Attached files

file filename
EX-10.3 - United States Brent Oil Fund, LPv179156_ex10-3.htm
EX-10.1 - United States Brent Oil Fund, LPv179156_ex10-1.htm
EX-10.4 - United States Brent Oil Fund, LPv179156_ex10-4.htm
EX-23.2B - United States Brent Oil Fund, LPv179156_ex23-2b.htm
EX-23.2A - United States Brent Oil Fund, LPv179156_ex23-2a.htm

As filed with the Securities and Exchange Commission on April 2, 2010

Registration No. 333-162015

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



 

Amendment No. 3 to

FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933



 

UNITED STATES BRENT OIL FUND, LP

(Exact Name of Registrant as Specified in Its Charter)

   
Delaware   6770   27-0925904
(State or Other Jurisdiction of
Incorporation or Organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

 
United States Commodity Funds LLC
1320 Harbor Bay Parkway, Suite 145
Alameda, California 94502
510.522.9600
  Nicholas D. Gerber
1320 Harbor Bay Parkway, Suite 145
Alameda, California 94502
510.522.9600
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant’s Principal Executive Offices)
  (Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)


 

Copies to:

James M. Cain, Esq.
W. Thomas Conner, Esq.
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, DC 20004-2415
202.383.0100



 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

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 o   Accelerated Filer o
Non-Accelerated Filer x
(Do not check if a smaller reporting company)
  Smaller Reporting Company o

CALCULATION OF REGISTRATION FEE

       
Title of Each Class of Securities to Be Registered   Amount to Be
Registered
  Proposed Maximum
Offering Price
Per Unit(1)
  Proposed Maximum
Aggregate
Offering Price(1)
  Amount of
Registration Fee
Units of United States Brent Oil Fund, LP     50,000,000 Units     $ 50.00     $ 2,500,000,000     $ 139,500 (2) 

(1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(d) under the Securities Act of 1933.
(2) Previously paid in connection with the initial filing of the registration statement on September 18, 2009.


 

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 


 
 

TABLE OF CONTENTS

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the SEC is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 
PRELIMINARY PROSPECTUS   SUBJECT TO COMPLETION

United States Brent Oil Fund, LP

50,000,000 Units

United States Brent Oil Fund, LP, a Delaware limited partnership, is a commodity pool that will issue units that may be purchased and sold on the NYSE Arca. United States Brent Oil Fund, LP is referred to as USBO throughout this document. The investment objective of USBO is for the daily changes in percentage terms of its units’ net asset value to reflect the daily changes in percentage terms of the spot price of Brent crude oil as measured by the changes in the price of the futures contract on Brent crude oil as traded on the ICE Futures Exchange that is the near month contract to expire, except when the near month contract is within two weeks of expiration, in which case the futures contract will be the next month contract to expire, less USBO’s expenses. This is a best efforts offering. USBO will continuously offer creation baskets consisting of 100,000 units to authorized purchasers through ALPS Distributors, Inc., which is the marketing agent. Merrill Lynch Professional Clearing Corp. is expected to be the initial authorized purchaser. Authorized purchasers will pay a transaction fee of $1,000 for each order to create one or more baskets. There are no arrangements to place funds in an escrow, trust, or similar account. This will be a continuous offering and will not terminate until the earlier of when all of the registered units have been sold or three years following the effectiveness of this registration statement.

It is anticipated that on the effective date (the date the Securities and Exchange Commission declares the registration statement relating to this prospectus effective), the initial authorized purchaser will, though it is under no obligation to do so, purchase one or more initial creation baskets of 100,000 units at a price per unit of $50.00. It is expected that the proceeds from that purchase will be invested on that day and that USBO’s initial per unit net asset value will be established as of 4:00 p.m. New York City time that day. The units are expected to begin trading on the NYSE Arca under the ticker symbol “BNO” on the day following the effective date. Units offered in creation baskets on any day after the effective date will be offered at the per unit net asset value calculated shortly after the close of the core trading session on the NYSE Arca.
Authorized purchasers will be the only persons that may place orders to create and redeem baskets. An authorized purchaser is under no obligation to create or redeem baskets, and an authorized purchaser is under no obligation to offer to the public units of any baskets it does create. Authorized purchasers that do offer to the public units from the baskets they create will do so at per-unit offering prices that are expected to reflect, among other factors, the trading price of the units on the NYSE Arca, the net asset value of USBO at the time the authorized purchaser purchased the creation basket and the net asset value at the time of the offer of the units to the public, the supply of and demand for units at the time of sale, and the liquidity of the crude oil futures contract market and the market for other crude oil-related investments. The prices of units offered by authorized purchasers are expected to fall between USBO’s net asset value and the trading price of the units on the NYSE Arca at the time of sale. The difference between the price paid by authorized purchasers as underwriters and the price paid to such authorized purchasers by investors will be deemed underwriting compensation. Units initially comprising the same basket but offered by authorized purchasers to the public at different times may have different offering prices. Units are expected to trade in the secondary market on the NYSE Arca. Units may trade in the secondary market at prices that are lower or higher relative to their net asset value per unit. The amount of the discount or premium in the trading price relative to the net asset value per unit may be influenced by various factors, including the number of investors who seek to purchase or sell units in the secondary market and the liquidity of the crude oil futures contract market and the market for other crude oil-related investments. Authorized purchasers will not be required to sell any specific number or dollar amount of units.

USBO is not a mutual fund registered under the Investment Company Act of 1940 and is not subject to regulation under such Act.

Some of the risks of investing in USBO include:

Investing in crude oil interests subjects USBO to the risks of the crude oil industry which could result in large fluctuations in the price of USBO’s units.
If certain correlations do not exist, then investors may not be able to use USBO as a cost-effective way to invest in crude oil or as a hedge against the risk of loss in crude oil-related transactions.
USBO does not expect to make cash distributions.
USBO and its general partner may have conflicts of interest, which may permit them to favor their own interests to your detriment.
USBO has no operating history so there is no performance history to serve as a basis for you to evaluate an investment in USBO.

Investing in USBO involves other significant risks. See “What Are the Risk Factors Involved with an Investment in USBO?” beginning on page 12.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION (“SEC”) NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES OFFERED IN THIS PROSPECTUS, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

THE COMMODITY FUTURES TRADING COMMISSION (“CFTC”) HAS NOT PASSED UPON THE MERITS OF PARTICIPATING IN THIS POOL NOR HAS IT PASSED ON THE ADEQUACY OR ACCURACY OF THIS DISCLOSURE DOCUMENT.

This prospectus is in two parts: a disclosure document and a statement of additional information. These parts are bound together, and both contain important information.

   
  Per Unit   Per Basket
Price of the units in the first basket(s) sold   $ 50.00     $ 5,000,000.00  

The date of this prospectus is [  ], 2010.


 
 

TABLE OF CONTENTS

COMMODITY FUTURES TRADING COMMISSION
RISK DISCLOSURE STATEMENT

YOU SHOULD CAREFULLY CONSIDER WHETHER YOUR FINANCIAL CONDITION PERMITS YOU TO PARTICIPATE IN A COMMODITY POOL. IN SO DOING, YOU SHOULD BE AWARE THAT FUTURES AND OPTIONS TRADING CAN QUICKLY LEAD TO LARGE LOSSES AS WELL AS GAINS. SUCH TRADING LOSSES CAN SHARPLY REDUCE THE NET ASSET VALUE OF THE POOL AND CONSEQUENTLY THE VALUE OF YOUR INTEREST IN THE POOL. IN ADDITION, RESTRICTIONS ON REDEMPTIONS MAY AFFECT YOUR ABILITY TO WITHDRAW YOUR PARTICIPATION IN THE POOL.

FURTHER, COMMODITY POOLS MAY BE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT, ADVISORY AND BROKERAGE FEES. IT MAY BE NECESSARY FOR THOSE POOLS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS. THIS DISCLOSURE DOCUMENT CONTAINS A COMPLETE DESCRIPTION OF EACH EXPENSE TO BE CHARGED THIS POOL BEGINNING ON PAGE 84 AND A STATEMENT OF THE PERCENTAGE RETURN NECESSARY TO BREAK EVEN, THAT IS, TO RECOVER THE AMOUNT OF YOUR INITIAL INVESTMENT, ON PAGE 7.

THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER FACTORS NECESSARY TO EVALUATE YOUR PARTICIPATION IN THIS COMMODITY POOL. THEREFORE, BEFORE YOU DECIDE TO PARTICIPATE IN THIS COMMODITY POOL, YOU SHOULD CAREFULLY STUDY THIS DISCLOSURE DOCUMENT, INCLUDING THE DESCRIPTION OF THE PRINCIPAL RISK FACTORS OF THIS INVESTMENT, BEGINNING ON PAGE 12.

YOU SHOULD ALSO BE AWARE THAT THIS COMMODITY POOL MAY TRADE FOREIGN FUTURES OR OPTIONS CONTRACTS. TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET, MAY BE SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION TO THE POOL AND ITS PARTICIPANTS. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE TRANSACTIONS FOR THE POOL MAY BE EFFECTED.

AS OF THE DATE OF THIS PROSPECTUS THIS POOL HAS NOT COMMENCED TRADING AND DOES NOT HAVE ANY PERFORMANCE HISTORY.

i


 
 

TABLE OF CONTENTS

UNITED STATES BRENT OIL FUND, LP

TABLE OF CONTENTS

 
  Page
Prospectus Summary     1  
Overview of USBO     1  
The Units     3  
USBO’s Investments in Crude Oil Interests     4  
Principal Investment Risks of an Investment in USBO     4  
Principal Offices of USBO and the General Partner     6  
Financial Condition of USBO     6  
Defined Terms     6  
Breakeven Analysis     7  
The Offering     8  
What Are the Risk Factors Involved with an Investment in USBO?     12  
Risks Associated with Investing Directly or Indirectly in Crude Oil     12  
USBO’s Operating Risks     18  
Risk of Leverage and Volatility     25  
Over-the-Counter Contract Risk     26  
Risk of Trading in International Markets     27  
Tax Risk     28  
The Offering     30  
What Is USBO?     30  
Who Is the General Partner?     30  
Contributions to the Limited Partner     35  
Compensation and Fees to the General Partner     35  
Prior Performance of the General Partner and Affiliates     35  
Other Related Commodity Trading and Investment Management Experience     52  
How Does USBO Operate?     52  
What Is USBO’s Investment Strategy?     55  
What Are Futures Contracts?     56  
What Is the Crude Oil Market and the Petroleum-Based Fuel Market?     60  
Why Does USBO Purchase and Sell Futures Contracts?     61  
What Is the Flow of Units?     65  
What Are the Trading Policies of USBO?     65  
Who Are the Service Providers?     67  
Form of Units     69  
Transfer of Units     69  
Withdrawal of Limited Partners     71  
What Is the Plan of Distribution?     71  
Calculating NAV     73  

ii


 
 

TABLE OF CONTENTS

 
  Page
Creation and Redemption of Units     74  
Use of Proceeds     79  
Management’s Discussion and Analysis of Financial Condition and Results of Operations     79  
Limited Partnership Agreement     82  
Fees of USBO     84  
The General Partner Has Conflicts of Interest     84  
The General Partner’s Responsibility and Remedies     85  
Liability and Indemnification     86  
Provisions of Law     87  
Books and Records     87  
Analysis of Critical Accounting Policies     87  
Statements, Filings, and Reports     87  
Reports to Limited Partners     88  
Fiscal Year     88  
Governing Law; Consent to Delaware Jurisdiction     89  
Legal Matters     89  
Experts     89  
Privacy Policy     89  
U.S. Federal Income Tax Considerations     89  
Other Tax Considerations     97  
Investment by ERISA Accounts     98  
Information You Should Know     100  
Statement Regarding Forward-Looking Statements     100  
Where You Can Find More Information     101  
Summary of Promotional and Sales Material     101  
Intellectual Property     101  
Index to Financial Statements     F-1  
Appendix A:
Glossary of Defined Terms
    A-1  
Appendix B:
United States Brent Oil Fund, LP Form of Amended and Restated Agreement of Limited Partnership
    B-1  
Statement of Additional Information     SAI-1  
The Commodity Interest Markets     SAI-3  
Potential Advantages of Investment     SAI-12  

Until [  ], 2010 (25 days after the date of this prospectus), all dealers effecting transactions in the offered units, whether or not participating in this distribution, may be required to deliver a prospectus. This requirement is in addition to the obligations of dealers to deliver a prospectus when acting as underwriters and with respect to unsold allotments or subscriptions.

iii


 
 

TABLE OF CONTENTS

PROSPECTUS SUMMARY

This is only a summary of the prospectus and, while it contains material information about USBO and its units, it does not contain or summarize all of the information about USBO and the units contained in this prospectus that is material and/or which may be important to you. You should read this entire prospectus, including “What Are the Risk Factors Involved with an Investment in USBO?” beginning on page 12, before making an investment decision about the units.

Overview of USBO

United States Brent Oil Fund, LP, a Delaware limited partnership (“USBO” or “Us” or “We”), is a commodity pool that will issue units that may be purchased and sold on the NYSE Arca. USBO was organized as a limited partnership under Delaware law on September 2, 2009 and is currently operating pursuant to the Amended and Restated Agreement of Limited Partnership dated      (the “LP Agreement”), as amended from time to time, which is included as Appendix B. It is expected that the initial limited partner of USBO will be Kellogg Capital Group, LLC. It is managed and controlled by its general partner, United States Commodity Funds LLC (“General Partner”). The General Partner is a single member limited liability company formed in Delaware on May 10, 2005, that is registered as a commodity pool operator (“CPO”) with the Commodity Futures Trading Commission (“CFTC”) and is a member of the National Futures Association (“NFA”). Prior to June 13, 2008, the General Partner’s name was Victoria Bay Asset Management, LLC. USBO will pay the General Partner a management fee of 0.75% of NAV on its average net assets.

The net assets of USBO will consist primarily of investments in futures contracts for crude oil, heating oil, gasoline, natural gas and other petroleum-based fuels that are traded on the ICE Futures Exchange (formerly, the International Petroleum Exchange), New York Mercantile Exchange (the “NYMEX”), or other U.S. and foreign exchanges (collectively, “Futures Contracts”). USBO may also invest in other crude oil-related investments such as cash-settled options on Futures Contracts, forward contracts for crude oil, cleared swap contracts and over-the-counter transactions that are based on the price of crude oil and other petroleum-based fuels, Futures Contracts and indices based on the foregoing (collectively, “Other Crude Oil-Related Investments”). For convenience and unless otherwise specified, Futures Contracts and Other Crude Oil-Related Investments collectively are referred to as “Crude Oil Interests” in this prospectus. The General Partner is authorized by USBO in its sole judgment to employ, establish the terms of employment for, and terminate commodity trading advisors or futures commission merchants.

USBO will invest in Crude Oil 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 positions in Futures Contracts and Other Crude Oil-Related Investments. The primary focus of the General Partner will be investing in Futures Contracts and the management of investments in short-term obligations of the United States of two years or less (“Treasuries”), cash and/or cash equivalents for margining purposes and as collateral.

The investment objective of USBO 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 spot price of Brent crude oil as measured by the changes in the price of the futures contract on Brent crude oil as traded on ICE Futures Exchange that is the near month contract to expire, except when the near month contract is within two weeks of expiration, in which case the futures contract will be the next month contract to expire (the “Benchmark Futures Contract”), less USBO’s expenses. It is not the intent of USBO to be operated in a fashion such that its NAV will equal, in dollar terms, the dollar price of spot crude oil or any particular futures contract based on crude oil. USBO may invest in interests other than the Benchmark Futures Contract to comply with accountability levels and position limits. For a detailed discussion of accountability levels and position limits, see “What are Futures Contracts?”

As a specific benchmark, the General Partner will endeavor to place USBO’s trades in Futures Contracts and Other Crude Oil-Related-Investments and otherwise manage USBO’s investments so that “A” will be within plus/minus 10 percent of “B”, where:

A is the average daily change in USBO’s NAV for any period of 30 successive valuation days, i.e., any NYSE Arca trading day as of which USBO calculates its NAV, and

1


 
 

TABLE OF CONTENTS

B is the average daily change in the price of the Benchmark Futures Contract over the same period.

An investment in the units is intended to allow both retail and institutional investors to easily gain exposure to the crude oil market in a cost-effective manner. The units are also expected to provide additional means for diversifying an investor’s investments or hedging exposure to changes in crude oil prices.

The Benchmark Futures Contract will be changed from the near month contract to the next month contract over a four-day period. Each month, the Benchmark Futures Contract will change starting at the end of the day on the date two weeks prior to expiration of the near month contract for that month. During the first three days of the period, the applicable value of the Benchmark Futures Contract will be based on a combination of the near month contract and the next month contract as follows: (1) day 1 will consist of 75% of the then near month contract’s total return for the day, plus 25% of the total return for the day of the next month contract, (2) day 2 will consist of 50% of the then near month contract’s total return for the day, plus 50% of the total return for the day of the next month contract, and (3) day 3 will consist of 25% of the then near month contract’s total return for the day, plus 75% of the total return for the day of the next month contract. On day 4, the Benchmark Futures Contract will be the next month contract to expire at that time and that contract will remain the Benchmark Futures Contract until the beginning of following month’s change in the Benchmark Futures Contract over a four-day period.

On each day during the four-day period, the General Partner anticipates it will “roll” USBO’s positions in oil investments by closing, or selling, a percentage of USBO’s positions in oil interests and reinvesting the proceeds from closing those positions in new oil interests that reflect the change in the Benchmark Futures Contract.

The anticipated dates that the monthly four-day roll period will commence for 2010 will be posted on USBO’s website at www.unitedstatesbrentoilfund.com, and are subject to change without notice.

The General Partner will employ a “neutral” investment strategy intended to track the changes in the price of the Benchmark Futures Contract regardless of whether the price goes up or goes down. USBO’s “neutral” investment strategy is designed to permit investors generally to purchase and sell USBO’s units for the purpose of taking positions indirectly in crude oil in a cost-effective manner, and/or to permit participants in the crude oil or other industries to hedge the risk of losses in their crude oil-related transactions. Accordingly, depending on the investment objective of an individual investor, the risks generally associated with taking positions in crude oil and/or the risks involved in hedging may exist. In addition, an investment in USBO involves the risk that the changes in the price of USBO’s units will not accurately track the changes in the price of the Benchmark Futures Contract. For example, USBO will also invest in Treasuries and hold cash and/or cash equivalents to be used to meet its current or potential margin or collateral requirements with respect to its positions in Futures Contracts and Other Crude Oil-Related Investments. USBO does not expect there to be any meaningful correlation between the performance of USBO’s investments in Treasuries/cash/ cash equivalents and the changes in the price of crude oil. While the level of interest earned on or the market price of these investments may in some respect correlate to changes in the price of crude oil, this correlation is not anticipated as part of USBO’s efforts to meet its objectives.

This and certain risk factors discussed in this prospectus may cause a lack of correlation between the changes in USBO’s NAV and the changes in the price of Brent crude oil.

USBO will create and redeem units only in blocks of 100,000 units called Creation Baskets and Redemption Baskets, respectively. Only Authorized Purchasers may purchase or redeem Creation Baskets or Redemption Baskets. An Authorized Purchaser is under no obligation to create or redeem baskets, and an Authorized Purchaser is under no obligation to offer to the public units of any baskets it does create. It is expected that baskets will be created when there is sufficient demand for units that the market price per unit is at a premium to the NAV per unit. Authorized Purchasers will then sell such units, which will be listed on the NYSE Arca, to the public at per unit offering prices that are expected to reflect, among other factors, the trading price of the units on the NYSE Arca, the NAV of USBO at the time the Authorized Purchaser purchased the Creation Baskets and the NAV at the time of the offer of the units to the public, the supply of and demand for units at the time of sale, and the liquidity of the Futures Contracts market and the market for Other Crude Oil-Related Investments. The prices of units offered by Authorized Purchasers are expected to

2


 
 

TABLE OF CONTENTS

fall between USBO’s NAV and the trading price of the units on the NYSE Arca at the time of sale. Similarly, it is expected that baskets will be redeemed when the market price per unit is at a discount to the NAV per unit. Retail investors seeking to purchase or sell units on any day are expected to effect such transactions in the secondary market, on the NYSE Arca, at the market price per unit, rather than in connection with the creation or redemption of baskets.

The minimum number of Creation Baskets that must be sold is one. All proceeds from the sale of Creation Baskets will be invested as quickly as possible in the investments described in this prospectus. There will be no escrow or similar holding of funds that has a time period or other conditions. Investments will be held through USBO’s custodian, Brown Brothers Harriman & Co. (“Custodian”), or through accounts with USBO’s commodity futures brokers. There is no stated maximum time period for USBO’s operations and the fund will continue until all units are redeemed or the fund is liquidated pursuant to the terms of the LP Agreement.

There is no specified limit on the maximum amount of Creation Baskets that can be sold. At some point, accountability levels and position limits on certain of the Futures Contracts in which USBO intends to invest may practically limit the maximum amount of Creation Baskets that will be sold if the General Partner determines that the other investment alternatives available to USBO at that time will not enable it to meet its stated investment objective.

Units may also be purchased and sold by individuals and entities that are not Authorized Purchasers in smaller increments than Creation Baskets on the NYSE Arca. However, these transactions will be effected at bid and ask prices established by specialist firm(s). Like any listed security, units of USBO can be purchased and sold at any time a secondary market is open.

In managing USBO’s assets, the General Partner does not intend to use a technical trading system that issues buy and sell orders. The General Partner intends instead to employ quantitative methodologies whereby each time one or more baskets are purchased or redeemed, the General Partner will purchase or sell positions in the Futures Contracts and Other Crude Oil-Related Investments with an aggregate market value that approximates the amount of Treasuries and/or cash received or paid upon the purchase or redemption of the basket(s).

Note to Secondary Market Investors:  The units can be directly purchased from or redeemed by USBO only in Creation Baskets or Redemption Baskets, respectively, and only by Authorized Purchasers. Each Creation Basket and Redemption Basket will consist of 100,000 units and may be worth millions of dollars. Individual investors, therefore, will not be able to directly purchase units from or redeem units with USBO. Some of the information contained in this prospectus, including information about buying and redeeming units directly from and to USBO is only relevant to Authorized Purchasers. Units will also be listed and traded on the NYSE Arca under the ticker symbol “BNO” and may be purchased and sold as individual units. Individuals interested in purchasing units in the secondary market should contact their broker. Units purchased or sold through a broker may be subject to commissions.

Except when aggregated in Redemption Baskets, units will not be redeemable securities. There is no guarantee that units will trade at or near the per-unit NAV.

The Units

The units are registered as securities under the Securities Act of 1933 (“1933 Act”) and the Securities Exchange Act of 1934 (“Exchange Act”) and will not provide dividend rights or conversion rights and there will not be sinking funds. The units may only be redeemed when aggregated in Redemption Baskets as discussed under “Creation and Redemption of Units” and limited partners will have limited voting rights as discussed under “Who is the General Partner?” Cumulative voting will neither be permitted nor required and there will be no preemptive rights. As discussed in the LP Agreement, upon liquidation of USBO, its assets will be distributed pro rata to limited partners based upon the number of units held. Each limited partner will receive its share of the assets in cash or in kind, and the proportion of such share that is received in cash may vary from partner to partner, as the General Partner in its sole discretion may decide.

This will be a continuous offering under Rule 415 of the 1933 Act and will terminate when all of the registered units have been sold. It is anticipated that when all registered units have been sold pursuant to this

3


 
 

TABLE OF CONTENTS

registration statement, additional units will be registered in subsequent registration statements. As discussed above, the minimum purchase requirement for Authorized Purchasers is a Creation Basket, which will consist of 100,000 units. Under the plan of distribution, USBO does not require a minimum purchase amount for investors who purchase units from Authorized Purchasers. There are no arrangements to place funds in an escrow, trust, or similar account.

USBO’s Investments in Crude Oil Interests

A brief description of the principal types of Crude Oil Interests in which USBO may invest is set forth below.

A futures contract is a standardized contract traded on a futures exchange that calls for the future delivery of a specified quantity of a commodity at a specified time and place.
A forward contract is a supply contract between principals, not traded on an exchange, to buy or sell a specified quantity of a commodity on or before a specified date at a specified price.
A spot contract is a cash market transaction in which the buyer and seller agree to the immediate purchase and sale of a commodity, usually with a two-day settlement. Spot contracts are not uniform and are not exchange-traded.
An option on a futures contract, forward contract or a commodity on the spot market gives the buyer of the option the right, but not the obligation, to buy or sell a futures contract, forward contract or a commodity as applicable, at a specified price on or before a specified date. Options on futures contracts are standardized contracts traded on an exchange, while options on forward contracts and commodities on the spot market, referred to collectively in this prospectus as over-the-counter options, generally are individually negotiated, principal-to-principal contracts not traded on an exchange.
Over-the-counter contracts (such as swap contracts) generally involve an exchange of a stream of payments between the contracting parties. Over-the-counter contracts generally are not uniform and not exchange-traded.

A more detailed description of Crude Oil Interests and other aspects of the crude oil and crude oil interests markets can be found later in this prospectus.

As noted, USBO expects to invest primarily in Futures Contracts, including those traded on the ICE Futures Exchange. USBO expressly disclaims any association with such exchange or endorsement of USBO by such exchange and acknowledges that “ICE” and “ICE Futures Exchange” are registered trademarks of such exchange.

Principal Investment Risks of an Investment in USBO

An investment in USBO involves a degree of risk. Some of the risks you may face are summarized below. A more extensive discussion of these risks appears beginning on page 12.

Unlike mutual funds, commodity pools or other investment pools that actively manage their investments in an attempt to realize income and gains from their investing activities and distribute such income and gains to their investors, USBO generally does not expect to distribute cash to limited partners or other unitholders. You should not invest in USBO if you will need cash distributions from USBO to pay taxes on your share of income and gains of USBO, if any, or for any other reason.
There is the risk that the changes in the price of USBO’s units on the NYSE Arca will not closely track the changes in the price of Brent crude oil. This could happen if the price of units traded on the NYSE Arca does not correlate closely with USBO’s NAV; the changes in USBO’s NAV do not closely correlate with the changes in the price of the Benchmark Futures Contract; or the changes in the price of the Benchmark Futures Contract do not closely correlate with the changes in the cash or spot price of Brent crude oil. This is a risk because if these correlations do not exist, then investors may not be able to use USBO as a cost-effective way to indirectly invest in crude oil or as a hedge against the risk of loss in crude oil-related transactions.

4


 
 

TABLE OF CONTENTS

USBO seeks to have the daily changes in its units’ NAV in percentage terms track the daily changes in the spot price of Brent crude oil in percentage terms rather than profit from speculative trading of Crude Oil Interests. The General Partner will therefore endeavor to manage USBO’s positions in Crude Oil Interests so that USBO’s assets are, unlike those of other commodity pools, not leveraged (i.e., so that the aggregate value of USBO’s unrealized losses from its investments in such Crude Oil Interests at any time will not exceed the value of USBO’s assets). There is no assurance that the General Partner will successfully implement this investment strategy. While the General Partner does not currently intend to leverage USBO's assets, it is not prohibited from doing so under the LP Agreement and is not limited in the amount of leverage it can employ. If the General Partner permits USBO to become leveraged, you could lose all or substantially all of your investment if USBO’s trading positions suddenly turn unprofitable. These movements in price may be the result of factors outside of the General Partner’s control and may not be anticipated by the General Partner.
The price relationship between the near month contract to expire and the next month contract to expire that compose the Benchmark Futures Contract will vary and may impact both the total return over time of USBO’s NAV, as well as the degree to which its total return tracks the Benchmark Futures Contract. In the event of a crude oil futures market where near month contracts trade at a higher price than next month contracts to expire, a situation described as “backwardation” in the futures market, then, absent the impact of the overall movement in crude oil prices, the value of the Benchmark Futures Contract would tend to rise as it approaches expiration. As a result positions in the Benchmark Futures Contract would tend to track higher. Conversely, in the event of a crude oil futures market where near month contracts trade at a lower price than next month contracts to expire, a situation described as “contango” in the futures market, then, absent the impact of the overall movement in crude oil prices, the value of the Benchmark Futures Contract would tend to decline as it approaches expiration. As a result, positions in the Benchmark Futures Contract would tend to track lower. When compared to the total return of other price indices, such as the spot price of Brent crude oil, the impact of backwardation and contango may lead the total return of USBO’s NAV to vary significantly. In the event of a prolonged period of contango, and absent the impact of rising or falling crude oil prices, this could have a significant negative impact on USBO’s NAV and total return.
Investors may choose to use USBO as a means of indirectly taking positions in Brent crude oil and there are risks involved in such investments. The risks and hazards that are inherent in the crude oil industry may cause the price of crude oil to widely fluctuate, for example, due to changes in supply and demand for crude oil as a result of refinery shutdowns or changes in the weather. The exploration and production of crude oil are uncertain processes with many risks. The cost of drilling, completing and operating wells for crude oil is often uncertain, and a number of factors can delay or prevent drilling operations or production of crude oil.
Investors, including those who directly participate in the crude oil industry, may choose to use USBO as a vehicle to hedge against the risk of loss associated with the rising cost of crude oil, and there are risks involved in hedging activities. While hedging can provide protection against an adverse movement in market prices, it can also preclude a hedger’s opportunity to benefit from a favorable market movement.
USBO invests primarily in Futures Contracts, and particularly in Futures Contracts traded on the ICE Futures Exchange, which involves certain risks including that changes in its NAV may not correlate with changes in the Benchmark Futures Contract.
USBO expects to invest primarily in Futures Contracts that are traded outside the United States. Some non-U.S. markets present risks because they are not subject to the same degree of regulation as their U.S. counterparts. In some of these non-U.S. markets, the performance on a contract is the responsibility of the counterparty and is not backed by an exchange or clearing corporation and therefore exposes USBO to credit risk. However, Futures Contracts traded on the ICE Futures Exchange, including the Benchmark Futures Contract, are backed by the ICE Futures Exchange and do not expose USBO to the risks of some other non-U.S. exchanges or clearing corporations.

5


 
 

TABLE OF CONTENTS

Trading in non-U.S. markets also leaves USBO susceptible to fluctuations in the value of the local currency against the U.S. dollar for contracts not traded in U.S. dollars. The Benchmark Futures Contract, however, is traded in U.S. dollars and does not expose USBO to the risk of currency fluctuations.
USBO may also invest in Other Crude Oil-Related Investments, many of which are negotiated contracts that are not as liquid as Futures Contracts and expose USBO to credit risk that its counterparty may not be able to satisfy its obligations to USBO.
USBO will pay fees and expenses that are incurred regardless of whether it is profitable.
You will have no rights to participate in the management of USBO and will have to rely on the duties and judgment of the General Partner to manage USBO.
The structure and operation of USBO may involve conflicts of interest. For example, a conflict may arise because the General Partner and its principals and affiliates may trade for themselves. In addition, the General Partner has sole current authority to manage the investments and operations of USBO, which may create a conflict with the unitholders’ best interests. The General Partner may also have a conflict to the extent that its trading decisions may be influenced by the effect they would have on 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”), the United States Heating Oil Fund, LP (“USHO”), the United States Short Oil Fund, LP (USSO”) or the United States 12 Month Natural Gas Fund (“US12NG”) or, other commodity pools that it manages, or any other commodity pool the General Partner may form and manage in the future. USOF, USNG, US12OF, UGA, USHO, USSO and US12NG, are referred to herein as the “Related Public Funds.”
Regulation of the commodity interest and energy markets is extensive and constantly changing. Currently, a number of proposals that would alter the regulation of Crude Oil Interests are being considered by federal regulators and Congress. These proposals include the imposition of fixed positions on energy-based commodity futures contracts, extension of position and accountability limits to futures contracts on non-U.S. exchanges previously exempt from such limits, and the forced use of clearinghouse mechanisms for all over-the-counter transactions. Certain proposals would aggregate and limit all positions in energy futures held by a single entity, whether such positions exist on U.S. futures exchanges, non-U.S. futures exchanges, or in over-the-counter contracts. While it cannot be predicted at this time what reforms will eventually be made or how they will impact USBO, if any of the aforementioned proposals are implemented, USBO’s ability to meet its investment objective may be negatively impacted and investors could be adversely affected.
USBO is new and has no operating history. Therefore, you do not have the benefit of reviewing the past performance of USBO as a basis for you to evaluate an investment in USBO.

For additional risks, see “What Are the Risk Factors Involved with an Investment in USBO?”

Principal Offices of USBO and the General Partner

USBO’s principal office is located at 1320 Harbor Bay Parkway, Suite 145, Alameda, California 94502. The telephone number is 510.522.9600. The General Partner’s principal office is also located at 1320 Harbor Bay Parkway, Suite 145, Alameda, California 94502.

Financial Condition of USBO

USBO will not calculate the NAV prior to the effective date. The initial NAV will be determined as of 4:00 p.m. New York time on the effective date.

Defined Terms

For a glossary of defined terms, see Appendix A.

6


 
 

TABLE OF CONTENTS

Breakeven Analysis

The breakeven analysis below indicates the approximate dollar returns and percentage required for the redemption value of a hypothetical $50.00 initial investment in a single unit to equal the amount invested twelve months after the investment was made. This breakeven analysis refers to the redemption of baskets by Authorized Purchasers and is not related to any gains an individual investor would have to achieve in order to break even. The breakeven analysis is an approximation only.

 
Assumed initial selling price per unit   $ 50.00  
Management Fee (0.75%)(1)   $ 0.38  
Creation Basket Fee(2)   $ (0.01 ) 
Estimated Brokerage Fee (0.14%)(3)   $ 0.07  
Interest Income (0.14%)(4)   $ (0.07 ) 
Independent Directors and Officers’ Fees(5)   $ 0.01  
Fees and expenses associated with tax accounting and reporting(6)   $ 0.25  
Amount of trading income (loss) required for the redemption value at the end of one year to equal the initial selling price of the unit   $ 0.63  
Percentage of initial selling price per unit     1.26 %(7) 

(1) USBO is contractually obligated to pay the General Partner a management fee based on daily net assets and paid monthly of 0.75% per annum on average net assets.
(2) Authorized Purchasers are required to pay a Creation or Redemption Basket fee of $1,000 for each order they place to create or redeem one or more baskets. An order must be at least one basket, which is 100,000 units. This breakeven analysis assumes a hypothetical investment in a single unit so the Creation Basket fee is $.01 (1,000/100,000).
(3) USBO determined this estimate as follows. The breakeven analysis assumes an initial investment by an investor in one unit. Assuming the price of the unit is $50.00, USBO would receive $5,000,000 upon the sale of a Creation Basket (100,000 units multiplied by $50.00). Assuming no change in the settlement price of the contracts, USBO would be required to sell and purchase positions in 71 futures contracts each month to support the Creation Basket ($5,000,000 divided by the total value of a crude oil contract of $69,830 (as of September 9, 2009, the settlement price for crude oil was $69.83)). Assuming futures commission merchants charge approximately $4.00 per crude oil contract for each buy or sale, the monthly futures commission merchant commission charge per contract would be approximately $8.00, and the annual futures commission merchant commission charge per contract would be approximately $96. Assuming no change in the settlement price of the contracts, USBO would sell and buy 71 crude oil contracts each month to support a Creation Basket, which means that USBO’s monthly commission charge per Creation Basket would be approximately $568, and the annual commission charge per Creation Basket would be approximately $6,816 (71 contracts bought and sold * approximately $8.00 per month * 12 months). As a percentage of the total investment of $5,000,000 to support the issuance of the Creation Basket, USBO’s annual commission expense would be approximately 0.14% ($6,816 divided by $5,000,000 per annum).
(4) USBO will earn interest on funds it will deposit with the futures commission merchant and the custodian and it estimates that the interest rate will be 0.14% based on the current interest rate on three-month Treasury Bills as of March 25, 2010. The actual rate may vary.
(5) The foregoing assumes that the assets of USBO are aggregated with those of the Related Public Funds, that the aggregate fees paid to the independent directors for 2009 equaled $433,046, that the allocable portion of the fees borne by USBO equal one percent of the aggregate assets of USBO and the Related Public Funds, or $4,330 and that USBO will have $30 million in assets.
(6) USBO assumed the aggregate costs attributable to tax accounting and reporting to be $150,000. This estimate is based on the experience of the General Partner in its management of similar funds. The number in the break-even table assumes USBO has $30 million in assets.
(7) For purposes of this breakeven analysis, we have assumed that USBO has $30 million in assets. If, however, only the initial creation basket is sold for proceeds of $5 million, the amount of trading income required for the redemption value at the end of one year to equal the initial selling price of one unit would be $1.91 or 3.82% of the initial selling price per unit.

7


 
 

TABLE OF CONTENTS

THE OFFERING

Offering:    
    USBO will be offering Creation Baskets consisting of 100,000 units through ALPS Distributors, Inc. (“Marketing Agent”) as marketing agent to Authorized Purchasers. The initial Authorized Purchaser will purchase one or more initial Creation Baskets of 100,000 units at an initial offering price per unit equal to $50.00. The initial Authorized Purchaser intends to offer the units of the initial Creation Basket(s) publicly. The effective date will be the date on which the SEC declares the registration statement relating to this prospectus effective and is expected to be the date of the sale of the initial Creation Basket(s). However, the proceeds are not expected to be invested until the order for the first Creation Basket has settled and cash is received from the initial Authorized Purchaser. The units are expected to begin trading on the day following the purchase of the initial Creation Basket(s) by the initial Authorized Purchaser.
Use of Proceeds:    
    The General Partner will apply substantially all of USBO’s assets toward trading positions in Futures Contracts and other Crude Oil-Related Investments and investing in Treasuries, cash and/or cash equivalents. The General Partner expects to deposit a portion of USBO’s net assets with the futures commission merchant, UBS Securities LLC, or other custodian to be used to meet its current or potential margin or collateral requirements in connection with its investment in Futures Contracts or Other Crude Oil-Related Investments. USBO will use only Treasuries, cash and/or cash equivalents to satisfy these requirements. The General Partner expects that all entities that will hold or trade USBO’s assets will be based in the United States and will be subject to United States regulations. The General Partner believes that 10% to 20% of USBO’s assets will normally be committed as margin for its positions in Futures Contracts. However, from time to time, the percentage of assets committed as margin may be substantially more, or less, than such range. The remaining portion of USBO’s assets, of which the General Partner expects to be the vast majority, will be held in Treasuries, cash and/or cash equivalents by its custodian, Brown Brothers Harriman & Co. (“Custodian”), or posted as collateral to support USBO’s investments in Crude Oil Interests. All interest income earned on these investments will be retained for USBO’s benefit.
NYSE Arca Symbol:    
    “BNO”
Creation and Redemption:    
    Authorized Purchasers will pay a $1,000 fee for each order to create or redeem one or more Creation Baskets or Redemption Baskets. Authorized Purchasers will not be required to sell any specific number or dollar amount of units. The per unit price of units offered in Creation Baskets on any day after the effective date of the registration statement relating to this prospectus will be the total NAV of USBO calculated shortly after the close of the core trading session on the NYSE Arca on that day divided by the number of issued and outstanding units.

8


 
 

TABLE OF CONTENTS

Withdrawal:    
    As discussed in the LP Agreement, if the General Partner gives at least fifteen (15) days’ written notice to a limited partner, then the General Partner may for any reason, in its sole discretion, require any such limited partner to withdraw entirely from the partnership or to withdraw a portion of its partner capital account. If the General Partner does not give at least fifteen (15) days’ written notice to a limited partner, then it may only require withdrawal of all or any portion of the capital account of any limited partner in the following circumstances: (i) the unitholder made a misrepresentation to the General Partner in connection with its purchase of units; or (ii) the limited partner’s ownership of units would result in the violation of any law or regulation applicable to the partnership or a partner.
Registration Clearance and Settlement:    
    Individual certificates will not be issued for the units. Instead, units will be represented by one or more global certificates, which will be deposited by the Custodian with the Depository Trust Company (“DTC”) and registered in the name of Cede & Co., as nominee for DTC. The global certificates evidence all of the units outstanding at any time. Unitholders are limited to (1) participants in DTC such as banks, brokers, dealers and trust companies (“DTC Participants”), (2) those who maintain, either directly or indirectly, a custodial relationship with a DTC Participant (“Indirect Participants”), and (3) those banks, brokers, dealers, trust companies and others who hold interests in the units through DTC Participants or Indirect Participants, in each case who satisfy the requirements for transfers of units. DTC Participants acting on behalf of investors holding units through such participants’ accounts in DTC will follow the delivery practice applicable to securities eligible for DTC’s Same-Day Funds Settlement System. Units will be credited to DTC Participants’ securities accounts following confirmation of receipt of payment.
    The administrator, Brown Brothers Harriman & Co. (“Administrator”), has been appointed registrar and transfer agent for the purpose of registering and transferring units. The General Partner will recognize transfer of units only if such transfer is done in accordance with the LP Agreement, including the delivery of a transfer application.
Net Asset Value:    
    The NAV is calculated by taking the current market value of USBO’s total assets and subtracting any liabilities. Under USBO’s current operational procedures, the Administrator calculates the NAV of USBO’s units 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 of the NYSE Arca typically closes at 4:00 p.m. New York time. The Administrator will use the ICE Futures Exchange settlement price (a weighted average price of trades during a three minute settlement period from 2:27 p.m. New York time) for the contracts held on the ICE Futures Exchange, but will calculate or determine the value of all other USBO

9


 
 

TABLE OF CONTENTS

    investments as of the earlier of the close of the NYSE Arca or 4:00 p.m. New York time.
    The NYSE Arca currently calculates an approximate net asset value every 15 seconds throughout each day USBO’s units are traded on the NYSE Arca for as long as the ICE Futures Exchange’s main pricing mechanism is open.
Fund Expenses:    
    USBO will pay the General Partner a management fee of 0.75% of NAV on its average net assets. Brokerage fees for Treasuries, Futures Contracts, and Other Crude Oil-Related Investments are estimated to be 0.14% and will be paid to unaffiliated brokers. USBO also pays any licensing fees for the use of intellectual property. Registration fees paid to the SEC, the Financial Industry Regulatory Authority (“FINRA”), or other regulatory agency in connection with the initial offers and sales of the units and the legal, printing, accounting and other expenses associated with such registrations will be paid by the General Partner, but the fees and expenses associated with subsequent SEC registrations of units will be borne by USBO. USBO also is responsible for the fees and expenses, which may include directors and officers liability insurance, of the independent directors of the General Partner in connection with their activities with respect to USBO. These director fees and expenses may be shared with other funds managed by the General Partner. These fees and expenses equaled $433,046 for 2009, though this amount may change in future years. The General Partner, and not USBO, is responsible for payment of the fees of USBO’s Marketing Agent, Administrator and Custodian. USBO and/or the General Partner may be required to indemnify the Marketing Agent, Administrator or Custodian under certain circumstances. USBO also pays the fees and expenses associated with its tax accounting and reporting requirements with the exception of certain initial implementation services fees and base services fees which will be paid by the General Partner. The General Partner paid approximately $575,000 on behalf of the Related Public Funds in 2009.
Termination Events:    
    USBO shall continue in effect from the date of its formation in perpetuity, unless sooner terminated upon the occurrence of any one or more of the following events: the death, adjudication of incompetence, bankruptcy, dissolution, withdrawal, or removal of a General Partner who is the sole remaining General Partner, unless a majority in interest of limited partners within ninety (90) days after such event elects to continue the partnership and appoints a successor general partner or the affirmative vote of a majority in interest of the limited partners subject to certain conditions. Upon termination of the partnership, the affairs of the partnership shall be wound up and all of its debts and liabilities discharged or otherwise provided for in the order of priority as provided by law. The fair market value of the remaining assets of the partnership shall then be determined by the General Partner. Thereupon, the assets of the partnership shall be distributed pro rata to the partners in accordance with their units.

10


 
 

TABLE OF CONTENTS

Authorized Purchasers:    
    We expect the initial Authorized Purchaser to be Merrill Lynch Professional Clearing Corp. We expect subsequent Authorized Purchasers to purchase or redeem Creation Baskets or Redemption Baskets, respectively, from or to USBO. A list of Authorized Purchasers will be available from the Marketing Agent. Authorized Purchasers must be (1) registered broker-dealers or other securities market participants, such as banks and other financial institutions, that are not required to register as broker-dealers to engage in securities transactions, and (2) DTC Participants. To become an Authorized Purchaser, a person must enter into an Authorized Purchaser Agreement with the General Partner.

11


 
 

TABLE OF CONTENTS

WHAT ARE THE RISK FACTORS INVOLVED WITH AN INVESTMENT IN USBO?

You should consider carefully the risks described below before making an investment decision. You should also refer to the other information included in this prospectus, including USBO’s financial statements and the related notes.

Risks Associated with Investing Directly or Indirectly in Crude Oil

Investing in Crude Oil Interests subjects USBO to the risks of the crude oil industry and this could result in large fluctuations in the price of USBO’s units.

USBO is subject to the risks and hazards of the crude oil industry because it intends to invest in Crude Oil Interests. The risks and hazards that are inherent in the crude oil industry may cause the price of crude oil to widely fluctuate. If USBO’s units accurately track the percentage changes in the terms of the Benchmark Futures Contract or the spot price of Brent crude oil, then the price of its units may also fluctuate. The exploration and production of crude oil are uncertain processes with many risks. The cost of drilling, completing and operating wells for crude oil is often uncertain, and a number of factors can delay or prevent drilling operations or production of crude oil, including:

unexpected drilling conditions;
pressure or irregularities in formations;
equipment failures or repairs;
fires or other accidents;
adverse weather conditions;
pipeline ruptures, spills or other supply disruptions; and
shortages or delays in the availability of drilling rigs and the delivery of equipment.

Crude oil transmission, distribution, gathering, and processing activities involve numerous risks that may affect the price of crude oil.

There are a variety of hazards inherent in crude oil transmission, distribution, gathering, and processing, such as leaks, explosions, pollution, release of toxic substances, adverse weather conditions (such as hurricanes and flooding), pipeline failure, abnormal pressures, uncontrollable flows of crude oil, scheduled and unscheduled maintenance, physical damage to the gathering or transportation system, and other hazards which could affect the price of crude oil. To the extent these hazards limit the supply or delivery of crude oil, crude oil prices will increase.

Changes in the political climate could have negative consequences for crude oil prices.

Tensions with Iran, the world’s fourth largest oil exporter, could put oil exports in jeopardy. Other global concerns include civil unrest and sabotage affecting the flow of oil from Nigeria, a large oil exporter. Meanwhile, friction continues between the governments of the United States and Venezuela, a major exporter of oil to the United States. Additionally, a series of production cuts by members of the Organization of Oil Exporting Countries (“OPEC”) followed by a refusal to subsequently increase oil production have tightened world oil markets.

Fluctuations in the reserve capacity of crude oil could impact future prices.

In the past, a supply disruption in one area of the world was softened by the ability of major oil-producing nations such as Saudi Arabia to increase output to make up the difference. In recent years much of that reserve capacity has been absorbed by increased demand. The current global economic downturn, however, has led to a decrease in the demand for oil that is expected to last through the end of 2009 and a corresponding increase in reserve capacities. According to the United States Government’s Energy Information Administration, global oil demand is expected to fall by almost 1.8 million barrels a day in 2009, compared with largely unchanged demand in 2008. Global demand for oil is expected to rise by 0.7 million barrels a

12


 
 

TABLE OF CONTENTS

day in 2010. Consumption of oil products continues to increase in certain parts of the world, especially in rapidly growing countries such as India and China, which is now the world’s second-largest energy user. The volatility of demand in the oil market makes it difficult to predict the availability of reserve capacities.

The price of USBO’s units may be influenced by factors such as the short-term supply and demand for crude oil and the short-term supply and demand for USBO’s units. This may cause the units to trade at a price that is above or below USBO’s NAV per unit. Accordingly, changes in the price of units may substantially vary from the changes in the price of crude oil. If this variation occurs, then you may not be able to effectively use USBO as a way to hedge against crude oil-related losses or as a way to indirectly invest in crude oil.

While it is expected that the trading prices of the units will fluctuate in accordance with the changes in USBO’s NAV, the prices of units may also be influenced by other factors, including the short-term supply and demand for crude oil and the units. There is no guarantee that the units will not trade at appreciable discounts from, and/or premiums to, USBO’s NAV. This could cause the changes in the price of the units to substantially vary from the changes in the price of Brent crude oil. This may be harmful to you because if changes in the price of the units vary substantially from the changes in the Benchmark Futures Contract or the spot price of Brent crude oil, then you may not be able to effectively use USBO as a way to hedge the risk of losses in your crude oil-related transactions or as a way to indirectly invest in crude oil.

Changes in USBO’s NAV may not correlate with changes in the price of the Benchmark Futures Contract. If this were to occur, you may not be able to effectively use USBO as a way to hedge against crude oil-related losses or as a way to indirectly invest in crude oil.

The General Partner will endeavor to invest USBO’s assets as fully as possible in Futures Contracts and Other Crude Oil-Related Investments so that changes in percentage terms in the NAV will closely correlate with changes in percentage terms in the price of the Benchmark Futures Contract. However, changes in USBO’s NAV may not correlate with changes in the price of the Benchmark Futures Contract for several reasons as set forth below:

USBO (i) may not be able to sell/buy the exact amount of positions in Futures Contracts and Other Crude Oil-Related Investments to have a perfect correlation with NAV; (ii) may not always be able to buy and sell Futures Contracts or Other Crude Oil-Related Investments at the market price; (iii) may not experience a perfect correlation between the Benchmark Futures Contract and the underlying investments in Futures Contracts, Other Crude Oil-Related Investments and Treasuries, cash and cash equivalents; and (iv) is required to pay brokerage fees and the management fee, which will have an effect on the correlation.
Short-term supply and demand for crude oil may cause the changes in the market price of the Benchmark Futures Contract to vary from changes in USBO’s NAV if USBO has fully invested in positions in Futures Contracts that do not reflect such supply and demand and it is unable to replace such contracts with Futures Contracts that do reflect such supply and demand. In addition, there are also technical differences between the two markets, e.g., one is a physical market while the other is a futures market traded on exchanges, that may cause variations between the spot price of Brent crude oil and the prices of related futures contracts.
USBO plans to sell and buy only as many positions in Futures Contracts and Other Crude Oil-Related Investments that it can to get the changes in percentage terms of the NAV as close as possible to the changes in percentage terms in the price of the Benchmark Futures Contract. The remainder of its assets will be invested in Treasuries, cash and/or cash equivalents and will be used to satisfy initial margin and additional margin requirements, if any, and to otherwise support its investments in positions in Crude Oil Interests. Investments in Treasuries, cash and/or cash equivalents, both directly and as margin, will provide rates of return that will vary from changes in the value of the spot price of Brent crude oil and the price of the Benchmark Futures Contract.
In addition, because USBO will incur certain expenses in connection with its investment activities, and will hold most of its assets in cash and/or more liquid short-term securities for margin and other liquidity purposes and for redemptions that may be necessary on an ongoing basis, the General

13


 
 

TABLE OF CONTENTS

Partner will not be able to fully invest USBO’s assets in Futures Contracts or Other Crude Oil-Related Investments and there cannot be perfect correlation between changes in USBO’s NAV and changes in the price of the Benchmark Futures Contract.
As USBO grows, there may be more or less correlation. For example, if USBO only has enough money to buy positions in three Benchmark Futures Contracts and it needs to invest in four contracts to track the price of Brent crude oil then the correlation will be lower, but if it takes positions in 20,000 Benchmark Futures Contracts and it needs to invest in 20,001 contracts then the correlation will be higher. At certain asset levels, USBO may be limited in its ability to sell or purchase positions in the Benchmark Futures Contract or other Futures Contracts due to accountability levels imposed by the relevant exchanges. To the extent that USBO takes positions in these other Futures Contracts or Other Crude Oil-Related Investments, the correlation with the Benchmark Futures Contract may be lower. If USBO is required to invest in other Futures Contracts and Other Crude Oil-Related Investments that are less correlated with the Benchmark Futures Contract, USBO would likely invest in over-the-counter contracts to increase the level of correlation of USBO’s assets. Over-the-counter contracts entail certain risks described below under “Over-the-Counter Contract Risk.”
USBO may not be able to sell or buy the exact number of positions in Futures Contracts and Other Crude Oil-Related Investments to have a perfect correlation with the Benchmark Futures Contract if the purchase price of the positions in Futures Contracts required to be fully invested in such contracts is higher than the proceeds received for the sale of a Creation Basket on the day the basket was sold. In such case, USBO could not invest the entire proceeds from the purchase of the Creation Basket in such positions (for example, assume USBO receives $5,000,000 for the sale of a Creation Basket and assume that the value of the position in a Futures Contract for crude oil is $49,410 based on a price of $49.41 per barrel, then USBO could only invest in only 101 positions in such Futures Contracts with an aggregate value of $4,990,410), USBO would be required to invest a percentage of the proceeds in cash, Treasuries or other liquid securities to be deposited as margin with the futures commission merchant through which the contract was purchased. The remainder of the purchase price for the Creation Basket would remain invested in Treasuries, cash and/or cash equivalents or other liquid securities as determined by the General Partner from time to time based on factors such as potential calls for margin or anticipated redemptions. If the trading market for Futures Contracts is suspended or closed, USBO may not be able to sell or purchase these investments at the last reported price for such investments.

If changes in USBO’s NAV do not correlate with changes in the price of the Benchmark Futures Contract, then investing in USBO may not be an effective way to hedge against crude oil-related losses or indirectly invest in crude oil.

The Benchmark Futures Contract may not correlate with the spot price of Brent crude oil and this could cause the changes in the price of units to substantially vary from the changes in the spot price of Brent crude oil. If this were to occur, then you may not be able to effectively use USBO as a way to hedge against crude oil-related losses or as a way to indirectly invest in crude oil.

When using the Benchmark Futures Contract as a strategy to track the spot price of Brent crude oil, at best the correlation between changes in prices of such Crude Oil Interests and the spot price of Brent crude oil can be only approximate. The degree of imperfection of correlation depends upon circumstances such as variations in the speculative Brent crude oil market, supply of and demand for such Crude Oil Interests and technical influences in futures trading. If there is a weak correlation between the Crude Oil Interests and the spot price of Brent crude oil, then the price of units may not accurately track the price movements of Brent crude oil and you may not be able to effectively use USBO as a way to hedge the risk of losses in your crude oil-related transactions or as a way to indirectly invest in crude oil.

USBO may experience a loss if it is required to sell Treasuries at a price lower than the price at which they were acquired.

The value of Treasuries generally moves inversely with movements in interest rates. If USBO is required to sell Treasuries at a price lower than the price at which they were acquired, USBO will experience a loss.

14


 
 

TABLE OF CONTENTS

This loss may adversely impact the price of the units and may decrease the correlation between the price of the units, the price of USBO’s positions in Futures Contracts and Other Crude Oil-Related Investments, and the spot price of Brent crude oil.

Certain of USBO’s investments could be illiquid which could cause large losses to investors at any time or from time to time.

USBO may not always be able to liquidate its positions in its investments at the desired price. It is difficult to execute a trade at a specific price when there is a relatively small volume of buy and sell orders in a market. A market disruption, such as a foreign government taking political actions that disrupt the market in its currency, its crude oil production or exports, or in another major export, can also make it difficult to liquidate a position. Alternatively, limits imposed by futures exchanges or other regulatory organizations, such as accountability levels, position limits and price fluctuation limits, may contribute to a lack of liquidity with respect to some Crude Oil Interests.

Unexpected market illiquidity may cause major losses to investors at any time or from time to time. In addition, USBO does not intend at this time to establish a credit facility, which would provide an additional source of liquidity, but instead will rely only on the Treasuries, cash and/or cash equivalents that it holds. The anticipated large value of the positions in Futures Contracts that the General Partner will acquire or enter into for USBO increases the risk of illiquidity. Other Crude Oil-Related Investments that USBO invests in, such as negotiated over-the-counter contracts, may have a greater likelihood of being illiquid since they are contracts between two parties that take into account not only market risk, but also the relative credit, tax, and settlement risks under such contracts. Such contracts also have limited transferability that results from such risks and from the contract’s express limitations. Because both Futures Contracts and Other Crude Oil-Related Investments may be illiquid, USBO’s Crude Oil Interests may be more difficult to liquidate at favorable prices in periods of illiquid markets and losses may be incurred during the period in which positions are being liquidated.

If the nature of hedgers and speculators in futures markets has shifted such that crude oil purchasers are the predominant hedgers in the market, USBO might have to reinvest at higher futures prices or choose Other Crude Oil-Related Investments.

The changing nature of the hedgers and speculators in the crude oil market will influence whether futures prices are above or below the expected future spot price. In order to induce speculators to take the corresponding long side of the same futures contract, crude oil producers must generally be willing to sell futures contracts at prices that are below expected future spot prices. Conversely, if the predominant hedgers in the futures market are the purchasers of the crude oil who purchase futures contracts to hedge against a rise in prices, then speculators will only take the short side of the futures contract if the futures price is greater than the expected future spot price of crude oil. This can have significant implications for USBO when it is time to reinvest the proceeds from a maturing Futures Contract into a new Futures Contract.

While USBO does not intend to make physical delivery of crude oil under its Futures Contracts, physical delivery under such contracts impacts the value of the contracts.

While it is not the current intention of USBO to make physical delivery of crude oil under its Futures Contracts, futures contracts are not required to be cash-settled and it is possible to take delivery under these contracts. Storage costs associated with purchasing crude oil could result in costs and other liabilities that could impact the value of Futures Contracts or Other Crude Oil-Related Investments. Storage costs include the time value of money invested in crude oil as a physical commodity plus the actual costs of storing the crude oil less any benefits from ownership of crude oil that are not obtained by the holder of a futures contract. In general, Futures Contracts have a one-month delay for contract delivery and the back month (the back month is any future delivery month other than the spot month) includes storage costs. To the extent that these storage costs change for crude oil while USBO holds Futures Contracts or Other Crude Oil-Related Investments, the value of the Futures Contracts or Other Crude Oil-Related Investments, and therefore USBO’s NAV, may change as well.

15


 
 

TABLE OF CONTENTS

The price relationship between the near month contract and the next month contract to expire that compose the Benchmark Futures Contract will vary and may impact both the total return over time of USBO’s NAV, as well as the degree to which its total return tracks other crude oil price indices’ total returns.

The Benchmark Futures Contract is the near month contract to expire until the near month contract is within two weeks of expiration, when it is sold and near month contract is replaced with the next month contract to expire. In the event of a crude oil futures market where near month contracts trade at a higher price than next month contracts to expire, a situation described as “backwardation” in the futures market, then absent the impact of the overall movement in crude oil prices the value of the Benchmark Futures Contract would tend to rise as it approaches expiration. As a result positions in the Benchmark Futures Contract would tend to track higher. Conversely, in the event of a crude oil futures market where near month contracts trade at a lower price than next month contracts to expire, a situation described as “contango” in the futures market, then absent the impact of the overall movement in crude oil prices the value of the Benchmark Futures Contract would tend to decline as it approaches expiration. As a result positions in the Benchmark Futures Contract would tend to track lower. When compared to total return of other price indices, such as the spot price of crude oil, the impact of backwardation and contango may lead the total return of USBO’s NAV to vary significantly. In the event of a prolonged period of contango, and absent the impact of rising or falling crude oil prices, this could have a significant negative impact on USBO’s NAV and total return.

Regulation of the commodity interests and energy markets is extensive and constantly changing; future regulatory developments are impossible to predict but may significantly and adversely affect USBO.

The futures markets are subject to comprehensive statutes, regulations, and margin requirements. In addition, the FSA, the CFTC and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including, for example, the retroactive implementation of speculative position limits or higher margin requirements, the establishment of daily price limits and the suspension of trading. The regulation of futures transactions in the United Kingdom and the United States is a rapidly changing area of law and is subject to modification by government and judicial action.

The regulation of commodity interest transactions in the United Kingdom and the United States is a rapidly changing area of law and is subject to ongoing modification by governmental and judicial action. Considerable regulatory attention has been focused on non-traditional investment pools which are publicly distributed in the United States. There is a possibility of future regulatory changes altering, perhaps to a material extent, the nature of an investment in USBO or the ability of USBO to continue to implement its investment strategy. In addition, various national governments have expressed concern regarding the disruptive effects of speculative trading in the energy markets and the need to regulate the derivatives markets in general. The effect of any future regulatory change on USBO is impossible to predict, but could be substantial and adverse.

In the wake of the economic crisis last year, the Administration, federal regulators and Congress are revisiting the regulation of the financial sector, including securities and commodities markets. These efforts are likely to result in significant changes in the regulation of these markets.

Currently, a number of proposals that would alter the regulation of Crude Oil Interests are being considered by federal regulators and Congress. These proposals include the imposition of fixed position limits on energy-based commodity futures contracts, extension of position and accountability limits to futures contract on non-U.S. exchanges previously exempt from such limits, and the forced use of clearinghouse mechanisms for all over-the-counter transactions. Certain proposals would aggregate and limit all positions in energy futures held by a single entity, whether such positions exist on U.S. futures exchange, non-U.S. futures exchanges, or in over-the-counter contracts. While it cannot be predicted at this time what reforms will eventually be made or how they will impact USBO, if any of the aforementioned proposals are implemented, USBO’s ability to meet its investment objective may be negatively impacted and investors could be adversely affected.

On January 26, 2010, the CFTC published a proposed rule that, if implemented, would set fixed position limits on certain energy Futures Contracts, including the NYMEX Light Sweet crude oil futures contract, NYMEX New York Harbor No. 2 heating oil futures contract, NYMEX RBOB gasoline futures contract and

16


 
 

TABLE OF CONTENTS

NYMEX Henry Hub natural gas futures contract, along with any contract based upon these contracts. The proposed position limits would be set as a percentage of the open interest in these contracts for the spot month, any single month, and all months combined. Additionally, the proposed rule would aggregate positions in the enumerated contracts and those based upon such contracts, including contracts listed on separate exchanges. This proposal is currently undergoing a 90-day public comment period. Although this proposed rule as currently drafted does not impose limits on the Benchmark Futures Contract, we cannot predict whether future actions by the CFTC will extend to the Benchmark Futures Contract. Any CFTC actions in the future to extend position limits to the Benchmark Future Contract could negatively impact USBO’s ability to meet its investment objective and investors could be adversely affected.

If you are investing in USBO for purposes of hedging, you might be subject to several risks including the possibility of losing the benefit of favorable market movement.

Participants in the crude oil or in other industries may use USBO as a vehicle to hedge the risk of losses in their crude oil-related transactions. There are several risks in connection with using USBO as a hedging device. While hedging can provide protection against an adverse movement in market prices, it can also preclude a hedger’s opportunity to benefit from a favorable market movement. In a hedging transaction using USBO units, the hedger may be concerned that the hedged item will increase in price, but must recognize the risk that the price may instead decrease and if this happens he will have lost his opportunity to profit from the change in price because the hedging transaction will result in a loss rather than a gain. Thus, the hedger foregoes the opportunity to profit from favorable price movements.

In addition, if the hedge is not a perfect one, the hedger can lose on the hedging transaction and not realize an offsetting gain in the value of the underlying item being hedged.

When using futures contracts as a hedging technique, at best, the correlation between changes in prices of futures contracts and of the items being hedged can be only approximate. The degree of imperfection of correlation depends upon circumstances such as: variations in speculative markets, demand for futures and for crude oil products, technical influences in futures trading, and differences between anticipated energy costs being hedged and the instruments underlying the standard futures contracts available for trading. Even a well-conceived hedge may be unsuccessful to some degree because of unexpected market behavior as well as the expenses associated with creating the hedge.

In addition, using an investment in USBO as a hedge for changes in energy costs (e.g., investing in heating oil, crude oil, gasoline, natural gas, or other fuels, or electricity) may not correlate because changes in the spot price of crude oil may vary from changes in energy costs because the spot price may not be at the same rate as changes in the price of other energy products and, in any case, the price of crude oil does not reflect the refining, transportation, and other costs that may impact the hedger’s energy costs.

An investment in USBO may provide you little or no diversification benefits. Thus, in a declining market, USBO may have no gains to offset your losses from other investments, and you may suffer losses on your investment in USBO at the same time you incur losses with respect to other asset classes.

Historically, Futures Contracts and Other Crude Oil-Related Investments have generally been non-correlated to the performance of other asset classes such as stocks and bonds. Non-correlation means that there is a low statistically valid relationship between the performance of futures and other commodity interest transactions, on the one hand, and stocks or bonds, on the other hand. However, there can be no assurance that such non-correlation will continue during future periods. If, contrary to historic patterns, USBO’s performance were to move in the same general direction as the financial markets, you will obtain little or no diversification benefits from an investment in the units. In such a case, USBO may have no gains to offset your losses from other investments, and you may suffer losses on your investment in USBO at the same time you incur losses with respect to other investments.

Variables such as drought, floods, weather, embargoes, tariffs and other political events may have a larger impact on crude oil prices and crude oil-linked instruments, including Futures Contracts and Other Crude Oil-Related Investments, than on traditional securities. These additional variables may create additional investment risks that subject USBO’s investments to greater volatility than investments in traditional securities.

17


 
 

TABLE OF CONTENTS

Non-correlation should not be confused with negative correlation, where the performance of two asset classes would be opposite of each other. There is no historic evidence that the spot price of crude oil and prices of other financial assets, such as stocks and bonds, are negatively correlated. In the absence of negative correlation, USBO cannot be expected to be automatically profitable during unfavorable periods for the stock market, or vice versa.

USBO’s Operating Risks

USBO is not a registered investment company so you do not have the protections of the Investment Company Act of 1940.

USBO is not an investment company subject to the Investment Company Act of 1940. Accordingly, you do not have the protections afforded by that statute which, for example, requires investment companies to have a majority of disinterested directors and regulates the relationship between the investment company and its investment manager.

USBO has no operating history so there is no performance history to serve as a basis for you to evaluate an investment in USBO.

USBO is new and has no operating history. Therefore, you do not have the benefit of reviewing the past performance of USBO as a basis to evaluate an investment in USBO. The General Partner’s current experience involves managing USOF, an exchange traded security that invests primarily in Futures Contracts for light, sweet crude oil, Treasuries, cash and/or cash equivalents; USNG, an exchange traded security that invests primarily in Futures Contracts for natural gas, Treasuries, cash and/or cash equivalents; US12OF, an exchange traded security that invests primarily in Futures Contracts for light, sweet crude oil, Treasuries, cash and/or cash equivalents; UGA, an exchange traded security that invests primarily in Futures Contracts for gasoline, Treasuries, cash and/or cash equivalents; USHO, an exchange traded security that invests primarily in Futures Contracts for heating oil, Treasuries, cash and/or cash equivalents; USSO, an exchange traded security that invests primarily in short positions in Futures Contracts for crude oil, Treasuries, cash and/or cash equivalents; and US12NG, an exchange traded security that invests primarily in Futures Contracts for natural gas, Treasuries, cash and/or cash equivalents. However, there are significant differences between operating funds which attempt to track the returns of US-based crude oil, natural gas, gasoline or heating oil and operating a fund that is attempting to track the crude oil futures market based in the United Kingdom. The General Partner’s results with the crude oil, natural gas, gasoline and heating oil funds may not be representative of results that may be experienced with an fund investing in non-U.S. crude oil futures.

The General Partner is leanly staffed and relies heavily on key personnel to manage trading activities.

In managing and directing the day-to-day activities and affairs of USBO, the General Partner relies heavily on Messrs. Howard Mah and John Hyland. If Messrs. Mah or Hyland were to leave or be unable to carry out their present responsibilities, it may have an adverse effect on the management of USBO. Furthermore, Messrs. Mah and Hyland are currently involved in the management of the Related Public Funds, and the General Partner has filed a registration statement for one other exchange traded security fund, USCI. Mr. Mah is also employed by Ameristock Corporation, a registered investment adviser that manages a public mutual fund. It is estimated that Mr. Mah will spend approximately 90% of his time on USBO and Related Public Fund matters. Mr. Hyland will spend approximately 85% of his time on USBO and Related Public Fund matters. To the extent that the General Partner establishes additional funds, even greater demands will be placed on Messrs. Mah and Hyland, as well as the other officers of the General Partner and its Board of Directors.

Accountability levels, position limits, and daily price fluctuation limits set by the exchanges have the potential to cause a tracking error, which could cause the price of units to substantially vary from the price of the Benchmark Futures Contract and prevent you from being able to effectively use USBO as a way to hedge against crude oil-related losses or as a way to indirectly invest in crude oil.

The Benchmark Futures Contract is currently traded on the ICE Futures Exchange without specific accountability levels or position limits. However, the ICE Futures Exchange’s daily position management regime requires that any position greater than 500 contracts in the nearest two months to expire must be

18


 
 

TABLE OF CONTENTS

reported to the ICE Futures Exchange on a daily basis. The ICE Futures Exchange has powers to prevent the development of excessive positions or unwarranted speculation or any other undesirable situation and may take any steps necessary to resolve such situations including the ability to mandate limitations on the size of such positions or to reduce positions where appropriate. Although the Benchmark Futures Contract is not subject to the more stringent accountability levels and position limits established by U.S. designated contract markets (discussed below), recent actions by the ICE Futures Exchange indicate that the exchange is actively using its oversight authority to regulate positions in its contracts.

U.S. designated contract markets such as the NYMEX have established accountability levels and position limits on the maximum net long or net short futures contracts in commodity interests that any person or group of persons under common trading control (other than as a hedge, which an investment by USBO is not) may hold, own or control. For example, the current accountability level for investments at any one time in light, sweet crude oil Futures Contracts is 20,000. While this is not a fixed ceiling, it is a threshold above which the NYMEX may exercise greater scrutiny and control over an investor, including limiting an investor to holding no more than 20,000 light, sweet crude oil Futures Contracts. With regard to position limits, the NYMEX limits an investor from holding more than 3,000 net futures in the last 3 days of trading in the near month contract to expire.

In addition to accountability levels and position limits, the NYMEX also sets daily price fluctuation limits on futures contracts. The daily price fluctuation limit establishes the maximum amount that the price of futures contracts may vary either up or down from the previous day’s settlement price. Once the daily price fluctuation limit has been reached in a particular Futures Contract, no trades may be made at a price beyond that limit.

For example, the NYMEX imposes a $10.00 per barrel ($10,000 per contract) price fluctuation limit for light, sweet crude oil Futures Contracts. This limit is initially based off of the previous NYMEX trading day’s settlement price. If any light, sweet crude oil Futures Contract is traded, bid, or offered at the limit for five minutes, trading is halted for five minutes. When trading resumes it begins at the point where the limit was imposed and the limit is reset to be $10.00 per barrel in either direction of that point. If another halt were triggered, the market would continue to be expanded by $10.00 per barrel in either direction after each successive five-minute trading halt. There is no maximum price fluctuation limit during any one trading session.

U.S. futures exchanges, including the NYMEX, currently do not implement fixed position limits for Futures Contracts held outside of the last few days of trading in the near month contract to expire. However, on January 26, 2010, the CFTC published a proposed rule that, if implemented, would set fixed position limits on energy Futures Contracts, including the NYMEX Light Sweet crude oil futures contract, NYMEX New York Harbor No. 2 heating oil futures contract, NYMEX RBOB gasoline futures contract and NYMEX Henry Hub natural gas futures contract, along with any contract based upon these contracts. The proposed position limits would be set as a percentage of the open interest in these contracts for the spot month, any single month, and all months combined. Additionally, the proposed rule would aggregate positions in the enumerated contracts and those based upon such contracts, including contracts listed on separate exchanges. This proposal is currently undergoing a 90-day public comment period. Although this proposed rule as currently drafted does not impose limits on the Benchmark Futures Contract, we cannot predict whether future actions by the CFTC will extend to the Benchmark Futures Contract. Any CFTC actions in the future to extend position limits to the Benchmark Future Contract could negatively impact USBO’s ability to meet its investment objective and investors could be adversely affected.

All of these limits may potentially cause a tracking error between the price of the units and the price of the Benchmark Futures Contract. This may in turn prevent you from being able to effectively use USBO as a way to hedge against crude oil-related losses or as a way to indirectly invest in crude oil.

USBO is not limiting the size of the offering and is committed to utilizing substantially all of its proceeds to purchase Futures Contracts and Other Crude Oil-Related Investments. If USBO is required to limit or reduce the size of its positions in Brent crude oil contracts on the ICE Futures Exchange, it may then, if permitted under applicable regulatory requirements, purchase Futures Contracts on the NYMEX or other

19


 
 

TABLE OF CONTENTS

exchanges that trade listed crude oil futures. The Futures Contracts available on the NYMEX are comparable to the contracts on the ICE Futures Exchange, but they may have different underlying commodities, sizes, deliveries, and prices.

There are technical and fundamental risks inherent in the trading system the General Partner intends to employ.

The General Partner’s trading system is quantitative in nature and it is possible that the General Partner might make a mathematical error. In addition, it is also possible that a computer or software program may malfunction and cause an error in computation.

To the extent that the General Partner uses spreads and straddles as part of its trading strategy, there is the risk that the NAV may not closely track the changes in the Benchmark Futures Contract.

Spreads combine simultaneous long and short positions in related futures contracts that differ by commodity (e.g., long crude oil and short gasoline), by market (long crude oil futures, short Brent crude oil futures), or by delivery month (long December, short November). Spreads gain or lose value as a result of relative changes in price between the long and short positions. Spreads often reduce risk to investors, because the contracts tend to move up or down together. However, both legs of the spread could move against an investor simultaneously, in which case the spread would lose value. Certain types of spreads may face unlimited risk because the short contract can increase by an unlimited amount and the investor would have to take delivery or offset at any price.

A commodity straddle takes both long and short option positions in the same commodity in the same market and delivery month simultaneously. The buyer of a straddle profits if either the long or the short leg of the straddle moves further than the combined cost of both options. The seller of a straddle profits if both the long and short positions do not trade beyond a range equal to the combined premium for selling both options.

If the General Partner were to utilize a spread or straddle position and the spread performed differently than expected, the results could impact USBO’s tracking error. This could affect USBO’s investment objective of having its NAV closely track the changes in the Benchmark Futures Contract. Additionally, a loss on a spread position would negatively impact USBO’s absolute return.

USBO and the General Partner may have conflicts of interest, which may permit them to favor their own interests to your detriment.

USBO and the General Partner may have inherent conflicts to the extent the General Partner attempts to maintain USBO’s asset size in order to preserve its fee income and this may not always be consistent with USBO’s objective of having the value of its units’ NAV track changes in the price of the Benchmark Futures Contract. The General Partner’s officers, directors and employees do not devote their time exclusively to USBO. These persons are directors, officers or employees of other entities that may compete with USBO for their services. They could have a conflict between their responsibilities to USBO and to those other entities.

In addition, the General Partner’s principals, officers, directors or employees may trade futures and related contracts for their own account. A conflict of interest may exist if their trades are in the same markets and at the same time as USBO’s trades using the clearing broker to be used by USBO. A potential conflict also may occur if the General Partner’s principals, officers, directors or employees trade their accounts more aggressively or invest in their accounts which are opposite, or ahead of, the positions taken by USBO.

The General Partner has sole current authority to manage the investments and operations of USBO, and this may allow it to act in a way that furthers its own interests which may create a conflict with your best interests. Limited partners have limited voting control, which will limit the ability to influence matters such as amendment of the LP Agreement, change in USBO’s basic investment policy, dissolution of this fund, or the sale or distribution of USBO’s assets.

The General Partner serves as the general partner to the Related Public Funds, as well as USBO. The General Partner may have a conflict to the extent that its trading decisions for USBO may be influenced by the effect they would have on the other funds it manages. These trading decisions may be influenced since the General Partner also serves as the general partner for all of the funds and is required to meet all of the funds’

20


 
 

TABLE OF CONTENTS

investment objectives as well as USBO’s. If the General Partner believes that a trading decision it made on behalf of USBO might (i) impede its other funds from reaching their investment objectives, or (ii) improve the likelihood of meeting its other funds’ objectives, then the General Partner may choose to change its trading decision for USBO, which could either impede or improve the opportunity for USBO to meet its investment objective. In addition, the General Partner is required to indemnify the officers and directors of its other funds, if the need for indemnification arises. This potential indemnification will cause the General Partner’s assets to decrease. If the General Partner’s other sources of income are not sufficient to compensate for the indemnification, then the General Partner may terminate and you could lose your investment.

Unitholders may only vote on the removal of the General Partner and limited partners have only limited voting rights. Unitholders and limited partners will not participate in the management of USBO and do not control the General Partner so they will not have influence over basic matters that affect USBO.

Unitholders that have not applied to become limited partners have no voting rights, other than to remove the General Partner. Limited partners will have limited voting rights with respect to USBO’s affairs. Unitholders may remove the General Partner only if 66 2/3% of the unitholders elect to do so. Unitholders and limited partners will not be permitted to participate in the management or control of USBO or the conduct of its business. Unitholders and limited partners must therefore rely upon the duties and judgment of the General Partner to manage USBO’s affairs.

The General Partner may manage a large amount of assets and this could affect USBO’s ability to trade profitably.

Increases in assets under management may affect trading decisions. In general, the General Partner does not intend to limit the amount of assets of USBO that it may manage. The more assets the General Partner manages, the more difficult it may be for it to trade profitably because of the difficulty of trading larger positions without adversely affecting prices and performance and of managing risk associated with larger positions.

USBO could terminate at any time and cause the liquidation and potential loss of your investment and could upset the overall maturity and timing of your investment portfolio.

USBO may terminate at any time, regardless of whether USBO has incurred losses, subject to the terms of the LP Agreement. In particular, unforeseen circumstances, including the death, adjudication of incompetence, bankruptcy, dissolution, withdrawal, or removal of the General Partner could cause USBO to terminate unless a majority in interest of the limited partners within 90 days of the event elects to continue the partnership and appoints a successor general partner or the affirmative vote of a majority in interest of the limited partners subject to certain conditions. However, no level of losses will require the General Partner to terminate USBO. USBO’s termination would cause the liquidation and potential loss of your investment. Termination could also negatively affect the overall maturity and timing of your investment portfolio.

Limited partners may not have limited liability in certain circumstances, including potentially having liability for the return of wrongful distributions.

Under Delaware law, a limited partner might be held liable for our obligations as if it were a General Partner if the limited partner participates in the control of the partnership’s business and the persons who transact business with the partnership think the limited partner is the General Partner.

A limited partner will not be liable for assessments in addition to its initial capital investment in any of our capital securities representing limited partnership interests. However, a limited partner may be required to repay to us any amounts wrongfully returned or distributed to it under some circumstances. Under Delaware law, we may not make a distribution to limited partners if the distribution causes our liabilities (other than liabilities to partners on account of their partnership interests and nonrecourse liabilities) to exceed the fair value of our assets. Delaware law provides that a limited partner who receives such a distribution and knew at the time of the distribution that the distribution violated the law will be liable to the limited partnership for the amount of the distribution for three years from the date of the distribution.

21


 
 

TABLE OF CONTENTS

With adequate notice, a limited partner may be required to withdraw from the partnership for any reason.

If the General Partner gives at least fifteen (15) days’ written notice to a limited partner, then the General Partner may for any reason, in its sole discretion, require any such limited partner to withdraw entirely from the partnership or to withdraw a portion of its partner capital account. The General Partner may require withdrawal even in situations where the limited partner has complied completely with the provisions of the LP Agreement.

USBO’s existing units are, and any units USBO issues in the future will be, subject to restrictions on transfer. Failure to satisfy these requirements will preclude you from being able to have all the rights of a limited partner.

No transfer of any unit or interest therein may be made if such transfer would (a) violate the then applicable federal or state securities laws or rules and regulations of the SEC, any state securities commission, the CFTC or any other governmental authority with jurisdiction over such transfer, or (b) cause USBO to be taxable as a corporation or affect USBO’s existence or qualification as a limited partnership. In addition, investors may only become limited partners if they transfer their units to purchasers that meet certain conditions outlined in the LP Agreement, which provides that each record holder or limited partner or unitholder applying to become a limited partner (each a record holder) may be required by the General Partner to furnish certain information, including that holder’s nationality, citizenship or other related status. A transferee who is not a U.S. resident may not be eligible to become a record holder or a limited partner if its ownership would subject USBO to the risk of cancellation or forfeiture of any of its assets under any federal, state or local law or regulation. All purchasers of USBO’s units, who wish to become limited partners or record holders, and receive cash distributions, if any, or have certain other rights, must deliver an executed transfer application in which the purchaser or transferee must certify that, among other things, he, she or it agrees to be bound by USBO’s LP Agreement and is eligible to purchase USBO’s securities. Any transfer of units will not be recorded by the transfer agent or recognized by us unless a completed transfer application is delivered to the General Partner or the Administrator. A person purchasing USBO’s existing units, who does not execute a transfer application and certify that the purchaser is eligible to purchase those securities acquires no rights in those securities other than the right to resell those securities. Whether or not a transfer application is received or the consent of the General Partner obtained, our units will be securities and will be transferable according to the laws governing transfers of securities. See “Transfer of Units.”

USBO does not expect to make cash distributions.

The General Partner intends to re-invest any realized gains in Crude Oil Interests rather than distributing cash to limited partners. Therefore, unlike mutual funds, commodity pools or other investment pools that actively manage their investments in an attempt to realize income and gains from their investing activities and distribute such income and gains to their investors, USBO generally does not expect to distribute cash to limited partners. You should not invest in USBO if you will need cash distributions from USBO to pay taxes on your share of income and gains of USBO, if any, or for any other reason. Although USBO does not intend to make cash distributions, the income earned from its investments held directly or posted as margin may reach levels that merit distribution, e.g., at levels where such income is not necessary to support its underlying investments in Crude Oil Interests and investors adversely react to being taxed on such income without receiving distributions that could be used to pay such tax. If this income becomes significant then cash distributions may be made.

There is a risk that USBO will not earn trading gains sufficient to compensate for the fees and expenses that it must pay and as such USBO may not earn any profit.

USBO expects to pay brokerage charges of approximately 0.14% (including futures commission merchant fees of $4.00 per buy or sell), any licensing fees for the use of intellectual property, registration fees with the SEC, FINRA, or other regulatory agency in connection with offers and sales of the units subsequent to the initial offering of the units including the legal, printing, accounting and other expenses associated therewith. USBO also pays the fees and expenses, including directors and officers liability insurance, of the independent directors, management fees of 0.75% of NAV on its average net assets, tax accounting and reporting costs, and over-the-counter spreads and extraordinary expenses (i.e., expenses not in the ordinary course of business,

22


 
 

TABLE OF CONTENTS

including the indemnification of any person against liabilities and obligations to the extent permitted by law and required under the LP Agreement and under agreements entered into by the General Partner on USBO’s behalf 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 expenses and the settlement of claims and litigation) that can not be quantified. These fees and expenses must be paid in all cases regardless of whether USBO’s activities are profitable. Accordingly, USBO must earn trading gains sufficient to compensate for these fees and expenses before it can earn any profit.

USBO, to date, has depended upon the General Partner to pay all its expenses. If this offering of units does not raise sufficient funds to pay USBO’s future expenses, the General Partner no longer pays such expenses and no other source of funding of expenses is found, USBO will terminate and investors may lose all or part of their investment.

To date, all of USBO’s expenses have been funded by the General Partner. If the General Partner and USBO are unsuccessful in raising sufficient funds to cover its expenses or in locating any other source of funding, USBO will terminate and investors may lose all or part of their investment.

USBO may incur higher fees and expenses upon renewing existing or entering into new contractual relationships.

The clearing arrangements between the clearing brokers and USBO generally are terminable by the clearing brokers once the clearing broker has given USBO notice. Upon termination, the General Partner may be required to renegotiate or make other arrangements for obtaining similar services if USBO intends to continue trading in Futures Contracts or Other Crude Oil-Related Investments at its level of capacity at such time. The services of any clearing broker may not be available, or even if available, these services may not be available on the terms as favorable as those of the expired or terminated clearing arrangements.

USBO may miss certain trading opportunities because it will not receive the benefit of the expertise of independent trading advisors.

The General Partner does not employ trading advisors for USBO; however, it reserves the right to employ them in the future. The only advisor to USBO is the General Partner. A lack of independent trading advisors may be disadvantageous to USBO because it will not receive the benefit of a trading advisor’s expertise.

An unanticipated number of redemption requests during a short period of time could have an adverse effect on the NAV of USBO.

If a substantial number of requests for redemption of Redemption Baskets are received by USBO during a relatively short period of time, USBO may not be able to satisfy the requests from USBO’s assets not committed to trading. As a consequence, it could be necessary to liquidate positions in USBO’s trading positions before the time that the trading strategies would otherwise dictate liquidation.

The financial markets are currently in a period of disruption and recession and USBO does not expect these conditions to improve in the near future.

Currently and throughout 2009, the financial markets have experienced very difficult conditions and volatility as well as significant adverse trends. The deteriorating conditions in these markets have resulted in a decrease in availability of corporate credit and liquidity and have led indirectly to the insolvency, closure or acquisition of a number of major financial institutions and have contributed to further consolidation within the financial services industry. A continued recession or a depression could adversely affect the financial condition and results of operations of USBO’s service providers and Authorized Purchasers which would impact the ability of the General Partner to achieve USBO’s investment objective.

The failure or bankruptcy of a clearing broker could result in a substantial loss of USBO’s assets the clearing broker could be subject to proceedings that impair its ability to execute USBO’s trades.

Under CFTC regulations, a clearing broker maintains customers’ assets in a bulk segregated account. If a clearing broker fails to do so, or is unable to satisfy a substantial deficit in a customer account, its other

23


 
 

TABLE OF CONTENTS

customers may be subject to risk of a substantial loss of their funds in the event of that clearing broker’s bankruptcy. In that event, the clearing broker’s customers, such as USBO, are entitled to recover, even in respect of property specifically traceable to them, only a proportional share of all property available for distribution to all of that clearing broker’s customers. The bankruptcy of a clearing broker could result in the complete loss of USBO’s assets posted with the clearing broker; though, the vast majority of USBO’s assets are expected to be held in Treasuries, cash and/or cash equivalents with USBO’s custodian and would not be impacted by the bankruptcy of a clearing broker. USBO also may be subject to the risk of the failure of, or delay in performance by, any exchanges and markets and their clearing organizations, if any, on which commodity interest contracts are traded.

From time to time, the clearing brokers may be subject to legal or regulatory proceedings in the ordinary course of their business. A clearing broker’s involvement in costly or time-consuming legal proceedings may divert financial resources or personnel away from the clearing broker’s trading operations, which could impair the clearing broker’s ability to successfully execute and clear USBO’s trades.

The failure or insolvency of USBO’s custodian could result in a substantial loss of USBO’s assets.

As noted above, the vast majority of USBO’s assets are held in Treasuries, cash and/or cash equivalents with USBO’s custodian. The insolvency of the custodian could result in a complete loss of USBO’s assets held by that custodian, which, at any given time, would likely comprise a substantial portion of USBO’s total assets.

Third parties may infringe upon or otherwise violate intellectual property rights or assert that the General Partner has infringed or otherwise violated their intellectual property rights, which may result in significant costs and diverted attention.

Third parties may utilize USBO’s intellectual property or technology, including the use of its business methods, trademarks and trading program software, without permission. The General Partner has a patent pending for USBO’s business method and it is registering its trademarks. USBO does not currently have any proprietary software. However, if it obtains proprietary software in the future, then any unauthorized use of USBO’s proprietary software and other technology could also adversely affect its competitive advantage. USBO may have difficulty monitoring unauthorized uses of its patents, trademarks, proprietary software and other technology. Also, third parties may independently develop business methods, trademarks or proprietary software and other technology similar to that of the General Partner or claim that the General Partner has violated their intellectual property rights, including their copyrights, trademark rights, trade names, trade secrets and patent rights. As a result, the General Partner may have to litigate in the future to protect its trade secrets, determine the validity and scope of other parties’ proprietary rights, defend itself against claims that it has infringed or otherwise violated other parties’ rights, or defend itself against claims that its rights are invalid. Any litigation of this type, even if the General Partner is successful and regardless of the merits, may result in significant costs, divert its resources from USBO, or require it to change its proprietary software and other technology or enter into royalty or licensing agreements.

The success of USBO depends on the ability of the General Partner to accurately implement trading systems, and any failure to do so could subject USBO to losses on such transactions.

The General Partner anticipates using mathematical formulas built into a generally available spreadsheet program to decide whether it should buy or sell Crude Oil Interests each day. Specifically, the General Partner anticipates using the spreadsheet to make mathematical calculations and to monitor positions in Crude Oil Interests and Treasuries and correlations to the Benchmark Futures Contract. The General Partner must accurately process the spreadsheets’ outputs and execute the transactions called for by the formulas. In addition, USBO relies on the General Partner to properly operate and maintain its computer and communications systems. Execution of the formulas and operation of the systems are subject to human error. Any failure, inaccuracy or delay in implementing any of the formulas or systems and executing USBO’s transactions could impair its ability to achieve USBO’s investment objective. It could also result in decisions to undertake transactions based on inaccurate or incomplete information. This could cause substantial losses on transactions.

24


 
 

TABLE OF CONTENTS

USBO may experience substantial losses on transactions if the computer or communications system fails.

USBO’s trading activities, including its risk management, depend on the integrity and performance of the computer and communications systems supporting them. Extraordinary transaction volume, hardware or software failure, power or telecommunications failure, a natural disaster or other catastrophe could cause the computer systems to operate at an unacceptably slow speed or even fail. Any significant degradation or failure of the systems that the General Partner uses to gather and analyze information, enter orders, process data, monitor risk levels and otherwise engage in trading activities may result in substantial losses on transactions, liability to other parties, lost profit opportunities, damages to the General Partner’s and USBO’s reputations, increased operational expenses and diversion of technical resources.

If the computer and communications systems are not upgraded, USBO’s financial condition could be harmed.

The development of complex computer and communications systems and new technologies may render the existing computer and communications systems supporting USBO’s trading activities obsolete. In addition, these computer and communications systems must be compatible with those of third parties, such as the systems of exchanges, clearing brokers and the executing brokers. As a result, if these third parties upgrade their systems, the General Partner will need to make corresponding upgrades to continue effectively its trading activities. USBO’s future success will depend on USBO’s ability to respond to changing technologies on a timely and cost-effective basis.

USBO depends on the reliable performance of the computer and communications systems of third parties, such as brokers and futures exchanges, and may experience substantial losses on transactions if they fail.

USBO depends on the proper and timely function of complex computer and communications systems maintained and operated by the futures exchanges, brokers and other data providers that the General Partner uses to conduct trading activities. Failure or inadequate performance of any of these systems could adversely affect the General Partner’s ability to complete transactions, including its ability to close out positions, and result in lost profit opportunities and significant losses on commodity interest transactions. This could have a material adverse effect on revenues and materially reduce USBO’s available capital. For example, unavailability of price quotations from third parties may make it difficult or impossible for the General Partner to use its proprietary software that it relies upon to conduct its trading activities. Unavailability of records from brokerage firms may make it difficult or impossible for the General Partner to accurately determine which transactions have been executed or the details, including price and time, of any transaction executed. This unavailability of information also may make it difficult or impossible for the General Partner to reconcile its records of transactions with those of another party or to accomplish settlement of executed transactions.

The occurrence of a terrorist attack, or the outbreak, continuation or expansion of war or other hostilities could disrupt USBO’s trading activity and materially affect USBO’s profitability.

The operations of USBO, the exchanges, brokers and counterparties with which USBO does business, and the markets in which USBO does business could be severely disrupted in the event of a major terrorist attack or the outbreak, continuation or expansion of war or other hostilities. The terrorist attacks of September 11, 2001 and the war in Iraq, global anti-terrorism initiatives and political unrest in the Middle East and Southeast Asia continue to fuel this concern.

Risk of Leverage and Volatility

If the General Partner permits USBO to become leveraged, you could lose all or substantially all of your investment if USBO’s trading positions suddenly turn unprofitable.

Commodity pools’ trading positions in futures contracts or other commodity interests are typically required to be secured by the deposit of margin funds that represent only a small percentage of a futures contract’s (or other commodity interests’) entire face value. This feature permits commodity pools to “leverage” their assets by purchasing or selling futures contracts (or other commodity interests) with an aggregate value in excess of the commodity pool’s assets. While this leverage can increase the pool’s profits, relatively

25


 
 

TABLE OF CONTENTS

small adverse movements in the price of the pool’s futures contracts can cause significant losses to the pool. While the General Partner does not currently intend to leverage USBO’s assets, it is not prohibited from doing so under the LP Agreement or otherwise and is not limited in the amount of leverage it can employ.

The price of crude oil is volatile which could cause large fluctuations in the price of units.

Movements in the price of crude oil may be the result of factors outside of the General Partner’s control and may not be anticipated by the General Partner. Among the factors that can cause volatility in the price of crude oil are:

worldwide or regional demand for energy, which is affected by economic conditions;
the domestic and foreign supply and inventories of oil and gas;
weather conditions, including abnormally mild winter or summer weather, and abnormally harsh winter or summer weather;
availability and adequacy of pipeline and other transportation facilities;
domestic and foreign governmental regulations and taxes;
political conditions in gas or oil producing regions;
technological advances relating to energy usage or relating to technology for exploration, production, refining and petrochemical manufacturing;
the ability of members of the Organization of Petroleum Exporting Countries (“OPEC”) to agree upon and maintain oil prices and production levels;
the price and availability of alternative fuels; and
the impact of energy conservation efforts.

The impact of environmental and other governmental laws and regulations may affect the price of crude oil.

Environmental and other governmental laws and regulations have increased the costs to plan, design, drill, install, operate and abandon oil wells. Other laws have prevented exploration and drilling of crude oil in certain environmentally sensitive federal lands and waters. Several environmental laws that have a direct or an indirect impact on the price of crude oil include, but are not limited to, the Clean Air Act, Clean Water Act, Resource Conservation and Recovery Act, and the Comprehensive Environmental Response, Compensation and Liability Act of 1980.

The limited method for transporting and storing crude oil may cause the price of crude oil to increase.

Crude oil is transported throughout the United Kingdom and the United States by way of pipelines, barges, tankers, trucks and rail cars and is stored in aboveground and underground storage facilities. These systems may not be adequate to meet demand, especially in times of peak demand or in areas of the United Kingdom or the United States where crude oil service is already limited due to minimal pipeline and storage infrastructure. As a result of the limited method for transporting and storing crude oil, the price of crude oil may increase.

Over-the-Counter Contract Risk

Over-the-counter transactions are subject to little, if any, regulation.

A portion of USBO’s assets may be used to trade over-the-counter crude oil interest contracts, such as forward contracts or swap or spot contracts. Over-the-counter contracts are typically traded on a principal-to-principal basis through dealer markets that are dominated by major money center and investment banks and other institutions and are essentially unregulated by the CFTC. You therefore do not receive the protection of CFTC regulation or the statutory scheme of the Commodity Exchange Act in connection with this trading activity by USBO. The markets for over-the-counter contracts rely upon the integrity of market participants in

26


 
 

TABLE OF CONTENTS

lieu of the additional regulation imposed by the CFTC on participants in the futures markets. The lack of regulation in these markets could expose USBO in certain circumstances to significant losses in the event of trading abuses or financial failure by participants.

USBO will be subject to credit risk with respect to counterparties to over-the-counter contracts entered into by USBO or held by special purpose or structured vehicles.

USBO also faces the risk of non-performance by the counterparties to the over-the-counter contracts. Unlike in futures contracts, the counterparty to these contracts is generally a single bank or other financial institution, rather than a clearing organization backed by a group of financial institutions. As a result, there will be greater counterparty credit risk in these transactions. A counterparty may not be able to meet its obligations to USBO, in which case USBO could suffer significant losses on these contracts.

If a counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, USBO may experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding. USBO may obtain only limited recovery or may obtain no recovery in such circumstances.

USBO may be subject to liquidity risk with respect to its over-the-counter contracts.

Over-the-counter contracts may have terms that make them less marketable than Futures Contracts. Over-the-counter contracts are less marketable because they are not traded on an exchange, do not have uniform terms and conditions, and are entered into based upon the creditworthiness of the parties and the availability of credit support, such as collateral, and in general, they are not transferable without the consent of the counterparty. These conditions diminish the ability to realize the full value of such contracts.

Risk of Trading in International Markets

Trading in international markets will expose USBO to credit and regulatory risk.

The General Partner expects to invest primarily in Futures Contracts, a significant portion of which will be outside United States exchanges including the ICE Futures Exchange. Some non-U.S. markets present risks because they are not subject to the same degree of regulation as their U.S. counterparts. None of the CFTC, NFA, or any domestic exchange regulates activities of any foreign boards of trade or exchanges, including the execution, delivery and clearing of transactions, nor has the power to compel enforcement of the rules of a foreign board of trade or exchange or of any applicable non-U.S. laws. However, the CFTC does have some oversight authority and the ability to impose certain self-regulatory and reporting requirements on non-U.S. futures exchanges trading U.S.-linked futures contracts and contracts with a significant price discovery function.

Additonally, the rights of market participants, such as USBO, in the event of the insolvency or bankruptcy of a non-U.S. market or broker are also likely to be more limited than in the case of U.S. markets or brokers. As a result, in these markets, USBO has less legal and regulatory protection than it does when it trades domestically.

In some of these non-U.S. markets, the performance on a contract is the responsibility of the counterparty and is not backed by an exchange or clearing corporation and therefore exposes USBO to credit risk. However, Futures Contracts traded on the ICE Futures Exchange, including the Benchmark Futures Contract, are backed by the ICE Futures Exchange and may not expose USBO to the risks of some other non-U.S. exchanges or clearing corporations that do not have similar backing. Trading in non-U.S. markets also leaves USBO susceptible to fluctuations in the value of the local currency against the U.S. dollar for contracts not traded in U.S. dollars. The Benchmark Futures Contract, however, is traded in U.S. dollars and does not expose USBO to the risk of currency fluctuations. Additionally, trading on non-U.S. exchanges is subject to the risks presented by exchange controls, expropriation, increased tax burdens and exposure to local economic declines and political instability. An adverse development with respect to any of these variables could reduce the profit or increase the loss earned on trades in the affected international markets.

International trading activities subject USBO to foreign exchange risk.

The price of any non-U.S. Futures Contract, option on any non-U.S. Futures Contract or non-U.S. Other Crude Oil Interest, and, therefore, the potential profit and loss on such Crude Oil Interests, may be affected by

27


 
 

TABLE OF CONTENTS

any variance in the foreign exchange rate between the time the order is placed and the time it is liquidated, offset or exercised. As a result, changes in the value of the local currency relative to the U.S. dollar may cause losses to USBO even if the contract traded is profitable.

USBO’s international trading could expose it to losses resulting from non-U.S. exchanges that are less developed or less reliable than United States exchanges.

Some non-U.S. exchanges also may be in a more developmental stage so that prior price histories may not be indicative of current price dynamics. In addition, USBO may not have the same access to certain positions on foreign trading exchanges as do local traders, and the historical market data on which General Partner bases its strategies may not be as reliable or accessible as it is for U.S. exchanges.

Tax Risk

Please refer to “U.S. Federal Income Tax Considerations” for information regarding the U.S. federal income tax consequences of the purchase, ownership and disposition of units.

Your tax liability may exceed the amount of distributions, if any, on your units.

Cash or property will be distributed at the sole discretion of the General Partner. The General Partner currently does not intend to make cash or other distributions with respect to units. You will be required to pay U.S. federal income tax and, in some cases, state, local, or foreign income tax, on your allocable share of USBO’s taxable income, without regard to whether you receive distributions or the amount of any distributions. Therefore, your tax liability with respect to your units may exceed the amount of cash or value of property (if any) distributed.

Your allocable share of taxable income or loss may differ from your economic income or loss on your units.

Due to the application of the assumptions and conventions applied by USBO in making allocations for tax purposes and other factors, your allocable share of USBO’s income, gain, deduction or loss may be different than your economic profit or loss from your units for a taxable year. This difference could be temporary or permanent and, if permanent, could result in your being taxed on amounts in excess of your economic income.

Items of income, gain, deduction, loss and credit with respect to units could be reallocated if the U.S. Internal Revenue Service does not accept the assumptions and conventions applied by USBO in allocating those items, with potential adverse consequences for you.

The U.S. tax rules pertaining to partnerships are complex and their application to large, publicly traded partnerships such as USBO is in many respects uncertain. USBO will apply certain assumptions and conventions in an attempt to comply with the intent of the applicable rules and to report taxable income, gains, deductions, losses and credits in a manner that properly reflects unitholders’ economic gains and losses. These assumptions and conventions may not fully comply with all aspects of the Internal Revenue Code (“Code”) and applicable Treasury Regulations, however, and it is possible that the U.S. Internal Revenue Service, or the IRS, will successfully challenge our allocation methods and require us to reallocate items of income, gain, deduction, loss or credit in a manner that adversely affects you. If this occurs, you may be required to file an amended tax return and to pay additional taxes plus deficiency interest.

We could be treated as a corporation for federal income tax purposes, which may substantially reduce the value of your units.

USBO has received an opinion of counsel that, under current U.S. federal income tax laws, USBO will be treated as a partnership that is not taxable as a corporation for U.S. federal income tax purposes, provided that (i) at least 90 percent of USBO’s annual gross income consists of “qualifying income” as defined in the Code, (ii) USBO is organized and operated in accordance with its governing agreements and applicable law and (iii) USBO does not elect to be taxed as a corporation for federal income tax purposes. Although the General Partner anticipates that USBO will satisfy the “qualifying income” requirement for all of its taxable

28


 
 

TABLE OF CONTENTS

years, that result cannot be assured. USBO has not requested and will not request any ruling from the IRS with respect to its classification as a partnership not taxable as a corporation for federal income tax purposes. If the IRS were to successfully assert that USBO is taxable as a corporation for federal income tax purposes in any taxable year, rather than passing through its income, gains, losses and deductions proportionately to unitholders, USBO would be subject to tax on its net income for the year at corporate tax rates. In addition, although the General Partner does not currently intend to make distributions with respect to units, any distributions would be taxable to unitholders as dividend income. Taxation of USBO as a corporation could materially reduce the after-tax return on an investment in units and could substantially reduce the value of your units.

PROSPECTIVE INVESTORS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE POSSIBLE TAX CONSEQUENCES TO THEM OF AN INVESTMENT IN UNITS; SUCH TAX CONSEQUENCES MAY DIFFER IN RESPECT OF DIFFERENT INVESTORS.

29


 
 

TABLE OF CONTENTS

THE OFFERING

What Is USBO?

USBO is a Delaware limited partnership organized on September 2, 2009. USBO maintains its main business office at 1320 Harbor Bay Parkway, Suite 145, Alameda, California 94502. USBO is a commodity pool. It operates pursuant to the terms of the LP Agreement, which grants full management control to the General Partner.

THIS POOL HAS NOT COMMENCED TRADING AND
DOES NOT HAVE ANY PERFORMANCE HISTORY.

Who Is the General Partner?

Our sole General Partner is United States Commodity Funds LLC (formerly known as Victoria Bay Asset Management, LLC), a single member limited liability company that was formed in the state of Delaware on May 10, 2005. It maintains its main business office at 1320 Harbor Bay Parkway, Suite 145, Alameda, California 94502. The General Partner is a wholly-owned subsidiary of Wainwright Holdings, Inc., a Delaware corporation (“Wainwright”). Mr. Nicholas Gerber (discussed below) controls Wainwright by virtue of his ownership of Wainwright’s shares. Wainwright is a holding company that previously owned an insurance company organized under Bermuda law, which has been liquidated, and a registered investment advisor firm named Ameristock Corporation, which has been distributed to the Wainwright shareholders. The General Partner is a member of the NFA and is registered with the CFTC as of December 1, 2005. The General Partner’s registration as a CPO with the NFA was approved on December 1, 2005.

The General Partner also manages the Related Public Funds. USOF is a publicly traded limited partnership which seeks to have the changes in percentage terms of its units’ NAV track the changes in percentage terms of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the changes in the price of the futures contract on light, sweet crude oil traded on the NYMEX, less USOF’s expenses. USOF invests in a mixture of listed crude oil futures contracts, other non-listed oil related investments, Treasuries, cash and cash equivalents. USOF’s units began trading on April 10, 2006. As of February 28, 2010, USOF had total net assets of $1,854,622,764 and had outstanding units of 47.8 million. USOF employs an investment strategy in its operations that is similar to the investment strategy of USBO, except that its benchmark is the near month contract for light, sweet crude oil delivered to Cushing, Oklahoma on a long basis.

USNG is a publicly traded limited partnership which seeks to have the changes in percentage terms of its units’ NAV track the changes in percentage terms of the spot price of natural gas delivered at the Henry Hub, Louisiana, as measured by the changes in the price of the futures contract on natural gas traded on the NYMEX, less USNG’s expenses. USNG invests in a mixture of listed natural gas futures contracts, other non-listed natural gas related investments, Treasuries, cash and cash equivalents. USNG’s units began trading on April 18, 2007. As of February 28, 2010, USNG had total net assets of $3,594,443,718 and had outstanding units of 411.4 million. USNG employs an investment strategy in its operations that is similar to the investment strategy of USBO, except its benchmark is the near month contract for natural gas delivered at the Henry Hub, Louisiana.

US12OF is a publicly traded limited partnership which seeks to have the changes in percentage terms of its units’ NAV track the changes in percentage terms of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the changes in the average of the prices of 12 futures contracts on light, sweet crude oil traded on the NYMEX, less US12OF’s expenses. US12OF invests in a mixture of listed crude oil futures contracts, other non-listed oil related investments, Treasuries, cash and cash equivalents. US12OF’s units began trading on December 6, 2007. As of February 28, 2010, US12OF had total net assets of $161,837,281 and had outstanding units of 4.1 million. US12OF employs an investment strategy in its operations that is similar to the investment strategy of USBO, except that its benchmark is the average of the prices of the near month contract to expire and the following eleven months contracts for light, sweet crude oil delivered to Cushing, Oklahoma.

30


 
 

TABLE OF CONTENTS

UGA is a publicly traded limited partnership which seeks to have the changes in percentage terms of its units’ NAV track the changes in percentage terms of the spot price of unleaded gasoline delivered to the New York harbor, as measured by the changes in the price of the futures contract on gasoline traded on the NYMEX, less UGA’s expenses. UGA invests in a mixture of listed gasoline futures contracts, other non-listed gasoline related investments, Treasuries, cash and cash equivalents. UGA’s units began trading on February 26, 2008. As of February 28, 2010, UGA had total net assets of $72,327,350 and had outstanding units of 2.0 million. UGA employs an investment strategy in its operations that is similar to the investment strategy of USBO except that its benchmark is the near month contract for unleaded gasoline delivered at the New York harbor.

USHO is a publicly traded limited partnership which seeks to have the changes in percentage terms of its units’ NAV track the changes in percentage terms of the spot price of heating oil for delivery to the New York harbor, as measured by the changes in the price of the futures contract on heating oil traded on the NYMEX, less USHO’s expenses. USHO invests in a mixture of listed heating oil futures contracts, other non-listed heating oil related investments, Treasuries, cash and cash equivalents. USHO’s units began trading on April 8, 2008. As of February 28, 2010, USHO had total net assets of $15,702,463 and had outstanding units of 600,000. USHO employs an investment strategy in its operations that is similar to the investment strategy of USBO except that its benchmark is the near month contract for heating oil (also known as No. 2 fuel) delivered at the New York harbor.

USSO is a commodity pool and issues units traded on the NYSE Arca. The investment objective of USSO is to have the changes in percentage terms of its units’ NAV inversely reflect the changes in percentage terms of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the changes in the price of the futures contract on light, sweet crude oil as traded on the NYMEX, less USSO’s expenses. USSO invests in a mixture of listed crude oil futures contracts, other non-listed crude oil related investments, Treasuries, cash and cash equivalents. USSO’s units began trading on September 18, 2009. As of February 28, 2010, USSO had total net assets of $13,102,818 and had outstanding units of 300,000. USSO employs an investment strategy in its operations that is similar to the investment strategy of USBO, except its benchmark is the inverse of the near month contract for light, sweet crude oil delivered to Cushing, Oklahoma.

U12NG is a commodity pool and issues units traded on the NYSE Arca. The investment objective of US12NG is to have the changes in percentage terms of its units’ NAV reflect the changes in percentage terms of the spot price of natural gas delivered at the Henry Hub, Louisiana, as measured by the changes in the average of the prices of 12 futures contracts on natural gas traded on the NYMEX, consisting of the near month contract to expire and the contracts for the following eleven months, for a total of 12 consecutive months’ contracts, except when the near month contract is within two weeks of expiration, in which case it will be measured by the futures contracts that are the next month contract to expire and the contracts for the following eleven consecutive months, less US12NG’s expenses. US12NG invests in a mixture of listed natural gas futures contracts, other non-listed natural gas futures contracts, other non-listed natural gas-related investments, Treasuries, cash and cash equivalents. US12NG’s units began trading on November 18, 2009. As of February 28, 2010, US12NG had total net assets of $33,573,229 and had outstanding units of 700,000. US12NG employs an investment strategy in its operations that is similar to the investment strategy of USBO, except its benchmark is the average of the prices of the near month contract to expire and the following eleven months contracts for natural gas delivered at the Henry Hub, Louisiana.

The General Partner has filed a registration statement for one other exchange traded security fund, USCI. The investment objective of USCI will be for the daily changes in percentage terms of its units’ NAV to reflect the daily changes in percentage terms of the SummerHaven Dynamic Commodity Index (“SDCI”) Total Return, less USCI’s expenses.

See “Prior Performance of the General Partner and Affiliates on page 35.”

The General Partner is required to evaluate the credit risk of USBO to the futures commission merchant, oversee the purchase and sale of USBO’s units by certain Authorized Purchasers, review daily positions and margin requirements of USBO, and manage USBO’s investments. The General Partner also pays the fees of the Marketing Agent, the Administrator, and the Custodian and, in connection with the initial public offering

31


 
 

TABLE OF CONTENTS

of the units, registration fees paid to the SEC, FINRA, or any other regulatory agency, including the legal, printing, accounting and other expenses associated therewith.

Limited partners have no right to elect the General Partner on an annual or any other continuing basis. If the General Partner voluntarily withdraws, however, the holders of a majority of our outstanding limited partner interests (excluding for purposes of such determination interests owned by the withdrawing General Partner and its affiliates) may elect its successor. The General Partner may not be removed as general partner except upon approval by the affirmative vote of the holders of at least 66 2/3% of our outstanding limited partner interests (excluding limited partner interests owned by the General Partner and its affiliates), subject to the satisfaction of certain conditions set forth in the LP Agreement.

The business and affairs of our General Partner are managed by a board of directors, which is comprised of four management directors some of whom are also its executive officers (the “Management Directors”) and three independent directors who meet the independent director requirements established by the NYSE Arca Equities Rules and the Sarbanes-Oxley Act of 2002. Notwithstanding the foregoing, the Management Directors have the authority to manage the General Partner pursuant to its limited liability company agreement, as amended from time to time. The General Partner has an audit committee which is made up of the three independent directors (Peter M. Robinson, Gordon L. Ellis, and Malcolm R. Fobes III). The audit committee is governed by an audit committee charter that is posted on USBO’s website. The board of directors has determined that each member of the audit committee meets the financial literacy requirements of the NYSE Arca and the audit committee charter. The board of directors has further determined that each of Messrs. Ellis and Fobes have accounting or related financial management expertise, as required by the NYSE Arca, such that each of them is considered an “Audit Committee Financial Expert” as such term is defined in Item 407(d)(5) of Regulation S-K.

Mr. Nicholas Gerber and Mr. Howard Mah also serve as executive officers of the General Partner. USBO has no executive officers. Its affairs are generally managed by the General Partner. The following individuals serve as Management Directors of the General Partner.

Nicholas Gerber has been the President and CEO of the General Partner since June 9, 2005 and a Management Director of the General Partner since May 10, 2005. He maintains his main business office at 1320 Harbor Bay Parkway, Suite 145, Alameda, California 94502. Mr. Gerber has acted as a portfolio manager for the Related Public Funds since April 2006 and USBO since September 2009. He is listed with the CFTC as a Principal of the General Partner on November 29, 2005, as Branch Manager of the General Partner since May 15, 2009, and registered with the CFTC as an Associated Person of the General Partner on December 1, 2005. Currently, Mr. Gerber manages USBO and the Related Public Funds. He will also manage USCI. Mr. Gerber has also served as Vice President/Chief Investment Officer of Lyon’s Gate Reinsurance Company, Ltd., a company formed to reinsure workmen’s compensation insurance, since June of 2003. Mr. Gerber has an extensive background in securities portfolio management and in developing investment funds that make use of indexing and futures contracts. He is also the founder of Ameristock Corporation, a California-based investment adviser registered under the Investment Advisers Act of 1940, that has been sponsoring and providing portfolio management services to mutual funds since March 1995. Since August 1995, Mr. Gerber has been the portfolio manager of the Ameristock Mutual Fund, Inc. a mutual fund registered under the Investment Company Act of 1940, focused on large cap U.S. equities that, as of February 28, 2010, had $208,573,985 in assets. He has also been a Trustee for the Ameristock ETF Trust since June 2006, and served as a portfolio manager for the Ameristock/Ryan 1 Year, 2 Year, 5 Year, 10 Year and 20 Year Treasury ETF from June 2007 to June 2008 when such funds were liquidated. In these roles, Mr. Gerber has gained extensive experience in evaluating and retaining third-party service providers, including custodians, accountants, transfer agents, and distributors. Mr. Gerber has passed the Series 3 examination for associated persons. He holds an MBA in finance from the University of San Francisco and a BA from Skidmore College. Mr. Gerber is 47 years old.

Howard Mah has been a Management Director of the General Partner since May 10, 2005, Secretary of the General Partner since June 9, 2005, and Chief Financial Officer of the General Partner since May 23, 2006. He has been listed with the CFTC as a Principal of the General Partner since November 29, 2005. Mr. Mah is currently involved in the management of USBO and the Related Public Funds and will be involved in the management of USCI. Mr. Mah also serves as the General Partner’s Chief Compliance Officer.

32


 
 

TABLE OF CONTENTS

He received a Bachelor of Education from the University of Alberta, in 1986 and an MBA from the University of San Francisco in 1988. He has been Secretary and Chief Compliance Officer of the Ameristock ETF Trust since February 2007, Chief Compliance Officer of Ameristock Corporation since January 2001, a tax & finance consultant in private practice since January 1995, Secretary of Ameristock Mutual Fund since June 1995 and Ameristock Focused Value Fund from December 2000 to January 2005, Chief Compliance Officer of Ameristock Mutual Fund since August 2004 and the Co-Portfolio Manager of the Ameristock Focused Value Fund from December 2000 to January 2005. Mr. Mah is 45 years old.

Andrew F. Ngim has been a Management Director of the General Partner since May 10, 2005 and Treasurer of the General Partner since June 9, 2005. He has been listed with the CFTC as a Principal of the General Partner since November 29, 2005. As Treasurer of the General Partner, Mr. Ngim is currently involved in the management of USBO and the Related Public Funds and will be involved in the management of USCI. He received a Bachelor of Arts from the University of California at Berkeley in 1983. Mr. Ngim has been Ameristock Corporation’s Managing Director since January 1999 and co-portfolio manager of Ameristock Corporation since January 2000, Trustee of the Ameristock ETF Trust since February 2007, and served as a portfolio manager for the Ameristock/Ryan 1 Year, 2 Year, 5 Year, 10 Year and 20 Year Treasury ETF from June 2007 to June 2008 when such funds were liquidated. Mr. Ngim is 48 years old.

Robert L. Nguyen has been a Management Director of the General Partner since May 10, 2005. He has been listed with the CFTC as a Principal of the General Partner since November 29, 2005 and registered with the CFTC as an Associated Person on November 9, 2007. As a Management Director of the General Partner, Mr. Nguyen is currently involved in the management of USBO and the Related Public Funds and will be involved in the management of USCI. He received a Bachelor of Science from California State University Sacramento in 1981. Mr. Nguyen has been the Managing Principal of Ameristock Corporation since January 2000. Mr. Nguyen is 49 years old.

The following individuals provide significant services to USBO but are employed by the General Partner.

John P. Love has acted as the Portfolio Operations Manager for USBO and the Related Public Funds since January 2006 and, effective March 1, 2010, is the Senior Portfolio Manager for USBO and the Related Public Funds. He is expected to be the Senior Portfolio Manager for USCI. Mr. Love is also employed by the General Partner. He has been listed with the CFTC as a Principal of the General Partner since January 17, 2006. Mr. Love also served as the operations manager of Ameristock Corporation from October 2002 to January 2007, where he was responsible for back office and marketing activities for the Ameristock Mutual Fund and Ameristock Focused Value Fund and for the firm in general. Mr. Love holds a Series 3 license and was registered with the CFTC as an Associated Person of the General Partner from December 1, 2005 through April 16, 2009. Mr. Love has passed the Level I Chartered Financial Analyst examination and is currently a Level II candidate in the CFA Program. He holds a BFA in cinema-television from the University of Southern California. Mr. Love is 38 years old.

John T. Hyland, CFA acts as a Portfolio Manager and as the Chief Investment Officer for the General Partner. He registered with the CFTC as an Associated Person of the General Partner on December 1, 2005, and has been listed with the CFTC as a Principal of the General Partner since January 17, 2006. Mr. Hyland became the Portfolio Manager for USOF, USNG, US12OF, UGA, USHO, USSO and US12NG in April 2006, April 2007, December 2007, February 2008, March 2008, June 2008 and November 2009, respectively, and as Chief Investment Officer of the General Partner since January 2008, acts in such capacity on behalf of USBO and the Related Public Funds. He is also expected to become the Portfolio Manager for USCI. As part of his responsibilities for USBO and the Related Public Funds, Mr. Hyland handles day-to-day trading, helps set investment policies, and oversees USBO and the Related Public Funds’ activities with their futures commission brokers, custodian-administrator, and marketing agent. Mr. Hyland has an extensive background in portfolio management and research with both equity and fixed income securities, as well as in the development of new types of complex investment funds. In July 2001, Mr. Hyland founded Towerhouse Capital Management, LLC, a firm that provides portfolio management and new fund development expertise to non-U.S. institutional investors. Mr. Hyland has been, and remains, a Principal and Portfolio Manager for Towerhouse. Mr. Hyland received his Chartered Financial Analyst (“CFA”) designation in 1994. Mr. Hyland is a member of the CFA Institute (formerly AIMR). He is also a member of the National Association of

33


 
 

TABLE OF CONTENTS

Petroleum Investment Analysts, a not-for-profit organization of investment professionals focused on the oil industry. He is a graduate of the University of California, Berkeley. Mr. Hyland is 50 years old.

Ray W. Allen acts as a Portfolio Operations Manager for UGA, USHO, USSO and US12NG and is expected to be a Portfolio Operations Manager for USBO. He was hired by the General Partner in October 2007 and has been employed by the General Partner since January 14, 2008. He holds a Series 3 license and registered with the CFTC as an Associated Person of the General Partner on March 25, 2008. He has been listed with the CFTC as a Principal of the General Partner since March 18, 2009. Mr. Allen’s responsibilities include daily trading and operations for UGA, USHO, USSO and US12NG. In addition, from February 2002 – Octo- ber 2007, Mr. Allen was responsible for analyzing and evaluating the creditworthiness of client companies at Marble Bridge Funding Group Inc., in Walnut Creek, CA. Marble Bridge Funding Group Inc. is a commercial finance company providing capital to entrepreneurial companies. Mr. Allen received a BA in Economics from the University of California at Berkeley in 1980. Mr. Allen is 53 years old.

The following individuals serve as independent directors of the General Partner.

Peter M. Robinson has been an Independent Director of the General Partner since September 30, 2005 and, as such, serves on the board of directors of the General Partner, which acts on behalf of USBO and the Related Public Funds. He has been listed with the CFTC as a Principal of the General Partner since December 2005. Mr. Robinson has been employed as a Research Fellow writing about business and politics with the Hoover Institution since April 1993. The Hoover Institution is a public policy think tank located on the campus of Stanford University. Mr. Robinson graduated from Dartmouth College in 1979 and Oxford University in 1982. Mr. Robinson received an MBA from the Stanford University Graduate School of Business. Mr. Robinson has also written three books and has been published in the New York Times, Red Herring, and Forbes ASAP and he is the editor of Can Congress Be Fixed?: Five Essays on Congressional Reform (Hoover Institution Press, 1995). Mr. Robinson is 52 years old.

Gordon L. Ellis has been an Independent Director of the General Partner since September 30, 2005 and, as such, serves on the board of directors of the General Partner, which acts on behalf of USBO and the Related Public Funds. He has been listed with the CFTC as a Principal of the General Partner since November 2005. Mr. Ellis has been Chairman of International Absorbents, Inc., a holding company of Absorption Corp., since July 1988, President and Chief Executive Officer since November 1996 and a Class I Director of the company since July 1985. Mr. Ellis is also a director of Absorption Corp., International Absorbents, Inc.’s wholly-owned subsidiary which is engaged in developing, manufacturing and marketing a wide range of animal care and industrial absorbent products. Mr. Ellis is a director/trustee of Polymer Solutions, Inc., a former publicly-held company that sold all of its assets effective as of February 3, 2004 and is currently winding down its operations and liquidating following such sale. Polymer Solutions previously manufactured paints, coatings, stains and primers for wood furniture manufacturers. Mr. Ellis is a professional engineer with an MBA in international finance. Mr. Ellis is 63 years old.

Malcolm R. Fobes III has been an Independent Director of the General Partner since September 30, 2005 and, as such, serves on the board of directors of the General Partner, which acts on behalf of USBO and the Related Public Funds. He has been listed with the CFTC as a Principal of the General Partner since November 2005. Mr. Fobes is the founder, Chairman and Chief Executive Officer of Berkshire Capital Holdings, Inc., a California-based investment adviser registered under the Investment Advisers Act of 1940, that has been sponsoring and providing portfolio management services to mutual funds since June 1997. Since June 1997, Mr. Fobes has been the Chairman and President of The Berkshire Funds, a mutual fund investment company registered under the Investment Company Act of 1940. Mr. Fobes also serves as portfolio manager of the Berkshire Focus Fund, a mutual fund registered under the Investment Company Act of 1940, which concentrates its investments in the electronic technology industry. From April 2000 to July 2006, Mr. Fobes also served as co-portfolio manager of The Wireless Fund, a mutual fund registered under the Investment Company Act of 1940, which concentrates its investments in companies engaged in the development, production, or distribution of wireless-related products or services. In these roles, Mr. Fobes has gained extensive experience in evaluating and retaining third-party service providers, including custodians, accountants, transfer

34


 
 

TABLE OF CONTENTS

agents, and distributors. Mr. Fobes was also contributing editor of Start a Successful Mutual Fund: The Step-by-Step Reference Guide to Make It Happen (JV Books, 1995). Mr. Fobes holds a B.S. degree in Finance and Economics from San Jose State University in California. Mr. Fobes is 45 years old.

The following are individual Principals, as that term is defined in CFTC Rule 3.1, for the General Partner: Melinda Gerber, the Gerber Family Trust, the Nicholas and Melinda Gerber Living Trust, Howard Mah, Andrew Ngim, Robert Nguyen, Peter Robinson, Gordon Ellis, Malcolm Fobes, John Love, John Hyland, Ray Allen and Wainwright Holdings, Inc. These individuals are principals due to their positions, however, Nicholas Gerber and Melinda Gerber are also principals due to their controlling stake in Wainwright. None of the principals owns or has any other beneficial interest in USBO. Nicholas Gerber, John Hyland and Ray Allen will make trading and investment decisions for USBO. Nicholas Gerber, Ray Allen, and John Hyland execute trades on behalf of USBO. In addition, Nicholas Gerber, John Hyland, Robert Nguyen and Ray Allen are registered with the CFTC as Associated Persons of the General Partner and are Associate Members of the NFA.

Contributions to the Limited Partner

The General Partner has contributed $20 and Wainwright has contributed $980 to USBO for their limited partnership interests. However, following the commencement of the offering, neither the General Partner nor its affiliates will have any beneficial interest in the pool because USBO will redeem out the General Partner and Wainwright’s initial limited partnership interests.

Compensation and Fees to the General Partner

USBO is contractually obligated to pay the General Partner a management fee based on daily net assets and paid monthly of 0.75% per annum on average net assets.

In addition to the fees and expenses that the independent directors of the General Partner will receive through their service as directors, each of the three independent directors of the General Partner also entered into a Director Deferred Compensation Agreement (the “Director Agreement”) with the General Partner and each of the commodity pools for which it acts as the general partner, including USBO and the Related Public Funds, to provide sufficient incentive to each independent director to continue his service as such. Pursuant to the Director Agreement, each independent director may receive certain deferred compensation payments from USBO and the Related Public Funds and such deferred compensation would be apportioned in a manner consistent with the payment of fees and expenses of the directors. Deferred compensation payments due to each independent director would not exceed an aggregate amount equal to two times the annual compensation received by such director as of April 1, 2010. Subject to certain exceptions, the deferred compensation would be payable on the later of April 1, 2012, the director’s separation from service, as defined by the Director Agreement, or upon the director’s death.

Prior Performance of the General Partner and Affiliates

The General Partner is also currently the general partner of the Related Public Funds. Each of the General Partner and the Related Public Funds is located in California.

USOF’s units began trading on the American Stock Exchange on April 10, 2006 and are offered on a continuous basis. As a result of the acquisition of the American Stock Exchange by NYSE Euronext, USOF’s units commenced trading on the NYSE Arca on November 25, 2008. As of February 28, 2010, the total amount of money raised by USOF from its authorized purchasers was $24,259,131,469; the total number of authorized purchasers of USOF was 18; the number of baskets purchased by authorized purchasers of USOF was 4,813; and the aggregate amount of units purchased was 481,300,000.

Since the offering of USOF units to the public on April 10, 2006 to February 28, 2010, the simple average daily change in its benchmark oil futures contract was -0.026%, while the simple average daily change in the NAV of USOF over the same time period was -0.021%. The average daily difference was 0.005% (or 0.5 basis points, where 1 basis point equals  1/100 of 1%). As a percentage of the daily movement of the benchmark oil futures contract, the average error in daily tracking by the NAV was 1.532%, meaning that over this time period USOF’s tracking error was within the plus or minus 10% range established as its benchmark tracking goal.

USNG’s units began trading on the American Stock Exchange on April 18, 2007 and are offered on a continuous basis. As a result of the acquisition of the American Stock Exchange by NYSE Euronext, USNG’s

35


 
 

TABLE OF CONTENTS

units commenced trading on the NYSE Arca on November 25, 2008. As of February 28, 2010 the total amount of money raised by USNG from its authorized purchasers was $10,558,665,387; the total number of authorized purchasers of USNG was 15; the number of baskets purchased by authorized purchasers of USNG was 5,961; and the aggregate amount of units purchased was 596,100,000.

Since the offering of USNG units to the public on April 18, 2007 to February 28, 2010, the simple average daily change in its benchmark futures contract was -0.189%, while the simple average daily change in the NAV of USNG over the same time period was -0.187. The average daily difference was 0.002% (or 0.2 basis points, where 1 basis point equals  1/100 of 1%). As a percentage of the daily movement of the benchmark futures contract, the average error in daily tracking by the NAV was 0.489%, meaning that over this time period USNG’s tracking error was within the plus or minus 10% range established as its benchmark tracking goal.

US12OF’s units began trading on the American Stock Exchange on December 6, 2007 and are offered on a continuous basis. As a result of the acquisition of the American Stock Exchange by NYSE Euronext, US12OF’s units commenced trading on the NYSE Arca on November 25, 2008. As of February 28, 2010, the total amount of money raised by US12OF from its authorized purchasers was $225,180,194; the total number of authorized purchasers of US12OF was 7; the number of baskets purchased by authorized purchasers of US12OF was 75; and the aggregate amount of units purchased was 7,500,000.

Since the offering of US12OF units to the public on December 6, 2007 to February 28, 2010, the simple average daily change in its benchmark oil futures contracts was -0.006%, while the simple average daily change in the NAV of US12OF over the same time period was -0.005%. The average daily difference was 0.001% (or 0.1 basis points, where 1 basis point equals  1/100 of 1%). As a percentage of the daily movement of the benchmark oil futures contracts, the average error in daily tracking by the NAV was -0.141%, meaning that over this time period US12OF’s tracking error was within the plus or minus 10% range established as its benchmark tracking goal.

UGA’s units began trading on the American Stock Exchange on February 26, 2008 and are offered on a continuous basis. As a result of the acquisition of the American Stock Exchange by NYSE Euronext, UGA’s units commenced trading on the NYSE Arca on November 25, 2008. As of February 28, 2010, the total amount of money raised by UGA from its authorized purchasers was $129,739,781; the total number of authorized purchasers of UGA was 7; the number of baskets purchased by Authorized Purchasers of UGA was 43; and the aggregate amount of units purchased was 4,300,000.

Since the offering of UGA units to the public on February 26, 2008 to February 28, 2010, the simple average daily change in its benchmark futures contract was -0.010%, while the simple average daily change in the NAV of UGA over the same time period was -0.011%. The average daily difference was -0.001% (or 0.1 basis points, where 1 basis point equals  1/100 of 1%). As a percentage of the daily movement of the benchmark futures contract, the average error in daily tracking by the NAV was -0.658%, meaning that over this time period UGA’s tracking error was within the plus or minus 10% range established as its benchmark tracking goal.

USHO’s units began trading on the American Stock Exchange on April 9, 2008 and are offered on a continuous basis. As a result of the acquisition of the American Stock Exchange by NYSE Euronext, USHO’s units commenced trading on the NYSE Arca on November 25, 2008. As of February 28, 2010, the total amount of money raised by USHO from its authorized purchasers was $27,751,399; the total number of authorized purchasers of USHO was 7; the number of baskets purchased by authorized purchasers of USHO was 8; and the aggregate amount of units purchased was 800,000.

Since the offering of USHO units to the public on April 9, 2008 to February 28, 2010, the simple average daily change in its benchmark futures contract was -0.095%, while the simple average daily change in the NAV of USHO over the same time period was -0.095%. The average daily difference was 0%. As a percentage of the daily movement of the Benchmark Futures Contract, the average error in daily tracking by the NAV was -0.700%, meaning that over this time period USHO’s tracking error was within the plus or minus 10% range established as its benchmark tracking goal.

USSO’s units began trading on the NYSE Arca on September 18, 2009 and are offered on a continuous basis. As of February 28, 2010, the total amount of money raised by USSO from its authorized purchasers

36


 
 

TABLE OF CONTENTS

was $14,290,533; the total number of authorized purchasers was 7; the number of baskets purchased by authorized purchasers was 3; and the aggregate amount of units purchased was 300,000.

Since the offering of USSO units to the public on September 18, 2009 to February 28, 2010, the inverse of the simple average daily change in its benchmark futures contract was -0.105, while the simple average daily change in the NAV of USSO over the same time period was -0.108%. The average daily difference was -0.003% (or 0.3 basis points, where 1 basis point equals  1/100 of 1%). As a percentage of the daily movement of the benchmark futures contract, the average error in daily tracking by the NAV was -0.639%, meaning that over this time period USSO’s tracking error was within the plus or minus 10% range established as its benchmark tracking goal.

US12NG’s units began trading on the NYSE Arca on November 18, 2009 and are offered on a continuous basis. As of February 28, 2010, the total amount of money raised by US12NG from its authorized purchasers was $40,652,357; the total number of authorized purchasers was 3; the number of baskets purchased by authorized purchasers was 8; and the aggregate amount of units purchased was 800,000.

Since the offering of US12NG units to the public on November 18, 2009 to February 28, 2010, the simple average daily change in its benchmark futures contract was -0.025%, while the simple average daily change in the NAV of US12NG over the same time period was -0.028%. The average daily difference was -0.003% (or -0.3 basis points, where 1 basis point equals 1/100 of 1%). As a percentage of the daily movement of the benchmark futures contract, the average error in daily tracking by the NAV was -0.024%, meaning that over this time period US12NG’s tracking error was within the plus or minus 10% range established as its benchmark tracking goal.

The table below shows the relationship between the trading prices of the units of each of the Related Public Funds and the daily NAV of such fund, since inception through February 28, 2010. The first row shows the average amount of the variation between the fund’s closing market price and NAV, computed on a daily basis since inception, while the second and third rows depict the maximum daily amount of the end of day premiums and discounts to NAV since inception, on a percentage basis. Management of the General Partner believes that maximum and minimum end of day premiums and discounts typically occur because trading in the units continues on the NYSE Arca until 4:00 p.m. New York time while regular trading in the Benchmark Futures Contract on the NYMEX ceases at 2:30 p.m. New York time and the value of the relevant benchmark futures contract, for purposes of determining its end of day NAV, can be determined at that time. One known exception to this conclusion were the premiums on trading in USNG units that occurred between July 8, 2009 and September 28, 2009, when USNG suspended the issuance of Creation Baskets as a result of regulatory concern relating to the size of USNG’s positions in the natural gas futures and cleared swap markets, and there was continued demand for such units and other similar natural gas futures linked investments in the market.

             
  USOF   USNG   US12OF   UGA   USHO   USSO(1)   US12NG
Average Difference     $0.00       $0.10       -$0.05       $0.01       $0.01       $0.00       -$0.01  
Max Premium %     4.17%       21.32%       10.58%       7.25%       3.20%       1.14%       0.95%  
Max Discount %     -4.62%       -3.51%       -9.93%       -3.11%       -3.07%       -7.09%       -0.77%  

(1) USSO began trading operations on September 18, 2009, and thus no meaningful data is available indicating the relationship between the trading prices of its units and its daily NAV for the specified period.

37


 
 

TABLE OF CONTENTS

There are significant differences between investing in USBO and the Related Public Funds and investing directly in the futures market. The General Partner’s results with the Related Public Funds may not be representative of results that may be experienced with a fund directly investing in futures contracts or other managed funds investing in futures contracts. For more information on the performance of the Related Public Funds see the Performance Tables below.

Performance of the Related Public Funds

USOF:

Experience in Raising and Investing in Funds Through February 28, 2010

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

 
Dollar Amount Offered*   $ 71,257,630,000  
Dollar Amount Raised   $ 24,259,131,469  
Organizational and Offering Expenses:**
        
SEC registration fee   $ 2,480,174  
FINRA registration fee   $ 603,500  
Listing fee   $ 5,000  
Auditor’s fees and expenses   $ 495,850  
Legal fees and expenses   $ 2,066,024  
Printing expenses   $ 285,230  
Length of USOF offering     Continuous  

* Reflects the offering price per unit set forth on the cover page of the registration statement registering such units filed with the SEC.
** Through December 31, 2006, these expenses were paid for by an affiliate of the General Partner in connection with the initial public offering. Following December 31, 2006, USOF has recorded these expenses.

Compensation to the General Partner and Other Compensation USOF:

Expenses Paid by USOF Through February 28, 2010 in Dollar Terms:

 
Expenses   Amount in
Dollar Terms
Amount Paid to General Partner   $ 22,409,847  
Amount Paid in Portfolio Brokerage Commissions   $ 7,674,333  
Other Amounts Paid*   $ 9,124,600  
Total Expenses Paid   $ 39,208,780  

* Includes expenses relating to the registration of units, legal fees, auditing fees, printing expenses, licensing fees, expenses relating to the tax reporting and fees paid to the independent directors.

38


 
 

TABLE OF CONTENTS

Expenses Paid by USOF Through February 28, 2010 as a Percentage of Daily Net Assets:

 
Expenses   Amount As a Percentage of
Average Daily Net Assets
General Partner     0.46% annualized  
Portfolio Brokerage Commissions     0.16% annualized  
Other Amounts Paid     0.19% annualized  
Total Expenses Paid     0.81% annualized  
USOF Performance:
        
Name of Commodity Pool     USOF  
Type of Commodity Pool     Exchange traded security  
Inception of Trading     April 10, 2006  
Aggregate Subscriptions (from inception through February 28, 2010)     $24,259,131,469  
Total Net Assets as of February 28, 2010     $1,854,622,764  
Initial NAV per Unit as of Inception     $67.39  
NAV per Unit as of February 28, 2010     $38.80  
Worst Monthly Percentage Draw-down     Oct 2008 (31.57)%  
Worst Peak-to-Valley Draw-down     Jun 08 – Feb 09 (75.84)%  
Number of Unitholders (as of December 31, 2009)     84,835  

COMPOSITE PERFORMANCE DATA FOR USOF
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

         
  Rates of Return
Month   2006   2007   2008   2009   2010
January              (6.55 )%      (3.98 )%      (14.60 )%      (8.78 )% 
February              5.63 %      11.03 %      (6.55 )%      8.62 % 
March              4.61 %      0.63 %      7.23 %       
April     3.47%*       (4.26 )%      12.38 %      (2.38 )%       
May     (2.91 )%      (4.91 )%      12.80 %      26.69 %       
June     3.16 %      9.06 %      9.90 %      4.16 %       
July     (0.50 )%      10.55 %      (11.72 )%      (2.30 )%       
August     (6.97 )%      (4.93 )%      (6.75 )%      (1.98 )%       
September     (11.71 )%      12.11 %      (12.97 )%      0.25 %       
October     (8.46 )%      16.98 %      (31.57 )%      8.43 %       
November     4.73 %      (4.82 )%      (20.65 )%      (0.51 )%       
December     (5.21 )%      8.66 %      (22.16 )%      (0.03 )%       
Annual Rate of Return     (23.03 )%      46.15 %      (54.75 )%      14.14 %      (0.92)%**  

* Partial from April 10, 2006.
** Through February 28, 2010.

Draw-down:  Losses experienced by the fund over a specified period. Draw-down is measured on the basis of monthly returns only and does not reflect intra-month figures.

Worst Monthly Percentage Draw-down:  The largest single month loss sustained since inception of trading.

Worst Peak-to-Valley Draw-down:  The largest percentage decline in the NAV per unit over the history of the fund. This need not be a continuous decline, but can be a series of positive and negative returns where the negative returns are larger than the positive returns. Worst Peak-to-Valley Draw-down represents the greatest percentage decline from any month-end NAV per unit that occurs without such month-end NAV per unit being equaled or exceeded as of a subsequent month-end. For example, if the NAV per unit declined by

39


 
 

TABLE OF CONTENTS

$1 in each of January and February, increased by $1 in March and declined again by $2 in April, a “peak-to-valley drawdown” analysis conducted as of the end of April would consider that “drawdown” to be still continuing and to be $3 in amount, whereas if the NAV per unit had increased by $2 in March, the January-February drawdown would have ended as of the end of February at the $2 level.

USNG:

Experience in Raising and Investing in Funds Through February 28, 2010

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

 
Dollar Amount Offered*   $ 11,846,500,000  
Dollar Amount Raised   $ 10,558,665,387  
Organizational and Offering Expenses:**
        
SEC registration fee   $ 1,361,084  
FINRA registration fee   $ 377,500  
Listing fee   $ 5,000  
Auditor’s fees and expenses   $ 434,350  
Legal fees and expenses   $ 1,631,179  
Printing expenses   $ 73,270  
Length of USNG offering     Continuous  

* Reflects the offering price per unit set forth on the cover page of the registration statement registering such units filed with the SEC.
** Through April 18, 2007, these expenses were paid for by the General Partner. Following April 18, 2007, USNG has recorded these expenses.

Compensation to the General Partner and Other Compensation USNG

Expenses Paid by USNG Through February 28, 2010 in Dollar Terms:

 
Expenses   Amount in
Dollar Terms
Amount Paid to General Partner   $ 23,398,469  
Amount Paid in Portfolio Brokerage Commissions   $ 13,850,511  
Other Amounts Paid*   $ 11,808,870  
Total Expenses Paid   $ 49,057,850  

* Includes expenses relating to the registration of units, legal fees, auditing fees, printing expenses, licensing fees, expenses relating to the tax reporting and fees paid to the independent directors.

40


 
 

TABLE OF CONTENTS

Expenses Paid by USNG Through February 28, 2010 as a Percentage of Average Daily Net Assets:

 
Expenses   Amount As a Percentage of
Average Daily Net Assets
General Partner     0.55% annualized  
Portfolio Brokerage Commissions     0.33% annualized  
Other Amounts Paid     0.28% annualized  
Total Expense Ratio     1.16% annualized  
USNG Performance:
        
Name of Commodity Pool     USNG  
Type of Commodity Pool     Exchange traded security  
Inception of Trading     April 18, 2007  
Aggregate Subscriptions (from inception through February 28, 2010)     $10,558,665,387  
Total Net Assets as of February 28, 2010     $3,594,443,718  
Initial NAV per Unit as of Inception     $50.00  
NAV per Unit as of February 28, 2010     $8.74  
Worst Monthly Percentage Draw-down     Jul 08 (32.13)%  
Worst Peak-to-Valley Draw-down     Jun 08 – Nov 09 (85.89)%  
Number of Unitholders (as of December 31, 2009)     203,277  

COMPOSITE PERFORMANCE DATA FOR USNG
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

       
  Rates of Return
Month   2007   2008   2009   2010
January              8.87 %      (21.49 )%      (7.65 )% 
February              15.87 %      (5.47 )%      (6.02 )% 
March              6.90 %      (11.81 )%       
April     4.30%*       6.42 %      (13.92 )%       
May     (0.84 )%      6.53 %      10.37 %       
June     (15.90 )%      13.29 %      (4.63 )%       
July     (9.68 )%      (32.13 )%      (8.70 )%       
August     (13.37 )%      (13.92 )%      (27.14 )%       
September     12.28 %      (9.67 )%      26.03 %       
October     12.09 %      (12.34 )%      (13.31 )%       
November     (16.16 )%      (6.31 )%      (11.86 )%       
December     0.75 %      (14.32 )%      13.91 %       
Annual Rate of Return     (27.64 )%      (35.68 )%      (56.73 )      (13.21)%**  

* Partial from April 17, 2007.
** Through February 28, 2010.

For a definition of draw-down, please see text below “Composite Performance Data for USOF.”

41


 
 

TABLE OF CONTENTS

US12OF:

Experience in Raising and Investing in Funds Through February 28, 2010

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

 
Dollar Amount Offered*   $ 3,718,000,000  
Dollar Amount Raised   $ 225,180,194  
Organizational and Offering Expenses:**
        
SEC registration fee   $ 129,248  
FINRA registration fee   $ 151,000  
Listing fee   $ 5,000  
Auditor’s fees and expenses   $ 145,700  
Legal fees and expenses   $ 312,297  
Printing expenses   $ 44,402  
Length of US12OF offering     Continuous  

* Reflects the offering price per unit set forth on the cover page of the registration statement registering such units filed with the SEC.
** Through March 31, 2009, these expenses were paid for by an affiliate of the General Partner in connection with the initial public offering. Following March 31, 2009, US12OF has recorded these expenses.

Compensation to the General Partner and Other Compensation US12OF:

Expenses Paid by US12OF Through February 28, 2010 in Dollar Terms:

 
Expenses   Amount in Dollar Terms
Amount Paid to General Partner   $ 1,077,738  
Amount Paid in Portfolio Brokerage Commissions   $ 57,575  
Other Amounts Paid*   $ 1,078,491  
Total Expenses Paid or Accrued   $ 2,213,804  
Expenses Waived**   $ (262,220 ) 
Total Expenses Paid or Accrued Including Expenses Waived   $ 1,951,584  

* Includes expenses relating to the registration of units, legal fees, auditing fees, printing expenses, licensing fees, expenses relating to the tax reporting and fees paid to the independent directors.
** The General Partner, 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 US12OF’s NAV, on an annualized basis through March 31, 2009, after which date such payments were no longer necessary. The General Partner has no obligation to continue such payment in subsequent periods.

42


 
 

TABLE OF CONTENTS

Expenses Paid by US12OF Through February 28, 2010 as a Percentage of Average Daily Net Assets:

 
Expenses   Amount As a Percentage of
Average Daily Net Assets
General Partner     0.60% annualized  
Portfolio Brokerage Commissions     0.03% annualized  
Other Amounts Paid     0.61% annualized  
Total Expenses Paid or Accrued     1.24% annualized  
Expenses Waived     (0.15)% annualized  
Total Expenses Paid or Accrued Including Expenses Waived     1.09% annualized  
US12OF Performance:
        
Name of Commodity Pool     US12OF  
Type of Commodity Pool     Exchange traded security  
Inception of Trading     December 6, 2007  
Aggregate Subscriptions (from inception through February 28, 2010)     $225,180,194  
Total Net Assets as of February 28, 2010     $161,837,281  
Initial NAV per Unit as of Inception     $50.00  
NAV per Unit as of February 28, 2010     $39.47  
Worst Monthly Percentage Draw-down     Oct 2008 (29.59)%  
Worst Peak-to-Valley Draw-down     Jun 08 – Feb 09 (66.97)%  
Number of Unitholders (as of December 31, 2009)     6,875  

COMPOSITE PERFORMANCE DATA FOR US12OF
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

       
  Rates of Return
Month   2007   2008   2009   2010
January              (2.01 )%      (7.11 )%      (8.40 )% 
February              10.48 %      (4.34 )%      6.73 % 
March              (0.66 )%      9.22 %       
April              11.87 %      (1.06 )%       
May              15.47 %      20.40 %       
June              11.59 %      4.51 %       
July              (11.39 )%      1.22 %       
August              (6.35 )%      (2.85 )%       
September              (13.12 )%      (0.92 )%       
October              (29.59 )%      8.48 %       
November              (16.17 )%      2.31 %       
December     8.44%*       (12.66 )%      (1.10 )%       
Annual Rate of Return     8.44 %      (42.39 )%      29.23 %      (2.23)%**  

* Partial from December 6, 2007.
** Through February 28, 2010.

For a definition of draw-down, please see text below “Composite Performance Data for USOF.”

43


 
 

TABLE OF CONTENTS

UGA:

Experience in Raising and Investing in Funds Through February 28, 2010

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

 
Dollar Amount Offered*   $ 1,500,000,000  
Dollar Amount Raised   $ 129,739,781  
Organizational and Offering Expenses:**
        
SEC registration fee   $ 184,224  
FINRA registration fee   $ 151,000  
Listing fee   $ 5,000  
Auditor’s fees and expenses   $ 27,500  
Legal fees and expenses   $ 223,392  
Printing expenses   $ 162,901  
Length of UGA offering     Continuous  

* Reflects the offering price per unit set forth on the cover page of the registration statement registering such units filed with the SEC.
** Through September 1, 2009, initial offering costs and a portion of ongoing expenses were paid for by the General Partner. Following September 1, 2009, UGA has recorded these expenses.

Compensation to the General Partner and Other Compensation UGA:

Expenses Paid by UGA Through February 28, 2010 in Dollar Terms:

 
Expenses   Amount in
Dollar Terms
Amount Paid to General Partner   $ 542,047  
Amount Paid in Portfolio Brokerage Commissions   $ 101,346  
Other Amounts Paid*   $ 614,130  
Total Expenses Paid or Accrued   $ 1,257,523  
Expenses Waived:**   $ (446,690 ) 
Total Expenses Paid or Accrued Including Expenses Waived   $ 810,833  

* Includes expenses relating to the registration of new units, legal fees, auditing fees, printing expenses, licensing fees, expenses relating to tax reporting and fees paid to the independent directors.
** The General Partner, 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 UGA’s NAV, on an annualized basis. The General Partner has no obligation to continue such payment into subsequent periods.

44


 
 

TABLE OF CONTENTS

Expenses Paid by UGA Through February 28, 2010 as a Percentage of Average Daily Net Assets:

 
Expenses   Amount As a Percentage of
Average Daily Net Assets
General Partner     0.60% annualized  
Portfolio Brokerage Commissions     0.11% annualized  
Other Amounts Paid     0.68% annualized  
Total Expenses Paid or Accrued     1.39% annualized  
Expenses Waived     (0.49)% annualized  
Total Expenses Paid Including Expenses Waived     0.90% annualized  
UGA Performance:
        
Name of Commodity Pool     UGA  
Type of Commodity Pool     Exchange traded security  
Inception of Trading     February 26, 2008  
Aggregate Subscriptions (from inception through February 28, 2010)     $129,739,781  
Total Net Assets as of February 28, 2010     $72,327,350  
Initial NAV per Unit as of Inception     $50.00  
NAV per Unit as of February 28, 2010     $36.16  
Worst Monthly Percentage Draw-down     Oct 2008 (38.48)%  
Worst Peak-to-Valley Draw-down     Jun 08 – Dec 08 (69.02)%  
Number of Unitholders (as of December 31, 2009)     5,131  

COMPOSITE PERFORMANCE DATA FOR UGA
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

     
  Rates of Return
Month   2008   2009   2010
January              16.23 %      (7.47 )% 
February     (0.56)%*       0.26 %      7.33 % 
March     (2.39 )%      2.59 %       
April     10.94 %      2.07 %       
May     15.60 %      30.41 %       
June     4.79 %      1.65 %       
July     (12.79 )%      6.24 %       
August     (3.88 )%      (3.71 )%       
September     (9.36 )%      (3.38 )%       
October     (38.48 )%      10.96 %       
November     (21.35 )%      1.00 %       
December     (15.72 )%      0.55 %       
Annual Rate of Return     (59.58 )%      80.16 %      (0.69)%**  

* Partial from February 26, 2008.
** Through February 28, 2010.

For a definition of draw-down, please see text below “Composite Performance Data for USOF.”

45


 
 

TABLE OF CONTENTS

USHO:

Experience in Raising and Investing in Funds Through February 28, 2010

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

 
Dollar Amount Offered*   $ 500,000,000  
Dollar Amount Raised   $ 27,751,399  
Organizational and Offering Expenses:**
        
SEC registration fee   $ 142,234  
FINRA registration fee   $ 151,000  
Listing fee   $ 5,000  
Auditor’s fees and expenses   $ 27,500  
Legal fees and expenses   $ 130,517  
Printing expenses   $ 106,584  
Length of USHO offering     Continuous  

* Reflects the offering price per unit set forth on the cover page of the registration statement registering such units filed with the SEC.
** Through August 31, 2009, initial offering costs and a portion of ongoing expenses were paid for by the General Partner. Following August 31, 2009, USHO has recorded these expenses.

Compensation to the General Partner and Other Compensation USHO:

Expenses Paid by USHO Through February 28, 2010 in Dollar Terms:

 
Expenses   Amount in
Dollar Terms
Amount Paid to General Partner   $ 124,889  
Amount Paid in Portfolio Brokerage Commissions   $ 20,117  
Other Amounts Paid*   $ 475,234  
Total Expenses Paid or Accrued   $ 620,240  
Expenses Waived**   $ (431,694 ) 
Total Expenses Paid or Accrued Including Expenses Waived   $ 188,546  

* Includes expenses relating to the registration of new units, legal fees, auditing fees, printing expenses, licensing fees, expenses relating to tax reporting and fees paid to the independent directors.
** The General Partner, 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 USHO’s NAV, on an annualized basis. The General Partner has no obligation to continue such payment into subsequent periods.

46


 
 

TABLE OF CONTENTS

Expenses Paid by USHO Through February 28, 2010 as a Percentage of Average Daily Net Assets:

 
Expenses   Amount As a Percentage of
Average Daily Net Assets
General Partner     0.60% annualized  
Portfolio Brokerage Commissions     0.10% annualized  
Other Amounts Paid     2.29% annualized  
Total Expenses Paid or Accrued     2.99% annualized  
Expenses Waived     (2.08)% annualized  
Total Expenses Paid Including Expenses Waived     0.91% annualized  
USHO Performance:
        
Name of Commodity Pool     USHO  
Type of Commodity Pool     Exchange traded security  
Inception of Trading     April 9, 2008  
Aggregate Subscriptions (from inception through February 28, 2010)     $27,751,399  
Total Net Assets as of February 28, 2010     $15,702,463  
Initial NAV per Unit as of Inception     $50.00  
NAV per Unit as of February 28, 2010     $26.17  
Worst Monthly Percentage Draw-down     Oct 08 (28.63)%  
Worst Peak-to-Valley Draw-down     Jun 08 – Feb 09 (69.17)%  
Number of Unitholders (as of December 31, 2009)     1,154  

47


 
 

TABLE OF CONTENTS

COMPOSITE PERFORMANCE DATA FOR USHO
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

     
  Rates of Return
Month   2008   2009   2010
January              0.05 %      (10.17 )% 
February              (11.34 )%      5.78 % 
March              6.73 %       
April     2.84%*       (3.85 )%       
May     15.93 %      23.13 %       
June     5.91 %      4.55 %       
July     (12.18 )%      0.39 %       
August     (8.41 )%      (2.71 )%       
September     (9.77 )%      (0.48 )%       
October     (28.63 )%      7.60 %       
November     (18.38 )%      0.19 %       
December     (17.80 )%      2.23 %       
Annual Rate of Return     (56.12 )%      25.52 %      (4.97)%**  

* Partial from April 9, 2008.
** Through February 28, 2010.

For a definition of draw-down, please see text below “Composite Performance Data for USOF.”

USSO:

Experience in Raising and Investing in Funds Through February 28, 2010

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

 
Dollar Amount Offered*   $ 1,250,000,000  
Dollar Amount Raised   $ 14,290,533  
Organizational and Offering Expenses:**
        
SEC registration fee   $ 49,125  
FINRA registration fee   $ 75,500  
Listing fee   $ 5,000  
Auditor’s fees and expenses   $ 2,500  
Legal fees and expenses   $ 512,460  
Printing expenses   $ 23,945  
Length of USSO offering     Continuous  

* Reflects the offering price per unit set forth on the cover page of the registration statement registering such units filed with the SEC.
** These expenses were paid for by the General Partner.

48


 
 

TABLE OF CONTENTS

Compensation to the General Partner and Other Compensation USSO:

Expenses Paid by USSO Through February 28, 2010 in Dollar Terms:

 
Expenses   Amount in
Dollar Terms
Amount Paid to General Partner   $ 33,306  
Amount Paid in Portfolio Brokerage Commissions   $ 7,668  
Other Amounts Paid*   $ 322,824  
Total Expenses Paid or Accrued   $ 363,798  
Expenses Waived**   $ (311,355 ) 
Total Expenses Paid or Accrued Including Expenses Waived   $ 52,443  

* Includes expenses relating to legal fees, auditing fees, printing expenses, licensing fees, expenses relating to tax reporting and fees paid to the independent directors.
** The General Partner, 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 USSO's NAV, on an annualized basis. The General Partner has no obligation to continue such payment into subsequent periods.

Expenses Paid by USSO Through February 28, 2010 as a Percentage of Average Daily Net Assets:

 
Expenses   Amount As a Percentage of
Average Daily Net Assets
General Partner     0.61% annualized  
Portfolio Brokerage Commissions     0.14% annualized  
Other Amounts Paid     5.89% annualized  
Total Expenses Paid or Accrued     6.64% annualized  
Expenses Waived     (5.68)% annualized  
Total Expenses Paid Including Expenses Waived     0.96% annualized  
USSO Performance:
        
Name of Commodity Pool     USSO  
Type of Commodity Pool     Exchange traded security  
Inception of Trading     September 18, 2009  
Aggregate Subscriptions (from inception through February 28, 2010)     $14,290,533  
Total Net Assets as of February 28, 2010     $13,102,818  
Initial NAV per Unit as of Inception     $50.00  
NAV per Unit as of February 28, 2010     $43.68  
Worst Monthly Percentage Draw-down     Feb 10 (8.94)%  
Worst Peak-to-Valley Draw-down     Sep 09 – Dec 09 (12.02)%  
Number of Unitholders (as of December 31, 2009)     185  

49


 
 

TABLE OF CONTENTS

COMPOSITE PERFORMANCE DATA FOR USSO
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

   
  Rates of Return
Month   2009   2010
January           9.05 % 
February           (8.94 )% 
March            
April            
May            
June            
July            
August            
September     (2.90)%*        
October     (8.65 )%       
November     (0.25 )%       
December     (0.57 )%       
Annual Rate of Return     (12.02 )%      (0.70)%**  

* Partial from September 18, 2009.
** Through February 28, 2010.

For a definition of draw-down, please see text below “Composite Performance Data for USOF.”

US12NG:

Experience in Raising and Investing in Funds Through February 28, 2010

PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

 
Dollar Amount Offered*   $ 1,500,000,000  
Dollar Amount Raised   $ 40,652,357  
Organizational and Offering Expenses:**
        
SEC registration fee   $ 82,445  
FINRA registration fee   $ 75,500  
Listing fee   $ 5,000  
Auditor’s fees and expenses   $ 2,500  
Legal fees and expenses   $ 202,252  
Printing expenses   $ 31,558  
Length of US12NG offering     Continuous  

* Reflects the offering price per unit set forth on the cover page of the registration statement registering such units filed with the SEC.
** These expenses were paid for by the General Partner.

50


 
 

TABLE OF CONTENTS

Compensation to the General Partner and Other Compensation US12NG:

Expenses Paid by US12NG Through February 28, 2010 in Dollar Terms:

 
Expenses   Amount in
Dollar Terms
Amount Paid to General Partner   $ 52,266  
Amount Paid in Portfolio Brokerage Commissions   $ 7,822  
Other Amounts Paid*   $ 266,432  
Total Expenses Paid or Accrued   $ 326,520  
Expenses Waived**   $ (248,331 ) 
Total Expenses Paid or Accrued Including Expenses Waived   $ 78,189  

* Includes expenses relating to legal fees, auditing fees, printing expenses, licensing fees, expenses relating to tax reporting and fees paid to the independent directors.
** The General Partner, 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 US12NG’s NAV, on an annualized basis. The General Partner has no obligation to continue such payment into subsequent periods.

Expenses Paid by US12NG Through February 28, 2010 as a Percentage of Average Daily Net Assets:

 
Expenses   Amount As a Percentage of
Average Daily Net Assets
General Partner     0.61% annualized  
Portfolio Brokerage Commissions     0.09% annualized  
Other Amounts Paid     3.09% annualized  
Total Expenses Paid or Accrued     3.79% annualized  
Expenses Waived     (2.88)% annualized  
Total Expenses Paid or Accrued Including Expenses Waived     0.91% annualized  
US12NG Performance:
        
Name of Commodity Pool     US12NG  
Type of Commodity Pool     Exchange traded security  
Inception of Trading     November 18, 2009  
Aggregate Subscriptions (from inception through February 28, 2010)     $40,652,357  
Total Net Assets as of February 28, 2010     $33,573,229  
Initial NAV per Unit as of Inception     $50.00  
NAV per Unit as of February 28, 2010     $47.96  
Worst Monthly Percentage Draw-down     Jan 10 (5.93)%  
Worst Peak-to-Valley Draw-down     Jan 10 – Feb 10 (10.81)%  
Number of Unitholders (as of December 31, 2009)     1,276  

COMPOSITE PERFORMANCE DATA FOR US12NG
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

   
  Rates of Return
Month   2009   2010
January           (5.93 )% 
February           (5.18 )% 
March            
April            
May            
June            
July            
August            
September            
October            
November     (0.02)%*  
December     7.56 %       
Annual Rate of Return     7.54 %      (10.81)%**  

* Partial from November 18, 2009.
** Through February 28, 2010.

For a definition of draw-down, please see text below “Composite Performance Data for USOF.”

51


 
 

TABLE OF CONTENTS

Other Related Commodity Trading and Investment Management Experience

Until December 31, 2009, Ameristock Corporation was an affiliate of the General Partner. Ameristock Corporation is a California-based registered investment advisor registered under the Investment Advisors Act of 1940, as amended, that has been sponsoring and providing portfolio management services to mutual funds since 1995. Ameristock Corporation is the investment adviser to the Ameristock Mutual Fund, Inc., a mutual fund registered under the Investment Company Act of 1940 that focuses on large cap U.S. equities that had $208,573,985 in assets as of February 28, 2010. Ameristock Corporation was also the investment advisor to the Ameristock ETF Trust, an open-end management investment company registered under the 1940 Act that consisted of five separate investment portfolios, each of which sought investment results, before fees and expenses, that corresponded generally to the price and yield performance of a particular U.S. Treasury securities index owned and compiled by Ryan Holdings LLC and Ryan ALM, Inc. The Ameristock ETF Trust has liquidated each of its investment portfolios and has wound up its affairs.

How Does USBO Operate?

The net assets of USBO will consist primarily of investments in futures contracts for Brent crude oil, but may also consist of investment contracts for other types of crude oil, natural gas, gasoline, heating oil and other petroleum-based fuels traded on the ICE Futures Exchange, NYMEX, or other U.S. and foreign exchanges (collectively, “Futures Contracts”). USBO may also invest in other crude oil-related investments such as cash-settled options on Futures Contracts, forward contracts for crude oil, cleared swap contracts and over-the-counter transactions that are based on the price of crude oil and other petroleum-based fuels, Futures Contracts and indices based on the foregoing (collectively, “Other Crude Oil-Related Investments”). For convenience and unless otherwise specified, Futures Contracts and Other Crude Oil-Related Investments collectively are referred to as “Crude Oil Interests” in this prospectus.

USBO will invest in Crude Oil Interests to the fullest extent possible without being leveraged or unable to satisfy its current or potential margin or collateral obligations with respect to its investments in Futures Contracts and Other Crude Oil-Related Investments. The primary focus of the General Partner will be investing in Futures Contracts and the management of investments in short-term obligations of the United States of two years or less (“Treasuries”), cash and/or cash equivalents for margining purposes and as collateral.

The investment objective of USBO is for the daily changes in percentage terms of its units’ net asset value to reflect the daily changes in percentage terms of the spot price of Brent crude oil as measured by the changes in the price of the futures contract on Brent crude oil as traded on the ICE Futures Exchange that is the near month contract to expire, except when the near month contract is within two weeks of expiration, in which case the futures contract will be the next month contract to expire, less USBO’s expenses. It is not the intent of USBO to be operated in a fashion such that its NAV will equal, in dollar terms, the dollar price of spot crude oil or any particular futures contract based on crude oil.

As a specific benchmark, the General Partner will endeavor to place USBO’s trades in Futures Contracts and Other Crude Oil-Related Investments and otherwise manage USBO’s investments so that “A” will be within plus/minus 10 percent of “B”, where:

A is the average daily change in USBO’s NAV for any period of 30 successive valuation days, i.e., any NYSE Arca trading day as of which USBO calculates its NAV, and
B is the average daily change in the price of the Benchmark Futures Contract over the same period.

An investment in the units provides a means for diversifying an investor’s portfolio or hedging exposure to changes in oil prices. An investment in the units allows both retail and institutional investors to easily gain exposure to the crude oil market in a transparent, cost-effective manner.

The Benchmark Futures Contract will be changed from the near month contract to the next month contract over a four-day period. Each month, the Benchmark Futures Contract will change starting at the end of the day on the date two weeks prior to expiration of the near month contract for that month. During the first three days of the period, the applicable value of the Benchmark Futures Contract will be based on a combination of the near month contract and the next month contract as follows: (1) day 1 will consist of 75% of the

52


 
 

TABLE OF CONTENTS

then near month contract’s total return for the day, plus 25% of the total return for the day of the next month contract, (2) day 2 will consist of 50% of the then near month contract’s total return for the day, plus 50% of the total return for the day of the next month contract, and (3) day 3 will consist of 25% of the then near month contract’s total return for the day, plus 75% of the total return for the day of the next month contract. On day 4, the Benchmark Futures Contract will be the next month contract to expire at that time and that contract will remain the Benchmark Futures Contract until the beginning of following month’s change in the Benchmark Futures Contract over a four-day period.

On each day during the four-day period, the General Partner anticipates it will “roll” USBO’s positions in oil interests by closing, or selling, a percentage of USBO’s positions in oil interests and reinvesting the proceeds from closing those positions in new oil interests that reflect the change in the Benchmark Futures Contract.

The anticipated monthly dates on which the Benchmark Futures Contract will be changed and the Crude Oil Interests will be “rolled” in 2010 and subsequent years will be posted on USBO’s website at www.unitedstatesbrentoilfund.com, and will be subject to change without notice.

The General Partner believes that market arbitrage opportunities will cause changes in USBO’s unit price on the NYSE Arca to closely track changes in USBO’s NAV. The General Partner believes that changes in USBO’s NAV in percentage terms will closely track the changes in percentage terms in the Benchmark Futures Contract in, less USBO’s expenses.

The expected correlation of the price of USBO’s units, USBO’s NAV and the price of the Benchmark Futures Contract is illustrated in the following diagram:

[GRAPHIC MISSING]

The General Partner will employ a “neutral” investment strategy intended to track changes in the price of the Benchmark Futures Contract regardless of whether the price goes up or goes down. USBO’s “neutral” investment strategy is designed to permit investors generally to purchase and sell USBO’s units for the purpose of taking positions indirectly in Brent crude oil in a cost-effective manner, and/or to permit participants

53


 
 

TABLE OF CONTENTS

in the crude oil or other industries to hedge the risk of losses in their crude oil-related transactions. Accordingly, depending on the investment objective of an individual investor, the risks generally associated with taking positions in crude oil and/or the risks involved in hedging may exist. In addition, an investment in USBO involves the risk that the changes in the price of USBO’s units will not accurately track the changes in the Benchmark Futures Contract.

USBO’s total portfolio composition will be disclosed each day that the NYSE Arca is open for trading, on USBO’s website at www.unitedstatesbrentoilfund.com. The website disclosure of portfolio holdings will be made daily and will include, as applicable, the name and value of each Crude Oil Interest, the specific types of Other Crude Oil-Related Investments and characteristics of such Other Crude Oil-Related Investments, Treasuries, and the amount of cash and/or cash equivalents held in USBO’s portfolio. USBO’s website is publicly accessible at no charge. USBO’s assets will be held in segregated accounts pursuant to the Commodity Exchange Act and CFTC regulations.

USBO will create and redeem units only in blocks of 100,000 units called Creation Baskets and Redemption Baskets, respectively. Only Authorized Purchasers may purchase or redeem Creation Baskets or Redemption Baskets. An Authorized Purchaser is under no obligation to create or redeem baskets, and an Authorized Purchaser is under no obligation to offer to the public units of any baskets it does create. It is expected that baskets will be created when there is sufficient demand for units that the market price per unit is at a premium to the NAV per unit. Authorized Purchasers will then sell such units, which will be listed on the NYSE Arca, to the public at per-unit offering prices that are expected to reflect, among other factors, the trading price of the units on the NYSE Arca, the NAV of USBO at the time the Authorized Purchaser purchased the Creation Baskets and the NAV at the time of the offer of the units to the public, the supply of and demand for units at the time of sale, and the liquidity of the Futures Contracts market and the market for Other Crude Oil-Related Investments. The prices of units offered by Authorized Purchasers are expected to fall between USBO’s NAV and the trading price of the units on the NYSE Arca at the time of sale. Similarly, it is expected that baskets will be redeemed when the market price per unit is at a discount to the NAV per unit. Retail investors seeking to purchase or sell units on any day are expected to effect such transactions in the secondary market, on the NYSE Arca, at the market price per unit, rather than in connection with the creation or redemption of baskets.

The minimum number of Creation Baskets that must be sold is one. All proceeds from the sale of Creation Baskets will be invested as quickly as possible in the investments described in this prospectus. There will be no escrow or similar holding of funds that has a time period or other conditions. Investments will be held through the Custodian or through accounts with USBO’s commodity futures brokers. There is no stated maximum time period for USBO’s operations and the fund will continue until all units are redeemed or the fund is liquidated pursuant to the terms of the LP Agreement.

There is no specified limit on the maximum amount of Creation Baskets that can be sold. At some point, accountability levels on certain of the Futures Contracts in which USBO intends to invest may practically limit the maximum amount of Creation Baskets that will be sold if the General Partner determines that the other investment alternatives available to USBO at that time will not enable it to meet its stated investment objective.

While USBO will issue units only in Creation Baskets, units may also be purchased and sold in much smaller increments on the NYSE Arca. These transactions, however, will be effected at bid and ask prices established by specialist firm(s). Like any listed security, units can be purchased and sold at any time a secondary market is open.

The chart below illustrates the historical correlation between the Benchmark Futures Contract and certain other fuel-based commodity futures contracts in which USBO may invest. These correlations are relevant because the General Partner endeavors to invest USBO’s assets in Futures Contracts and Other Oil Interests so that daily changes in USBO’s NAV correlate as closely as possible with daily changes in the price of the Benchmark Futures Contract. If certain other fuel-based commodity futures contracts do not closely correlate with the Futures Contracts then their use could lead to greater tracking error. As noted, the General Partner also believes that the changes in the price of the Benchmark Futures Contract will closely correlate with changes in the spot price of Brent crude oil. Assuming that the units’ value tracks the Benchmark Futures

54


 
 

TABLE OF CONTENTS

Contract as intended, the stated objective of USBO for the units’ NAV to reflect the performance of the spot price of Brent crude oil would be met if the trend reflected over the past ten years were to continue. However, there is no guarantee that such trend will continue.

The degree of correlation varies both among the different commodities and also varies over time. As such, the use of an energy related commodity to hedge a different energy commodity can only produce, at best, an imperfect hedge. The following price graph is scaled so all contracts start at the same level at year end 1999.

[GRAPHIC MISSING]

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

What Is USBO’s Investment Strategy?

In managing USBO’s assets the General Partner does not intend to use a technical trading system that issues buy and sell orders. The General Partner does intend to employ a quantitative methodology whereby each time a Creation Basket is sold, the General Partner will take corresponding positions in Crude Oil Interests, such as the Benchmark Futures Contract, that have an aggregate market value that approximates the amount of Treasuries and/or cash received from the sale of the Creation Basket.

As an example, assume that a Creation Basket is sold by USBO, and that USBO’s closing NAV per unit is $50.00. In that case, USBO would receive $5,000,000 in proceeds from the sale of the Creation Basket ($50 NAV per unit multiplied by 100,000 units, and ignoring the Creation Basket fee of $1,000). If one were to assume further that the General Partner wants to invest the entire proceeds from the Creation Basket in positions in the Benchmark Futures Contract and that the market value of the Benchmark Futures Contract is $141,370, USBO would be unable to sell the exact number of Benchmark Futures Contracts with an aggregate market value equal to $5,000,000. Instead, USBO would be able to buy 35 Benchmark Futures Contracts with an aggregate face amount of $4,947,750. Assuming a margin requirement equal to 10% of the value of the Benchmark Futures Contract, USBO would be required to deposit $494,775 in Treasuries and cash with the futures commission merchant through which the Benchmark Futures Contracts were sold. The remainder of

55


 
 

TABLE OF CONTENTS

the proceeds from the sale of the Creation Basket would remain invested in cash, cash equivalents, and Treasuries as determined by the General Partner from time to time based on factors such as potential calls for margin or anticipated redemptions.

The specific Futures Contracts to be sold will depend on various factors, including a judgment by the General Partner as to the appropriate diversification of USBO’s investments in futures contracts with respect to the month of expiration, and the prevailing price volatility of particular contracts. While the General Partner anticipates significant investments in ICE Futures Exchange futures contracts, as USBO reaches certain position limits on the ICE Futures Exchange, or for other reasons, it will invest in Futures Contracts traded on other exchanges or may invest in Other Crude Oil-Related Investments such as contracts in the “over-the-counter” market.

The General Partner does not anticipate letting its Futures Contracts expire and making delivery of the underlying crude oil. Instead, the General Partner will close existing positions e.g., when it changes the Benchmark Futures Contract or it otherwise determines it would be appropriate to do so and reinvest the proceeds in new Futures Contracts. Positions may also be closed out to meet orders for Redemption Baskets and in such case proceeds for such baskets will not be reinvested.

By remaining invested as fully as possible in Futures Contracts or Other Crude Oil-Related Investments, the General Partner believes that the changes in percentage terms in USBO’s NAV will closely track the changes in percentage terms in the prices of the Benchmark Futures Contract. The General Partner believes that certain arbitrage opportunities will result in the price of the units traded on the NYSE Arca closely tracking the NAV of USBO. Additionally, as discussed above, the General Partner has conducted research that indicates that Futures Contracts traded on the ICE Futures Exchange have closely tracked the spot price of the underlying oil. Based on these expected interrelationships, the General Partner believes that the changes in the price of USBO’s units as traded on the NYSE Arca will closely track the changes in the spot price of Brent crude oil.

What Are Futures Contracts?

Futures contracts are agreements between two parties. One party agrees to buy a commodity such as crude oil from the other party at a later date at a price and quantity agreed upon when the contract is made. Futures contracts are traded on futures exchanges. For example, Brent crude oil Futures Contracts traded on the ICE Futures Exchange trade in units of 1,000 barrels. The Brent crude oil Futures Contracts traded on the ICE Futures Exchange are priced by an electronic, screen-based system that determines the price by matching electronically offers to purchase and sell.

Certain typical and significant characteristics of Futures Contracts are discussed below. Additional risks of investing in or taking positions in Futures Contracts are included in “What are the Risk Factors Involved with an Investment in USBO?”

Impact of Exchange Regulation, Accountability Levels, Position Limits and Price Fluctuation Limits.  The Benchmark Futures Contract is currently traded on the ICE Futures Exchange without specific accountability levels or position limits. However, the ICE Futures Exchange’s daily position management regime requires that any position greater than 500 contracts in the nearest two months to expire must be reported to the ICE Futures Exchange on a daily basis. The ICE Futures Exchange has powers to prevent the development of excessive positions or unwarranted speculation or any other undesirable situation and may take any steps necessary to resolve such situations including the ability to mandate limitations on the size of such positions or to reduce positions where appropriate. Although the Benchmark Futures Contract is not subject to the same accountability levels and position limits established by U.S. designated contract markets, recent actions by the ICE Futures Exchange indicate that the exchange is actively using its oversight authority to regulate positions in its contracts.

If USBO is required to limit or reduce the size of its positions in Brent crude oil contracts on the ICE Futures Exchange, it may then, if permitted under applicable regulatory requirements, purchase Futures Contracts on the NYMEX or other exchanges that trade listed crude oil futures. The Futures Contracts available on the NYMEX are comparable to the contracts on the ICE Futures Exchange, but they may have

56


 
 

TABLE OF CONTENTS

different underlying commodities, sizes, deliveries, and prices. In addition, the Futures Contracts available on the NYMEX may be subject to accountability levels and position limits.

The CFTC and U.S. designated contract markets such as the NYMEX have established accountability levels and position limits on the maximum net long or net short Futures Contracts in commodity interests that any person or group of persons under common trading control (other than as a hedge, which an investment by USBO is not) may hold, own or control. The net position is the difference between an individual or firm’s open long contracts and open short contracts in any one commodity. In addition, most U.S. futures exchanges, such as the NYMEX, limit the daily price fluctuation for futures contracts. Currently the ICE Futures Exchange imposes position and accountability limits that are similar to those imposed by the NYMEX for all of its U.S.-linked futures and options contracts, but does not limit the maximum daily price fluctuation.

The accountability levels for the Futures Contracts traded on the NYMEX are not a fixed ceiling, but rather a threshold above which the NYMEX may exercise greater scrutiny and control over an investor’s positions. The current accountability level for net long or short positions at any one time in the NYMEX Contract for light, sweet crude oil Futures Contracts is 20,000 net contracts. If USBO exceeds this accountability level for positions in light, sweet crude oil Futures Contracts, the NYMEX will monitor USBO’s exposure and may ask for further information on USBO’s activities including the total size of all positions, investment and trading strategy, and the extent of USBO’s liquidity resources. If deemed necessary by the NYMEX, it could also order USBO and the Related Public Funds to reduce their aggregate position back to the accountability level. There are no specific position accountability levels or limits, nor are there are any maximum daily price fluctuation limits for the ICE Brent Crude Oil (physically settled) futures contract.

If the ICE Futures Exchange or the NYMEX orders USBO to reduce its position back to a level that the ICE Futures Exchange or NYMEX deems appropriate for USBO, such a position level may impact the mix of investments in Crude Oil Interests made by USBO. To illustrate, assume that the Benchmark Futures Contract and the unit price of USBO are each $100, and that the ICE Futures Exchange has determined that USBO may not own more than 20,000 Benchmark Futures Contracts. In such case, USBO could invest up to $2 billion of its daily net assets in the Benchmark Futures Contract (i.e., $100 per contract multiplied by 1,000 (a Benchmark Futures Contract is a contract for 1,000 barrels) multiplied by 20,000 contracts) before reaching the position level imposed by the ICE Futures Exchange. Once the daily net assets of the portfolio exceed $2 billion in the Benchmark Futures Contract, the portfolio may not be able to take any further positions in the Benchmark Futures Contract, depending on whether the ICE Futures Exchange imposes limits. If the ICE Futures Exchange does impose limits at the $2 billion level (or another level), USBO anticipates that it will invest the majority of its assets above that level in a mix of other Futures Contracts or Other Crude Oil-Related Investments.

In addition to accountability levels, the ICE Futures Exchange and the NYMEX impose position limits on contracts held in the last few days of trading in the near month contract to expire. It is unlikely that USBO will run up against such position limits because USBO’s investment strategy is to close out its positions and “roll” from the near month contract to expire to the next month contract beginning two weeks from expiration of the contract.

U.S. futures exchanges, including the NYMEX, also limit the amount of price fluctuation for Futures Contracts. For example, the NYMEX imposes a $10 per barrel ($10,000 per contract) price fluctuation limit for light, sweet crude oil Futures Contracts. This limit is initially based off of the previous trading day’s settlement price. If any light, sweet crude oil Futures Contract is traded, bid, or offered at the limit for five minutes, trading is halted for five minutes. When trading resumes it begins at the point where the limit was imposed and the limit is reset to be $10.00 per barrel in either direction of that point. If another halt were triggered, the market would continue to be expanded by $10.00 per barrel in either direction after each successive five-minute trading halt. There is no maximum price fluctuation limit during any one trading session.

U.S. futures exchanges, including the NYMEX, currently do not implement fixed position limits for Futures Contracts held outside of the last few days of trading in the near month contract to expire. However, on January 26, 2010 the CFTC published a proposed rule that, if implemented, would set fixed position limits on energy Futures Contracts, including the NYMEX Henry Hub natural gas futures contract, NYMEX Light Sweet crude oil futures contract, NYMEX New York Harbor No. 2 heating oil futures contract, and NYMEX

57


 
 

TABLE OF CONTENTS

New York Harbor gasoline blendstock (“RBOB”) gasoline futures contract, along with any contract based upon these contracts. The proposed position limits would be set as a percentage of the open interest in these contracts for the spot month, any single month, and all months combined. Additionally, the proposed rule would aggregate positions in the enumerated contracts and those based upon such contracts, including contracts listed on separate exchanges. This proposal is currently undergoing a 90-day public comment period. Although this proposed rule as currently drafted does not impose limits on the Benchmark Futures Contract, we cannot predict whether future actions by the CFTC will extend to the Benchmark Futures Contract. Any CFTC actions in the future to extend position limits to the Benchmark Future Contract could negatively impact USBO’s ability to meet its investment objective and investors could be adversely affected.

USBO anticipates that to the extent it invests in Futures Contracts other than Brent crude oil contracts (such as futures contracts for light, sweet crude oil, natural gas, heating oil, and gasoline) and Other Crude Oil-Related Investments, it will enter into various non-exchange-traded derivative contracts to hedge the short-term price movements of such Futures Contracts and Other Crude Oil-Related Investments against the current Benchmark Futures Contracts.

Examples of the position and price limits imposed are as follows:

Futures Contract Position Limits Chart

   
Futures Contract   Position Accountability
Levels and Limits
  Maximum Daily Price Fluctuation
ICE Brent Crude Oil (physically settled)   There are no specific position accountability levels and limits.   There is no maximum daily price fluctuation limit.
NYMEX Brent Crude Oil (financially settled)   Any one month: 20,000 net futures/all months: 20,000 net futures, but not to exceed 2,000 contracts in the last three days of trading in the spot month.   There is no maximum daily price fluctuation limit.
NYMEX Light, Sweet Crude Oil (physically settled)   Any one month: 10,000 net futures/all months: 20,000 net futures, but not to exceed 3,000 contracts in the last three days of trading in the spot month.   $10.00 per barrel ($10,000 per contract) for all months. If any contract is traded, bid, or offered at the limit for five minutes, trading is halted for five minutes. When trading resumes, the limit is expanded by $10.00 per barrel in either direction. If another halt were triggered, the market would continue to be expanded by $10.00 per barrel in either direction after each successive five-minute trading halt. There will be no maximum price fluctuation limits during any one trading session.
NYMEX Light, Sweet Crude Oil (financially settled)   Any one month: 20,000 net futures/all months: 20,000 net futures, but not to exceed 2,000 contracts in the last three days of trading in the spot month.   There is no maximum daily price fluctuation limit.
ICE West Texas Intermediate (“WTI”) Futures (financially settled)   Any one month: 10,000 net futures/all months: 20,000 net futures, but not to exceed 3,000 contracts in the last three days of trading in the spot month.   There is no maximum daily price fluctuation.

58


 
 

TABLE OF CONTENTS

   
Futures Contract   Position Accountability
Levels and Limits
  Maximum Daily Price Fluctuation
NYMEX Heating Oil (physically settled)   Any one month: 5,000/all months: 7,000 net futures, but not to exceed 1,000 contracts in the last three days of trading in the spot month.   $0.25 per gallon ($10,500 per contract) for all months. If any contract is traded, bid, or offered at the limit for five minutes, trading is halted for five minutes. When trading resumes, the limit is expanded by $0.25 per gallon in either direction. If another halt were triggered, the market would continue to be expanded by $0.25 per gallon in either direction after each successive five-minute trading halt. There will be no maximum price fluctuation limits during any one trading session.
NYMEX Gasoline (physically settled)   Any one month: 5,000/all months: 7,000 net futures, but not to exceed 1,000 contracts in the last three days of trading in the spot month.   $0.25 per gallon ($10,500 per contract) for all months. If any contract is traded, bid, or offered at the limit for five minutes, trading is halted for five minutes. When trading resumes, the limit is expanded by $0.25 per gallon in either direction. If another halt were triggered, the market would continue to be expanded by $0.25 per gallon in either direction after each successive five-minute trading halt. There will be no maximum price fluctuation limits during any one trading session.
NYMEX Natural Gas (physically settled)   Any one month: 6,000/all months: 12,000 net futures, but not to exceed 1,000 contracts in the last three days of trading in the spot month.   $3.00 per mmBtu ($30,000 per contract) for all months. If any contract is traded, bid, or offered at the limit for five minutes, trading is halted for five minutes. When trading resumes, the limit is expanded by $3.00 per mmBtu in either direction. If another halt were triggered, the market would continue to be expanded by $3.00 per mmBtu in either direction after each successive five-minute trading halt. There will be no maximum price fluctuation limits during any one trading session.

Price Volatility.  Despite daily price limits, the price volatility of Futures Contracts generally has been historically greater than that for traditional securities such as stocks and bonds. Price volatility often is greater day-to-day as opposed to intra-day. Futures Contracts tend to be more volatile than stocks and bonds because price movements of crude oil and other energy products are more currently and directly influenced by economic factors for which current data is available and are traded by crude oil futures traders throughout the day. These economic factors include changes in interest rates; governmental, agricultural, trade, fiscal, monetary and exchange control programs and policies; weather and climate conditions; changing supply and demand relationships; changes in balances of payments and trade; U.S. and international rates of inflation; currency devaluations and revaluations; U.S. and international political and economic events; and changes in philosophies and emotions of market participants. Because USBO will invest a significant portion of its assets in positions in Futures Contracts, the assets of USBO, and therefore the prices of USBO units, may be subject to greater volatility than traditional securities.

59


 
 

TABLE OF CONTENTS

Marking-to-Market Futures Positions.  Futures Contracts are marked to market at the end of each trading day and the margin required with respect to such contracts is adjusted accordingly. This process of marking-to-market is designed to prevent losses from accumulating in any futures account. Therefore, if USBO’s futures positions have declined in value, USBO may be required to post variation margin to cover this decline. Alternatively, if USBO futures positions have increased in value, this increase will be credited to USBO’s account.

What Is the Crude Oil Market and the Petroleum-Based Fuel Market?

USBO may purchase Futures Contracts traded on the ICE Futures Exchange that are based on Brent crude oil. It may also purchase contracts on other exchanges, including NYMEX and the Singapore Exchange. The contracts provide for delivery of several grades of domestic and internationally traded foreign crudes, and, among other things, serve the diverse needs of the physical market. In Europe, Brent crude oil is the standard for futures contracts and is primarily traded on the ICE Futures Exchange. Brent crude oil is the price reference for two-thirds of the world’s traded oil. The ICE Brent Futures is a deliverable contract with an option to cash settle which trades in units of 1,000 barrels (42,000 U.S. gallons). The ICE Futures Exchange also offers a WTI Futures contract which trades in units of 1,000 barrels. The WTI Futures contract is cash settled against the prevailing market price for U.S. light, sweet crude oil.

Brent Crude Oil.  Crude oil is the world’s most actively traded commodity. The Futures Contracts for Brent crude oil that are traded on the ICE Futures Exchange are the world’s second most liquid forum for crude oil trading, as well as the world’s second largest volume futures contract trading on a physical commodity. Due to the liquidity and price transparency of light, sweet crude oil Futures Contracts, they are used as a principal international pricing benchmark. The Futures Contracts for Brent crude oil trade on the ICE Futures Exchange in units of 1,000 U.S. barrels and, if not closed out before maturity, will result in delivery of oil to Sullom Voe, an oil terminal located in the Shetland Island near Scotland, which is also accessible to the international spot markets by tanker.

The price of crude oil is established by the supply and demand conditions in the global market overall, and more particularly, in the main refining centers of Singapore, Northwest Europe, and the U.S. Gulf Coast. Demand for petroleum products by consumers, as well as agricultural, manufacturing and transportation industries, determines demand for crude oil by refiners. Since the precursors of product demand are linked to economic activity, crude oil demand will tend to reflect economic conditions. However, other factors such as weather also influence product and crude oil demand.

The price of Brent crude oil has historically exhibited periods of significant volatility.

Heating Oil.  Heating oil, also known as No. 2 fuel oil, accounts for 25% of the yield of a barrel of crude oil, the second largest “cut” from oil after gasoline. The heating oil futures contract, listed and traded on the NYMEX, trades in units of 42,000 gallons (1,000 barrels) and is based on delivery in the New York harbor, the principal cash market center. The price of heating oil has historically been volatile.

Gasoline.  Gasoline is the largest single volume refined product sold in the U.S. and accounts for almost half of national oil consumption. The gasoline Futures Contract, listed and traded on the NYMEX, trades in units of 42,000 gallons (1,000 barrels) and is based on delivery at petroleum products terminals in the New York harbor, the major East Coast trading center for imports and domestic shipments from refineries in the New York harbor area or from the Gulf Coast refining centers. The price of gasoline has historically been volatile.

Natural Gas.  Natural gas accounts for almost a quarter of U.S. energy consumption. The natural gas futures contract listed and traded on the NYMEX trades in units of 10,000 million British thermal units and is based on delivery at the Henry Hub in Louisiana, the nexus of 16 intra- and interstate natural gas pipeline systems that draw supplies from the region’s prolific gas deposits. The pipelines serve markets throughout the U.S. East Coast, the Gulf Coast, the Midwest, and up to the Canadian border. The price of natural gas has historically been volatile.

60


 
 

TABLE OF CONTENTS

Why Does USBO Purchase and Sell Futures Contracts?

The investment objective of USBO is to have the daily changes in percentage terms of its units’ NAV reflect the daily changes in percentage terms of the spot price of Brent crude oil as measured by the changes in the price of the futures contract on Brent crude oil as traded on the ICE Futures Exchange that is the near month contract to expire, except when the near month contract is within two weeks of expiration, in which case the futures contract will be the next month contract to expire, less USBO’s expenses. USBO seeks to have its aggregate NAV approximate at all times the aggregate market value of the Futures Contracts and Other Crude Oil-Related Investments it holds.

Other than investing in Futures Contracts and Other Crude Oil-Related Investments, USBO will only invest in assets to support these investments in Crude Oil Interests. At any given time, a significant majority of USBO’s investments will be in Treasuries, cash and/or cash equivalents that serve as segregated assets supporting USBO’s positions in Futures Contracts and Other Crude Oil-Related Investments. For example, the sale or purchase of a Futures Contract with a stated value of $10 million would not require USBO to receive or pay $10 million upon entering into the contract; rather, only a margin deposit, generally of 10% to 20% of the stated value of the Futures Contract, would be required. To secure its Futures Contract obligations, USBO would deposit the required margin with the futures commission merchant and would separately hold, through its Custodian, Treasuries, cash and/or cash equivalents in an amount equal to the balance of the current market value of the contract, which at the contract’s inception would be $10 million minus the amount of the margin deposit, or $9 million (assuming a 10% margin).

As a result of the foregoing, USBO expects that 10% to 20% of its assets will be held as margin in segregated accounts with a futures commission merchant. In addition to the Treasuries and cash it posts with the futures commission merchant for the Futures Contracts it owns, USBO will hold through the Custodian, Treasuries, cash and/or cash equivalents that can be posted as margin or as collateral to support its over-the-counter contracts. USBO intends to earn interest income from the Treasuries and/or cash equivalents that it will purchase, and on the cash it holds through the Custodian. It anticipates that the earned interest income will increase the NAV and limited partners’ capital contribution accounts. USBO plans to reinvest the earned interest income, hold it in cash, or use it to pay its expenses. If USBO reinvests the earned interest income, it will make investments that are consistent with its investment objectives.

Term Structure of Crude Oil Futures Prices and the Impact on Total Returns.  Several factors determine the total return from investing in a futures contract position. One factor that impacts the total return that will result from investing in near month crude oil futures contracts and “rolling” those contracts forward each month is the price relationship between the current near month contract and the later month contracts. For example, if the price of the near month contract is higher than the next month contract (a situation referred to as “backwardation” in the futures market), then absent any other change there is a tendency for the price of a next month contract to rise in value as it becomes the near month contract and approaches expiration. Conversely, if the price of a near month contract is lower than the next month contract (a situation referred to as “contango” in the futures market), then absent any other change there is a tendency for the price of a next month contract to decline in value as it becomes the near month contract and approaches expiration.

As an example, assume that the price of crude oil for immediate delivery (the “spot” price), was $50 per barrel, and the value of a position in the near month futures contract was also $50. Over time, the price of the barrel of crude oil will fluctuate based on a number of market factors, including demand for oil relative to its supply. The value of the near month contract will likewise fluctuate in reaction to a number of market factors. If investors seek to maintain their holding in a near month contract position and not take delivery of the oil, every month they must sell their current near month contract as it approaches expiration and invest in the next month contract.

If the futures market is in backwardation, e.g., when the expected price of crude oil in the future would be less, the investor would be buying a next month contract for a lower price than the current near month contract. Hypothetically, and assuming no other changes to either prevailing crude oil prices or the price relationship between the spot price, the near month contract and the next month contract (and ignoring the impact of commission costs and the interest earned on Treasuries, cash and/or cash equivalents), the value of the next month contract would rise as it approaches expiration and becomes the new near month contract. In

61


 
 

TABLE OF CONTENTS

this example, the value of the $50 investment would tend to rise faster than the spot price of crude oil, or fall slower. As a result, it would be possible in this hypothetical example for the price of spot crude oil to have risen to $60 after some period of time, while the value of the investment in the futures contract would have risen to $65, assuming backwardation is large enough or enough time has elapsed. Similarly, the spot price of crude oil could have fallen to $40 while the value of an investment in the futures contract could have fallen to only $45. Over time, if backwardation remained constant, the difference would continue to increase. In the event of a prolonged period of backwardation, and absent the impact of rising or falling crude oil prices, this could have a significant positive impact on USBO’s NAV and total return.

If the futures market is in contango, the investor would be buying a next month contract for a higher price than the current near month contract. Hypothetically, and assuming no other changes to either prevailing crude oil prices or the price relationship between the spot price, the near month contract and the next month contract (and ignoring the impact of commission costs and the interest earned on cash), the value of the next month contract would fall as it approaches expiration and becomes the new near month contract. In this example, it would mean that the value of the $50 investment would tend to rise slower than the spot price of crude oil, or fall faster. As a result, it would be possible in this hypothetical example for the spot price of crude oil to have risen to $60 after some period of time, while the value of the investment in the futures contract will have risen to only $55, assuming contango is large enough or enough time has elapsed. Similarly, the spot price of crude oil could have fallen to $45 while the value of an investment in the futures contract could have fallen to $40. Over time, if contango remained constant, the difference would continue to increase. In the event of a prolonged period of contango, and absent the impact of rising or falling crude oil prices, this could have a significant negative impact on USBO’s NAV and total return.

Historically, the oil futures markets have experienced periods of contango and backwardation, with backwardation being in place more often than contango. During the previous two years, including 2006 and the first half of 2007, these markets have experienced contango. However, starting early in the third quarter of 2007, the crude oil futures market moved into backwardation and remained in that condition for the rest of the year. The crude oil markets remained in backwardation for all of the first quarter of 2008. The chart below compares the price of the near month contract to the price of the second month contract over the last 10 years (1998-2007). When the price of the near month contract is higher than the price of the second month contract, the market would be described as being in backwardation. When the price of the near month contract is lower than the price of the second month contract, the market would be described as being in contango. Although the prices of the near month contract and the price of the second month contract do tend to move up or down together, it can be seen that at times the near month prices are clearly higher than the price of the second month contract (backwardation), and other times they are below the price of the second month contract (contango).

62


 
 

TABLE OF CONTENTS

Brent Crude Oil Prices Near Month (“BZ1”) and Next Near Month (“BZ2”) Comparison*
(10 years ending 12/31/08)

[GRAPHIC MISSING]

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

An alternative way to view the same data is to subtract from the dollar price of the near month contract the dollar price of the second month contract. If the resulting number is a positive number, then the near month price is higher than the price of the second month contract and the market could be described as being in backwardation. If the resulting number is a negative number, then the near month price is lower than the price of the second month contract and the market could be described as being in contango. The chart below shows the results from subtracting from the near month price the price of the second month contract for the 10 year period between 1998 and 2008.

63


 
 

TABLE OF CONTENTS

Front Month Brent Crude Oil Futures Contract Minus Second Month Brent Crude Oil Futures Contract*
(10 years ending 12/31/2008)

[GRAPHIC MISSING]

*PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

Periods of contango or backwardation do not meaningfully impact USBOs investment objective of having percentage changes in its per unit NAV track percentage changes in the price of the Benchmark Futures Contract since the impact of backwardation and contango tended to equally impact the percentage changes in price of both USBOs units and the Benchmark Futures Contract. It is impossible to predict with any degree of certainty whether backwardation or contango will occur in the future. It is likely that both conditions will occur during different periods.

64


 
 

TABLE OF CONTENTS

What Is the Flow of Units?

[GRAPHIC MISSING]

What Are the Trading Policies of USBO?

Liquidity

USBO will invest only in Futures Contracts and Other Crude Oil-Related Investments that are traded in sufficient volume to permit, in the opinion of the General Partner, ease of taking and liquidating positions in these financial interests.

Spot Commodities

While crude oil Futures Contracts traded on the ICE Futures Exchange can be physically settled, USBO does not intend to take or make physical delivery. However, USBO may from time to time trade in Other Crude Oil-Related Investments, including contracts based on the spot price of crude oil.

Leverage

While USBO expects its ratio of margin to total assets to generally range from 10% to 20%, the General Partner endeavors to have the value of USBO’s Treasuries, cash and cash equivalents, whether held by USBO or posted as margin or collateral, at all times approximate the aggregate market value of USBO’s obligations under its Futures Contracts and Other Crude Oil-Related Investments. While the General Partner does not intend to leverage USBO’s assets, it is not prohibited from doing so under the LP Agreement.

Borrowings

Borrowings will not be used by USBO, unless USBO is required to borrow money in the event of physical delivery, USBO trades in cash commodities, or for short-term needs created by unexpected redemptions.

65


 
 

TABLE OF CONTENTS

USBO expects to have the value of its Treasuries, cash and cash equivalents, whether held by USBO or posted as margin or collateral, to at all times approximate the aggregate market value of its obligations under USBO’s Futures Contracts and Other Crude Oil-Related Investments. USBO does not plan to establish credit lines.

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

In addition to Futures Contracts, there are also a number of listed options on the Futures Contracts on the principal futures exchanges. These contracts offer investors and hedgers another set of financial vehicles to use in managing exposure to the crude oil market. Consequently, USBO may purchase options on crude oil Futures Contracts on these exchanges in pursuing its investment objective.

In addition to the Futures Contracts and options on the Futures Contracts, there also exists an active non-exchange-traded market in derivatives tied to crude oil. These derivatives transactions (also known as over-the-counter contracts) are usually entered into between two parties. Unlike most of the exchange-traded Futures Contracts or exchange-traded options on the Futures Contracts, each party to such contract bears the credit risk that the other party may not be able to perform its obligations under its contract.

Some crude oil-based derivatives transactions contain fairly generic terms and conditions and are available from a wide range of participants. Other crude oil-based derivatives have highly customized terms and conditions and are not as widely available. Many of these over-the-counter contracts are cash-settled forwards for the future delivery of crude oil- or petroleum-based fuels 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 crude oil spot price, forward crude oil price, the Benchmark Futures Contract price, or other crude oil futures contract price. For example, USBO may enter into over-the-counter derivative contracts whose value will be tied to changes in the difference between the crude oil spot price, the Benchmark Futures Contract price, or some other futures contract price traded on New York Mercantile Exchange or ICE Futures Exchange and the price of other Futures Contracts that may be invested in by USBO.

To protect itself from the credit risk that arises in connection with such contracts, USBO will enter into agreements with each counterparty that provide for the netting of its overall exposure to its counterparty, such as the agreements published by the International Swaps and Derivatives Association, Inc. USBO will also require that the counterparty be highly rated and/or provide collateral or other credit support to address USBO’s exposure to the counterparty.

The creditworthiness of each potential counterparty will be assessed by the General Partner. The General Partner will assess or review, as appropriate, the creditworthiness of each potential or existing counterparty to an over-the-counter contract pursuant to guidelines approved by the General Partner’s Board of Directors. Furthermore, the General Partner on behalf of USBO will only enter into over-the-counter contracts with counterparties who are, or 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, and (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 General Partner’s Board of Directors after consultation with its legal counsel. Existing counterparties are also reviewed periodically by the General Partner.

USBO anticipates that the use of Other Crude Oil-Related Investments together with its investments in Futures Contracts will produce price and total return results that closely track the investment goals of USBO.

USBO 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 Benchmark Futures Contract. USBO 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 USBO to changes in the price relationship between futures contracts which will expire sooner and those that will expire later. USBO would use such a spread if the General Partner felt that taking such long and short positions, when combined with the rest of its holdings, would more closely track the investment goals of USBO, or if the General Partner felt it would lead to an overall lower cost of trading to achieve a given level of economic exposure to movements in crude oil prices.

66


 
 

TABLE OF CONTENTS

USBO 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. USBO would make use of such a straddle approach if, in the opinion of the General Partner, the resulting combination would more closely track the investment goals of USBO or if it would lead to an overall lower cost of trading to achieve a given level of economic exposure to movements in crude oil prices.

Pyramiding

USBO will not employ the technique, commonly known as pyramiding, in which the speculator uses unrealized profits on existing positions as variation margin for the purchase or sale of additional positions in the same or another commodity interest.

Who Are the Service Providers?

Brown Brothers Harriman & Co. is anticipated to be the registrar and transfer agent for the units. Brown Brothers Harriman & Co. is also anticipated to be the Custodian for USBO. In this capacity, Brown Brothers Harriman & Co. will hold USBO’s Treasuries, cash and cash equivalents pursuant to a custodial agreement. In addition, Brown Brothers Harriman & Co. will perform certain administrative and accounting services for USBO and will prepare certain SEC and CFTC reports on behalf of USBO. The General Partner will pay Brown Brothers Harriman & Co.’s fees.

USBO also plans to employ ALPS Distributors, Inc. as the Marketing Agent, which is further discussed under “What is the Plan of Distribution?” The General Partner will pay the Marketing Agent’s fees.

USBO and the futures commission merchant, UBS Securities LLC (“UBS Securities”), will enter into an Institutional Futures Client Account Agreement. This Agreement requires UBS Securities to provide services to USBO in connection with the purchase and sale of Crude Oil Interests that may be purchased or sold by or through UBS Securities for USBO’s account. USBO will pay the futures commission merchant fees.

UBS Securities is not affiliated with us or our General Partner. Therefore, we do not believe that we have any conflicts of interest with them or their trading principals arising from their acting as our futures commission merchant.

UBS Securities’ principal business address is 677 Washington Blvd, Stamford, CT 06901. UBS Securities is a futures clearing broker for USBO. UBS Securities is registered in the US with FINRA as a Broker-Dealer and with the CFTC as a Futures Commission Merchant. UBS Securities is a member of various US futures and securities exchanges.

UBS Securities is the defendant in two purported securities class actions pending in District Court of the Northern District of Alabama, brought by holders of stocks and bonds of HealthSouth, captioned In re HealthSouth Corporation Stockholder, No. CV-03-BE-1501-S and In re HealthSouth Corporation Bondholder Litigation, No. CV-03-BE-1502-S. Both complaints assert liability under the Securities Act of 1934.

On June 27, 2007, the Securities Division of the Secretary of the Commonwealth of Massachusetts (“Massachusetts Securities Division”) filed an administrative complaint (the “Complaint”) and notice of adjudicatory proceeding against UBS Securities LLC, captioned In The Matter of UBS Securities, LLC, Docket No. E-2007-0049, which alleges, in sum and substance, that UBS Securities has been violating the Massachusetts Uniform Securities Act (the “Act”) and related regulations by providing the advisers for certain hedge funds with gifts and gratuities in the form of below market office rents, personal loans with below market interest rates, event tickets, and other perks, in order to induce those hedge fund advisers to increase or retain their level of prime brokerage fees paid to UBS Securities. The Complaint seeks a cease and desist order from conduct that violates the Act and regulations, to censure UBS Securities, to require UBS Securities to pay an administrative fine of an unspecified amount, and to find as fact the allegations of the Complaint.

On June 26, 2008, the Massachusetts Securities Division filed an administrative complaint and notice of adjudicatory proceeding against UBS Securities and UBS Financial Services, Inc. (“UBS Financial”), captioned In the Matter of UBS Securities, LLC and UBS Financial Services, Inc., Docket No. 2008-0045, which alleged that UBS Securities and UBS Financial violated the Act in connection with the marketing and sale of auction rate securities.

67


 
 

TABLE OF CONTENTS

On July 22, 2008, the Texas State Securities board filed an administrative proceeding against UBS Securities and UBS Financial captioned the Matter of the Dealer Registrations of UBS Financial Services, Inc. and UBS Securities LLC, SOAH Docket No. 312-08-3918, SSB Docket No. 08-IC04, alleging violations of the anti-fraud provision of the Texas Securities Act in connection with the marketing and sale of auction rate securities.

On July 24, 2008 the New York Attorney General (“NYAG”) filed a complaint in Supreme Court of the State of New York against UBS Securities and UBS Financial captioned State of New York v. UBS Securities LLC and UBS Financial Services, Inc., No. 650262/2008, in connection with UBS’s marketing and sale of auction rate securities. The complaint alleges violations of the anti-fraud provisions of New York state statutes and seeks a judgment ordering that the firm buy back auction rate securities from investors at par, disgorgement, restitution and other remedies.

On August 8, 2008, UBS Securities and UBS Financial reached agreements in principle with the SEC, the NYAG, the Massachusetts Securities Division and other state regulatory agencies represented by the North American Securities Administrators Association (“NASAA”) to restore liquidity to all remaining client’s holdings of auction rate securities by June 30, 2012. On August 20, 2008, the Texas proceeding was dismissed and withdrawn. On October 2, 2008, UBS Securities and UBS Financial entered into a final consent agreement with the Massachusetts