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FAIR VALUE OF FINANCIAL INSTRUMENTS
 6 Months Ended
Jun. 30, 2011
FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS

US12NG values its investments in accordance with Accounting Standards Codification 820 - Fair Value Measurements and Disclosures (“ASC 820”). ASC 820 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurement. The changes to past practice resulting from the application of ASC 820 relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurement. ASC 820 establishes a fair value hierarchy that distinguishes between: (1) market participant assumptions developed based on market data obtained from sources independent of US12NG (observable inputs) and (2) US12NG’s own assumptions about market participant assumptions developed based on the best information available under the circumstances (unobservable inputs). The three levels defined by the ASC 820 hierarchy are as follows:

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

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

 

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 within 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 US12NG’s securities at December 31, 2010 using the fair value hierarchy:

 

$28,013,635 $28,013,635 $28,013,635 $28,013,635
At December 31, 2010    Total     Level I     Level II      Level III  

Short-Term Investments

    $ 28,013,635      $ 28,013,635      $ —         $ —     

Exchange-Traded Futures Contracts

          

United States Contracts

      (2,175,060 )      (2,175,060 )      —           —     

During the year ended December 31, 2010, there were no significant transfers between Level I and Level II.

The following table summarizes the valuation of US12NG’s securities at June 30, 2011 using the fair value hierarchy:

 

$32,017,537 $32,017,537 $32,017,537 $32,017,537
At June 30, 2011    Total     Level I     Level II      Level III  

Short-Term Investments

    $ 32,017,537      $ 32,017,537      $ —         $ —     

Exchange-Traded Futures Contracts

          

United States Contracts

      (1,458,490 )      (1,458,490 )      —           —     

During the six months ended June 30, 2011, there were no significant transfers between Level I and Level II.

US12NG has adopted the provisions of Accounting Standards Codification 815 - Derivatives and Hedging, which require presentation of qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts and gains and losses on derivatives.

Fair Value of Derivative Instruments

 

Condensed State Condensed State Condensed State

Derivatives not

Accounted

for as Hedging

Instruments

      Condensed  Statement
of
Financial
Condition Location		    Fair Value At
June 30, 2011		     Fair Value At
December 31, 2010		  

Futures - Commodity Contracts

      Assets    $ (1,458,490 )    $ (2,175,060 ) 

 

The Effect of Derivative Instruments on the Condensed Statements of Operations

 

         For the six months ended
June 30, 2011		     For the six months ended
June 30, 2010		  

Derivatives
not Accounted

for as Hedging

Instruments

   

Location of

Gain or (Loss)

on Derivatives

Recognized

in Income

   Realized Gain
or (Loss) on
Derivatives
Recognized
in Income		     Change in
Unrealized
Gain or (Loss)
Recognized
in Income		     Realized Gain
or (Loss) on
Derivatives
Recognized
in Income		     Change in
Unrealized
Gain or (Loss)
Recognized
in Income		  

Futures - Commodity
Contracts

   

Realized loss on closed positions

   $ (3,068,370 )      $ (2,772,650 )   
  

Change in unrealized gain (loss) on open positions

     $ 716,570        $ (4,783,520 )