10-K: United States Commodity Index Funds Trust Files 10-K Report for Fiscal Year 2023

United States Commodity Index Funds Trust releases its annual report on Form 10-K for the fiscal year ended December 31, 2023, detailing the performance and financial status of its commodity index funds.

Summary

• The United States Commodity Index Funds Trust, a Delaware statutory trust, has released its annual report on Form 10-K for the fiscal year ended December 31, 2023.
• The trust is organized into two series: the United States Commodity Index Fund (USCI) and the United States Copper Index Fund (CPER).
• USCI aims to track the SummerHaven Dynamic Commodity Index Total ReturnSM (SDCI), while CPER aims to track the SummerHaven Copper Index Total ReturnSM (SCI).
• As of December 31, 2023, USCI held 4,766 futures contracts and CPER held 1,342 futures contracts.
• USCI's per share NAV increased by approximately 0.20% to $56.34, while CPER's per share NAV increased by approximately 4.46% to $24.10.
• The report details the investment objectives, strategies, and risks associated with each fund, as well as the fees and expenses incurred.
• The report also includes audited financial statements and management's discussion and analysis of financial condition and results of operations.

Sentiment

Score: 6

Explanation: The document is neutral in tone, providing factual information about the funds' performance and operations. While there are positive aspects like NAV increases, the report also highlights risks and challenges, resulting in a moderate sentiment score.

Positives

• Both USCI and CPER saw increases in their per share NAV during the fiscal year 2023.
• The report provides detailed information on the funds' holdings, expenses, and performance.
• The report includes audited financial statements, providing assurance of the accuracy of the financial data.
• The report details the investment objectives and strategies of each fund, providing transparency to investors.

Negatives

• The report notes that natural market forces like contango and backwardation can impact the total return on an investment in the funds.
• The report highlights that the daily percentage changes in a Trust Series NAV may not correlate with daily percentage changes in the price of the Applicable Index.
• The report mentions that the market price at which investors buy or sell shares may be significantly more or less than NAV.
• The report notes that an investor's tax liability may exceed the amount of distributions, if any, on its shares.

Risks

• The NAV of a Trust Series shares relates directly to the value of its assets invested in accordance with the Applicable Index and other assets held by a Trust Series and fluctuations in the prices of these assets could materially adversely affect an investment in a Trust Series shares.
• An investment in a Trust Series may provide little or no diversification benefits.
• Historical performance of a Trust Series and its Applicable Benchmark Component Futures Contracts is not indicative of future performance.
• The market price at which investors buy or sell shares may be significantly more or less than NAV.
• Daily percentage changes in a Trust Series NAV may not correlate with daily percentage changes in the price of the Applicable Index.
• Accountability levels, position limits, and daily price fluctuation limits set by the exchanges have the potential to cause tracking error.
• Risk mitigation measures imposed by the Trust Series FCMs have the potential to cause tracking error.
• Each Trust Series will be subject to credit risk with respect to counterparties to OTC contracts.
• Valuing OTC derivatives may be less certain than actively traded financial instruments.

Future Outlook

The report contains forward-looking statements regarding the plans and objectives of management for future operations, which are subject to various risks and uncertainties.

Management Comments

• USCF believes that the market arbitrage opportunities will cause the daily changes in USCIs share price on the NYSE Arca on a percentage basis to closely track the daily changes in USCIs per share NAV on a percentage basis.
• USCF believes that the net effect of this expected relationship and the expected relationship described above between USCIs per share NAV and the SDCI will be that the daily changes in the price of USCIs shares on the NYSE Arca on a percentage basis will closely track the daily changes in the SDCI on a percentage basis, less USCIs expenses.
• USCF believes that market arbitrage opportunities will cause daily changes in CPERs share price on the NYSE Arca on a percentage basis, to closely track the daily changes in CPERs per share NAV on a percentage basis.
• USCF believes that the net effect of this expected relationship and the expected relationship described above between CPERs per share NAV and the SCI will be that the daily changes in the price of CPERs shares on the NYSE Arca on a percentage basis will closely track the daily changes in the SCI on a percentage basis, less CPERs expenses.

Industry Context

This report provides insight into the performance of commodity index funds in a volatile market environment, highlighting the challenges and opportunities in this sector. The report also provides information on the regulatory environment and the impact of market conditions on the funds' ability to track their benchmarks.

Comparison to Industry Standards

• The report compares the performance of the SDCI to other major diversified commodity indexes, such as the S&P GSCI Commodity Index, Bloomberg Commodity Index, and Deutsche Bank Liquid Commodity Index, showing that the SDCI had a positive return of 1.60% while the others had negative returns.
• The report compares the performance of the SCI to the Bloomberg Copper Subindex Total Return, showing that the SCI had a return of 5.88% while the Bloomberg index had a return of 4.73%.
• The report also provides a comparison of the hypothetical total return of the SDCI and SCI with the actual total return of other major indexes over a five and ten year period.
• The report notes that the price volatility of futures contracts generally has been historically greater than that for traditional securities such as stocks and bonds.

Legal Proceedings

• The report mentions ongoing litigation involving USCF and USO, including the Optimum Strategies Action, the Lucas Class Action, the Wang Class Action, the Mehan Action, and the In re United States Oil Fund, LP Derivative Litigation.
• The report also notes the settlement of SEC and CFTC investigations related to USCF and USO.

Related Party Transactions

• The report discloses that USCF is the sponsor of the Trust and each of its series, and is responsible for the management of the Trust and the Trust Series.
• The report also discloses that USCF pays fees to SummerHaven for advisory services and licensing agreements.
• The report notes that USCF pays the fees of BNY Mellon for custodial, administrative, accounting, and transfer agency services.
• The report also notes that USCF pays the fees of ALPS Distributors, Inc., which serves as the marketing agent for the Trust Series.

Stakeholder Impact

• Shareholders are provided with detailed information about the funds' performance, risks, and expenses.
• Authorized Participants are provided with information about the creation and redemption process.
• The report provides transparency to regulators and other stakeholders about the funds' operations and compliance.
• The report provides information about the impact of market conditions on the funds' performance.

Next Steps

• The Trust Series will continue to monitor market conditions and regulatory requirements.
• The Trust Series will continue to manage its investments to track the Applicable Index.
• The Trust Series will continue to provide transparency to investors through regular reporting.

Key Dates

Keywords

commodity index funds, USCI, CPER, futures contracts, SummerHaven Dynamic Commodity Index, SummerHaven Copper Index, net asset value, financial report, investment risk, market risk