United States Commodity Index Funds Trust - FORM 10-Q

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EX-32.2 - United States Commodity Index Funds Trust	v220966_ex32-2.htm
EX-31.2 - United States Commodity Index Funds Trust	v220966_ex31-2.htm
EX-32.1 - United States Commodity Index Funds Trust	v220966_ex32-1.htm
EX-31.1 - United States Commodity Index Funds Trust	v220966_ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2011.

¨	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: 001-34833

United States Commodity Index Funds Trust

(Exact name of registrant as specified in its charter)

Delaware		27-1537655
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1320 Harbor Bay Parkway, Suite 145

Alameda, California 94502

(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)

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.

x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

¨ Yes ¨ No

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

	Large accelerated filer ¨		Accelerated filer ¨

	Non-accelerated filer x		Smaller reporting company ¨
	(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

¨ Yes x No

UNITED STATES COMMODITY INDEX FUNDS TRUST

Table of Contents

		Page
Part I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements.		1

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.		16

Item 3. Quantitative and Qualitative Disclosures About Market Risk.		41

Item 4. Controls and Procedures.		42

Part II. OTHER INFORMATION
Item 1. Legal Proceedings.		43

Item 1A. Risk Factors.		43

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.		43

Item 3. Defaults Upon Senior Securities.		43

Item 4. Removed and Reserved.		43

Item 5. Other Information.		43

Item 6. Exhibits.		43

Part I. FINANCIAL INFORMATION

Item 1. Condensed Financial Statements.

Index to Condensed Financial Statements

Documents	Page
Condensed Statements of Financial Condition at March 31, 2011 (Unaudited) and December 31, 2010		2

Condensed Schedule of Investments (Unaudited) at March 31, 2011		3

Condensed Statements of Operations (Unaudited) for the three months ended March 31, 2011 and 2010		4

Condensed Statements of Changes in Capital (Unaudited) for the three months ended March 31, 2011 and Condensed Statements of Changes in Units Outstanding (Unaudited) for the three months ended March 31, 2011		5

Condensed Statements of Cash Flows (Unaudited) for the three months ended March 31, 2011 and 2010		6

Notes to Condensed Financial Statements for the period ended March 31, 2011 (Unaudited)		7

United States Commodity Index Funds Trust

Condensed Statements of Financial Condition

At March 31, 2011 (Unaudited) and December 31, 2010

	March 31, 2011				December 31, 2010
	United States Commodity Index Fund		United States Commodity Index Funds Trust		United States Commodity Index Fund		United States Commodity Index Funds Trust
	United States Commodity Index Fund		United States Commodity Index Funds Trust		United States Commodity Index Fund		United States Commodity Index Funds Trust
Assets
Cash and cash equivalents (Note 6)	$	359,162,336	$	359,165,336	$	87,443,112	$	87,443,112
Equity in Newedge trading accounts:
Cash		34,230,135		34,230,135		8,225,946		8,225,946
Unrealized gain on open commodity futures contracts		15,462,956		15,462,956		7,417,317		7,417,317
Receivable for units sold		27,912,637		27,912,637		-		-
Receivable from Sponsor (Note 4)		36,907		36,907		51,397		51,397
Dividend receivable		1,191		1,191		505		505
Other assets		16,894		16,894		-		-

Total assets	$	436,823,056	$	436,826,056	$	103,138,277	$	103,138,277

Liabilities and Capital
Management fees payable (Note 4)	$	299,807	$	299,807	$	66,026	$	66,026
Professional fees payable		123,300		123,300		74,832		74,832
Brokerage commissions payable		19,945		19,945		5,085		5,085

Total liabilities		443,052		443,052		145,943		145,943

Commitments and Contingencies (Notes 4, 5 and 6)

Capital
Sponsor		1,000		4,000		1,000		1,000
Unitholders		436,379,004		436,379,004		102,991,334		102,991,334
Total Capital		436,380,004		436,383,004		102,992,334		102,992,334

Total liabilities and capital	$	436,823,056	$	436,826,056	$	103,138,277	$	103,138,277


Units outstanding		6,200,020		6,200,020		1,600,020		1,600,020
Net asset value per unit	$	70.38			$	64.37
Market value per unit	$	70.58			$	64.50

See accompanying notes to condensed financial statements.

United States Commodity Index Funds Trust

Condensed Schedule of Investments (Unaudited)

At March 31, 2011

United States Commodity Index Fund

			Gain (Loss) on
	Number of		Open Commodity			% of
	Contracts		Contracts			Capital
Open Futures Contracts - Long
Foreign Contracts
LME Nickel Futures LN contracts, expiring June 2011		50	$	839,856			0.19
ICE-US Coffee-C Futures KC contracts, expiring July 2011		304		1,980,281			0.45
ICE-US Cotton Futures CT contracts, expiring July 2011		327		3,226,985			0.74
ICE-US Sugar # 11 Futures SB contracts, expiring July 2011		1,100		(4,906	)		(0.00	)
LME Tin Futures LT contracts, expiring July 2011		204		2,713,325			0.62
LME Lead Futures LL contracts, expiring August 2011		491		1,565,400			0.36
LME Nickel Futures LN contracts, expiring September 2011		175		(1,369,560	)		(0.31	)
ICE-UK Gasoil Futures QS contracts, expiring February 2012		312		2,637,875			0.60
ICE Brent Crude Oil Futures CO contracts, expiring March 2012		268		1,113,760			0.26
ICE Brent Crude Oil Futures CO contracts, expiring April 2012		8		22,960			0.01
		3,239		12,725,976			2.92

United States Contracts
CME Live Cattle Futures LC contracts, expiring June 2011		656		546,010			0.12
CMX Silver Futures SI contracts, expiring July 2011		164		403,795			0.09
CBOT Corn Futures C contracts, expiring September 2011		929		1,773,237			0.41
CBOT Wheat Futures W contracts, expiring September 2011		787		(1,173,250	)		(0.27	)
CBOT Soybean Oil Futures BO contracts, expiring December 2011		914		734,514			0.17
NYMEX Heating Oil Futures HO contracts, expiring December 2011		123		198,274			0.05
NYMEX Heating Oil Futures HO contracts, expiring March 2012		113		138,974			0.03
CBOT Soybean S Futures contracts, expiring May 2012		468		713,838			0.16
		4,154		3,335,392			0.76

Open Futures Contracts – Short*
Foreign Contracts
LME Nickel Futures LN contracts, expiring June 2011		50		(592,040	)		(0.14	)
LME Tin Futures contracts, expiring July 2011		9		(86,944	)		(0.02	)
LME Lead Futures LL contracts, expiring August 2011		24		(94,711	)		(0.02	)
LME Nickel Futures LN contracts, expiring September 2011		175		175,283			0.04
		258		(598,412	)		(0.14	)
Total Open Futures Contracts		7,651	$	15,462,956			3.54

	Principal Amount		Market Value
Cash Equivalents
United States Treasury Obligations
U.S. Treasury Bill:
0.10%, 4/07/2011	$	33,000,000	$	32,999,415	7.56
0.09%, 4/14/2011		15,000,000		14,999,332	3.44
0.14%, 4/21/2011		15,000,000		14,998,875	3.44
0.12%, 4/28/2011		10,000,000		9,999,100	2.29
0.09%, 5/26/2011		165,010,000		164,987,922	37.81
0.05%, 6/09/2011		35,005,000		34,999,536	8.02
0.09%, 6/16/2011		35,005,000		34,998,718	8.02
0.08%, 6/30/2011		10,000,000		9,998,125	2.29
0.05%, 7/07/2011		30,000,000		29,993,938	6.87
Total Cash Equivalents			$	347,974,961	79.74

*	All short contracts are offset by the same number of Futures Contracts in the corresponding long positions and are acquired solely for the purpose of reducing a long position (i.e., due to a redemption or to reflect a rebalancing of the SummerHaven Dynamic Commodity Index Total Return).

See accompanying notes to condensed financial statements.

United States Commodity Index Funds Trust

Condensed Statements of Operations (Unaudited)

For the three months ended March 31, 2011 and 2010


	Three months ended March 31, 2011						Three months ended March 31, 2010
	United States			United States			United States
	Commodity			Commodity			Commodity
	Index Fund			Index Funds Trust			Index Funds Trust
Income
Gain on trading of commodity futures contracts:
Realized gain on closed positions	$	9,924,895		$	9,924,895		$	-
Change in unrealized gain on open positions		8,045,639			8,045,639			-
Realized trading gain on short-term investments		186			186			-
Interest income		55,628			55,628			-
Other income		36,000			36,000			-

Total income		18,062,348			18,062,348			-

Expenses
Management fees (Note 4)		578,228			578,228			-
Professional fees		123,300			123,300			-
Brokerage commissions		89,402			89,402			-
Other expenses		1,154			1,154			-

Total expenses		792,084			792,084			-

Expense waiver (Note 4)		(36,907	)		(36,907	)		-

Net expenses		755,177			755,177			-

Net income	$	17,307,171		$	17,307,171		$	-
Net income per unit	$	6.01
Net income per weighted average unit	$	4.80
Weighted average units outstanding		3,603,353

See accompanying notes to condensed financial statements.

United States Commodity Index Funds Trust

Condensed Statements of Changes in Capital (Unaudited)

For the three months ended March 31, 2011

	United States Commodity Index Fund								United States Commodity
	Sponsor		Unitholders			Total			Index Funds Trust

Balances, at December 31, 2010	$	1,000	$	102,991,334		$	102,992,334		$	102,992,334
Additions		-		322,964,885			322,964,885			322,967,885
Redemptions		-		(6,884,386	)		(6,884,386	)		(6,884,386	)
Net income		-		17,307,171			17,307,171			17,307,171

Balances, at March 31, 2011	$	1,000	$	436,379,004		$	436,380,004		$	436,383,004

Condensed Statements of Changes in Units Outstanding (Unaudited)

For the three months ended March 31, 2011

	United States Commodity Index Fund								United States Commodity
	Sponsor		Unitholders			Total			Index Funds Trust

Balances, at December 31, 2010		20		1,600,000			1,600,020			1,600,020
Additions		-		4,700,000			4,700,000			4,700,000
Redemptions		-		(100,000	)		(100,000	)		(100,000	)

Units Outstanding, at March 31, 2011		20		6,200,000			6,200,020			6,200,020

Net Asset Value Per Unit:
At December 31, 2010						$	64.37
At March 31, 2011						$	70.38

See accompanying notes to condensed financial statements.

United States Commodity Index Funds Trust

Condensed Statements of Cash Flows (Unaudited)

For the three months ended March 31, 2011 and 2010

	Three months ended March 31, 2011						Three months ended March 31, 2010
	United States Commodity Index Fund			United States Commodity Index Funds Trust			United States Commodity Index Funds Trust
Cash Flows from Operating Activities:
Net income	$	17,307,171		$	17,307,171		$	-
Adjustments to reconcile net income to net cash used in operating activities:
Increase in commodity futures trading account - cash		(26,004,189	)		(26,004,189	)		-
Unrealized gain on futures contracts		(8,045,639	)		(8,045,639	)		-
Decrease in receivable from Sponsor		14,490			14,490			-
Increase in dividend receivable		(686	)		(686	)		-
Increase in other assets		(16,894	)		(16,894	)		-
Increase in management fees payable		233,781			233,781			-
Increase in professional fees payable		48,468			48,468			-
Increase in brokerage commissions payable		14,860			14,860			-
Net cash used in operating activities		(16,448,638	)		(16,448,638	)		-

Cash Flows from Financing Activities:
Addition of units		295,052,248			295,055,248			-
Redemption of units		(6,884,386	)		(6,884,386	)		-

Net cash provided by financing activities		288,167,862			288,170,862			-

Net Increase in Cash and Cash Equivalents		271,719,224			271,722,224			-

Cash and Cash Equivalents, beginning of period		87,443,112			87,443,112			-
Cash and Cash Equivalents, end of period	$	359,162,336		$	359,165,336		$	-

See accompanying notes to condensed financial statements.

United States Commodity Index Funds Trust

Notes to Condensed Financial Statements

For the period ended March 31, 2011 (Unaudited)

NOTE 1 - ORGANIZATION AND BUSINESS

The United States Commodity Index Funds Trust (the “Trust”) was organized as a Delaware statutory trust on December 21, 2009. The Trust is a series trust formed pursuant to the Delaware Statutory Trust Act and includes the United States Commodity Index Fund (“USCI”), which is a commodity pool that issues units (“units”) that may be purchased and sold on the NYSE Arca, Inc. (the “NYSE Arca”). The Trust also includes three additional series, the United States Metals Index Fund (“USMI”), the United States Agriculture Index Fund (“USAI”) and the United States Copper Index Fund (“USCUI”), that may be publicly offered in the future, but USCI, which was formed on April 1, 2010, is currently the Trust’s only publicly offered series. USCI, USMI, USAI and USCUI are collectively referred to herein as the “Trust Series.” The Trust and each Trust Series operate pursuant to the Second Amended and Restated Declaration of Trust and Trust Agreement dated as of November 10, 2010 (the “Trust Agreement”). United States Commodity Funds LLC (“USCF”) is the sponsor of the Trust and USCI and is also responsible for the management of the Trust and Trust Series. A registration statement has been filed with the U.S. Securities and Exchange Commission (the “SEC”) registering units of USMI, USAI and USCUI. However, such registration statement has not been declared effective as of the date of this quarterly report on Form 10-Q. For purposes of the financial statement presentation, unless specified otherwise, all references will be to USCI, the only series of the Trust which has units publicly offered.

USCF has the power and authority to establish and designate one or more series (“Funds”) and to issue units thereof, from time to time as it deems necessary or desirable. USCF has exclusive power to fix and determine the relative rights and preferences as between the units of any series as to right of redemption, special and relative rights as to dividends and other distributions and on liquidation, conversion rights, and conditions under which the series shall have separate voting rights or no voting rights. The term for which the Trust is to exist commenced on the date of the filing of the Certificate of Trust, and the Trust and any Fund will exist in perpetuity, unless earlier terminated in accordance with the provisions of the Trust Agreement. Separate and distinct records must be maintained for each Fund and the assets associated with a Fund must be held in such separate and distinct records (directly or indirectly, including a nominee or otherwise) and accounted for in such separate and distinct records separately from the assets of any other Fund. Each Fund is separate from all other Funds created as series of the Trust in respect of the assets and liabilities allocated to that Fund and represents a separate investment portfolio of the Trust.

The sole Trustee of the Trust is Wilmington Trust Company (the “Trustee”), a Delaware banking corporation. The Trustee is unaffiliated with USCF. The Trustee’s duties and liabilities with respect to the offering of units and the management of the Trust are limited to its express obligations under the Trust Agreement.

USCF is a member of the National Futures Association (the “NFA”) and became a commodity pool operator (“CPO”) registered with the Commodity Futures Trading Commission (the “CFTC”) effective December 1, 2005. The Trust and USCI have a fiscal year ending on December 31.

USCF is also the general partner of the United States Oil Fund, LP (“USOF”), the United States Natural Gas Fund, LP (“USNG”), the United States 12 Month Oil Fund, LP (“US12OF”), the United States Gasoline Fund, LP (“UGA”) and the United States Heating Oil Fund, LP (“USHO”), which listed their limited partnership units on the American Stock Exchange (the “AMEX”) under the ticker symbols “USO” on April 10, 2006, “UNG” on April 18, 2007, “USL” on December 6, 2007, “UGA” on February 26, 2008 and “UHN” on April 9, 2008, respectively. As a result of the acquisition of the AMEX by NYSE Euronext, each of USOF’s, USNG’s, US12OF’s, UGA’s and USHO’s units commenced trading on the NYSE Arca on November 25, 2008. USCF is also the general partner of the United States Short Oil Fund, LP (“USSO”), the United States 12 Month Natural Gas Fund, LP (“US12NG”) and the United States Brent Oil Fund, LP (“USBO”), which listed their limited partnership units on the NYSE Arca under the ticker symbols “DNO” on September 24, 2009, “UNL” on November 18, 2009 and “BNO” on June 2, 2010, respectively.

USCI issues units to certain authorized purchasers (“Authorized Purchasers”) by offering baskets consisting of 100,000 units (“Creation Baskets”) through ALPS Distributors, Inc., as the marketing agent (the “Marketing Agent”). The purchase price for a Creation Basket is based upon the net asset value of a unit 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.

In addition, Authorized Purchasers pay USCI a $1,000 fee for each order placed to create one or more Creation Baskets or to redeem one or more baskets consisting of 100,000 units (“Redemption Baskets”). Units may be purchased or sold on a nationally recognized securities exchange in smaller increments than a Creation Basket or Redemption Basket. Units purchased or sold on a nationally recognized securities exchange are not purchased or sold at the net asset value of USCI but rather at market prices quoted on such exchange.

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 accounting principles generally accepted in the United States of America (“GAAP”). The financial information included herein is unaudited; however, such financial information reflects all 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

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 statement 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 statement of operations. USCI earns interest on its assets denominated in U.S. dollars on deposit with the futures commission merchant at the 90-day Treasury bill rate. In addition, USCI earns income on funds held at the custodian 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

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

In accordance with GAAP, each Trust Series is required to determine whether a tax position is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any tax related appeals or litigation processes, based on the technical merits of the position. Each Trust Series files an income tax return in the U.S. federal jurisdiction, and may file income tax returns in various U.S. states. Each Trust Series is not subject to income tax return examinations by major taxing authorities for years before 2010 (year of each Trust Series’ inception, but not necessarily the commencement of operations for each Trust Series). The tax benefit recognized is measured as the largest amount of benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. De-recognition of a tax benefit previously recognized results in each Trust Series recording a tax liability that reduces net assets. However, each Trust Series’ conclusions regarding this policy may be subject to review and adjustment at a later date based on factors including, but not limited to, on-going analyses of and changes to tax laws, regulations and interpretations thereof. Each Trust Series recognizes interest accrued related to unrecognized tax benefits and penalties related to unrecognized tax benefits in income tax fees payable, if assessed. No interest expense or penalties have been recognized as of and for the period ended March 31, 2011.

Creations and Redemptions

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

USCI receives or pays the proceeds from units sold or redeemed within three business days after the trade date of the purchase or redemption. The amounts due from Authorized Purchasers are reflected in USCI’s condensed statement of financial condition as receivable for units sold, and amounts payable to Authorized Purchasers upon redemption are reflected as payable for units redeemed.

Trust Capital and Allocation of Income and Losses

Profit or loss shall be allocated among the unitholders of USCI in proportion to the number of units each investor holds as of the close of each month. USCF may revise, alter or otherwise modify this method of allocation as described in the Trust Agreement.

Calculation of Net Asset Value

USCI’s net asset value is calculated on each NYSE Arca trading day by taking the current market value of its total assets, subtracting any liabilities and dividing the amount by the total number of units issued and outstanding. USCI uses the closing prices on the relevant Futures Exchanges (as defined in Note 3 below) of the Futures Contracts (as defined in Note 3 below) that at any given time make up the SummerHaven Dynamic Commodity Index Total ReturnSM (the “Commodity Index”) (determined at the earlier of the close of such exchange or 2:30 p.m. New York time) for the contracts traded on the Futures Exchanges, but calculates or determines the value of all other USCI investments using market quotations, if available, or other information customarily used to determine the fair value of such investments.

Net Income (Loss) per Unit

Net income (loss) per unit is the difference between the net asset value per unit at the beginning of each period and the net asset value per unit (“NAV”) at the end of each period. The weighted average number of units outstanding was computed for purposes of disclosing net income (loss) per weighted average unit. The weighted average units are equal to the number of units outstanding at the end of the period, adjusted proportionately for units redeemed based on the amount of time the units were outstanding during such period.

Offering Costs

Offering costs incurred in connection with the registration of additional units after the initial registration of units are borne by USCI. 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 three months or less.

Use of Estimates

The preparation of condensed financial statements in conformity with 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.

NOTE 3 - TRUST SERIES

In connection with the execution of the First Trust Agreement on April 1, 2010, USCI was designated as the first series of the Trust. USCF contributed $1,000 to the Trust upon its formation on December 21, 2009, representing an initial contribution of capital to the Trust. Following the designation of USCI as the first series of the Trust, the initial capital contribution of $1,000 was transferred from the Trust to USCI and deemed an initial contribution to USCI. In connection with the commencement of USCI’s initial offering of units, USCF received 20 Sponsor Units of USCI in exchange for the previously received capital contribution, representing a beneficial ownership interest in USCI.

On July 30, 2010, USCI received a notice of effectiveness from the SEC for its registration of 50,000,000 units on Form S-1 with the SEC. On August 10, 2010, USCI listed its units on the NYSE Arca under the ticker symbol “USCI”. USCI established its initial NAV by setting the price at $50.00 per unit and issued 100,000 units in exchange for $5,000,000 on August 9, 2010. USCI commenced investment operations on August 9, 2010 by purchasing Futures Contracts traded on the Futures Exchanges. In order to satisfy NYSE Arca listing standards that at least 100,000 units be outstanding at the beginning of the trading day on the NYSE Arca, USCF purchased the initial Creation Basket from the initial Authorized Purchaser at the initial offering price. The $1,000 fee that would otherwise be charged to the Authorized Purchaser in connection with an order to create or redeem was waived in connection with the initial Creation Basket. USCF agreed not to resell the units comprising such basket except that it may require the initial Authorized Purchaser to repurchase all of these units at a per unit price equal to USCI’s per unit NAV within five days following written notice from USCF, subject to the conditions that: (i) on the date of repurchase, the initial Authorized Purchaser must immediately redeem these units in accordance with the terms of the Authorized Purchaser Agreement and (ii) immediately following such redemption at least 100,000 units of USCI remain outstanding. USCF held such initial Creation Basket until September 3, 2010, at which time the initial Authorized Purchaser repurchased the units comprising such basket in accordance with the specified conditions noted above.

USCI’s trading advisor is SummerHaven Investment Management, LLC (“SummerHaven”), a Delaware limited liability company that is registered as a commodity trading advisor and CPO with the CFTC and is a member of the NFA. SummerHaven provides advisory services to USCF with respect to the Commodity Index and the investment decisions of USCI.

The Trustee accepts service of legal process on the Trust in the State of Delaware and makes certain filings under the Delaware Statutory Trust Act. The Trustee does not owe any other duties to the Trust, USCF or the unitholders.

The investment objective of USCI is for the daily changes in percentage terms of its units’ net asset value to reflect the daily changes in percentage terms of the Commodity Index, less USCI’s expenses. The Sponsor does not intend to operate USCI in a fashion such that its per unit NAV will equal, in dollar terms, the spot prices of the commodities underlying the Benchmark Component Futures Contracts that comprise the Commodity Index or the prices of any particular group of Futures Contracts. USCI accomplishes its objective through investments in futures contracts for commodities that are traded on the New York Mercantile Exchange (the “NYMEX”), ICE Futures (“ICE Futures”), Chicago Board of Trade (“CBOT”), Chicago Mercantile Exchange (“CME”), London Metal Exchange (“LME”), Commodity Exchange, Inc. (“COMEX”) or on other foreign exchanges (such exchanges, collectively, the “Futures Exchanges”) (such futures contracts, collectively, “Futures Contracts”) and, to a lesser extent, in order to comply with regulatory requirements or in view of market conditions, other commodity-based contracts and instruments such as cash-settled options on Futures Contracts, forward contracts relating to commodities, cleared swap contracts and other over-the-counter transactions that are based on the price of commodities and Futures Contracts (collectively, “Other Commodity-Related Investments”). As of March 31, 2011, USCI held 7,651 Futures Contracts.

In connection with the Second Amended and Restated Trust Agreement dated November 10, 2010, USMI, USAI and USCUI were designated as three additional series of the Trust. Following the designation of the additional series, an initial capital contribution of $3,000 was transferred from USCF to the Trust. The Trust will transfer $1,000 each to USMI, USAI and USCUI, which will be deemed a capital contribution to each series. Upon commencement of USMI’s, USAI’s and USCUI’s initial offering of units, USCF will receive Sponsor Units in each of USMI, USAI and USCUI in exchange for the previously received capital contribution, representing a beneficial ownership in each series. A registration statement registering units of USMI, USAI and USCUI has been filed with the SEC, but has not yet been declared effective as of the date of filing of this quarterly report on Form 10-Q.

NOTE 4 - FEES PAID BY THE FUND AND RELATED PARTY TRANSACTIONS

Sponsor Management Fee

Under the Trust Agreement, USCF is responsible for investing the assets of each Trust Series in accordance with the objectives and policies of each such series. In addition, USCF has arranged for one or more third parties to provide trading advisory, administrative, custody, accounting, transfer agency and other necessary services to each Trust Series. Currently, as the only publicly available series of the Trust, USCI is contractually obligated to pay USCF a fee for these services, which is paid monthly, equal to 0.95% per annum of average daily net assets.

Trustee Fee

The Trustee is the Delaware trustee of the Trust. In connection with the Trustee’s services, currently, as the only publicly available series of the Trust, USCI is responsible for paying the Trustee’s annual fees in the amount of $3,000.

Ongoing Registration Fees and Other Offering Expenses

USCI pays all costs and expenses associated with the ongoing registration of its units subsequent to the initial offering. These costs include registration or other fees paid to regulatory agencies in connection with the offer and sale of units, and all legal, accounting, printing and other expenses associated with such offer and sale. For the three months ended March 31, 2011, USCI did not incur any registration fees or other offering expenses.

Investor Tax Reporting Cost

The fees and expenses associated with each Trust Series’ audit expenses and tax accounting and reporting requirements are paid by the Trust Series. These costs are estimated to be $300,000 for the year ending December 31, 2011.

Other Expenses and Fees and Expense Waivers

In addition to the fees described above, USCI pays all brokerage fees and other expenses in connection with the operation of USCI, excluding costs and expenses paid by USCF as outlined in Note 5 below. USCF, though under no obligation to do so, agreed to pay certain expenses, to the extent that such expenses exceeded 0.15% (15 basis points) of USCI’s NAV, on an annualized basis, through March 31, 2011.

NOTE 5 - CONTRACTS AND AGREEMENTS

USCF and the Trust, each on its own behalf and on behalf of each Trust Series, are party to a marketing agent agreement, dated as of July 22, 2010, as amended from time to time, with the Marketing Agent, whereby the Marketing Agent provides certain marketing services for USCI as outlined in the agreement. The fee of the Marketing Agent, which is borne by USCF, is equal to 0.06% on USCI’s assets up to $3 billion and 0.04% on USCI’s assets in excess of $3 billion.

The above fee does not include the following expenses, which are also borne by USCF: the cost of placing advertisements in various periodicals; web construction and development; or the printing and production of various marketing materials.

USCF and the Trust, on its own behalf and on behalf of each Trust Series, are also party to a custodian agreement, dated July 22, 2010, as amended from time to time, with Brown Brothers Harriman & Co. (“BBH&Co.”), whereby BBH&Co. holds investments on behalf of USCI. USCF pays the fees of the custodian, which are determined by the parties from time to time. In addition, USCF and the Trust, on its own behalf and on behalf of USCI, are party to an administrative agency agreement, dated July 22, 2010, as amended from time to time, with BBH&Co., whereby BBH&Co. acts as the administrative agent, transfer agent and registrar for USCI. USCF also pays the fees of BBH&Co. for its services under such agreement and such fees are determined by the parties from time to time.

Currently, USCF pays BBH&Co. for its services, in the foregoing capacities, a minimum amount of $75,000 annually for its custody, fund accounting and fund administration services rendered to USCI and each of the affiliated funds managed by USCF, as well as a $20,000 annual fee for its transfer agency services. In addition, USCF pays BBH&Co. an asset-based charge of (a) 0.06% for the first $500 million of USCI’s, USOF’s, USNG’s, US12OF’s, UGA’s, USHO’s, USSO’s, US12NG’s and USBO’s combined net assets, (b) 0.0465% for USCI’s, USOF’s, USNG’s, US12OF’s, UGA’s, USHO’s, USSO’s, US12NG’s and USBO’s combined net assets greater than $500 million but less than $1 billion, and (c) 0.035% once USCI’s, USOF’s, USNG’s, US12OF’s, UGA’s, USHO’s, USSO’s, US12NG’s and USBO’s combined net assets exceed $1 billion. The annual minimum amount will not apply if the asset-based charge for all accounts in the aggregate exceeds $75,000. USCF also pays transaction fees ranging from $7 to $15 per transaction.

USCI has entered into a brokerage agreement, dated March 1, 2010, as amended from time to time, with Newedge USA, LLC (“Newedge”). The agreement requires Newedge to provide services to USCI in connection with the purchase and sale of Futures Contracts and Other Commodity-Related Investments that may be purchased and sold by or through Newedge for USCI’s account. In accordance with the agreement, Newedge charges USCI commissions of approximately $7 to $15 per round-turn trade, including applicable exchange and NFA fees for Futures Contracts and options on Futures Contracts.

USCF is party to an Amended Advisory Agreement, dated November 8, 2010, as amended from time to time, with SummerHaven, whereby SummerHaven provides advisory services to USCF with respect to the Commodity Index and investment decisions for USCI. SummerHaven’s advisory services include, but are not limited to, general consultation regarding the calculation and maintenance of the Commodity Index, anticipated changes to the Commodity Index and the nature of the Commodity Index’s current or anticipated component securities. For these services, USCF pays SummerHaven a fee based on a percentage of the average daily assets of each Trust Series. For USCI, the fee is equal to the percentage fees paid to USCF minus 0.14%, with that result multiplied by 0.5, minus 0.06% to arrive at the actual fee paid.

USCF is also party to an Amended Licensing Agreement, dated November 8, 2010, as amended from time to time, with SummerHaven whereby SummerHaven sub-licensed to USCI the use of certain names and marks, including the Commodity Index, for which SummerHaven has a sub-license from SummerHaven Index Management, LLC, the owner of the Commodity Index. Under the licensing agreement, USCF is expected to pay SummerHaven an annual fee of $15,000 for the year ending December 31, 2011 and in subsequent years, plus an annual fee of 0.06% of the average daily assets of each Trust Series.

NOTE 6 - FINANCIAL INSTRUMENTS, OFF-BALANCE SHEET RISKS AND CONTINGENCIES

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.

USCI may enter into Futures Contracts and options on Futures Contracts 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.

The purchase and sale of futures contracts and options on futures contracts require margin deposits with a futures commission merchant. Additional deposits may be necessary for any loss on contract value. The Commodity Exchange Act requires a futures commission merchant to segregate all customer transactions and assets from the futures commission merchant’s proprietary activities.

Futures contracts 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 USCI 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.

Through March 31, 2011, all of the Futures Contracts held by USCI were exchange-traded. The risks associated with exchange-traded contracts are generally perceived to be less than those associated with over-the-counter transactions since, in over-the-counter transactions, a party must rely solely on the credit of its respective individual counterparties. However, in the future, if USCI 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. 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’s cash and other property, such as U.S. Treasuries, deposited with a futures commission merchant are considered commingled with all other customer funds, subject to the futures commission merchant’s segregation requirements. In the event of a futures commission merchant’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 a futures commission merchant could result in the complete loss of USCI’s assets posted with that futures commission merchant; however, the vast majority of USCI’s assets are held in U.S. Treasuries, cash and/or cash equivalents with USCI’s custodian and would not be impacted by the insolvency of a futures commission merchant. Also, the failure or insolvency of USCI’s custodian could result in a substantial loss of USCI’s assets.

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. As of March 31, 2011 and December 31, 2010, USCI had deposits in domestic and foreign financial institutions, including cash investments in money market funds, in the amounts of $393,392,471 and $95,669,058, respectively. This amount is subject to loss should these institutions cease operations.

For derivatives, risks arise from changes in the market value of the contracts. Theoretically, USCI is exposed to market risk equal to the value of Futures Contracts purchased and unlimited liability on such contracts sold short. As both a buyer and a seller of options, USCI 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.

USCI’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, USCI 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 USCI are reported in its condensed statement of financial condition at market or fair value, or at carrying amounts that approximate fair value, because of their highly liquid nature and short-term maturity.

NOTE 7 - FINANCIAL HIGHLIGHTS

The following table presents per unit performance data and other supplemental financial data for USCI for the three months ended March 31, 2011. This information has been derived from information presented in the condensed financial statements.

	For the three months ended
	March 31, 2011
	(Unaudited)
Per Unit Operating Performance:

Net asset value, beginning of period	$	64.37
Total income		6.22
Total expenses		(0.21	)
Net increase in net asset value		6.01
Net asset value, end of period	$	70.38

Total Return		9.34	%

Ratios to Average Net Assets
Total income		7.32	%
Management fees*		0.95	%
Total expenses excluding management fees*		0.35	%
Expenses waived*		(0.06	) %
Net expenses excluding management fees*		0.29	%
Net income		7.01	%

*Annualized

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

NOTE 8 – FAIR VALUE OF FINANCIAL INSTRUMENTS

USCI 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 USCI (observable inputs) and (2) USCI’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.

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 USCI’s securities at December 31, 2010 using the fair value hierarchy:

At December 31, 2010	Total		Level I		Level II		Level III

Short-Term Investments	$	60,988,891	$	60,988,891	$	-	$	-
Exchange-Traded Futures Contracts
Foreign Contracts		3,224,603		3,224,603		-		-
United States Contracts		4,192,714		4,192,714		-		-

During the year ended December 31, 2010, there were no significant transfers between Level I and Level II.

The following table summarizes the valuation of USCI’s securities at March 31, 2011 using the fair value hierarchy:

At March 31, 2011	Total		Level I		Level II		Level III

Short-Term Investments	$	347,974,961	$	347,974,961	$	-	$	-
Exchange-Traded Futures Contracts
Foreign Contracts		12,127,564		12,127,564		-		-
United States Contracts		3,335,392		3,335,392		-		-

During the three months ended March 31, 2011, there were no significant transfers between Level I and Level II.

USCI has 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 Accounted for as Hedging Instruments	Condensed Statement of Financial Condition Location	Fair Value At March 31, 2011		Fair Value At December 31, 2010

Futures - Commodity Contracts	Assets	$	15,462,956	$	7,417,317

The Effect of Derivative Instruments on the Condensed Statements of Operations

		For the three months ended March 31, 2011
Derivatives not Accounted for as Hedging Instruments	Location of Gain or (Loss) on Derivatives Recognized in Income	Realized Gain or (Loss) on Derivatives Recognized in Income		Change in Unrealized Gain or (Loss) Recognized in Income

Futures - Commodity Contracts	Realized gain on closed positions	$	9,924,895

	Change in unrealized gain on open positions			$	8,045,639

NOTE 9 – RECENT ACCOUNTING PRONOUNCEMENTS

In January 2010, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2010-06 “Improving Disclosures about Fair Value Measurements.” ASU No. 2010-06 clarifies existing disclosure and requires additional disclosures regarding fair value measurements. Effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years, entities will need to disclose information about purchases, sales, issuances and settlements of Level 3 securities on a gross basis, rather than as a net number as currently required. The implementation of ASU No. 2010-06 is not expected to have a material impact on USCI’s financial statement disclosures.

NOTE 10 – SUBSEQUENT EVENTS

USCI has performed an evaluation of subsequent events through the date the financial statements were issued. This evaluation did not result in any subsequent events that necessitated disclosures and/or adjustments.

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 Commodity Index Funds Trust (the “Trust”) 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 the Trust’s actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe the Trust’s future plans, strategies and expectations, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend” or “project,” the negative of these words, other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and the Trust cannot assure investors that the projections included in these forward-looking statements will come to pass. The Trust’s actual results could differ materially from those expressed or implied by the forward-looking statements as a result of various factors.

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

United States Commodity Index Fund (“USCI”) is a commodity pool that issues units representing fractional undivided beneficial interests in USCI (“units”) that may be purchased and sold on the NYSE Arca, Inc. (the “NYSE Arca”). USCI is a series of the Trust, a Delaware statutory trust formed on December 21, 2009. The Trust also includes three additional series, the United States Metals Index Fund, the United States Agriculture Index Fund and the United States Copper Index Fund, that may be publicly offered in the future, but USCI, which was formed on April 1, 2010, is currently the Trust’s only publicly offered series. USCI, USMI, USAI and USCUI are collectively referred to herein as the “Trust Series.” The Trust and each Trust Series operate pursuant to the Trust’s Second Amended and Restated Declaration of Trust and Trust Agreement (the “Trust Agreement”), dated November 10, 2010. Wilmington Trust Company (the “Trustee”), a Delaware banking corporation, is the Delaware trustee of the Trust. The Trust and each Trust Series are managed and controlled by United States Commodity Funds LLC (the “Sponsor”). A registration statement has been filed with the SEC registering units of USMI, USAI and USCUI. However, such registration statement has not been declared effective as of the date of this quarterly report on Form 10-Q. For purposes of this quarterly report on Form 10-Q, unless specified otherwise, all references will be to USCI, the only series of the Trust which has units publicly offered.

USCI invests in futures contracts for commodities that are traded on the New York Mercantile Exchange (the “NYMEX”), ICE Futures (“ICE Futures”), Chicago Board of Trade (“CBOT”), Chicago Mercantile Exchange (“CME”), London Metal Exchange (“LME”), Commodity Exchange, Inc. (“COMEX”) or on other foreign exchanges (such exchanges, collectively, the “Futures Exchanges”) (such futures contracts, collectively, “Futures Contracts”) and, to a lesser extent, in order to comply with regulatory requirements or in view of market conditions, other commodity-based contracts and instruments such as cash-settled options on Futures Contracts, forward contracts relating to commodities, cleared swap contracts and other over-the-counter transactions that are based on the price of commodities and Futures Contracts (collectively, “Other Commodity-Related Investments”). Market conditions that the Sponsor currently anticipates could cause USCI to invest in Other Commodity Related Investments would be those allowing USCI to obtain greater liquidity or to execute transactions with more favorable pricing. Futures Contracts and Other Commodity-Related Investments collectively are referred to as “Commodity Interests” in this quarterly report on Form 10-Q.

The investment objective of USCI is for the daily changes in percentage terms of its units’ net asset value (“NAV”) to reflect the daily changes in percentage terms of the SummerHaven Dynamic Commodity Index Total ReturnSM (the “Commodity Index”), less USCI’s expenses. The Sponsor does not intend to operate USCI in a fashion such that its per unit NAV will equal, in dollar terms, the spot prices of the commodities underlying the Benchmark Component Futures Contracts (defined below) that comprise the Commodity Index or the prices of any particular group of Futures Contracts. The Commodity Index is comprised of 14 Futures Contracts that are selected on a monthly basis from a list of 27 possible Futures Contracts. The Futures Contracts that at any given time make up the Commodity Index are referred to herein as “Benchmark Component Futures Contracts”. USCI invests first in the current Benchmark Component Futures Contracts and other Futures Contracts intended to replicate the return on the current Benchmark Component Futures Contracts and, thereafter may hold Futures Contracts in a particular commodity other than one specified as the Benchmark Component Futures Contract, or may hold Other Commodity-Related Investments that may fail to closely track the Commodity Index’s total return movements. If USCI increases in size, and due to its obligations to comply with regulatory limits or due to other market pricing or liquidity factors, USCI may invest in Futures Contract months other than the designated month specified as the Benchmark Component Futures Contract, or in Other Commodity-Related Investments, which may have the effect of increasing transaction related expenses and may result in increased tracking error.

USCI seeks to achieve its investment objective by investing in Futures Contracts and Other Commodity-Related Investments such that daily changes in its NAV closely track the daily changes in the price of the Commodity Index. USCI’s positions in Commodity Interests are rebalanced on a monthly basis in order to track the changing nature of the Commodity Index. If Futures Contracts relating to a particular commodity remain in the Commodity Index from one month to the next, such Futures Contracts are rebalanced to the 7.14% target weight. Specifically, on a specified day near the end of each month (the “Selection Date”), it will be determined if a current Benchmark Component Futures Contract will be replaced by a new Futures Contract in either the same or different underlying commodity as a Benchmark Component Futures Contract for the following month, in which case USCI’s investments would have to be changed accordingly. In order that USCI’s trading does not unduly cause extraordinary market movements, and to make it more difficult for third parties to profit by trading based on market movements that could be expected from changes in the Benchmark Component Futures Contracts, USCI’s investments typically are not rebalanced entirely on a single day, but rather typically rebalanced over a period of four days. After fulfilling the margin and collateral requirements with respect to its Commodity Interests, USCF invests the remainder of USCI’s proceeds from the sale of units in short-term obligations of the United States government (“Treasuries”) or cash equivalents, and/or merely hold such assets in cash (generally in interest-bearing accounts).

The regulation of commodity interests in the United States is a rapidly changing area of law and is subject to ongoing modification by governmental and judicial action. On July 21, 2010, a broad financial regulatory reform bill, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), was signed into law that includes provisions altering the regulation of commodity interests. Provisions in the new law include the requirement that position limits be established on a wide range of commodity interests including energy-based and other commodity futures contracts, certain cleared commodity swaps and certain over-the-counter commodity contracts; new registration, recordkeeping, capital and margin requirements for “swap dealers” and “major swap participants” as determined by the new law and applicable regulations; and the forced use of clearinghouse mechanisms for most swap transactions that are currently entered into in the over-the-counter market. The new law and the rules that are currently being and are expected to be promulgated thereunder may negatively impact USCI’s ability to meet its investment objective either through limits or requirements imposed on it or upon its counterparties. Further, increased regulation of, and the imposition of additional costs on, swap transactions under the new legislation and implementing regulations could cause a reduction in the swap market and the overall derivatives markets, which could restrict liquidity and adversely affect USCI. In particular, new position limits imposed on USCI or its counterparties may impact USCI’s ability to invest in a manner that most efficiently meets its investment objective and new requirements, including capital and mandatory clearing, may increase the cost of USCI’s investments and doing business, which could adversely affect USCI’s investors.

Additionally, the Dodd-Frank Act requires the U.S. Commodity Futures Trading Commission (the “CFTC”) to promulgate rules establishing position limits for futures and options contracts on commodities, as well as for swaps that are economically equivalent to futures or options. On January 13, 2011, the CFTC proposed new rules, which if implemented in their proposed form, would establish position limits and limit formulas for certain physical commodity futures, including Futures Contracts and options on Futures Contracts, executed pursuant to the rules of designated contract markets (i.e., certain regulated exchanges) and commodity swaps that are economically equivalent to such futures and options contracts. The CFTC has also proposed aggregate position limits that would apply across different trading venues to contracts based on the same underlying commodity. At this time, it is unknown precisely when such position limits would take effect. The CFTC’s position limits for futures contracts held during the last few days of trading in the near month contract to expire, which, under the CFTC’s proposed rule would be substantially similar to the position limits currently set by the exchanges, could take effect as early as Spring 2011. Based on the CFTC’s current proposal, other position limits would not take effect until March 2012 or later.

On April 12, 2011, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Farm Credit System and the Federal Housing Finance Agency (collectively, the “Prudential Regulators”) and the CFTC issued proposed rules establishing minimum initial and variation margin collection requirements for certain swap dealers and major swap participants (collectively, “Covered Swap Entities”), which if adopted, would require Covered Swap Entities to collect minimum initial and variation margin amounts from swap counterparties. The Prudential Regulators’ proposed rules would apply to those Covered Swap Entities that are regulated by the Prudential Regulators and the CFTC’s proposed rules would apply to Covered Swap Entities that are not regulated by the Prudential Regulators.

The amount of initial and variation margin that Covered Swap Entities would be required to collect under the proposed rules varies based on whether their counterparty to a particular swap is (1) a Covered Swap Entity, (2) a “high-risk” financial entity end-user, (3) a “low-risk” financial entity end-user (e.g., financial entities subject to capital requirements imposed by bank or insurance regulators, that predominantly use swaps to hedge and that do not have significant swap exposure) or (4) a non-financial end-user. With certain exceptions not applicable to USCI and the affiliated funds managed by USCF, Covered Swap Entities would not be required to post initial or variation margin to any of their counterparties except for other Covered Swap Entities.

Covered Swap Entities and all financial entity end-users would be required to post initial margin and variation margin when they enter into swaps with Covered Swap Entities. Margin posted by “low-risk” financial entity end-users could be subject to thresholds under the proposed rules. As commodity pools, USCI and the affiliated funds managed by USCF would be “high-risk” financial entity end-users and would therefore have to post margin without thresholds.

On April 27, 2011, the CFTC and the SEC proposed joint rules defining “swaps” and “security-based swaps,” thus providing more clarity regarding which transactions will be regulated as such under the Dodd-Frank Act. The rules proposed in April 2011 are currently open to the public for comment at the time of the filing of this quarterly report on Form 10-Q. The CFTC has now issued proposed versions of all of the rules it is required to promulgate under the Dodd-Frank Act but, with one exception not applicable to USCI and the affiliated funds managed by USCF, the CFTC has not promulgated any final rules or indicated when such final rules would take effect. The effect of the future regulatory change on USCI is impossible to predict, but it could be substantial and adverse.

USCF is a limited liability company formed in Delaware on May 10, 2005, that is registered as a commodity pool operator (“CPO”) with the CFTC and is a member of the National Futures Association (the “NFA”). USCI’s trading advisor is SummerHaven Investment Management, LLC (“SummerHaven”), a Delaware limited liability company that is registered as a commodity trading advisor and CPO with the CFTC and is a member of the NFA. USCF manages USCI’s investments directly, using the trading advisory services of SummerHaven for guidance with respect to the Commodity Index and USCF’s selection of investments on behalf of USCI. USCF is also authorized to select futures commission merchants to execute USCI’s transactions in Futures Contracts and Other Commodity-Related Investments.

Commodity Markets

Commodity Futures Price Movements
Three Months Ended March 31, 2011

As measured by the four major diversified commodity indexes listed below, commodity futures prices exhibited moderate daily swings along with an uneven upward trend during the three months ended March 31, 2011. The table below compares the total returns of the Commodity Index to the three major diversified commodity indexes over this time period.

SummerHaven Dynamic Commodity Index Total ReturnSM(1)(2)	9.79	%
S&P GSCI Commodity Index Total Return(1)	11.56	%
Dow Jones-UBS Commodity Index Total Return(1)	4.45	%
Deutsche Bank Liquid Commodity Index-Optimum Yield Total ReturnTM(1)	11.54	%

(1) Source: Bloomberg

(2) The inception date for the SummerHaven Dynamic Commodity Index Total Return is December 2009

The value of the Commodity Index as of December 31, 2010 was 1,852.04. As of March 31, 2011, the value of the Commodity Index was 2033.40, up approximately 9.79% over the three months ended March 31, 2011.

USCI’s NAV began the period at $64.37 per unit and ended the period at $70.38 per unit on March 31, 2011, an increase of approximately 9.34% over the period. USCI’s NAV reached its high for the period on March 4, 2011 at $71.81 per unit and reached its low for the period on January 7, 2011 at $63.01 per unit. The return of 9.79% on the Commodity Index listed above is a hypothetical return only and could not actually be achieved by an investor holding Futures Contracts due to the impact of trading costs and other expenses. See “Tracking the Commodity Index” below for information about how expenses and income affect USCI’s NAV.

Valuation of Futures Contracts and the Computation of the NAV

The NAV of USCI’s units is calculated once each NYSE Arca trading day. The 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. USCI’s administrator uses the closing prices on the relevant Futures Exchanges of the Benchmark Component Futures Contracts (determined at the earlier of the close of such exchange or 2:30 p.m. New York time) for the contracts held on the Futures Exchanges, but calculates or determines the value of all other USCI investments using market quotations, if available, or other information customarily used to determine the fair value of such investments.

Results of Operations

Results of Operations. On August 10, 2010, USCI listed its units on the NYSE Arca under the ticker symbol “USCI.” USCI established its initial offering price at $50.00 per unit and issued 100,000 units to the initial authorized purchaser, Merrill Lynch Professional Clearing Corp., in exchange for $5,000,000 in cash. In order to satisfy NYSE Arca listing standards that at least 100,000 units be outstanding at the beginning of the trading day on the NYSE Arca, USCF purchased the initial Creation Basket from the initial Authorized Purchaser at the initial offering price. The $1,000 fee that would otherwise be charged to the Authorized Purchaser in connection with an order to create or redeem was waived in connection with the initial Creation Basket. USCF agreed not to resell the units comprising such basket except that it may require the initial Authorized Purchaser to repurchase all of these units at a per unit price equal to USCI’s per unit NAV within five days following written notice from USCF, subject to the conditions that: (i) on the date of repurchase, the initial Authorized Purchaser must immediately redeem these units in accordance with the terms of the Authorized Purchaser Agreement and (ii) immediately following such redemption at least 100,000 units of USCI remain outstanding. USCF held such initial Creation Basket until September 3, 2010, at which time the initial Authorized Purchaser repurchased the units comprising such basket in accordance with the specified conditions noted above.

Since its initial offering of 50,000,000 units, USCI has not registered any subsequent offerings of its units. As of March 31, 2011, USCI had issued 6,400,020 units, 6,200,020 of which were outstanding. As of March 31, 2011, there were 43,599,980 units registered but not yet issued.

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

For the Three Months Ended March 31, 2011

A comparison of USCI’s results of operations for the three months ended March 31, 2010 and 2011 has not been provided because USCI had not commenced operations as of March 31, 2010.

As of March 31, 2011, the total unrealized gain on Futures Contracts owned or held on that day was $15,462,956, and USCI established cash deposits, including cash investments in money market funds, that were equal to $393,392,471. USCI held 91.30% of its cash assets in overnight deposits and money market funds at its custodian bank, while 8.70% of the cash balance was held as margin deposits for the Futures Contracts purchased. The ending per unit NAV on March 31, 2011 was $70.38.

Portfolio Expenses. USCI’s expenses consist of investment management fees, brokerage fees and commissions, certain offering costs and expenses relating to tax accounting and reporting requirements. The management fee that USCI pays to USCF is calculated as a percentage of the total net assets of USCI. USCI pays USCF a management fee of 0.95% of its average net assets. The fee is accrued daily and paid monthly.

During the three months ended March 31, 2011, the daily average total net assets of USCI were $246,845,671. The management fee incurred by USCI during the period amounted to $578,228.

In addition to the management fee, USCI pays all brokerage fees and other expenses, including certain tax reporting costs, ongoing registration or other fees paid to the SEC, the Financial Industry Regulatory Authority (“FINRA”) and any other regulatory agency in connection with offers and sales of its units subsequent to the initial offering and all legal, accounting, printing and other expenses associated therewith. The total of these fees and expenses for the three months ended March 31, 2011 was $176,949. For the three months ended March 31, 2011, USCI did not incur any fees or other expenses relating to the registration or offering of additional units. During the three months ended March 31, 2011, an expense waiver was in effect which offset certain of the expenses incurred by USCI. The total amount of the expense waiver was $36,907. For the three months ended March 31, 2011, the expenses of USCI, including management fees, commissions, and all other expenses, before allowance for the expense waiver, totaled $792,084, and after allowance for the expense waiver, totaled $755,177.

USCI also incurs commissions to brokers for the purchase and sale of Futures Contracts, Other Commodity-Related Investments or Treasuries. During the three months ended March 31, 2011, total commissions paid to brokers amounted to $89,402. As an annualized percentage of total net assets, the figure for the three months ended March 31, 2011 represents approximately 0.15% of total net assets. However, there can be no assurance that commission costs and portfolio turnover will not cause commission expenses to rise in future quarters.

The fees and expenses associated with USCI’s audit expenses and tax accounting and reporting requirements are paid by USCI. These costs are estimated to be $300,000 for the year ending December 31, 2011. USCF, though under no obligation to do so, agreed to pay certain expenses, to the extent that such expenses exceeded 0.15% (15 basis points) of USCI’s NAV, on an annualized basis, through March 31, 2011.

Interest Income. USCI seeks to invest its assets such that it holds Futures Contracts and Other Commodity-Related Investments in an amount equal to the total net assets of its portfolio. Typically, such investments do not require USCI to pay the full amount of the contract value at the time of purchase, but rather require USCI to post an amount as a margin deposit against the eventual settlement of the contract. As a result, USCI retains an amount that is approximately equal to its total net assets, which USCI invests in Treasuries, cash and/or cash equivalents. This includes both the amount on deposit with the futures commission merchant as margin, as well as unrestricted cash and cash equivalents held with USCI’s custodian bank. The Treasuries, cash and/or cash equivalents earn income that accrues on a daily basis. For the three months ended March 31, 2011, USCI earned $55,628 in interest income on such cash and/or cash equivalents. Based on USCI’s average daily total net assets, this was equivalent to an annualized yield of 0.09%. USCI purchased Treasuries during the three months ended March 31, 2011 and also held cash and/or cash equivalents during this time period.

Portfolio Holdings

During the three months ended March 31, 2011 and the period from USCI’s inception date, August 9, 2010, to March 31, 2011, USCI’s portfolio held at all times Futures Contracts based on 14 different commodities. Due to changes in the composition of the Commodity Index, each month the list of Benchmark Component Futures Contracts held by USCI changed (see the section “The Commodity Index” below). The tables below list the Benchmark Component Futures Contracts held during the three months ended March 31, 2011 and from the inception date, August 9, 2010, to March 31, 2011, respectively.

Benchmark Component Futures Contracts

Commodity

As of Jan 31,

2011

As of Feb 28,

2011

As of Mar 31,

2011

Crude Oil (Brent)

Crude Oil (WTI)

Gas Oil

Heating Oil

Natural Gas

Unleaded Gasoline

Feeder Cattle

Lean Hogs

Live Cattle

Bean Oil

Corn

Soybeans

Soybean Meal

Wheat

Aluminum

Copper

Lead

Nickel

Tin

Zinc

Gold

Platinum

Silver

Cocoa

Coffee

Cotton

Sugar

Total Number of Benchmark

Component Futures Contracts

l = Component

Benchmark Component Futures Contratacts

Commodity

Commencement

of Operations

8/9/2010

As of

9/1/2010

As of

10/1/2010

As of

11/1/2010

As of

12/1/2010

As of

1/1/2011

As of

2/1/2011

As of

3/1/2011

Crude Oil (Brent)

Crude Oil (WTI)

Gas Oil

Heating Oil

Natural Gas

Unleaded Gasoline

Feeder Cattle

Lean Hogs

Live Cattle

Corn

Soybeans

Soybean Meal

Soybean Oil

Wheat

Aluminum

Copper

Lead

Nickel

Tin

Zinc

Gold

Platinum

Silver

Cocoa

Coffee

Cotton

Sugar

Total Number of
Benchmark Component
Futures Contracts	14	14	14	14	14	14	14	14

l = Component

The table below reflects the same listing of monthly Benchmark Component Futures Contracts as the tables above with two changes. First, the table below includes a column showing the change in the spot price of each of the 27 commodities as measured from USCI’s inception date, August 9, 2010 to March 31, 2011. Second, while the tables above list the order of the commodities alphabetically (first by which of the six sectors a commodity falls into and then within each sector), the table below lists the commodities from the commodity that had the highest positive change in spot price to the commodity that had the lowest positive change or largest negative change in spot price. Investors are cautioned that the change in the spot price of a given commodity does not represent the actual return that USCI might have earned on any holdings in futures contracts based on that commodity. This is due to two factors. First, the return on a futures contract may be higher, or lower, than the change in the spot price of the commodity due to the impact of backwardation or contango. Second, USCI may not have owned any such futures contract for the entire time period represented in the table below. Thus, USCI’s total actual return on its holdings in any of the commodities shown below may be higher, or lower, than the actual change in the spot price of the particular commodity.

Benchmark Component Futures Contracts

Commodity

Commencement

Of Operations

8/9/2010

As of

9/1/2010

As of

10/1/2010

As of

11/1/2010

As of

12/1/2010

As of

1/1/2011

As of

2/1/2011

As of

3/1/2011

Spot Price

Performance

since USCI

inception*

Cotton

143

Silver

108

Corn

Coffee

Sugar

Tin

Unleaded Gasoline

Gas Oil

Crude Oil (Brent)

Heating Oil

Soybean Oil

Soybeans

Live Cattle

Crude Oil (WTI)

Copper

Lead

Aluminum

Gold

Feeder Cattle

Soybean Meal

Lean Hogs

Nickel

Platinum

Zinc

Wheat

Natural Gas

Cocoa

-2

l = Component

* From 8/9/10 to 3/31/11

Source: Bloomberg

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

For the 30 valuation days ended March 31, 2011, the simple average daily change in the Commodity Index was 0.060%, while the simple average daily change in the NAV of USCI over the same time period was 0.052%. The average daily difference was -0.008% (or -0.8 basis points, where 1 basis point equals 1/100 of 1%). As a percentage of the daily movement of the Commodity Index, the average error in daily tracking by the NAV was -1.277%, meaning that over this time period USCI’s tracking error was within the plus or minus 10% range established as its benchmark tracking goal. The first chart below shows the daily movement of USCI’s NAV versus the daily movement of the Commodity Index for the 30- valuation day period ended March 31, 2011. The second chart below shows the monthly total returns of USCI as compared to the monthly value of the Benchmark Component Futures Contracts since inception.

Since the commencement of the offering of USCI’s units to the public on August 10, 2010 to March 31, 2011, the simple average daily change in the Commodity Index was 0.221%, while the simple average daily change in the NAV of USCI over the same time period was 0.216%. The average daily difference was -0.006% (or -0.6 basis points, where 1 basis point equals 1/100 of 1%). As a percentage of the daily movement of the Commodity Index, the average error in daily tracking by the NAV was 1.669%, meaning that over this time period USCI’s tracking error was within the plus or minus 10% range established as its benchmark tracking goal.

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

An alternative tracking measurement of the return performance of USCI versus the return of the Commodity Index can be calculated by comparing the actual return of USCI, measured by changes in its NAV, versus the expected changes in its NAV under the assumption that USCI’s returns had been exactly the same as the daily changes in the price of the Commodity Index.

For the three months ended March 31, 2011, the actual total return of USCI as measured by changes in its NAV was 9.34%. This is based on an initial NAV of $64.37 on December 31, 2010 and an ending NAV as of March 31, 2011 of $70.38. During this time period, USCI made no distributions to its unitholders. However, if USCI’s daily changes in its NAV had instead exactly tracked the changes in the daily return of the Commodity Index, USCI would have had an estimated NAV of $70.81 as of March 31, 2011, for a total return over the relevant time period of 9.79%. The difference between the actual NAV total return of USCI of 9.34% and the expected total return based on the Commodity Index of 9.79% was an error over the time period of -0.664%, which is to say that USCI’s actual total return underperformed the Commodity Index result by that percentage. USCF believes that a portion of the difference between the actual return and the expected Commodity Index return can be attributed to the net impact of the expenses that USCI pays, offset in part by the income that USCI collects on its cash and cash equivalent holdings. During the three months ended March 31, 2011, USCI received interest income of $55,628, which is equivalent to a weighted average income rate of 0.09% for such period. In addition, during the three months ended March 31, 2011, USCI also collected $36,000 from its Authorized Purchasers for creating or redeeming baskets of units. This income also contributed to USCI’s actual return. However, if the total assets of USCI continue to increase, USCF believes that the impact on total returns of these fees from creations and redemptions will diminish as a percentage of the total return. During the three months ended March 31, 2011, USCI incurred net expenses of $755,177. Income from interest and Authorized Purchaser collections net of expenses was $(663,549), which is equivalent to an annualized weighted average net income rate of (1.09)% for the three months ended March 31, 2011.

There are currently three factors that have impacted or are most likely to impact USCI’s ability to accurately track the Commodity Index.

First, USCI may buy or sell its holdings in the then current Benchmark Component Futures Contracts at a price other than the closing settlement price of that contract on the day during which USCI executes the trade. In that case, USCI may pay a price that is higher, or lower, than that of the Benchmark Component Futures Contracts, which could cause the changes in the daily NAV of USCI to either be too high or too low relative to the changes in the price of the Commodity Index. During the three months ended March 31, 2011, USCF attempted to minimize the effect of these transactions by seeking to execute its purchase or sale of the Benchmark Component Futures Contracts at, or as close as possible to, the end of the day settlement price. However, it may not always be possible for USCI to obtain the closing settlement price and there is no assurance that failure to obtain the closing settlement price in the future will not adversely impact USCI’s attempt to track the Commodity Index over time.

Second, USCI earns interest income on its cash, cash equivalents and Treasury holdings. USCI is not required to distribute any portion of its income to its unitholders and did not make any distributions to unitholders during the three months ended March 31, 2011. Interest payments, and any other income, were retained within the portfolio and added to USCI’s NAV. At the same time, USCI incurred expenses for its management fee, brokerage commissions and other expenses (including ongoing registration fees). The calculation of the Commodity Index includes an interest portion, calculated daily using the 90-Day U.S. Treasury Bill’s total return, but does not include an expense component. When USCI’s income exceeds the sum of USCI’s expenses by the yield on the 90-Day U.S. Treasury Bill, USCI realizes a net yield that tends to cause daily changes in the NAV of USCI to track slightly higher than daily changes in the price of the Commodity Index. If this net yield is lower than the yield on the 90-Day U.S. Treasury Bill that tends to cause daily changes in the NAV of USCI to track slightly lower than daily changes in the price of the Commodity Index. During the three months ended March 31, 2011, USCI earned, on an annualized basis, approximately 0.09% on its cash holdings. It also incurred cash expenses on an annualized basis of 0.95% for management fees, approximately 0.15% in brokerage commission costs related to the purchase and sale of Futures Contracts and 0.14% for other net expenses. The foregoing fees and expenses resulted in a net yield on an annualized basis of approximately (1.15)% and affected USCI’s ability to track its benchmark. If short-term interest rates rise above the current levels, the level of deviation created by the yield would decrease. Conversely, if short-term interest rates were to decline, the amount of error created by the yield would increase. When short-term yields drop to a level lower than the combined expenses of the management fee and the brokerage commissions, then the tracking error becomes a negative number and would tend to cause the daily returns of the NAV to underperform the daily returns of the Commodity Index.

Third, USCI may hold Futures Contracts in a particular commodity other than the one specified as the Benchmark Component Futures Contract, or may hold Other Commodity-Related Investments in its portfolio that may fail to closely track the Commodity Index’s total return movements. For example, if for a given month one of the Benchmark Component Futures Contracts is the NYMEX WTI physically settled Futures Contract, trading under the symbol “CL,” for the contract month of November 2011, it is possible that USCI could hold a NYMEX WTI financially settled Futures Contract, trading under the symbol “WS,” for the contract month of November 2011. Alternatively, and using the same example, USCI could hold the ICE WTI financially settled Futures Contract, also for the contract month of November 2011. As a third example, USCI could hold the NYMEX WTI physically settled Futures Contract, trading under the symbol “CL,” but for a contract month other than November 2011. Finally, USCI could hold Other Commodity-Related Investments. In any of these cases, the error in tracking the Commodity Index could result in daily changes in the NAV of USCI that are either too high, or too low, relative to the daily changes in the price of the Commodity Index. During the three months ended March 31, 2011, USCI did not hold any Other Commodity-Related Investments, but did, at times and for short holding periods, hold Futures Contracts that were in months other than the months specified as the Benchmark Component Futures Contract. If USCI increases in size, and due to its obligations to comply with regulatory limits or due to other market pricing or liquidity factors, USCI may invest in Futures Contract months other than the designated month specified as the Benchmark Component Futures Contract, or in Other Commodity-Related Investments, which may have the effect of increasing transaction related expenses and may result in increased tracking error.

The Commodity Index

The Commodity Index was developed based upon academic research by Yale University professors Gary B. Gorton and K. Geert Rouwenhorst, and Hitotsubashi University professor Fumio Hayashi. The Commodity Index is designed to reflect the performance of a fully margined or collateralized portfolio of 14 Eligible Commodity Futures Contracts with equal weights, selected each month from a universe of the 27 Eligible Commodity Futures Contracts. The Commodity Index is rules-based and rebalanced monthly based on observable price signals. In this context, the term “rules-based” is meant to indicate that the composition of the Commodity Index in any given month will be determined by quantitative formulas relating to the prices of the futures contracts that relate to the commodities that are eligible to be included in the Commodity Index. Such formulas are not subject to adjustment based on other factors. The overall return on the Commodity Index is generated by two components: (i) uncollateralized returns from the Benchmark Component Futures Contracts comprising the Commodity Index and (ii) a daily fixed income return reflecting the interest earned on a hypothetical 3-month U.S. Treasury Bill collateral portfolio, calculated using the weekly auction rate for the 3-Month U.S. Treasury Bills published by the U.S Department of the Treasury. SummerHaven Index Management, LLC (“SummerHaven Indexing”) is the owner of the Commodity Index.

The Commodity Index is composed of physical non-financial commodity futures contracts with active and liquid markets traded upon futures exchanges in major industrialized countries. The futures contracts are denominated in U.S. dollars and weighted equally by notional amount. The Commodity Index currently reflects commodities in six commodity sectors: energy (e.g., crude oil, natural gas, heating oil, etc.), precious metals (e.g., gold, silver platinum), industrial metals (e.g., zinc, nickel, aluminum, copper, etc.), grains (e.g., wheat, corn, soybeans, etc.), softs (e.g., sugar, cotton, coffee, cocoa), and livestock (e.g., live cattle, lean hogs, feeder cattle).

Table 1 below lists the eligible commodities, the relevant Futures Exchanges on which the Eligible Commodity Futures Contracts are listed and quotation details. Table 2 lists the Eligible Commodity Futures Contracts, their sector designation and maximum allowable tenor.

TABLE 1

Commodity	Designated Contract	Exchange	Units	Quote

Crude Oil (Brent)	Crude Oil	ICE-UK	1,000 barrels	USD/barrel

Crude Oil (WTI)	Light, Sweet Crude Oil	NYMEX	1,000 barrels	USD/barrel

Gas Oil	Gas Oil	ICE-UK	100 metric tons	USD/metric ton

Heating Oil	Heating Oil	NYMEX	42,000 gallons	U.S. cents/gallon

Natural Gas	Henry Hub Natural Gas	NYMEX	10,000 mmbtu	USD/mmbtu

Unleaded Gasoline	Reformulated Blendstock for Oxygen Blending “RBOB”	NYMEX	42,000 gallons	U.S. cents/gallon

Feeder Cattle	Feeder Cattle	CME	50,000 lbs.	U.S. cents/pound

Lean Hogs	Lean Hogs	CME	40,000 lbs.	U.S. cents/pound

Live Cattle	Live Cattle	CME	40,000 lbs.	U.S. cents/pound

Soybean Oil	Soybean Oil	CBOT	60,000 lbs.	U.S. cents/pound

Corn	Corn	CBOT	5,000 bushels	U.S. cents/bushel

Soybeans	Soybeans	CBOT	5,000 bushels	U.S. cents/bushel

Soybean Meal	Soybean Meal	CBOT	100 tons	USD/ton

Wheat (Soft Red Winter)	Wheat (Soft Red Winter)	CBOT	5,000 bushels	U.S. cents/bushel

Aluminum	High Grade Primary Aluminum	LME	25 metric tons	USD/metric ton

Copper	Copper	COMEX	25,000 lbs	U.S. cents/pound

Lead	Lead	LME	25 metric tons	USD/metric ton

Nickel	Primary Nickel	LME	6 metric tons	USD/metric ton

Tin	Tin	LME	5 metric tons	USD/metric ton

Zinc	Special High Grade Zinc	LME	25 metric tons	USD/metric ton

Gold	Gold	COMEX	100 troy oz.	USD/troy oz.

Platinum	Platinum	NYMEX	50 troy oz.	USD/troy oz.

Silver	Silver	COMEX	5,000 troy oz.	U.S. cents/troy oz.

Cocoa	Cocoa	ICE-US	10 metric tons	USD/metric ton

Coffee	Coffee “C”	ICE-US	37,500 lbs	U.S. cents/pound

Cotton	Cotton	ICE-US	50,000 lbs	U.S. cents/pound

Sugar	World Sugar No. 11	ICE-US	112,000 lbs.	U.S. cents/pound

TABLE 2

Commodity Symbol	Commodity Name	Sector	Allowed Contracts	Max. tenor
CO	Brent Crude	Energy	All 12 Calendar Months	12

CL	Crude Oil	Energy	All 12 Calendar Months	12

QS	Gas Oil	Energy	All 12 Calendar Months	12

HO	Heating Oil	Energy	All 12 Calendar Months	12

NG	Natural Gas	Energy	All 12 Calendar Months	12

XB	RBOB	Energy	All 12 Calendar Months	12

FC	Feeder Cattle	Livestock	Jan, Mar, Apr, May, Aug, Sep, Oct, Nov	5

LH	Lean Hogs	Livestock	Feb, Apr, Jun, Jul, Aug, Oct, Dec	5

LC	Live Cattle	Livestock	Feb, Apr, Jun, Aug, Oct, Dec	5

BO	Soybean Oil	Grains	Jan, Mar, May, Jul, Aug, Sep, Oct, Dec	7

C	Corn	Grains	Mar, May, Jul, Sep, Dec	12

S	Soybeans	Grains	Jan, Mar, May, Jul, Aug, Sep, Nov	12

SM	Soymeal	Grains	Jan, Mar, May, Jul, Aug, Sep, Oct, Dec	7

W	Wheat (Soft Red Winter)	Grains	Mar, May, Jul, Sep, Dec	7

LA	Aluminum	Industrial Metals	All 12 Calendar months	12

HG	Copper	Industrial Metals	All 12 Calendar Months	12

LL	Lead	Industrial Metals	All 12 Calendar Months	7

LN	Nickel	Industrial Metals	All 12 Calendar Months	7

LT	Tin	Industrial Metals	All 12 Calendar Months	7

LX	Zinc	Industrial Metals	All 12 Calendar Months	7

GC	Gold	Precious Metals	Feb, Apr, Jun, Aug, Oct, Dec	12

PL	Platinum	Precious Metals	Jan, Apr, Jul, Oct	5

SI	Silver	Precious Metals	Mar, May, Jul, Sep, Dec	5

CC	Cocoa	Softs	Mar, May, Jul, Sep, Dec	7

KC	Coffee	Softs	Mar, May, Jul, Sep, Dec	7

CT	Cotton	Softs	Mar, May, Jul, Dec	7

SB	Sugar	Softs	Mar, May, Jul, Oct	7

Prior to the end of each month, SummerHaven Indexing determines the composition of the Commodity Index and provides such information to Bloomberg, L.P. (“Bloomberg”). Values of the Commodity Index are computed by Bloomberg and disseminated approximately every fifteen (15) seconds from 8:00 a.m. to 5:00 p.m., New York City time, which also publishes a daily Commodity Index value at approximately 5:30 p.m., New York City time, under the index ticker symbol “SDCITR:IND.” Only settlement and last-sale prices are used in the Commodity Index’s calculation, bids and offers are not recognized — including limit-bid and limit-offer price quotes. Where no last-sale price exists, typically in the more deferred contract months, the previous days’ settlement price is used. This means that the underlying Commodity Index may lag its theoretical value. This tendency to lag is evident at the end of the day when the Commodity Index value is based on the settlement prices of the Benchmark Component Futures Contracts, and explains why the underlying Commodity Index often closes at or near the high or low for the day.

Composition of the Commodity Index

The composition of the Commodity Index on any given day, as determined and published by SummerHaven Indexing, is determinative of the benchmark for USCI. Neither the SummerHaven Dynamic Commodity IndexSM (“SDCI”) index methodology nor any set of procedures, however, are capable of anticipating all possible circumstances and events that may occur with respect to the Commodity Index and the methodology for its composition, weighting and calculation. Accordingly, a number of subjective judgments must be made in connection with the operation of the Commodity Index that cannot be adequately reflected in this description of the Commodity Index. All questions of interpretation with respect to the application of the provisions of the SDCI index methodology, including any determinations that need to be made in the event of a market emergency or other extraordinary circumstances, will be resolved by SummerHaven Indexing.

Contract Expirations

Because the Commodity Index is comprised of actively traded contracts with scheduled expirations, it can be calculated only by reference to the prices of contracts for specified expiration, delivery or settlement periods, referred to as contract expirations. The contract expirations included in the Commodity Index for each commodity during a given year are designated by SummerHaven Indexing, provided that each contract must be an active contract. An active contract for this purpose is a liquid, actively-traded contract expiration, as defined or identified by the relevant trading facility or, if no such definition or identification is provided by the relevant trading facility, as defined by standard custom and practice in the industry.

If a Futures Exchange ceases trading in all contract expirations relating to an Eligible Commodity Futures Contract, SummerHaven Indexing may designate a replacement contract on the commodity. The replacement contract must satisfy the eligibility criteria for inclusion in the Commodity Index. To the extent practicable, the replacement will be effected during the next monthly review of the composition of the Commodity Index. If that timing is not practicable, SummerHaven Indexing will determine the date of the replacement based on a number of factors, including the differences between the existing Benchmark Component Futures Contract and the replacement contract with respect to contractual specifications and contract expirations.

If a Benchmark Component Futures Contract is eliminated and there is no replacement contract, the underlying commodity will necessarily drop out of the Commodity Index. The designation of a replacement contract, or the elimination of a commodity from the Commodity Index because of the absence of a replacement contract, could affect the value of the Commodity Index, either positively or negatively, depending on the price of the contract that is eliminated and the prices of the remaining contracts. It is impossible, however, to predict the effect of these changes, if they occur, on the value of the Commodity Index.

Commodity Selection

Fourteen of the 27 Eligible Commodity Future Contracts are selected for inclusion in the Commodity Index for the next month, subject to the constraint that each of the six commodity sectors is represented by at least one commodity. The methodology used to select the 14 Benchmark Component Futures Contracts is based solely on quantitative data using observable futures prices and is not subject to human bias.

Monthly commodity selection is a two-step process based upon examination of the relevant futures prices for each commodity:

The annualized percentage price difference between the closest-to-expiration Benchmark Component Futures Contract and the next closest-to-expiration Benchmark Component Futures Contract is calculated for each of the 27 Eligible Commodity Futures Contracts on the Selection Date. The seven commodities with the highest percentage price difference are selected. A hypothetical example is included below, with the seven selected commodities shaded below:

Eligible Commodity	Percentage Price Difference			Ranking
Crude Oil (Brent)		-4.75	%		13
Crude Oil (WTI)		-5.01	%		14
Gas Oil		20.78	%		1
Heating Oil		-7.87	%		21
Natural Gas		-19.92	%		25
Unleaded Gasoline (RBOB)		1.27	%		5
Feeder Cattle		-27.42	%		27
Lean Hogs		-20.68	%		26
Live Cattle		14.31	%		3
Soybean Oil		-6.70	%		20
Corn		-17.58	%		24
Soybeans		-5.12	%		16
Soybean Meal		3.23	%		4
Wheat (Soft Red Winter)		-15.41	%		23
Aluminum		-6.61	%		19
Copper		-0.69	%		9
Lead		-4.66	%		12
Nickel		-0.57	%		6
Tin		-1.83	%		11
Zinc		-5.33	%		17
Gold		-0.64	%		8
Platinum		-1.42	%		10
Silver		-0.62	%		7
Cocoa		-5.09	%		15
Coffee		-10.26	%		22
Cotton		-6.18	%		18
Sugar		16.81	%		2

For the remaining 20 eligible commodities, the percentage price change of each commodity over the previous year is calculated, as measured by the change in the price of the closest-to-expiration Eligible Commodity Futures Contract on the Selection Date from the price of the closest-to-expiration Eligible Commodity Futures Contract a year prior to the Selection Date. The seven commodities with the highest percentage price change are selected. A hypothetical example is included below, with the next seven selected commodities shaded below (the selected commodities are ranked 1 – 7):

Eligible Commodity	Percentage Price Change			Ranking
Crude Oil (Brent)		40.26	%		10
Crude Oil (WTI)		68.10	%		6
Heating Oil		67.65	%		7
Natural Gas		10.88	%		17
Feeder Cattle		12.41	%		16
Lean Hogs		17.07	%		14
Soybean Oil		26.94	%		11
Corn		-3.16	%		19
Soybeans		4.86	%		18
Wheat (Soft Red Winter)		-7.69	%		20
Aluminum		66.67	%		8
Copper		88.22	%		3
Lead		73.54	%		5
Tin		77.57	%		4
Zinc		97.61	%		1
Gold		15.77	%		15
Platinum		56.47	%		9
Cocoa		18.03	%		12
Coffee		17.68	%		13
Cotton		97.05	%		2

When evaluating the data from the second step, all six commodity sectors must be represented. If the selection of the seven additional commodities with the highest price change fails to meet the overall diversification requirement that all six commodity sectors are represented in the Commodity Index, the commodity with the highest price change among the commodities of the omitted sector(s) would be substituted for the commodity with the lowest price change among the seven additional commodities.

The 14 commodities selected are included in the Commodity Index for the next month on an equally-weighted basis. Due to the dynamic monthly commodity selection, the sector weights will vary from approximately 7% to 43% over time, depending on the price observations each month. The Selection Date for the Commodity Index is the fifth business day prior to the first business day of the next calendar month.

The following graph shows the sector weights of the commodities selected for inclusion in the Commodity Index as of March 31, 2011.

Contract Selection

For each commodity selected for inclusion into the Commodity Index for a particular month, the Commodity Index selects a specific Benchmark Component Futures Contract with a tenor (i.e., contract month) among the eligible tenors (the range of contract months) based upon the relative prices of the Benchmark Component Futures Contracts within the eligible range of contract months. The previous notwithstanding, the contract expiration is not changed for such month if a contract remains in the Commodity Index, as long as the contract does not expire or enter its notice period in the subsequent month.

Portfolio Construction

The portfolio rebalancing takes place during the last four business days of the month (the “Rebalancing Period”). At the end of each of the days in the Rebalancing Period, one fourth of the prior month portfolio positions are replaced by an equally-weighted position in the commodity contracts determined on the Selection Date. At the end of the Rebalancing Period, the Commodity Index takes an equal-weight position of approximately 7.14% in each of the selected commodity contracts.

Commodity Index Return Calculation

The percentage excess return equals the percentage change of the market values of the underlying commodity futures. During the Rebalancing Period, the Commodity Index changes its contract holdings during a four day period.

The value of the SDCI Excess ReturnSM (“SDCI ER”) at the end of a business day “t” is equal to the SDCI ER value on day “t-1” multiplied by the sum of the daily percentage price changes of each commodity future factoring in each respective commodity future’s notional holding on day “t-1”.

Rebalancing Period

The Commodity Index is rebalanced during the Rebalancing Period, when existing positions are replaced by new positions based on the signals used for contract selection as outlined above. At the end of the first day of the Rebalancing Period, the signals are observed and on the second day a new portfolio is constructed that is equally weighted in terms of notional positions in the newly selected contracts.

Total Return Calculation

The value of the SDCI Total ReturnSM (“SDCI TR”) on any business day is equal to the product of: (i) the value of the SDCI TR on the immediately preceding business day multiplied by (ii) one plus the sum of the day’s SDCI ER returns and one business day’s interest from the hypothetical Treasury Bill portfolio. The value of the SDCI TR will becalculated and published by Bloomberg.

Commodity Index Base Level

The SDCI TR was set to 100 on January 2, 1991.

2011 Holiday Schedule

The SDCI TR will not be computed on the following weekdays in 2011:

January	17
February	21
April	22
May	30
July	4
September	5
November	24

The holiday schedule is subject to change. USCI will not accept orders for Creation Baskets or Redemption Baskets on these days.

The table and chart below show the hypothetical performance of the Commodity Index from December 31, 1997 through March 31, 2011.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT USCI WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM IN SPITE OF TRADING LOSSES ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS IN GENERAL OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.

USCF HAS HAD LITTLE OR NO EXPERIENCE IN TRADING DIVERSIFIED BASKETS OF COMMODITY FUTURES FOR ITSELF OR FOR CUSTOMERS. BECAUSE THERE ARE NO ACTUAL TRADING RESULTS TO COMPARE TO THE HYPOTHETICAL PERFORMANCE RESULTS, INVESTORS SHOULD BE PARTICULARLY WARY OF PLACING UNDUE RELIANCE ON THESE HYPOTHETICAL PERFORMANCE RESULTS.

Since the Commodity Index was launched on December 18, 2009, there is only actual performance history of the Commodity Index from that date to present. This data is available for periods prior to December 18, 2009. However, the components of the Commodity Index and the weighting of the components of the Commodity Index are established each month based on purely quantitative data that is not subject to revision based on other external factors. As a result, the table below reflects how the Commodity Index would have performed during the prior 10 years had it been in effect during such time period. The performance data does not reflect any reinvestment or distribution of profits, commission charges, management fees or other expenses that would have been incurred in connection with operating and managing a commodity pool designed to track the Commodity Index. Such fees and expenses would reduce the performance returns shown in the table below.

Hypothetical Performance Results* for the period

from December 31, 1997 through March 31, 2011

Year	Ending Level		Annual Return
1997		225.020
1998		185.543		-17.54	%
1999		236.420		27.42	%
2000		331.115		40.05	%
2001		303.456		-8.35	%
2002		380.074		25.25	%
2003		479.254		26.09	%
2004		592.263		23.58	%
2005		781.942		32.03	%
2006		1115.816		42.70	%
2007		1518.705		36.11	%
2008		1175.767		-22.58	%
2009		1532.841		30.37	%
2010		1852.038		20.82	%
2011 (YTD)		2033.403		9.79	%

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

SummerHaven Dynamic Commodity IndexSM Year-Over-Year

Hypothetical Total Returns (1998 – 3/31/2011)

Source: SummerHaven Indexing, Bloomberg

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

The following table and chart compare the hypothetical total return of the Commodity Index in comparison with the actual total return of three major indexes for the period from December 31, 1997 to March 31, 2011.

	Hypothetical and Historical Results for the period from December 31,
	1997 through March 31, 2011*
	DJ-UBS TR			S&P GSCI TR			DB LCI OY TR			SDCI TR
Total return		120	%		80	%		448	%		804	%
Average Annual return (total)		9.01	%		11.32	%		17.87	%		21.08	%
Annualized volatility		17.25	%		24.51	%		19.62	%		15.95	%
Annualized Sharpe ratio		0.36			0.34			0.76			1.12

Source: SummerHaven Indexing, Bloomberg

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

The table immediately above shows the performance of the Commodity Index from December 31, 1997 through March 31, 2011 in comparison with three traditional commodities indices: the S&P GSCI Commodity Index (GSCI®) Total Return, Dow Jones-UBS Commodity Index Total ReturnSM, and the Deutsche Bank Liquid Commodity Index-Optimum Yield Total ReturnTM. The S&P GSCI® Commodity Index Total Return is a composite index of commodity sector returns representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities. The Dow Jones-UBS Commodity Index Total ReturnSM is currently composed of futures contracts on a diversified basket of commodities traded on U.S. exchanges. The Deutsche Bank Liquid Commodity Index-Optimum Yield Total Return™ is designed to reflect the performance of certain wheat, corn, light sweet crude oil, heating oil, gold and aluminum futures contracts plus the returns from investing in 3-month U.S. Treasury Bills. The data for the SDCI Total Return Index is derived by using the Commodity Index’s calculation methodology with historical prices for the futures contracts comprising the Commodity Index. The information about each of the indices comes from publicly-available material about such indices but is not designed to provide a thorough overview of the methodology of each index. None of the indices has an investment objective identical to the Commodity Index. As a result, there are inherent limitations in comparing the performance of such indices against the Commodity Index. For more information about these indices and their methodologies, please refer to the material published by the sponsors of each such index which may be found on their websites. USCI is not responsible for any information found on such websites, and such information is not part of this quarterly report on Form 10-Q.

In the table above, “Total Return” refers to the return of the relevant index from December 31, 1997 to March 31, 2011; “Annualized Volatility” is a measure of the amount of variation or fluctuation in the returns of the relevant index. Annualized Volatility is calculated by taking the monthly standard deviation of the relevant index’s return and multiplying it by the square root of 12; and “Annualized Sharpe Ratio” is a measure of the total return of each relevant index adjusted by the risk-free interest rate (the 90 Day U.S. Treasury Bill yield) and the volatility of each index. Many investors consider volatility to be a measure of risk, and lower volatility of investment returns is considered a positive investment attribute as opposed to higher volatility. Annualized Sharpe Ratio is a standard measure for investors to compare two different investments or indexes that have different levels of volatility. If two indexes have the same total return, but one has lower Annualized Volatility, then its Annualized Sharpe Ratio will be higher. The higher the Annualized Sharpe Ratio, the better the risk-adjusted performance. Annualized Sharpe Ratio is calculated by taking the average monthly total return of the relevant index and subtracting the then current yield on the 90-Day U.S. Treasury Bill. The annualized return of this series is then divided by the Annualized Volatility of this series, and this result is the Annualized Sharpe Ratio for the relevant index. A higher Sharpe Ratio is not a guarantee that one investment or index will in the future produce better risk adjustment total returns, but USCF believes it is a useful tool for investors to consider when making investment decisions.

10 Year Comparison of Index Returns of the DJ-UBS TR, S&P GSCI TR,

DB LCI OY TR, and the Hypothetical Returns of the SDCI TR

(3/31/01 – 3/31/11)

Source: SummerHaven Indexing, Bloomberg

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

The following chart compares the hypothetical total return of the Commodity Index in comparison with the actual total return of three major indexes over a five year period.

Five Year Comparison of Index Returns of the DJ-UBS TR, S&P GSCI TR,

DB LCI OY TR, and the Hypothetical Returns of the SDCI TR

(3/31/06 – 3/31/11)

Source: SummerHaven Indexing, Bloomberg

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

Critical Accounting Policies

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

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

Liquidity and Capital Resources

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

USCI currently generates cash primarily from: (i) the sale of baskets consisting of 100,000 units (“Creation Baskets”) and (ii) income earned on Treasuries, cash and/or cash equivalents. USCI has allocated substantially all of its net assets to trading in Commodity Interests. USCI invests in Commodity Interests to the fullest extent possible without being leveraged or unable to satisfy its current or potential margin or collateral obligations with respect to its investments in Commodity Interests. A significant portion of USCI’s NAV is held in cash and cash equivalents that are used as margin and as collateral for its trading in Commodity Interests. The balance of the net assets is held in USCI’s account at its custodian bank. Income received from USCI’s money market funds is paid to USCI. During the three months ended March 31, 2011, USCI’s expenses exceeded the income USCI earned and the cash earned from the sale of Creation Baskets. During the three months ended March 31, 2011, USCI was forced to use other assets to pay cash expenses, which could cause a drop in USCI’s NAV over time. To the extent expenses exceed income USCI’s NAV will be negatively impacted.

USCI’s investments in Commodity Interests may be subject to periods of illiquidity because of market conditions, regulatory considerations and other reasons. For example, most commodity exchanges limit the fluctuations in futures contract prices during a single day by regulations referred to as “daily limits.” During a single day, no trades may be executed at prices beyond the daily limit. Once the price of a futures contract has increased or decreased by an amount equal to the daily limit, positions in the contracts can neither be taken nor liquidated unless the traders are willing to effect trades at or within the specified daily limit. Such market conditions could prevent USCI from promptly liquidating its positions in Futures Contracts. During the three months ended March 31, 2011, USCI was not forced to purchase or liquidate any of its positions while daily limits were in effect; however, USCI cannot predict whether such an event may occur in the future.

Prior to the initial offering of each Trust Series, all payments with respect to each Trust Series’ expenses were or are paid by USCF. USCI, which as of the date of this quarterly report on Form 10-Q, is the only series which offers units publicly, does not have an obligation or intention to refund such payments by USCF. USCF is under no obligation to pay USCI’s or any other additional Trust Series’ current or future expenses. Since the initial offering of units, USCI has been responsible for expenses relating to: (i) management fees, (ii) brokerage fees and commissions, (iii) ongoing registration expenses in connection with offers and sales of its units subsequent to the initial offering, (iv) other expenses, including certain tax reporting costs, (v) the fees of the Trustee in connection with its services as Delaware trustee of the Trust and (vi) other extraordinary expenses not in the ordinary course of business, while USCF has been responsible for expenses relating to the fees of USCI’s Marketing Agent, Administrator and Custodian, the trading advisory and licensing fees of SummerHaven and offering expenses relating to the initial offering of units of USCI, USMI, USAI and USCUI. If USCF and each Trust Series are unsuccessful in raising sufficient funds to cover these respective expenses or in locating any other source of funding, one more of the Trust Series will terminate and investors may lose all or part of their investment.

Market Risk

Trading in Commodity Interests such as Futures Contracts involves USCI entering into contractual commitments to purchase or sell specified amounts of commodities at a specified date in the future. The aggregate market value of the contracts will significantly exceed USCI’s future cash requirements since USCI intends to close out its open positions prior to settlement. As a result, USCI is generally only subject to the risk of loss arising from the change in value of the contracts. USCI considers the “fair value” of its derivative instruments to be the unrealized gain or loss on the contracts. The market risk associated with USCI’s commitments to purchase a specific commodity will be limited to the aggregate market value of the contracts held.

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 limited experience that USCI has had in utilizing its model to trade in Commodity Interests in a manner intended to track the changes in the Commodity Index, as well as drastic market occurrences, could ultimately lead to the loss of all or substantially all of an investor’s capital.

Credit Risk

When USCI enters into Futures Contracts and Other Commodity-Related Investments, it is exposed to the credit risk that the counterparty will not be able to meet its obligations. The counterparty for the Futures Contracts traded on the Futures Exchanges is the clearinghouse associated with the particular exchange. In general, in addition to margin required to be posted by the clearinghouse in connection with cleared trades, clearinghouses are backed by their members who may be required to share in the financial burden resulting from the nonperformance of one of their members and, therefore, this additional member support should significantly reduce credit risk. Some foreign exchanges are not backed by their clearinghouse members but may be backed by a consortium of banks or other financial institutions. Unlike in the case of exchange-traded Futures Contracts, the counterparty to an over-the-counter Commodity Interest contract is generally a single bank or other financial institution. As a result, there will be greater counterparty credit risk in over-the-counter transactions. There can be no assurance that any counterparty, clearinghouse, or their members or their financial backers will satisfy their obligations to USCI in such circumstances.

USCF attempts to manage the credit risk of USCI by following various trading limitations and policies. In particular, USCI generally posts margin and/or holds liquid assets that are approximately equal to the market value of its obligations to counterparties under the Futures Contracts and Other Commodity-Related Investments it holds. USCF has implemented procedures that include, but are not limited to, executing and clearing trades and entering into over-the-counter transactions only with creditworthy parties and/or requiring the posting of collateral or margin by such parties for the benefit of USCI to limit its credit exposure. Newedge USA, LLC, USCI’s commodity broker, or any other broker that may be retained by USCI in the future, when acting as USCI’s futures commission merchant in accepting orders to purchase or sell Futures Contracts on United States exchanges, is required by CFTC regulations to separately account for and segregate as belonging to USCI, all assets of USCI relating to domestic Futures Contracts trading. These futures commission merchants are not allowed to commingle USCI’s assets with their other assets. In addition, the CFTC requires commodity brokers to hold in a secure account USCI’s assets related to foreign Futures Contracts trading. During the three months ended March 31, 2011, the only foreign exchanges on which USCI made investments were the ICE Futures, which is a London based futures exchange, and the LME, which is a London based metal commodities exchange. Those Futures Contracts are denominated in U.S. dollars.

If, in the future, USCI purchases over-the-counter contracts, see “Item 3. Quantitative and Qualitative Disclosures About Market Risk” in this quarterly report on Form 10-Q for a discussion of over-the-counter contracts.

As of March 31, 2011, USCI had deposits in domestic and foreign financial institutions, including cash investments in money market funds, in the amount of $393,392,471. This amount is subject to loss should these institutions cease operations.

Off Balance Sheet Financing

As of March 31, 2011, neither the Trust nor USCI has any loan guarantee, credit support or other off-balance sheet arrangement of any kind other than agreements entered into in the normal course of business, which may include indemnification provisions relating to certain risks that service providers undertake in performing services which are in the best interests of USCI. While USCI’s exposure under these indemnification provisions cannot be estimated, they are not expected to have a material impact on USCI’s financial position.

Redemption Basket Obligation

In order to meet its investment objective and pay its contractual obligations described below, USCI requires liquidity to redeem units, which redemptions must be in blocks of 100,000 units called “Redemption Baskets”. USCI has to date satisfied this obligation by paying from the cash or cash equivalents it holds or through the sale of its Treasuries in an amount proportionate to the number of units being redeemed.

Contractual Obligations

USCI’s primary contractual obligations are with USCF and certain other service providers. USCF, in return for its services, is entitled to a management fee calculated as a fixed percentage of USCI’s NAV, currently 0.95% of its average net assets. USCI is also responsible for all ongoing fees, costs and expenses of its operation, including:

brokerage and other fees and commissions incurred in connection with the trading activities of USCI;

expenses incurred in connection with registering additional units of USCI or offering units of USCI after the time any units of USCI have begun trading on the NYSE Arca;

the routine expenses associated with distribution, including printing and mailing, of any monthly, annual and other reports to unitholders required by applicable U.S. federal and state regulatory authorities;

payment for routine services of the Trustee, legal counsel and independent accountants;

payment for fees associated with tax accounting and reporting, routine accounting, bookkeeping, whether performed by an outside service provider or by affiliates of USCF;

costs and expenses associated with investor relations and services;

the payment of any distributions related to redemption of units;

payment of all federal, state, local or foreign taxes payable on the income, assets or operations of USCI and the preparation of all tax returns related thereto; and

extraordinary expenses (including, but not limited to, indemnification of any person against liabilities and obligations to the extent permitted by law and required under the Trust Agreement and the bringing and defending of actions at law or in equity and otherwise engaging in the conduct of litigation and the incurring of legal expense and the settlement of claims and litigation).

While USCF has agreed to pay registration fees to the SEC, FINRA, NYSE Arca or any other regulatory agency or exchange in connection with the initial offer and sale of the units and the legal, printing, accounting and other expenses associated with such registration, USCI is responsible for any registration fees and related expenses incurred in connection with any subsequent offer and sale of its units after the initial offering of units.

USCI pays its own brokerage and other transaction costs. USCI pays fees to futures commission merchants in connection with its transactions in Futures Contracts. Futures commission merchant fees were 0.15% for the three months ended March 31, 2011 for USCI. In general, transaction costs on over-the-counter Commodity Interests and on Treasuries and other short-term securities are embedded in the purchase or sale price of the instrument being purchased or sold, and may not readily be estimated. USCF, though under no obligation to do so, agreed to pay certain expenses, to the extent that such expenses exceeded 0.15% (15 basis points) of USCI’s NAV, on an annualized basis, through March 31, 2011.

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

As of March 31, 2011, USCI’s portfolio consisted of 7,651 Futures Contracts traded on the Futures Exchanges. For a list of USCI’s current holdings, please see USCI’s website at www.unitedstatescommodityindexfund.com. See “Portfolio Holdings” for a complete list of Futures Contracts held by USCI during the three months ended March 31, 2011.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Over-the-Counter Derivatives (Including Spreads and Straddles)

In the future, 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.

Some commodity-based derivatives transactions contain fairly generic terms and conditions and are available from a wide range of participants. Other commodity-based derivatives have highly customized terms and conditions and are not as widely available. Many of these OTC Contracts are cash-settled forwards for the future delivery of specified commodities that have terms similar to the Futures Contracts. Others take the form of “swaps” in which the two parties exchange cash flows based on pre-determined formulas tied to the spot price of the specified commodity, forward commodity price or commodity futures price. In these swaps, a party pays a fixed price per unit and the other pays a variable price based on the average price of the future contracts for a specified period or the price on a specific date, with payments typically made between the parties on a net basis. For example, USCI may enter into OTC derivative contracts whose value will be tied to changes in the difference between the spot price of the specified commodity, the price of Futures Contracts traded on the Futures Exchanges and the prices of other Futures Contracts in which USCI may invest.

To reduce the credit risk that arises in connection with such contracts, USCI will generally enter into an agreement with each counterparty based on the Master Agreement published by the International Swaps and Derivatives Association, Inc. that provides for the netting of its overall exposure to its counterparty.

USCF assesses or reviews, as appropriate, the creditworthiness of each potential or existing counterparty to an OTC Contract pursuant to guidelines approved by USCF’s board of directors (the “Board”). Furthermore, USCF, on behalf of USCI, only enters into OTC Contracts with counterparties who are, or are affiliates of, (a) banks regulated by a United States federal bank regulator, (b) broker-dealers regulated by the SEC, (c) insurance companies domiciled in the United States, or (d) producers, users or traders of energy, whether or not regulated by the CFTC. Any entity acting as a counterparty shall be regulated in either the United States or the United Kingdom unless otherwise approved by the Board after consultation with its legal counsel. Existing counterparties are also reviewed periodically by USCF. USCI will also require that the counterparty be highly rated and/or provide collateral or other credit support. Even if collateral is used to reduce counterparty credit risk, sudden changes in the value of OTC transactions may leave a party open to financial risk due to a counterparty default since the collateral held may not cover a party’s exposure on the transaction in such situations.

The Dodd-Frank Act requires the CFTC and SEC to establish both “initial and variation margin requirements” on all swaps that are not cleared by a registered clearing organization (i.e., uncleared swaps). In addition, the Dodd-Frank Act provides parties who post initial margin to a swap dealer or major swap participant with a statutory right to insist that such margin be held in a segregated account with an independent custodian. At this time, the CFTC has proposed rules addressing margin requirements and the statutory right of certain market participants, but has not implemented any rules on these issues. On April 12, 2011, the Prudential Regulators and the CFTC issued proposed rules establishing minimum initial and variation margin collection requirements for Covered Swap Entities, which if adopted, would require Covered Swap Entities to collect minimum initial and variation margin amounts from swap counterparties. The Prudential Regulators’ proposed rules would apply to those Covered Swap Entities that are regulated by the Prudential Regulators and the CFTC’s proposed rules would apply to Covered Swap Entities that are not regulated by the Prudential Regulators.

On April 27, 2011, the CFTC voted to propose rules for capital requirements for Covered Swap Entities that are not regulated by a Prudential Regulator. Covered Swap Entities that are regulated by a Prudential Regulator will be subject to the capital requirements already imposed by such Prudential Regulator. In general, higher levels of capital would be imposed on Covered Swap Entities that do not collect margin from their counterparties (or that collect margin subject to thresholds) in connection with their swaps, and could increase the costs of such swaps. The rules proposed in April 2011 are currently open to the public for comment at the time of the filing of this quarterly report on Form 10-Q.

In general, 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.

USCI may employ spreads or straddles in its trading to mitigate the differences in its investment portfolio and its goal of tracking the price of the Commodity Index. USCI would use a spread when it chooses to take simultaneous long and short positions in futures written on the same underlying asset, but with different delivery months. The effect of holding such combined positions is to adjust the sensitivity of USCI to changes in the price relationship between futures contracts, which will expire sooner, and those that will expire later. USCI would use such a spread if USCF felt that taking such long and short positions, when combined with the rest of its holdings, would more closely track the investment goals of USCI, or if USCF felt it would lead to an overall lower cost of trading to achieve a given level of economic exposure to movements in commodity prices. USCI would enter into a straddle when it chooses to take an option position consisting of a long (or short) position in both a call option and put option. The economic effect of holding certain combinations of put options and call options can be very similar to that of owning the underlying futures contracts. USCI would make use of such a straddle approach if, in the opinion of USCF, the resulting combination would more closely track the investment goals of USCI or if it would lead to an overall lower cost of trading to achieve a given level of economic exposure to movements in commodity prices.

During the three months ended March 31, 2011, USCI did not employ any hedging methods such as those described above since all of its investments were made over an exchange. Therefore, during such period, USCI was not exposed to counterparty risk.

USCI anticipates that the use of Other Commodity-Related Investments together with its investments in Futures Contracts will produce price and total return results that closely track the investment goals of USCI. However, there can be no assurance of this. OTC Contracts may result in higher transaction-related expenses than the brokerage commissions paid in connection with the purchase of Futures Contracts, which may impact USCI’s ability to successfully track the Commodity Index.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

The Trust and USCI maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in the Trust’s periodic reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms.

The duly appointed officers of USCF, including its chief executive officer and chief financial officer, who perform functions equivalent to those of a principal executive officer and principal financial officer of the Trust if the Trust had any officers, have evaluated the effectiveness of the Trust’s and USCI’s disclosure controls and procedures and have concluded that the disclosure controls and procedures of the Trust and USCI have been effective as of the end of the period covered by this quarterly report on Form 10-Q.

Change in Internal Control Over Financial Reporting

There were no changes in the Trust’s or USCI’s internal control over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Trust’s or USCI’s internal control over financial reporting.

Part II.

OTHER INFORMATION

Item 1. Legal Proceedings.

Not applicable.

Item 1A. Risk Factors.

There have been no material changes from the risk factors previously disclosed in the Trust’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, filed on March 30, 2011.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Not applicable.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Removed and Reserved.

Item 5.

Other Information.

Monthly Account Statements

Pursuant to the requirement under Rule 4.22 under the Commodity Exchange Act, each month the Trust and USCI publish account statements for USCI’s unitholders, which include Statements of Income (Loss) Statements of Changes in NAV and Statements of Changes in Units Outstanding. The account statements are furnished to the SEC on a current report on Form 8-K pursuant to Section 13 or 15(d) of the Exchange Act and posted each month on USCI’s website at www.unitedstatescommodityindexfund.com.

Item 6.

Exhibits.

Listed below are the exhibits, which are filed as part of this quarterly report on Form 10-Q (according to the number assigned to them in Item 601 of Regulation S-K):

Exhibit
Number		Description of Document
31.1(1)		Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2(1)		Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1(1)		Certification by Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2(1)		Certification by Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1)		Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

United States Commodity Index Funds Trust (Registrant)

By: United States Commodity Funds LLC, its Sponsor

By: /s/ Nicholas D. Gerber

Nicholas D. Gerber

President and Chief Executive Officer

(Principal executive officer)

Date: May 16, 2011

By: /s/ Howard Mah

Howard Mah

Chief Financial Officer

(Principal financial and accounting officer)

Date: May 16, 2011

Attached files

United States Commodity Index Funds Trust Reports

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