritiesMemberus-gaap:CashEquivalentsMember2020-06-300001376227ung:UsTreasuryBillsSeventyMemberus-gaap:USTreasurySecuritiesMemberus-gaap:CashEquivalentsMember2020-06-300001376227ung:UsTreasuryBillsSeventyFourMemberus-gaap:USTreasurySecuritiesMemberus-gaap:CashEquivalentsMember2020-06-300001376227ung:UsTreasuryBillsSeventyFiveMemberus-gaap:USTreasurySecuritiesMemberus-gaap:CashEquivalentsMember2020-06-300001376227ung:NymexNaturalGasFuturesNgMay2020ContractsExpiringApril2020Membercountry:USung:OpenCommodityFuturesContractsLongMember2020-06-300001376227ung:GoldmanSachsFinancialSquareFundsGovernmentFundClassFsMemberus-gaap:MoneyMarketFundsMember2020-06-300001376227ung:FidelityInvestmentsMoneyMarketFundsGovernmentPortfolioMemberus-gaap:MoneyMarketFundsMember2020-06-300001376227us-gaap:MoneyMarketFundsMember2020-06-300001376227us-gaap:CashEquivalentsMember2020-06-300001376227ung:TradesNecessitatedByCreationAndRedemptionActivityMember2020-06-300001376227ung:RebalancingInvestmentsTransactionMember2020-06-300001376227ung:TradesNecessitatedByCreationAndRedemptionActivityMember2019-06-300001376227ung:RebalancingInvestmentsTransactionMember2019-06-3000013762272007-04-012007-04-300001376227ung:RedemptionBasketsMember2020-06-300001376227ung:CreationBasketsMember2020-06-3000013762272020-03-3100013762272019-03-3100013762272018-12-310001376227ung:FollowingReverseSplitMember2018-01-040001376227ung:PriorToReverseSplitMember2007-04-1800013762272020-04-012020-06-3000013762272019-04-012019-06-3000013762272019-01-012019-06-300001376227srt:MinimumMember2020-01-012020-06-300001376227srt:MaximumMember2020-01-012020-06-3000013762272019-06-3000013762272020-06-3000013762272019-12-310001376227ung:PriorToReverseSplitMember2018-01-0400013762272018-01-040001376227srt:MinimumMemberung:GroupFourMemberung:MarketingAgreementMember2020-06-300001376227ung:GroupThreeMemberung:MarketingAgreementMember2020-06-300001376227ung:GroupThreeMemberung:MarketingAgreementMember2020-01-012020-06-300001376227ung:GroupFourMemberung:MarketingAgreementMember2020-01-012020-06-300001376227us-gaap:LicensingAgreementsMember2020-01-012020-06-300001376227ung:MarketingAgreementMember2020-01-012020-06-300001376227ung:UnitedStatesNaturalGasMember2020-01-012020-06-300001376227ung:UnitedStatesNaturalGasMember2020-06-3000013762272020-08-0300013762272020-01-012020-06-30xbrli:sharesiso4217:USDxbrli:pureiso4217:USDung:itemiso4217:USDxbrli:shares

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2020.

or

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from                to                .

Commission file number: 001-33096

United States Natural Gas Fund, LP

(Exact name of registrant as specified in its charter)

Delaware

 

20-5576760

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

1850 Mt. Diablo Boulevard, Suite 640

Walnut Creek, California 94596

(Address of principal executive offices) (Zip Code)

(510) 522-9600

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class:

    

Trading Symbol(s)

    

Name of each exchange on which registered:

Shares of United States Natural Gas Fund, LP

UNG

NYSE Arca, Inc.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

 

Accelerated Filer

 

 

 

 

 

Non-Accelerated Filer

 

Smaller Reporting Company

 

 

 

 

 

Emerging Growth Company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.). Yes   No

The registrant had 34,284,588 outstanding shares as of August 3, 2020.

Table of Contents

United States Natural Gas Fund, LP

Table of Contents

Table of Contents

Part I. FINANCIAL INFORMATION

Item 1. Condensed Financial Statements.

Index to Condensed Financial Statements

1

Table of Contents

United States Natural Gas Fund, LP

Condensed Statements of Financial Condition

At June 30, 2020 (Unaudited) and December 31, 2019

    

June 30, 2020

    

December 31, 2019

Assets

 

  

 

  

Cash and cash equivalents (at cost $328,821,241 and $375,588,135, respectively) (Notes 2 and 5)

$

328,821,241

$

375,588,135

Equity in trading accounts:

 

 

Cash and cash equivalents (at cost $86,405,619 and $83,410,316, respectively)

 

86,405,619

 

83,410,316

Unrealized gain (loss) on open commodity futures contracts

 

1,356,010

 

(20,768,690)

Receivable for shares sold

3,070

6,765,424

Dividends receivable

 

33,366

 

140,270

Interest receivable

 

 

5,227

Prepaid insurance*

 

41,221

 

7,569

Prepaid registration fees

 

287,490

 

467,490

ETF transaction fees receivable

 

 

1,000

Total Assets

$

416,948,017

$

445,616,741

 

 

Liabilities and Partners' Capital

Payable for shares redeemed

$

32,816,146

$

General Partner management fees payable (Note 3)

193,217

207,145

Professional fees payable

 

405,449

 

786,718

Brokerage commissions payable

 

141,756

 

36,300

Directors' fees payable*

 

3,645

 

10,691

License fees payable

 

10,538

 

2,633

 

 

Total Liabilities

 

33,570,751

 

1,043,487

 

 

Commitments and Contingencies (Notes 3, 4 & 5)

 

 

 

 

Partners' Capital

 

 

General Partners

 

 

Limited Partners

 

383,377,266

 

444,573,254

Total Partners' Capital

 

383,377,266

 

444,573,254

 

 

Total Liabilities and Partners' Capital

$

416,948,017

$

445,616,741

 

 

Limited Partners' shares outstanding

 

37,384,588

 

26,284,588

Net asset value per share

$

10.25

$

16.91

Market value per share

$

10.26

$

16.86

*     Certain prior year amounts have been reclassified for consistency with the current presentation.

See accompanying notes to condensed financial statements.

2

Table of Contents

United States Natural Gas Fund, LP

Condensed Schedule of Investments (Unaudited)

At June 30, 2020

    

    

    

Fair Value/

    

Unrealized Gain

(Loss) on Open 

Notional

Number of

Commodity 

% of Partners'

    

Amount

    

Contracts

    

Contracts

    

Capital

Open Commodity Futures Contracts - Long

 

  

 

  

 

  

 

  

United States Contracts

 

 

  

 

  

 

  

NYMEX Natural Gas NG August 2020 contracts, expiring July 2020*

$

382,025,440

 

21,895

$

1,356,010

 

0.35

    

Principal

    

Market

    

% of Partners'

Amount

Value

Capital

Cash Equivalents

 

  

 

  

United States Treasury Obligations

 

  

 

  

U.S. Treasury Bills:

 

  

 

  

1.54%, 7/02/2020

$

  10,000,000

$

9,999,576

 

2.61

1.52%, 7/09/2020

 

  10,000,000

 

9,996,661

 

2.61

1.55%, 7/16/2020

 

  10,000,000

 

9,993,625

 

2.61

1.53%, 7/23/2020

 

  10,000,000

 

9,990,742

 

2.61

1.54%, 7/30/2020

 

  10,000,000

 

9,987,755

 

2.60

1.54%, 8/06/2020

 

  10,000,000

 

9,984,800

 

2.60

1.52%, 8/13/2020

 

  10,000,000

 

9,982,000

 

2.60

1.53%, 8/20/2020

 

  10,000,000

 

9,979,028

 

2.60

1.43%, 8/27/2020

 

  10,000,000

 

9,977,675

 

2.60

0.68%, 9/03/2020

 

  10,000,000

 

9,988,089

 

2.61

Total United States Treasury Obligations

 

99,879,951

 

26.05

United States Money Market Funds

Fidelity Investments Money Market Funds - Government Portfolio,0.06%#

103,921

103,921

0.03

Goldman Sachs Financial Square Funds - Government Fund - Class FS, 0.15%#

268,149,233

268,149,233

69.94

RBC U.S. Government Money Market Fund - Institutional Share Class, 0.10%#

 

617,849

 

617,850

 

0.16

Total United States Money Market Funds

 

 

268,871,004

 

70.13

Total Cash Equivalents

$

368,750,955

 

96.18

*     Collateral amounted to $86,405,619 on open commodity futures contracts.

#     Reflects the 7-day yield at June 30, 2020.

See accompanying notes to condensed financial statements.

3

Table of Contents

United States Natural Gas Fund, LP

Condensed Statements of Operations (Unaudited)

For the three and six months ended June 30, 2020 and 2019

    

Three months ended

    

Three months ended

    

Six months ended

    

Six months ended

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

Income

 

  

  

  

  

  

  

  

Gain (loss) on trading of commodity futures contracts:

 

  

  

  

  

  

  

  

Realized gain (loss) on closed commodity futures contracts

$

(102,525,960)

  

$

(53,152,570)

$

(227,224,580)

  

$

(104,711,777)

Change in unrealized gain (loss) on open commodity futures contracts

 

30,575,360

  

 

11,805,850

  

 

22,124,700

  

 

61,939,447

Realized gain (loss) on short-term investments

 

  

 

93

  

 

  

 

93

Dividend income

 

104,118

  

 

37,004

  

 

773,179

  

 

149,114

Interest income*

 

603,045

  

 

1,611,194

  

 

1,680,576

  

 

3,221,514

ETF transaction fees

 

42,070

  

 

20,000

  

 

86,070

  

 

57,000

Total Income (Loss)

$

(71,201,367)

  

$

(39,678,429)

  

$

(202,560,055)

  

$

(39,344,609)

 

  

 

  

 

  

 

Expenses

 

  

 

  

 

  

 

General Partner management fees (Note 3)

$

581,249

  

$

412,293

  

$

1,269,405

  

$

845,208

Professional fees

 

192,575

  

 

241,337

  

 

352,011

  

 

480,022

Brokerage commissions

 

595,544

  

 

251,098

  

 

1,168,244

  

 

522,662

Directors' fees and insurance

 

19,695

  

 

13,382

  

 

44,198

  

 

30,583

License fees

 

14,531

  

 

10,307

  

 

31,735

  

 

21,130

Registration fees

 

111,750

  

 

15,429

  

 

180,000

  

 

40,819

Total Expenses

$

1,515,344

  

$

943,846

  

$

3,045,593

  

$

1,940,424

Net Income (Loss)

$

(72,716,711)

  

$

(40,622,275)

$

(205,605,648)

  

$

(41,285,033)

Net Income (Loss) per limited partner share

$

(2.18)

  

$

(3.59)

$

(6.66)

  

$

(4.52)

Net Income (Loss) per weighted average limited partner share

$

(2.18)

  

$

(3.19)

$

(6.33)

  

$

(3.37)

Weighted average limited partner shares outstanding

33,313,159

  

 

12,742,830

 

32,485,137

  

 

12,254,201

*     Interest income does not exceed paid in kind of 5%.

See accompanying notes to condensed financial statements.

4

Table of Contents

United States Natural Gas Fund, LP

Condensed Statement in Changes in Partners’ Capital (Unaudited)

For the three and six months ended June 30, 2020 and 2019

Limited Partners*

Three months ended

Three months ended

    

Six months ended

    

Six months ended

    

June 30, 2020

    

June 30, 2019

    

June 30, 2020

    

June 30, 2019

Balances at beginning of period

$

327,914,952

$

254,882,942

$

444,573,254

$

248,014,523

Addition of 21,500,000, 8,400,000, 38,600,000 and 19,400,000 partnership shares, respectively

250,904,441

 

175,491,124

 

505,641,792

 

446,533,840

Redemption of (10,500,000), (2,900,000), (27,500,000) and (13,200,000) partnership shares, respectively

(122,725,416)

 

(64,810,638)

 

(361,232,132)

 

(328,322,177)

Net income (loss)

(72,716,711)

 

(40,622,275)

 

(205,605,648)

 

(41,285,033)

 

  

 

 

Balances at end of period

$

383,377,266

$

324,941,153

$

383,377,266

$

324,941,153

*     General Partners' shares outstanding and capital for the periods presented were zero.

See accompanying notes to condensed financial statements.

5

Table of Contents

United States Natural Gas Fund, LP

Condensed Statements of Cash Flows (Unaudited)

For the six months ended June 30, 2020 and 2019

    

Six months ended

    

Six months ended

June 30, 2020

June 30, 2019

Cash Flows from Operating Activities:

 

  

 

  

Net income (loss)

$

(205,605,648)

$

(41,285,033)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

Change in unrealized (gain) loss on open commodity futures contracts

 

(22,124,700)

 

(61,939,447)

(Increase) decrease in dividends receivable

 

106,904

 

40,061

(Increase) decrease in interest receivable

 

5,227

 

9,670

(Increase) decrease in prepaid insurance*

(33,652)

(16,493)

(Increase) decrease in prepaid registration fees

 

180,000

 

(496,097)

(Increase) decrease in ETF transaction fees receivable

 

1,000

 

1,000

Increase (decrease) in General Partner management fees payable

 

(13,928)

 

(39,220)

Increase (decrease) in professional fees payable

 

(381,269)

 

(393,667)

Increase (decrease) in brokerage commissions payable

 

105,456

 

Increase (decrease) in directors' fees payable*

 

(7,046)

 

(398)

Increase (decrease) in license fees payable

 

7,905

 

(4,678)

Net cash provided by (used in) operating activities

 

(227,759,751)

 

(104,124,302)

Cash Flows from Financing Activities:

 

 

Addition of partnership shares

 

512,404,146

 

446,533,840

Redemption of partnership shares

 

(328,415,986)

 

(372,155,453)

Net cash provided by (used in) financing activities

 

183,988,160

 

74,378,387

Net Increase (Decrease) in Cash and Cash Equivalents

 

(43,771,591)

 

(29,745,915)

 

 

Total Cash, Cash Equivalents and Equity in Trading Accounts, beginning of period

 

458,998,451

 

359,791,174

Total Cash, Cash Equivalents and Equity in Trading Accounts, end of period

$

415,226,860

$

330,045,259

 

 

Components of Cash and cash equivalents:

 

 

Cash and Cash Equivalents

$

328,821,241

$

265,182,362

Equity in Trading Accounts:

 

 

Cash and cash equivalents

 

86,405,619

 

64,862,897

Total Cash, Cash Equivalents and Equity in Trading Accounts

$

415,226,860

$

330,045,259

*     Certain prior year amounts have been reclassified for consistency with the current presentation.

See accompanying notes to condensed financial statements.

6

Table of Contents

United States Natural Gas Fund, LP

Notes to the Condensed Financial Statements

For the six months ended June 30, 2020 (Unaudited)

NOTE 1 — ORGANIZATION AND BUSINESS

The United States Natural Gas Fund, LP (“UNG”) was organized as a limited partnership under the laws of the state of Delaware on September 11, 2006. UNG is a commodity pool that issues limited partnership shares (“shares”) that may be purchased and sold on the NYSE Arca, Inc. (the “NYSE Arca”). Prior to November 25, 2008, UNG’s shares traded on the American Stock Exchange (the “AMEX”). UNG will continue in perpetuity, unless terminated sooner upon the occurrence of one or more events as described in its Fifth Amended and Restated Agreement of Limited Partnership dated as of December 15, 2017 (the “LP Agreement”). The investment objective of UNG is for the daily changes in percentage terms of its shares’ per share net asset value (“NAV”) to reflect the daily changes in percentage terms of the price of natural gas delivered at the Henry Hub, Louisiana, as measured by the daily changes in the price of the futures contract for natural gas  traded on the New York Mercantile Exchange (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 measured by the futures contract that is the next month contract to expire (the “Benchmark Futures Contract”), plus interest earned on UNG’s collateral holdings, less UNG’s expenses. UNG seeks to achieve its investment objective by investing so that the average daily percentage change in UNG'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.

UNG’s investment objective is not for its NAV or market price of shares to equal, in dollar terms, the spot price of natural gas or any particular futures contract based on natural gas, nor is UNG’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.

United States Commodity Funds LLC (“USCF”), the general partner of UNG, believes that it is not practical to manage the portfolio to achieve such an investment goal when investing in Natural Gas Futures Contracts (as defined below) and Other Natural Gas-Related Investments (as defined below). The net assets of UNG consist primarily of investments in futures contracts for natural gas that are traded on the NYMEX, ICE Futures Exchange (“ICE Futures”) or other U.S. and foreign exchanges (collectively, “Natural Gas Futures Contracts”) and, to a lesser extent, in order to comply with regulatory requirements or in view of market conditions, other natural gas-related investments such as cash-settled options on Natural Gas Futures Contracts, forward contracts for natural gas, cleared swap contracts, and non-exchange traded over-the-counter (“OTC”) transactions that are based on the price of natural gas, crude oil and other petroleum-based fuels, as well as futures contracts for crude oil, diesel-heating oil, gasoline and other petroleum-based fuels and indices based on the foregoing (collectively, “Other Natural Gas-Related Investments”). Market conditions that USCF currently anticipates could cause UNG to invest in Other Natural Gas-Related Investments including those allowing UNG to obtain greater liquidity or to execute transactions with more favorable pricing. For convenience and unless otherwise specified, Natural Gas Futures Contracts and Other Natural Gas-Related Investments collectively are referred to as “Natural Gas Interests” in this quarterly report on Form 10-Q. As of June 30, 2020, UNG held 21,895 NG Futures August 2020 Contracts traded on the NYMEX and did not hold any Natural Gas Futures Contracts traded on the ICE Futures US.

UNG commenced investment operations on April 18, 2007 and has a fiscal year ending on December 31. USCF is responsible for the management of UNG. USCF is a member of the National Futures Association (the “NFA”) and became registered as a commodity pool operator with the Commodity Futures Trading Commission (the “CFTC”) effective December 1, 2005 and a swaps firm on August 8, 2013.

7

Table of Contents

USCF is also the general partner of the United States Oil Fund, LP (“USO”), the United States 12 Month Oil Fund, LP (“USL”) and the United States Gasoline Fund, LP (“UGA”), which listed their limited partnership shares on the AMEX under the ticker symbols “USO” on April 10, 2006, “USL” on December 6, 2007 and “UGA” on February 26, 2008, respectively. As a result of the acquisition of the AMEX by NYSE Euronext, each of USO’s, USL’s and UGA’s shares commenced trading on the NYSE Arca on November 25, 2008. USCF is also the general partner of the United States 12 Month Natural Gas Fund, LP (“UNL”) and the United States Brent Oil Fund, LP (“BNO”), which listed their limited partnership shares on the NYSE Arca under the ticker symbols “UNL” on November 18, 2009 and “BNO” on June 2, 2010, respectively. USCF previously served as the general partner for the United States Short Oil Fund, LP (“DNO”) and the United States Diesel-Heating Oil Fund, LP (“UHN”), both of which were liquidated in 2018.

USCF is also the sponsor of the United States Commodity Index Fund (“USCI”), the United States Copper Index Fund (“CPER”) and the USCF Crescent Crypto Index Fund (“XBET”), each a series of the United States Commodity Index Funds Trust (“USCIFT”). USCF previously served as the sponsor for the United States Agricultural Index Fund (“USAG”) a series of USCIFT which was liquidated in 2018. A registration statement that had been previously filed for XBET was withdrawn on June 25, 2020. USCI and CPER listed their shares on the NYSE Arca under the ticker symbols “USCI” on August 10, 2010 and “CPER” on November 15, 2011, respectively.

In addition, USCF was the sponsor of the USCF Funds Trust, a Delaware statutory trust, and each of its series, the United States 3x Oil Fund (“USOU”) and the United States 3x Short Oil Fund (“USOD”), which listed their shares on the NYSE Arca on July 20, 2017 under the ticker symbols “USOU” and “USOD”, respectively. Each of USOU and USOD liquidated all of its assets and distributed cash pro rata to all remaining shareholders in December 2019.

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

UNG issues shares to certain authorized purchasers (“Authorized Participants”) by offering baskets consisting of 100,000 shares (“Creation Baskets”) through ALPS Distributors, Inc., as the marketing agent (the “Marketing Agent”). The purchase price for a Creation Basket is based upon the NAV of a share calculated shortly after the close of the core trading session on the NYSE Arca on the day the order to create the basket is properly received.

Authorized Participants pay UNG a $1,000 transaction fee for  each order placed to create one or more Creation Baskets or to redeem one or more baskets (“Redemption Baskets”), consisting of 100,000 shares. Shares may be purchased or sold on a nationally recognized securities exchange in smaller increments than a Creation Basket or Redemption Basket. Shares purchased or sold on a nationally recognized securities exchange are not purchased or sold at the per share NAV of UNG but rather at market prices quoted on such exchange.

In April 2007, UNG initially registered 30,000,000 shares on Form S-1 with the U.S. Securities and Exchange Commission (the “SEC”). On April 18, 2007, UNG listed its shares on the AMEX under the ticker symbol “UNG” and switched to trading on the NYSE Arca under the same ticker symbol on November 25, 2008. On that day, UNG established its initial per share NAV by setting the price at $50.00 and issued 200,000 shares in exchange for $10,001,000. UNG also commenced investment operations on April 18, 2007, by purchasing Natural Gas Futures Contracts traded on the NYMEX based on natural gas. As of June 30, 2020, UNG had registered a total of 2,280,000,000 shares.

On January 4, 2018, after the close of trading on the NYSE Arca, UNG effected a 1-for-4 reverse share split and post-split shares of UNG began trading on January 5, 2018. As a result of the reverse share split, every four pre-split shares of UNG were automatically exchanged for one post-split share. Immediately prior to the reverse split, there were 97,466,476 shares of UNG issued and outstanding, representing a per share NAV of $5.69. Immediately after the reverse share split, the number of issued and outstanding shares of UNG decreased to 24,366,619, not accounting for fractional shares, and the per share NAV increased to $22.76. In connection with the reverse share split, the CUSIP number for UNG’s shares changed to 912318300. UNG’s ticker symbol, “UNG,” did not change.

8

Table of Contents

The accompanying unaudited condensed financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X promulgated by the SEC and, therefore, do not include all information and footnote disclosure required under generally accepted accounting principles in the United States of America (“U.S. GAAP”). The financial information included herein is unaudited; however, such financial information reflects all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of USCF, necessary for the fair presentation of the condensed financial statements for the interim period.

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The condensed financial statements have been prepared in conformity with U.S. GAAP as detailed in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification. UNG is an investment company and follows the accounting and reporting guidance in FASB Topic 946.

Revenue Recognition

Commodity futures contracts, forward contracts, physical commodities and related options are recorded on the trade date. All such transactions are recorded on the identified cost basis and marked to market daily. Unrealized gains or losses on open contracts are reflected in the condensed statements of financial condition and represent the difference between the original contract amount and the market value (as determined by exchange settlement prices for futures contracts and related options and cash dealer prices at a predetermined time for forward contracts, physical commodities, and their related options) as of the last business day of the year or as of the last date of the condensed financial statements. Changes in the unrealized gains or losses between periods are reflected in the condensed statements of operations. UNG earns income on funds held at the custodian or futures commission merchants (“FCMs”) at prevailing market rates earned on such investments.

Brokerage Commissions

Brokerage commissions on all open commodity futures contracts are accrued on a full-turn basis.

Income Taxes

UNG is not subject to federal income taxes; each partner reports his/her allocable share of income, gain, loss deductions or credits on his/her own income tax return.

In accordance with U.S. GAAP, UNG is required to determine whether a tax position is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any tax related appeals or litigation processes, based on the technical merits of the position. UNG files an income tax return in the U.S. federal jurisdiction and may file income tax returns in various U.S. states. UNG is not subject to income tax return examinations by major taxing authorities for years before 2016. The tax benefit recognized is measured as the largest amount of benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. De-recognition of a tax benefit previously recognized results in UNG recording a tax liability that reduces net assets. However, UNG’s conclusions regarding this policy may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analysis of and changes to tax laws, regulations and interpretations thereof. UNG recognizes interest accrued related to unrecognized tax benefits and penalties related to unrecognized tax benefits in income tax fees payable, if assessed. No interest expense or penalties have been recognized as of and for the period ended June 30, 2020.

Creations and Redemptions

Authorized Participants may purchase Creation Baskets or redeem Redemption Baskets only in blocks of   100,000 shares at a price equal to the NAV of the shares calculated shortly after the close of the core trading session on the NYSE Arca on the day the order is placed.

9

Table of Contents

UNG receives or pays the proceeds from shares sold or redeemed within two business days after the trade date of the purchase or redemption. The amounts due from Authorized Participants are reflected in UNG’s condensed statements of financial condition as receivable for shares sold and amounts payable to Authorized Participants upon redemption are reflected as payable for shares redeemed.

Authorized Participants pay UNG a $1,000 transaction fee for each order placed to create one or more Creation Baskets or to redeem one or more Redemption Baskets.

Partnership Capital and Allocation of Partnership Income and Losses

Profit or loss shall be allocated among the partners of UNG in proportion to the number of shares each partner holds as of the close of each month. USCF may revise, alter or otherwise modify this method of allocation as described in the LP Agreement.

Calculation of Per Share NAV

UNG’s per share NAV is calculated on each NYSE Arca trading day by taking the current market value of its total assets, subtracting any liabilities and dividing that amount by the total number of shares outstanding. UNG uses the closing price for the contracts on the relevant exchange on that day to determine the value of contracts held on such exchange.

Net Income (Loss) Per Share

Net income (loss) per share is the difference between the per share NAV at the beginning of each period and at the end of each period. The weighted average number of shares outstanding was computed for purposes of disclosing net income (loss) per weighted average share. The weighted average shares are equal to the number of shares outstanding at the end of the period, adjusted proportionately for shares added and redeemed based on the amount of time the shares were outstanding during such period. There were no shares held by USCF at June 30, 2020.

Offering Costs

Offering costs incurred in connection with the registration of additional shares after the initial registration of shares are borne by UNG. These costs include registration fees paid to regulatory agencies and all legal, accounting, printing and other expenses associated with such offerings. These costs are accounted for as a deferred charge and thereafter amortized to expense over twelve months on a straight-line basis or a shorter period if warranted.

Cash Equivalents

Cash equivalents include money market funds and overnight deposits or time deposits with original maturity dates of six months or less.

Reclassification

Certain amounts in the accompanying condensed financial statements were reclassified to conform to the current presentation.

Use of Estimates

The preparation of condensed financial statements in conformity with U.S. GAAP requires USCF to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed financial statements, and the reported amounts of the revenue and expenses during the reporting period. Actual results may differ from those estimates and assumptions.

10

Table of Contents

NOTE 3 — FEES PAID BY THE FUND AND RELATED PARTY TRANSACTIONS

USCF Management Fee

Under the LP Agreement, USCF is responsible for investing the assets of UNG in accordance with the objectives and policies of UNG. In addition, USCF has arranged for one or more third parties to provide administrative, custody, accounting, transfer agency and other necessary services to UNG. For these services, UNG is contractually obligated to pay USCF a fee, which is paid monthly, equal to 0.60% per annum of average daily total net assets of $1,000,000,000 or less and 0.50% per annum of average daily total net assets that are greater than $1,000,000,000.

Ongoing Registration Fees and Other Offering Expenses

UNG pays all costs and expenses associated with the ongoing registration of its shares subsequent to the initial offering. These costs include registration or other fees paid to regulatory agencies in connection with the offer and sale of shares, and all legal, accounting, printing and other expenses associated with such offer and sale. For the six months ended June 30, 2020 and 2019, UNG incurred $180,000 and $40,819, respectively, in registration fees and offering expenses.

Independent Directors’ and Officers’ Expenses

UNG is responsible for paying its portion of the directors’ and officers’ liability insurance for UNG and the Related Public Funds and the fees and expenses of the independent directors who also serve as audit committee members of UNG and the Related Public Funds. UNG shares the fees and expenses on a pro rata basis with each Related Public Fund, as described above, based on the relative assets of each Related Public Fund computed on a daily basis. These fees and expenses for the year ending December 31, 2020 are estimated to be a total of $64,000 for UNG and, in the aggregate for UNG and the Related Public Funds, $574,000.

Licensing Fees

As discussed in Note 4 below, UNG entered into a licensing agreement with the NYMEX on April 10, 2006, as amended on October 20, 2011. Pursuant to the agreement, UNG and the Related Public Funds, other than BNO, USCI and CPER, pay a licensing fee that is equal to 0.015% on all net assets. During the six months ended June 30, 2020 and 2019, UNG incurred $31,735 and $21,130, respectively under this arrangement.

Investor Tax Reporting Cost

The fees and expenses associated with UNG’s audit expenses and tax accounting and reporting requirements are paid by UNG. These costs are estimated to be $760,000 for the year ending December 31, 2020. Tax reporting costs fluctuate between years due to the number of shareholders during any given year.

Other Expenses and Fees

In addition to the fees described above, UNG pays all brokerage fees and other expenses in connection with the operation of UNG, excluding costs and expenses paid by USCF as outlined in Note 4 – Contracts and Agreements below.

NOTE 4 — CONTRACTS AND AGREEMENTS

Marketing Agent Agreement

UNG is party to a marketing agent agreement, dated as of April 17, 2007, as amended from time to time, with the Marketing Agent and USCF, whereby the Marketing Agent provides certain marketing services for UNG as outlined in the agreement. The fee of the Marketing Agent, which is borne by USCF, is equal to 0.06% on UNG’s assets up to $3 billion and 0.04% on UNG’s assets in excess of $3 billion. In no event may the aggregate compensation paid to the Marketing Agent and any affiliate of USCF for distribution-related services exceed 10% of the gross proceeds of UNG’s offering.

11

Table of Contents

The above fee does not include website construction and development, which are also borne by USCF.

Custody, Transfer Agency and Fund Administration and Accounting Services Agreements

USCF engaged The Bank of New York Mellon, a New York corporation authorized to do a banking business (“BNY Mellon”), to provide UNG and each of the Related Public Funds with certain custodial, administrative and accounting, and transfer agency services, pursuant to the following agreements with BNY Mellon dated as of March 20, 2020 (together, the “BNY Mellon Agreements”), which were effective as of April 1, 2020: (i) a Custody Agreement; (ii) a Fund Administration and Accounting Agreement; and (iii) a Transfer Agency and Service Agreement. USCF pays the fees of BNY Mellon for its services under the BNY Mellon Agreements and such fees are determined by the parties from time to time.

Brown Brothers Harriman and Co. ("BBH&Co.") previously served as the Administrator, Custodian, Transfer Agent and Fund Accounting Agent for UNG and the Related Public Funds prior to BNY Mellon commencing such services on April 1, 2020. Certain fund accounting and fund administration services rendered by BBH&Co. to UNG and the Related Public Funds terminated on May 31, 2020 to allow for the transition to BNY Mellon.

Brokerage and Futures Commission Merchant Agreements

UNG entered into a brokerage agreement with RBC Capital Markets  LLC (“RBC”) to serve as UNG’s FCM effective October 10, 2013. In addition, UNG entered into a Commodity Futures Customer Agreement dated as of May 28, 2020 with RCG Division of Marex Spectron ("RCG") and a Customer Agreement with ED & F Man Capital Markets Inc. ("MCM") on June 5, 2020, pursuant to which RCG and MCM each act as an FCM for UNG. The agreements with UNG's FCMs require the FCMs to provide services to UNG in connection with the purchase and sale of Natural Gas Futures Contracts and Other Natural Gas-Related Investments that may be purchased and sold by or through the applicable FCM for UNG’s account. In accordance with the FCM agreements, UNG pays each FCM commissions of approximately $7 to $8 per round-turn trade, including applicable exchange, clearing and NFA fees for Natural Gas Futures Contracts and options on Natural Gas Futures Contracts. Such fees include those incurred when purchasing Natural Gas Futures Contracts and options on Natural Gas Futures Contracts when UNG issues shares as a result of a Creation Basket, as well as fees incurred when selling Natural Gas Futures Contracts and options on Natural Gas Futures Contracts when UNG redeems shares as a result of a Redemption Basket. Such fees are also incurred when Natural Gas Futures Contracts and options on Natural Gas Futures Contracts are purchased or redeemed for the purpose of rebalancing the portfolio. UNG also incurs commissions to brokers for the purchase and sale of Natural Gas Futures Contracts, Other Natural Gas-Related Investments or short-term obligations of the United States of two years or less (“Treasuries”).

Six months

Six months

 

ended

ended

 

    

June 30, 2020

    

June 30, 2019

Total commissions accrued to brokers

$

1,168,244

$

522,662

Total commissions as annualized percentage of average total net assets

 

0.55

%  

 

0.37

%

Commissions accrued as a result of rebalancing

$

1,025,730

$

436,630

Percentage of commissions accrued as a result of rebalancing

 

87.80

%  

 

83.54

%

Commissions accrued as a result of creation and redemption activity

$

142,514

$

86,032

Percentage of commissions accrued as a result of creation and redemption activity

 

12.20

%  

 

16.46

%

The increase in total commissions accrued to brokers for the six months ended June 30, 2020, compared to the six months ended June 30, 2019, was due primarily to a higher  number of natural gas futures contracts being held and traded.

12

Table of Contents

NYMEX Licensing Agreement

UNG and the NYMEX entered into a licensing agreement on April 10, 2006, as amended on October 20, 2011, whereby UNG was granted a non-exclusive license to use certain of the NYMEX’s settlement prices and service marks. Under the licensing agreement, UNG and the Related Public Funds, other than BNO, USCI and CPER,  pay the NYMEX an asset-based fee for the license, the terms of which are described in Note 3. UNG expressly disclaims any association with the NYMEX or endorsement of UNG by the NYMEX and acknowledges that “NYMEX” and “New York Mercantile Exchange” are registered trademarks of the NYMEX.

NOTE 5 — FINANCIAL INSTRUMENTS, OFF-BALANCE SHEET RISKS AND CONTINGENCIES

UNG may engage in the trading of futures contracts, options on futures contracts, cleared swaps and OTC swaps (collectively, “derivatives”). UNG is exposed to both market risk, which is the risk arising from changes in the market value of the contracts, and credit risk, which is the risk of failure by another party to perform according to the terms of a contract.

UNG may enter into futures contracts, options on futures contracts, cleared swaps, and OTC swaps to gain exposure to changes in the value of an underlying commodity. A futures contract obligates the seller to deliver (and the purchaser to accept) the future delivery of a specified quantity and type of a commodity at a specified time and place. Some futures contracts may call for physical delivery of the asset, while others are settled in cash. The contractual obligations of a buyer or seller may generally be satisfied by taking or making physical delivery of the underlying commodity or by making an offsetting sale or purchase of an identical futures contract on the same or linked exchange before the designated date of delivery. Cleared swaps are agreements that are eligible to be cleared by a clearinghouse, e.g., ICE Clear Europe, and provide the efficiencies and benefits that centralized clearing on an exchange offers to traders of futures contracts, including credit risk intermediation and the ability to offset positions initiated with different counterparties. OTC swaps are entered into between two parties in private contracts. In an OTC swap, each party bears credit risk to the other party, i.e., the risk that the other party may not be able to perform its obligations under the OTC swap.

The purchase and sale of futures contracts, options on futures contracts and cleared swaps require margin deposits with an FCM. Additional deposits may be necessary for any loss on contract value. The Commodity Exchange Act requires an FCM to segregate all customer transactions and assets from the FCM’s proprietary activities. To reduce the credit risk that arises in connection with OTC swaps, UNG will generally enter into an agreement with each counterparty based on the Master Agreement published by the International Swaps and Derivatives Association, Inc., which provides for the netting of its overall exposure to its counterparty. The Master Agreement is negotiated as between the parties and would address, among other things, the exchange of margin between the parties.

Futures contracts, options on futures contracts and cleared swaps involve, to varying degrees, elements of market risk (specifically commodity price risk) and exposure to loss in excess of the amount of variation margin. The face or contract amounts reflect the extent of the total exposure UNG has in the particular classes of instruments. Additional risks associated with the use of futures contracts are an imperfect correlation between movements in the price of the futures contracts and the market value of the underlying securities and the possibility of an illiquid market for a futures contract. Buying and selling options on futures contracts exposes investors to the risks of purchasing or selling futures contracts. As to OTC swaps, valuing OTC derivatives is less certain than valuing actively traded financial instruments such as exchange-traded futures contracts and securities or cleared swaps, because the price and terms on which such OTC derivatives are entered into or can be terminated are individually negotiated, and those prices and terms may not reflect the best price or terms available from other sources. In addition, while market makers and dealers generally quote indicative prices or terms for entering into or terminating OTC contracts, they typically are not contractually obligated to do so, particularly if they are not a party to the transaction. As a result, it may be difficult to obtain an independent value for an outstanding OTC derivatives transaction.

13

Table of Contents

All of the futures contracts held by UNG through June 30, 2020 were exchange-traded. The risks associated with exchange-traded contracts are generally perceived to be less than those associated with OTC swaps since, in OTC swaps, a party must rely solely on the credit of its respective individual counterparties. However, in the future, if UNG were to enter into non-exchange traded contracts, it would be subject to the credit risk associated with counterparty non-performance. The credit risk from counterparty non-performance associated with such instruments is the net unrealized gain, if any, on the transaction. UNG has credit risk under its futures contracts since the sole counterparty to all domestic and foreign futures contracts is the clearinghouse for the exchange on which the relevant contracts are traded. In addition, UNG bears the risk of financial failure by the clearing broker.

A novel strain of coronavirus (COVID-19) outbreak was declared a pandemic by the World Health Organization on March 11, 2020. The situation is evolving with various cities and countries around the world responding in different ways to address the outbreak. There are direct and indirect economic effects developing for various industries and individual companies throughout the world. Management will continue to monitor the impact COVID-19 has on the Fund and reflect the consequences as appropriate in the Fund's accounting and financial reporting. The recent pandemic spread of the novel coronavirus and related geopolitical events could lead to increased market volatility, disruption to U.S. and world economies and markets and may have significant adverse effects on the Fund and its investments.

UNG’s cash and other property, such as Treasuries, deposited with its FCMs are considered commingled with all other customer funds, subject to such FCM’s segregation requirements. In the event of an FCM’s insolvency, recovery may be limited to a pro rata share of segregated funds available. It is possible that the recovered amount could be less than the total of cash and other property deposited. The insolvency of an FCM could result in the complete loss of UNG’s assets posted with that FCM; however, the majority of UNG’s assets are held in investments in Treasuries, cash and/or cash equivalents with UNG’s custodian and would not be impacted by the insolvency of an FCM. The failure or insolvency of UNG’s custodian, however, could result in a substantial loss of UNG’s assets.

USCF invests a portion of UNG's cash in money market funds that seek to maintain a stable per share NAV. UNG is exposed to any risk of loss associated with an investment in such money market funds. As of June 30, 2020 and December 31, 2019, UNG held investments in money market funds in the amounts of $268,871,004 and $160,000,000, respectively. UNG also holds cash deposits with its custodian. Pursuant to a written agreement with BNY Mellon, uninvested overnight cash balances are swept to offshore branches of U.S. regulated and domiciled banks located in Grand Cayman, Cayman Islands; which are subject to U.S. regulation and regulatory oversight. As of June 30, 2020 and December 31, 2019, UNG held cash deposits and investments in Treasuries in the amounts of $146,355,856 and $298,998,451 respectively, with the custodian and FCMs. Some or all of these amounts may be subject to loss should UNG’s custodian and/or FCMs cease operations.

For derivatives, risks arise from changes in the market value of the contracts. Theoretically, UNG is exposed to market risk equal to the value of futures contracts purchased and unlimited liability on such contracts sold short or that the value of the futures contract could fall below zero. As both a buyer and a seller of options, UNG pays or receives a premium at the outset and then bears the risk of unfavorable changes in the price of the contract underlying the option.

UNG’s policy is to continuously monitor its exposure to market and counterparty risk through the use of a variety of financial, position and credit exposure reporting controls and procedures. In addition, UNG has a policy of requiring review of the credit standing of each broker or counterparty with which it conducts business.

The financial instruments held by UNG are reported in its condensed statements of financial condition at market or fair value, or at carrying amounts that approximate fair value, because of their highly liquid nature and short-term maturity.

14

Table of Contents

NOTE 6 — FINANCIAL HIGHLIGHTS

The following table presents per share performance data and other supplemental financial data for the three and six months ended June 30, 2020 and 2019 for the shareholders. This information has been derived from information presented in the condensed financial statements.

Three months ended

Three months ended

    

Six months ended

    

Six months ended

 

June 30, 2020

June 30, 2019

June 30, 2020

June 30, 2019

 

(Unaudited)

(Unaudited)

(Unaudited)

(Unaudited)

 

Per Share Operating Performance:

 

  

  

  

  

Net asset value, beginning of period

$

12.43

$

23.42

$

16.91

$

24.35

Total income (loss)

(2.13)

(3.52)

 

(6.57)

  

 

(4.36)

Total expenses

(0.05)

(0.07)

 

(0.09)

  

 

(0.16)

Net increase (decrease) in net asset value

(2.18)

(3.59)

 

(6.66)

  

 

(4.52)

Net asset value, end of period

$

10.25

$

19.83

$

10.25

$

19.83

 

  

 

Total Return

(17.54)

%

(15.33)

%

 

(39.38)

%  

 

(18.56)

%  

  

Ratios to Average Net Assets

 

  

 

Total income (loss)

(18.27)

%

(14.40)

%

 

(47.61)

%  

 

(13.85)

%

Management fees*

0.60

%

0.60

%

 

0.60

%  

 

0.60

%

Expenses excluding management fees*

0.96

%

0.39

%

 

0.84

%  

 

0.78

%

Net income (loss)

(18.66)

%

(14.74)

%

 

(48.33)

%  

 

(14.53)

%

*

Annualized.

Total returns are calculated based on the change in value during the period. An individual shareholder’s total return and ratio may vary from the above total returns and ratios based on the timing of contributions to and withdrawals from UNG.

NOTE 7 — FAIR VALUE OF FINANCIAL INSTRUMENTS

UNG values its investments in accordance with Accounting Standards Codification 820 – Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurement. The changes to past practice resulting from the application of ASC 820 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurement. ASC 820 establishes a fair value hierarchy that distinguishes between: (1) market participant assumptions developed based on market data obtained from sources independent of UNG (observable inputs) and (2) UNG’s own assumptions about market participant assumptions developed based on the best information available under the circumstances (unobservable inputs). The three levels defined by the ASC 820 hierarchy are as follows:

Level I – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level II – Inputs other than quoted prices included within Level I that are observable for the asset or liability, either directly or indirectly. Level II assets include the following: quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).

Level III – Unobservable pricing input at the measurement date for the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available.

15

Table of Contents

In some instances, the inputs used to measure fair value might fall within different levels of the fair value hierarchy. The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest input level that is significant to the fair value measurement in its entirety.

The following table summarizes the valuation of UNG’s securities at June 30, 2020 using the fair value hierarchy:

At June 30, 2020

    

Total

    

Level I

    

Level II

    

Level III

Short-Term Investments

$

368,750,955

$

368,750,955

$

$

Exchange-Traded Futures Contracts

 

 

 

  

 

  

United States Contracts

 

1,356,010

 

1,356,010

 

 

The following table summarizes the valuation of UNG’s securities at December 31, 2019 using the fair value hierarchy:

At December 31, 2019

    

Total

    

Level I

    

Level II

    

Level III

Short-Term Investments

$

418,959,876

$

418,959,876

$

$

Exchange-Traded Futures Contracts

 

  

 

  

 

  

 

  

United States Contracts

 

(20,768,690)

 

(20,768,690)

 

 

Effective January 1, 2009, UNG adopted the provisions of Accounting Standards Codification 815 — Derivatives and Hedging, which require presentation of qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts and gains and losses on derivatives.

Fair Value of Derivative Instruments

Derivatives not

    

Condensed

    

    

Accounted for

Statements of 

Fair Value

Fair Value

as Hedging

Financial

at June 30,

at December 31, 

Instruments

Condition Location

2020

2019

Futures - Commodity Contracts

 

Assets

$

1,356,010

$

(20,768,690)

The Effect of Derivative Instruments on the Condensed Statements of Operations

For the six months ended

For the six months ended

June 30, 2020

June 30, 2019

Change in

Change in

Location of

Realized

Unrealized

Realized

Unrealized

Derivatives not

Gain (Loss)

gain (Loss)

Gain (Loss) on

Gain (Loss)

Gain (Loss) on

Accounted for

on Derivatives

on Derivatives

Derivatives

in Derivatives

Derivatives

as Hedging

Recognized in

Recognized in

Recognized in

Recognized in

Recognized in

Instruments

    

Income

    

Income

    

Income

    

Income

    

Income

Futures - Commodity Contracts

 

Realized gain (loss) on closed positions

$

(227,224,580)

 

$

(104,711,777)

 

  

 

  

 

  

 

  

 

 

  

 

Change in unrealized gain (loss) on open positions

 

  

$

22,124,700

 

  

$

61,939,447

NOTE 8 — RECENT ACCOUNTING PRONOUNCEMENTS

In August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-13, which changes certain fair value measurement disclosure requirements. The new ASU, in addition to other modifications and additions, removes the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, and the Funds’ policy for the timing of transfers between levels. The amendments are effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Fund has evaluated the implications of certain provisions of the ASU and has determined that there will be no material impacts to the financial statements.

16

Table of Contents

NOTE 9 — SUBSEQUENT EVENTS

UNG has performed an evaluation of subsequent events through the date the condensed financial statements were issued. This evaluation did not result in any subsequent events that necessitated disclosures and/or adjustments, other than the following:

USCF was named as a defendant in a putative stockholder class action on July 10, 2020 by Momo Wang, individually and on behalf of others similarly situated, against defendants United States Oil Fund, LP (“USO”), USCF, John P. Love, Stuart P. Crumbaugh, Nicholas D. Gerber, Andrew F. Ngim, Robert L. Nguyen, Peter M. Robinson, Gordon L. Ellis, Malcolm R. Fobes III, ABN Amro, BNP Paribas Securities Corp., Citadel Securities LLC, Citigroup Global Market Inc., Credit Suisse Securities USA LLC, Deutsche Bank Securities Inc., Goldman Sachs & Company, JP Morgan Securities Inc., Merrill Lynch Professional Clearing Corp., Morgan Stanley & Company Inc., Nomura Securities International Inc., RBC Capital Markets LLC, SG Americas Securities LLC, UBS Securities LLC, and Virtu Financial BD LLC.

The putative class action complaint alleged that beginning in March 2020, in connection with USO's registration and issuance of additional USO shares, defendants failed to disclose to investors certain extraordinary market conditions and the attendant risks that caused the demand for oil to fall precipitously, including the COVID-19 global pandemic and the Saudi Arabia-Russia oil price war. The plaintiff alleged that defendants possessed inside knowledge about the consequences of these converging adverse events on USO and did not sufficiently acknowledge them until late April and May 2020, after USO suffered losses and was allegedly forced to abandon its investment strategy. The putative stockholder class action was pending in the U.S. District Court for the Northern District of California as Case No. 3:20-cv-4596 but was voluntarily dismissed effective August 4, 2020.

USCF was named as a defendant in a purported stockholder class action on July 31, 2020 by Moshe Ephrati, individually and on behalf of others similarly situated, against defendants USCF, USO, John P. Love and Stuart P. Crumbaugh. The stockholder class action is pending in the U.S. District Court for the Southern District of New York as Civil Action No. 1:20-cv-06010.

The putative class action complaint alleges that beginning in March 2020, in connection with USO's registration and issuance of additional USO shares, defendants failed to disclose to investors certain extraordinary market conditions and the attendant risks that caused the demand for oil to fall precipitously, including the COVID-19 global pandemic and the Saudi Arabia-Russia oil price war. Plaintiff alleges that defendants possessed inside knowledge about the consequences of these converging adverse events on USO and did not sufficiently acknowledge them until late April and May 2020, after USO suffered losses and was allegedly forced to abandon its investment strategy. The complaint seeks to certify a class and award the class compensatory damages at an amount to be determined at trial. Since this stockholder class action makes the same substantive claims made against the same defendants in the stockholder class action commenced by Robert Lucas on June 19, 2020, which is summarized above in “Part II. Other Information - Item 1. Legal Proceedings,” and is also pending in the U.S. District Court for the Southern District of New York as Civil Action No. 1:20-cv-04740, it is expected that these two stockholder class actions will be consolidated. The defendants intend to vigorously contest the claims and move for their dismissal.

USCF may have additional actions filed against it based on similar allegations as those that were made in the putative class actions that have been reported.

17

Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the condensed financial statements and the notes thereto of the United States Natural Gas Fund, LP (“UNG”) 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 UNG’s actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. UNG 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; significant market volatility in the commodities markets and futures markets 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 UNG'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 UNG’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 UNG cannot assure investors that the projections included in these forward-looking statements will come to pass. UNG’s actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors.

UNG 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 UNG assumes no obligation to update any such forward-looking statements. Although UNG 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 UNG may make directly to them or through reports that UNG files in the future with the U.S. 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

UNG, a Delaware limited partnership, is a commodity pool that issues shares that may be purchased and sold on the NYSE Arca, Inc. (the “NYSE Arca”). The investment objective of UNG is for the daily changes in percentage terms of its shares’ per share net asset value (“NAV”) to reflect the daily changes in percentage terms of the price of natural gas delivered at the Henry Hub, Louisiana, as measured by the daily changes in the price of the futures contract for natural gas traded on the New York Mercantile Exchange (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 measured by the futures contract that is the next month contract to expire (the “Benchmark Futures Contract”), plus interest earned on UNG’s collateral holdings, less UNG’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. UNG seeks to achieve its investment objective by investing so that the average daily percentage change in UNG's NAV for any period of 30 successive valuation days will be within plus/minus 10 percent (10)% of the average daily percentage changes in the price of the Benchmark Futures Contract over the same period.

18

Table of Contents

UNG’s investment objective is not for its NAV or market price of shares to equal, in dollar terms, the spot price of natural gas or any particular futures contract based on natural gas, nor is UNG’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 UNG, 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 Natural Gas Futures Contracts (as defined below) and Other Natural Gas-Related Investments (as defined below).

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

USCF believes that market arbitrage opportunities will cause daily changes in UNG’s share price on the NYSE Arca on a percentage basis to closely track daily changes in UNG’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 natural gas. USCF believes that the net effect of these relationships will be that the daily changes in the price of UNG’s shares on the NYSE Arca on a percentage basis will closely track the daily changes in the spot price of natural gas on a percentage basis, plus interest earned on the Fund’s collateral holdings, less UNG’s expenses.

UNG seeks to achieve its investment objective by investing so that the average daily percentage change in UNG’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.

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 UNG is not) may hold, own or control. These levels and position limits apply to the futures contracts that UNG 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.

19

Table of Contents

The accountability levels for the Benchmark Futures Contract and other Natural Gas 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 6,000 net contracts. In addition, the NYMEX imposes an accountability level for all months of 12,000 net futures contracts for natural gas. In addition, the ICE Futures maintains accountability levels, position limits and monitoring authority for its Henry Hub natural gas contracts. If UNG and the Related Public Funds exceed these accountability levels for investments in the futures contracts for natural gas, the NYMEX and ICE Futures will monitor such 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 UNG and the Related Public Funds. If deemed necessary by the NYMEX and/or ICE Futures, UNG could be ordered to reduce its aggregate net futures contracts back to the accountability level. As of June 30, 2020, UNG held 21,895 NYMEX Natural Gas Futures NG contracts and did not hold any Natural Gas Futures Contracts traded on the ICE Futures US. UNG exceeded accountability levels of the NYMEX during the six months ended June 30, 2020, when it held a maximum of 28,953 Natural Gas Futures NG Contracts. UNG did not exceed accountability levels of ICE Futures during the six months ended June 30, 2020. No action was taken by the NYMEX and UNG did not reduce the number of Natural Gas Futures Contracts held as a result.

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 UNG will run up against such position limits because UNG’s investment strategy is to close out its positions and “roll” from the near month contract to expire to the next month contract during a four-day period beginning two weeks from expiration of the contract. For the six months ended June 30, 2020, UNG 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”), CFTC, NFA, the futures exchanges, clearing organizations and other regulatory bodies.

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.

The CFTC has proposed to adopt limits on speculative positions in 25 physical commodity futures and option contracts as well as swaps that are economically equivalent to such contracts in the agriculture, energy and metals markets, which rules were recently re-proposed in January 2020 (the “Position Limit Rules”). The Position Limit Rules would, among other things: identify which contracts are subject to speculative position limits; set thresholds that restrict the size of speculative positions that a person may hold in the spot month, other individual months, and all months combined; create an exemption for positions that constitute bona fide hedging transactions; impose responsibilities on DCMs and swap execution facilities (“SEFs”) to establish position limits or, in some cases, position accountability rules; and apply to both futures and swaps across four relevant venues: OTC, DCMs, SEFs as well as certain non-U.S. located platforms. The CFTC’s first attempt at finalizing the Position Limit Rules, in 2011, was successfully challenged by market participants in 2012 and, since then, the CFTC has re-proposed them and solicited comments from market participants multiple times. At this time, it is unclear how the Position Limit Rules may affect UNG, but the effect may be substantial and adverse. By way of example, the Position Limit Rules may negatively impact the ability of UNG to meet its investment objectives through limits that may inhibit USCF’s ability to sell additional Creation Baskets of UNG.

20

Table of Contents

Until such time as the Position Limit Rules are adopted, 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 nine agricultural products (e.g., corn, wheat and soy), 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). As a result, UNG may be limited with respect to the size of its investments in any commodities subject to these limits.

Under existing and recently adopted CFTC regulations, 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 percent 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 participant (the “Aggregation Rules”). The Aggregation Rules will also apply with respect to the Position Limit Rules if and when such Position Limit Rules are adopted.

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.

21

Table of Contents

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. UNG does not currently engage in security-based swap transactions and, therefore, the SEC's margin rules are not expected to apply to UNG.

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 UNG 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 are expected in the future, and, when finalized, could require UNG 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 UNG’s FCM.

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, UNG 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, UNG 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 UNG. A portion of UNG’s assets that are not used for margin or collateral in the Futures Contracts currently are invested in government MMFs. UNG does not hold any non-government MMFs and does not anticipate investing in any non-government MMFs. However, if UNG invests in other types of MMFs besides government MMFs in the future, UNG 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).

22

Table of Contents

Although such government money market funds 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 UNG may lose money by investing in a government money market fund. An investment in a government money market fund 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 money market fund can fall below the $1.00 share price. UNG cannot rely on or expect a government money market fund's adviser or its affiliates to enter into support agreements or take other actions to maintain the government money market fund's $1.00 share price. The credit quality of a government money market fund's holdings can change rapidly in certain markets, and the default of a single holding could have an adverse impact on the government money market fund's share price. Due to fluctuations in interest rates, the market value of securities held by a government money market fund may vary. A government money market fund's share price can also be negatively affected during periods of high redemption pressures and/or illiquid markets.

Price Movements

Natural gas futures prices were volatile during the six months ended June 30, 2020. The price of the Benchmark Futures Contract started the period at $2.189 per million British thermal shares (“MMBtu”). The high of the period was on January 10, 2020 when the price reached $2.202 per MMBtu. The low of the period was on June 26, 2020 when the price dropped to $1.544 per MMBtu. The period ended with the Benchmark Futures Contract at $1.751 per MMBtu, a decrease of approximately (20.01)% over the period. UNG’s per share NAV began the period at $16.91 and ended the period at $10.25 on June 30, 2020, a decrease of approximately (39.38)% over the period. The Benchmark Futures Contract prices listed above began with the February 2020 contracts and ended with the August 2020 contracts. The decrease of approximately (20.01)% on the Benchmark Futures Contract listed above is a hypothetical return only and could not actually be achieved by an investor holding Natural Gas Futures Contracts. An investment in Natural Gas 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 Natural Gas Futures Contracts, measured from the start of the period to the end of the period, does not represent the actual benchmark results that UNG seeks to track, which are more fully described below in the section titled “Tracking UNG's Benchmark.”

During the six months ended June 30, 2020, the natural gas futures market experienced states of both contango and backwardation. When the market is in a state of contango, the near month natural gas futures contract is lower than the price of the next month natural gas futures contract, or contracts further away from expiration. During periods of backwardation the near month natural gas futures contract is higher than the price of the next month natural gas 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 Natural Gas Futures Prices and the Impact on Total Returns” below.

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

The per share NAV of UNG’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. UNG’s 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 UNG investments, including cleared swaps 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 Natural Gas Market

Results of Operations. On April 18, 2007, UNG listed its shares on the AMEX under the ticker symbol “UNG.” On that day, UNG established its initial offering price at $50.00 per share and issued 200,000 shares to the initial Authorized Participant in exchange for $10,000,000 in cash. As a result of the acquisition of the AMEX by NYSE Euronext, UNG’s shares ceased trading on the AMEX and commenced trading on the NYSE Arca on November 25, 2008. As of June 30, 2020, there were 161,000,000 shares registered but not yet issued.

23

Table of Contents

More shares may have been issued by UNG than are outstanding due to the redemption of shares. Unlike funds that are registered under the 1940 Act,shares that have been redeemed by UNG cannot be resold by UNG. As a result, UNG 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, 2020, UNG had the following Authorized Participants: ABN Amro, BNP Paribas Securities Corp., Citadel Securities LLC, Citigroup Global Markets Inc., Credit Suisse Securities USA LLC, Deutsche Bank Securities Inc., Goldman Sachs & Company, JP Morgan Securities Inc., Merrill Lynch Professional Clearing Corp., Morgan Stanley & Company Inc., Nomura Securities International Inc., RBC Capital Markets LLC, SG Americas Securities LLC, UBS Securities LLC and Virtu Financial BD LLC.

For the Six Months Ended June 30, 2020 Compared to the Six Months Ended June 30, 2019

    

Six months

    

Six months

 

ended

ended

 

June 30, 2020

June 30, 2019

 

Average daily total net assets

$

425,460,081

$

284,070,900

Dividend and interest income earned on Treasuries, cash and/or cash equivalents

$

2,453,755

$

3,370,628

Annualized yield based on average daily total net assets

 

1.15

%  

 

2.39

%

Management fee

$

1,269,405