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Disclosure

An investment in the units issued by United States Commodity Index Fund ("USCI") involves risks. These risks can significantly impact the market value of the units. Some of the risks you may face are summarized below.

  • Historical Performance of the Commodity Index is no guide to the future performance of the Units.
  • Unlike mutual funds, commodity pools or other investment pools that actively manage their investments in an attempt to realize income and gains from their investing activities and distribute such income and gains to their investors, USCI generally does not expect to distribute cash to limited partners.
  • Changes in USCI’s NAV may not correlate with the changes in the value of its corresponding Commodity Index.
  • The Commodity Index is not designed to correlate exactly with the spot price of any commodity and this could cause the changes in the price of the Units to substantially vary from the changes in the spot prices of the commodities underlying the Benchmark Component Futures Contracts. Therefore, you may not be able to effectively use USCI to hedge against commodity-related losses or to indirectly invest in commodities.
  • Changes in the composition and valuation of the Commodity Index may adversely affect the value of an investor’s units.
  • USCI’s exposure to market risk depends on a number of factors, including the markets for commodities, the volatility of interest rates and foreign exchange rates, the liquidity of the Commodity Interest markets and the relationships among the contracts held by USCI.
  • The Commodity Index reflects commodities in the energy, precious metals, industrial metals, grains, softs and livestock sectors. A change in price of any of the commodities in these sectors will have a significant effect on the level of the Commodity Index and the value of the units, which could have a material adverse effect on an investment.
  • An unanticipated number of redemption requests during a short period of time could have an adverse effect on the NAV of USCI.
  • There is a risk that USCI will not earn trading gains sufficient to compensate for the fees and expenses that it must pay and as such USCI may not earn any profit.
  • An investment in USCI involves the risk that the changes in the price of USCI’s units will not accurately track the changes in the Commodity Index, and that changes in the Commodity Index will not closely correlate with changes in the spot prices of the commodities underlying the Benchmark Component Futures Contracts.
  • USCI 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.
  • USCI engages in the trading of futures contracts and options on futures contracts and may engage in cleared swaps (collectively, “derivatives”). USCI 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.
  • 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.
  • Accountability levels, position limits, and daily price fluctuation limits set by the exchanges have the potential to cause a tracking error, which could cause the price of units to substantially vary from the price of the Commodity Index and prevent investors from being able to effectively use USCI as a way to hedge against commodity-related losses or as a way to indirectly invest in commodities.
  • USCF may manage a large amount of assets and this could affect USCI’s ability to trade profitably.
  • USCI 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, USCI bears the risk of financial failure by the clearing broker.
  • USCI may purchase over-the-counter contracts (“OTC Contracts”).  Unlike most exchange-traded Futures Contracts or exchange-traded options on such futures, each party to an OTC Contract bears the credit risk that the other party may not be able to perform its obligations under its contract.
  • In general, in addition to margin required to be posted by the clearinghouse in connection with cleared trades, clearinghouses are backed by their members who may be required to share in the financial burden resulting from the nonperformance of one of their members and, therefore, this additional member support should significantly reduce credit risk. Some foreign exchanges are not backed by their clearinghouse members but may be backed by a consortium of banks or other financial institutions.
  • Trading on non-U.S. exchanges is often in the currency of the exchange’s home jurisdiction.  Consequently, USCI is subject to the additional risk of fluctuations in the exchange rate between such currencies and U.S. dollars and the possibility that exchange controls could be imposed in the future.  Trading on non-U.S. exchanges may differ from trading on U.S. exchanges in a variety of ways and, accordingly, may subject USCI to additional risks.
  • While the U.S. government does not currently impose any restrictions on the movements of currencies, it could choose to do so.  The imposition or relaxation of exchange controls in various jurisdictions could significantly affect the market for that and other jurisdictions’ currencies.  Trading in the interbank market also exposes USCI to a risk of default since failure of a bank with which USCI had entered into a forward contract would likely result in a default and thus possibly substantial losses to USCI.
  • USCI has a substantial portion of its assets on deposit with banks. Assets deposited with banks are subject to credit risk. In the event of a bank's insolvency, recovery of USCI's assets on deposit may be limited to account insurance or other protection afforded such deposits.
  • USCF invests a portion of USCI’s cash in money market funds that seek to maintain a stable net asset value. USCI is exposed to any risk of loss associated with an investment in these money market funds.
  • USCI may experience a loss if it is required to sell Treasury Securities or cash equivalents at a price lower than the price at which they were acquired.
  • Proposed regulation by the CFTC and SEC as promulgated under the Dodd-Frank Act would change operational requirements by USCI, increasing cost and changing operational procedures which could negatively impact USCI.
  • Regulation of the commodities and energy markets is extensive and constantly changing; future regulatory developments are impossible to predict but may significantly and adversely affect USCI.
  • All of the Funds are series of the Trust and as a result, a court could potentially conclude that the assets and liabilities of USCI are not segregated from those of another Fund or series of the Trust, thereby potentially exposing assets in USCI to the liabilities of another Fund or another series.
  • USCI is not a registered investment company, so unitholders do not have the protections of the 1940 Act.
  • An investment in USCI may provide little or no diversification benefits. Thus, in a declining market, USCI may have no gains to offset losses from other investments, and an investor may suffer losses on its investment in USCI while incurring losses with respect to other asset classes.
  • USCI, USCF and SummerHaven may have conflicts of interest, which may cause them to favor their own interests to the detriment of unitholders.
  • Investors cannot be assured of the continuation of the agreement between SummerHaven and the Sponsor for use of the Commodity Index, and discontinuance of the Commodity Index may be detrimental to USCI.
  • Investors cannot be assured of SummerHaven’s continued services, and discontinuance may be detrimental to USCI.
  • The Sponsor is leanly staffed and relies heavily on key personnel and its trading advisor, SummerHaven, to manage its activities.
  • USCI depends on the reliable performance of the computer and communications systems of third parties, such as brokers and futures exchanges, and may experience substantial losses on transactions if they fail.
  • USCI may experience substantial losses on transactions if the computer or communications system fails.
  • If the computer and communications systems are not upgraded, USCI’s financial condition could be harmed.

*Some risks listed above may be mitigated due to rules proposed by the CFTC and SEC as promulgated under the Dodd-Frank Act.  For a discussion of these risks and others, please see the current Prospectus .

For a copy of the Prospectus contact: ALPS Distributors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203 or call 800.920.0259 or click here .

USCI is not a mutual fund or any other type of Investment Company within the meaning of the Investment Company Act of 1940, as amended, and is not subject to regulation thereunder.

Commodities and futures generally are volatile and are not suitable for all investors. USCI is speculative and involves a high degree of risk. An investor may lose all or substantially all of an investment in USCI. Funds that focus on a single sector generally experience greater volatility.

For further discussion of these and additional risks associated with an investment in USCI units, click here.

Investing in USCI subjects you to the risks of the commodities industry. These risks could result in large fluctuations in the price of USCI's units. An investor could lose all or substantially all of his/her investment.

The price of units may not accurately track the daily changes in the Index and you may not be able to effectively use USCI as a way to hedge the risk of losses in your commodity-related transactions or as a way to indirectly invest in commodities.

Investors buy and sell units in the secondary market (i.e., not directly from USCI). Only "authorized purchasers" may trade directly with USCI, in minimum blocks of 100,000 units.

The United States Commodity Index Fund is distributed by ALPS Distributors, Inc.

© Copyright 2010-2012 | United States Commodity Index Fund | All rights reserved.