Attached files
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| 8-K - United States Natural Gas Fund, LP | v211742_8k.htm |
Exhibit
99.1
PRESS
RELEASE
Alameda,
CA, February 16, 2011
NOTICE
OF REVERSE UNIT SPLIT
United
States Natural Gas Fund, LP (“USNG”) announced today that it will execute a
two-for-one reverse unit split that will be effective for holders of USNG units
(“Unitholders”) after the close of the markets on March 8,
2011. Units of USNG will trade at their post-split prices on March 9,
2011. USNG’s ticker symbol, “UNG”, will not change, and units of USNG
will continue to trade on the NYSE Arca. USNG’s new CUSIP number will
be 912318110.
The
reverse unit split will reduce the number of USNG’s units outstanding and will
result in a proportionate increase in the net asset value per unit (“NAV”) of
USNG. As a result of the reverse unit split, Unitholders on March 8,
2011 will receive one post-split unit of USNG for every two pre-split units of
USNG they hold. Immediately after the reverse unit split is
effective, USNG’s post-split units will have an NAV that is two times higher
than that of pre-split units.
The
reverse unit split will affect all of USNG’s Unitholders. The reverse
unit split will not affect any Unitholder’s percentage interest in USNG, except
to the extent that the reverse unit split results in a Unitholder receiving cash
in the transaction. The NYSE Arca does not permit the trading of
fractional units. As described below, Unitholders otherwise entitled
to receive fractional units as a result of the reverse unit split will thus
receive cash in lieu of such fractional units.
Illustration
of a Reverse Unit Split
The
following table shows the effect of a hypothetical 2 for 1 reverse unit
split:
Table
1.
Hypothetical
Example of a 2-for-1 Reverse Unit Split:
|
Period
|
#
of Units
|
Net
Asset Value (NAV)
|
Total
Value
|
|
Pre-Split
|
100
|
$8
|
$800
|
|
Post-Split
|
50
|
$16
|
$800
|
Redemption
of Fractional Units and Tax Consequences for the Reverse Unit Split
USNG
Unitholders that hold USNG units that are not an exact multiple of USNG’s
reverse unit split ratio (a multiple of 2) would hold fractional units as a
result of the reverse unit split. As noted above, the NYSE Arca does
not permit the trading of fractional units. Unitholders otherwise
entitled to fractional units as a result of the reverse unit split will receive
cash in lieu of such fractional units. The receipt of cash in lieu of
fractional units will generally reduce a USNG Unitholder’s basis in USNG units
by the amount of cash received. If the amount of cash received in
lieu of fractional units exceeds a USNG Unitholder’s aggregate basis in the
Unitholder’s units, such Unitholder would recognize gain equal to the amount of
such excess. Other than in the case of USNG Unitholders receiving
cash in excess of basis, the reverse unit split is not anticipated to result in
the recognition of taxable gain to USNG Unitholders.
“Odd-Lot”
Unit
Also, as
a result of the reverse unit split, USNG may have outstanding, with respect to
certain of its authorized purchasers, aggregations of less than 100,000 units
required to make a redemption basket, or a so-called “odd-lot
unit”. Each of USNG’s authorized purchasers will be provided with a
one-time opportunity to redeem any odd-lot unit resulting from the reverse unit
split.
For
a further discussion about USNG and the risks associated with an investment in
USNG, see USNG’s Prospectus, which is available at
www.unitedstatesnaturalgasfund.com.
Frequently
Asked Questions About the Reverse Unit Split
|
1.
|
What
is a reverse unit split?
|
A reverse
unit split reduces the number of a fund’s outstanding units and results in a
proportionate increase in the net asset value per unit (“NAV”) for that fund
based on a predetermined ratio. In a 2-for-1 reverse unit split,
every 2 pre-split units held by a Unitholder are replaced with 1 post-split unit
that has an NAV that is two times higher than that of the pre-split
units.
|
2.
|
How
does the reverse unit split affect a Unitholder’s investment in
USNG?
|
The
economic value of USNG’s units will not change as a result of the reverse unit
split. After the reverse unit split, a Unitholder will own fewer USNG
units, but each USNG unit will have an NAV that is two times higher than that of
the pre-split USNG units.
The
reverse unit split will not affect any Unitholder’s percentage interest in USNG,
except to the extent that the reverse unit split could result in a USNG
Unitholder receiving cash in lieu of a fractional unit. USNG
Unitholders that hold quantities of USNG units that are not an exact multiple of
2 would be entitled to receive fractional units as a result of the reverse unit
split. However, the NYSE Arca does not permit the trading of
fractional units. As a result, Unitholders otherwise entitled to
receive fractional units due to the reverse unit split will receive cash in lieu
of such fractional units.
For
example, a USNG Unitholder that holds 105 pre-split units would receive 52.5
post-split units if fractional units were permitted. Since the NYSE
Arca does not permit trading of fractional units, the Unitholder will hold 52
post-split units and will receive cash in lieu of the 0.5 fractional
unit.
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3.
|
How
many units of USNG will be received as a result of the reverse unit
split?
|
USNG will
undergo a 2 for 1 reverse unit split. At the close of trading on
March 8, 2011, each
USNG Unitholder will receive 1 post-split unit for every 2 pre-split units
held. No Unitholder will receive fractional units. Any Unitholder
otherwise entitled to receive a fractional unit as a result of the reverse unit
split will receive cash in lieu thereof
|
4.
|
When
will the USNG reverse unit split take
place?
|
USNG will
effect the reverse unit split after the close of the markets on March 8,
2011. The number of issued and outstanding USNG units will decrease
as a result. USNG Unitholders at the close of trading on March 8,
2011 will participate in the reverse unit split. Post-split USNG
units will begin trading on the NYSE Arca, on a split-adjusted basis, on March
9, 2011, the first trading day following the reverse unit split.
|
5.
|
Why
has USNG decided to reverse split its
units?
|
USNG has
decided to implement the reverse unit split for three reasons. First,
the reverse unit split is expected to increase the marketability and liquidity
of USNG units. Second, the reverse unit split is anticipated to
improve USNG’s tracking of the changes in percentage terms of the price of
natural gas delivered at the Henry Hub, Louisiana, as measured by changes in the
price of the “Benchmark Futures Contract” (as defined in the
Prospectus). Third, the reverse unit split will ensure that the value
of USNG units is well above the NYSE Arca’s minimum continued listing
requirements.
|
6.
|
Will
the reverse unit split be a taxable transaction for USNG
Unitholders?
|
Other
than in the case of certain USNG Unitholders that receive cash in lieu of
fractional units, the reverse unit split is not anticipated to result in the
recognition of gain or loss by the USNG Unitholders. If a
Unitholder’s units were acquired on different dates, the reverse unit split may
cause the Unitholder to have a split holding period in some or all of the
Unitholder’s units. As noted above, the NYSE Arca does not permit the
trading of fractional units, and Unitholders otherwise entitled to fractional
units as a result of the reverse unit split will receive cash in lieu of such
fractional units. The receipt of cash in lieu of fractional units may
cause some USNG Unitholders to recognize taxable gains, but it is generally
anticipated that the reverse unit split will not result in the recognition of
gain or loss for Unitholders unless the amount of cash received by a Unitholder
exceeds the Unitholder’s basis in the USNG units. To the extent the
amount of cash received in lieu of fractional units does not exceed a USNG
Unitholder’s basis in the USNG units, the USNG Unitholder’s basis in its USNG
units will be reduced by the amount of cash received, but the Unitholder will
not recognize any gain or loss. If the amount of cash received in
lieu of fractional units exceeds a USNG Unitholder’s basis in the Unitholder’s
units, such Unitholder would recognize gain equal to the amount of such cash
received in excess of such Unitholder’s basis. USNG Unitholders
should consult their own tax advisors concerning the tax consequences of the
USNG reverse unit split in light of their own unique
circumstances.
|
7.
|
What
will happen to USNG units sold before March 8,
2011?
|
Sales of
USNG units occurring before the close of trading on March 8, 2011, the date of
the reverse unit split, will not be impacted by the reverse unit
split. Such sale(s) would take place before the reverse unit split is
effected, so the transaction would be executed at the pre-split price and
quantity.
|
8.
|
What
will happen to USNG units purchased before March 8,
2011?
|
Purchases
of USNG units occurring before the close of trading on March 8, 2011 would take
place before the reverse unit split, and therefore the transaction would be
executed at the pre-split price and quantity. USNG units not sold
before the close of trading on March 8, 2011 will be affected by the reverse
unit split. After March 8, 2011, a USNG Unitholder will hold
fewer units of USNG, but those units will have a higher NAV.
|
9.
|
What
will happen to USNG units purchased or sold on or after March 9,
2011?
|
USNG
units purchased or sold on or after March 9, 2011 will reflect the reverse unit
split. Starting on March 9, 2011 there will be fewer units of USNG
available for purchase or sale, but the NAV per USNG unit will be
higher.
|
10.
|
Will
there be a new ticker or CUSIP number associated with the reverse unit
split?
|
USNG’s
ticker symbol, “UNG”, will not change as a result of the reverse unit
split. However, USNG’s CUSIP number will change. USNG’s
new CUSIP number after March 8, 2011 will be 912318110.
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11.
|
Will
the USNG reverse unit split affect a Limit or Good ‘Til Cancelled
Order?
|
The
reverse unit split will cancel Limit and Good ‘Til Cancelled orders for USNG
units. Investors should replace these orders following the reverse
unit split and adjust orders to the post-split price.
An
investment in units issued by USNG involves risks. These risks can
significantly impact the market value of USNG’s units. Some of the
risks you may face are summarized below:
|
·
|
There
is the risk that the changes in the price of USNG’s units on the NYSE Arca
will not closely track the changes in the price of natural
gas. This could happen if the price of units traded on the NYSE
Arca does not correlate closely with USNG’s NAV; the changes in USNG’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 natural gas. This is a risk because if these
correlations do not exist, then investors may not be able to use USNG as a
cost-effective way to invest directly in natural gas or as a hedge against
the risk of loss in natural gas-related
transactions.
|
|
·
|
USNG
seeks to have the changes in its units’ NAV in percentage terms track
changes in the price of natural gas in percentage terms rather than profit
from speculative trading in Natural Gas Interests. The General
Partner therefore endeavors to manage USNG’s positions in Natural Gas
Interests so that USNG’s assets are, unlike those of other commodity
pools, not leveraged (i.e., so that the
aggregate value of USNG’s unrealized losses from its investments in such
Natural Gas Interests in any time will not exceed the value of USNG’s
assets). There is no assurance that the General Partner will
successfully implement this investment strategy. If the General
Partner permits USNG to become leveraged, you could lose all or
substantially all of your investments if USNG’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 USNG’s NAV, as well
as the degree to which its total return tracks other natural gas price
indices’ total returns. In cases in which the near month
contract’s price is lower than the next month contract’s price (a
situation known as “contango” in the futures markets), then absent the
impact of the overall movement in natural gas prices the value of the
benchmark contract would tend to decline as it approaches its
expiration. In cases in which the near month contract’s price
is higher than the next month contract’s price (a situation known as
“backwardation” in the futures markets), then absent the impact of the
overall movement in natural gas prices the value of the benchmark contract
would tend to rise as it approaches
expiration.
|
|
·
|
Investors
may choose to use USNG as a means of investing indirectly in natural gas
and there are risks involved in such investments. The risks and
hazards that are inherent in the natural gas industry may cause the price
of natural gas to widely fluctuate. The exploration for, and
production of, natural gas is an uncertain process with many
risks. The cost of drilling, completing and operating wells for
natural gas is often uncertain, and a number of factors can delay or
prevent drilling operations and
production.
|
|
·
|
Investors,
including those who participate in the natural gas industry, may choose to
use USNG as a vehicle to hedge against the risk of loss 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.
|
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·
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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, USNG generally does not distribute cash to limited partners or
other Unitholders. You should not invest in USNG if you need
cash distributions from USNG to pay taxes on your share of income and loss
of USNG, if any, or for any other
reason.
|
|
·
|
USNG
invests primarily in Futures Contracts, and particularly in Futures
Contracts traded on the New York Mercantile
Exchange.
|
|
·
|
Certain
matters discussed in this press release, including any statements that are
predictive in nature or concern future market and economic conditions,
USNG’s future performance, or USNG’s future actions and their expected
results are “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are based on current expectations and projections about future
events and are not guarantees of future performance. USNG does
not have a specific policy or intent of updating or revising
forward-looking statements. Actual events and results may
differ materially from those expressed or forecasted in forward-looking
statements due to a number of factors. Please see USNG’s
periodic reports and other filings with the SEC for a further discussion
of these and other risks and uncertainties applicable to our
business. The forward-looking statements and projections
contained in this press release are excluded from the safe harbor
protection provided by Section 21E of the Securities Exchange Act of
1934.
|
For
a further discussion about USNG and the risks associated with an investment in
USNG, see USNG’s Prospectus, which is available at
www.unitedstatesnaturalgasfund.com.