UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-Q




x
            Quarterly
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act
      of 1934 for the quarterly period ended March 31,
  2009.


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: 001-34016


United States Heating Oil Fund,
LP


(Exact
name of registrant as specified in its charter)




Delaware
                
                20-8837345(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)
522-3336


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





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




 ̈
Yes    x No








UNITED
STATES HEATING OIL FUND, LP


Table
of Contents





PagePart
      I. FINANCIAL INFORMATIONItem
      1.  Condensed Financial Statements.
                            
                            1Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations.
                            
                            15Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk.
                            
                            29Item
      4. Controls and Procedures.
                            
                            30Part
      II. OTHER INFORMATIONItem
      1. Legal Proceedings.
                            
                            31Item
      1A. Risk Factors.
                            
                            31Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.
                            
                            31Item
      3. Defaults Upon Senior Securities.
                            
                            31Item
      4. Submission of Matters to a Vote of Security Holders.
                            
                            31Item
      5. Other Information.
                            
                            31Item
      6. Exhibits.
                            
                            31








Part I.FINANCIAL
INFORMATION





Item
1. Condensed Financial Statements.





Index
to Condensed Financial Statements




Documents
                    
                    PageCondensedStatements of Financial Condition
      at March 31, 2009 (Unaudited) and December 31, 2008
                    
                    
                    2CondensedSchedule of Investments
      (Unaudited) at March 31, 2009
                    
                    
                    3Condensed
      Statements of Operations (Unaudited) for the three months ended March 31,
      2009 and 2008
                    
                    
                    4Condensed
      Statement of Changes in Partners’ Capital (Unaudited) for the three months
      ended March 31, 2009
                    
                    
                    5CondensedStatements of Cash Flows
      (Unaudited)for the
      three months ended March 31, 2009 and 2008
                    
                    
                    6Notes
      to Condensed Financial Statements for the three months ended March
      31, 2009 (Unaudited)
                    
                    
                    7


1




United
States Heating Oil Fund, LP


Condensed
Statements of Financial Condition


At
March 31, 2009 (Unaudited) and December 31, 2008




March 31, 2009
                      
                      
                      December 31, 2008AssetsCash
      and cash equivalents
                      
                      $
                      5,047,424
                      
                      
                      $
                      2,930,413Equity
      in UBS Securities LLC trading accounts:Cash
                      
                      
                      1,055,908
                      
                      
                      
                      1,541,092Unrealized
      gain (loss) on open commodity futures contracts
                      
                      
                      131,242
                      
                      
                      
                      (69,250
                      )Receivable
      from general partner
                      
                      
                      23,213
                      
                      
                      
                      87,698Interest
      receivable
                      
                      
                      957
                      
                      
                      
                      1,125Other
      assets
                      
                      
                      135
                      
                      
                      
                      -Total
      assets
                      
                      $
                      6,258,879
                      
                      
                      $
                      4,491,078Liabilities
      and Partners' CapitalGeneral
      Partner management fees (Note 3)
                      
                      $
                      2,056
                      
                      
                      $
                      1,578Brokerage
      commission fees payable
                      
                      
                      345
                      
                      
                      
                      245Other
      liabilities
                      
                      
                      25,053
                      
                      
                      
                      101,357Total
      liabilities
                      
                      
                      27,454
                      
                      
                      
                      103,180Commitments and Contingencies(Notes 3, 4 and 5)Partners'
      CapitalGeneral
      Partner
                      
                      
                      -
                      
                      
                      
                      -Limited
      Partners
                      
                      
                      6,231,425
                      
                      
                      
                      4,387,898Total
      Partners' Capital
                      
                      
                      6,231,425
                      
                      
                      
                      4,387,898Total
      liabilities and partners' capital
                      
                      $
                      6,258,879
                      
                      
                      $
                      4,491,078Limited
      Partners' units outstanding
                      
                      
                      300,000
                      
                      
                      
                      200,000Net
      asset value per unit
                      
                      $
                      20.77
                      
                      
                      $
                      21.94Market
      value per unit
                      
                      $
                      20.61
                      
                      
                      $
                      21.59





See
accompanying notes to condensed financial statements.


2





United
States Heating Oil Fund, LP


Condensed
Schedule of Investments (Unaudited)


At
March 31, 2009





Open
Futures
Contracts


Gain
      onNumber
      of
                  
                  
                  Open
                    Commodity
                  
                  
                  %
      of
                    Partners'Contracts
                  
                  
                  Contracts
                  
                  
                  CapitalUnited
      States ContractsHeating
      Oil Futures contracts, expire May 2009
                  
                  
                  108
                  
                  
                  $
                  131,242
                  
                  
                  
                  2.11




Cash
      EquivalentsCost
                                
                                
                                Market
                                  ValueUnited
      States - Money Market FundGoldman
      Sachs Financial Square Funds - Government Fund
                                
                                $
                                2,290,227
                                
                                
                                
                                2,290,227
                                
                                
                                
                                36.75Cash
                                
                                
                                
                                
                                
                                
                                2,757,197
                                
                                
                                
                                44.25Total
      Cash and Cash Equivalents
                                
                                
                                
                                
                                
                                
                                5,047,424
                                
                                
                                
                                81.00Cash
      on deposit with broker
                                
                                
                                
                                
                                
                                
                                1,055,908
                                
                                
                                
                                16.94Liabilities,
      less other assets and receivables
                                
                                
                                
                                
                                
                                
                                (3,149
                                )
                                
                                
                                (0.05
                                )Total
      Partners' Capital
                                
                                
                                
                                
                                
                                $
                                6,231,425
                                
                                
                                
                                100.00





See
accompanying notes to condensed financial statements.


3





United
States Heating Oil Fund, LP


Condensed
Statements of Operations (Unaudited)


For
the three months ended March 31, 2009 and 2008





Three
      months ended
                        
                        
                        Three
      months endedMarch 31, 2009
                        
                        
                        March 31, 2008IncomeGains
      (losses) on trading of commodity futures contracts:Realized
      losses on closed positions
                        
                        $
                        (538,549
                        )
                        
                        $
                        -Change
      in unrealized gains on open positions
                        
                        
                        200,491
                        
                        
                        
                        -Interest
      income
                        
                        
                        3,560
                        
                        
                        
                        -Other
      income
                        
                        
                        1,000
                        
                        
                        
                        -Total
      loss
                        
                        
                        (333,498
                        )
                        
                        
                        -ExpensesGeneral
      Partner management fees (Note 3)
                        
                        
                        6,148
                        
                        
                        
                        -Brokerage
      commissions
                        
                        
                        1,735
                        
                        
                        
                        -Other
      expenses
                        
                        
                        25,095
                        
                        
                        
                        -Total
      expenses
                        
                        
                        32,978
                        
                        
                        
                        -Expense
      waiver
                        
                        
                        (23,213
                        )
                        
                        
                        -Net
      expenses
                        
                        
                        9,765
                        
                        
                        
                        -Net
      loss
                        
                        $
                        (343,263
                        )
                        
                        $
                        -Net
      loss per limited partnership unit
                        
                        $
                        (1.17
                        )
                        
                        $
                        -Net
      loss per weighted average limited partnership unit
                        
                        $
                        (1.70
                        )
                        
                        $
                        -Weighted
      average limited partnership units outstanding
                        
                        
                        202,222
                        
                        
                        
                        -





See
accompanying notes to condensed financial statements.


4





United
States Heating Oil Fund, LP


Condensed
Statement of Changes in Partners' Capital (Unaudited)


For
the three months ended March 31, 2009





General Partner
                    
                    
                    Limited Partners
                    
                    
                    TotalBalances,
      at December 31, 2008
                    
                    $
                    -
                    
                    
                    $
                    4,387,898
                    
                    
                    $
                    4,387,898Addition
      of 100,000 partnership units
                    
                    
                    -
                    
                    
                    
                    2,186,790
                    
                    
                    
                    2,186,790Net
      loss
                    
                    
                    -
                    
                    
                    
                    (343,263
                    )
                    
                    
                    (343,263
                    )Balances,
      at March 31, 2009
                    
                    $
                    -
                    
                    
                    $
                    6,231,425
                    
                    
                    $
                    6,231,425Net
      Asset Value Per UnitAt
      December 31, 2008
                    
                    $
                    21.94At
      March 31, 2009
                    
                    $
                    20.77





See
accompanying notes to condensed financial statements.


5




United
States Heating Oil Fund, LP


Condensed
Statements of Cash Flows (Unaudited)


For
the three months ended March 31, 2009 and 2008





Three
      months ended
                
                
                Three
      months endedMarch 31, 2009
                
                
                March 31, 2008Cash
      Flows from Operating Activities:Net
      loss
                
                $
                (343,263
                )
                
                $
                -Adjustments
      to reconcile net loss to net cash used in operating
      activities:Decrease
      in commodity futures trading account - cash
                
                
                485,184
                
                
                
                -Unrealized
      gains on futures contracts
                
                
                (200,492
                )
                
                
                -Decrease
      in receivable from general partner
                
                
                64,485
                
                
                
                -Decrease
      in interest receivable and other assets
                
                
                33
                
                
                
                -Increase
      in management fees payable
                
                
                478
                
                
                
                -Increase
      in commission fees payable
                
                
                100
                
                
                
                -Increase
      in other liabilities
                
                
                (76,304
                )
                
                
                -Net
      cash used in operating activities
                
                
                (69,779
                )
                
                
                -Cash
      Flows from Financing Activities:Subscription
      of partnership units
                
                
                2,186,790
                
                
                
                -Net
      cash provided by financing activities
                
                
                2,186,790
                
                
                
                -Net
      Increase in Cash and Cash Equivalents
                
                
                2,117,011
                
                
                
                -Cash and Cash
      Equivalents, beginning of period
                
                
                2,930,413
                
                
                
                1,000Cash and Cash
      Equivalents, end of period
                
                $
                5,047,424
                
                
                $
                1,000





See
accompanying notes to condensed financial statements.


6





United
States Heating Oil Fund, LP


Notes
to Condensed Financial Statements


For
the three months ended March 31, 2009 (Unaudited)





NOTE 1 - ORGANIZATION AND
BUSINESS





The
United States Heating Oil Fund, LP (“USHO”) was organized as a limited
partnership under the laws of the state of Delaware on April 13,
2007.  USHO is a commodity pool that issues units that may be
purchased and sold on the NYSE Arca, Inc. (the “NYSE Arca”). Prior to November
25, 2008, USHO’s units traded on the American Stock Exchange (the “AMEX”). USHO
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 March 7, 2008 (the “LP Agreement”). The
investment objective of USHO 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 heating oil (also known as No. 2 fuel oil) for delivery to the New York
harbor as measured by the changes in the price of the futures contract on
heating oil as 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 USHO’s expenses. USHO accomplishes its objective
through investments in futures contracts for heating oil, crude oil, gasoline,
natural gas 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 heating oil-related investments such as cash-settled options on
Futures Contracts, forward contracts for heating oil and over-the-counter
transactions that are based on the price of heating oil, crude oil and other
petroleum-based fuels, Futures Contracts and indices based on the foregoing
(collectively, “Other Heating Oil-Related Investments”).  As of March
31, 2009, USHO held 108 Futures Contracts traded on the NYMEX.





USHO
commenced investment operations on April 9, 2008 and has a fiscal year ending on
December 31. United States Commodity Funds LLC (formerly known as Victoria Bay
Asset Management, LLC) (the “General Partner”) is responsible for the
management of USHO. 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 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 Gasoline Fund, LP
(“UGA”), 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 “UGA” on February 26, 2008, respectively. As a result of
the acquisition of the AMEX by NYSE Euronext, each of USOF’s, USNG’s, US12OF’s
and UGA’s units commenced trading on the NYSE Arca on November 25,
2008.





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. 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.





USHO issues
limited partnership interests (“units”) to certain authorized purchasers
(“Authorized Purchasers”) by offering baskets consisting of 100,000 units
(“Creation Baskets”) through ALPS Distributors, Inc. (the “Marketing Agent”).
The purchase price for a Creation Basket is based upon the net asset value of
a unit determined as of the earlier of the close of the New York Stock
Exchange (the “NYSE”) or 4:00 p.m. New York time on the day the order to create
the basket is properly received.





In
addition, Authorized Purchasers pay USHO a $1,000 fee for each order
to create one or more Creation Baskets or 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 USHO but rather at market prices quoted on such
exchange.


7





In April
2008, USHO initially registered 10,000,000 units on Form S-1 with the
SEC.  On April 9, 2008, USHO listed its units on the AMEX under the
ticker symbol “UHN”. On that day, USHO established its initial net asset value
by setting the price at $50.00 per unit and issued 200,000 units in exchange for
$10,001,000. USHO also commenced investment operations on April 9, 2008 by
purchasing Futures Contracts traded on the NYMEX based on heating
oil.  As of March 31, 2009, USHO had registered a total of 10,000,000
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. USHO 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, USHO earns interest
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





USHO 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.





Additions
and Redemptions





Authorized
Purchasers may purchase Creation Baskets or redeem Redemption Baskets only
in blocks of 100,000 units equal to the net asset value of the units determined
as of 4:00 p.m. New York time on the day the order is placed.




USHO
records units sold or redeemed one business day after the trade date of the
purchase or redemption. The amounts due from Authorized Purchasers are
reflected in USHO’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.





Partnership
Capital and Allocation of Partnership Income and Losses





Profit or
loss shall be allocated among the partners of USHO 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





USHO's
net asset value is calculated on each 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. USHO uses the closing price
for the contracts on the relevant exchange on that day to determine the value of
contracts held on such exchange.


8





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.





Offering
Costs





Offering
costs incurred in connection with the registration of additional units after the
initial registration of units are borne by USHO. These costs include
registration fees paid to regulatory agencies and all legal, accounting,
printing and other expenses associated therewith. These costs will be 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 and
cash equivalents include money market funds and overnight deposits or time
deposits with original maturity dates of three months or less.





Use
of Estimates





The
preparation of condensed financial statements in conformity with accounting
principles generally accepted in the United States of America requires USHO’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 USHO in accordance with the objectives and policies of USHO. 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 USHO. For these services, USHO is contractually obligated to pay the
General Partner a fee, which is paid monthly and based on average daily net
assets, that is equal to 0.60% per annum on all amounts of average daily net
assets.





Ongoing
Registration Fees and Other Offering Expenses





USHO pays
all costs and expenses associated
with the ongoing registration of units subsequent to the initial offering. These
costs include registration or other fees paid to regulatory agencies in
connection with the offer and sale of units, and all legal, accounting, printing
and other expenses associated with such offer and sale.For the three
month periods ended March 31, 2009 and 2008, USHO incurred no registration fees
and other offering expenses since the initial offering of units is still
ongoing.





Directors’
Fees





USHO 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 audit committee members. 
USHO shares these fees with USOF, USNG, US12OF and UGA based on the
relative assets of each fund, computed on a daily basis. These fees for the
calendar year 2009 are estimated to be a total of $477,000 for all
funds.


9





Licensing
Fees





As
discussed in Note 4, USHO entered into a licensing agreement with the NYMEX
on May 30, 2007. Pursuant to the agreement, USHO and the affiliated funds
managed by the General Partner 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 three month period
ended March 31, 2009, USHO incurred $257 under this arrangement; USHO did not
incur fees for the three month period ended March 31, 2008 since USHO had not
commenced operations yet.





Investor
Tax Reporting Cost





The fees
and expenses associated with USHO’s audit expenses and tax accounting and
reporting requirements, with the exception of certain initial implementation
service fees and base service fees which were borne by the General Partner, are
paid by USHO.





Other
Expenses and Fees and Expense Waivers





In
addition to the fees described above, USHO pays all brokerage fees, taxes and
other expenses in connection with the operation of USHO, 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
USHO’s NAV, on an annualized basis, through at least June 30, 2009. The General
Partner has no obligation to continue such payment into subsequent
periods.





NOTE
4 - CONTRACTS AND AGREEMENTS





USHO is
party to a marketing agent agreement, dated as of March 10, 2008,
with the Marketing Agent, whereby the Marketing Agent provides certain
marketing services for USHO as outlined in the agreement. The fee of the
Marketing Agent, which is borne by the General Partner, is equal to 0.06% on
USHO’s assets up to $3 billion; and 0.04% on USHO’s assets in excess of $3
billion.





The above
fees do 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.





USHO is
also party to a custodian agreement, dated March 13, 2008, with Brown Brothers
Harriman & Co. (“BBH&Co.”), whereby BBH&Co. holds investments on
behalf of USHO. The General Partner pays the fees of the custodian, which
are determined by the parties from time to time. In addition, USHO is party to
an administrative agency agreement, dated February 7, 2008, with the General
Partner and BBH&Co., whereby BBH&Co. acts as the administrative agent,
transfer agent and registrar for USHO. 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.





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 USHO 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
USHO’s, USOF’s, USNG’s, US12OF’s and UGA’s combined net assets, (b) 0.0465% for
USHO’s, USOF’s, USNG’s, US12OF’s and UGA’s combined net assets greater than $500
million but less than $1 billion, and (c) 0.035% once USHO’s, USOF’s, USNG’s,
US12OF’s and UGA’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 $30.00 per transaction.





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


10





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





USHO
expressly disclaims any association with the NYMEX or endorsement of USHO 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





USHO engages
in the trading of futures contracts and options on futures contracts
(collectively, “derivatives”). USHO 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.





USHO 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. 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
USHO 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.





All of
the futures contracts currently traded by USHO 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, USHO must rely solely on the credit of its
respective individual counterparties. However, in the future, if USHO 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. USHO also has credit risk since the sole counterparty
to all domestic and foreign futures contracts is the exchange on which the
relevant contracts are traded. In addition, USHO bears the risk of financial
failure by the clearing broker.





Fair
Value of Derivative Instruments





Asset DerivativesAs of March 31, 2009
                                          
                                          As of December 31, 2008Derivatives not
                                          
                                          Condensed
                                          
                                          
                                          
                                          CondensedAccounted
                                          
                                          Statement of
                                          
                                          
                                          
                                          Statement offor as Hedging
                                          
                                          Financial
                                          
                                          
                                          
                                          FinancialInstruments under
                                          
                                          Condition
                                          
                                          Unrealized
                                          
                                          Condition
                                          
                                          UnrealizedStatement 133
                                          
                                          Location
                                          
                                          Appreciation
                                          
                                          Location
                                          
                                          DepreciationCommodity
      Contracts
                                          
                                          Assets
                                          
                                          $
                                          131,242
                                          *
                                          Assets
                                          
                                          $
                                          (69,250)





*
Includes cumulative appreciation/(depreciation) of futures contracts as reported
on the Condensed Schedule of Investments.


11





The
Effect of Derivative Instruments on the Condensed Statements of
Operations


for
the three months ended March 31, 2009 and 2008





Derivatives
      not
                            
                            Location
      of
                            
                            Realized
                              Gain
      or (Loss)
                            
                            
                            Change
      inUnrealized
                              Appreciation
      or
                            
                            
                            Realized
                              Gain
      or (Loss)
                            
                            
                            Change
      inUnrealizedAppreciation
      orAccounted
                            
                            Gain
      or (Loss)
                            
                            on
      Derivatives
                            
                            
                            (Depreciation)
                            
                            
                            on
      Derivatives
                            
                            
                            (Depreciation)for
      as Hedging
                            
                            on
      Derivatives
                            
                            Recognized
                            
                            
                            Recognized
                            
                            
                            Recognized
                            
                            
                            RecognizedInstruments
      under
                            
                            Recognized
                            
                            in
      Income
                            
                            
                            in
      Income
                            
                            
                            in
      Income
                            
                            
                            in
      IncomeStatement
      133
                            
                            in
      Income
                            
                            2009
                            
                            
                            2009
                            
                            
                            2008
                            
                            
                            2008Commodity
      Contracts
                            
                            Realized
      gains (losses) on closed positions
                            
                            $
                            (538,549
                            )
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -Change
      in unrealized gains (losses) on open positions
                            
                            
                            -
                            
                            
                            
                            200,491
                            
                            
                            
                            -
                            
                            
                            
                            -





USHO’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 USHO’s assets posted with that futures commission merchant;
however, the vast majority of USHO’s assets are held in Treasuries, cash and/or
cash equivalents with USHO’s custodian and would not be impacted by the
insolvency of a futures commission merchant. Also, the failure or insolvency of
USHO’s custodian could result in a substantial loss of USHO’s
assets.





USHO invests
its cash in money market funds that seek to maintain a stable net asset value.
USHO is exposed to any risk of loss associated with an investment in these money
market funds. As of March 31, 2009 and December 31, 2008, USHO had deposits in
domestic and foreign financial institutions,including cash investments in
money market funds, in the amounts of $6,103,332 and $4,471,505, 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, USHO 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, USHO 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.





USHO’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, USHO 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 USHO 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.


12





NOTE 6
– FAIR VALUE OF FINANCIAL INSTRUMENTS




Effective
January 1, 2008, USHO adopted FAS 157 – Fair Value Measurements (“FAS
157”).  FAS 157 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 current
practice resulting from the application of FAS 157 relate to the definition of
fair value, the methods used to measure fair value, and the expanded disclosures
about fair value measurement. FAS 157 establishes a fair value hierarchy that
distinguishes between (1) market participant assumptions developed based on
market data obtained from sources independent of USHO (observable inputs) and
(2) USHO’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 FAS 157 hierarchy are as
follows:




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




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




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




In some
instances, the inputs used to measure fair value might fall 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 USHO’s securities at March 31, 2009
using the fair value hierarchy:




At March
      31, 2009
                
                Total
                
                
                Level I
                
                
                Level II
                
                
                Level IIIInvestments
                
                $
                2,290,227
                
                
                $
                2,290,227
                
                
                $
                -
                
                
                $
                -Other
      Financial Instruments
                
                
                131,242
                
                
                
                131,242
                
                
                
                -
                
                
                
                -





NOTE
7 - FINANCIAL HIGHLIGHTS





The
following table presents per unit performance data and other supplemental
financial data for the three months ended March 31, 2009 and 2008 for the
limited partners. This information has been derived from information presented
in the condensed financial statements.  Since USHO did not commence
operations until April 9, 2008, no per unit performance data for the three
months ended March 31, 2008 has been included.




13





For
      the three months ended
                    
                    
                    For
      the three months endedMarch
      31, 2009
                    
                    
                    March
      31, 2008(Unaudited)
                    
                    
                    (Unaudited)Per Unit Operating
    Performance:Net
      asset value, beginning of period
                    
                    $
                    21.94
                    
                    
                    $
                    -Total
      loss
                    
                    
                    (1.12
                    )
                    
                    
                    -Net
      expenses
                    
                    
                    (0.05
                    )
                    
                    
                    -Net
      decrease in net asset value
                    
                    
                    (1.17
                    )
                    
                    
                    -Net
      asset value, end of period
                    
                    $
                    20.77
                    
                    
                    $
                    -Total
      Return
                    
                    
                    (5.33
                    )%
                    
                    
                    0.00
                    %Ratios
      to Average Net AssetsTotal
      loss
                    
                    
                    (8.02
                    )%
                    
                    
                    0.00
                    %Management
      fees*
                    
                    
                    0.60
                    %
                    
                    
                    0.00
                    %Total
      expenses excluding management fees*
                    
                    
                    2.62
                    %
                    
                    
                    0.00
                    %Expense
      waived*
                    
                    
                    (2.27
                    )%
                    
                    
                    0.00
                    %Net
      expenses excluding management fees*
                    
                    
                    0.35
                    %
                    
                    
                    0.00
                    %Net
      loss
                    
                    
                    (8.26
                    )%
                    
                    
                    0.00
                    %*Annualized





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


14





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 Heating Oil Fund, LP
(“USHO”) 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 USHO’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 USHO’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
USHO cannot assure investors that the projections included in these
forward-looking statements will come to pass. USHO’s actual results could
differ materially from those expressed or implied by the forward-looking
statements as a result of various factors.





USHO 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 USHO assumes no obligation to update any such
forward-looking statements. Although USHO 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 USHO may make directly to them or through reports that
USHO 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





USHO, 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 USHO is to have the changes in percentage terms of its
units’ net asset value (“NAV”) reflect the changes in percentage terms of the
spot price of heating oil, as measured by the changes in the price of the
futures contract on heating oil for delivery to the New York harbor as traded on
the New York Mercantile Exchange (the “Benchmark Futures Contract”) that is the
near month contract to expire, except when the near month contract is within two
weeks of expiration, the futures contract will be the next month contract to
expire, less USHO’s expenses.





USHO
seeks to achieve its investment objective by investing in a combination of
heating oil futures contracts and other heating oil-related investments such
that changes in its NAV, measured in percentage terms, will closely track
the Benchmark Futures Contract, also measured in percentage terms. USHO’s
general partner believes the Benchmark Futures Contract historically has
exhibited a close correlation with the spot price of heating oil. It is not the
intent of USHO to be operated in a fashion such that the NAV will equal, in
dollar terms, the spot price of heating oil or any particular futures contract
based on heating oil.  Management believes that it is not practical to
manage the portfolio to achieve such an investment goal when investing in listed
heating oil futures contracts.





On any
valuation day, the Benchmark Futures Contract is the near
month futures contract for heating oil traded on the New York
Mercantile Exchange (the “NYMEX”) unless the near month contract will expire
within two weeks of the valuation day, in which case the Benchmark Futures
Contract is the next month contract for heating oil 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.





USHO may
also invest in futures contracts for heating oil, crude oil, gasoline, natural
gas 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
heating oil-related investments such as cash-settled options on Futures
Contracts, forward contracts for heating oil and over-the-counter transactions
that are based on the price of heating oil, crude oil and other petroleum-based
fuels, Futures Contracts and indices based on the foregoing (collectively,
“Other Heating Oil-Related Investments”). For convenience and unless otherwise
specified, Futures Contracts and Other Heating Oil-Related Investments
collectively are referred to as “Heating Oil Interests” in this quarterly report
on Form 10-Q.


15





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





Heating
oil futures prices were volatile during the three months ended March 31, 2009.
The price of the Benchmark Futures Contract started the period at the $1.4421
per gallon level. It rose sharply over the course of the period and hit a peak
in January 2009 of approximately $1.6263 per gallon. The low of the period was
in March 2009 when prices dropped to the $1.1331 per gallon level. The period
ended with the Benchmark Futures Contract at $1.3679 per gallon, down
approximately 5.1% over the period. Similarly, USHO’s NAV rose during the period
from a starting level of $21.94 per unit to a high in January 2009 of $24.72 per
unit. USHO’s NAV reached its low for the period in March 2009 at $17.40 per
unit. The NAV on March 31, 2009 was $20.77, down approximately 5.3% over the
period.





At the
beginning of the first quarter of 2009, the heating oil futures market was in a
state of contango, meaning that the price of the near month heating oil futures
contract was typically lower than the price of the next month heating oil
futures contract, or contracts further away from expiration. For much of the
rest of the quarter, the heating oil futures market moved back and forth between
a mild backwardation market and a mild contango market. A backwardation market
is one in which the price of the near month heating oil futures contract is
higher than the price of the next month heating oil futures contract, or
contracts further away from expiration. At the end of the first quarter of 2009
the market moved into a much steeper contango market. For a discussion of the
impact of backwardation and contango on total returns, see "Term Structure of
Heating Oil Futures Prices and the Impact on Total Returns".





Valuation
of Futures Contracts and the Computation of the NAV





The NAV
of USHO units is calculated once each trading day as of the earlier of the close
of the New York Stock Exchange (the “NYSE”) or  4:00 p.m. New
York time. The NAV for a particular trading day is released after 4:15 p.m.
New York time. Trading on the NYSE typically closes at 4:00 p.m. New
York time. USHO 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 USHO investments,
including ICE Futures contracts or other futures contracts, as of 4:00
p.m. New York time.





Results
of Operations and the Heating Oil Market





Results of
Operations.On April 9, 2008, USHO listed its units on the American
Stock Exchange (the “AMEX”) under the ticker symbol “UHN.”  On that
day, USHO established its initial offering price at $50.00 per unit and issued
200,000 units to the initial authorized purchaser Merrill Lynch, in exchange for
$10,001,000 in cash.  As of March 31, 2009, USHO had issued 500,000
units, 300,000 of which were outstanding. As of March 31, 2009, there were
9,500,000 units registered but not yet issued.  As a result of the
acquisition of the AMEX by NYSE Euronext, USHO’s units no longer trade on the
AMEX and commenced trading on the NYSE Arca on November 25, 2008.





More
units may have been issued by USHO 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 USHO cannot be
resold by USHO. As a result, USHO contemplates that additional offerings of its
units will be registered with the SEC in the future in anticipation of
additional issuances and redemptions.


16





For the Three Months Ended
March 31, 2009





As of
March 31, 2009, the total unrealized gain on heating oil Futures Contracts owned
or held on that day was $131,242 and USHO established cash deposits, including
cash investments in money market funds that were equal to $6,103,332. The
majority of cash assets were held in overnight deposits at USHO’s custodian
bank, while 17.30% of the cash balance was held with the futures commission
merchant as margin deposits for the Futures Contracts purchased.  The
ending per unit NAV on March 31, 2009 was $20.77.





Portfolio Expenses. USHO’s
expenses consist of investment management fees, brokerage
fees and commissions, certain offering costs, licensing fees and the fees
and expenses of the independent directors of the General Partner.  The
management fee that USHO pays to the General Partner is calculated as a
percentage of the total net assets of USHO.  USHO pays the
General Partner a management fee of 0.60% of net assets.  The fee is
accrued daily.





During
the three month period ended March 31, 2009, the daily average total net assets
of USHO were $4,155,889.  During the three month period
ended March 31, 2009, the management fee paid by USHO amounted to $6,148, which
was calculated at the 0.60% rate and accrued daily and was accrued
daily.





In
addition to the management fee, USHO pays for all brokerage fees, taxes 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, taxes and expenses for
the three months ended March 31, 2009 was $26,830. For the three month period
ended March 31, 2009, USHO did not incur any fees and other expenses
relating to the registration and offering of additional units. Expenses incurred
in connection with organizing USHO and the costs of the initial
offering of units were borne by the General Partner, and are not
subject to reimbursement by USHO.





USHO 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 its audit committee
members. USHO shares these fees 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”) and the United States Gasoline Fund, LP
(“UGA”) based on the relative assets of each fund computed on a daily basis.
These fees for calendar year 2009 are estimated to be a total of $477,000 for
all funds. By
comparison, for the year ended December 31, 2008, these fees amounted to a total
of $282,000 for all funds, and USHO’s portion of such fees was $1,422.
Directors’ expenses are expected to increase in 2009 due to payment for
directors’ and officers’ liability insurance and an increase in the compensation
awarded to the independent directors. Effective as of March 3, 2009, the General
Partner has 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’ insurance coverage.





USHO also
incurs commissions to brokers for the purchase and sale of Futures Contracts,
Other Heating Oil-Related Investments or short-term obligations of the
United States of two years or less (“Treasuries”). During the three month period
ended March 31, 2009, total commissions paid to brokers amounted to $1,735. As
an annualized percentage of average net assets, the figure for the three
month period ended March 31, 2009 represents approximately 0.17% of average net
assets. No commissions were paid to brokers during the three month period ended
March 31, 2008 because USHO had not yet commenced operations.  However,
there can be no assurance that commission costs and portfolio turnover will not
cause commission expenses to rise in future quarters.





Interest Income. USHO seeks
to invest its assets such that it holds Futures Contracts and Other Heating
Oil-Related Investments in an amount equal to the total net assets of the
portfolio. Typically, such investments do not require USHO to pay the full
amount of the contract value at the time of purchase, but rather require USHO to
post an amount as a margin deposit against the eventual settlement of the
contract. As a result, USHO retains an amount that is approximately equal to its
total net assets, which USHO 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 USHO’s custodian bank. The Treasuries, cash and/or cash
equivalents earn interest that accrues on a daily basis. For the three
month period ended March 31, 2009, USHO earned $3,560 in interest income on such
cash holdings. Based on USHO’s average daily total net assets, this is
equivalent to an annualized yield of 0.35%. USHO did not
purchase Treasuries during the three month period ended March 31, 2009 and
held all of its funds in cash and/or cash equivalents during this time
period.


17





Tracking USHO’s Benchmark.
USHO seeks to manage its portfolio such that changes in its average daily NAV,
on a percentage basis, closely track changes in the average daily price of the
Benchmark Futures Contract, also on a percentage basis. Specifically, USHO
seeks to manage the portfolio such that over any rolling period of 30 valuation
days, the average daily change in the 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 Benchmark Futures
Contract for a particular 30-day time period was 0.5% per day, USHO’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). USHO’s portfolio management goals do not include
trying to make the nominal price of USHO’s NAV equal to the nominal price of the
current Benchmark Futures Contract or the spot price for heating oil.
Management believes that it is not practical to manage the portfolio to achieve
such an investment goal when investing in listed heating oil Futures
Contracts.





For the
30 valuation days ended March 31, 2009, the simple average daily change in the
Benchmark Futures Contract was 0.538%, while the simple average daily change in
the NAV of USHO over the same time period was 0.534%. The average daily
difference was -0.004% (or -0.4 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 -1.91%, meaning that over
this time period USHO’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 USHO’s NAV versus the daily movement of the Benchmark Futures
Contract for the 30-day period ended March 31, 2009.










*PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS


18










*PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS





Since the
offering of USHO units to the public on April 9, 2008 to March 31, 2009,
the simple average daily change in the Benchmark Futures Contract was
-.302%, while the simple average daily change in the NAV of USHO over the same
time period was -0.299%. The average daily difference was 0.002% (or 0.2 basis
points, where 1 basis point equals 1/100 of 1%). As a percentage of the daily
movement of the Benchmark Futures Contract, the average error in daily
tracking by the NAV was 0.161%, meaning that over this time period USHO’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 USHO versus the
return of its Benchmark Futures Contract can be calculated by comparing the
actual return of USHO, measured by changes in its NAV, versus the expected changes in its NAV
under the assumption that USHO’s returns had been exactly the same as the daily
changes in its Benchmark Futures Contract.





For the
three month period ended March 31, 2009, the actual total return of USHO as
measured by changes in its NAV was -5.33%. This is based on an initial
NAV of $21.94 on December 31, 2008 and an ending NAV as of March 31,
2009 of $20.77. During this time period, USHO made no distributions to its
unitholders. However, if USHO’s daily changes in its NAV had instead exactly
tracked the changes in the daily return of the Benchmark Futures Contract, USHO
would have ended the first quarter of 2009 with an estimated NAV of $20.75,
for a total return over the relevant time period of -5.41%. The difference
between the actual NAV total return of USHO of -5.33% and the expected total
return based on the Benchmark Futures Contract of -5.41% was an error over the
time period of 0.08%, which is to say that USHO’s actual total return exceeded
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 impact of the interest that USHO collects on its cash and
cash equivalent holdings. During the three month period ended March 31, 2009,
USHO received interest income of $3,560, which is equivalent to a weighted
average interest rate of 0.35% for the three month period ended March 31, 2009.
In addition, during the three month period ended March 31, 2009, USHO also
collected $1,000 from brokerage firms creating or redeeming baskets of units.
This income also contributed to USHO’s actual return exceeding the benchmark
results. However, if the total assets of USHO 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 three
month period ended March 31, 2009, USHO incurred net expenses of $9,765. Income
from interest and brokerage collections net of expenses was $(5,205), which is
equivalent to a weighted average net interest rate of -0.51% for the three month
period ended March 31, 2009.


19





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





First,
USHO 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 USHO executes the trade. In that case, USHO 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 USHO to either be too
high or too low relative to the changes in the Benchmark Futures
Contract.  During the three month period ended March 31, 2009,
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 USHO 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 USHO’s attempt to track the Benchmark Futures
Contract over time.





Second,
USHO earns interest on its cash, cash equivalents and Treasury holdings.
USHO is not required to distribute any portion of its income to its unitholders
and did not make any distributions to unitholders during the three month period
ended March 31, 2009. Interest payments, and any other income, were retained
within the portfolio and added to USHO’s NAV. When this income exceeds the level
of USHO’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),
USHO will realize a net yield that will tend to cause daily changes in the
NAV of USHO to track slightly higher than daily changes in the
Benchmark Futures Contract.  During the three month period ended
March 31, 2009, USHO earned, on an annualized basis, approximately 0.35% on its
cash holdings. It also incurred cash expenses on an annualized basis of 0.60%
for management fees and approximately 0.17% in brokerage commission costs
related to the purchase and sale of futures contracts, and 0.18% for other
expenses. The foregoing fees and expenses resulted in a net yield on an
annualized basis of approximately -0.60% and affected USHO’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 increase. Conversely, if
short-term interest rates were to decline, the amount of error created by the
yield would decrease. 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.





Third,
USHO may hold Other Heating Oil-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 USHO that are either too
high, or too low, relative to the daily changes in the Benchmark Futures
Contract. During the three month period ended March 31, 2009, USHO did not hold
any Other Heating Oil-Related Investments. However, there can be no assurance
that in the future USHO will not make use of such Other Heating Oil-Related
Investments.





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


20





As an
example, assume that the price of heating oil 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 heating oil
will fluctuate based on a number of market factors, including demand for
heating oil relative to its supply. The value of the near month contract will
likewise fluctuate in reaction to a number of market factors. If investors
seek to maintain their position in a near month contract and not take delivery
of the heating oil, every month they must sell their current near month contract
as it approaches expiration and invest in the next month contract.





If the
futures market is in backwardation, e.g., when the expected price
of heating oil in the future would be less, the investor would be buying a next
month contract for a lower price than the current near month contract.
Hypothetically, and assuming no other changes to either prevailing heating oil
prices or the price relationship between the spot price, the near month contract
and the next month contract (and ignoring the impact of commission costs and the
interest earned on Treasuries, cash and/or cash equivalents), the value of the
next month contract would rise as it approaches expiration and becomes the new
near month contract. In this example, the value of the $2.00 investment would
tend to rise faster than the spot price of heating oil, or fall slower. As a
result, it would be possible in this hypothetical example for the price of spot
heating oil 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 heating oil 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 heating oil
prices or the price relationship between the spot price, the near month contract
and the next month contract (and ignoring the impact of commission costs and the
interest earned on cash), the value of the next month contract would fall as it
approaches expiration and becomes the new near month contract. In this example,
it would mean that the value of the $2.00 investment would tend to rise slower
than the spot price of heating oil, or fall faster. As a result, it would be
possible in this hypothetical example for the spot price of heating oil 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 heating
oil 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 (1999-2008). 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  heating oil prices, both near month and next month,
often display a seasonal pattern in which the price of heating oil tends to rise
in the winter months and decline in the summer months. This mirrors the physical
demand for heating oil, which typically peaks in the winter.


21




Price
of Near Month Heating Oil Contract ("HO1")  and Price of Next Month
Contract ("HO2")*


(10 years ending
12/31/08)









*PAST PERFORMANCE IS NOT NECESSARILY
INDICATIVE OF FUTURE RESULTS





Another
way to view backwardation and contango data over time is to subtract the dollar
price of the next month heating oil futures contract from the dollar price of
the near month heating oil futures contract. If the resulting number is a
positive number, then the near month price 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 price of the
next month contract from the near month price for the 10 year period between
1999 and 2008. Investors will note that the near month heating oil 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 heating oil 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 winter months as the price of heating oil for delivery in
those winter 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
fall, 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 winter season.


22




Price at Near Month Heating Oil Contract Minus Next
Month Heating Oil Contract *


(10
years ending December 31, 2008)









*PAST PERFORMANCE IS NOT NECESSARILY
INDICATIVE OF FUTURE RESULTS





While the
investment objective of USHO is not to have the market price of its units match,
dollar for dollar, changes in the spot price of heating oil, contango and
backwardation have impacted the total return on an investment in USHO units
during the past year relative to a hypothetical direct investment in
heating oil. For example, an investment in USHO units made on December 31, 2008
and held to March 31, 2009 decreased, based upon the changes in the NAV for USHO
units on those days, by approximately 5.33%, while the spot price of heating oil
for immediate delivery during the same period decreased by approximately 5.10%
(note: this comparison ignores the potential costs associated with physically
owning and storing heating oil, which could be substantial).





Periods
of contango or backwardation do not materially impact USHO’s investment
objective of having percentage changes in its per unit NAV track percentage
changes in the price of the Benchmark Futures Contract since the impact of
backwardation and contango tended to equally impact the percentage changes in
price of both USHO’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.





Heating Oil
Market.  During the three month period ended March 31, 2009,
the price of heating oil in the United States, as measured by changes in the
price of the futures contract traded on the NYMEX that was closest to
expiration, fell approximately 5.1% from $1.4429 per gallon to $1.3679 per
gallon. (Investors are cautioned that these represent prices for heating oil on
a wholesale basis and should not be directly compared to retail
prices.)





During
the three month period ended March 31, 2009, the price of crude oil, the raw
material from which heating oil is refined, rose approximately 11% from
approximately $44 per barrel to approximately $49 per barrel. The price of crude
oil was influenced by several factors, including ongoing weak demand for crude
oil globally and modest decreases in the production levels of crude
oil.


23




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 heating oil. At the same time, there can be other factors that,
particularly in the short term, cause the price of heating oil to rise (or
fall), more (or less) than the price of crude oil. For example, warmer weather
during the high demand period of the winter season could cause American
consumers to reduce their heating oil consumption. Furthermore, heating oil
prices are impacted by the availability of refining capacity. As a result, it is
possible that changes in heating oil prices may not match the changes in crude
oil prices.





Heating Oil 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 1998 and 2008, the chart below compares the monthly
movements of heating oil versus the monthly movements of several other energy
commodities, such as natural gas, crude oil, and unleaded gasoline, 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 heating oil 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 heating oil had a strong positive correlation to movements in crude oil and
unleaded gasoline. Finally, heating oil had a positive, but weaker, correlation
with natural gas.





10 Year Correlation Matrix
                  1998-2008
                
                Large Cap
                  U.S.
                  Equities
                  (S&P 500)
                
                
                U.S. Govt.
                  Bonds
                  (EFFAS
                  U.S.
                  Government
                  Bond Index)
                
                
                Global
                  Equities
                  (FTSE
                  World
                  Index)
                
                
                Unleaded
                  Gasoline
                
                
                Natural
                  Gas
                
                
                Crude
                  Oil
                
                
                Heating
                  OilLarge
      Cap U.S. Equities (S&P 500)
                
                
                1.000
                
                
                
                -0.223
                
                
                
                0.936
                
                
                
                0.266
                
                
                
                0.045
                
                
                
                0.063
                
                
                
                0.003U.S.
      Govt. Bonds (EFFAS U.S. Government Bond Index)
                
                
                
                
                
                
                1.000
                
                
                
                -0.214
                
                
                
                -0.134
                
                
                
                0.054
                
                
                
                -0.29
                
                
                
                0.037Global
      Equities (FTSE World Index)
                
                
                
                
                
                
                
                
                
                
                1.000
                
                
                
                0.384
                
                
                
                0.072
                
                
                
                0.155
                
                
                
                0.084Unleaded
      Gasoline
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1.000
                
                
                
                0.254
                
                
                
                0.747
                
                
                
                0.787Natural
      Gas
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1.000
                
                
                
                0.292
                
                
                
                0.394Crude
      Oil
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1.000
                
                
                
                0.738Heating
      Oil
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1.000source:
      Bloomberg, NYMEX





PAST
PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS


24





The chart
below covers a more recent, but much shorter, range of dates than the above
chart. Over the one year period ended March 31, 2009, heating oil continued to
have a strong positive correlation with crude oil and unleaded gasoline. During
this period, it also had a stronger correlation with the movements of natural
gas than it had displayed over the ten year period ended December 31, 2008.
Notably, the correlation between heating oil and both large cap U.S. equities
and global equities, which had been essentially non-correlated over the ten year
period ended December 31, 2008, displayed results that indicated that they had a
weak but positive correlation over this shorter time period, particularly due to
the recent downturn in the U.S. economy. Finally, the results showed that crude
oil and U.S. government bonds, which had essentially been non-correlated for the
ten year period ended December 31, 2008, were weakly negatively correlated over
this more recent time period.





Correlation
      Matrix
                                                -12
      months ended March 31, 2009
                                              
                                              Large
      Cap
                                                U.S.
                                                Equities
                                                (S&P
      500)
                                              
                                              
                                              U.S.
      Govt.
                                                Bonds
                                                (EFFAS
                                                U.S.
                                                Government
                                                Bond
      Index)
                                              
                                              
                                              Global
                                                Equities
                                                (FTSE
                                                World
                                                Index)
                                              
                                              
                                              Crude
                                                Oil
                                              
                                              
                                              Unleaded
                                                Gasoline
                                              
                                              
                                              Natural
                                                Gas
                                              
                                              
                                              Heating
                                                OilLarge
      Cap U.S. Equities (S&P 500)
                                              
                                              
                                              1.000
                                              
                                              
                                              
                                              0.234
                                              
                                              
                                              
                                              0.980
                                              
                                              
                                              
                                              0.527
                                              
                                              
                                              
                                              0.504
                                              
                                              
                                              
                                              0.014
                                              
                                              
                                              
                                              0.564U.S.
      Govt. Bonds (EFFAS U.S. Government Bond Index)
                                              
                                              
                                              
                                              
                                              
                                              
                                              1.000
                                              
                                              
                                              
                                              0.296
                                              
                                              
                                              
                                              -0.220
                                              
                                              
                                              
                                              -0.399
                                              
                                              
                                              
                                              0.067
                                              
                                              
                                              
                                              -0.296Global
      Equities (FTSE World Index)
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              1.000
                                              
                                              
                                              
                                              0.541
                                              
                                              
                                              
                                              0.525
                                              
                                              
                                              
                                              0.067
                                              
                                              
                                              
                                              0.562Crude
      Oil
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              1.000
                                              
                                              
                                              
                                              0.811
                                              
                                              
                                              
                                              0.513
                                              
                                              
                                              
                                              0.871Unleaded
      Gasoline
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              1.000
                                              
                                              
                                              
                                              0.189
                                              
                                              
                                              
                                              0.883Natural
      Gas
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              1.000
                                              
                                              
                                              
                                              0.444Heating
      Oil
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              
                                              1.000source:
      Bloomberg, NYMEX




PAST PERFORMANCE IS NOT NECESSARILY
INDICATIVE OF FUTURE RESULTS




Investors
are cautioned that the historical price relationships between heating oil 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
heating oil 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 heating oil could have long term
correlation results that indicate prices of heating oil 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 heating oil to equities and bonds will be
either more strongly positively correlated or more strongly negatively
correlated than the long term historical results suggest.





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


25





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. USHO’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 USHO’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 USHO for its forward 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, USHO estimates interest income on a daily
basis using prevailing interest 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





USHO has
not made, and does not anticipate making, use of borrowings or other lines of
credit to meet its obligations. USHO has met, and it is anticipated that USHO
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. USHO’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 and  payment of its expenses,
summarized below under “Contractual Obligations.”





USHO currently
generates cash primarily from (i) the sale of baskets consisting of 100,000
units (“Creation Baskets”) and (ii) interest earned on Treasuries, cash
and/or cash equivalents. USHO has allocated substantially all of its net
assets to trading in Heating Oil Interests. USHO invests in Heating Oil
Interests to the fullest extent possible without being leveraged or unable to
satisfy its current or potential margin or collateral obligations with respect
to its investments in Futures Contracts and Other Heating Oil-Related
Investments. A significant portion of the NAV is held in cash and cash
equivalents that are used as margin and as collateral for USHO’s trading in
Heating Oil Interests. The balance of the net assets is held in USHO’s
account at its custodian bank. Interest earned on USHO’s interest-bearing funds
is paid to USHO.





USHO’s
investment in Heating Oil 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
USHO from promptly liquidating its positions in Futures Contracts. During
the three month period ended March 31, 2009, USHO was not forced to purchase or
liquidate any of its positions while daily limits were in effect; however, USHO
cannot predict whether such an event may occur in the future.





Prior to
the initial offering of USHO, all payments with respect to USHO’s expenses were
paid by the General Partner. USHO does not have an obligation or intention to
refund such payments by the General Partner. The General Partner is under no
obligation to pay USHO’s current or future expenses. Since such date, USHO has
been responsible for expenses relating to (i) investment 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)
taxes and 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 USHO’s
marketing agent, administrator and custodian. If the General Partner and
USHO are unsuccessful in raising sufficient funds to cover these respective
expenses or in locating any other source of funding, USHO will terminate and
investors may lose all or part of their
investment.


26





Market
Risk





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





USHO’s
exposure to market risk depends on a number of factors, including the
markets for heating oil, the volatility of interest rates and foreign exchange
rates, the liquidity of the Futures Contracts and Other Heating Oil-Related
Investments markets and the relationships among the contracts held by USHO. The
limited experience that USHO has had in utilizing its model to trade in
Heating Oil Interests in a manner intended to track the changes in the spot
price of heating oil, as well as drastic market occurrences, could ultimately
lead to the loss of all or substantially all of an investor’s
capital.





Credit
Risk





When USHO
enters into Futures Contracts and Other Heating Oil-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 foreign futures exchanges is the clearinghouse associated
with the particular exchange. In general, 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 USHO in such circumstances.





The
General Partner attempts to manage the credit risk of USHO by following
various trading limitations and policies. In particular, USHO 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 Heating Oil-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 USHO to limit its credit
exposure. UBS Securities LLC, USHO’s commodity broker, or any other broker that
may be retained by USHO in the future, when acting as USHO’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 USHO, all assets of USHO relating to
domestic Futures Contracts trading. These futures commission merchants are not
allowed to commingle USHO’s assets with its other assets. In addition, the CFTC
requires commodity brokers to hold in a secure account the USHO assets related
to foreign Futures Contracts trading.





In the
future, USHO may purchase 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
March 31, 2009, USHO had deposits in domestic and foreign financial
institutions,including
cash investments in money market funds, in the amount of $6,103,332. This amount
is subject to loss should these institutions cease operations.


27





Off
Balance Sheet Financing





As of
March 31, 2009, USHO 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 USHO. While USHO’s exposure under these indemnification
provisions cannot be estimated, they are not expected to have a material impact
on USHO’s financial position.





Redemption
Basket Obligation





In order
to meet its investment objective and pay its contractual obligations described
below, USHO requires liquidity to redeem units, which redemptions must be
in blocks of 100,000 units called “Redemption Baskets”.  USHO 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





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





The
General Partner agreed to pay the start-up costs associated with the
formation of USHO, 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 USHO and its units with the SEC, FINRA and the
AMEX, respectively. However, following USHO’s initial offering of units,
offering costs incurred in connection with registering and listing additional
units of USHO are directly borne on an ongoing basis by USHO, and not by the
General Partner.





The
General Partner pays the fees of USHO’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 in connection with the preparation of USHO’s
condensed financial statements and its SEC and CFTC reports. The General Partner
and USHO have also entered into a licensing agreement with the NYMEX
pursuant to which USHO and the affiliated funds managed by the General Partner
pay a licensing fee to the NYMEX. USHO 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 Parner. The
General Partner, though under no obligation to do so, agreed to pay certain
costs for tax reporting and audit expenses normally borne by USHO to the extent
that such expenses exceed 0.15% (15 basis points) of USHO’s NAV, on an
annualized basis, through at least June 30, 2009. The General Partner has no
obligation to continue such payment into subsequent periods.





In
addition to the General Partner’s management fee, USHO 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 USHO’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.  USHO 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 USHO’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 USHO’s
existence. Either party may terminate these agreements earlier for certain
reasons described in the agreements.


28





Item 3.  Quantitative
and Qualitative Disclosures About Market Risk.





Over-the-Counter
Derivatives





In the
future, USHO 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
heating oil-based derivatives transactions contain fairly generic terms and
conditions and are available from a wide range of participants. Other heating
oil-based derivatives have highly customized terms and conditions and are not as
widely available. Many of these over-the-counter contracts are cash-settled
forwards for the future delivery of heating oil- or petroleum-based fuels that
have terms similar to the Futures Contracts. Others take the form of “swaps” in
which the two parties exchange cash flows based on pre-determined formulas tied
to the spot price of heating oil, forward heating oil prices or heating oil
futures prices. For example, USHO may enter into over-the-counter derivative
contracts whose value will be tied to changes in the difference between
the spot price of heating oil, the price of Futures Contracts traded
on the NYMEX and the prices of other Futures Contracts that may be invested
in by USHO.





To
protect itself from the credit risk that arises in connection with such
contracts, USHO 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. USHO also may require that the counterparty be highly rated and/or
provide collateral or other credit support to address USHO’s exposure to the
counterparty. In addition, it is also possible for USHO and its counterparty to
agree to clear their agreement through an established futures clearinghouse such
as those connected to the NYMEX or the ICE Futures. In that event, USHO would no
longer have credit risk of its original counterparty, as the clearinghouse would
now be USHO’s counterparty. USHO 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 USHO 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, and (d) producers, users or traders of energy, whether or not
regulated by the CFTC. Any entity acting as a counterparty shall be
regulated in either the United States or the United Kingdom unless
otherwise approved by the Board after consultation with its legal counsel.
Existing counterparties are also reviewed periodically by the General
Partner.





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





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


29





During
the three month period ended March 31, 2009, USHO did not employ any hedging
methods such as those described above since all of its investments were made
over an exchange. Therefore, USHO was not exposed to counterparty
risk.





Item 4.  Controls and
Procedures.





Disclosure
Controls and Procedures





USHO
maintains disclosure controls and procedures that are designed to ensure that
material information required to be disclosed in USHO’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
USHO if USHO had any officers, have evaluated the effectiveness of USHO’s
disclosure controls and procedures and have concluded that the disclosure
controls and procedures of USHO 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 USHO’s internal control over financial reporting during
USHO’s last fiscal quarter that have materially affected, or are reasonably
likely to materially affect, USHO’s internal control over financial
reporting.


30





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 USHO's
Annual Report on Form 10-K for the fiscal year ended December 31,
2008.





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





Not applicable.





Item
3.  Defaults Upon Senior Securities.





Not applicable.





Item
4.  Submission of Matters to a Vote of Security
Holders.





Not
applicable.





Item 5.  Other
Information.





Monthly
Account Statements





Pursuant
to the requirement under Rule 4.22 under the Commodity Exchange Act, each month
USHO 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 USHO’s website
at www.unitedstatesheatingoilfund.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 Document31.1*
            
            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


31





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 Heating Oil Fund, LP (Registrant)


By:
United States Commodity Funds LLC, its general partner





By:
                          /s/
      Nicholas D. GerberNicholas
      D. GerberChief
      Executive
Officer





Date:  May
15, 2009





By:
                          /s/
      Howard MahHoward
      MahChief
      Financial
Officer





Date:  May
15, 2009


32