UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





x
            Quarterly
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934 for the quarterly period ended June 30,
  2010.


OR


 ̈
            Transition
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934 for the
              transition
      period
      from                      to                     .








Commission
File Number: 001-33975





United
States Gasoline Fund, LP


(Exact
name of registrant as specified in its charter)





Delaware
            
            20-8837263(State
      or other jurisdiction of
              incorporation
      or organization)
            
            (I.R.S.
      Employer
              Identification
      No.)





1320
Harbor Bay Parkway, Suite 145


Alameda,
California 94502


(Address
of principal executive offices) (Zip code)





(510)
522-9600


(Registrant’s
telephone number, including area code)





N/A


(Former
name, former address and former fiscal year, if changed since last
report)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.





x
Yes     ̈ No





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).


 ̈
Yes     ̈  No





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





Large
      accelerated filer  ̈
            Accelerated
      filer xNon-accelerated
      filer  ̈
            Smaller
      reporting company ̈(Do
      not check if a smaller reporting
company)





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





 ̈
Yes    x No





UNITED
STATES GASOLINE FUND, LP


Table
of Contents





Part
      I. FINANCIAL INFORMATION
              PageItem
      1.  Condensed Financial Statements.
              1Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations.
              16Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk.
              33Item
      4. Controls and Procedures.
              34Part
      II. OTHER INFORMATIONItem
      1. Legal Proceedings.
              35Item
      1A. Risk Factors.
              35Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.
              35Item
      3. Defaults Upon Senior Securities.
              35Item
      4. Reserved.
              35Item
      5. Other Information.
              35Item
      6. Exhibits.
              35





Part I.FINANCIAL
INFORMATION





Item
1. Condensed Financial Statements.





Index
to Condensed Financial Statements





Documents
              PageCondensed
      Statements of Financial Condition at June 30, 2010 (Unaudited) and
      December 31, 2009
              2Condensed
      Schedule of Investments (Unaudited) at June 30, 2010
              3Condensed
      Statements of Operations (Unaudited) for the three and six months ended
      June 30, 2010 and 2009
              4Condensed
      Statement of Changes in Partners’ Capital (Unaudited) for the six months
      ended June 30, 2010
              5Condensed
      Statements of Cash Flows (Unaudited) for the six months ended June 30,
      2010 and 2009
              6Notes
      to Condensed Financial Statements for the period ended June 30, 2010
      (Unaudited)
              7


1


United
States Gasoline Fund, LP


Condensed
Statements of Financial Condition


At
June 30, 2010 (Unaudited) and December 31, 2009





June 30,2010
                    
                    
                    December 31,2009AssetsCash
      and cash equivalents (Note 5)
                    
                    $
                    66,684,909
                    
                    
                    $
                    61,883,040Equity
      in UBS Securities LLC trading accounts:Cash
                    
                    
                    13,963,801
                    
                    
                    
                    1,354,561Unrealized
      gain (loss) on open commodity futures contracts
                    
                    
                    (2,937,060
                    )
                    
                    
                    5,883,944Receivable
      from General Partner (Note 3)
                    
                    
                    201,463
                    
                    
                    
                    256,355Dividend
      receivable
                    
                    
                    3,063
                    
                    
                    
                    2,868Other
      assets
                    
                    
                    249,832
                    
                    
                    
                    197,365Total
      assets
                    
                    $
                    78,166,008
                    
                    
                    $
                    69,578,133Liabilities
      and Partners’ CapitalGeneral
      Partner management fees payable (Note 3)
                    
                    $
                    39,776
                    
                    
                    $
                    34,774Professional
      fees payable
                    
                    
                    259,910
                    
                    
                    
                    350,250Brokerage
      commission fees payable
                    
                    
                    3,100
                    
                    
                    
                    2,700Other
      liabilities
                    
                    
                    5,550
                    
                    
                    
                    4,669Total
      liabilities
                    
                    
                    308,336
                    
                    
                    
                    392,393Commitments and Contingencies(Notes 3, 4 and 5)Partners’
      CapitalGeneral
      Partner
                    
                    
                    -
                    
                    
                    
                    -Limited
      Partners
                    
                    
                    77,857,672
                    
                    
                    
                    69,185,740Total
      Partners’ Capital
                    
                    
                    77,857,672
                    
                    
                    
                    69,185,740Total
      liabilities and partners’ capital
                    
                    $
                    78,166,008
                    
                    
                    $
                    69,578,133Limited
      Partners’ units outstanding
                    
                    
                    2,300,000
                    
                    
                    
                    1,900,000Net
      asset value per unit
                    
                    $
                    33.85
                    
                    
                    $
                    36.41Market
      value per unit
                    
                    $
                    33.73
                    
                    
                    $
                    36.58





See
accompanying notes to condensed financial statements.


2


United
States Gasoline Fund, LP


Condensed
Schedule of Investments (Unaudited)


At
June 30, 2010





Loss on Open
                        
                        
                        % ofNumber of
                        
                        
                        Commodity
                        
                        
                        Partners’Contracts
                        
                        
                        Contracts
                        
                        
                        CapitalOpen
      Futures Contracts— LongUnited
      States ContractsNYMEX
      RBOB Gasoline Futures RB contracts, expire August 2010
                        
                        
                        900
                        
                        
                        $
                        (2,937,060
                        )
                        
                        
                        (3.77
                        )Principal
                          Amount
                        
                        
                        MarketValueCash
      EquivalentsUnited
      States - Money Market FundsFidelity
      Institutional Government Portfolio - Class I
                        
                        $
                        45,045,533
                        
                        
                        $
                        45,045,533
                        
                        
                        
                        57.85Goldman
      Sachs Financial Square Funds - Government Fund - Class SL
                        
                        
                        6,400,340
                        
                        
                        
                        6,400,340
                        
                        
                        
                        8.22Morgan
      Stanley Institutional Liquidity Fund - Government
Portfolio
                        
                        
                        10,001,906
                        
                        
                        
                        10,001,906
                        
                        
                        
                        12.85Total
      Cash Equivalents
                        
                        
                        
                        
                        
                        $
                        61,447,779
                        
                        
                        
                        78.92





See
accompanying notes to condensed financial statements.


3


United
States Gasoline Fund, LP


Condensed
Statements of Operations (Unaudited)


For
the three and six months ended June 30, 2010 and 2009





Three months
                  ended
                  June 30, 2010
                
                
                Three months
                  ended
                  June 30, 2009
                
                
                Six months
                  ended
                  June 30, 2010
                
                
                Six months
                  ended
                  June 30, 2009IncomeGains
      (loss) on trading of commodity futures contracts:Realized
      gain (loss) on closed positions
                
                $
                (8,276,155
                )
                
                $
                28,094,329
                
                
                $
                1,272,348
                
                
                $
                35,829,276Change
      in unrealized loss on open positions
                
                
                (2,869,176
                )
                
                
                (5,125,125
                )
                
                
                (8,821,004
                )
                
                
                (8,121,027
                )Dividend
      income
                
                
                8,835
                
                
                
                39,151
                
                
                
                12,144
                
                
                
                60,069Interest
      income
                
                
                834
                
                
                
                1,965
                
                
                
                1,136
                
                
                
                3,148Other
      income
                
                
                6,000
                
                
                
                7,000
                
                
                
                8,000
                
                
                
                19,000Total
      income (loss)
                
                
                (11,129,662
                )
                
                
                23,017,320
                
                
                
                (7,527,376
                )
                
                
                27,790,466ExpensesGeneral
      Partner management fees (Note 3)
                
                
                130,042
                
                
                
                122,534
                
                
                
                233,787
                
                
                
                170,539Professional
      fees
                
                
                89,350
                
                
                
                37,310
                
                
                
                259,910
                
                
                
                74,210Brokerage
      commission fees
                
                
                21,796
                
                
                
                24,538
                
                
                
                37,508
                
                
                
                40,339Other
      expenses
                
                
                20,610
                
                
                
                6,578
                
                
                
                27,839
                
                
                
                9,308Total
      expenses
                
                
                261,798
                
                
                
                190,960
                
                
                
                559,044
                
                
                
                294,396Expense
      waiver (Note 3)
                
                
                (56,839
                )
                
                
                (6,934
                )
                
                
                (201,463
                )
                
                
                (31,833
                )Net
      expenses
                
                
                204,959
                
                
                
                184,026
                
                
                
                357,581
                
                
                
                262,563Net
      income (loss)
                
                $
                (11,334,621
                )
                
                $
                22,833,294
                
                
                $
                (7,884,957
                )
                
                $
                27,527,903Net
      income (loss) per limited partnership unit
                
                $
                (4.27
                )
                
                $
                8.60
                
                
                $
                (2.56
                )
                
                $
                12.48Net
      income (loss) per weighted average limitedpartnership
      unit
                
                $
                (4.63
                )
                
                $
                8.08
                
                
                $
                (3.59
                )
                
                $
                12.95Weighted
      average limited partnership units outstanding
                
                
                2,446,154
                
                
                
                2,825,275
                
                
                
                2,196,133
                
                
                
                2,126,519





See
accompanying notes to condensed financial statements.


4


United
States Gasoline Fund, LP


Condensed
Statement of Changes in Partners’ Capital (Unaudited)


For
the six months ended June 30, 2010





GeneralPartner
                
                
                LimitedPartners
                
                
                TotalBalances,
      at December 31, 2009
                
                $
                -
                
                
                $
                69,185,740
                
                
                $
                69,185,740Addition
      of 1,000,000 partnership units
                
                
                -
                
                
                
                37,299,469
                
                
                
                37,299,469Redemption
      of 600,000 partnership units
                
                
                -
                
                
                
                (20,742,580
                )
                
                
                (20,742,580
                )Net
      loss
                
                
                -
                
                
                
                (7,884,957
                )
                
                
                (7,884,957
                )Balances,
      at June 30, 2010
                
                $
                -
                
                
                $
                77,857,672
                
                
                $
                77,857,672Net
      Asset Value Per UnitAt
      December 31, 2009
                
                $
                36.41At
      June 30, 2010
                
                $
                33.85





See
accompanying notes to condensed financial statements.


5


United
States Gasoline Fund, LP


Condensed
Statements of Cash Flows (Unaudited)


For
the six months ended June 30, 2010 and 2009





Six months ended
                
                
                Six months endedJune 30, 2010
                
                
                June 30, 2009Cash
      Flows from Operating Activities:Net
      income (loss)
                
                $
                (7,884,957
                )
                
                $
                27,527,903Adjustments
      to reconcile net income (loss) to net cash provided by (used in) operating
      activities:Increase
      in commodity futures trading account – cash
                
                
                (12,609,240
                )
                
                
                (21,191,337
                )Unrealized
      loss on futures contracts
                
                
                8,821,004
                
                
                
                8,121,027Decrease
      in receivable from General Partner
                
                
                54,892
                
                
                
                94,515Increase
      in dividend receivable
                
                
                (195
                )
                
                
                (1,079
                )Increase
      in other assets
                
                
                (52,467
                )
                
                
                (8,963
                )Increase
      in General Partner management fees payable
                
                
                5,002
                
                
                
                42,531Increase
      (decrease) in professional fees payable
                
                
                (90,340
                )
                
                
                74,210Increase
      in brokerage commission fees payable
                
                
                400
                
                
                
                2,400Increase
      (decrease) in other liabilities
                
                
                881
                
                
                
                (145,791
                )Net
      cash provided by (used in) operating activities
                
                
                (11,755,020
                )
                
                
                14,515,416Cash
      Flows from Financing Activities:Subscription
      of partnership units
                
                
                37,299,469
                
                
                
                61,873,840Redemption
      of partnership units
                
                
                (20,742,580
                )
                
                
                (18,073,299
                )Net
      cash provided by financing activities
                
                
                16,556,889
                
                
                
                43,800,541Net
      Increase in Cash and Cash Equivalents
                
                
                4,801,869
                
                
                
                58,315,957Cash and Cash
      Equivalents, beginning of period
                
                
                61,883,040
                
                
                
                11,691,510Cash and Cash
      Equivalents, end of period
                
                $
                66,684,909
                
                
                $
                70,007,467





See
accompanying notes to condensed financial statements.


6


United
States Gasoline Fund, LP


Notes
to Condensed Financial Statements


For
the period ended June 30, 2010 (Unaudited)





NOTE
1 - ORGANIZATION AND BUSINESS





The
United States Gasoline Fund, LP (“UGA”) was organized as a limited partnership
under the laws of the state of Delaware on April 13, 2007.  UGA is a
commodity pool that issues limited partnership units (“units”) that may be
purchased and sold on the NYSE Arca, Inc. (the “NYSE Arca”). Prior to November
25, 2008, UGA’s units traded on the American Stock Exchange (the “AMEX”). UGA
will continue in perpetuity, unless terminated sooner upon the occurrence of one
or more events as described in its Amended and Restated Agreement of Limited
Partnership dated as of February 11, 2008 (the “LP Agreement”). The investment
objective of UGA is for the changes in percentage terms of its units’ net asset
value to reflect the changes in percentage terms of the spot price of gasoline,
as measured by the changes in the price of the futures contract for unleaded
gasoline (also known as reformulated gasoline blendstock for oxygen blending, or
“RBOB”, for delivery to the New York harbor), traded on the New York Mercantile
Exchange (the “NYMEX”) 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 UGA’s expenses.
UGA accomplishes its objective through investments in futures contracts for
gasoline, crude oil, natural gas, heating oil and other petroleum-based fuels
that are traded on the NYMEX, ICE Futures or other U.S. and foreign exchanges
(collectively, “Futures Contracts”) and other gasoline-related investments such
as cash-settled options on Futures Contracts, forward contracts for gasoline,
cleared swap contracts and over-the-counter transactions that are based on the
price of gasoline, crude oil and other petroleum-based fuels, Futures Contracts
and indices based on the foregoing (collectively, “Other Gasoline-Related
Investments”). As of June 30, 2010, UGA held 900 Futures Contracts for gasoline
traded on the NYMEX.





UGA
commenced investment operations on February 26, 2008 and has a fiscal year
ending on December 31. United States Commodity Funds LLC (the “General Partner”)
is responsible for the management of UGA. The General Partner is a member of the
National Futures Association (the “NFA”) and became a commodity pool operator
registered with the Commodity Futures Trading Commission (the “CFTC”) effective
December 1, 2005. The General Partner is also the general partner of the United
States Oil Fund, LP (“USOF”), the United States Natural Gas Fund, LP (“USNG”),
the United States 12 Month Oil Fund, LP (“US12OF”) and the United States Heating
Oil Fund, LP (“USHO”), which listed their limited partnership units on the AMEX
under the ticker symbols “USO” on April 10, 2006, “UNG” on April 18, 2007, “USL”
on December 6, 2007 and “UHN” on April 9, 2008, respectively. As a result of the
acquisition of the AMEX by NYSE Euronext, each of USOF’s, USNG’s, US12OF’s and
USHO’s units commenced trading on the NYSE Arca on November 25, 2008. The
General Partner is also the general partner of the United States Short Oil Fund,
LP (“USSO”), the United States 12 Month Natural Gas Fund, LP (“US12NG”) and the
United States Brent Oil Fund, LP (“USBO”), which listed their limited
partnership units on the NYSE Arca under the ticker symbols “DNO” on September
24, 2009, “UNL” on November 18, 2009 and “BNO” on June 2, 2010,
respectively.  The General Partner has also filed a registration
statement to register units of the United States Commodity Index Fund
(“USCI”).





The
accompanying unaudited condensed financial statements have been prepared in
accordance with Rule 10-01 of Regulation S-X promulgated by the U.S. Securities
and Exchange Commission (the “SEC”) and, therefore, do not include all
information and footnote disclosure required under accounting principles
generally accepted in the United States of America (“GAAP”). The financial
information included herein is unaudited; however, such financial information
reflects all adjustments which are, in the opinion of management, necessary for
the fair presentation of the condensed financial statements for the interim
period.





UGA
issues units to certain authorized purchasers (“Authorized Purchasers”) by
offering baskets consisting of 100,000 units (“Creation Baskets”) through ALPS
Distributors, Inc., as the marketing agent (the “Marketing Agent”). The purchase
price for a Creation Basket is based upon the net asset value of a unit
calculated shortly after the close of the core trading session on the NYSE Arca
on the day the order to create the basket is properly received.





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


7


In
November 2007, UGA initially registered 30,000,000 units on Form S-1 with the
SEC. On February 26, 2008, UGA listed its units on the AMEX under the ticker
symbol “UGA”. On that day, UGA established its initial net asset value by
setting the price at $50.00 per unit and issued 300,000 units in exchange for
$15,001,000. UGA also commenced investment operations on February 26, 2008, by
purchasing Futures Contracts traded on the NYMEX based on gasoline. As of June
30, 2010, UGA had registered a total of 80,000,000 units.





NOTE
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Revenue
Recognition





Commodity
futures contracts, forward contracts, physical commodities, and related options
are recorded on the trade date. All such transactions are recorded on the
identified cost basis and marked to market daily. Unrealized gains or losses on
open contracts are reflected in the condensed statement of financial condition
and in the difference between the original contract amount and the market value
(as determined by exchange settlement prices for futures contracts and related
options and cash dealer prices at a predetermined time for forward contracts,
physical commodities, and their related options) as of the last business day of
the year or as of the last date of the condensed financial statements. Changes
in the unrealized gains or losses between periods are reflected in the condensed
statement of operations. UGA earns interest on its assets denominated in U.S.
dollars on deposit with the futures commission merchant at the 90-day Treasury
bill rate. In addition, UGA earns income on funds held at the custodian at
prevailing market rates earned on such investments.





Brokerage
Commissions





Brokerage
commissions on all open commodity futures contracts are accrued on a full-turn
basis.





Income
Taxes





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





In
accordance with GAAP, UGA is required to determine whether a tax position is
more likely than not to be sustained upon examination by the applicable taxing
authority, including resolution of any tax related appeals or litigation
processes, based on the technical merits of the position.  UGA files
an income tax return in the U.S. federal jurisdiction, and may file income tax
returns in various U.S. states.  Generally, UGA is no longer subject
to income tax return examinations by major taxing authorities for years before
2007 (year of inception).  The tax benefit recognized is measured as
the largest amount of benefit that has a greater than fifty percent likelihood
of being realized upon ultimate settlement.  De-recognition of a tax
benefit previously recognized results in UGA recording a tax liability that
reduces net assets.  However, UGA’s conclusions regarding this policy
may be subject to review and adjustment at a later date based on factors
including, but not limited to, on-going analyses of and changes to tax laws,
regulations and interpretations thereof.  UGA recognizes interest
accrued related to unrecognized tax benefits and penalties related to
unrecognized tax benefits in income tax fees payable, if assessed.  No
interest expense or penalties have been recognized as of and for the period
ended June 30, 2010.





Creations
and Redemptions





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





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


8


Partnership
Capital and Allocation of Partnership Income and Losses





Profit or
loss shall be allocated among the partners of UGA in proportion to the number of
units each partner holds as of the close of each month. The General Partner may
revise, alter or otherwise modify this method of allocation as described in the
LP Agreement.





Calculation
of Net Asset Value





UGA’s net
asset value is calculated on each NYSE Arca trading day by taking the current
market value of its total assets, subtracting any liabilities and dividing the
amount by the total number of units issued and outstanding. UGA uses the closing
price for the contracts on the relevant exchange on that day to determine the
value of contracts held on such exchange.





Net
Income (Loss) per Unit





Net
income (loss) per unit is the difference between the net asset value per unit at
the beginning of each period and at the end of each period. The weighted average
number of units outstanding was computed for purposes of disclosing net income
(loss) per weighted average unit. The weighted average units are equal to the
number of units outstanding at the end of the period, adjusted proportionately
for units redeemed based on the amount of time the units were outstanding during
such period. There were no units held by the General Partner at June 30,
2010.





Offering
Costs





Offering
costs incurred in connection with the registration of additional units after the
initial registration of units are borne by UGA. These costs include registration
fees paid to regulatory agencies and all legal, accounting, printing and other
expenses associated with such offerings. These costs are accounted for as a
deferred charge and thereafter amortized to expense over twelve months on a
straight-line basis or a shorter period if warranted.





Cash
Equivalents





Cash
equivalents include money market funds and overnight deposits or time deposits
with original maturity dates of three months or less.





Reclassification





Certain
amounts in the accompanying condensed financial statements were reclassified to
conform with the current presentation.





Use
of Estimates





The
preparation of condensed financial statements in conformity with GAAP requires
UGA’s management to make estimates and assumptions that affect the reported
amount of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the condensed financial statements, and the reported
amounts of the revenue and expenses during the reporting period. Actual results
could differ from those estimates and assumptions.





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





General
Partner Management Fee





Under the
LP Agreement, the General Partner is responsible for investing the assets of UGA
in accordance with the objectives and policies of UGA. In addition, the General
Partner has arranged for one or more third parties to provide administrative,
custody, accounting, transfer agency and other necessary services to UGA. For
these services, UGA is contractually obligated to pay the General Partner a fee,
which is paid monthly, that is equal to 0.60% per annum of average daily net
assets.


9


Ongoing
Registration Fees and Other Offering Expenses





UGA pays
all costs and expenses associated with the ongoing registration of its units
subsequent to the initial offering. These costs include registration or other
fees paid to regulatory agencies in connection with the offer and sale of units,
and all legal, accounting, printing and other expenses associated with such
offer and sale. For the six months ended June 30, 2010 and 2009, UGA incurred
$6,516 and $0, respectively, in registration fees and other offering
expenses.





Directors’
Fees and Expenses





UGA is
responsible for paying its portion of the directors’ and officers’ liability
insurance of the General Partner and the fees and expenses of the independent
directors of the General Partner who are also the General Partner’s audit
committee members. These fees and expenses for the calendar year 2010 are
estimated to be a total of $1,178,870 for all funds.  Effective as of
April 1, 2010, UGA is responsible for paying its portion of any payments that
may become due to the independent directors pursuant to the deferred
compensation agreements entered into between the independent directors, the
General Partner and each of the affiliated funds.  UGA shares all
director fees and expenses, including any that may become due pursuant to the
deferred compensation agreements, with USOF, USNG, US12OF, USHO, USSO, US12NG
and USBO based on the relative assets of each fund, computed on a daily
basis.





Licensing
Fees





As
discussed in Note 4, UGA entered into a licensing agreement with the NYMEX on
May 30, 2007. Pursuant to the agreement, UGA and the affiliated funds managed by
the General Partner, other than USBO, pay a licensing fee that is equal to 0.04%
for the first $1,000,000,000 of combined assets of the funds and 0.02% for
combined assets above $1,000,000,000. During the six months ended June 30, 2010
and 2009, UGA incurred $9,190 and $6,896, respectively, under this
arrangement.





Investor
Tax Reporting Cost





The fees
and expenses associated with UGA’s audit expenses and tax accounting and
reporting requirements are paid by UGA.  These costs are estimated to
be $255,302 for the calendar year 2010.





Other
Expenses and Fees and Expense Waivers





In
addition to the fees described above, UGA pays all brokerage fees and other
expenses in connection with the operation of UGA, excluding costs and
expenses paid by the General Partner as outlined in Note 4.  The
General Partner, though under no obligation to do so, agreed to pay certain
expenses, to the extent that such expenses exceed 0.15% (15 basis points) of
UGA’s NAV, on an annualized basis, through September 30, 2010, after which date
such payments are no longer necessary.  The General Partner has no
obligation to continue such payment into subsequent periods.





NOTE
4 - CONTRACTS AND AGREEMENTS





UGA is
party to a marketing agent agreement, dated as of February 15, 2008, as amended
from time to time, with the Marketing Agent and the General Partner, whereby the
Marketing Agent provides certain marketing services for UGA as outlined in the
agreement. The fee of the Marketing Agent, which is borne by the General
Partner, is equal to 0.06% on UGA’s assets up to $3 billion; and 0.04% on UGA’s
assets in excess of $3 billion.





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





UGA is
also party to a custodian agreement, dated January 16, 2008, as amended from
time to time, with Brown Brothers Harriman & Co. (“BBH&Co.”) and the
General Partner, whereby BBH&Co. holds investments on behalf of UGA. The
General Partner pays the fees of the custodian, which are determined by the
parties from time to time. In addition, UGA is party to an administrative agency
agreement, dated February 7, 2008, as amended from time to time, with the
General Partner and BBH&Co., whereby BBH&Co. acts as the administrative
agent, transfer agent and registrar for UGA. The General Partner also pays the
fees of BBH&Co. for its services under this agreement and such fees are
determined by the parties from time to time.


10


Currently,
the General Partner pays BBH&Co. for its services, in the foregoing
capacities, a minimum amount of $75,000 annually for its custody, fund
accounting and fund administration services rendered to UGA and each of the
affiliated funds managed by the General Partner, as well as a $20,000 annual fee
for its transfer agency services. In addition, the General Partner pays
BBH&Co. an asset-based charge of (a) 0.06% for the first $500 million of
UGA’s, USOF’s, USNG’s, US12OF’s, USHO’s, USSO’s, US12NG’s and USBO’s combined
net assets, (b) 0.0465% for UGA’s, USOF’s, USNG’s, US12OF’s, USHO’s, USSO’s,
US12NG’s and USBO’s combined net assets greater than $500 million but less than
$1 billion, and (c) 0.035% once UGA’s, USOF’s, USNG’s, US12OF’s, USHO’s, USSO’s,
US12NG’s and USBO’s combined net assets exceed $1 billion. The annual minimum
amount will not apply if the asset-based charge for all accounts in the
aggregate exceeds $75,000. The General Partner also pays transaction fees
ranging from $7.00 to $15.00 per transaction.





UGA has
entered into a brokerage agreement with UBS Securities LLC (“UBS Securities”).
The agreement requires UBS Securities to provide services to UGA in connection
with the purchase and sale of Futures Contracts and Other Gasoline-Related
Investments that may be purchased and sold by or through UBS Securities for
UGA’s account. In accordance with the agreement, UBS Securities charges UGA
commissions of approximately $7 per round-turn trade, including applicable
exchange and NFA fees for Futures Contracts and options on Futures
Contracts.





On May
30, 2007, UGA and the NYMEX entered into a licensing agreement whereby UGA was
granted a non-exclusive license to use certain of the NYMEX’s settlement prices
and service marks. Under the licensing agreement, UGA and the affiliated
funds managed by the General Partner, other than USBO, pay the NYMEX an
asset-based fee for the license, the terms of which are described in Note
3.





UGA
expressly disclaims any association with the NYMEX or endorsement of UGA by the
NYMEX and acknowledges that “NYMEX” and “New York Mercantile Exchange” are
registered trademarks of the NYMEX.





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





UGA
engages in the trading of futures contracts and options on futures contracts
(collectively, “derivatives”). UGA is exposed to both market risk, which is the
risk arising from changes in the market value of the contracts, and credit risk,
which is the risk of failure by another party to perform according to the terms
of a contract.





UGA may
enter into futures contracts and options on futures contracts to gain exposure
to changes in the value of an underlying commodity. A futures contract obligates
the seller to deliver (and the purchaser to accept) the future delivery of a
specified quantity and type of a commodity at a specified time and place. Some
futures contracts may call for physical delivery of the asset, while others are
settled in cash. The contractual obligations of a buyer or seller may generally
be satisfied by taking or making physical delivery of the underlying commodity
or by making an offsetting sale or purchase of an identical futures contract on
the same or linked exchange before the designated date of delivery.





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





Futures
contracts involve, to varying degrees, elements of market risk (specifically
commodity price risk) and exposure to loss in excess of the amount of variation
margin. The face or contract amounts reflect the extent of the total exposure
UGA has in the particular classes of instruments. Additional risks associated
with the use of futures contracts are an imperfect correlation between movements
in the price of the futures contracts and the market value of the underlying
securities and the possibility of an illiquid market for a futures
contract.


11


All of
the futures contracts currently traded by UGA are exchange-traded. The risks
associated with exchange-traded contracts are generally perceived to be less
than those associated with over-the-counter transactions since, in
over-the-counter transactions, UGA must rely solely on the credit of its
respective individual counterparties. However, in the future, if UGA were to
enter into non-exchange traded contracts, it would be subject to the credit risk
associated with counterparty non-performance. The credit risk from counterparty
non-performance associated with such instruments is the net unrealized gain, if
any. UGA also has credit risk since the sole counterparty to all domestic and
foreign futures contracts is the clearinghouse for the exchange on which the
relevant contracts are traded. In addition, UGA bears the risk of financial
failure by the clearing broker.





UGA’s
cash and other property, such as U.S. Treasuries, deposited with a futures
commission merchant are considered commingled with all other customer funds,
subject to the futures commission merchant’s segregation requirements. In the
event of a futures commission merchant’s insolvency, recovery may be limited to
a pro rata share of segregated funds available. It is possible that the
recovered amount could be less than the total of cash and other property
deposited. The insolvency of a futures commission merchant could result in the
complete loss of UGA’s assets posted with that futures commission merchant;
however, the vast majority of UGA’s assets are held in U.S. Treasuries, cash
and/or cash equivalents with UGA’s custodian and would not be impacted by the
insolvency of a futures commission merchant. Also, the failure or insolvency of
UGA’s custodian could result in a substantial loss of UGA’s assets.





The
General Partner invests a portion of UGA’s cash in money market funds that seek
to maintain a stable net asset value. UGA is exposed to any risk of loss
associated with an investment in these money market funds. As of June 30, 2010
and December 31, 2009, UGA had deposits in domestic and foreign financial
institutions,including
cash investments in money market funds, in the amounts of $80,648,710 and
$63,237,601, respectively. This amount is subject to loss should these
institutions cease operations.





For
derivatives, risks arise from changes in the market value of the contracts.
Theoretically, UGA is exposed to a market risk equal to the value of futures
contracts purchased and unlimited liability on such contracts sold short. As
both a buyer and a seller of options, UGA pays or receives a premium at the
outset and then bears the risk of unfavorable changes in the price of the
contract underlying the option.





UGA’s
policy is to continuously monitor its exposure to market and counterparty risk
through the use of a variety of financial, position and credit exposure
reporting controls and procedures. In addition, UGA has a policy of requiring
review of the credit standing of each broker or counterparty with which it
conducts business.





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





NOTE
6 – FAIR VALUE OF FINANCIAL INSTRUMENTS





UGA
values its investments in accordance with Accounting Standards Codification 820
– Fair Value Measurements and Disclosures (“ASC 820”).  ASC 820
defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurement. The changes to past practice resulting from the application
of ASC 820 relate to the definition of fair value, the methods used to measure
fair value, and the expanded disclosures about fair value measurement. ASC 820
establishes a fair value hierarchy that distinguishes between (1) market
participant assumptions developed based on market data obtained from sources
independent of UGA (observable inputs) and (2) UGA’s own assumptions about
market participant assumptions developed based on the best information available
under the circumstances (unobservable inputs). The three levels defined by the
ASC 820 hierarchy are as follows:




Level I –
Quoted prices (unadjusted) in active markets for identical assets or
liabilities that the reporting entity has the ability to access at the
measurement date.




Level II
– Inputs other than quoted prices included within Level I that are observable
for the asset or liability, either directly or indirectly.  Level II
assets include the following: quoted prices for similar assets or liabilities
in active markets, quoted prices for identical or similar assets or liabilities
in markets that are not active, inputs other than quoted prices that are
observable for the asset or liability, and inputs that are derived principally
from or corroborated by observable market data by correlation or other means
(market-corroborated inputs).


12




Level III
– Unobservable pricing input at the measurement date for the asset or liability.
Unobservable inputs shall be used to measure fair value to the extent that
observable inputs are not available.




In some
instances, the inputs used to measure fair value might fall in different levels
of the fair value hierarchy.  The level in the fair value hierarchy
within which the fair value measurement in its entirety falls shall be
determined based on the lowest input level that is significant to the fair value
measurement in its entirety.




The
following table summarizes the valuation of UGA’s securities at December 31,
2009 using the fair value hierarchy:




At December 31, 2009
                Total
                
                Level I
                
                Level II
                
                Level IIIShort-Term
      Investments
                
                $
                53,435,830
                
                
                $
                53,435,830
                
                
                $
                -
                
                
                $
                -Exchange-Traded
      Futures ContractsUnited
      States Contracts
                
                
                5,883,944
                
                
                
                5,883,944
                
                
                
                -
                
                
                
                -





During
the year ended December 31, 2009, there were no significant transfers between
Level I and Level II.




The
following table summarizes the valuation of UGA’s securities at June 30, 2010
using the fair value hierarchy:




At June 30, 2010
                Total
                
                Level I
                
                Level II
                
                Level IIIShort-Term
      Investments
                
                $
                61,447,779
                
                
                $
                61,447,779
                
                
                $
                -
                
                
                $
                -Exchange-Traded
      Futures ContractsUnited
      States Contracts
                
                
                (2,937,060
                )
                
                
                (2,937,060
                )
                
                
                -
                
                
                
                -





During
the six months ended June 30, 2010, there were no significant transfers between
Level I and Level II.





Effective
January 1, 2009, UGA adopted the provisions of Accounting Standards Codification
815 —Derivatives and Hedging, which require presentation of qualitative
disclosures about objectives and strategies for using derivatives, quantitative
disclosures about fair value amounts and gains and losses on
derivatives.





Fair
Value of Derivative Instruments





Derivatives
      not
                          
                          Statement
      of
                          
                          Fair Value
                          
                          Fair ValueAccounted
                          
                          Financial
                          
                          At
                          
                          Atfor
      as Hedging
                          
                          Condition
                          
                          June 30,
                          
                          December 31,Instruments
                          
                          Location
                          
                          2010
                          
                          2009Futures
      -Commodity
      Contracts
                          
                          Assets
                          
                          
                          $
                          (2,937,060)
                          
                          $
                          5,883,944





The
Effect of Derivative Instruments on the Statements of Operations





For the six months ended
                                      
                                      
                                      For the six months endedJune 30, 2010
                                      
                                      
                                      June 30, 2009Location of
                                      
                                      Realized
                                      
                                      
                                      Change in
                                      
                                      
                                      Realized
                                      
                                      
                                      Change inDerivatives not
                                      
                                      Gain or (Loss)
                                      
                                      Gain or (Loss)
                                      
                                      
                                      Unrealized
                                      
                                      
                                      Gain or (Loss)
                                      
                                      
                                      UnrealizedAccounted
                                      
                                      on Derivatives
                                      
                                      on Derivatives
                                      
                                      
                                      Gain or (Loss)
                                      
                                      
                                      on Derivatives
                                      
                                      
                                      Gain or (Loss)for as Hedging
                                      
                                      Recognized
                                      
                                      Recognized
                                      
                                      
                                      Recognized
                                      
                                      
                                      Recognized
                                      
                                      
                                      RecognizedInstruments
                                      
                                      in Income
                                      
                                      in Income
                                      
                                      
                                      in Income
                                      
                                      
                                      in Income
                                      
                                      
                                      in IncomeFutures - Commodity
      Contracts
                                      
                                      Realized gain (loss)
      on closed
      positions
                                      
                                      $
                                      1,272,348
                                      
                                      
                                      
                                      
                                      
                                      
                                      $
                                      35,829,276Change in unrealized
      gain
      (loss) on open positions
                                      
                                      
                                      
                                      
                                      
                                      $
                                      (8,821,004)
                                      
                                      
                                      
                                      
                                      
                                      
                                      $
                                      (8,121,027)





13


NOTE
7 - FINANCIAL HIGHLIGHTS





The
following table presents per unit performance data and other supplemental
financial data for the six months ended June 30, 2010 and 2009 for the
unitholders. This information has been derived from information presented in the
condensed financial statements.





For the six
                      months ended
                    
                    
                    For the six
                      months endedJune 30, 2010
                    
                    
                    June 30, 2009(Unaudited)
                    
                    
                    (Unaudited)Per Unit Operating
    Performance:Net
      asset value, beginning of period
                    
                    $
                    36.41
                    
                    
                    $
                    20.21Total
      income (loss)
                    
                    
                    (2.40
                    )
                    
                    
                    12.62Net
      expenses
                    
                    
                    (0.16
                    )
                    
                    
                    (0.14
                    )Net
      increase (decrease) in net asset value
                    
                    
                    (2.56
                    )
                    
                    
                    12.48Net
      asset value, end of period
                    
                    $
                    33.85
                    
                    
                    $
                    32.69Total
      Return
                    
                    
                    (7.03
                    )%
                    
                    
                    61.75
                    %Ratios
      to Average Net AssetsTotal
      income (loss)
                    
                    
                    (9.58
                    )%
                    
                    
                    48.49
                    %Management
      fees*
                    
                    
                    0.60
                    %
                    
                    
                    0.60
                    %Total
      expenses excluding management fees*
                    
                    
                    0.83
                    %
                    
                    
                    0.43
                    %Expenses
      waived*
                    
                    
                    (0.51
                    )%
                    
                    
                    (0.11
                    )%Net
      expenses excluding management fees*
                    
                    
                    0.32
                    %
                    
                    
                    0.32
                    %Net income
      (loss)
                    
                    
                    (10.03
                    )%
                    
                    
                    48.03
                    %





*Annualized





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




NOTE 8 – RECENT ACCOUNTING
PRONOUNCEMENTS





In
January 2010, the Financial Accounting Standards Board issued Accounting
Standards Update (“ASU”)No. 2010-06 “Improving
Disclosures about Fair Value Measurements.” ASU No. 2010-06 clarifies existing
disclosure andrequires additional
disclosures regarding fair value measurements. Effective for fiscal years
beginningafter
December 15, 2010, and for interim periods within those fiscal years, entities
will need to disclose informationabout purchases, sales,
issuances and settlements of Level 3 securities on a gross basis, rather than as
a net number ascurrently required. The
implementation of ASU No. 2010-06 will have no impact on UGA’s financial
statement disclosures.


14


NOTE 9 – SUBSEQUENT
EVENTS





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


15


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





The
following discussion should be read in conjunction with the condensed financial
statements and the notes thereto of the United States Gasoline Fund, LP (“UGA”)
included elsewhere in this quarterly report on Form 10-Q.





Forward-Looking
Information





This
quarterly report on Form 10-Q, including this “Management’s Discussion and
Analysis of Financial Condition and Results of Operations,” contains
forward-looking statements regarding the plans and objectives of management for
future operations. This information may involve known and unknown risks,
uncertainties and other factors that may cause UGA’s actual results, performance
or achievements to be materially different from future results, performance or
achievements expressed or implied by any forward-looking statements.
Forward-looking statements, which involve assumptions and describe UGA’s future
plans, strategies and expectations, are generally identifiable by use of the
words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,”
“intend” or “project,” the negative of these words, other variations on these
words or comparable terminology. These forward-looking statements are based on
assumptions that may be incorrect, and UGA cannot assure investors that the
projections included in these forward-looking statements will come to pass.
UGA’s actual results could differ materially from those expressed or implied by
the forward-looking statements as a result of various factors.





UGA has
based the forward-looking statements included in this quarterly report on Form
10-Q on information available to it on the date of this quarterly report on Form
10-Q, and UGA assumes no obligation to update any such forward-looking
statements. Although UGA undertakes no obligation to revise or update any
forward-looking statements, whether as a result of new information, future
events or otherwise, investors are advised to consult any additional disclosures
that UGA may make directly to them or through reports that UGA in the future
files with the U.S. Securities and Exchange Commission (the “SEC”), including
annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports
on Form 8-K.





Introduction





UGA, a
Delaware limited partnership, is a commodity pool that issues units that may be
purchased and sold on the NYSE Arca, Inc. (the “NYSE Arca”). The investment
objective of UGA is for the changes in percentage terms of its units’ net asset
value (“NAV”) to reflect the changes in percentage terms of the spot price of
gasoline, as measured by the changes in the price of the futures contract for
unleaded gasoline (also known as reformulated gasoline blendstock for oxygen
blending, or “RBOB”, for delivery to the New York harbor), traded on the New
York Mercantile Exchange (the “NYMEX”) that is the near month contract to
expire, except when the near month contract is within two weeks of expiration,
in which case it will be measured by the futures contract that is the next month
contract to expire (the “Benchmark Futures Contract”), less UGA’s
expenses.





UGA
invests in futures contracts for gasoline, crude oil, natural gas, heating oil
and other petroleum-based fuels that are traded on the NYMEX, ICE Futures or
other U.S. and foreign exchanges (collectively, “Futures Contracts”) and other
gasoline-related investments such as cash-settled options on Futures Contracts,
forward contracts for gasoline, cleared swap contracts and over-the-counter
transactions that are based on the price of gasoline, crude oil and other
petroleum-based fuels, Futures Contracts and indices based on the foregoing
(collectively, “Other Gasoline-Related Investments”). For convenience and unless
otherwise specified, Futures Contracts and Other Gasoline-Related Investments
collectively are referred to as “Gasoline Interests” in this quarterly report on
Form 10-Q.





UGA seeks
to achieve its investment objective by investing in a combination of Futures
Contracts and Other Gasoline-Related Investments such that changes in its NAV,
measured in percentage terms, will closely track the changes in the price of the
Benchmark Futures Contract, also measured in percentage terms. UGA’s general
partner believes the daily changes in the price of the Benchmark Futures
Contract have historically exhibited a close correlation with the daily changes
in the spot price of gasoline. It is not the intent of UGA to be operated in a
fashion such that the NAV will equal, in dollar terms, the spot price of
gasoline or any particular futures contract based on gasoline. Management
believes that it is not practical to manage the portfolio to achieve such an
investment goal when investing in Futures Contracts and Other Gasoline-Related
Investments.


16


On any
valuation day, the Benchmark Futures Contract is the near month futures contract
for gasoline traded on the NYMEX unless the near month contract is within two
weeks of expiration, in which case the Benchmark Futures Contract is the next
month contract for gasoline traded on the NYMEX. “Near month contract” means the
next contract traded on the NYMEX due to expire. “Next month contract” means the
first contract traded on the NYMEX due to expire after the near month
contract.





The
regulation of commodity interests in the United States is a rapidly changing
area of law and is subject to ongoing modification by governmental and judicial
action.  As stated under the heading, “Risk Factors” in Item 1A of
UGA’s annual report on Form 10-K for the year ended December 31, 2009,
regulation of the commodity interests and energy markets is extensive and
constantly changing; future regulatory developments in the commodity interests
and energy markets are impossible to predict but may significantly and adversely
affect UGA.





On July
21, 2010, a broad financial regulatory reform bill, “The Dodd-Frank Wall Street
Reform and Consumer Protection Act,” was signed into law that includes
provisions altering the regulation of commodity interests.  Provisions
in the new law include the requirement that position limits on energy-based
commodity futures contracts be established; new registration, recordkeeping,
capital and margin requirements for “swap dealers” and “major swap participants”
as determined by the new law and applicable regulations; and the forced use of
clearinghouse mechanisms for most over-the-counter transactions. Additionally,
the new law requires the aggregation, for purposes of position limits, of all
positions in energy futures held by a single entity and its affiliates, whether
such positions exist on U.S. futures exchanges, non-U.S. futures exchanges, or
in over-the-counter contracts. The U.S. Commodity Futures Trading Commission
(the “CFTC”), along with the SEC and other federal regulators, has been tasked
with developing the rules and regulations enacting the provisions noted
above.  The new law and the rules to be promulgated may negatively
impact UGA’s ability to meet its investment objective either through limits or
requirements imposed on it or upon its counterparties.  In particular,
new position limits imposed on UGA or its counterparties may impact UGA’s
ability to invest in a manner that most efficiently meets its investment
objective, and new requirements, including capital and mandatory clearing, may
increase the cost of UGA’s investments and doing business, which could adversely
affect UGA’s investors.





The
general partner of UGA, United States Commodity Funds LLC (the “General
Partner”), which is registered as a commodity pool operator (“CPO”) with the
CFTC, is authorized by the Amended and Restated Agreement of Limited Partnership
of UGA (the “LP Agreement”) to manage UGA. The General Partner is authorized by
UGA in its sole judgment to employ and establish the terms of employment for,
and termination of, commodity trading advisors or futures commission
merchants.





Price
Movements





Gasoline
futures prices were volatile during the six months ended June 30, 2010 and
exhibited moderate daily swings along with an uneven upward trend between
January and late April and a downward trend from May to late June 2010. The
price of the Benchmark Futures Contract started the period at $2.053 per gallon.
It hit a peak on May 3, 2010 with a price of $2.435. The low of the period was
on February 5, 2010 when prices dropped to $1.886 per gallon. The period ended
with the Benchmark Gasoline Futures Contract at $2.060 per gallon, up
approximately 0.37% over the period.  UGA’s NAV had a starting level
of $36.41 per unit and reached its high for the period on May 3, 2010 at $39.90
per unit. UGA’s NAV reached its low for the period on May 25, 2010 at $31.45 per
unit. UGA’s NAV on June 30, 2010 was $33.85, down approximately 7.03% over the
period. The Benchmark Futures Contract prices listed above began with the
February 2010 contract and ended with the August 2010 contract.  The
return of approximately 0.37% on the Benchmark Futures Contract listed above is
a hypothetical return only and could not actually be achieved by an investor
holding Futures Contracts.  An investment in gasoline Futures
Contracts would need to be rolled forward during the time period described in
order to achieve such a result. Furthermore, the change in the nominal price of
these differing gasoline Futures Contracts, measured from the start of the
period to the end of the period, does not represent the actual benchmark results
that UGA seeks to track, which are more fully described below in the section
titled “Tracking UGA’s Benchmark”.





During
the six months ended June 30, 2010, the gasoline futures market exhibited
periods of both contango and slight backwardation. During periods of contango,
the price of the near month gasoline Futures Contract was typically lower than
the price of the next month gasoline Futures Contract, or contracts further away
from expiration.  On days when the market was in backwardation, the
price of the near month gasoline Futures Contract was typically higher than the
price of the next month gasoline Futures Contract, or contracts further away
from expiration.  For a discussion of the impact of backwardation and
contango on total returns, see “Term Structure of Gasoline Prices and the Impact
on Total Returns.”


17


Valuation
of Futures Contracts and the Computation of the NAV





The NAV
of UGA’s units is calculated once each NYSE Arca trading day. The NAV for a
particular trading day is released after 4:00 p.m. New York time. Trading during
the core trading session on the NYSE Arca typically closes at 4:00 p.m. New York
time. UGA’s administrator uses the NYMEX closing price (determined at the
earlier of the close of the NYMEX or 2:30 p.m. New York time) for the contracts
held on the NYMEX, but calculates or determines the value of all other UGA
investments, including ICE Futures contracts or other futures contracts, as of
the earlier of the close of the NYSE Arca or 4:00 p.m. New York
time.





Results
of Operations and the Gasoline Market





Results of Operations.On
February 26, 2008, UGA listed its units on the American Stock Exchange (the
“AMEX”) under the ticker symbol “UGA.” On that day, UGA established its initial
offering price at $50.00 per unit and issued 300,000 units to the initial
authorized purchaser, Kellogg Capital Group, LLC, in exchange for $15,001,000 in
cash. As a result of the acquisition of the AMEX by NYSE Euronext, UGA’s units
no longer trade on the AMEX and commenced trading on the NYSE Arca on November
25, 2008.





Since its
initial offering of 30,000,000 units, UGA has made one subsequent offering of
its units: 50,000,000 units which were registered with the SEC on April 30,
2010. As of June 30, 2010, UGA had issued 5,200,000 units, 2,300,000 of which
were outstanding. As of June 30, 2010, there were 74,800,000 units registered
but not yet issued.





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





For the Six Months Ended
June 30, 2010 Compared to the Six Months Ended June 30, 2009





As of
June 30, 2010, the total unrealized loss on gasoline Futures Contracts owned or
held on that day was $2,937,060 and UGA established cash deposits,including cash investments in
money market funds, that were equal to $80,648,710. UGA held 82.69% of its cash
assets in overnight deposits and money market funds at its custodian bank, while
17.31% of the cash balance was held as margin deposits for the Futures Contracts
purchased. The ending per unit NAV on June 30, 2010 was $33.85.





By
comparison, as of June 30, 2009, the total unrealized loss on gasoline Futures
Contracts owned or held on that day was $6,689,306 and UGA established cash
deposits,including cash
investments in money market funds, that were equal to $98,313,645. UGA held
71.21% of its cash assets in overnight deposits and money market funds at its
custodian bank, while 28.79% of the cash balance was held as margin deposits for
the Futures Contracts purchased. The ending per unit NAV on June 30, 2009 was
$32.69. The increase in the per unit NAV from June 30, 2009 compared to June 30,
2010 was primarily a result of higher prices for gasoline and the related
increase in the value of the gasoline Futures Contracts that UGA had invested in
between the period ended June 30, 2009 and the period ended June 30,
2010.





Portfolio Expenses. UGA’s
expenses consist of investment management fees, brokerage fees and commissions,
certain offering costs, licensing fees, the fees and expenses of the independent
directors of the General Partner and expenses relating to tax accounting and
reporting requirements. The management fee that UGA pays to the General Partner
is calculated as a percentage of the total net assets of UGA.  UGA
pays the General Partner a management fee of 0.60% of its average net assets.
The fee is accrued daily and paid monthly.





During
the six months ended June 30, 2010, the daily average total net assets of UGA
were $78,574,726. The management fee paid by UGA during the period amounted to
$233,787. By comparison, during the six months ended June 30, 2009, the daily
average total net assets of UGA were $57,317,365. The management fee paid by UGA
during the period amounted to $170,539.


18


In
addition to the management fee, UGA pays all brokerage fees and other expenses,
including certain tax reporting costs, licensing fees for the use of
intellectual property, ongoing registration or other fees paid to the SEC, the
Financial Industry Regulatory Authority (“FINRA”) and any other regulatory
agency in connection with offers and sales of its units subsequent to the
initial offering and all legal, accounting, printing and other expenses
associated therewith. The total of these fees and expenses for the six months
ended June 30, 2010 was $325,257, as compared to $123,857 for the six months
ended June 30, 2009. The increase in expenses from the six months ended June 30,
2009 as compared to the six months ended June 30, 2010 was primarily due to
UGA’s increased size and activity that resulted from its increased size,
including increased estimates for tax reporting, legal, accounting, printing,
and other expenses.  UGA incurred $6,516 and $0 in fees and other
expenses relating to the registration and offering of additional units during
the six months ended June 30, 2010 and 2009, respectively.  During the
six months ended June 30, 2010, an expense waiver was in effect which offset
certain of the expenses incurred by UGA.  The total amount of the fee
waiver totaled $201,463. For the six months ended June 30, 2010, the expenses of
UGA, including management fees, commissions, and all other expenses, before
allowance for the expense waiver, totaled $559,044, and after allowance for the
expense waiver, totaled $357,581.





UGA is
responsible for paying its portion of the directors’ and officers’ liability
insurance of the General Partner and the fees and expenses of the independent
directors of the General Partner who are also the General Partner’s audit
committee members. UGA shares these fees and expenses with 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 Heating Oil Fund, LP
(“USHO”), the United States Short Oil Fund, LP (“USSO”), the United States 12
Month Natural Gas Fund, LP (“US12NG”) and the United States Brent Oil Fund, LP
(“USBO”), based on the relative assets of each fund computed on a daily basis.
These fees and expenses for the calendar year 2010 are estimated to be a total
of $1,178,870 for all funds. By comparison, for the year ended December 31,
2009, these fees and expenses amounted to a total of $433,046 for all funds, and
UGA’s portion of such fees was $3,734. Directors’ expenses are expected to
increase in 2010 due to an increase in the amount of directors’ and officers’
liability insurance coverage and the incurrence of the independent directors’
deferred compensation expense.  Effective as of March 3, 2009, the
General Partner obtained directors’ and officers’ liability insurance covering
all of the directors and officers of the General Partner. Previously, the
General Partner did not have liability insurance for its directors and officers;
instead, the independent directors received a payment in lieu of directors’ and
officers’ liability insurance coverage.Effective as of April 1,
2010, UGA is also responsible for paying its portion of any payments that may
become due to the independent directors pursuant to the deferred compensation
agreements entered into between the independent directors, the General Partner
and each of the funds.





UGA also
incurs commissions to brokers for the purchase and sale of Futures Contracts,
Other Gasoline-Related Investments or short-term obligations of the United
States of two years or less (“Treasuries”). During the six months ended June 30,
2010, total commissions paid to brokers amounted to $37,508. By comparison,
during the six months ended June 30, 2009, total commissions paid to brokers
amounted to $40,339. The decrease in the total commissions paid to brokers from
the six months ended June 30, 2009 compared to the six months ended June 30,
2010 was primarily a function of the decrease in UGA’s trading activities
including fewer creations and redemptions during the six months ended June 30,
2010. A decrease in creation and redemption activity resulted in fewer trades
and a lower total commission amount.  As an annualized percentage of
total net assets, the figure for the six months ended June 30, 2010 represents
approximately 0.09% of total net assets. By comparison, the figure for the six
months ended June 30, 2009 represented approximately 0.14% of total net assets.
However, there can be no assurance that commission costs and portfolio turnover
will not cause commission expenses to rise in future quarters.





The fees
and expenses associated with UGA’s audit expenses and tax accounting and
reporting requirements are paid by UGA.  These costs are estimated to
be $255,302 for the calendar year 2010.  The General Partner, though
under no obligation to do so, agreed to pay certain expenses, to the extent that
such expenses exceed 0.15% (15 basis points) of UGA’s NAV, on an annualized
basis, through September 30, 2010, after which date such payments are no longer
necessary.  The General Partner has no obligation to continue such
payment into subsequent periods.


19


Dividend and Interest
Income.  UGA seeks to invest its assets such that it holds
Futures Contracts and Other Gasoline-Related Investments in an amount equal to
the total net assets of its portfolio. Typically, such investments do not
require UGA to pay the full amount of the contract value at the time of
purchase, but rather require UGA to post an amount as a margin deposit against
the eventual settlement of the contract. As a result, UGA retains an amount that
is approximately equal to its total net assets, which UGA invests in Treasuries,
cash and/or cash equivalents. This includes both the amount on deposit with the
futures commission merchant as margin, as well as unrestricted cash and cash
equivalents held with UGA’s custodian bank. The Treasuries, cash and/or cash
equivalents earn income that accrues on a daily basis. For the six months ended
June 30, 2010, UGA earned $13,280 in dividend and interest income on such cash
and/or cash equivalents. Based on UGA’s average daily total net assets, this was
equivalent to an annualized yield of 0.03%. UGA did not purchase Treasuries
during the six months ended June 30, 2010 and held only cash and/or cash
equivalents during this time period. By comparison, for the six months ended
June 30, 2009, UGA earned $63,217 in dividend and interest income on such cash
and/or cash equivalents.  Based on UGA’s average daily total net
assets, this was equivalent to an annualized yield of 0.22%. UGA did not
purchase Treasuries during the six months ended June 30, 2009 and held only cash
and/or cash equivalents during this time period. Interest rates on short-term
investments, including cash, cash equivalents, and Treasuries, were sharply
lower during the six months ended June 30, 2010 compared to the six months ended
June 30, 2009. As a result, the amount of income earned by UGA as a percentage
of total net assets was lower during the six months ended June 30,
2010.





For the Three Months Ended
June 30, 2010 Compared to the Three Months Ended June 30,
2009





Portfolio
Expenses.  During the three months ended June 30, 2010, the
daily average total net assets of UGA were $86,932,807. The management fee paid
by UGA during the period amounted to $130,042. By comparison, during the three
months ended June 30, 2009, the daily average total net assets of UGA were
$81,913,827. The management fee paid by UGA during the period amounted to
$122,534.





In
addition to the management fee, UGA pays all brokerage fees and other expenses,
including certain tax reporting costs, licensing fees for the use of
intellectual property, ongoing registration or other fees paid to the SEC, FINRA
and any other regulatory agency in connection with offers and sales of its units
subsequent to the initial offering and all legal, accounting, printing and other
expenses associated therewith. The total of these fees and expenses for the
three months ended June 30, 2010 was $131,756, as compared to $68,426 for the
three months ended June 30, 2009. The increase in expenses from the three months
ended June 30, 2009 as compared to the three months ended June 30, 2010 was
primarily due to UGA’s increased size and activity that resulted from its
increased size, including increased estimates for tax reporting, legal,
accounting, printing, and other expenses.  UGA incurred $4,546 and $0
in fees and other expenses relating to the registration and offering of
additional units during the three months ended June 30, 2010 and 2009,
respectively.  During the three months ended June 30, 2010, an expense
waiver was in effect which offset certain of the expenses incurred by
UGA.  The total amount of the expense waiver totaled
$56,839.  For the three months ended June 30, 2010, the expenses of
UGA, including management fees, commissions, and all other expenses, before
allowance for the expense waiver, totaled $261,798, and after allowance for the
expense waiver, totaled $204,959.





UGA is
responsible for paying its portion of the directors’ and officers’ liability
insurance of the General Partner and the fees and expenses of the independent
directors of the General Partner who are also the General Partner’s audit
committee members. UGA shares these fees and expenses with USOF,
USNG, US12OF, USHO, USSO, US12NG and USBO based on the relative assets of
each fund computed on a daily basis. These fees and expenses for the calendar
year 2010 are estimated to be a total of $1,178,870 for all funds. By
comparison, for the year ended December 31, 2009, these fees and expenses
amounted to a total of $433,046 for all funds, and UGA’s portion of such fees
was $3,734. Directors’ expenses are expected to increase in 2010 due to an
increase in the amount of directors’ and officers’ liability insurance coverage
and the incurrence of the independent directors’ deferred compensation expense.
 Effective as of March 3, 2009, the General Partner obtained directors’ and
officers’ liability insurance covering all of the directors and officers of the
General Partner. Previously, the General Partner did not have liability
insurance for its directors and officers; instead, the independent directors
received a payment in lieu of directors’ and officers’ liability insurance
coverage.  Effective as of April 1, 2010, UGA is also responsible for
paying its portion of any payments that may become due to the independent
directors pursuant to the deferred compensation agreements entered into between
the independent directors, the General Partner and each of the
funds.


20


UGA also
incurs commissions to brokers for the purchase and sale of Futures Contracts,
Other Gasoline-Related Investments or Treasuries. During the three months ended
June 30, 2010, total commissions paid to brokers amounted to $21,796. By
comparison, during the three months ended June 30, 2009, total commissions paid
to brokers amounted to $24,538. The decrease in the total commissions paid to
brokers from the three months ended June 30, 2010 compared to the three months
ended June 30, 2009 was primarily a function of the decrease in UGA’s trading
activities including fewer creations and redemptions during the three months
ended June 30, 2010. As an annualized percentage of total net assets, the figure
for the three months ended June 30, 2010 represents approximately 0.10% of total
net assets. By comparison, the figure for the three months ended June 30, 2009
represented approximately 0.12% of total net assets. However, there can be no
assurance that commission costs and portfolio turnover will not cause commission
expenses to rise in future quarters.





The fees
and expenses associated with UGA’s audit expenses and tax accounting and
reporting requirements are paid by UGA.  These costs are estimated to
be $255,302 for the calendar year 2010. The General Partner, though under no
obligation to do so, agreed to pay certain expenses, to the extent that such
expenses exceed 0.15% (15 basis points) of UGA’s NAV, on an annualized basis,
through September 30, 2010, after which date such payments are no longer
necessary.  The General Partner has no obligation to continue such
payment into subsequent periods.





Dividend and Interest
Income.  UGA seeks to invest its assets such that it holds
Futures Contracts and Other Gasoline-Related Investments in an amount equal to
the total net assets of its portfolio. Typically, such investments do not
require UGA to pay the full amount of the contract value at the time of
purchase, but rather require UGA to post an amount as a margin deposit against
the eventual settlement of the contract. As a result, UGA retains an amount that
is approximately equal to its total net assets, which UGA invests in Treasuries,
cash and/or cash equivalents. This includes both the amount on deposit with the
futures commission merchant as margin, as well as unrestricted cash and cash
equivalents held with UGA’s custodian bank. The Treasuries, cash and/or cash
equivalents earn income that accrues on a daily basis. For the three months
ended June 30, 2010, UGA earned $9,669 in dividend and interest income on such
cash and/or cash equivalents. Based on UGA’s average daily total net assets,
this was equivalent to an annualized yield of 0.04%. UGA did not purchase
Treasuries during the three months ended June 30, 2010 and held only cash and/or
cash equivalents during this time period. By comparison, for the three months
ended June 30, 2009, UGA earned $41,116 in dividend and interest income on such
cash and/or cash equivalents.  Based on UGA’s average daily total net
assets, this was equivalent to an annualized yield of 0.20%. UGA did not
purchase Treasuries during the three months ended June 30, 2009 and held only
cash and/or cash equivalents during this time period. Interest rates on
short-term investments, including cash, cash equivalents, and Treasuries, were
sharply lower during the three months ended June 30, 2010 compared to the three
months ended June 30, 2009. As a result, the amount of income earned by UGA as a
percentage of total net assets was lower during the three months ended June 30,
2010.





Tracking
UGA’s Benchmark





UGA’s
management seeks to manage UGA’s portfolio such that changes in its average
daily NAV, on a percentage basis, closely track the changes in the average daily
price of the Benchmark Futures Contract, also on a percentage basis.
Specifically, UGA’s management seeks to manage the portfolio such that over any
rolling period of 30 valuation days, the average daily change in UGA’s NAV is
within a range of 90% to 110% (0.9 to 1.1) of the average daily change in the
price of the Benchmark Futures Contract. As an example, if the average daily
movement of the price of the Benchmark Futures Contract for a particular 30-day
time period was 0.5% per day, UGA’s management would attempt to manage the
portfolio such that the average daily movement of the NAV during that same time
period fell between 0.45% and 0.55% (i.e., between 0.9 and 1.1 of
the benchmark’s results). UGA’s portfolio management goals do not include trying
to make the nominal price of UGA’s NAV equal to the nominal price of the current
Benchmark Futures Contract or the spot price for gasoline. Management believes
that it is not practical to manage the portfolio to achieve such an investment
goal when investing in listed gasoline Futures Contracts.





For the
30 valuation days ended June 30, 2010, the simple average daily change in the
Benchmark Futures Contract was 0.065%, while the simple average daily change in
the NAV of UGA over the same time period was 0.062%. 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 1.837%, meaning that over
this time period UGA’s tracking error was within the plus or minus 10% range
established as its benchmark tracking goal. The first chart below shows the
daily movement of UGA’s NAV versus the daily movement of the Benchmark Futures
Contract for the 30-day valuation period ended June 30, 2010.


21








*
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE
RESULTS


22








*
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS





Since the
offering of UGA units to the public on February 26, 2008 to June 30, 2010, the
simple average daily change in the Benchmark Futures Contract was -0.017%, while
the simple average daily change in the NAV of UGA over the same time period was
-0.018%. 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
-0.472%, meaning that over this time period UGA’s tracking error was within the
plus or minus 10% range established as its benchmark tracking goal.





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





For the
six months ended June 30, 2010, the actual total return of UGA as measured by
changes in its NAV was -7.03%. This is based on an initial NAV of $36.41 on
December 31, 2009 and an ending NAV as of June 30, 2010 of $33.85. During this
time period, UGA made no distributions to its unitholders. However, if UGA’s
daily changes in its NAV had instead exactly tracked the changes in the daily
return of the Benchmark Futures Contract, UGA would have had an estimated NAV of
$34.06 as of June 30, 2010, for a total return over the relevant time period of
-6.45%. The difference between the actual NAV total return of UGA of -7.03% and
the expected total return based on the Benchmark Futures Contract of -6.45% was
an error over the time period of -0.58%, which is to say that UGA’s actual total
return underperformed the benchmark result by that percentage. Management
believes that a portion of the difference between the actual return and the
expected benchmark return can be attributed to the net impact of the expenses
and the income that UGA collects on its cash and cash equivalent holdings.
During the six months ended June 30, 2010, UGA received dividend and interest
income of $13,280, which is equivalent to a weighted average income rate of
0.03% for such period. In addition, during the six months ended June 30, 2010,
UGA also collected $8,000 from its Authorized Purchasers for creating or
redeeming baskets of units. This income also contributed to UGA’s actual return.
However, if the total assets of UGA continue to increase, management believes
that the impact on total returns of these fees from creations and redemptions
will diminish as a percentage of the total return. During the six months ended
June 30, 2010, UGA incurred net expenses of $357,581. Income from dividends and
interest and Authorized Purchaser collections net of expenses was $336,301,
which is equivalent to an annualized weighted average net income rate of
(0.86)% for the six months ended June 30, 2010.


23
  By
comparison, for the six months ended June 30, 2009, the actual total return of
UGA as measured by changes in its NAV was 61.75%. This was based on an initial
NAV of $20.21 on December 31, 2008 and an ending NAV as of June 30, 2009 of
$32.69. During this time period, UGA made no distributions to its unitholders.
However, if UGA’s daily changes in its NAV had instead exactly tracked the
changes in the daily return of the Benchmark Futures Contract, UGA would have
had an estimated NAV of $32.84 as of June 30, 2009, for a total return over the
relevant time period of 62.49%. The difference between the actual NAV total
return of UGA of 61.75% and the expected total return based on the Benchmark
Futures Contract of 62.49% was an error over the time period of -0.74%, which is
to say that UGA’s actual total return trailed the benchmark result by that
percentage. Management believes that a portion of the difference between the
actual return and the expected benchmark return can be attributed to the net
impact of the expenses and the income that UGA collected on its cash and cash
equivalent holdings. During the six months ended June 30, 2009, UGA received
dividend and interest income of $63,217, which is equivalent to a weighted
average income rate of 0.22% for such period.  In addition, during the
six months ended June 30, 2009, UGA also collected $19,000 from its Authorized
Purchasers for creating or redeeming baskets of units. This income also
contributed to UGA’s actual return. During the six months ended June 30, 2009,
UGA incurred net expenses of $262,563. Income from dividends and interest and
Authorized Purchaser collections net of expenses was $(180,346), which is
equivalent to an annualized weighted average net income rate of (0.63)% for
the six months ended June 30, 2009.





There are
currently three factors that have impacted or are most likely to impact UGA’s
ability to accurately track its Benchmark Futures Contract.





First,
UGA may buy or sell its holdings in the then current Benchmark Futures Contract
at a price other than the closing settlement price of that contract on the day
during which UGA executes the trade. In that case, UGA may pay a price that is
higher, or lower, than that of the Benchmark Futures Contract, which could cause
the changes in the daily NAV of UGA to either be too high or too low relative to
the changes in the Benchmark Futures Contract. During the six months ended June
30, 2010, management attempted to minimize the effect of these transactions by
seeking to execute its purchase or sale of the Benchmark Futures Contract at, or
as close as possible to, the end of the day settlement price. However, it may
not always be possible for UGA to obtain the closing settlement price and there
is no assurance that failure to obtain the closing settlement price in the
future will not adversely impact UGA’s attempt to track the Benchmark Futures
Contract over time.





Second,
UGA earns dividend and interest income on its cash and cash equivalents. UGA is
not required to distribute any portion of its income to its unitholders and did
not make any distributions to unitholders during the six months ended June 30,
2010. Interest payments, and any other income, were retained within the
portfolio and added to UGA’s NAV. When this income exceeds the level of UGA’s
expenses for its management fee, brokerage commissions and other expenses
(including ongoing registration fees, licensing fees and the fees and expenses
of the independent directors of the General Partner), UGA will realize a net
yield that will tend to cause daily changes in the NAV of UGA to track slightly
higher than daily changes in the Benchmark Futures Contract. During the six
months ended June 30, 2010, UGA earned, on an annualized basis, approximately
0.03% on its cash holdings. It also incurred cash expenses on an annualized
basis of 0.60% for management fees and approximately 0.09% in brokerage
commission costs related to the purchase and sale of futures contracts, and
0.22% for other expenses. The foregoing fees and expenses resulted in a net
yield on an annualized basis of approximately (0.88)% and affected UGA’s ability
to track its benchmark. If short-term interest rates rise above the current
levels, the level of deviation created by the yield would decrease. Conversely,
if short-term interest rates were to decline, the amount of error created by the
yield would increase. When short-term yields drop to a level lower than the
combined expenses of the management fee and the brokerage commissions, then the
tracking error becomes a negative number and would tend to cause the daily
returns of the NAV to underperform the daily returns of the Benchmark Futures
Contract.


24


Third,
UGA may hold Other Gasoline-Related Investments in its portfolio that may fail
to closely track the Benchmark Futures Contract’s total return movements. In
that case, the error in tracking the Benchmark Futures Contract could result in
daily changes in the NAV of UGA that are either too high, or too low, relative
to the daily changes in the Benchmark Futures Contract. During the six months
ended June 30, 2010, UGA did not hold any Other Gasoline-Related
Investments.  If UGA increases in size, and due to its obligations to
comply with regulatory limits, UGA may invest in Other Gasoline-Related
Investments, which may have the effect of increasing transaction related
expenses and result in increased tracking error.





Term Structure of Gasoline 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 gasoline
futures contracts and “rolling” those contracts forward each month is the price
relationship between the current near month contract and the next month
contract.  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 gasoline for immediate delivery (the “spot”
price), was $2.00 per gallon, and the value of a position in the near month
futures contract was also $2.00. Over time, the price of a gallon of gasoline
will fluctuate based on a number of market factors, including demand for
gasoline 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 position in a near month contract and not take delivery
of the gasoline, 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 gasoline 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 gasoline
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
income earned on 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 this example, the value of the $2.00 investment would tend to rise
faster than the spot price of gasoline, or fall slower. As a result, it would be
possible in this hypothetical example for the spot price of gasoline to have
risen to $2.50 after some period of time, while the value of the investment in
the futures contract would have risen to $2.60, assuming backwardation is large
enough or enough time has elapsed. Similarly, the spot price of gasoline could
have fallen to $1.50 while the value of an investment in the futures contract
could have fallen to only $1.60. Over time, if backwardation remained constant,
the difference would continue to increase.





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 gasoline
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 income earned on cash and/or cash equivalents), 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 $2.00
investment would tend to rise slower than the spot price of gasoline, or fall
faster. As a result, it would be possible in this hypothetical example for the
spot price of gasoline to have risen to $2.50 after some period of time, while
the value of the investment in the futures contract will have risen to only
$2.40, assuming contango is large enough or enough time has
elapsed.  Similarly, the spot price of gasoline could have fallen to
$1.50 while the value of an investment in the futures contract could have fallen
to $1.40. Over time, if contango remained constant, the difference would
continue to increase.





The chart
below compares the price of the near month contract to the price of the next
month contract over the last 10 years (2000-2009) for gasoline. When the price
of the near month contract is higher than the price of the next 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 next month contract, the
market would be described as being in contango. Although the prices of the near
month contract and the price of the next 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 next month contract (backwardation), and other
times they are below the price of the next month contract (contango). In
addition, investors can observe that gasoline prices, both near month and next
month, often display a seasonal pattern in which the price of gasoline tends to
rise in the summer months and decline in the winter months. This mirrors the
physical demand for gasoline, which typically peaks in the
summer.


25











*PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS





An
alternative way to view backwardation and contango data over time is to subtract
the dollar price of the next month gasoline futures contract from the dollar
price of the near month gasoline futures contract. If the resulting number is a
positive number, then the price of the near month contract is higher than the
price of the next month 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 next month and the market could be
described as being in contango. The chart below shows the results from
subtracting the next month contract price from the price of the near month
contract for the 10 year period between 2000 and 2009. Investors will note
that the near month gasoline futures contract spent time in both backwardation
and contango. Investors will further note that the markets display a very
seasonal pattern that corresponds to the seasonal demand patterns for gasoline
mentioned above. That is, in many, but not all cases, the price of the near
month is higher than the next month during the middle of the summer months as
the price of gasoline for delivery in those summer months rises to meet peak
demand. At the same time, the price of the near month contract, when that month
is just before the onset of spring, does not rise as far or as fast as the price
of a next month contract whose delivery falls closer to the start of the summer
season.


26











*PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS





While the
investment objective of UGA is not to have the market price of its units match,
dollar for dollar, changes in the spot price of gasoline, contango and
backwardation have impacted the total return on an investment in UGA units
during the past year relative to a hypothetical direct investment in gasoline.
For example, an investment in UGA units made on December 31, 2009 and held to
June 30, 2010 decreased based upon the changes in the NAV for UGA units on those
days, by -7.03%, while the spot price of gasoline for immediate delivery during
the same period increased by 0.37% (note: this comparison ignores the potential
costs associated with physically owning and storing gasoline, which could be
substantial). By comparison, an investment in UGA units made on December 31,
2008 and held to June 30, 2009 increased, based upon the changes in the NAV for
UGA units on those days, by 61.75%, while the spot price of gasoline for
immediate delivery during the same period increased by 88.18% (note: this
comparison ignores the potential costs associated with physically owning and
storing gasoline, which could be substantial).





Periods
of contango or backwardation do not materially impact UGA’s investment objective
of having the percentage changes in its per unit NAV track the 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 UGA’s 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.





Gasoline Market. During the
six months ended June 30, 2010, the price of unleaded gasoline in the United
States was impacted by several factors. The price of the Benchmark Futures
Contract began 2010 at $2.053 per gallon. It rose over the course of this time
period and hit a peak on May 3, 2010 of $2.435 per gallon. The second quarter
ended with the Benchmark Futures Contract at $2.060 per gallon, up approximately
0.37% over this time period (investors are cautioned that these represent prices
for gasoline on a wholesale basis and should not be directly compared to retail
prices at a gasoline service station).


27


During
the six months ended June 30, 2010, the price of crude oil, the raw material
from which gasoline is refined, fell by approximately 4.70% from approximately
$79.36 per barrel to approximately $75.63 per barrel. The price of crude oil was
influenced by several factors. On the consumption side, demand increased inside
and outside the United States as global economic growth, including emerging
economies such as China and India, improved for the second quarter of the
year.  On the supply side, efforts to reduce production by the
Organization of the Petroleum Exporting Countries to more closely match global
consumption were partially successful.  Crude oil prices did finish
the second quarter of 2010 approximately 4.70% lower than at the beginning of
the year, though as investors looked forward to continued improvements in the
global economy.  Management believes, however, that should the global
economic situation cease to improve, or decline, there is a meaningful
possibility that crude oil prices could further retreat from their current
levels.





Management
believes that over both the medium-term and the long-term, changes in the price
of crude oil will exert the greatest influence on the price of refined petroleum
products such as gasoline. At the same time, there can be other factors that,
particularly in the short term, cause the price of gasoline to rise (or fall),
more (or less) than the price of crude oil. For example, higher gasoline prices
cause American consumers to reduce their gasoline consumption, particularly
during the high demand period of the summer driving season and gasoline prices
are impacted by the availability of refining capacity. Furthermore, a slowdown
or recession in the U.S. economy may have a greater impact on U.S. gasoline
prices than on global crude oil prices. As a result, it is possible that changes
in gasoline prices may not match the changes in crude oil prices.





Unleaded Gasoline Price Movements in
Comparison to Other Energy Commodities and Investment
Categories.  The General Partner believes that investors
frequently measure the degree to which prices or total returns of one investment
or asset class move up or down in value in concert with another investment or
asset class. Statistically, such a measure is usually done by measuring the
correlation of the price movements of the two different investments or asset
classes over some period of time. The correlation is scaled between 1 and -1,
where 1 indicates that the two investment options move up or down in price or
value together, known as “positive correlation,” and -1 indicating that they
move in completely opposite directions, known as “negative correlation.” A
correlation of 0 would mean that the movements of the two are neither positively
or negatively correlated, known as “non-correlation.” That is, the investment
options sometimes move up and down together and other times move in opposite
directions.





For the
ten year time period between 2000 and 2009, the chart below compares the monthly
movements of unleaded gasoline prices versus the monthly movements of the prices
of several other energy commodities, such as natural gas, crude oil and heating
oil, as well as several major non-commodity investment asset classes, such as
large cap U.S. equities, U.S. government bonds and global equities. It can be
seen that over this particular time period, the movement of unleaded gasoline on
a monthly basis was not strongly correlated, positively or negatively, with the
movements of large cap U.S. equities, U.S. government bonds or global equities.
However, movements in unleaded gasoline had a strong positive correlation to
movements in crude oil and heating oil. Finally, unleaded gasoline had a
positive, but weak, correlation with natural gas.





10 Year Correlation
                            Matrix 2000-2009
                          
                          Large
                            Cap U.S.
                            Equities
                            (S&P
                            500)
                          
                          
                          U.S. Gov’t.
                            Bonds
                            (EFFAS U.S.
                            Gov’t. Bond
                            Index)
                          
                          
                          Global
                            Equities
                            (FTSE
                            World
                            Index)
                          
                          
                          Crude Oil
                          
                          
                          Heating
                            Oil
                          
                          
                          Natural
                            Gas
                          
                          
                          Unleaded
                            GasolineLarge
      Cap U.S. Equities (S&P 500)
                          
                          
                          1.000
                          
                          
                          
                          -0.259
                          
                          
                          
                          0.966
                          
                          
                          
                          0.152
                          
                          
                          
                          0.087
                          
                          
                          
                          0.023
                          
                          
                          
                          0.135U.S.
      Gov’t. Bonds (EFFAS U.S. Gov’t. Bond Index)
                          
                          
                          
                          
                          
                          
                          1.000
                          
                          
                          
                          -0.237
                          
                          
                          
                          -0.127
                          
                          
                          
                          -0.078
                          
                          
                          
                          0.128
                          
                          
                          
                          -0.214Global
      Equities (FTSE World Index)
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          1.000
                          
                          
                          
                          0.246
                          
                          
                          
                          0.165
                          
                          
                          
                          0.084
                          
                          
                          
                          0.196Crude
      Oil
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          1.000
                          
                          
                          
                          0.783
                          
                          
                          
                          0.334
                          
                          
                          
                          0.724Heating
      Oil
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          1.000
                          
                          
                          
                          0.466
                          
                          
                          
                          0.613Natural
      Gas
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          1.000
                          
                          
                          
                          0.257Unleaded
      Gasoline
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          
                          1.000





source:
Bloomberg, NYMEX





28




PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS





The chart
below covers a more recent, but much shorter, range of dates than the above
chart. Over the one year period ended June 30, 2010, unleaded gasoline continued
to have a strong positive correlation with crude oil and heating oil. During
this period, it also had a negative correlation with the movements of natural
gas. The correlation between unleaded gasoline and both large cap U.S. equities
and global equities, which had been essentially non-correlated over the ten year
period ended December 31, 2009, exhibited mild correlation over this shorter
time period. Finally, the results showed that unleaded gasoline and U.S.
government bonds, which had essentially been non-correlated for the ten year
period ended December 31, 2009, were negatively correlated over this more recent
time period.





Correlation Matrix
                      12 months ended June
                      30, 2010
                    
                    Large Cap
                      U.S.
                      Equities
                      (S&P 500)
                    
                    
                    U.S. Gov't.
                      Bonds
                      (EFFAS
                      U.S. Gov’t.
                      Bond Index)
                    
                    
                    Global
                      Equities
                      (FTSE
                      World
                      Index)
                    
                    
                    Crude Oil
                    
                    
                    Heating
                      Oil
                    
                    
                    Natural
                      Gas
                    
                    
                    Unleaded
                      GasolineLarge
      Cap U.S. Equities (S&P 500)
                    
                    
                    1.000
                    
                    
                    
                    -0.400
                    
                    
                    
                    0.968
                    
                    
                    
                    0.495
                    
                    
                    
                    0.613
                    
                    
                    
                    -0.125
                    
                    
                    
                    0.460U.S.
      Gov't. Bonds (EFFAS U.S. Gov’t. Bond Index)
                    
                    
                    
                    
                    
                    
                    1.000
                    
                    
                    
                    -0.411
                    
                    
                    
                    -0.486
                    
                    
                    
                    -0.574
                    
                    
                    
                    -0.015
                    
                    
                    
                    -0.445Global
      Equities (FTSE World Index)
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    1.000
                    
                    
                    
                    0.523
                    
                    
                    
                    0.635
                    
                    
                    
                    -0.079
                    
                    
                    
                    0.471Crude
      Oil
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    1.000
                    
                    
                    
                    0.941
                    
                    
                    
                    -0.089
                    
                    
                    
                    0.801Heating
      Oil
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    1.000
                    
                    
                    
                    -0.075
                    
                    
                    
                    0.846Natural
      Gas
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    1.000
                    
                    
                    
                    -0.524Unleaded
      Gasoline
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    
                    1.000





Source:
Bloomberg, NYMEX





PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS





Investors
are cautioned that the historical price relationships between gasoline and
various other energy commodities, as well as other investment asset classes, as
measured by correlation may not be reliable predictors of future price movements
and correlation results. The results pictured above would have been different if
a different range of dates had been selected. The General Partner believes that
gasoline has historically not demonstrated a strong correlation with equities or
bonds over long periods of time. However, the General Partner also believes that
in the future it is possible that gasoline could have long term correlation
results that indicate prices of gasoline more closely track the movements of
equities or bonds. In addition, the General Partner believes that, when measured
over time periods shorter than ten years, there will always be some periods
where the correlation of gasoline to equities and bonds will be either more
strongly positively correlated or more strongly negatively correlated than the
long term historical results suggest.


29


The
correlations between gasoline, crude oil, natural gas and heating oil are
relevant because the General Partner endeavors to invest UGA’s assets in Futures
Contracts and Other Gasoline-Related Investments so that daily changes in
percentage terms in UGA’s NAV correlate as closely as possible with daily
changes in percentage terms in the price of the Benchmark Futures Contract. If
certain other fuel-based commodity futures contracts do not closely correlate
with the gasoline Futures Contracts, then their use could lead to greater
tracking error. As noted above, the General Partner also believes that the
changes in percentage terms in the price of the Benchmark Futures Contract will
closely correlate with changes in percentage terms in the spot price of
gasoline.





Critical
Accounting Policies





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





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





Liquidity
and Capital Resources





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





UGA
currently generates cash primarily from (i) the sale of baskets consisting of
100,000 units (“Creation Baskets”) and (ii) income earned on cash and/or cash
equivalents. UGA has allocated substantially all of its net assets to trading in
Gasoline Interests. UGA invests in Gasoline 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 Gasoline-Related Investments. A significant portion of UGA’s
NAV is held in cash and cash equivalents that are used as margin and as
collateral for its trading in Gasoline Interests. The balance of the net assets
is held in UGA’s account at its custodian bank. Income received from UGA’s money
market funds is paid to UGA. During the six months ended June 30, 2010, UGA’s
expenses exceeded income UGA earned and the cash earned from the sale of
Creation Baskets and the redemption of Redemption Baskets. To the extent
expenses have exceeded income, UGA’s NAV will be negatively
impacted.





UGA’s
investments in Gasoline Interests may be subject to periods of illiquidity
because of market conditions, regulatory considerations and other reasons. For
example, most commodity exchanges limit the fluctuations in futures contracts
prices during a single day by regulations referred to as “daily limits.” During
a single day, no trades may be executed at prices beyond the daily limit. Once
the price of a futures contract has increased or decreased by an amount equal to
the daily limit, positions in the contracts can neither be taken nor liquidated
unless the traders are willing to effect trades at or within the specified daily
limit. Such market conditions could prevent UGA from promptly liquidating its
positions in Futures Contracts. During the six months ended June 30, 2010, UGA
was not forced to purchase or liquidate any of its positions while daily limits
were in effect; however, UGA cannot predict whether such an event may occur in
the future.


30


Prior to
the initial offering of UGA, all payments with respect to UGA’s expenses were
paid by the General Partner.  UGA does not have an obligation or
intention to refund such payments by the General Partner.  The General
Partner is under no obligation to pay UGA’s current or future expenses. Since
the initial offering of units, UGA has been responsible for expenses relating to
(i) management fees, (ii) brokerage fees and commissions, (iii) licensing fees
for the use of intellectual property, (iv) ongoing registration expenses in
connection with offers and sales of its units subsequent to the initial
offering, (v) other expenses, including certain tax reporting costs, (vi) fees
and expenses of the independent directors of the General Partner and (vii) other
extraordinary expenses not in the ordinary course of business, while the General
Partner has been responsible for expenses relating to the fees of UGA’s
marketing agent, administrator and custodian and registration expenses relating
to the initial offering of units. If the General Partner and UGA are
unsuccessful in raising sufficient funds to cover these respective expenses or
in locating any other source of funding, UGA will terminate and investors may
lose all or part of their investment.





Market
Risk





Trading
in Futures Contracts and Other Gasoline-Related Investments, such as forwards,
involves UGA entering into contractual commitments to purchase or sell gasoline
at a specified date in the future. The aggregate market value of the contracts
will significantly exceed UGA’s future cash requirements since UGA intends to
close out its open positions prior to settlement. As a result, UGA is generally
only subject to the risk of loss arising from the change in value of the
contracts. UGA considers the “fair value” of its derivative instruments to be
the unrealized gain or loss on the contracts. The market risk associated with
UGA’s commitments to purchase gasoline is limited to the aggregate market value
of the contracts held. However, should UGA enter into a contractual commitment
to sell gasoline, it would be required to make delivery of the gasoline at the
contract price, repurchase the contract at prevailing prices or settle in cash.
Since there are no limits on the future price of gasoline, the market risk to
UGA could be unlimited.





UGA’s
exposure to market risk depends on a number of factors, including the markets
for gasoline, the volatility of interest rates and foreign exchange rates, the
liquidity of the Futures Contracts and Other Gasoline-Related Investments
markets and the relationships among the contracts held by UGA. Drastic market
occurrences could ultimately lead to the loss of all or substantially all of an
investor’s capital.





Credit
Risk





When UGA
enters into Futures Contracts and Other Gasoline-Related Investments, it is
exposed to the credit risk that the counterparty will not be able to meet its
obligations. The counterparty for the Futures Contracts traded on the NYMEX and
on most other futures exchanges is the clearinghouse associated with the
particular exchange. In general, in addition to margin required to be posted by
the exchange or clearinghouse in connection with trades on the exchange or
through the clearinghouse, clearinghouses are backed by their members who may be
required to share in the financial burden resulting from the nonperformance of
one of their members and, therefore, this additional member support should
significantly reduce credit risk. Some foreign exchanges are not backed by their
clearinghouse members but may be backed by a consortium of banks or other
financial institutions. There can be no assurance that any counterparty,
clearinghouse, or their members or their financial backers will satisfy their
obligations to UGA in such circumstances.





The
General Partner attempts to manage the credit risk of UGA by following various
trading limitations and policies. In particular, UGA generally posts margin
and/or holds liquid assets that are approximately equal to the market value of
its obligations to counterparties under the Futures Contracts and Other
Gasoline-Related Investments it holds. The General Partner has implemented
procedures that include, but are not limited to, executing and clearing trades
only with creditworthy parties and/or requiring the posting of collateral or
margin by such parties for the benefit of UGA to limit its credit
exposure.


31


UBS
Securities LLC, UGA’s commodity broker, or any other broker that may be retained
by UGA in the future, when acting as UGA’s futures commission merchant in
accepting orders to purchase or sell Futures Contracts on United States
exchanges, is required by CFTC regulations to separately account for and
segregate as belonging to UGA, all assets of UGA relating to domestic Futures
Contracts trading. These futures commission merchants are not allowed to
commingle UGA’s assets with their other assets. In addition, the CFTC requires
commodity brokers to hold in a secure account UGA’s assets related to foreign
Futures Contracts trading.





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





As of
June 30, 2010, UGA had deposits in domestic and foreign financial
institutions,including
cash investments in money market funds, in the amount of $80,648,710. This
amount is subject to loss should these institutions cease
operations.





Off
Balance Sheet Financing





As of
June 30, 2010, UGA has no loan guarantee, credit support or other off-balance
sheet arrangements of any kind other than agreements entered into in the normal
course of business, which may include indemnification provisions relating to
certain risks that service providers undertake in performing services which are
in the best interests of UGA. While UGA’s exposure under these indemnification
provisions cannot be estimated, they are not expected to have a material impact
on UGA’s financial position.





Redemption
Basket Obligation





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





Contractual
Obligations





UGA’s
primary contractual obligations are with the General Partner. In return for its
services, the General Partner is entitled to a management fee calculated monthly
as a fixed percentage of UGA’s NAV, currently 0.60% of NAV on its average daily
net assets.





The
General Partner agreed to pay the start-up costs associated with the formation
of UGA, primarily its legal, accounting and other costs in connection with the
General Partner’s registration with the CFTC as a CPO and the registration and
listing of UGA and its units with the SEC, FINRA and the AMEX, respectively.
However, since UGA’s initial offering of units, offering costs incurred in
connection with registering and listing additional units of UGA are directly
borne on an ongoing basis by UGA, and not by the General Partner.





The
General Partner pays the fees of UGA’s marketing agent, ALPS Distributors, Inc.,
and the fees of the custodian and transfer agent, Brown Brothers Harriman &
Co. (“BBH&Co.”), as well as BBH&Co.’s fees for performing administrative
services, including those in connection with the preparation of UGA’s condensed
financial statements and its SEC and CFTC reports.  The General
Partner and UGA have also entered into a licensing agreement with the NYMEX
pursuant to which UGA and the affiliated funds managed by the General Partner,
other than USBO, pay a licensing fee to the NYMEX. UGA also pays the fees and
expenses associated with its tax accounting and reporting requirements with the
exception of certain initial implementation service fees and base service fees
which are paid by the General Partner. The General Partner, though under no
obligation to do so, agreed to pay certain costs for tax reporting and audit
expenses normally borne by UGA to the extent that such expenses exceed 0.15% (15
basis points) of UGA’s NAV, on an annualized basis, through at least September
30, 2010. The General Partner has no obligation to continue such payment into
subsequent periods.


32


In
addition to the General Partner’s management fee, UGA pays its brokerage fees
(including fees to a futures commission merchant), over-the-counter dealer
spreads, any licensing fees for the use of intellectual property, and,
subsequent to the initial offering, registration and other fees paid to the SEC,
FINRA, or other regulatory agencies in connection with the offer and sale of
units, as well as legal, printing, accounting and other expenses associated
therewith, and extraordinary expenses. The latter are expenses not incurred in
the ordinary course of UGA’s business, including expenses relating to the
indemnification of any person against liabilities and obligations to the extent
permitted by law and under the LP Agreement, the bringing or defending of
actions in law or in equity or otherwise conducting litigation and incurring
legal expenses and the settlement of claims and litigation. Commission payments
to a futures commission merchant are on a contract-by-contract, or round turn,
basis.  UGA also pays a portion of the fees and expenses of the
independent directors of the General Partner.  See Note 3 to the Notes
to Condensed Financial Statements (Unaudited).





The
parties cannot anticipate the amount of payments that will be required under
these arrangements for future periods, as UGA’s NAVs and trading levels to meet
its investment objectives will not be known until a future date. These
agreements are effective for a specific term agreed upon by the parties with an
option to renew, or, in some cases, are in effect for the duration of UGA’s
existence. Either party may terminate these agreements earlier for certain
reasons described in the agreements.As of June 30, 2010, UGA’s
portfolio consisted of 900 RBOB Gasoline Futures RB Contracts traded on the
NYMEX.  For a list of UGA’s current holdings, please see UGA’s website
at www.unitedstatesgasolinefund.com.





Item
3.  Quantitative and Qualitative Disclosures About Market
Risk.





Over-the-Counter
Derivatives





In the
future, UGA may purchase over-the-counter contracts. Unlike most of the
exchange-traded Futures Contracts or exchange-traded options on such futures,
each party to an over-the-counter contract bears the credit risk that the other
party may not be able to perform its obligations under its
contract.





Some
gasoline-based derivatives transactions contain fairly generic terms and
conditions and are available from a wide range of participants. Other
gasoline-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 gasoline- 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 spot price of gasoline, forward gasoline prices or gasoline
futures prices. For example, UGA may enter into over-the-counter derivative
contracts whose value will be tied to changes in the difference between the spot
price of gasoline, the price of Futures Contracts traded on the NYMEX and the
prices of other Futures Contracts in which UGA may invest.





To
protect itself from the credit risk that arises in connection with such
contracts, UGA may enter into agreements with each counterparty that provide for
the netting of its overall exposure to such counterparty, such as the agreements
published by the International Swaps and Derivatives Association, Inc. UGA also
may require that the counterparty be highly rated and/or provide collateral or
other credit support to address UGA’s exposure to the counterparty. In addition,
it is also possible for UGA and its counterparty to agree to clear their
transactions under the agreement through an established futures clearinghouse
such as those connected to the NYMEX or the ICE Futures. In that event, UGA
would no longer bear the credit risk of its original counterparty, as the
clearinghouse would now be UGA’s counterparty. UGA would still retain any price
risk associated with its transaction.





The
creditworthiness of each potential counterparty is assessed by the General
Partner. The General Partner assesses or reviews, 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 (the “Board”). Furthermore, the General Partner on
behalf of UGA only enters into over-the-counter contracts with counterparties
who are, or are affiliates of, (a) banks regulated by a United States federal
bank regulator, (b) broker-dealers regulated by the SEC, (c) insurance companies
domiciled in the United States, or (d) producers, users or traders of energy,
whether or not regulated by the CFTC. Any entity acting as a counterparty shall
be regulated in either the United States or the United Kingdom unless otherwise
approved by the Board after consultation with its legal counsel. Existing
counterparties are also reviewed periodically by the General
Partner.


33


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





UGA 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. UGA 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 UGA to changes in the price relationship between
futures contracts which will expire sooner and those that will expire later. UGA
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 UGA, 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 gasoline prices. UGA 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. UGA 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 UGA or if it would lead to an
overall lower cost of trading to achieve a given level of economic exposure to
movements in gasoline prices.





During
the six months ended June 30, 2010, UGA did not employ any hedging methods such
as those described above since all of its investments were made over an
exchange. Therefore, during the six months ended June 30, 2010, UGA was not
exposed to counterparty risk.





Item 4.  Controls and
Procedures.





Disclosure
Controls and Procedures





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





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





Change
in Internal Control Over Financial Reporting





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


34


Part II. OTHER INFORMATION





Item
1.  Legal Proceedings.





Not applicable.





Item
1A.  Risk Factors.





There has
not been a material change from the risk factors previously disclosed in UGA’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2009, filed on
March 16, 2010, except for the update to the risk factor set forth below to
reflect the passage of The Dodd-Frank Wall Street Reform and Consumer Protection
Act.
 
 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 UGA.
 
 The
futures markets are subject to comprehensive statutes, regulations, and margin
requirements. In addition, 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 commodity interest transactions in 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 UGA or the ability of UGA 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
UGA is impossible to predict, but could be substantial and adverse.
 
 In the
wake of the economic crisis of 2008 and 2009, 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.
 
 On July
21, 2010, a broad financial regulatory reform bill, “The Dodd-Frank Wall Street
Reform and Consumer Protection Act,” was signed into law that includes
provisions altering the regulation of commodity interests. Provisions in the new
law include the requirement that position limits on energy-based commodity
futures contracts be established; new registration, recordkeeping, capital and
margin requirements for “swap dealers” and “major swap participants” as
determined by the new law and applicable regulations; and the forced use of
clearinghouse mechanisms for most over-the-counter transactions. Additionally,
the new law requires the aggregation, for purposes of position limits, of all
positions in energy futures held by a single entity and its affiliates, whether
such positions exist on U.S. futures exchanges, non-U.S. futures exchanges, or
in over-the-counter contracts. The CFTC, along with the SEC and other federal
regulators, has been tasked with developing the rules and regulations enacting
the provisions noted above. The new law and the rules to be promulgated may
negatively impact UGA’s ability to meet its investment objective either through
limits or requirements imposed on it or upon its counterparties. In particular,
new position limits imposed on UGA or its counterparties may impact UGA’s
ability to invest in a manner that most efficiently meets its investment
objective, and new requirements, including capital and mandatory clearing, may
increase the cost of UGA’s investments and doing business, which could adversely
affect UGA’s investors.


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





Not applicable.





Item
3.  Defaults Upon Senior Securities.





Not applicable.





Item
4.Reserved.





Item
5.  Other Information.





Monthly
Account Statements





Pursuant
to the requirement under Rule 4.22 under the Commodity Exchange Act, each month
UGA publishes an account statement for its unitholders, which includes a
Statement of Income (Loss) and a Statement of Changes in NAV. The account
statement is furnished to the SEC on a current report on Form 8-K pursuant to
Section 13 or 15(d) of the Exchange Act and posted each month on UGA’s website
at www.unitedstatesgasolinefund.com.





Item 6. Exhibits.





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





ExhibitNumber
              
              Description of Document10.9**
              
              Form
      of United States Commodity Funds LLC Director Deferred Compensation
      Agreement.31.1*
              
              Certification
      by Principal Executive Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2*
              
              Certification
      by Principal Financial Officer Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1*
              
              Certification
      by Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as
      Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.32.2*
              
              Certification
      by Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as
      Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.





*           Filed
herewith.


**         Incorporated
by reference to Exhibit 99.1 to the Registrant’s Current Report on Form 8-K,
filed on April 1, 2010.


35


SIGNATURES





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





United
States Gasoline Fund, LP (Registrant)


By:
United States Commodity Funds LLC, its general partner





By:
                  /s/
      Nicholas
      D. GerberNicholas
      D. GerberPresident
      and Chief Executive Officer(Principal
      executive officer)Date:  August
      9, 2010By:
                  /s/
      Howard
      MahHoward
      MahChief
      Financial Officer(Principal
      financial and accounting officer)Date:  August
      9, 2010





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