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ProShares Trust II - Quarter Report: 2011 June (Form 10-Q)

Form 10-Q
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended June 30, 2011.

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: 001-34200

PROSHARES TRUST II

(Exact name of registrant as specified in its charter)

 

Delaware   87-6284802

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

c/o ProShare Capital Management LLC

7501 Wisconsin Avenue, Suite 1000

Bethesda, Maryland 20814

(Address of principal executive offices) (Zip code)

(240) 497-6400

(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).    x  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   x    Accelerated filer    ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    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


Table of Contents

PROSHARES TRUST II

Table of Contents

 

Part I. FINANCIAL INFORMATION    Page  
Item 1.   Condensed Financial Statements.      1   
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations.      118   
Item 3.   Quantitative and Qualitative Disclosures About Market Risk.      155   
Item 4.   Controls and Procedures.      172   

Part II. OTHER INFORMATION

  
Item 1.   Legal Proceedings.      173   
Item 1A.   Risk Factors.      173   
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.      173   
Item 3.   Defaults Upon Senior Securities.      176   
Item 4.   Removed and Reserved.      176   
Item 5.   Other Information.      176   
Item 6.   Exhibits.      176   


Table of Contents

Part I. FINANCIAL INFORMATION

 

Item 1. Condensed Financial Statements.

Index

 

     Page  

Documents

  

Statements of Financial Condition, Schedules of Investments, Statements of Operations, Statements of Changes in Shareholders’ Equity and Statements of Cash Flows:

  

ProShares Ultra DJ-UBS Commodity

     2   

ProShares UltraShort DJ-UBS Commodity

     7   

ProShares Ultra DJ-UBS Crude Oil

     12   

ProShares UltraShort DJ-UBS Crude Oil

     17   

ProShares Ultra DJ-UBS Natural Gas

     22   

ProShares Short DJ-UBS Natural Gas

     23   

ProShares UltraShort DJ-UBS Natural Gas

     24   

ProShares Ultra Gold

     25   

ProShares Short Gold

     30   

ProShares UltraShort Gold

     31   

ProShares Ultra Silver

     36   

ProShares UltraShort Silver

     41   

ProShares Ultra Euro

     46   

ProShares UltraShort Euro

     51   

ProShares Ultra Yen

     56   

ProShares UltraShort Yen

     61   

ProShares Ultra VIX Short-Term Futures ETF

     66   

ProShares VIX Short-Term Futures ETF

     67   

ProShares Short VIX Short-Term Futures ETF

     72   

ProShares UltraShort VIX Short-Term Futures ETF

     73   

ProShares Ultra VIX Mid-Term Futures ETF

     74   

ProShares VIX Mid-Term Futures ETF

     75   

ProShares Short VIX Mid-Term Futures ETF

     80   

ProShares UltraShort VIX Mid-Term Futures ETF

     81   

ProShares Trust II

     82   

Notes to Financial Statements

     86   

 

-1-


Table of Contents

PROSHARES ULTRA DJ-UBS COMMODITY

STATEMENTS OF FINANCIAL CONDITION

 

000000000000000 000000000000000
     June 30, 2011
(unaudited)
     December 31, 2010  

Assets

     

Cash

   $ 9,009       $ 17,743   

Short-term U.S. government and agency obligations (Note 3)
(cost $18,514,256 and $16,426,195, respectively)

     18,514,669         16,426,651   

Unrealized appreciation on swap agreements

     —           1,755,750   
  

 

 

    

 

 

 

Total assets

     18,523,678         18,200,144   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     15,033         13,486   

Unrealized depreciation on swap agreements

     1,813,382         —     
  

 

 

    

 

 

 

Total liabilities

     1,828,415         13,486   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     16,695,263         18,186,658   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 18,523,678       $ 18,200,144   
  

 

 

    

 

 

 

Shares outstanding

     500,014         500,014   
  

 

 

    

 

 

 

Net asset value per share

   $ 33.39       $ 36.37   
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 33.38       $ 36.27   
  

 

 

    

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-2-


Table of Contents

PROSHARES ULTRA DJ-UBS COMMODITY

SCHEDULE OF INVESTMENTS

JUNE 30, 2011

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations (111% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.050% due 07/07/11

   $ 1,951,000       $ 1,950,997   

0.060% due 07/14/11†

     1,152,000         1,151,996   

0.058% due 07/21/11†

     2,441,000         2,440,975   

0.053% due 07/28/11†

     676,000         675,995   

0.023% due 08/04/11†

     2,576,000         2,575,965   

0.048% due 08/18/11†

     1,830,000         1,829,964   

0.044% due 08/25/11†

     4,115,000         4,114,908   

0.035% due 09/08/11†

     1,154,000         1,153,978   

0.014% due 09/15/11†

     2,620,000         2,619,891   
     

 

 

 

Total short-term U.S. government and agency obligations (cost $18,514,256)

      $ 18,514,669   
     

 

 

 

 

 

 

Swap Agreements^

 

     Termination
Date
     Notional
Amount at
Value*
     Unrealized
Appreciation
(Depreciation)
 

Swap agreement with Goldman Sachs International based on Dow Jones-UBS Commodity Index

     07/06/11       $ 8,152,130       $ (435,944

Swap agreement with UBS AG based on Dow Jones-UBS Commodity Index

     07/06/11         25,337,039         (1,377,438
        

 

 

 
         $ (1,813,382
        

 

 

 

 

All or partial amount segregated as collateral for swap agreements.

 

^ The positions and counterparties herein are as of June 30, 2011. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at anytime.

 

* For swap agreements, a positive amount represents “long” exposure to the benchmark Index. A negative amount represents “short” exposure to the benchmark Index.

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-3-


Table of Contents

PROSHARES ULTRA DJ-UBS COMMODITY

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(unaudited)

 

     Three months
ended
June 30, 2011
    Three months
ended
June 30, 2010
    Six months
ended
June 30, 2011
    Six months
ended
June 30, 2010
 

Investment Income

        

Interest

   $ 3,412      $ 6,549      $ 9,271      $ 11,318   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     48,436        28,875        94,549        60,926   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     48,436        28,875        94,549        60,926   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (45,024     (22,326     (85,278     (49,608
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Swap agreements

     (1,213,954     (2,396,285     1,990,167        (2,738,144

Short-term U.S. government and agency obligations

     123        89        123        966   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (1,213,831     (2,396,196     1,990,290        (2,737,178
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Swap agreements

     (2,137,478     1,020,246        (3,569,132     (636,568

Short-term U.S. government and agency obligations

     (303     194        (43     2,550   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (2,137,781     1,020,440        (3,569,175     (634,018
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (3,351,612     (1,375,756     (1,578,885     (3,371,196
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (3,396,636   $ (1,398,082   $ (1,664,163   $ (3,420,804
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ (6.19   $ (2.74   $ (3.07   $ (6.63
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     548,366        509,904        542,555        516,312   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-4-


Table of Contents

PROSHARES ULTRA DJ-UBS COMMODITY

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(unaudited)

 

Shareholders’ equity, at December 31, 2010

   $ 18,186,658   

Addition of 50,000 shares

     1,782,755   

Redemption of 50,000 shares

     (1,609,987
  

 

 

 

Net addition (redemption) of 0 shares

     172,768   
  

 

 

 

Net investment income (loss)

     (85,278

Net realized gain (loss)

     1,990,290   

Change in net unrealized appreciation/depreciation

     (3,569,175
  

 

 

 

Net income (loss)

     (1,664,163
  

 

 

 

Shareholders’ equity, at June 30, 2011

   $ 16,695,263   
  

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-5-


Table of Contents

PROSHARES ULTRA DJ-UBS COMMODITY

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2011 AND 2010

(unaudited)

 

     Six months
ended

June 30, 2011
    Six months
ended

June 30, 2010
 

Cash flow from operating activities

    

Net income (loss)

   $ (1,664,163   $ (3,420,804

Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:

    

Net sale (purchase) of short-term U.S. government and agency obligations

     (2,088,061     8,268,742   

Change in unrealized appreciation/depreciation on investments

     3,569,175        634,018   

Increase (Decrease) in management fee payable

     1,547        (5,877
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (181,502     5,476,079   
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     1,782,755        5,958,070   

Payment on shares redeemed

     (1,609,987     (9,976,249
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     172,768        (4,018,179
  

 

 

   

 

 

 

Net increase (decrease) in cash

     (8,734     1,457,900   

Cash, beginning of period

     17,743        78,112   
  

 

 

   

 

 

 

Cash, end of period

   $ 9,009      $ 1,536,012   
  

 

 

   

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-6-


Table of Contents

PROSHARES ULTRASHORT DJ-UBS COMMODITY

STATEMENTS OF FINANCIAL CONDITION

 

000000000000000 000000000000000
     June 30, 2011
(unaudited)
     December 31, 2010  

Assets

     

Cash

   $ 13,740       $ 10,654   

Short-term U.S. government and agency obligations (Note 3)
(cost $27,261,191 and $1,594,783, respectively)

     27,261,465         1,594,842   

Unrealized appreciation on swap agreements

     2,252,534         —     
  

 

 

    

 

 

 

Total assets

     29,527,739         1,605,496   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     31,970         1,273   

Unrealized depreciation on swap agreements

     —           164,150   
  

 

 

    

 

 

 

Total liabilities

     31,970         165,423   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     29,495,769         1,440,073   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 29,527,739       $ 1,605,496   
  

 

 

    

 

 

 

Shares outstanding

     609,997         30,003   
  

 

 

    

 

 

 

Net asset value per share (Note 1)

   $ 48.35       $ 48.00   
  

 

 

    

 

 

 

Market value per share (Note 1) (Note 2)

   $ 48.67       $ 48.30   
  

 

 

    

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-7-


Table of Contents

PROSHARES ULTRASHORT DJ-UBS COMMODITY

SCHEDULE OF INVESTMENTS

JUNE 30, 2011

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations (92% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.005% due 07/07/11†

   $ 10,203,000       $ 10,202,986   

0.010% due 07/28/11†

     656,000         655,995   

0.015% due 08/04/11†

     1,993,000         1,992,973   

0.048% due 08/18/11†

     309,000         308,994   

0.045% due 08/25/11†

     5,581,000         5,580,874   

0.021% due 09/15/11†

     8,290,000         8,289,655   

0.011% due 09/22/11

     115,000         114,994   

0.015% due 09/29/11

     115,000         114,994   
     

 

 

 

Total short-term U.S. government and agency obligations (cost $27,261,191)

      $ 27,261,465   
     

 

 

 

 

 

 

Swap Agreements^

     Termination
Date
     Notional
Amount at
Value*
    Unrealized
Appreciation
(Depreciation)
 

Swap agreement with Goldman Sachs International based on Dow Jones-UBS Commodity Index

     07/06/11       $ (14,458,798   $ 494,019   

Swap agreement with UBS AG based on Dow Jones-UBS Commodity Index

     07/06/11         (44,002,256     1,758,515   
       

 

 

 
        $ 2,252,534   
       

 

 

 

 

All or partial amount segregated as collateral for swap agreements.

 

^ The positions and counterparties herein are as of June 30, 2011. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at anytime.

 

* For swap agreements, a positive amount represents “long” exposure to the benchmark Index. A negative amount represents “short” exposure to the benchmark Index.

 

 

 

 

 

See accompanying notes to financial statements.

 

-8-


Table of Contents

PROSHARES ULTRASHORT DJ-UBS COMMODITY

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(unaudited)

 

     Three months
ended
June 30, 2011
    Three months
ended
June 30, 2010
    Six months
ended
June 30, 2011
    Six months
ended
June 30, 2010
 

Investment Income

        

Interest

   $ 2,051      $ 1,438      $ 2,791      $ 2,318   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     73,560        10,734        79,037        19,491   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     73,560        10,734        79,037        19,491   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (71,509     (9,296     (76,246     (17,173
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Swap agreements

     (5,131,689     688,684        (5,516,002     551,420   

Short-term U.S. government and agency obligations

     1,169        —          1,166        (82
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (5,130,520     688,684        (5,514,836     551,338   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Swap agreements

     2,333,550        (548,694     2,416,684        (220,929

Short-term U.S. government and agency obligations

     257        36        215        413   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     2,333,807        (548,658     2,416,899        (220,516
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (2,796,713     140,026        (3,097,937     330,822   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (2,868,222   $ 130,730      $ (3,174,183   $ 313,649   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share (Note 1)

   $ (4.20   $ 2.36      $ (8.62   $ 6.06   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding (Note 1)

     682,524        55,497        368,065        51,771   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-9-


Table of Contents

PROSHARES ULTRASHORT DJ-UBS COMMODITY

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED

JUNE 30, 2011

(unaudited)

 

Shareholders’ equity, at December 31, 2010

   $ 1,440,073   

Addition of 1,780,000 shares (Note 1)

     84,549,839   

Redemption of 1,200,006 shares (Note 1)

     (53,319,960
  

 

 

 

Net addition (redemption) of 579,994 shares (Note 1)

     31,229,879   
  

 

 

 

Net investment income (loss)

     (76,246

Net realized gain (loss)

     (5,514,836

Change in net unrealized appreciation/depreciation

     2,416,899   
  

 

 

 

Net income (loss)

     (3,174,183
  

 

 

 

Shareholders’ equity, at June 30, 2011

   $ 29,495,769   
  

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-10-


Table of Contents

PROSHARES ULTRASHORT DJ-UBS COMMODITY

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2011 AND 2010

(unaudited)

 

     Six months
ended

June 30, 2011
    Six months
ended

June 30, 2010
 

Cash flow from operating activities

    

Net income (loss)

   $ (3,174,183   $ 313,649   

Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:

    

Decrease (Increase) in segregated cash balances for swap agreements

     —          65,800   

Net sale (purchase) of short-term U.S. government and agency obligations

     (25,666,408     69,494   

Change in unrealized appreciation/depreciation on investments

     (2,416,899     220,516   

Increase (Decrease) in management fee payable

     30,697        1,136   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (31,226,793     670,595   
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     84,549,839        3,370,174   

Payment on shares redeemed

     (53,319,960     (3,226,596
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     31,229,879        143,578   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     3,086        814,173   

Cash, beginning of period

     10,654        90,383   
  

 

 

   

 

 

 

Cash, end of period

   $ 13,740      $ 904,556   
  

 

 

   

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-11-


Table of Contents

PROSHARES ULTRA DJ-UBS CRUDE OIL

STATEMENTS OF FINANCIAL CONDITION

 

000000000000000 000000000000000
     June 30, 2011
(unaudited)
     December 31, 2010  

Assets

     

Cash

   $ 3,864,304       $ 905,158   

Segregated cash balances with brokers for futures contracts

     29,816,100         10,631,250   

Short-term U.S. government and agency obligations (Note 3)
(cost $382,581,117 and $244,384,335, respectively)

     382,583,422         244,394,920   

Unrealized appreciation on swap agreements

     —           5,649,644   

Receivable from capital shares sold

     18,214,973         —     

Receivable on open futures contracts

     1,843,059         3,035,150   
  

 

 

    

 

 

 

Total assets

     436,321,858         264,616,122   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     —           36,266,723   

Management fee payable

     244,818         216,322   

Unrealized depreciation on swap agreements

     9,679,803         —     
  

 

 

    

 

 

 

Total liabilities

     9,924,621         36,483,045   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     426,397,237         228,133,077   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 436,321,858       $ 264,616,122   
  

 

 

    

 

 

 

Shares outstanding

     9,999,170         4,562,504   
  

 

 

    

 

 

 

Net asset value per share (Note 1)

   $ 42.64       $ 50.00   
  

 

 

    

 

 

 

Market value per share (Note 1) (Note 2)

   $ 42.18       $ 49.98   
  

 

 

    

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-12-


Table of Contents

PROSHARES ULTRA DJ-UBS CRUDE OIL

SCHEDULE OF INVESTMENTS

JUNE 30, 2011

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations (90% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.005% due 07/07/11

   $ 21,106,000       $ 21,105,970   

0.064% due 07/14/11†

     10,947,000         10,946,964   

0.058% due 07/21/11

     16,364,000         16,363,828   

0.035% due 07/28/11†

     19,575,000         19,574,859   

0.021% due 08/04/11†

     71,671,000         71,670,018   

0.028% due 08/11/11†

     26,046,000         26,045,568   

0.023% due 08/18/11†

     32,705,000         32,704,362   

0.045% due 08/25/11†

     10,373,000         10,372,767   

0.033% due 09/01/11

     20,671,000         20,670,477   

0.034% due 09/08/11†

     10,792,000         10,791,796   

0.022% due 09/15/11†

     57,152,000         57,149,622   

0.016% due 09/22/11†

     78,030,000         78,025,545   

0.015% due 09/29/11

     7,162,000         7,161,646   
     

 

 

 

Total short-term U.S. government and agency obligations (cost $382,581,117)

      $ 382,583,422   
     

 

 

 

 

 

 

Futures Contracts Purchased

 

     Number of
Contracts
     Notional
Amount at
Value
     Unrealized
Appreciation
(Depreciation)
 

Crude Oil – NYMEX, expires September 2011

     3,681       $ 353,228,760       $ (8,560,860

Swap Agreements^

 

     Termination
Date
     Notional
Amount at
Value*
     Unrealized
Appreciation
(Depreciation)
 

Swap agreement with Goldman Sachs International based on Dow Jones-UBS Crude Oil Sub-Index

     07/06/11       $ 167,208,929       $ (5,067,105

Swap agreement with UBS AG based on Dow Jones-UBS Crude Oil Sub-Index

     07/06/11         332,370,201         (4,612,698
        

 

 

 
         $ (9,679,803
        

 

 

 

 

All or partial amount segregated as collateral for swap agreements.

 

^ The positions and counterparties herein are as of June 30, 2011. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at anytime.

 

* For swap agreements, a positive amount represents “long” exposure to the benchmark Index. A negative amount represents “short” exposure to the benchmark Index.

 

 

 

 

See accompanying notes to financial statements.

 

-13-


Table of Contents

PROSHARES ULTRA DJ-UBS CRUDE OIL

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(unaudited)

 

     Three months
ended

June 30, 2011
    Three months
ended

June 30, 2010
    Six months
ended

June 30, 2011
    Six months
ended

June 30, 2010
 

Investment Income

        

Interest

   $ 39,410      $ 132,798      $ 137,728      $ 174,054   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     657,181        841,537        1,456,224        1,445,462   

Brokerage commissions

     25,104        51,622        54,773        79,965   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     682,285        893,159        1,510,997        1,525,427   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (642,875     (760,361     (1,373,269     (1,351,373
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Futures contracts

     11,804,564        (11,447,341     34,464,884        8,078,781   

Swap agreements

     (19,651,096     (45,766,422     39,873,011        (12,270,907

Short-term U.S. government and agency obligations

     8,033        2,683        12,962        45,375   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (7,838,499     (57,211,080     74,350,857        (4,146,751
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Futures contracts

     (28,278,000     (9,058,300     (13,973,620     (15,378,680

Swap agreements

     (5,895,327     17,726,009        (15,329,447     1,334,168   

Short-term U.S. government and agency obligations

     (12,459     18,945        (8,280     41,803   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (34,185,786     8,686,654        (29,311,347     (14,002,709
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (42,024,285     (48,524,426     45,039,510        (18,149,460
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (42,667,160   $ (49,284,787   $ 43,666,241      $ (19,500,833
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share (Note 1)

   $ (7.60   $ (5.76   $ 6.92      $ (2.78
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding (Note 1)

     5,611,258        8,560,855        6,305,952        7,008,498   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-14-


Table of Contents

PROSHARES ULTRA DJ-UBS CRUDE OIL

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED

JUNE 30, 2011

(unaudited)

 

Shareholders’ equity, at December 31, 2010

   $ 228,133,077   

Addition of 17,475,000 shares (Note 1)

     786,629,115   

Redemption of 12,038,334 shares (Note 1)

     (632,031,196
  

 

 

 

Net addition (redemption) of 5,436,666 shares (Note 1)

     154,597,919   
  

 

 

 

Net investment income (loss)

     (1,373,269

Net realized gain (loss)

     74,350,857   

Change in net unrealized appreciation/depreciation

     (29,311,347
  

 

 

 

Net income (loss)

     43,666,241   
  

 

 

 

Shareholders’ equity, at June 30, 2011

   $ 426,397,237   
  

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-15-


Table of Contents

PROSHARES ULTRA DJ-UBS CRUDE OIL

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2011 AND 2010

(unaudited)

 

     Six months
ended

June 30, 2011
    Six months
ended

June 30, 2010
 

Cash flow from operating activities

    

Net income (loss)

   $ 43,666,241      $ (19,500,833

Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:

    

Decrease (Increase) in segregated cash balances with brokers for futures contracts

     (19,184,850     (7,324,639

Net sale (purchase) of short-term U.S. government and agency obligations

     (138,196,782     (123,037,745

Change in unrealized appreciation/depreciation on investments

     15,337,727        (1,375,971

Decrease (Increase) in receivable on futures contracts

     1,192,091        1,466,444   

Increase (Decrease) in management fee payable

     28,496        162,519   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (97,157,077     (149,610,225
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     768,414,142        695,289,489   

Payment on shares redeemed

     (668,297,919     (537,708,197
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     100,116,223        157,581,292   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     2,959,146        7,971,067   

Cash, beginning of period

     905,158        80,936   
  

 

 

   

 

 

 

Cash, end of period

   $ 3,864,304      $ 8,052,003   
  

 

 

   

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-16-


Table of Contents

PROSHARES ULTRASHORT DJ-UBS CRUDE OIL

STATEMENTS OF FINANCIAL CONDITION

 

     June 30, 2011
(unaudited)
     December 31,
2010
 

Assets

     

Cash

   $ 1,249,378       $ 4,007,347   

Segregated cash balances with brokers for futures contracts

     9,059,758         4,252,500   

Short-term U.S. government and agency obligations (Note 3)
(cost $123,613,509 and $135,631,915, respectively)

     123,614,651         135,637,192   

Unrealized appreciation on swap agreements

     6,899,392         —     

Receivable from capital shares sold

     19,578,874         —     
  

 

 

    

 

 

 

Total assets

     160,402,053         143,897,039   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     —           6,313,753   

Payable on open futures contracts

     —           1,140,144   

Management fee payable

     113,611         117,277   

Unrealized depreciation on swap agreements

     —           4,111,608   
  

 

 

    

 

 

 

Total liabilities

     113,611         11,682,782   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     160,288,442         132,214,257   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 160,402,053       $ 143,897,039   
  

 

 

    

 

 

 

Shares outstanding

     3,319,944         2,600,003   
  

 

 

    

 

 

 

Net asset value per share (Note 1)

   $ 48.28       $ 50.85   
  

 

 

    

 

 

 

Market value per share (Note 1) (Note 2)

   $ 48.80       $ 50.85   
  

 

 

    

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-17-


Table of Contents

PROSHARES ULTRASHORT DJ-UBS CRUDE OIL

SCHEDULE OF INVESTMENTS

JUNE 30, 2011

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations (77% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.050% due 07/07/11†

   $ 12,535,000       $ 12,534,982   

0.065% due 07/14/11†

     12,893,000         12,892,957   

0.058% due 07/21/11

     9,894,000         9,893,896   

0.012% due 07/28/11†

     11,862,000         11,861,915   

0.022% due 08/04/11†

     14,013,000         14,012,808   

0.015% due 08/11/11†

     12,250,000         12,249,797   

0.045% due 08/18/11†

     1,842,000         1,841,964   

0.044% due 08/25/11†

     10,847,000         10,846,756   

0.026% due 09/01/11

     1,289,000         1,288,967   

0.036% due 09/08/11†

     9,613,000         9,612,818   

0.010% due 09/15/11†

     18,416,000         18,415,234   

0.011% due 09/22/11†

     5,226,000         5,225,702   

0.015% due 09/29/11

     2,937,000         2,936,855   
     

 

 

 

Total short-term U.S. government and agency obligations (cost $123,613,509)

      $ 123,614,651   
     

 

 

 

 

 

 

Futures Contracts Sold

 

     Number of
Contracts
     Notional
Amount at
Value
     Unrealized
Appreciation
(Depreciation)
 

Crude Oil – NYMEX, expires September 2011

     1,146       $ 109,970,160       $ 2,287,900   

Swap Agreements^

 

     Termination
Date
     Notional
Amount at
Value*
    Unrealized
Appreciation
(Depreciation)
 

Swap agreement with Goldman Sachs International based on Dow Jones-UBS Crude Oil Sub-Index

     07/06/11       $ (73,730,860   $ 2,781,226   

Swap agreement with UBS AG based on Dow Jones-UBS Crude Oil Sub-Index

     07/06/11         (136,879,095     4,118,166   
       

 

 

 
        $ 6,899,392   
       

 

 

 

 

All or partial amount segregated as collateral for swap agreements.

 

^ The positions and counterparties herein are as of June 30, 2011. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at anytime.

 

* For swap agreements, a positive amount represents “long” exposure to the benchmark Index. A negative amount represents “short” exposure to the benchmark Index.

 

 

 

 

See accompanying notes to financial statements.

 

-18-


Table of Contents

PROSHARES ULTRASHORT DJ-UBS CRUDE OIL

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2011 AND 2010

(unaudited)

 

     Three months
ended
June 30, 2011
    Three months
ended
June 30, 2010
    Six months
ended
June 30, 2011
    Six months
ended
June 30, 2010
 

Investment Income

        

Interest

   $ 25,984      $ 33,056      $ 62,434      $ 55,494   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     401,339        189,102        699,551        406,784   

Brokerage commissions

     16,653        15,543        32,302        27,722   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     417,992        204,645        731,853        434,506   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (392,008     (171,589     (669,419     (379,012
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Futures contracts

     7,076,973        5,375,460        2,465,383        5,001,258   

Swap agreements

     24,452,132        16,625,026        15,128,493        18,583,440   

Short-term U.S. government and agency obligations

     9,722        7,620        10,149        8,525   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     31,538,827        22,008,106        17,604,025        23,593,223   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Futures contracts

     5,409,880        3,248,810        4,672,320        3,865,930   

Swap agreements

     7,491,982        1,175,687        11,011,000        (618,247

Short-term U.S. government and agency obligations

     (5,295     1,417        (4,135     7,912   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     12,896,567        4,425,914        15,679,185        3,255,595   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     44,435,394        26,434,020        33,283,210        26,848,818   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 44,043,386      $ 26,262,431      $ 32,613,791      $ 26,469,806   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share (Note 1)

   $ 11.02      $ 20.97      $ 9.90      $ 20.23   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding (Note 1)

     3,997,966        1,252,640        3,294,495        1,308,456   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-19-


Table of Contents

PROSHARES ULTRASHORT DJ-UBS CRUDE OIL

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED

JUNE 30, 2011

(unaudited)

 

Shareholders’ equity, at December 31, 2010

   $ 132,214,257   

Addition of 7,080,000 shares (Note 1)

     304,540,395   

Redemption of 6,360,059 shares (Note 1)

     (309,080,001
  

 

 

 

Net addition (redemption) of 719,941 shares (Note 1)

     (4,539,606
  

 

 

 

Net investment income (loss)

     (669,419

Net realized gain (loss)

     17,604,025   

Change in net unrealized appreciation/depreciation

     15,679,185   
  

 

 

 

Net income (loss)

     32,613,791   
  

 

 

 

Shareholders’ equity, at June 30, 2011

   $ 160,288,442   
  

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-20-


Table of Contents

PROSHARES ULTRASHORT DJ-UBS CRUDE OIL

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2011 AND 2010

(unaudited)

 

     Six months
ended

June 30, 2011
    Six months
ended

June 30, 2010
 

Cash flow from operating activities

    

Net income (loss)

   $ 32,613,791      $ 26,469,806   

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

    

Decrease (Increase) in segregated cash balances for swap agreements

     —          (387,100

Decrease (Increase) in segregated cash balances with brokers for futures contracts

     (4,807,258     1,909,912   

Net sale (purchase) of short-term U.S. government and agency obligations

     12,018,406        35,378,783   

Change in unrealized appreciation/depreciation on investments

     (11,006,865     610,335   

Decrease (Increase) in receivable on futures contracts

     —          (417,984

Increase (Decrease) in management fee payable

     (3,666     (34,507

Increase (Decrease) in payable on futures contracts

     (1,140,144     (1,271,069
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     27,674,264        62,258,176   
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     284,961,521        245,392,705   

Payment on shares redeemed

     (315,393,754     (284,420,793
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (30,432,233     (39,028,088
  

 

 

   

 

 

 

Net increase (decrease) in cash

     (2,757,969     23,230,088   

Cash, beginning of period

     4,007,347        75,409   
  

 

 

   

 

 

 

Cash, end of period

   $ 1,249,378      $ 23,305,497   
  

 

 

   

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-21-


Table of Contents

PROSHARES ULTRA DJ-UBS NATURAL GAS*

STATEMENT OF FINANCIAL CONDITION

 

     June 30,  2011
(unaudited)
 

Assets

  

Cash

   $ 400   

Offering costs (Note 5)

     26,624   
  

 

 

 

Total assets

     27,024   
  

 

 

 

Liabilities and shareholders’ equity

  

Liabilities

  

Payable for offering costs

     26,624   
  

 

 

 

Total liabilities

     26,624   
  

 

 

 

Shareholders’ equity

  

Shareholders’ equity

   $ 400   
  

 

 

 

Total liabilities and shareholders’ equity

   $ 27,024   
  

 

 

 

 

* See Note 1.

 

 

 

 

 

See accompanying notes to financial statements.

 

-22-


Table of Contents

PROSHARES SHORT DJ-UBS NATURAL GAS*

STATEMENTS OF FINANCIAL CONDITION

 

000000000000000 000000000000000
     June 30,  2011
(unaudited)
     December 31, 2010  

Assets

     

Cash

   $ 200       $ 200   

Offering costs (Note 5)

     29,090         —     
  

 

 

    

 

 

 

Total assets

     29,290         200   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for offering costs

     29,090         —     
  

 

 

    

 

 

 

Total liabilities

     29,090         —     
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     200         200   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 29,290       $ 200   
  

 

 

    

 

 

 

 

* See Note 1.

 

 

 

 

 

See accompanying notes to financial statements.

 

-23-


Table of Contents

PROSHARES ULTRASHORT DJ-UBS NATURAL GAS*

STATEMENT OF FINANCIAL CONDITION

 

     June 30,  2011
(unaudited)
 

Assets

  

Cash

   $ 400   

Offering costs (Note 5)

     26,624   
  

 

 

 

Total assets

     27,024   
  

 

 

 

Liabilities and shareholders’ equity

  

Liabilities

  

Payable for offering costs

     26,624   
  

 

 

 

Total liabilities

     26,624   
  

 

 

 

Shareholders’ equity

  

Shareholders’ equity

   $ 400   
  

 

 

 

Total liabilities and shareholders’ equity

   $ 27,024   
  

 

 

 

 

* See Note 1.

 

 

 

 

 

See accompanying notes to financial statements.

 

-24-


Table of Contents

PROSHARES ULTRA GOLD

STATEMENTS OF FINANCIAL CONDITION

 

     June 30, 2011
(unaudited)
     December 31, 2010  

Assets

     

Cash

   $ 1,189,728       $ 1,262,424   

Segregated cash balances with brokers for futures contracts

     430,494         467,775   

Short-term U.S. government and agency obligations (Note 3)
(cost $296,045,464 and $249,242,580, respectively)

     296,053,835         249,250,657   

Unrealized appreciation on forward agreements

     —           8,724,587   

Receivable on open futures contracts

     —           60,830   
  

 

 

    

 

 

 

Total assets

     297,674,057         259,766,273   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     228,476         204,198   

Unrealized depreciation on forward agreements

     14,680,169         —     
  

 

 

    

 

 

 

Total liabilities

     14,908,645         204,198   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     282,765,412         259,562,075   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 297,674,057       $ 259,766,273   
  

 

 

    

 

 

 

Shares outstanding

     3,650,014         3,750,014   
  

 

 

    

 

 

 

Net asset value per share

   $ 77.47       $ 69.22   
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 76.78       $ 70.72   
  

 

 

    

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-25-


Table of Contents

PROSHARES ULTRA GOLD

SCHEDULE OF INVESTMENTS

JUNE 30, 2011

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations (105% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.050% due 07/07/11†

   $ 16,092,000       $ 16,091,978   

0.059% due 07/14/11†

     54,960,000         54,959,819   

0.058% due 07/21/11†

     20,507,000         20,506,785   

0.021% due 08/04/11

     24,013,000         24,012,671   

0.015% due 08/11/11

     7,803,000         7,802,870   

0.048% due 08/18/11†

     26,233,000         26,232,488   

0.044% due 08/25/11†

     46,744,000         46,742,948   

0.054% due 09/01/11

     12,146,000         12,145,693   

0.035% due 09/08/11†

     56,353,000         56,351,935   

0.020% due 09/15/11†

     26,596,000         26,594,894   

0.011% due 09/22/11

     2,306,000         2,305,868   

0.015% due 09/29/11

     2,306,000         2,305,886   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $296,045,464)

      $ 296,053,835   
     

 

 

 

 

 

 

Futures Contracts Purchased

 

     Number of
Contracts
     Notional
Amount at
Value
     Unrealized
Appreciation
(Depreciation)
 

Gold Futures – COMEX, expires August 2011

     84       $ 12,623,520       $ (216,870

Forward Agreements^

 

     Settlement Date      Commitment to
(Deliver)/Receive
     Notional
Amount at
Value*
     Unrealized
Appreciation
(Depreciation)
 

Forward agreements with Goldman Sachs International based on 0.995 Fine Troy Ounce Gold

     07/07/11       $ 93,920       $ 141,401,256       $ (3,702,742

Forward agreements with UBS AG based on 0.995 Fine Troy Ounce Gold

     07/07/11         273,300         411,466,815         (10,977,427
           

 

 

 
            $ (14,680,169
           

 

 

 

 

All or partial amount segregated as collateral for forward agreements.

 

^ The positions and counterparties herein are as of June 30, 2011. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at anytime.

 

* For forward agreements, a positive amount represents “long” exposure to the underlying commodity. A negative amount represents “short” exposure to the underlying commodity.

 

 

 

See accompanying notes to financial statements.

 

-26-


Table of Contents

PROSHARES ULTRA GOLD

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(unaudited)

 

     Three months
ended
June 30, 2011
    Three months
ended
June 30, 2010
    Six months
ended
June 30, 2011
    Six months
ended
June 30, 2010
 

Investment Income

        

Interest

   $ 46,720      $ 77,349      $ 118,504      $ 102,169   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     655,099        447,194        1,208,434        830,426   

Brokerage commissions

     905        1,067        1,810        2,071   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     656,004        448,261        1,210,244        832,497   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (609,284     (370,912     (1,091,740     (730,328
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Futures contracts

     645,135        984,644        823,165        905,501   

Forward agreements

     41,966,226        45,292,173        49,809,607        42,807,434   

Short-term U.S. government and agency obligations

     4        —          (148     5,759   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     42,611,365        46,276,817        50,632,624        43,718,694   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Futures contracts

     (386,850     62,390        (522,850     318,770   

Forward agreements

     (22,067,679     (8,015,828     (23,404,756     (523,305

Short-term U.S. government and agency obligations

     (2,106     13,222        294        14,523   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (22,456,635     (7,940,216     (23,927,312     (190,012
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     20,154,730        38,336,601        26,705,312        43,528,682   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 19,545,446      $ 37,965,689      $ 25,613,572      $ 42,798,354   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ 5.51      $ 10.43      $ 7.23      $ 11.79   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     3,546,717        3,640,124        3,540,622        3,630,125   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-27-


Table of Contents

PROSHARES ULTRA GOLD

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(unaudited)

 

Shareholders’ equity, at December 31, 2010

   $ 259,562,075   

Addition of 350,000 shares

     27,749,979   

Redemption of 450,000 shares

     (30,160,214
  

 

 

 

Net addition (redemption) of (100,000) shares

     (2,410,235
  

 

 

 

Net investment income (loss)

     (1,091,740

Net realized gain (loss)

     50,632,624   

Change in net unrealized appreciation/depreciation

     (23,927,312
  

 

 

 

Net income (loss)

     25,613,572   
  

 

 

 

Shareholders’ equity, at June 30, 2011

   $ 282,765,412   
  

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-28-


Table of Contents

PROSHARES ULTRA GOLD

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2011 AND 2010

(unaudited)

 

     Six months
ended

June 30, 2011
    Six months
ended

June 30, 2010
 

Cash flow from operating activities

    

Net income (loss)

   $ 25,613,572      $ 42,798,354   

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

    

Decrease (Increase) in segregated cash balances with brokers for futures contracts

     37,281        (171,521

Net sale (purchase) of short-term U.S. government and agency obligations

     (46,802,884     (27,330,200

Change in unrealized appreciation/depreciation on investments

     23,404,462        508,782   

Decrease (Increase) in receivable on futures contracts

     60,830        32,930   

Increase (Decrease) in management fee payable

     24,278        10,886   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     2,337,539        15,849,231   
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     27,749,979        55,273,217   

Payment on shares redeemed

     (30,160,214     (52,059,074
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (2,410,235     3,214,143   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     (72,696     19,063,374   

Cash, beginning of period

     1,262,424        96,468   
  

 

 

   

 

 

 

Cash, end of period

   $ 1,189,728      $ 19,159,842   
  

 

 

   

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-29-


Table of Contents

PROSHARES SHORT GOLD*

STATEMENTS OF FINANCIAL CONDITION

 

     June 30,  2011
(unaudited)
     December 31, 2010  

Assets

     

Cash

   $ 200       $ 200   

Offering costs (Note 5)

     12,424         —     
  

 

 

    

 

 

 

Total assets

     12,624         200   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for offering costs

     12,424         —     
  

 

 

    

 

 

 

Total liabilities

     12,424         —     
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     200         200   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 12,624       $ 200   
  

 

 

    

 

 

 

 

* See Note 1.

 

 

 

 

 

See accompanying notes to financial statements.

 

-30-


Table of Contents

PROSHARES ULTRASHORT GOLD

STATEMENTS OF FINANCIAL CONDITION

 

0000000000000 0000000000000
     June 30,  2011
(unaudited)
     December 31, 2010  

Assets

     

Cash

   $ 455,771       $ 404,683   

Segregated cash balances with brokers for futures contracts

     194,400         364,500   

Short-term U.S. government and agency obligations (Note 3)
(cost $90,493,286 and $80,111,190, respectively)

     90,494,051         80,114,447   

Unrealized appreciation on forward agreements

     4,408,940         —     

Receivable on open futures contracts

     44,804         —     
  

 

 

    

 

 

 

Total assets

     95,597,966         80,883,630   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable on open futures contracts

     —           94,800   

Management fee payable

     72,412         64,932   

Unrealized depreciation on forward agreements

     —           2,991,391   
  

 

 

    

 

 

 

Total liabilities

     72,412         3,151,123   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     95,525,554         77,732,507   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 95,597,966       $ 80,883,630   
  

 

 

    

 

 

 

Shares outstanding

     3,989,901         2,739,901   
  

 

 

    

 

 

 

Net asset value per share

   $ 23.94       $ 28.37   
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 24.14       $ 27.80   
  

 

 

    

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-31-


Table of Contents

PROSHARES ULTRASHORT GOLD

SCHEDULE OF INVESTMENTS

JUNE 30, 2011

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations (95% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.050% due 07/07/11†

   $ 8,177,000       $ 8,176,988   

0.060% due 07/14/11†

     906,000         905,997   

0.058% due 07/21/11†

     7,089,000         7,088,926   

0.006% due 07/28/11

     5,303,000         5,302,962   

0.016% due 08/04/11†

     18,611,000         18,610,745   

0.048% due 08/18/11†

     1,808,000         1,807,965   

0.045% due 08/25/11†

     25,893,000         25,892,417   

0.028% due 09/01/11

     984,000         983,975   

0.003% due 09/15/11†

     19,929,000         19,928,171   

0.011% due 09/22/11

     898,000         897,949   

0.015% due 09/29/11

     898,000         897,956   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $90,493,286)

      $ 90,494,051   
     

 

 

 

 

 

 

Futures Contracts Sold

 

     Number of
Contracts
     Notional
Amount at
Value
     Unrealized
Appreciation
(Depreciation)
 

Gold Futures – COMEX, expires August 2011

     32       $ 4,808,960       $ 80,660   

Forward Agreements^

 

     Settlement
Date
     Commitment to
(Deliver)/Receive
    Notional
Amount at
Value*
    Unrealized
Appreciation
(Depreciation)
 

Forward agreements with Goldman Sachs
International based on 0.995 Fine Troy
Ounce Gold

     07/07/11       $ (30,498   $ (45,916,264   $ 1,132,142   

Forward agreements with UBS AG based on
0.995 Fine Troy Ounce Gold

     07/07/11         (93,200     (140,317,260     3,276,798   
         

 

 

 
          $ 4,408,940   
         

 

 

 

 

All or partial amount segregated as collateral for forward agreements.

 

^ The positions and counterparties herein are as of June 30, 2011. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at anytime.

 

* For forward agreements, a positive amount represents “long” exposure to the underlying commodity. A negative amount represents “short” exposure to the underlying commodity.

 

 

 

 

See accompanying notes to financial statements.

 

-32-


Table of Contents

PROSHARES ULTRASHORT GOLD

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(unaudited)

 

     Three months ended
June 30, 2011
    Three months ended
June 30, 2010
    Six months ended
June 30, 2011
    Six months ended
June 30, 2010
 

Investment Income

        

Interest

   $ 12,751      $ 26,319      $ 44,027      $ 39,753   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     201,127        152,203        430,641        314,538   

Brokerage commissions

     761        775        1,853        1,825   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     201,888        152,978        432,494        316,363   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (189,137     (126,659     (388,467     (276,610
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Futures contracts

     (678,575     (422,725     (897,335     (314,318

Forward agreements

     (14,757,362     (18,270,102     (22,491,989     (20,089,396

Short-term U.S. government and agency obligations

     214        53        534        2,156   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (15,435,723     (18,692,774     (23,388,790     (20,401,558
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Futures contracts

     231,680        (1,690     373,410        (61,070

Forward agreements

     6,860,968        2,688,728        7,400,331        (381,418

Short-term U.S. government and agency obligations

     (2,020     2,175        (2,492     6,157   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     7,090,628        2,689,213        7,771,249        (436,331
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (8,345,095     (16,003,561     (15,617,541     (20,837,889
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (8,534,232   $ (16,130,220   $ (16,006,008   $ (21,114,499
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ (2.42   $ (10.46   $ (4.64   $ (14.40
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     3,526,165        1,541,572        3,448,188        1,466,482   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-33-


Table of Contents

PROSHARES ULTRASHORT GOLD

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(unaudited)

 

Shareholders’ equity, at December 31, 2010

   $ 77,732,507   

Addition of 2,000,000 shares

     54,729,892   

Redemption of 750,000 shares

     (20,930,837
  

 

 

 

Net addition (redemption) of 1,250,000 shares

     33,799,055   
  

 

 

 

Net investment income (loss)

     (388,467

Net realized gain (loss)

     (23,388,790

Change in net unrealized appreciation/depreciation

     7,771,249   
  

 

 

 

Net income (loss)

     (16,006,008
  

 

 

 

Shareholders’ equity, at June 30, 2011

   $ 95,525,554   
  

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-34-


Table of Contents

PROSHARES ULTRASHORT GOLD

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2011 AND 2010

(unaudited)

 

     Six months
ended

June 30, 2011
    Six months
ended

June 30, 2010
 

Cash flow from operating activities

    

Net income (loss)

   $ (16,006,008   $ (21,114,499

Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:

    

Decrease (Increase) in segregated cash balances for forward agreements

     —          (409,500

Decrease (Increase) in segregated cash balances with brokers for futures contracts

     170,100        22,361   

Net sale (purchase) of short-term U.S. government and agency obligations

     (10,382,096     (2,263,925

Change in unrealized appreciation/depreciation on investments

     (7,397,839     375,261   

Decrease (Increase) in receivable on futures contracts

     (44,804     —     

Increase (Decrease) in management fee payable

     7,480        2,523   

Increase (Decrease) in payable on futures contracts

     (94,800     —     
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (33,747,967     (23,387,779
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     54,729,892        49,991,342   

Payment on shares redeemed

     (20,930,837     (25,778,777
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     33,799,055        24,212,565   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     51,088        824,786   

Cash, beginning of period

     404,683        75,790   
  

 

 

   

 

 

 

Cash, end of period

   $ 455,771      $ 900,576   
  

 

 

   

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-35-


Table of Contents

PROSHARES ULTRA SILVER

STATEMENTS OF FINANCIAL CONDITION

 

000000000000000 000000000000000
     June 30, 2011
(unaudited)
     December 31, 2010  

Assets

     

Cash

   $ 2,267,056       $ 2,505,032   

Segregated cash balances with brokers for futures contracts

     6,199,200         2,395,913   

Short-term U.S. government and agency obligations (Note 3)
(cost $903,727,295 and $495,898,270, respectively)

     903,750,395         495,915,529   

Unrealized appreciation on forward agreements

     —           46,191,568   

Receivable on open futures contracts

     90,405         391,421   
  

 

 

    

 

 

 

Total assets

     912,307,056         547,399,463   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     727,807         395,544   

Unrealized depreciation on forward agreements

     29,650,423         —     
  

 

 

    

 

 

 

Total liabilities

     30,378,230         395,544   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     881,928,826         547,003,919   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 912,307,056       $ 547,399,463   
  

 

 

    

 

 

 

Shares outstanding

     5,250,014         3,500,014   
  

 

 

    

 

 

 

Net asset value per share

   $ 167.99       $ 156.29   
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 164.93       $ 158.59   
  

 

 

    

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-36-


Table of Contents

PROSHARES ULTRA SILVER

SCHEDULE OF INVESTMENTS

JUNE 30, 2011

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations (102% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.014% due 07/07/11†

   $ 43,993,000       $ 43,992,938   

0.049% due 07/14/11†

     92,141,000         92,140,696   

0.058% due 07/21/11†

     33,966,000         33,965,643   

0.006% due 07/28/11†

     14,572,000         14,571,895   

0.015% due 08/04/11†

     51,174,000         51,173,299   

0.048% due 08/11/11†

     274,987,000         274,982,435   

0.047% due 08/18/11†

     119,517,000         119,514,670   

0.044% due 08/25/11†

     34,847,000         34,846,216   

0.043% due 09/01/11

     28,223,000         28,222,286   

0.034% due 09/08/11†

     98,933,000         98,931,130   

0.012% due 09/15/11†

     17,754,000         17,753,262   

0.013% due 09/22/11†

     58,191,000         58,187,677   

0.015% due 09/29/11

     35,470,000         35,468,248   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $903,727,295)

      $ 903,750,395   
     

 

 

 

Futures Contracts Purchased

 

     Number of
Contracts
     Notional
Amount at
Value
     Unrealized
Appreciation
(Depreciation)
 

Silver Futures – COMEX, expires September 2011

     287       $ 49,983,920       $ (1,087,315

Forward Agreements^

 

     Settlement
Date
     Commitment to
(Deliver)/Receive
     Notional
Amount at
Value*
     Unrealized
Appreciation
(Depreciation)
 

Forward agreements with Goldman Sachs International based on 0.999 Fine Troy Ounce Silver

     07/07/11       $ 12,045,800       $ 421,855,962       $ (6,945,560

Forward agreements with UBS AG based on 0.999 Fine Troy Ounce Silver

     07/07/11         36,914,000         1,292,765,194         (22,704,863
           

 

 

 
            $ (29,650,423
           

 

 

 

 

All or partial amount segregated as collateral for forward agreements.

 

^ The positions and counterparties herein are as of June 30, 2011. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at anytime.

 

* For forward agreements, a positive amount represents “long” exposure to the underlying commodity. A negative amount represents “short” exposure to the underlying commodity.

 

 

 

 

 

See accompanying notes to financial statements.

 

-37-


Table of Contents

PROSHARES ULTRA SILVER

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2011 AND 2010

(unaudited)

 

     Three months
ended

June 30, 2011
    Three months
ended

June 30, 2010
    Six months
ended

June 30, 2011
    Six months
ended
June 30, 2010
 

Investment Income

        

Interest

   $ 172,821      $ 80,805      $ 358,916      $ 117,250   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     2,599,506        419,415        4,107,369        791,851   

Brokerage commissions

     3,290        1,580        5,228        3,355   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     2,602,796        420,995        4,112,597        795,206   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (2,429,975     (340,190     (3,753,681     (677,956
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Futures contracts

     4,639,205        1,254,115        8,607,516        311,419   

Forward agreements

     (210,971,245     31,635,413        58,404,905        24,739,760   

Short-term U.S. government and agency obligations

     38,696        492        40,326        7,983   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (206,293,344     32,890,020        67,052,747        25,059,162   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Futures contracts

     (9,939,230     (974,170     (4,143,535     680,035   

Forward agreements

     (95,001,841     (13,766,948     (75,841,991     10,496   

Short-term U.S. government and agency obligations

     (19,111     12,122        5,841        25,519   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (104,960,182     (14,728,996     (79,979,685     716,050   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (311,253,526     18,161,024        (12,926,938     25,775,212   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (313,683,501   $ 17,820,834      $ (16,680,619   $ 25,097,256   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ (62.69   $ 6.25      $ (3.77   $ 8.74   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     5,003,860        2,850,563        4,425,705        2,871,561   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-38-


Table of Contents

PROSHARES ULTRA SILVER

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED

JUNE 30, 2011

(unaudited)

 

Shareholders’ equity, at December 31, 2010

   $ 547,003,919   

Addition of 3,700,000 shares

     728,989,750   

Redemption of 1,950,000 shares

     (377,384,224
  

 

 

 

Net addition (redemption) of 1,750,000 shares

     351,605,526   
  

 

 

 

Net investment income (loss)

     (3,753,681

Net realized gain (loss)

     67,052,747   

Change in net unrealized appreciation/depreciation

     (79,979,685
  

 

 

 

Net income (loss)

     (16,680,619
  

 

 

 

Shareholders’ equity, at June 30, 2011

   $ 881,928,826   
  

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-39-


Table of Contents

PROSHARES ULTRA SILVER

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2011 AND 2010

(unaudited)

 

     Six months
ended

June 30, 2011
    Six months
ended

June 30, 2010
 

Cash flow from operating activities

    

Net income (loss)

   $ (16,680,619   $ 25,097,256   

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

    

Decrease (Increase) in segregated cash balances for forward agreements

     —          (337,800

Decrease (Increase) in segregated cash balances with brokers for futures contracts

     (3,803,287     104,638   

Net sale (purchase) of short-term U.S. government and agency obligations

     (407,829,025     (12,228,756

Change in unrealized appreciation/depreciation on investments

     75,836,150        (36,015

Decrease (Increase) in receivable on futures contracts

     301,016        (30,878

Increase (Decrease) in management fee payable

     332,263        15,012   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (351,843,502     12,583,457   
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     728,989,750        73,802,200   

Payment on shares redeemed

     (377,384,224     (69,247,131
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     351,605,526        4,555,069   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     (237,976     17,138,526   

Cash, beginning of period

     2,505,032        75,670   
  

 

 

   

 

 

 

Cash, end of period

   $ 2,267,056      $ 17,214,196   
  

 

 

   

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-40-


Table of Contents

PROSHARES ULTRASHORT SILVER

STATEMENTS OF FINANCIAL CONDITION

 

0000000000000 0000000000000
     June 30, 2011
(unaudited)
     December 31, 2010  

Assets

     

Cash

   $ 3,193,729       $ 3,514,285   

Segregated cash balances with brokers for futures contracts

     3,512,895         512,663   

Short-term U.S. government and agency obligations (Note 3)
(cost $635,371,119 and $105,316,101, respectively)

     635,383,368         105,319,504   

Unrealized appreciation on forward agreements

     15,622,660         —     
  

 

 

    

 

 

 

Total assets

     657,712,652         109,346,452   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable on open futures contracts

     —           227,423   

Management fee payable

     499,288         75,903   

Unrealized depreciation on forward agreements

     —           10,010,345   
  

 

 

    

 

 

 

Total liabilities

     499,288         10,313,671   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     657,213,364         99,032,781   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 657,712,652       $ 109,346,452   
  

 

 

    

 

 

 

Shares outstanding

     35,194,369         2,482,479   
  

 

 

    

 

 

 

Net asset value per share (Note 1)

   $ 18.67       $ 39.89   
  

 

 

    

 

 

 

Market value per share (Note 1) (Note 2)

   $ 18.99       $ 39.28   
  

 

 

    

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-41-


Table of Contents

PROSHARES ULTRASHORT SILVER

SCHEDULE OF INVESTMENTS

JUNE 30, 2011

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations (97% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.005% due 07/07/11†

   $ 20,235,000       $ 20,234,972   

0.065% due 07/14/11†

     49,364,000         49,363,837   

0.058% due 07/21/11†

     72,056,000         72,055,243   

0.010% due 07/28/11

     13,195,000         13,194,905   

0.037% due 08/04/11†

     119,384,000         119,382,364   

0.042% due 08/11/11†

     58,246,000         58,245,033   

0.046% due 08/18/11†

     117,227,000         117,224,714   

0.042% due 08/25/11†

     17,987,000         17,986,595   

0.028% due 09/01/11

     52,343,000         52,341,676   

0.031% due 09/08/11†

     19,651,000         19,650,629   

0.004% due 09/15/11

     52,767,000         52,764,805   

0.019% due 09/22/11†

     36,959,000         36,956,890   

0.015% due 09/29/11

     5,982,000         5,981,705   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $635,371,119)

      $ 635,383,368   
     

 

 

 

 

 

 

Futures Contracts Sold

 

     Number of
Contracts
     Notional
Amount at
Value
     Unrealized
Appreciation
(Depreciation)
 

Silver Futures – COMEX, expires September 2011

     207       $ 36,051,120       $ 848,525   

Forward Agreements^

 

     Settlement
Date
     Commitment to
(Deliver)/Receive
    Notional
Amount at
Value*
    Unrealized
Appreciation
(Depreciation)
 

Forward agreements with Goldman Sachs International based on 0.999 Fine Troy Ounce Silver

     07/07/11       $ (8,932,500   $ (312,825,083   $ 4,863,523   

Forward agreements with UBS AG based on 0.999 Fine Troy Ounce Silver

     07/07/11         (27,553,000     (964,933,613     10,759,137   
         

 

 

 
          $ 15,622,660   
         

 

 

 

 

All or partial amount segregated as collateral for forward agreements.

 

^ The positions and counterparties herein are as of June 30, 2011. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at anytime.

 

* For forward agreements, a positive amount represents “long” exposure to the underlying commodity. A negative amount represents “short” exposure to the underlying commodity.

 

 

 

 

See accompanying notes to financial statements.

 

-42-


Table of Contents

PROSHARES ULTRASHORT SILVER

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(unaudited)

 

     Three months
ended
June 30, 2011
    Three months
ended

June  30, 2010
    Six months
ended

June 30, 2011
    Six months
ended

June 30, 2010
 

Investment Income

        

Interest

   $ 57,651      $ 24,355      $ 104,548      $ 39,267   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     1,142,997        129,704        1,483,259        297,094   

Brokerage commissions

     1,656        1,235        2,287        1,892   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     1,144,653        130,939        1,485,546        298,986   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (1,087,002     (106,584     (1,380,998     (259,719
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Futures contracts

     1,933,700        (447,210     210,504        (63,750

Forward agreements

     27,010,732        (19,007,793     (52,554,885     (22,117,438

Short-term U.S. government and agency obligations

     1,253        130        2,521        3,217   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     28,945,685        (19,454,873     (52,341,860     (22,177,971
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Futures contracts

     1,138,020        173,585        1,367,945        (193,285

Forward agreements

     24,618,761        4,889,197        25,633,005        (835,316

Short-term U.S. government and agency obligations

     7,090        2,701        8,846        7,791   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     25,763,871        5,065,483        27,009,796        (1,020,810
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     54,709,556        (14,389,390     (25,332,064     (23,198,781
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 53,622,554      $ (14,495,974   $ (26,713,062   $ (23,458,500
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share (Note 1)

   $ 2.04      $ (37.76   $ (1.75   $ (60.79
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding (Note 1)

     26,263,600        383,857        15,228,421        385,917   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-43-


Table of Contents

PROSHARES ULTRASHORT SILVER

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED

JUNE 30, 2011

(unaudited)

 

Shareholders’ equity, at December 31, 2010

   $ 99,032,781   

Addition of 45,687,500 shares (Note 1)

     866,620,194   

Redemption of 12,975,610 shares (Note 1)

     (281,726,549
  

 

 

 

Net addition (redemption) of 32,711,890 shares (Note 1)

     584,893,645   
  

 

 

 

Net investment income (loss)

     (1,380,998

Net realized gain (loss)

     (52,341,860

Change in net unrealized appreciation/depreciation

     27,009,796   
  

 

 

 

Net income (loss)

     (26,713,062
  

 

 

 

Shareholders’ equity, at June 30, 2011

   $ 657,213,364   
  

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-44-


Table of Contents

PROSHARES ULTRASHORT SILVER

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2011 AND 2010

(unaudited)

 

     Six months
ended

June 30, 2011
    Six months
ended

June 30, 2010
 

Cash flow from operating activities

    

Net income (loss)

   $ (26,713,062   $ (23,458,500

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

    

Decrease (Increase) in segregated cash balances for forward agreements

     —          (100

Decrease (Increase) in segregated cash balances with brokers for futures contracts

     (3,000,232     224,903   

Net sale (purchase) of short-term U.S. government and agency obligations

     (530,055,018     19,196,388   

Change in unrealized appreciation/depreciation on investments

     (25,641,851     827,525   

Increase (Decrease) in management fee payable

     423,385        (11,843

Increase (Decrease) in payable on futures contracts

     (227,423     64,385   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (585,214,201     (3,157,242
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     866,620,194        53,370,408   

Payment on shares redeemed

     (281,726,549     (39,461,634
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     584,893,645        13,908,774   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     (320,556     10,751,532   

Cash, beginning of period

     3,514,285        78,312   
  

 

 

   

 

 

 

Cash, end of period

   $ 3,193,729      $ 10,829,844   
  

 

 

   

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-45-


Table of Contents

PROSHARES ULTRA EURO

STATEMENTS OF FINANCIAL CONDITION

 

00000000000 00000000000
     June 30, 2011
(unaudited)
     December 31, 2010  

Assets

     

Cash

   $ 4,393       $ 13,447   

Short-term U.S. government and agency obligations (Note 3)
(cost $8,954,717 and $7,373,910, respectively)

     8,954,822         7,374,157   

Unrealized appreciation on foreign currency forward contracts

     109,012         348,179   
  

 

 

    

 

 

 

Total assets

     9,068,227         7,735,783   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     6,963         6,099   
  

 

 

    

 

 

 

Total liabilities

     6,963         6,099   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     9,061,264         7,729,684   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 9,068,227       $ 7,735,783   
  

 

 

    

 

 

 

Shares outstanding

     300,014         300,014   
  

 

 

    

 

 

 

Net asset value per share

   $ 30.20       $ 25.76   
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 30.16       $ 25.86   
  

 

 

    

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-46-


Table of Contents

PROSHARES ULTRA EURO

SCHEDULE OF INVESTMENTS

JUNE 30, 2011

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations (99% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.050% due 07/07/11

   $ 121,000       $ 121,000   

0.060% due 07/14/11

     680,000         679,998   

0.058% due 07/21/11

     575,000         574,994   

0.053% due 07/28/11†

     526,000         525,996   

0.024% due 08/04/11†

     1,879,000         1,878,974   

0.015% due 08/11/11†

     805,000         804,987   

0.048% due 08/18/11

     588,000         587,988   

0.045% due 08/25/11

     839,000         838,981   

0.036% due 09/08/11

     1,404,000         1,403,973   

(0.014)% due 09/15/11

     1,076,000         1,075,955   

0.011% due 09/22/11

     231,000         230,987   

0.015% due 09/29/11

     231,000         230,989   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $8,954,717)

      $ 8,954,822   
     

 

 

 

 

 

 

Foreign Currency Forward Contracts^

 

     Settlement
Date
     Local
Currency
    Notional Amount
at Value  (USD)
    Unrealized
Appreciation
(Depreciation)
 

Contracts to Purchase

         

Euro with Goldman Sachs International

     07/08/11         6,308,625      $ 9,147,615      $ 62,038   

Euro with UBS AG

     07/08/11         6,990,900        10,136,925        61,710   
         

 

 

 
          $ 123,748   
         

 

 

 

Contracts to Sell

         

Euro with Goldman Sachs International

     07/08/11         (248,800   $ (360,764   $ (4,571

Euro with UBS AG

     07/08/11         (551,400     (799,540     (10,165
         

 

 

 
          $ (14,736
         

 

 

 

 

All or partial amount segregated as collateral for foreign currency forward contracts.

 

^ The positions and counterparties herein are as of June 30, 2011. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at anytime.

 

 

 

See accompanying notes to financial statements.

 

-47-


Table of Contents

PROSHARES ULTRA EURO

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(unaudited)

 

     Three months
ended
June 30, 2011
    Three months
ended
June 30, 2010
    Six months
ended
June 30, 2011
    Six months
ended
June 30, 2010
 

Investment Income

        

Interest

   $ 1,431      $ 4,342      $ 3,842      $ 5,822   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     21,134        30,631        40,060        49,931   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     21,134        30,631        40,060        49,931   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (19,703     (26,289     (36,218     (44,109
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Foreign currency forward contracts

     688,719        (2,103,157     1,607,088        (2,945,250

Short-term U.S. government and agency obligations

     19        (46     19        389   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     688,738        (2,103,203     1,607,107        (2,944,861
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Foreign currency forward contracts

     (272,940     88,388        (239,167     47,260   

Short-term U.S. government and agency obligations

     (162     451        (142     800   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (273,102     88,839        (239,309     48,060   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     415,636        (2,014,364     1,367,798        (2,896,801
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 395,933      $ (2,040,653   $ 1,331,580      $ (2,940,910
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ 1.32      $ (3.67   $ 4.44      $ (6.90
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     300,014        556,607        300,014        426,257   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-48-


Table of Contents

PROSHARES ULTRA EURO

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(unaudited)

 

Shareholders’ equity, at December 31, 2010

   $ 7,729,684   

Net investment income (loss)

     (36,218

Net realized gain (loss)

     1,607,107   

Change in net unrealized appreciation/depreciation

     (239,309
  

 

 

 

Net income (loss)

     1,331,580   
  

 

 

 

Shareholders’ equity, at June 30, 2011

   $ 9,061,264   
  

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-49-


Table of Contents

PROSHARES ULTRA EURO

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2011 AND 2010

(unaudited)

 

     Six months
ended
June 30, 2011
    Six months
ended
June 30, 2010
 

Cash flow from operating activities

    

Net income (loss)

   $ 1,331,580      $ (2,940,910

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

    

Net sale (purchase) of short-term U.S. government and agency obligations

     (1,580,807     939,465   

Change in unrealized appreciation/depreciation on investments

     239,309        (48,060

Increase (Decrease) in management fee payable

     864        5,519   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (9,054     (2,043,986
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     —          20,023,154   

Payment on shares redeemed

     —          (8,285,059
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     —          11,738,095   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     (9,054     9,694,109   

Cash, beginning of period

     13,447        79,160   
  

 

 

   

 

 

 

Cash, end of period

   $ 4,393      $ 9,773,269   
  

 

 

   

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-50-


Table of Contents

PROSHARES ULTRASHORT EURO

STATEMENTS OF FINANCIAL CONDITION

 

     June 30, 2011
(unaudited)
     December 31,
2010
 

Assets

     

Cash

   $ 322,049       $ 251,588   

Short-term U.S. government and agency obligations (Note 3)
(cost $634,949,814 and $471,813,434, respectively)

     634,959,570         471,829,446   

Receivable from capital shares sold

     10,050,072         —     
  

 

 

    

 

 

 

Total assets

     645,331,691         472,081,034   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     —           4,109,402   

Management fee payable

     435,362         364,560   

Unrealized depreciation on foreign currency forward contracts

     12,569,162         23,194,077   
  

 

 

    

 

 

 

Total liabilities

     13,004,524         27,668,039   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     632,327,167         444,412,995   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 645,331,691       $ 472,081,034   
  

 

 

    

 

 

 

Shares outstanding

     37,750,014         21,900,014   
  

 

 

    

 

 

 

Net asset value per share

   $ 16.75       $ 20.29   
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 16.76       $ 20.31   
  

 

 

    

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-51-


Table of Contents

PROSHARES ULTRASHORT EURO

SCHEDULE OF INVESTMENTS

JUNE 30, 2011

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations (100% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.050% due 07/07/11

   $ 10,077,000       $ 10,076,986   

0.063% due 07/14/11†

     67,831,000         67,830,776   

0.058% due 07/21/11†

     66,706,000         66,705,300   

0.030% due 08/04/11

     46,094,000         46,093,369   

0.043% due 08/11/11†

     4,880,000         4,879,919   

0.041% due 08/18/11

     30,250,000         30,249,410   

0.044% due 08/25/11†

     77,283,000         77,281,261   

0.041% due 09/01/11

     47,250,000         47,248,805   

0.033% due 09/08/11

     43,863,000         43,862,171   

0.033% due 09/15/11

     49,749,000         49,746,930   

0.014% due 09/22/11

     119,697,000         119,690,165   

0.015% due 09/29/11

     71,298,000         71,294,478   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $634,949,814)

      $ 634,959,570   
     

 

 

 

 

 

 

Foreign Currency Forward Contracts^

 

     Settlement
Date
     Local
Currency
    Notional
Amount at
Value (USD)
    Unrealized
Appreciation
(Depreciation)
 

Contracts to Purchase

         

Euro with Goldman Sachs International

     07/08/11         12,347,800      $ 17,904,522      $ 80,473   

Euro with UBS AG

     07/08/11         105,580,800        153,093,974        104,821   
         

 

 

 
          $ 185,294   
         

 

 

 

Contracts to Sell

         

Euro with Goldman Sachs International

     07/08/11         (438,423,925   $ (635,722,225   $ (5,908,019

Euro with UBS AG

     07/08/11         (550,659,000     (798,465,012     (6,846,437
         

 

 

 
          $ (12,754,456
         

 

 

 

 

All or partial amount segregated as collateral for foreign currency forward contracts.

 

^ The positions and counterparties herein are as of June 30, 2011. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at anytime.

 

 

 

See accompanying notes to financial statements.

 

-52-


Table of Contents

PROSHARES ULTRASHORT EURO

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(unaudited)

 

     Three months
ended

June  30, 2011
    Three months
ended
June 30, 2010
    Six months
ended

June  30, 2011
    Six months
ended
June 30, 2010
 

Investment Income

        

Interest

   $ 74,406      $ 194,264      $ 218,767      $ 233,219   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     1,086,768        1,008,849        2,120,677        1,489,971   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     1,086,768        1,008,849        2,120,677        1,489,971   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (1,012,362     (814,585     (1,901,910     (1,256,752
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Foreign currency forward contracts

     (39,284,937     74,527,067        (101,433,972     88,468,274   

Short-term U.S. government and agency obligations

     1,790        14,181        3,197        25,334   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (39,283,147     74,541,248        (101,430,775     88,493,608   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Foreign currency forward contracts

     6,451,205        (2,026,475     10,624,915        3,678,219   

Short-term U.S. government and agency obligations

     (3,006     38,706        (6,256     46,315   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     6,448,199        (1,987,769     10,618,659        3,724,534   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (32,834,948     72,553,479        (90,812,116     92,218,142   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (33,847,310   $ 71,738,894      $ (92,714,026   $ 90,961,390   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ (1.27   $ 3.97      $ (3.74   $ 6.42   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     26,676,388        18,089,025        24,766,312        14,170,732   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-53-


Table of Contents

PROSHARES ULTRASHORT EURO

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(unaudited)

 

Shareholders’ equity, at December 31, 2010

   $ 444,412,995   

Addition of 20,050,000 shares

     359,835,135   

Redemption of 4,200,000 shares

     (79,206,937
  

 

 

 

Net addition (redemption) of 15,850,000 shares

     280,628,198   
  

 

 

 

Net investment income (loss)

     (1,901,910

Net realized gain (loss)

     (101,430,775

Change in net unrealized appreciation/depreciation

     10,618,659   
  

 

 

 

Net income (loss)

     (92,714,026
  

 

 

 

Shareholders’ equity, at June 30, 2011

   $ 632,327,167   
  

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-54-


Table of Contents

PROSHARES ULTRASHORT EURO

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2011 AND 2010

(unaudited)

 

     Six months
ended

June  30, 2011
    Six months
ended

June  30, 2010
 

Cash flow from operating activities

    

Net income (loss)

   $ (92,714,026   $ 90,961,390   

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

    

Net sale (purchase) of short-term U.S. government and agency obligations

     (163,136,380     (335,398,197

Change in unrealized appreciation/depreciation on investments

     (10,618,659     (3,724,534

Increase (Decrease) in management fee payable

     70,802        334,722   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (266,398,263     (247,826,619
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     349,785,063        376,461,742   

Payment on shares redeemed

     (83,316,339     (117,270,815
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     266,468,724        259,190,927   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     70,461        11,364,308   

Cash, beginning of period

     251,588        76,035   
  

 

 

   

 

 

 

Cash, end of period

   $ 322,049      $ 11,440,343   
  

 

 

   

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-55-


Table of Contents

PROSHARES ULTRA YEN

STATEMENTS OF FINANCIAL CONDITION

 

     June 30, 2011
(unaudited)
     December 31, 2010  

Assets

     

Cash

   $ 2,536       $ 10,637   

Short-term U.S. government and agency obligations (Note 3)
(cost $3,358,901 and $4,733,572, respectively)

     3,358,922         4,733,703   

Unrealized appreciation on foreign currency forward contracts

     18,137         283,503   
  

 

 

    

 

 

 

Total assets

     3,379,595         5,027,843   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     2,643         3,603   
  

 

 

    

 

 

 

Total liabilities

     2,643         3,603   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     3,376,952         5,024,240   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 3,379,595       $ 5,027,843   
  

 

 

    

 

 

 

Shares outstanding

     100,014         150,014   
  

 

 

    

 

 

 

Net asset value per share

   $ 33.76       $ 33.49   
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 33.78       $ 33.29   
  

 

 

    

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-56-


Table of Contents

PROSHARES ULTRA YEN

SCHEDULE OF INVESTMENTS

JUNE 30, 2011

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations (99% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.050% due 07/07/11

   $ 584,000       $ 583,999   

0.065% due 07/14/11

     270,000         269,999   

0.030% due 08/04/11

     339,000         338,995   

0.015% due 08/11/11†

     358,000         357,994   

0.048% due 08/18/11

     226,000         225,996   

0.036% due 09/08/11

     499,000         498,990   

0.005% due 09/15/11

     509,000         508,979   

0.011% due 09/22/11

     287,000         286,984   

0.015% due 09/29/11

     287,000         286,986   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $3,358,901)

      $ 3,358,922   
     

 

 

 

 

 

 

Foreign Currency Forward Contracts^

 

     Settlement
Date
     Local
Currency
    Notional
Amount at
Value (USD)
    Unrealized
Appreciation
(Depreciation)
 

Contracts to Purchase

         

Yen with Goldman Sachs International

     07/08/11         324,120,000      $ 4,025,945      $ 12,384   

Yen with UBS AG

     07/08/11         234,410,000        2,911,643        6,359   
         

 

 

 
          $ 18,743   
         

 

 

 

Contracts to Sell

         

Yen with Goldman Sachs International

     07/08/11         (4,300,000   $ (53,411   $ (180

Yen with UBS AG

     07/08/11         (10,490,000     (130,298     (426
         

 

 

 
          $ (606
         

 

 

 

 

All or partial amount segregated as collateral for foreign currency forward contracts.

 

^ The positions and counterparties herein are as of June 30, 2011. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at anytime.

 

 

 

See accompanying notes to financial statements.

 

-57-


Table of Contents

PROSHARES ULTRA YEN

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(unaudited)

 

     Three months
ended
June 30, 2011
    Three months
ended
June 30, 2010
    Six months
ended
June 30, 2011
    Six months
ended
June 30, 2010
 

Investment Income

        

Interest

   $ 470      $ 1,633      $ 1,495      $ 2,546   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     7,813        9,418        15,917        19,069   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     7,813        9,418        15,917        19,069   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (7,343     (7,785     (14,422     (16,523
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Foreign currency forward contracts

     70,451        (102,356     226,180        (198,293

Short-term U.S. government and agency obligations

     25        —          19        (69
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     70,476        (102,356     226,199        (198,362
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Foreign currency forward contracts

     137,043        535,869        (265,366     585,212   

Short-term U.S. government and agency obligations

     (45     114        (110     491   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     136,998        535,983        (265,476     585,703   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     207,474        433,627        (39,277     387,341   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 200,131      $ 425,842      $ (53,699   $ 370,818   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ 2.00      $ 2.84      $ (0.52   $ 2.47   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     100,014        150,014        103,053        150,014   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-58-


Table of Contents

PROSHARES ULTRA YEN

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED

JUNE 30, 2011

(unaudited)

 

Shareholders’ equity, at December 31, 2010

   $ 5,024,240   

Redemption of 50,000 shares

     (1,593,589
  

 

 

 

Net investment income (loss)

     (14,422

Net realized gain (loss)

     226,199   

Change in net unrealized appreciation/depreciation

     (265,476
  

 

 

 

Net income (loss)

     (53,699
  

 

 

 

Shareholders’ equity, at June 30, 2011

   $ 3,376,952   
  

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-59-


Table of Contents

PROSHARES ULTRA YEN

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2011 AND 2010

(unaudited)

 

     Six months
ended
June 30, 2011
    Six months
ended
June 30, 2010
 

Cash flow from operating activities

    

Net income (loss)

   $ (53,699   $ 370,818   

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

    

Net sale (purchase) of short-term U.S. government and agency obligations

     1,374,671        956,807   

Change in unrealized appreciation/depreciation on investments

     265,476        (585,703

Increase (Decrease) in management fee payable

     (960     (222
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     1,585,488        741,700   
  

 

 

   

 

 

 

Cash flow from financing activities

    

Payment on shares redeemed

     (1,593,589     —     
  

 

 

   

 

 

 

Net increase (decrease) in cash

     (8,101     741,700   

Cash, beginning of period

     10,637        85,344   
  

 

 

   

 

 

 

Cash, end of period

   $ 2,536      $ 827,044   
  

 

 

   

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-60-


Table of Contents

PROSHARES ULTRASHORT YEN

STATEMENTS OF FINANCIAL CONDITION

 

000000000000000 000000000000000
     June 30, 2011
(unaudited)
     December 31, 2010  

Assets

     

Cash

   $ 183,946       $ 120,494   

Short-term U.S. government and agency obligations (Note 3)
(cost $365,745,911 and $223,865,319, respectively)

     365,754,641         223,873,131   
  

 

 

    

 

 

 

Total assets

     365,938,587         223,993,625   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     6,810,570         —     

Management fee payable

     283,420         170,158   

Unrealized depreciation on foreign currency forward contracts

     2,426,952         16,137,654   
  

 

 

    

 

 

 

Total liabilities

     9,520,942         16,307,812   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     356,417,645         207,685,813   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 365,938,587       $ 223,993,625   
  

 

 

    

 

 

 

Shares outstanding

     23,550,014         13,250,014   
  

 

 

    

 

 

 

Net asset value per share

   $ 15.13       $ 15.67   
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 15.13       $ 15.67   
  

 

 

    

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-61-


Table of Contents

PROSHARES ULTRASHORT YEN

SCHEDULE OF INVESTMENTS

JUNE 30, 2011

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations (103% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.050% due 07/07/11

   $ 40,206,000       $ 40,205,944   

0.064% due 07/14/11

     29,162,000         29,161,904   

0.058% due 07/21/11†

     22,436,000         22,435,764   

0.041% due 07/28/11

     48,298,000         48,297,652   

0.026% due 08/04/11†

     39,612,000         39,611,457   

0.043% due 08/11/11

     8,340,000         8,339,862   

0.048% due 08/18/11

     16,716,000         16,715,674   

0.044% due 08/25/11

     107,231,000         107,228,587   

0.055% due 09/01/11†

     4,663,000         4,662,882   

0.035% due 09/08/11

     4,724,000         4,723,911   

0.017% due 09/15/11

     31,497,000         31,495,690   

0.011% due 09/22/11

     6,438,000         6,437,632   

0.015% due 09/29/11

     6,438,000         6,437,682   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $365,745,911)

      $ 365,754,641   
     

 

 

 

 

 

 

Foreign Currency Forward Contracts^

 

     Settlement
Date
     Local
Currency
    Notional
Amount at
Value (USD)
    Unrealized
Appreciation
(Depreciation)
 

Contracts to Purchase

         

Yen with Goldman Sachs International

     07/08/11         2,235,880,000      $ 27,772,213      $ 4,982   

Yen with UBS AG

     07/08/11         6,524,880,000        81,046,549        (151,473
         

 

 

 
          $ (146,491
         

 

 

 

Contracts to Sell

         

Yen with Goldman Sachs International

     07/08/11         (31,837,740,000   $ (395,461,518   $ (1,211,905

Yen with UBS AG

     07/08/11         (34,312,880,000     (426,205,617     (1,068,556
         

 

 

 
          $ (2,280,461
         

 

 

 

 

All or partial amount segregated as collateral for foreign currency forward contracts.
^ The positions and counterparties herein are as of June 30, 2011. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at anytime.

 

 

 

See accompanying notes to financial statements.

 

-62-


Table of Contents

PROSHARES ULTRASHORT YEN

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011 AND 2010

(unaudited)

 

     Three months
ended

June 30, 2011
    Three months
ended

June 30, 2010
    Six months
ended

June 30, 2011
    Six months
ended

June 30, 2010
 

Investment Income

        

Interest

   $ 63,492      $ 69,595      $ 152,103      $ 86,129   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     852,848        364,439        1,527,901        598,770   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     852,848        364,439        1,527,901        598,770   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (789,356     (294,844     (1,375,798     (512,641
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Foreign currency forward contracts

     (4,069,778     (432,430     (21,728,019     298,913   

Short-term U.S. government and agency obligations

     2,795        1,343        2,809        4,937   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (4,066,983     (431,087     (21,725,210     303,850   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Foreign currency forward contracts

     (19,654,614     (17,979,091     13,710,702        (14,757,081

Short-term U.S. government and agency obligations

     (7,799     10,624        918        14,528   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (19,662,413     (17,968,467     13,711,620        (14,742,553
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (23,729,396     (18,399,554     (8,013,590     (14,438,703
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (24,518,752   $ (18,694,398   $ (9,389,388   $ (14,951,344
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ (1.06   $ (2.50   $ (0.46   $ (2.40
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     23,112,651        7,474,190        20,600,566        6,221,285   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-63-


Table of Contents

PROSHARES ULTRASHORT YEN

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED

JUNE 30, 2011

(unaudited)

 

Shareholders’ equity, at December 31, 2010

   $ 207,685,813   

Addition of 19,600,000 shares

     302,417,904   

Redemption of 9,300,000 shares

     (144,296,684
  

 

 

 

Net addition (redemption) of 10,300,000 shares

     158,121,220   
  

 

 

 

Net investment income (loss)

     (1,375,798

Net realized gain (loss)

     (21,725,210

Change in net unrealized appreciation/depreciation

     13,711,620   
  

 

 

 

Net income (loss)

     (9,389,388
  

 

 

 

Shareholders’ equity, at June 30, 2011

   $ 356,417,645   
  

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-64-


Table of Contents

PROSHARES ULTRASHORT YEN

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2011 AND 2010

(unaudited)

 

     Six months
ended

June 30, 2011
    Six months
ended

June 30, 2010
 

Cash flow from operating activities

    

Net income (loss)

   $ (9,389,388   $ (14,951,344

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

    

Net sale (purchase) of short-term U.S. government and agency obligations

     (141,880,592     (84,636,341

Change in unrealized appreciation/depreciation on investments

     (13,711,620     14,742,553   

Increase (Decrease) in management fee payable

     113,262        70,394   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (164,868,338     (84,774,738
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     302,417,904        112,049,212   

Payment on shares redeemed

     (137,486,114     (19,252,977
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     164,931,790        92,796,235   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     63,452        8,021,497   

Cash, beginning of period

     120,494        75,424   
  

 

 

   

 

 

 

Cash, end of period

   $ 183,946      $ 8,096,921   
  

 

 

   

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-65-


Table of Contents

PROSHARES ULTRA VIX SHORT-TERM FUTURES ETF*

STATEMENT OF FINANCIAL CONDITION

 

     June 30,  2011
(unaudited)
 

Assets

  

Cash

   $ 400   

Offering costs (Note 5)

     28,764   
  

 

 

 

Total assets

     29,164   
  

 

 

 

Liabilities and shareholders’ equity

  

Liabilities

  

Payable for offering costs

     28,764   
  

 

 

 

Total liabilities

     28,764   
  

 

 

 

Shareholders’ equity

  

Shareholders’ equity

   $ 400   
  

 

 

 

Total liabilities and shareholders’ equity

   $ 29,164   
  

 

 

 

 

* See Note 1.

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-66-


Table of Contents

PROSHARES VIX SHORT-TERM FUTURES ETF

STATEMENTS OF FINANCIAL CONDITION

 

000000000000000 000000000000000
     June 30, 2011
(unaudited)
     December 31, 2010  

Assets

     

Cash

   $ 2,495,908       $ 400   

Short-term U.S. government and agency obligations (Note 3)
(cost $47,043,900 and $0, respectively)

     47,044,543         —     

Receivable from capital shares sold

     6,820,250         —     

Offering costs (Note 5)

     100,870         198,998   
  

 

 

    

 

 

 

Total assets

     56,461,571         199,398   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     7,956,958         —     

Payable on open futures contracts

     1,865,964         —     

Management fee payable

     36,288         —     

Payable for offering costs

     —           198,998   
  

 

 

    

 

 

 

Total liabilities

     9,859,210         198,998   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     46,602,361         400   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 56,461,571       $ 199,398   
  

 

 

    

 

 

 

Shares outstanding

     1,025,005         5   
  

 

 

    

 

 

 

Net asset value per share

   $ 45.47       $ 80.00   
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 45.68       $ 80.00   
  

 

 

    

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-67-


Table of Contents

PROSHARES VIX SHORT-TERM FUTURES ETF

SCHEDULE OF INVESTMENTS

JUNE 30, 2011

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations (101% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.005% due 07/07/11

   $ 81,000       $ 81,000   

0.056% due 07/14/11†

     5,517,000         5,516,982   

0.058% due 07/21/11

     7,000         7,000   

0.006% due 07/28/11

     1,162,000         1,161,992   

0.017% due 08/04/11

     2,082,000         2,081,971   

0.030% due 08/11/11

     1,275,000         1,274,979   

0.044% due 08/18/11

     6,376,000         6,375,876   

0.042% due 08/25/11†

     5,910,000         5,909,867   

0.026% due 09/01/11

     2,596,000         2,595,934   

0.031% due 09/15/11

     9,924,000         9,923,587   

0.011% due 09/22/11

     6,058,000         6,057,654   

0.015% due 09/29/11

     6,058,000         6,057,701   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $47,043,900)

      $ 47,044,543   
     

 

 

 

 

 

 

Futures Contracts Purchased

 

     Number of
Contracts
     Notional Amount
at Value
     Unrealized
Appreciation
(Depreciation)
 

VIX Futures - CBOE, expires July 2011

     1,280       $ 22,656,000       $ (2,057,850

VIX Futures - CBOE, expires August 2011

     1,278         23,962,500         (2,394,810
        

 

 

 
         $ (4,452,660
        

 

 

 

 

All or partial amount segregated as collateral for futures contracts.

 

 

 

See accompanying notes to financial statements.

 

-68-


Table of Contents

PROSHARES VIX SHORT-TERM FUTURES ETF

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011

(unaudited)

 

     Three months
ended

June 30, 2011
    Six months
ended

June 30, 2011
 

Investment Income

    

Interest

   $ 6,917      $ 9,937   
  

 

 

   

 

 

 

Expenses

    

Management fee

     57,326        36,288   

Offering costs

     49,886        98,128   
  

 

 

   

 

 

 

Total expenses

     107,212        134,416   
  

 

 

   

 

 

 

Net investment income (loss)

     (100,295     (124,479
  

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

    

Net realized gain (loss) on

    

Futures contracts

     (12,442,150     (12,793,640

Short-term U.S. government and agency obligations

     1,496        1,500   
  

 

 

   

 

 

 

Net realized gain (loss)

     (12,440,654     (12,792,140
  

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

    

Futures contracts

     (1,970,450     (4,452,660

Short-term U.S. government and agency obligations

     (244     643   
  

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (1,970,694     (4,452,017
  

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (14,411,348     (17,244,157
  

 

 

   

 

 

 

Net income (loss)

   $ (14,511,643   $ (17,368,636
  

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ (15.00   $ (29.45
  

 

 

   

 

 

 

Weighted-average shares outstanding

     967,587        589,752   
  

 

 

   

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-69-


Table of Contents

PROSHARES VIX SHORT-TERM FUTURES ETF

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(unaudited)

 

Shareholders’ equity, at December 31, 2010

   $ 400   

Addition of 2,125,000 shares

     122,846,234   

Redemption of 1,100,000 shares

     (58,875,637
  

 

 

 

Net addition (redemption) of 1,025,000 shares

     63,970,597   
  

 

 

 

Net investment income (loss)

     (124,479

Net realized gain (loss)

     (12,792,140

Change in net unrealized appreciation/depreciation

     (4,452,017
  

 

 

 

Net income (loss)

     (17,368,636
  

 

 

 

Shareholders’ equity, at June 30, 2011

   $ 46,602,361   
  

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-70-


Table of Contents

PROSHARES VIX SHORT-TERM FUTURES ETF

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2011

(unaudited)

 

     Six months ended
June 30, 2011
 

Cash flow from operating activities

  

Net income (loss)

   $ (17,368,636

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

  

Net sale (purchase) of short-term U.S. government and agency obligations

     (47,043,900

Change in unrealized appreciation/depreciation on investments

     (643

Amortization of offering cost

     98,128   

Increase (Decrease) in management fee payable

     36,288   

Increase (Decrease) in payable on futures contracts

     1,865,964   

Increase (Decrease) in payable for offering costs

     (198,998
  

 

 

 

Net cash provided by (used in) operating activities

     (62,611,797
  

 

 

 

Cash flow from financing activities

  

Proceeds from addition of shares

     116,025,984   

Payment on shares redeemed

     (50,918,679
  

 

 

 

Net cash provided by (used in) financing activities

     65,107,305   
  

 

 

 

Net increase (decrease) in cash

     2,495,508   

Cash, beginning of period

     400   
  

 

 

 

Cash, end of period

   $ 2,495,908   
  

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-71-


Table of Contents

PROSHARES SHORT VIX SHORT-TERM FUTURES ETF*

STATEMENT OF FINANCIAL CONDITION

 

     June 30,  2011
(unaudited)
 

Assets

  

Cash

   $ 400   

Offering costs (Note 5)

     28,764   
  

 

 

 

Total assets

     29,164   
  

 

 

 

Liabilities and shareholders’ equity

  

Liabilities

  

Payable for offering costs

     28,764   
  

 

 

 

Total liabilities

     28,764   
  

 

 

 

Shareholders’ equity

  

Shareholders’ equity

   $ 400   
  

 

 

 

Total liabilities and shareholders’ equity

   $ 29,164   
  

 

 

 

 

* See Note 1.

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-72-


Table of Contents

PROSHARES ULTRASHORT VIX SHORT-TERM FUTURES ETF*

STATEMENT OF FINANCIAL CONDITION

 

     June 30,  2011
(unaudited)
 

Assets

  

Cash

   $ 400   

Offering costs (Note 5)

     18,478   
  

 

 

 

Total assets

     18,878   
  

 

 

 

Liabilities and shareholders’ equity

  

Liabilities

  

Payable for offering costs

     18,478   
  

 

 

 

Total liabilities

     18,478   
  

 

 

 

Shareholders’ equity

  

Shareholders’ equity

   $ 400   
  

 

 

 

Total liabilities and shareholders’ equity

   $ 18,878   
  

 

 

 

 

* See Note 1.

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-73-


Table of Contents

PROSHARES ULTRA VIX MID-TERM FUTURES ETF*

STATEMENT OF FINANCIAL CONDITION

 

     June 30,  2011
(unaudited)
 

Assets

  

Cash

   $ 400   

Offering costs (Note 5)

     18,478   
  

 

 

 

Total assets

     18,878   
  

 

 

 

Liabilities and shareholders’ equity

  

Liabilities

  

Payable for offering costs

     18,478   
  

 

 

 

Total liabilities

     18,478   
  

 

 

 

Shareholders’ equity

  

Shareholders’ equity

   $ 400   
  

 

 

 

Total liabilities and shareholders’ equity

   $ 18,878   
  

 

 

 

 

* See Note 1.

 

 

 

 

 

See accompanying notes to financial statements.

 

-74-


Table of Contents

PROSHARES VIX MID-TERM FUTURES ETF

STATEMENTS OF FINANCIAL CONDITION

 

     June 30, 2011
             (unaudited)            
             December 31, 2010           

Assets

     

Cash

   $ 707,277       $ 400   

Short-term U.S. government and agency obligations (Note 3) (cost $13,411,564 and $0, respectively)

     13,411,641         —     

Offering costs (Note 5)

     63,044         124,374   

Limitation by Sponsor

     26,552         —     
  

 

 

    

 

 

 

Total assets

     14,208,514         124,774   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable on open futures contracts

     312,783         —     

Payable for offering costs

     —           124,374   
  

 

 

    

 

 

 

Total liabilities

     312,783         124,374   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     13,895,731         400   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 14,208,514       $ 124,774   
  

 

 

    

 

 

 

Shares outstanding

     225,005         5   
  

 

 

    

 

 

 

Net asset value per share

   $ 61.76       $ 80.00   
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 61.78       $ 80.00   
  

 

 

    

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES VIX MID-TERM FUTURES ETF

SCHEDULE OF INVESTMENTS

JUNE 30, 2011

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations (97% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.050% due 07/07/11

   $ 147,000       $ 147,000   

0.065% due 07/14/11†

     3,240,000         3,239,989   

0.058% due 07/21/11

     2,116,000         2,115,978   

0.021% due 08/04/11

     957,000         956,987   

0.055% due 08/11/11

     154,000         153,997   

0.048% due 08/18/11

     865,000         864,983   

0.045% due 08/25/11

     564,000         563,987   

0.026% due 09/01/11

     317,000         316,992   

0.035% due 09/08/11

     285,000         284,995   

0.043% due 09/15/11

     313,000         312,987   

0.011% due 09/22/11

     4,454,000         4,453,746   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $13,411,564)

      $ 13,411,641   
     

 

 

 

 

 

 

Futures Contracts Purchased

 

     Number of
Contracts
     Notional
Amount at
Value
     Unrealized
Appreciation
(Depreciation)
 

VIX Futures – CBOE, expires October 2011

     101       $ 2,222,000       $ (80,600

VIX Futures – CBOE, expires November 2011

     203         4,577,650         (132,750

VIX Futures – CBOE, expires December 2011

     204         4,630,800         (136,210

VIX Futures – CBOE, expires January 2012

     101         2,454,300         (64,590
        

 

 

 
         $ (414,150
        

 

 

 

 

All or partial amount segregated as collateral for futures contracts.

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES VIX MID-TERM FUTURES ETF

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011

(unaudited)

 

     Three months
ended
June 30, 2011
    Six months
ended
June 30, 2011
 

Investment Income

    

Interest

   $ 1,738      $ 3,015   
  

 

 

   

 

 

 

Expenses

    

Offering costs

     31,179        61,330   

Limitation by Sponsor

     (8,987     (26,552
  

 

 

   

 

 

 

Total expenses

     22,192        34,778   
  

 

 

   

 

 

 

Net investment income (loss)

     (20,454     (31,763
  

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

    

Net realized gain (loss) on

    

Futures contracts

     (1,172,550     (1,860,800

Short-term U.S. government and agency obligations

     139        198   
  

 

 

   

 

 

 

Net realized gain (loss)

     (1,172,411     (1,860,602
  

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

    

Futures contracts

     (331,020     (414,150

Short-term U.S. government and agency obligations

     (272     77   
  

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (331,292     (414,073
  

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (1,503,703     (2,274,675
  

 

 

   

 

 

 

Net income (loss)

   $ (1,524,157   $ (2,306,438
  

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ (9.43   $ (18.43
  

 

 

   

 

 

 

Weighted-average shares outstanding

     161,543        125,145   
  

 

 

   

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES VIX MID-TERM FUTURES ETF

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED

JUNE 30, 2011

(unaudited)

 

Shareholders’ equity, at December 31, 2010

   $ 400   

Addition of 475,000 shares

     32,434,524   

Redemption of 250,000 shares

     (16,232,755
  

 

 

 

Net addition (redemption) of 225,000 shares

     16,201,769   
  

 

 

 

Net investment income (loss)

     (31,763

Net realized gain (loss)

     (1,860,602

Change in net unrealized appreciation/depreciation

     (414,073
  

 

 

 

Net income (loss)

     (2,306,438
  

 

 

 

Shareholders’ equity, at June 30, 2011

   $ 13,895,731   
  

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES VIX MID-TERM FUTURES ETF

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2011

(unaudited)

 

     Six months
ended
June 30, 2011
 

Cash flow from operating activities

  

Net income (loss)

   $ (2,306,438

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

  

Net sale (purchase) of short-term U.S. government and agency obligations

     (13,411,564

Change in unrealized appreciation/depreciation on investments

     (77

Decrease (Increase) in Limitation by Sponsor

     (26,552

Amortization of offering cost

     61,330   

Increase (Decrease) in payable on futures contracts

     312,783   

Increase (Decrease) in payable for offering costs

     (124,374
  

 

 

 

Net cash provided by (used in) operating activities

     (15,494,892
  

 

 

 

Cash flow from financing activities

  

Proceeds from addition of shares

     32,434,524   

Payment on shares redeemed

     (16,232,755
  

 

 

 

Net cash provided by (used in) financing activities

     16,201,769   
  

 

 

 

Net increase (decrease) in cash

     706,877   

Cash, beginning of period

     400   
  

 

 

 

Cash, end of period

   $ 707,277   
  

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES SHORT VIX MID-TERM FUTURES ETF

STATEMENT OF FINANCIAL CONDITION

 

     June 30,  2011
(unaudited)
 

Assets

  

Cash

   $ 400   

Offering costs (Note 5)

     18,478   
  

 

 

 

Total assets

     18,878   
  

 

 

 

Liabilities and shareholders’ equity

  

Liabilities

  

Payable for offering costs

     18,478   
  

 

 

 

Total liabilities

     18,478   
  

 

 

 

Shareholders’ equity

  

Shareholders’ equity

   $ 400   
  

 

 

 

Total liabilities and shareholders’ equity

   $ 18,878   
  

 

 

 

 

* See Note 1.

 

 

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT VIX MID-TERM FUTURES ETF

STATEMENT OF FINANCIAL CONDITION

 

     June 30,  2011
(unaudited)
 

Assets

  

Cash

   $ 400   

Offering costs (Note 5)

     18,478   
  

 

 

 

Total assets

     18,878   
  

 

 

 

Liabilities and shareholders’ equity

  

Liabilities

  

Payable for offering costs

     18,478   
  

 

 

 

Total liabilities

     18,478   
  

 

 

 

Shareholders’ equity

  

Shareholders’ equity

   $ 400   
  

 

 

 

Total liabilities and shareholders’ equity

   $ 18,878   
  

 

 

 

 

* See Note 1.

 

 

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES TRUST II

COMBINED STATEMENTS OF FINANCIAL CONDITION

 

     June 30, 2011
(unaudited)
     December 31, 2010  

Assets

     

Cash

   $ 15,962,424       $ 13,024,692   

Segregated cash balances with brokers for futures contracts

     49,212,847         18,624,601   

Short-term U.S. government and agency obligations (Note 3)

     

(cost $3,551,072,044 and $2,036,391,604, respectively)

     3,551,139,995         2,036,464,179   

Unrealized appreciation on swap agreements

     9,151,926         7,405,394   

Unrealized appreciation on forward agreements

     20,031,600         54,916,155   

Unrealized appreciation on foreign currency forward contracts

     127,149         631,682   

Receivable from capital shares sold

     54,664,169         —     

Receivable on open futures contracts

     1,978,268         3,487,401   

Offering costs (Note 5)

     390,116         323,372   

Limitation by Sponsor

     26,552         —     
  

 

 

    

 

 

 

Total assets

     3,702,685,046         2,134,877,476   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     14,767,528         46,689,878   

Payable on open futures contracts

     2,178,747         1,462,367   

Management fee payable

     2,698,091         1,633,355   

Payable for offering costs

     226,202         323,372   

Unrealized depreciation on swap agreements

     11,493,185         4,275,758   

Unrealized depreciation on forward agreements

     44,330,592         13,001,736   

Unrealized depreciation on foreign currency forward contracts

     14,996,114         39,331,731   
  

 

 

    

 

 

 

Total liabilities

     90,690,459         106,718,197   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     3,611,994,587         2,028,159,279   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 3,702,685,046       $ 2,134,877,476   
  

 

 

    

 

 

 

Shares outstanding

     125,463,489         55,764,998   
  

 

 

    

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES TRUST II

COMBINED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED

JUNE 30, 2011 AND 2010

(unaudited)

 

     Three months
ended
June 30, 2011
    Three months
ended
June 30, 2010
    Six months
ended
June 30, 2011
    Six months
ended
June 30, 2010
 

Investment Income

        

Interest

   $ 509,254      $ 652,503      $ 1,227,378      $ 869,339   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     7,805,134        3,632,101        13,299,907        6,324,313   

Brokerage commissions

     48,369        71,822        98,253        116,830   

Offering costs

     81,065        —          159,458        —     

Limitation by Sponsor

     (8,987     —          (26,552     —     
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     7,925,581        3,703,923        13,531,066        6,441,143   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (7,416,327     (3,051,420     (12,303,688     (5,571,804
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Futures contracts

     11,806,302        (4,703,057     31,019,677        13,918,891   

Swap agreements

     (1,544,607     (30,848,997     51,475,669        4,125,809   

Forward agreements

     (156,751,649     39,649,691        33,167,638        25,340,360   

Foreign currency forward contracts

     (42,595,545     71,889,124        (121,328,723     85,623,644   

Short-term U.S. government and agency obligations

     65,478        26,545        75,375        104,490   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (189,020,021     76,013,306        (5,590,364     129,113,194   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Futures contracts

     (34,125,970     (6,549,375     (17,093,140     (10,768,300

Swap agreements

     1,792,727        19,373,248        (5,470,895     (141,576

Forward agreements

     (85,589,791     (14,204,851     (66,213,411     (1,729,543

Foreign currency forward contracts

     (13,339,306     (19,381,309     23,831,084        (10,446,390

Short-term U.S. government and agency obligations

     (45,475     100,707        (4,624     168,802   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (131,307,815     (20,661,580     (64,950,986     (22,917,007
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (320,327,836     55,351,726        (70,541,350     106,196,187   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (327,744,163   $ 52,300,306      $ (82,845,038   $ 100,624,383   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES TRUST II

COMBINED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED

JUNE 30, 2011

(unaudited)

 

Shareholders’ equity, at December 31, 2010

   $ 2,028,159,279   

Addition of 120,372,500 shares

     3,673,128,916   

Redemption of 50,674,009 shares

     (2,006,448,570
  

 

 

 

Net addition (redemption) of 69,698,491 shares

     1,666,680,346   
  

 

 

 

Net investment income (loss)

     (12,303,688

Net realized gain (loss)

     (5,590,364

Change in net unrealized appreciation/depreciation

     (64,950,986
  

 

 

 

Net income (loss)

     (82,845,038
  

 

 

 

Shareholders’ equity, at June 30, 2011

   $ 3,611,994,587   
  

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES TRUST II

COMBINED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2011 AND 2010

(unaudited)

 

     Six months
ended
June 30, 2011
    Six months
ended
June 30, 2010
 

Cash flow from operating activities

    

Net income (loss)

   $ (82,845,038   $ 100,624,383   

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

    

Decrease (Increase) in segregated cash balances for swap agreements

     —          (321,300

Decrease (Increase) in segregated cash balances for forward agreements

     —          (747,400

Decrease (Increase) in segregated cash balances with brokers for futures contracts

     (30,588,246     (5,234,346

Net sale (purchase) of short-term U.S. government and agency obligations

     (1,514,680,440     (520,085,485

Change in unrealized appreciation/depreciation on investments

     47,857,846        12,148,707   

Decrease (Increase) in receivable on futures contracts

     1,509,133        1,050,512   

Decrease (Increase) in offering costs

     (226,202     —     

Decrease (Increase) in Limitation by Sponsor

     (26,552     —     

Amortization of offering cost

     159,458        —     

Increase (Decrease) in management fee payable

     1,064,736        550,262   

Increase (Decrease) in payable on futures contracts

     716,380        (1,206,684

Increase (Decrease) in payable for offering costs

     (97,170     —     
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (1,577,156,095     (413,221,351
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     3,618,464,747        1,690,982,113   

Payment on shares redeemed

     (2,038,370,920     (1,166,687,302
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     1,580,093,827        524,294,811   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     2,937,732        111,073,460   

Cash, beginning of period

     13,024,692        967,043   
  

 

 

   

 

 

 

Cash, end of period

   $ 15,962,424      $ 112,040,503   
  

 

 

   

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES TRUST II

NOTES TO FINANCIAL STATEMENTS

June 30, 2011

(unaudited)

NOTE 1 – ORGANIZATION

Introduction

ProShares Trust II (formerly known as the Commodities and Currencies Trust) (the “Trust”) is a Delaware statutory trust formed on October 9, 2007 and currently organized into separate series (each, a “Fund” and collectively, the “Funds”). The following fourteen series of the Trust, ProShares Ultra DJ-UBS Commodity, ProShares UltraShort DJ-UBS Commodity, ProShares Ultra DJ-UBS Crude Oil, ProShares UltraShort DJ-UBS Crude Oil, ProShares Ultra Gold, ProShares UltraShort Gold, ProShares Ultra Silver, ProShares UltraShort Silver, ProShares Ultra Euro, ProShares UltraShort Euro, ProShares Ultra Yen and ProShares UltraShort Yen (each, a “Leveraged Fund” and collectively, the “Leveraged Funds”), ProShares VIX Short-Term Futures ETF and ProShares VIX Mid-Term Futures ETF (each, a “VIX Fund” and collectively, the “VIX Funds”) issue common units of beneficial interest (“Shares”), which represent units of fractional undivided beneficial interest in and ownership of only that Leveraged or VIX Fund. The Shares of each Leveraged and VIX Fund are listed on the New York Stock Exchange Archipelago (“NYSE Arca”). The Trust has also registered shares for ten additional series: ProShares Short DJ-UBS Natural Gas and ProShares Short Gold (each, a “Short Fund” and collectively, the “Short Funds”), ProShares Ultra DJ-UBS Natural Gas, ProShares UltraShort DJ-UBS Natural Gas (each, a “New Natural Gas Fund” and collectively, the “New Natural Gas Funds”), ProShares Ultra VIX Short-Term Futures ETF, ProShares Short VIX Short-Term Futures ETF, ProShares UltraShort VIX Short-Term Futures ETF, ProShares Ultra VIX Mid-Term Futures ETF, ProShares Short VIX Mid-Term Futures ETF and ProShares UltraShort VIX Mid-Term Futures ETF (each, a “New VIX Fund” and collectively, the “New VIX Funds”). The Short Funds, the New Natural Gas Funds and the New VIX Funds are collectively referred to herein as the “New Funds”. As of June 30, 2011, each of the Short Funds had seed capital of $200, but neither of the Short Funds had commenced investment operations, and each of the New Natural Gas Funds and the New VIX Funds had seed capital of $400, but none of the New Natural Gas Funds or the New VIX Funds had commenced investment operations; therefore, these Financial Statements do not include Schedules of Investments, Statements of Operations, Statements of Changes in Shareholders’ Equity or Statements of Cash Flows for the New Funds. The Short Funds and the New Natural Gas Funds, together with the Leveraged Funds, are referred to as the “Geared Funds” in these Notes to Financial Statements. The Trust had no operations prior to November 24, 2008 other than matters relating to its organization, the registration of each series under the Securities Act of 1933, as amended, and the sale and issuance to ProShare Capital Management LLC (the “Sponsor”) of fourteen Shares of each Leveraged Fund at an aggregate purchase price of $350 in each of the Leveraged Funds.

Eight of the Funds, ProShares Ultra DJ-UBS Commodity, ProShares UltraShort DJ-UBS Commodity, ProShares Ultra DJ-UBS Crude Oil, ProShares UltraShort DJ-UBS Crude Oil, ProShares Ultra Euro, ProShares UltraShort Euro, ProShares Ultra Yen and ProShares UltraShort Yen, commenced trading on the NYSE Arca on November 25, 2008. Four of the Funds, ProShares Ultra Gold, ProShares UltraShort Gold, ProShares Ultra Silver and ProShares UltraShort Silver, commenced trading on the NYSE Arca on December 3, 2008. The VIX Funds commenced trading on the NYSE Arca on January 3, 2011.

Groups of Funds are collectively referred to in several different ways. References to “Ultra Funds,” “Short Funds” or “UltraShort Funds” refer to the different Funds based upon their investment objectives, but without distinguishing among the Funds’ benchmarks. References to “Commodity Index Funds”, “Commodity Funds” and “Currency Funds” refer to the different Funds according to their general benchmark categories without distinguishing among the Funds’ investment objectives or Fund-specific benchmarks. References to “VIX Funds” refer to the different Funds based upon their investment objective and their general benchmark categories.

Each “Ultra” Fund seeks daily investment results (before fees and expenses) that correspond to twice (2x) the daily performance of its corresponding benchmark. Each “Short” Fund seeks daily investment results (before fees and expenses) that correspond to the inverse (-1x) of the daily performance of its corresponding benchmark. Each “UltraShort” Fund seeks daily investment results (before fees and expenses) that correspond to twice the

 

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inverse (-2x) of the daily performance of its corresponding benchmark. Daily performance is measured from the calculation of one NAV to the next. Each of the Geared Funds generally invests or will invest in Financial Instruments (i.e., commodity-based or currency-based instruments whose value is derived from the value of an underlying asset, rate or index, including futures contracts and options on futures contracts, swap agreements, forward contracts and other commodity-based or currency-based options contracts) as a substitute for investing directly in a commodity or currency in order to gain exposure to the commodity index, commodity or currency. The Financial Instruments in which ProShares Short DJ-UBS Natural Gas will invest are limited to futures contracts. Financial Instruments also are used to produce economically “leveraged” or “inverse” investment results for the Funds. Each “VIX” Fund seeks daily investment results (before fees and expenses) that match the performance of a benchmark. Each VIX Fund intends to obtain exposure to its benchmark by investing in futures contracts (“VIX futures contracts”) based on the Chicago Board Options Exchange (“CBOE”) Volatility Index (the “VIX”).

The Geared Funds do not seek to achieve their stated investment objective over a period of time greater than one day because mathematical compounding prevents the Geared Funds from achieving such results. Accordingly, results over periods of time greater than one day should not be expected to be a simple multiple (e.g., 2x or -2x) of the period return of the corresponding benchmark and will likely differ significantly. The VIX Funds seek to achieve their stated investment objective both over a single day and over time.

ProShares Ultra DJ-UBS Commodity, ProShares UltraShort DJ-UBS Commodity, ProShares Ultra DJ-UBS Crude Oil and ProShares UltraShort DJ-UBS Crude Oil each have a benchmark that is an index designed to track the performance of commodity futures contracts, as applicable and as listed below. The daily performance of these indexes and the corresponding funds will likely be very different from the daily performance of the price of the related physical commodities.

Renaming of Indexes and Funds

On May 6, 2009, UBS Securities LLC acquired the commodity business of AIG Financial Products Corp. Effective May 7, 2009, the Dow Jones-AIG Commodity Indexes were re-branded as the Dow Jones-UBS Commodity Indexes. The Dow Jones-UBS Commodity Indexes have an identical methodology to the Dow Jones-AIG Commodity Indexes and take the identical form and format of the Dow Jones-AIG Commodity Indexes. In connection therewith:

The following indexes were renamed:

 

Former Index Name

  

New Index Name

Dow Jones-AIG Commodity Index    Dow Jones-UBS Commodity Index
Dow Jones-AIG Crude Oil Sub-Index    Dow Jones-UBS Crude Oil Sub-Index
The following Funds were renamed:   

Former Fund Name

  

New Fund Name

ProShares Ultra DJ-AIG Commodity    ProShares Ultra DJ-UBS Commodity
ProShares UltraShort DJ-AIG Commodity    ProShares UltraShort DJ-UBS Commodity
ProShares Ultra DJ-AIG Crude Oil    ProShares Ultra DJ-UBS Crude Oil
ProShares UltraShort DJ-AIG Crude Oil    ProShares UltraShort DJ-UBS Crude Oil

Reverse Splits

Prior to the opening of trading on the NYSE Arca on April 15, 2010, ProShares UltraShort Gold executed a 1-for-5 reverse split of shares, and ProShares UltraShort Silver executed a 1-for-10 reverse split of shares. The funds traded at their post-split prices on April 15, 2010. The ticker symbols for the funds did not change, and they continue to trade on the NYSE Arca.

Prior to the opening of trading on the NYSE Arca on February 25, 2011, ProShares UltraShort DJ-UBS Commodity and ProShares UltraShort DJ-UBS Crude Oil executed a 1-for-5 reverse split of shares and ProShares UltraShort Silver and ProShares Ultra DJ-UBS Crude Oil executed a 1-for-4 reverse split of shares. The funds traded at their

 

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post-split prices on February 25, 2011. The ticker symbols for the funds did not change, and they continue to trade on the NYSE Arca.

The reverse splits were applied retroactively for all periods presented, reducing the number of shares outstanding for each of the ProShares UltraShort Gold Fund, ProShares UltraShort Silver Fund, ProShares UltraShort DJ-UBS Commodity Fund, ProShares Ultra DJ-UBS Crude Oil Fund and ProShares UltraShort DJ-UBS Crude Oil Fund, and resulted in a proportionate increase in the price per share and per share information of each of the ProShares UltraShort Gold Fund, ProShares UltraShort Silver Fund, ProShares UltraShort DJ-UBS Commodity Fund, ProShares Ultra DJ-UBS Crude Oil Fund and ProShares UltraShort DJ-UBS Crude Oil Fund. Therefore, the reverse splits did not change the aggregate net asset value of a shareholder’s investment at the time of the split.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies followed by each Geared Fund and each VIX Fund, as applicable, in preparation of its financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

The accompanying unaudited financial statements were prepared in accordance with GAAP for interim financial information and with the instructions for Form 10-Q and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). In the opinion of management, all material adjustments, consisting only of normal recurring adjustments, considered necessary for a fair statement of the interim period financial statements have been made. Interim period results are not necessarily indicative of results for a full-year period. These financial statements and the notes thereto should be read in conjunction with the Trust’s and the Funds’ financial statements included in the Trust’s Annual Report on Form 10-K for the period ended December 31, 2010, as filed with the SEC on March 1, 2011.

Use of Estimates & Indemnifications

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in these financial statements. Actual results could differ from those estimates.

In the normal course of business, the Trust enters into contracts that contain a variety of representations which provide general indemnifications. The Trust’s maximum exposure under these arrangements cannot be known; however, the Trust expects any risk of loss to be remote.

Basis of Presentation

Pursuant to rules and regulations of the SEC, audited financial statements are presented for the Trust as a whole, as the SEC registrant, and for each Fund individually. The debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular Fund shall be enforceable only against the assets of such Fund and not against the assets of the Trust generally or any other Fund. Accordingly, the assets of one Fund of the Trust include only those funds and other assets that are paid to, held by or distributed to the Trust for the purchase of Units in that Fund.

Statement of Cash Flows

The cash amount shown in the Statements of Cash Flows is the amount reported as cash in the Statement of Financial Condition dated June 30, 2011, and represents non-segregated cash with the custodian and does not include short-term investments.

 

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Final Net Asset Value for Fiscal Period

The times of the calculation of the Leveraged Funds’ and the VIX Funds’ final net asset value for creation and redemption of fund shares for the period ended June 30, 2011 were as follows. All times are Eastern Standard Time:

 

     NAV Calculation Time      NAV Calculation Date  

Ultra Silver, UltraShort Silver

     7:00 A.M.         June 30   

Ultra Gold, UltraShort Gold

     10:00 A.M.         June 30   

Ultra DJ-UBS Commodity, UltraShort DJ-UBS Commodity

     2:30 P.M.         June 30   

Ultra DJ-UBS Crude Oil, UltraShort DJ-UBS Crude Oil

     2:30 P.M.         June 30   

Ultra Euro, UltraShort Euro

     4:00 P.M.         June 30   

Ultra Yen, UltraShort Yen

     4:00 P.M.         June 30   

VIX Short-Term Futures ETF, VIX Mid-Term Futures ETF

     4:15 P.M.         June 30   

Although the Leveraged Funds’ and VIX Funds’ shares may continue to trade on secondary markets subsequent to the calculation of the final NAV, these times represent the final opportunity to transact in creation or redemption units for the three and six months ended June 30, 2011.

Market value per share is determined at the close of the NYSE Arca and may be later than when the Funds’ NAV per share is calculated.

For financial reporting purposes, the Leveraged Funds and VIX Funds value transactions based upon the final closing price in their primary markets. Accordingly, the investment valuations in these financial statements differ from those used in the calculation of some Leveraged Funds’ and VIX Funds’ final creation/redemption NAV for the three and six months ended June 30, 2011.

Investment Valuation

Short-term investments are valued at market price. Treasury securities having a maturity of greater than sixty days are valued at market price. In each of these situations, valuations are typically categorized as Level 1 in the fair value hierarchy.

Derivatives (e.g., futures, swaps and forward agreements) are generally valued using independent sources and/or agreements with counterparties or other procedures as determined by the Sponsor. Futures contracts, except for those entered into by the Gold and Silver Funds, are generally valued at the last settled price on the applicable exchange on which that future trades. Futures contracts entered into by the Gold and Silver Funds are valued at the last sales price prior to the time at which the NAV per share of a Fund is determined. These valuations are typically categorized as Level 1 in the fair value hierarchy. If there was no sale on that day, and for non-exchange-traded derivatives, the Sponsor may in its sole discretion choose to determine a fair value price as the basis for determining the market value of such position for such day. Such fair value prices would be generally determined based on available inputs about the current value of the underlying financial instrument or commodity and would be based on principles that the Sponsor deems fair and equitable so long as such principles are consistent with normal industry standards. When market closing prices are not available, the Sponsor may fair value an asset of a Fund pursuant to the policies the Sponsor has adopted, which are consistent with normal industry standards. Depending on the source and relevant significance of valuation inputs, these instruments may be classified as Level 2 or Level 3 in the fair value hierarchy.

Fair value pricing may require subjective determinations about the value of an investment. While the Leveraged Funds’ and VIX Funds’ policy is intended to result in a calculation of a Leveraged Fund and VIX Fund’s NAV that fairly reflects investment values as of the time of pricing, the Leveraged Fund and VIX Fund cannot ensure that fair values determined by the Sponsor or persons acting at their direction would accurately reflect the price that a Fund could obtain for an investment if it were to dispose of that investment as of the time of pricing (for instance, in a forced or distressed sale). The prices used by a Leveraged Fund and VIX Fund may differ from the value that would be realized if the investments were sold and the differences could be material to the financial statements.

Fair Value of Financial Instruments

The Funds disclose the fair value of their investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The disclosure requirements establish a fair value hierarchy that

 

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distinguishes between: (1) market participant assumptions developed based on market data obtained from sources independent of the Funds (observable inputs); and (2) the Funds’ own assumptions about market participant assumptions developed based on the best information available under the circumstances (unobservable inputs). The three levels defined by the disclosure requirements 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 is determined based on the lowest input level that is significant to the fair value measurement in its entirety.

Fair value measurements also require additional disclosure when the volume and level of activity for the asset or liability have significantly decreased, as well as when circumstances indicate that a transaction is not orderly.

The following table summarizes the valuation of investments at June 30, 2011 using the fair value hierarchy:

 

     Level I - Quoted Prices     Level II - Other Significant
Observable Inputs
       
     Short-Term
U.S.
Government
and Agencies
     Futures
Contracts
    Forward
Agreements
    Foreign Currency
Forward  Contracts
    Swap
Agreements
    Total  

Ultra DJ-UBS Commodity

   $ 18,514,669       $ —        $ —        $ —        $ (1,813,382   $ 16,701,287   

UltraShort DJ-UBS Commodity

     27,261,465         —          —          —          2,252,534        29,513,999   

Ultra DJ-UBS Crude Oil

     382,583,422         (8,560,860     —          —          (9,679,803     364,342,759   

UltraShort DJ-UBS Crude Oil

     123,614,651         2,287,900        —          —          6,899,392        132,801,943   

Ultra Gold

     296,053,835         (216,870     (14,680,169     —          —          281,156,796   

UltraShort Gold

     90,494,051         80,660        4,408,940        —          —          94,983,651   

Ultra Silver

     903,750,395         (1,087,315     (29,650,423     —          —          873,012,657   

UltraShort Silver

     635,383,368         848,525        15,622,660        —          —          651,854,553   

Ultra Euro

     8,954,822         —          —          109,012        —          9,063,834   

UltraShort Euro

     634,959,570         —          —          (12,569,162     —          622,390,408   

Ultra Yen

     3,358,922         —          —          18,137        —          3,377,059   

UltraShort Yen

     365,754,641         —          —          (2,426,952     —          363,327,689   

VIX Short-Term Futures ETF

     47,044,543         (4,452,660     —          —          —          42,591,883   

VIX Mid-Term Futures ETF

     13,411,641         (414,150     —          —          —          12,997,491   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Trust

   $ 3,551,139,995       $ (11,514,770   $ (24,298,992   $ (14,868,965   $ (2,341,259   $ 3,498,116,009   

At June 30, 2011, there were no Level III portfolio investments for which significant unobservable inputs were used to determine fair value.

At June 30, 2011, there were no significant transfers in or out of Level I and Level II fair value measurements.

The inputs or methodology used for valuing investments are not necessarily an indication of the risk associated with investing in those securities.

 

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The following table summarizes the valuation of investments at December 31, 2010 using the fair value hierarchy:

 

     Level I - Quoted Prices     Level II - Other Significant
Observable Inputs
       
     Short-Term
U.S.
Government
and Agencies
     Futures
Contracts
    Forward
Agreements
    Foreign Currency
Forward  Contracts
    Swap
Agreements
    Total  

Ultra DJ-UBS Commodity

   $ 16,426,651       $ —        $ —        $ —        $ 1,755,750      $ 18,182,401   

UltraShort DJ-UBS Commodity

     1,594,842         —          —          —          (164,150     1,430,692   

Ultra DJ-UBS Crude Oil

     244,394,920         5,412,760        —          —          5,649,644        255,457,324   

UltraShort DJ-UBS Crude Oil

     135,637,192         (2,384,420     —          —          (4,111,608     129,141,164   

Ultra Gold

     249,250,657         305,980        8,724,587        —          —          258,281,224   

UltraShort Gold

     80,114,447         (292,750     (2,991,391     —          —          76,830,306   

Ultra Silver

     495,915,529         3,056,220        46,191,568        —          —          545,163,317   

UltraShort Silver

     105,319,504         (519,420     (10,010,345     —          —          94,789,739   

Ultra Euro

     7,374,157         —          —          348,179        —          7,722,336   

UltraShort Euro

     471,829,446         —          —          (23,194,077     —          448,635,369   

Ultra Yen

     4,733,703         —          —          283,503        —          5,017,206   

UltraShort Yen

     223,873,131         —          —          (16,137,654     —          207,735,477   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Trust

   $ 2,036,464,179       $ 5,578,370      $ 41,914,419      $ (38,700,049   $ 3,129,636      $ 2,048,386,555   

At December 31, 2010, there were no Level III portfolio investments for which significant unobservable inputs were used to determine fair value.

At December 31, 2010, there were no significant transfers in or out of Level I and Level II fair value measurements.

The inputs or methodology used for valuing investments are not necessarily an indication of the risk associated with investing in those securities.

Investment Transactions and Related Income

Investment transactions are recorded on the trade date. All such transactions are recorded on the identified cost basis and marked to market daily. Unrealized appreciation/depreciation on open contracts are reflected in the Statements of Financial Condition and changes in the unrealized appreciation/depreciation between periods are reflected in the Statements of Operations. Discounts on short-term securities purchased are amortized and reflected as Interest Income in the Statements of Operations.

Brokerage Commissions and Fees

Each Geared Fund pays its respective brokerage commissions, including applicable exchange fees, National Futures Association (“NFA”) fees, give-up fees, pit brokerage fees and other transaction related fees and expenses charged in connection with trading activities for each Fund’s investment in U.S. Commodity Futures Trading Commission regulated investments. The effects of trading spreads, financing costs/fees associated with Financial Instruments, and costs relating to the purchase of U.S. Treasury securities or similar high credit quality short-term fixed-income or similar securities would also be borne by the Funds. Brokerage commissions on futures contracts are recognized on a half-turn basis. For the period ended June 30, 2011, the Sponsor paid and is currently paying brokerage commissions on futures contracts for the VIX Funds by reimbursing the VIX Funds monthly for the brokerage commissions paid.

Federal Income Tax

Each Fund is registered as a series of a Delaware statutory trust and is or will be treated as a partnership for U.S. federal income tax purposes. Accordingly, no Fund expects to incur U.S. federal income tax liability; rather, each

 

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beneficial owner of a Fund’s Shares is or will be required to take into account its allocable share of its Fund’s income, gain, loss, deductions and other items for its Fund’s taxable year ending with or within the beneficial owner’s taxable year.

Management of the Funds has reviewed all open tax years and major jurisdictions and concluded that there is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns. The Funds are also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. On an ongoing basis, management will monitor its tax positions taken under the interpretation to determine if adjustments to conclusions are necessary based on factors including, but not limited to, further implementation of guidance expected from the Financial Accounting Standards Board and on-going analysis of tax law, regulation, and interpretations thereof.

NOTE 3 – INVESTMENTS

Short-Term Investments

The Funds may purchase U.S. Treasury Bills, agency securities, and other high-credit quality short-term fixed income or similar securities with original maturities of one year or less. A portion of these investments may be posted as collateral in connection with swap agreements and/or used as collateral for a Fund’s trading in futures and forward contracts.

Accounting for Derivative Instruments

In seeking to achieve each Fund’s investment objective, the Sponsor uses a mathematical approach to investing. Using this approach, the Sponsor determines the type, quantity and mix of investment positions that the Sponsor believes in combination should produce returns consistent with a Fund’s objective.

All open derivative positions at period-end for each Fund are disclosed in the Schedule of Investments and the notional value of these open positions relative to the shareholders’ equity of each Fund is generally representative of the notional value of open positions to shareholders’ equity throughout the reporting period for each respective Fund. The volume associated with derivative positions varies on a daily basis as each Fund transacts derivative contracts in order to achieve the appropriate exposure, as expressed in notional value, in comparison to shareholders’ equity consistent with each Fund’s investment objective.

Following is a description of the derivative instruments used by the Funds during the reporting period, including the primary underlying risk exposures related to each instrument type.

Futures Contracts

The Funds enter into futures contracts to gain exposure to changes in the value of an underlying index or 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, if applicable, 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, or by cash settlement at expiration of contract.

Upon entering into a futures contract, each Fund is required to deposit and maintain as collateral at least such initial margin as required by the exchange on which the transaction is effected. The initial margin is segregated as cash balances with brokers for futures contracts, as disclosed in the Statements of Financial Condition, and is restricted as to its use. The VIX Funds maintain collateral at the broker in the form of U.S. Treasury securities. These securities are restricted as to their use and are denoted as such on the Schedules of Investments. Pursuant to the futures contract, each Fund generally agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the futures contract. Such receipts or payments are known as variation margin and are

 

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recorded by each Fund as unrealized gains or losses. Each Fund will realize a gain or loss upon closing of a futures transaction.

Futures contracts involve, to varying degrees, elements of market risk (specifically commodity price risk or equity market volatility 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 each Fund has in the particular classes of instruments. Additional risks associated with the use of futures contracts are imperfect correlation between movements in the price of the futures contracts and the market value of the underlying index or commodity and the possibility of an illiquid market for a futures contract. With futures contracts, there is minimal counterparty risk to the Funds since futures contracts are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures contracts, guarantees the futures contracts against default.

Swap Agreements

Certain of the Funds enter into swap agreements for purposes of pursuing their investment objectives or as a substitute for investing directly in (or shorting) commodities, or to create an economic hedge against a position. Swap agreements are two-party contracts entered into primarily with institutional investors for a specified period, ranging from a day to more than one year. In a standard swap transaction, two parties agree to exchange the returns earned or realized on a particular predetermined investment, instrument or index in exchange for a fixed or floating rate of return in respect of a predetermined notional amount. In the case of futures contracts based indices, such as those used by the Commodity Index Funds, the reference interest rate is zero. The gross returns to be exchanged are calculated with respect to a notional amount and the benchmark returns to which the swap is linked. Swap agreements do not involve the delivery of underlying instruments.

Generally, swap agreements entered into by the Funds calculate and settle the obligations of the parties to the agreement on a “net basis” with a single payment. Consequently, each Fund’s current obligations (or rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the agreement based on the relative values of such obligations (or rights) (the “net amount”). In a typical swap agreement entered into by an Ultra Fund, the Ultra Fund would be entitled to settlement payments in the event the benchmark increases and would be required to make payments to the swap counterparties in the event the benchmark decreases, adjusted for any transaction costs or trading spreads on the notional amount the Funds may pay. In a typical swap agreement entered into by an UltraShort Fund, the UltraShort Fund would be required to make payments to the swap counterparties in the event the benchmark increases and would be entitled to settlement payments in the event the benchmark decreases, adjusted for any transaction costs or trading spreads on the notional amount the Funds may pay.

The net amount of the excess, if any, of each Fund’s obligations over its entitlements with respect to each swap agreement is accrued on a daily basis and an amount of cash and/or securities having an aggregate NAV at least equal to such accrued excess is maintained in a segregated account by the Funds’ Custodian. Until a swap agreement is settled in cash, the gain or loss on the notional amount less any transaction costs or trading spreads payable by each Fund on the notional amount are recorded as “unrealized appreciation or depreciation on swap agreements” and, when cash is exchanged, the gain or loss realized is recorded as “realized gains or losses on swap agreements.” Swap agreements are generally valued at the last settled price of the benchmark referenced Index.

The Trust, on behalf of a Fund, may enter into agreements with certain counterparties for derivative transactions. These agreements contain various conditions, events of default, termination events, covenants and representations. The triggering of certain events or the default on certain terms of the agreement could allow a party to terminate a transaction under the agreement and request immediate payment in an amount equal to the net positions owed the party under the agreement. This could cause a Fund to have to enter into a new transaction with the same counterparty, enter into a transaction with a different counterparty or seek to achieve its investment objective through any number of different investments or investment techniques.

Swap agreements involve, to varying degrees, elements of market risk (commodity price risk) and exposure to loss in excess of the unrealized gain/loss reflected. The notional amounts reflect the extent of the total investment exposure each Fund has under the swap agreement, which may exceed the NAV of each Fund. Additional risks associated with the use of swap agreements are imperfect correlation between movements in the notional amount and the price of the underlying reference index and the inability of counterparties to perform. Each Fund bears the

 

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risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. A Fund will enter into swap agreements only with large, well-capitalized and well established financial institutions. The creditworthiness of each of the firms that is a party to a swap agreement is monitored by the Sponsor. The Sponsor may use various techniques to minimize credit risk including early termination and payment, using different counterparties, limiting the net amount due from any individual counterparty and generally requiring collateral to be posted by the counterparty in an amount approximately equal to that owed to the Funds. All of the outstanding swap agreements at June 30, 2011 contractually terminate within one month but may be terminated without penalty by either party daily. Upon termination, the Fund is entitled to pay or receive the “unrealized appreciation or depreciation” amount.

The Funds, as applicable, collateralize swap agreements by segregating or designating cash and/or certain securities as indicated on the Statements of Financial Condition or Schedules of Investments. Such collateral is held for the benefit of the counterparty in a segregated tri-party account at the Custodian to protect the counterparty against non-payment by the Funds. In the event of a default by the counterparty, the Funds will seek withdrawal of this collateral from the segregated account and may incur certain costs in exercising its right with respect to the collateral. If a counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, the Funds may experience significant delays in obtaining any recovery in a bankruptcy or other reorganizational proceeding. The Funds may obtain only limited recovery or may obtain no recovery in such circumstances.

The Funds remain subject to credit risk with respect to the amount they expect to receive from counterparties. However, the Funds have sought to mitigate these risks by generally requiring that the counterparties for each Fund agree to post collateral for the benefit of the Fund, marked to market daily, in an amount approximately equal to what the counterparty owes the Fund. In the event of the bankruptcy of a counterparty, the Fund will have direct access to the collateral received from the counterparty, generally as of the day prior to the bankruptcy, because there is a one day time lag between the Fund’s request for collateral and the delivery of such collateral. To the extent any such collateral is insufficient, the Funds will be exposed to counterparty risk as described above, including the possible delays in recovering amounts as a result of bankruptcy proceedings. As of June 30, 2011, the collateral posted by counterparties consisted of U.S. Treasury securities.

Forward Contracts

Certain of the Funds enter into forward contracts for purposes of pursuing their investment objectives and as a substitute for investing directly in (or shorting) commodities and/or currencies. A forward contract is an agreement between two parties to purchase or sell a specified quantity of a commodity or currency at or before a specified date in the future at a specified price. Forward contracts are typically traded in the over-the-counter (“OTC”) markets and all details of the contract are negotiated between the counterparties to the agreement. Accordingly, the forward contracts are valued by reference to the contracts traded in the OTC markets.

The contractual obligations of a buyer or seller may generally be satisfied by taking or making physical delivery of the underlying commodity or currency, establishing an opposite position in the contract and recognizing the profit or loss on both positions simultaneously on the delivery date or, in some instances, paying a cash settlement before the designated date of delivery. The forward contracts are adjusted by the daily fluctuation of the underlying commodity or currency and any gains or losses are recorded for financial statement purposes as unrealized gains or losses until the contract settlement date.

Forward contracts are, in general, not cleared or guaranteed by a third party. The Funds may collateralize forward commodity contracts by segregating or designating cash and/or certain securities as indicated on their Statements of Financial Condition or Schedules of Investments. Such collateral is held for the benefit of the counterparty in a segregated tri-party account at the Custodian to protect the counterparty against non-payment by the Funds. In the event of a default by the counterparty, the Funds will seek withdrawal of this collateral from the segregated account and may incur certain costs in exercising its right with respect to the collateral. If a counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, the Funds may experience significant delays in obtaining any recovery in a bankruptcy or other reorganizational proceeding. The Funds may obtain only limited recovery or may obtain no recovery in such circumstances.

 

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The Funds remain subject to credit risk with respect to the amount they expect to receive from counterparties, as those amounts are not similarly collateralized by the counterparty. However, the Funds have sought to mitigate these risks by generally requiring that the counterparties for each Fund agree to post collateral for the benefit of the Fund, marked to market daily, in an amount approximately equal to what the counterparty owes the Fund. In the event of the bankruptcy of a counterparty, the Fund will have direct access to the collateral received from the counterparty, generally as of the day prior to the bankruptcy, because there is a one day time lag between the Fund’s request for collateral and the delivery of such collateral. To the extent any such collateral is insufficient, the Funds will be exposed to counterparty risk as described above, including the possible delays in recovering amounts as a result of bankruptcy proceedings.

Participants in trading foreign exchange forward contracts often do not require margin deposits, but rely upon internal credit limitations and their judgments regarding the creditworthiness of their counterparties.

A Fund will enter into forward contracts only with large, well-capitalized and well established financial institutions. The creditworthiness of each of the firms that is a party to a forward contract is monitored by the Sponsor.

 

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Fair Value of Derivative Instruments

as of June 30, 2011

 

     Asset Derivatives     Liability Derivatives  

Derivatives not

accounted for as hedging
instruments

   Statements of
Financial
Condition
Location
   Fund    Unrealized
Appreciation
    Statements of
Financial
Condition
Location
   Fund    Unrealized
Depreciation
 

Commodities Contracts

   Receivables
on open
futures
contracts,
unrealized
appreciation
on swap
and/or
forward
agreements
   ProShares UltraShort
DJ-UBS Commodity
   $ 2,252,534      Payable on
open
futures
contracts,
unrealized
depreciation
on swap
and/or
forward
agreements
   ProShares Ultra DJ-
UBS Commodity
   $ 1,813,382   
      ProShares UltraShort
DJ-UBS Crude Oil
     9,187,292      ProShares Ultra DJ-
UBS Crude Oil
     18,240,663
      ProShares UltraShort
Gold
     4,489,600      ProShares Ultra Gold      14,897,039
      ProShares UltraShort
Silver
     16,471,185      ProShares Ultra Silver      30,737,738
Foreign Exchange Contracts    Unrealized
appreciation
on foreign
currency
forward
contracts
   ProShares Ultra
Euro
     123,748      Unrealized
depreciation
on foreign
currency
forward
contracts
   ProShares Ultra Euro      14,736   
      ProShares UltraShort
Euro
     185,294         ProShares UltraShort
Euro
     12,754,456   
      ProShares Ultra Yen      18,743         ProShares Ultra Yen      606   
      ProShares UltraShort
Yen
     4,982         ProShares UltraShort
Yen
     2,431,934   

VIX Futures Contracts

   Receivables
on open
futures
contracts
        Payable on
open
futures
contracts
   ProShares VIX Short-
Term Futures ETF
     4,452,660
              ProShares VIX Mid-
Term Futures ETF
     414,150
        

 

 

         

 

 

 
      Total Trust    $ 32,733,378      Total Trust    $ 85,757,364

 

* Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedules of Investments. Only current day’s variation margin is reported within the Statements of Financial Condition in receivable/payable on open futures contracts.

 

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Fair Value of Derivative Instruments

as of December 31, 2010

 

    

Asset Derivatives

   

Liability Derivatives

 

Derivatives not
accounted for as hedging
instruments

  

Statements of
Financial
Condition
Location

  

Fund

   Unrealized
Appreciation
   

Statements of
Financial
Condition
Location

  

Fund

   Unrealized
Depreciation
 
Commodities Contracts    Receivables on open futures contracts, unrealized appreciation on swap and/or forward agreements    ProShares Ultra DJ-UBS Commodity    $ 1,755,750      Payable on open futures contracts, unrealized depreciation on swap and/or forward agreements    ProShares UltraShort DJ-UBS Commodity    $ 164,150   
      ProShares Ultra DJ-UBS Crude Oil      11,062,404      ProShares UltraShort DJ-UBS Crude Oil      6,496,028
      ProShares Ultra Gold      9,030,567      ProShares UltraShort Gold      3,284,141
      ProShares Ultra Silver      49,247,788      ProShares UltraShort Silver      10,529,765
Foreign Exchange Contracts    Unrealized appreciation on foreign currency forward contracts    ProShares Ultra Euro      353,487      Unrealized depreciation on foreign currency forward contracts    ProShares Ultra Euro      5,308   
      ProShares UltraShort Euro      930,978         ProShares UltraShort Euro      24,125,055   
      ProShares Ultra Yen      292,768         ProShares Ultra Yen      9,265   
      ProShares UltraShort Yen      1,856,768         ProShares UltraShort Yen      17,994,422   
        

 

 

         

 

 

 
      Total Trust    $ 74,530,510      Total Trust    $ 62,608,134

 

* Includes cumulative appreciation/depreciation of futures contracts as reported in the Schedules of Investments. Only current day’s variation margin is reported within the Statements of Financial Condition in receivable/payable on open futures contracts.

 

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The Effect of Derivative Instruments on the Statements of Operations

For the three months ended June 30, 2011

 

Derivatives not

accounted for as

hedging instruments

  

Location of Gain or
(Loss) on Derivatives
Recognized in Income

  

Fund

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

Commodity Contracts

  

Net realized gain (loss) on futures

contracts, swap

and/or forward

agreements/changes

in unrealized

appreciation/

depreciation on

futures contracts,

swap and/or forward agreements

   ProShares Ultra DJ-UBS Commodity    $ (1,213,954   $ (2,137,478
      ProShares UltraShort DJ-UBS Commodity      (5,131,689     2,333,550   
      ProShares Ultra DJ-UBS Crude Oil      (7,846,532     (34,173,327
      ProShares UltraShort DJ-UBS Crude Oil      31,529,105        12,901,862   
      ProShares Ultra Gold      42,611,361        (22,454,529
      ProShares UltraShort Gold      (15,435,937     7,092,648   
      ProShares Ultra Silver      (206,332,040     (104,941,071
      ProShares UltraShort Silver      28,944,432        25,756,781   

Foreign Exchange Contracts

  

Net realized gain

(loss) on foreign

currency forward

contracts/changes

in unrealized

appreciation/

depreciation on

foreign currency

forward contracts

   ProShares Ultra Euro      688,719        (272,940
      ProShares UltraShort Euro      (39,284,937     6,451,205   
      ProShares Ultra Yen      70,451        137,043   
      ProShares UltraShort Yen      (4,069,778     (19,654,614

VIX Futures Contracts

  

Net realized gain

(loss) on futures

contracts/changes in

unrealized

appreciation/

depreciation on

futures contracts

   ProShares VIX Short-Term Futures ETF      (12,442,150     (1,970,450
      ProShares VIX Mid-Term Futures ETF      (1,172,550     (331,020
        

 

 

   

 

 

 
      Total Trust    $ (189,085,499   $ (131,262,340

 

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The Effect of Derivative Instruments on the Statements of Operations

For the three months ended June 30, 2010

 

Derivatives not

accounted for as

hedging instruments

  

Location of Gain or
(Loss) on Derivatives
Recognized in Income

  

Fund

   Realized Gain
or (Loss) on
Derivatives
Recognized in
Income
    Change in
Unrealized
Appreciation/
Depreciation on
Derivatives
Recognized in
Income
 
Commodity Contracts   

Net realized gain

(loss) on futures

contracts, swap

and/or forward

agreements/changes

in unrealized

appreciation/

depreciation on

futures contracts,

swap and/or forward

agreements

   ProShares Ultra DJ-UBS Commodity    $ (2,396,285   $ 1,020,246   
      ProShares UltraShort DJ-UBS Commodity      688,684        (548,694
      ProShares Ultra DJ-UBS Crude Oil      (57,213,763     8,667,709   
      ProShares UltraShort DJ-UBS Crude Oil      22,000,486        4,424,497   
      ProShares Ultra Gold      46,276,817        (7,953,438
      ProShares UltraShort Gold      (18,692,827     2,687,038   
      ProShares Ultra Silver      32,889,528        (14,741,118
      ProShares UltraShort Silver      (19,455,003     5,062,782   
Foreign Exchange Contracts   

Net realized gain

(loss) on foreign

currency forward

contracts/changes

in unrealized

appreciation/

depreciation on

foreign currency

forward contracts

   ProShares Ultra Euro      (2,103,157     88,388   
      ProShares UltraShort Euro      74,527,067        (2,026,475
      ProShares Ultra Yen      (102,356     535,869   
      ProShares UltraShort Yen      (432,430     (17,979,091
        

 

 

   

 

 

 
      Total Trust    $ 75,986,761      $ (20,762,287

 

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The Effect of Derivative Instruments on the Statements of Operations

For the six months ended June 30, 2011

 

Derivatives not

accounted for as

hedging instruments

  

Location of Gain or
(Loss) on Derivatives
Recognized in Income

  

Fund

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

Commodity Contracts

  

Net realized gain (loss) on futures contracts, swap and/or forward agreements/changes

in unrealized appreciation/ depreciation on futures contracts, swap and/or forward agreements

   ProShares Ultra DJ-UBS Commodity    $ 1,990,167      $ (3,569,132
      ProShares UltraShort DJ-UBS Commodity      (5,516,002     2,416,684   
      ProShares Ultra DJ-UBS Crude Oil      74,337,895        (29,303,067
      ProShares UltraShort DJ-UBS Crude Oil      17,593,876        15,683,320   
      ProShares Ultra Gold      50,632,772        (23,927,606
      ProShares UltraShort Gold      (23,389,324     7,773,741   
      ProShares Ultra Silver      67,012,421        (79,985,526
      ProShares UltraShort Silver      (52,344,381     27,000,950   

Foreign Exchange Contracts

   Net realized gain (loss) on foreign currency forward contracts/changes in unrealized appreciation/ depreciation on foreign currency forward contracts    ProShares Ultra Euro      1,607,088        (239,167
      ProShares UltraShort Euro      (101,433,972     10,624,915   
      ProShares Ultra Yen      226,180        (265,366
      ProShares UltraShort Yen      (21,728,019     13,710,702   

VIX Futures Contracts

   Net realized gain (loss) on futures contracts/changes in unrealized appreciation/ depreciation on futures contracts    ProShares VIX Short-Term Futures ETF      (12,793,640     (4,452,660
      ProShares VIX Mid-Term Futures ETF      (1,860,800     (414,150
        

 

 

   

 

 

 
      Total Trust    $ (5,665,739   $ (64,946,362

 

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Table of Contents

The Effect of Derivative Instruments on the Statements of Operations

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
 

Fund

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

Commodity Contracts

   Net realized gain
(loss) on futures
contracts, swap
and/or forward
agreements/changes

in unrealized
appreciation/
depreciation on
futures contracts,
swap and/or forward
agreements

  ProShares Ultra DJ-UBS Commodity    $ (2,738,144   $ (636,568
     ProShares UltraShort DJ-UBS Commodity      551,420        (220,929
     ProShares Ultra DJ-UBS Crude Oil      (4,192,126     (14,044,512
     ProShares UltraShort DJ-UBS Crude Oil      23,584,698        3,247,683   
     ProShares Ultra Gold      43,712,935        (204,535
     ProShares UltraShort Gold      (20,403,714     (442,488
     ProShares Ultra Silver      25,051,179        690,531   
     ProShares UltraShort Silver      (22,181,188     (1,028,601

Foreign Exchange Contracts

   Net realized gain
(loss) on foreign
currency forward
contracts/changes
in unrealized
appreciation/
depreciation on
foreign currency
forward contracts
  ProShares Ultra Euro      (2,945,250     47,260   
     ProShares UltraShort Euro      88,468,274        3,678,219   
     ProShares Ultra Yen      (198,293     585,212   
     ProShares UltraShort Yen      298,913        (14,757,081
       

 

 

   

 

 

 
     Total Trust    $ 129,008,704      $ (23,085,809

 

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NOTE 4 – AGREEMENTS

Management Fee

Each Geared Fund pays or will pay the Sponsor a Management Fee, monthly in arrears, in an amount equal to 0.95% per annum of its average daily NAV of such Fund. In the first year of the Leveraged Funds’ operations, the Sponsor did not charge its fee in an amount equal to the organization and offering costs. The Sponsor reimbursed each Leveraged Fund, if applicable, to the extent that its offering costs exceeded 0.95% of its average daily NAV of each Fund for the first year of operations. Each VIX Fund pays the Sponsor a Management Fee, monthly in arrears, in an amount equal to 0.85% per annum of its average daily NAV. The Sponsor will not charge its fee in the first year of operation of each New Fund (as defined below) in an amount equal to the offering costs. The Sponsor has agreed to reimburse each New Fund to the extent that its offering costs exceed the Management Fee for the first year of operations. The Management Fee is or will be paid in consideration of the Sponsor’s services as commodity pool operator and commodity trading advisor, and for managing the business and affairs of the Geared Funds and the VIX Funds. From the Management Fee, the Sponsor pays or will pay the fees and expenses of the Administrator, Custodian, Distributor, Transfer Agent and the licensors for the Commodity Index Funds (Dow Jones & Company, Inc. and UBS Securities LLC, together, “DJ-UBS”), the routine operational, administrative and other ordinary expenses of each Fund, and the normal and expected expenses incurred in connection with the continuous offering of Shares of each Fund after the commencement of its trading operations, including, but not limited to, expenses such as ongoing SEC registration fees not exceeding 0.021% per annum of a Fund and Financial Industry Regulatory Authority (“FINRA”) filing fees. For the period ended June 30, 2011, the Sponsor paid and is currently paying brokerage commissions on futures contracts for the VIX Funds. Each Leveraged Fund and VIX Fund incurs and pays, and each Short Fund will incur and pay, its non-recurring and unusual fees and expenses.

The Administrator

The Sponsor and the Trust, for itself and on behalf of each Fund, has appointed Brown Brothers Harriman & Co. (“BBH&Co.”) as the Administrator of the Funds, and the Sponsor, the Trust, on its own behalf and on behalf of each Fund, and BBH&Co. have entered into an Administrative Agency Agreement (the “Administration Agreement”) in connection therewith. Pursuant to the terms of the Administration Agreement and under the supervision and direction of the Sponsor and the Trust, BBH&Co. prepares and files certain regulatory filings on behalf of the Funds. BBH&Co. may also perform other services for the Funds pursuant to the Administration Agreement as mutually agreed upon by the Sponsor, the Trust and BBH&Co. from time to time. Pursuant to the terms of the Administration Agreement, BBH&Co. also serves as the Transfer Agent of the Funds. The Administrator’s fees are or will be paid on behalf of the Funds by the Sponsor.

The Custodian

BBH&Co. serves as Custodian of the Funds, and the Trust, on its own behalf and on behalf of each Fund, and BBH&Co. have entered into a Custodian Agreement in connection therewith. Pursuant to the terms of the Custodian Agreement, BBH&Co. is responsible for the holding and safekeeping of assets delivered to it by the Funds, and performing various administrative duties in accordance with instructions delivered to BBH&Co. by the Funds. The Custodian’s fees are or will be paid on behalf of the Funds by the Sponsor.

The Distributor

SEI Investments Distribution Co. (“SEI”), serves as Distributor of the Funds and assists the Sponsor and the Administrator with certain functions and duties relating to distribution and marketing, including taking creation and redemption orders, consulting with the marketing staff of the Sponsor and its affiliates with respect to compliance with the requirements of FINRA and/or the NFA in connection with marketing efforts, and reviewing and filing of marketing materials with FINRA and/or the NFA. SEI retains all marketing materials separately for each Fund, at c/o SEI, One Freedom Valley Drive, Oaks, PA 19456. The Sponsor, on behalf of each Fund, has entered into a Distribution Services Agreement with SEI.

 

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Routine Operational, Administrative and Other Ordinary Expenses

The Sponsor pays or will pay all of the routine operational, administrative and other ordinary expenses of each Fund generally, as determined by the Sponsor including, but not limited to, fees and expenses of the Administrator, Custodian, Distributor, Transfer Agent, DJ-UBS, accounting and auditing fees and expenses, tax preparation expenses, legal fees not in excess of $100,000 per annum, ongoing SEC registration fees not exceeding 0.021% per annum of the NAV of a Fund, FINRA filing fees, individual K-1 preparation and mailing fees not exceeding 0.10% per annum of the NAV of a Fund, and report preparation and mailing expenses.

Non-Recurring Fees and Expenses

Each Leveraged Fund and VIX Fund pays and each Short Fund will pay all non-recurring and unusual fees and expenses, if any, as determined by the Sponsor. Non-recurring fees and expenses are fees and expenses such as legal claims and liabilities, litigation costs or indemnification or other material expenses which are not currently anticipated obligations of the Funds. Such fees and expenses are those that are non-recurring, unexpected or unusual in nature.

NOTE 5 – ORGANIZATION AND OFFERING COSTS

Organization costs are expensed as incurred and offering costs will be amortized by the Funds over a twelve month period on a straight-line basis. The Sponsor did not charge its fee in the first year of operation of each Leveraged Fund in an amount equal to the organization and offering fees. The Sponsor reimbursed each Leveraged Fund if its organization and offering costs exceeded 0.95% of its average daily NAV for the first year of operations.

Offering costs on the VIX Funds and the New Funds will be amortized over a twelve month period on a straight-line basis. The Sponsor will not charge its fee in the first year of operation of each VIX and Short Fund in an amount equal to the offering fees. The Sponsor has agreed to reimburse each VIX and Short Fund to the extent that its offering costs exceed 0.85% and 0.95%, respectively, of its average daily NAV for the first year of operations. At June 30, 2011, amounts payable for offering costs are reflected in the Statement of Financial Condition for each VIX and Short Fund.

NOTE 6 – CREATION AND REDEMPTION OF CREATION UNITS

Each Leveraged Fund and VIX Fund issues and redeems Shares and each Short Fund will issue and redeem shares from time to time, but only in one or more Creation Units. A Creation Unit is a block of 50,000 Shares of a Geared Fund and 25,000 Shares of a VIX Fund. Creation Units may be created or redeemed only by Authorized Participants. As a result of the reverse share splits as described in Note 1, certain redemptions as disclosed in the Statements of Changes in Shareholders’ Equity reflect payment of fractional share balances on beneficial shareholder accounts.

Except when aggregated in Creation Units, the Shares are not redeemable securities. Retail investors, therefore, generally will not be able to purchase or redeem Shares directly from or with a Fund. Rather, most retail investors will purchase or sell Shares in the secondary market with the assistance of a broker. Thus, some of the information contained in these Notes to Financial Statements—such as references to the Transaction Fees imposed on purchases and redemptions—is not relevant to retail investors.

Transaction Fees on Creation and Redemption Transactions

The manner by which Creation Units are purchased or redeemed is dictated by the terms of the Authorized Participant Agreement and Authorized Participant Handbook. By placing a purchase order, an Authorized Participant agrees to: (1) deposit cash with BBH&Co., the custodian of the Funds (the “Custodian”); and (2) if permitted by the Sponsor in its sole discretion with respect to a VIX Fund, enter into or arrange for an exchange of futures contract for related position (“EFCRP”) or block trade with the VIX Fund whereby the Authorized Participant would also transfer to such Fund a number and type of exchange-traded VIX futures contracts at or near the closing settlement price for such contracts on the purchase order date.

 

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Authorized Participants, generally, pay a fixed transaction fee of $500 in connection with each order to create or redeem a Creation Unit in order to compensate BBH&Co. for services in processing the creation and redemption of Creation Units. The fixed transaction fee for the VIX Funds is currently being paid for by the Sponsor. Authorized Participants may be required to pay a variable transaction fee of up to 0.10% of the value of the Creation Unit that is purchased or redeemed. The current variable transaction fee is 0.022% for the Commodity and Commodity Index Funds. There is currently no variable transaction fee for the Currency and VIX Funds. Authorized Participants may sell the Shares included in the Creation Units they purchase from the Funds to other investors in the secondary market. Currently there are no additional fees being charged for related EFCRP or block trade transactions.

The transaction fees that are included in the Sale and/or Redemption of Shares on the Statements of Changes in Shareholders’ Equity were as follows:

 

Fund

   Three Months  Ended
June 30, 2011
     Six Months  Ended
June 30, 2011
 

Ultra DJ-UBS Commodity

   $ 358       $ 755   

UltraShort DJ-UBS Commodity

     29,880         30,200   

Ultra DJ-UBS Crude Oil

     113,396         311,649   

UltraShort DJ-UBS Crude Oil

     84,973         135,226   

Ultra Gold

     7,903         12,822   

UltraShort Gold

     5,124         16,602   

Ultra Silver

     148,780         247,685   

UltraShort Silver

     202,237         248,427   

Ultra Euro

     —           —     

UltraShort Euro

     —           —     

Ultra Yen

     —           —     

UltraShort Yen

     —           —     

VIX Short-Term Futures ETF

     —           —     

VIX Mid-Term Futures ETF

     —           —     
  

 

 

    

 

 

 

Total Trust

   $ 592,651       $ 1,003,366   

 

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NOTE 7 – FINANCIAL HIGHLIGHTS

Selected data for a Share outstanding throughout the three months ended June 30, 2011:

Ultra ProShares

For the Three Months Ended June 30, 2011 (unaudited)

 

Per Share Operating Performance

   Ultra  DJ-
UBS
Commodity
    Ultra DJ-
UBS
Crude Oil
    Ultra Gold     Ultra Silver     Ultra Euro     Ultra Yen  

Net asset value, at March 31, 2011

   $ 39.4570      $ 57.1100      $ 71.6461      $ 227.3274      $ 28.8831      $ 31.7638   

Net investment income (loss)

     (0.0821     (0.1146     (0.1718     (0.4856     (0.0657     (0.0734

Net realized and unrealized gain (loss)

     (5.9853     (14.3521     5.9954        (58.8558     1.3854        2.0744   

Change in net asset value from operations

     (6.0674     (14.4667     5.8236        (59.3414     1.3197        2.0010   

Net asset value, at June 30, 2011

   $ 33.3896      $ 42.6433      $ 77.4697      $ 167.9860      $ 30.2028      $ 33.7648   

Market value per share, at March 31, 2011†

   $ 39.67      $ 56.99      $ 71.13      $ 225.09      $ 28.90      $ 31.77   

Market value per share, at June 30, 2011†

   $ 33.38      $ 42.18      $ 76.78      $ 164.93      $ 30.16      $ 33.78   

Total Return, at net asset value^

     (15.4 )%      (25.3 )%      8.1     (26.1 )%      4.6     6.3

Total Return, at market value^

     (15.9 )%      (26.0 )%      7.9     (26.7 )%      4.4     6.3

Ratios to Average Net Assets**

            

Expense ratio

     (0.95 )%      (0.99 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )% 

Expense ratio, excluding brokerage commissions

     (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )% 

Net investment income (loss)

     (0.88 )%      (0.93 )%      (0.88 )%      (0.89 )%      (0.89 )%      (0.89 )% 

 

Market values are determined at the close of the New York Stock Exchange, which may be later than when the Funds’ net asset value is calculated.
^ Percentages are not annualized for the period ended June 30, 2011.
** Percentages are annualized.

 

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Table of Contents

UltraShort ProShares

For the Three Months Ended June 30, 2011 (unaudited)

 

Per Share Operating Performance

   UltraShort DJ-
UBS  Commodity
    UltraShort DJ-
UBS Crude  Oil
    UltraShort
Gold
    UltraShort
Silver
    UltraShort
Euro
    UltraShort
Yen
 

Net asset value, at March 31, 2011

   $ 42.6800      $ 41.2095      $ 26.6741      $ 23.0776      $ 17.8435      $ 16.2663   

Net investment income (loss)

     (0.1048     (0.0981     (0.0536     (0.0414     (0.0379     (0.0342

Net realized and unrealized gain (loss)#

     5.7788        7.1691        (2.6787     (4.3624     (1.0552     (1.0976

Change in net asset value from operations

     5.6740        7.0710        (2.7323     (4.4038     (1.0931     (1.1318

Net asset value, at June 30, 2011

   $ 48.3540      $ 48.2805      $ 23.9418      $ 18.6738      $ 16.7504      $ 15.1345   

Market value per share, at March 31, 2011†

   $ 42.99      $ 41.30      $ 26.85      $ 23.33      $ 17.85      $ 16.27   

Market value per share, at June 30, 2011†

   $ 48.67      $ 48.80      $ 24.14      $ 18.99      $ 16.76      $ 15.13   

Total Return, at net asset value^

     13.3     17.2     (10.2 )%      (19.1 )%      (6.1 )%      (7.0 )% 

Total Return, at market value^

     13.2     18.2     (10.1 )%      (18.6 )%      (6.1 )%      (7.0 )% 

Ratios to Average Net Assets**

            

Expense ratio

     (0.95 )%      (0.99 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )% 

Expense ratio, excluding brokerage commissions

     (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )% 

Net investment income (loss)

     (0.92 )%      (0.93 )%      (0.89 )%      (0.90 )%      (0.88 )%      (0.88 )% 

 

# The amount shown for a share outstanding throughout the period may not accord with the change in aggregate gains and losses during the period because of timing of creation and redemption units in relation to fluctuating net asset value during the period.
Market values are determined at the close of the New York Stock Exchange, which may be later than when the Funds’ net asset value is calculated.
^ Percentages are not annualized for the period ended June 30, 2011.
** Percentages are annualized.

 

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Table of Contents

VIX ProShares

For the Three Months Ended June 30, 2011 (unaudited)

 

Per Share Operating Performance

   VIX Short-
Term  Futures
ETF
    VIX Mid-
Term  Futures
ETF
 

Net asset value, at March 31, 2011

   $ 64.0693      $ 67.3930   

Net investment income (loss)

     (0.1037     (0.1266

Net realized and unrealized gain (loss)

     (18.5001     (5.5090

Change in net asset value from operations

     (18.6038     (5.6356

Net asset value, at June 30, 2011

   $ 45.4655      $ 61.7574   

Market value per share, at March 31, 2011†

   $ 63.75      $ 67.38   

Market value per share, at June 30, 2011†

   $ 45.68      $ 61.78   

Total Return, at net asset value^

     (29.0 )%      (8.4 )% 

Total Return, at market value^

     (28.3 )%      (8.3 )% 

Ratios to Average Net Assets**

    

Expense ratio

     (0.85 )%      (0.85 )% 

Expense ratio, excluding brokerage commissions

     (0.85 )%      (0.85 )% 

Net investment income (loss)

     (0.80 )%      (0.78 )% 

 

Market values are determined at the close of the New York Stock Exchange, which may be later than when the Funds’ net asset value is calculated.
^ Percentages are not annualized for the period ended June 30, 2011.
** Percentages are annualized.

 

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Table of Contents

Selected data for a Share outstanding throughout the three months ended June 30, 2010:

Ultra ProShares

For the Three Months Ended June 30, 2010 (unaudited)

 

Per Share Operating Performance

   Ultra DJ-UBS
Commodity
    Ultra DJ-UBS
Crude Oil*
    Ultra Gold     Ultra Silver     Ultra Euro     Ultra Yen  

Net asset value, at March 31, 2010

   $ 25.0306      $ 52.9615      $ 45.5836      $ 58.0458      $ 26.6928      $ 25.7725   

Net investment income (loss)

     (0.0438     (0.0888     (0.1019     (0.1193     (0.0472     (0.0519

Net realized and unrealized gain (loss)

     (2.6147     (14.3519     10.3379        5.6087        (4.8740     2.8906   

Change in net asset value from operations

     (2.6585     (14.4407     10.2360        5.4894        (4.9212     2.8387   

Net asset value, at June 30, 2010

   $ 22.3721      $ 38.5208      $ 55.8196      $ 63.5352      $ 21.7716      $ 28.6112   

Market value per share, at March 31, 2010†

   $ 25.04      $ 52.24      $ 45.38      $ 57.77      $ 26.74      $ 25.81   

Market value per share, at June 30, 2010†

   $ 22.16      $ 38.12      $ 55.83      $ 62.67      $ 21.76      $ 28.65   

Total Return, at net asset value^

     (10.6 )%      (27.3 )%      22.5     9.5     (18.4 )%      11.0

Total Return, at market value^

     (11.5 )%      (27.0 )%      23.0     8.5     (18.6 )%      11.0

Ratios to Average Net Assets**

            

Expense ratio

     (0.95 )%      (1.01 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )% 

Expense ratio, excluding brokerage commissions

     (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )% 

Net investment income (loss)

     (0.73 )%      (0.86 )%      (0.79 )%      (0.77 )%      (0.82 )%      (0.79 )% 

 

* See Note 1 of these Notes to Financial Statements.
Market values are determined at the close of the New York Stock Exchange, which may be later than when the Funds’ net asset value is calculated.
^ Percentages are not annualized for the period ended June 30, 2010.
** Percentages are annualized.

 

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Table of Contents

UltraShort ProShares

For the Three Months Ended June 30, 2010 (unaudited)

 

Per Share Operating Performance

   UltraShort DJ-
UBS  Commodity*
    UltraShort DJ-
UBS  Crude Oil*
    UltraShort
Gold*
    UltraShort
Silver*
    UltraShort
Euro
    UltraShort
Yen
 

Net asset value, at March 31, 2010

   $ 78.6254      $ 60.5149      $ 48.3567      $ 162.6529      $ 20.7907      $ 21.3981   

Net investment income (loss)

     (0.1675     (0.1370     (0.0822     (0.2777     (0.0450     (0.0394

Net realized and unrealized gain (loss)

     6.0771        15.1013        (10.3277     (34.3149     4.2448        (2.4843

Change in net asset value from operations

     5.9096        14.9643        (10.4099     (34.5926     4.1998        (2.5237

Net asset value, at June 30, 2010

   $ 84.5350      $ 75.4792      $ 37.9468      $ 128.0603      $ 24.9905      $ 18.8744   

Market value per share, at March 31, 2010†

   $ 78.33      $ 61.35      $ 48.55      $ 163.20      $ 20.80      $ 21.44   

Market value per share, at June 30, 2010†

   $ 85.05      $ 76.20      $ 37.95      $ 129.84      $ 25.01      $ 18.84   

Total Return, at net asset value^

     7.5     24.7     (21.5 )%      (21.3 )%      20.2     (11.8 )% 

Total Return, at market value^

     8.6     24.2     (21.8 )%      (20.4 )%      20.2     (12.1 )% 

Ratios to Average Net Assets**

            

Expense ratio

     (0.95 )%      (1.03 )%      (0.95 )%      (0.96 )%      (0.95 )%      (0.95 )% 

Expense ratio, excluding brokerage commissions

     (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )% 

Net investment income (loss)

     (0.82 )%      (0.86 )%      (0.79 )%      (0.78 )%      (0.77 )%      (0.77 )% 

 

* See Note 1 of these Notes to Financial Statements.
Market values are determined at the close of the New York Stock Exchange, which may be later than when the Funds’ net asset value is calculated.
^ Percentages are not annualized for the period ended June 30, 2010.
** Percentages are annualized.

 

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Table of Contents

Selected data for a Share outstanding throughout the six months ended June 30, 2011:

Ultra ProShares

For the Six Months Ended June 30, 2011 (unaudited)

 

Per Share Operating Performance

   Ultra DJ-
UBS
Commodity
    Ultra DJ-
UBS
Crude  Oil*
    Ultra Gold     Ultra Silver     Ultra Euro     Ultra Yen  

Net asset value, at December 31, 2010

   $ 36.3723      $ 50.0017      $ 69.2163      $ 156.2862      $ 25.7644      $ 33.4918   

Net investment income (loss)

     (0.1572     (0.2178     (0.3083     (0.8482     (0.1207     (0.1399

Net realized and unrealized gain (loss)#

     (2.8255     (7.1406     8.5617        12.5480        4.5591        0.4129   

Change in net asset value from operations

     (2.9827     (7.3584     8.2534        11.6998        4.4384        0.2730   

Net asset value, at June 30, 2011

   $ 33.3896      $ 42.6433      $ 77.4697      $ 167.9860      $ 30.2028      $ 33.7648   

Market value per share, at December 31, 2010†

   $ 36.27      $ 49.98      $ 70.72      $ 158.59      $ 25.86      $ 33.29   

Market value per share, at June 30, 2011†

   $ 33.38      $ 42.18      $ 76.78      $ 164.93      $ 30.16      $ 33.78   

Total Return, at net asset value^

     (8.2 )%      (14.7 )%      11.9     7.5     17.2     0.8

Total Return, at market value^

     (8.0 )%      (15.6 )%      8.6     4.0     16.6     1.5

Ratios to Average Net Assets**

            

Expense ratio

     (0.95 )%      (0.99 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )% 

Expense ratio, excluding brokerage commissions

     (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )% 

Net investment income (loss)

     (0.86 )%      (0.90 )%      (0.86 )%      (0.87 )%      (0.86 )%      (0.86 )% 

 

* See Note 1 of these Notes to Financial Statements.
# The amount shown for a share outstanding throughout the period may not accord with the change in aggregate gains and losses during the period because of timing of creation and redemption units in relation to fluctuating net asset value during the period.
Market values are determined at the close of the New York Stock Exchange, which may be later than when the Funds’ net asset value is calculated.
^ Percentages are not annualized for the period ended June 30, 2011.
** Percentages are annualized.

 

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UltraShort ProShares

For the Six Months Ended June 30, 2011 (unaudited)

 

Per Share Operating Performance

   UltraShort DJ-
UBS  Commodity*
    UltraShort DJ-
UBS  Crude Oil*
    UltraShort
Gold
    UltraShort
Silver*
    UltraShort
Euro
    UltraShort
Yen
 

Net asset value, at December 31, 2010

   $ 47.9976      $ 50.8516      $ 28.3706      $ 39.8927      $ 20.2928      $ 15.6744   

Net investment income (loss)

     (0.2072     (0.2032     (0.1127     (0.0907     (0.0768     (0.0668

Net realized and unrealized gain (loss)#

     0.5636        (2.3679     (4.3161     (21.1282     (3.4656     (0.4731

Change in net asset value from operations

     0.3564        (2.5711     (4.4288     (21.2189     (3.5424     (0.5399

Net asset value, at June 30, 2011

   $ 48.3540      $ 48.2805      $ 23.9418      $ 18.6738      $ 16.7504      $ 15.1345   

Market value per share, at December 31, 2010†

   $ 48.30      $ 50.85      $ 27.80      $ 39.28      $ 20.31      $ 15.67   

Market value per share, at June 30, 2011†

   $ 48.67      $ 48.80      $ 24.14      $ 18.99      $ 16.76      $ 15.13   

Total Return, at net asset value^

     0.7     (5.1 )%      (15.6 )%      (53.2 )%      (17.5 )%      (3.4 )% 

Total Return, at market value^

     0.8     (4.0 )%      (13.2 )%      (51.7 )%      (17.5 )%      (3.4 )% 

Ratios to Average Net Assets**

            

Expense ratio

     (0.95 )%      (0.99 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )% 

Expense ratio, excluding brokerage commissions

     (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )% 

Net investment income (loss)

     (0.92 )%      (0.91 )%      (0.86 )%      (0.88 )%      (0.85 )%      (0.86 )% 

 

* See Note 1 of these Notes to Financial Statements.
# The amount shown for a share outstanding throughout the period may not accord with the change in aggregate gains and losses during the period because of timing of creation and redemption units in relation to fluctuating net asset value during the period.
Market values are determined at the close of the New York Stock Exchange, which may be later than when the Funds’ net asset value is calculated.
^ Percentages are not annualized for the period ended June 30, 2011.
** Percentages are annualized.

 

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VIX ProShares

For the Six Months Ended June 30, 2011 (unaudited)

 

     VIX Short-     VIX Mid-  
     Term Futures     Term Futures  

Per Share Operating Performance

   ETF     ETF  

Net asset value, at December 31, 2010

   $ 80.0000      $ 80.0000   

Net investment income (loss)

     (0.2111     (0.2538

Net realized and unrealized gain (loss)

     (34.3234     (17.9888

Change in net asset value from operations

     (34.5345     (18.2426

Net asset value, at June 30, 2011

   $ 45.4655      $ 61.7574   

Market value per share, at December 31, 2010†

   $ 80.00      $ 80.00   

Market value per share, at June 30, 2011†

   $ 45.68      $ 61.78   

Total Return, at net asset value^

     (43.2 )%      (22.8 )% 

Total Return, at market value^

     (42.9 )%      (22.8 )% 

Ratios to Average Net Assets**

    

Expense ratio

     (0.85 )%      (0.85 )% 

Expense ratio, excluding brokerage commissions

     (0.85 )%      (0.85 )% 

Net investment income (loss)

     (0.79 )%      (0.78 )% 

 

Market values are determined at the close of the New York Stock Exchange, which may be later than when the Funds’ net asset value is calculated.
^ Percentages are not annualized for the period ended June 30, 2011.
** Percentages are annualized.

 

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Table of Contents

Selected data for a Share outstanding throughout the six months ended June 30, 2010:

Ultra ProShares

For the Six Months Ended June 30, 2010 (unaudited)

 

Per Share Operating Performance

   Ultra DJ-
UBS
Commodity
    Ultra DJ-
UBS
Crude Oil*
    Ultra Gold     Ultra Silver     Ultra Euro     Ultra Yen  

Net asset value, at December 31, 2009

   $ 28.2051      $ 50.4982      $ 44.0778      $ 57.0257      $ 30.1257      $ 26.1393   

Net investment income (loss)

     (0.0961     (0.1928     (0.2012     (0.2361     (0.1035     (0.1101

Net realized and unrealized gain (loss)

     (5.7369     (11.7846     11.9430        6.7456        (8.2506     2.5820   

Change in net asset value from operations

     (5.8330     (11.9774     11.7418        6.5095        (8.3541     2.4719   

Net asset value, at June 30, 2010

   $ 22.3721      $ 38.5208      $ 55.8196      $ 63.5352      $ 21.7716      $ 28.6112   

Market value per share, at December 31, 2009†

   $ 28.43      $ 50.72      $ 44.68      $ 56.15      $ 30.17      $ 26.58   

Market value per share, at June 30, 2010†

   $ 22.16      $ 38.12      $ 55.83      $ 62.67      $ 21.76      $ 28.65   

Total Return, at net asset value^

     (20.7 )%      (23.7 )%      26.6     11.4     (27.7 )%      9.5

Total Return, at market value^

     (22.1 )%      (24.8 )%      25.0     11.6     (27.9 )%      7.8

Ratios to Average Net Assets**

            

Expense ratio

     (0.95 )%      (1.00 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )% 

Expense ratio, excluding brokerage commissions

     (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )% 

Net investment income (loss)

     (0.77 )%      (0.89 )%      (0.84 )%      (0.81 )%      (0.84 )%      (0.82 )% 

 

* See Note 1 of these Notes to Financial Statements.
Market values are determined at the close of the New York Stock Exchange, which may be later than when the Funds’ net asset value is calculated.
^ Percentages are not annualized for the period ended June 30, 2010.
** Percentages are annualized.

 

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UltraShort ProShares

For the Six Months Ended June 30, 2010 (unaudited)

 

Per Share Operating Performance

   UltraShort DJ-
UBS  Commodity*
    UltraShort DJ-
UBS  Crude Oil*
    UltraShort
Gold*
    UltraShort
Silver*
    UltraShort
Euro
    UltraShort
Yen
 

Net asset value, at December 31, 2009

   $ 73.1052      $ 68.4432      $ 52.4052      $ 188.3683      $ 18.6755      $ 21.4246   

Net investment income (loss)

     (0.3317     (0.2897     (0.1886     (0.6730     (0.0887     (0.0824

Net realized and unrealized gain (loss)

     11.7615        7.3257        (14.2698     (59.6350     6.4037        (2.4678

Change in net asset value from operations

     11.4298        7.0360        (14.4584     (60.3080     6.3150        (2.5502

Net asset value, at June 30, 2010

   $ 84.5350      $ 75.4792      $ 37.9468      $ 128.0603      $ 24.9905      $ 18.8744   

Market value per share, at December 31, 2009†

   $ 73.23      $ 68.25      $ 51.75      $ 191.60      $ 18.70      $ 21.30   

Market value per share, at June 30, 2010†

   $ 85.05      $ 76.20      $ 37.95      $ 129.84      $ 25.01      $ 18.84   

Total Return, at net asset value^

     15.6     10.3     (27.6 )%      (32.0 )%      33.8     (11.9 )% 

Total Return, at market value^

     16.1     11.6     (26.7 )%      (32.2 )%      33.7     (11.5 )% 

Ratios to Average Net Assets**

            

Expense ratio

     (0.95 )%      (1.01 )%      (0.96 )%      (0.96 )%      (0.95 )%      (0.95 )% 

Expense ratio, excluding brokerage commissions

     (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )% 

Net investment income (loss)

     (0.84 )%      (0.89 )%      (0.84 )%      (0.83 )%      (0.80 )%      (0.81 )% 

 

* See Note 1 of these Notes to Financial Statements.
Market values are determined at the close of the New York Stock Exchange, which may be later than when the Funds’ net asset value is calculated.
^ Percentages are not annualized for the period ended June 30, 2010.
** Percentages are annualized.

 

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NOTE 8 – RISK

Correlation and Compounding Risk

The Geared Funds do not seek to achieve their stated investment objective over a period of time greater than one day because mathematical compounding prevents the Funds from achieving such results. Accordingly, results over periods of time greater than one day should not be expected to be a simple inverse correlation (-1x) or multiple (2x or -2x) of the period return of the corresponding benchmark and will likely differ significantly. Geared Funds seek daily results as measured from the calculation of one NAV to the next. The VIX Funds seek to achieve their stated investment objective both over a single day and over time.

While the Funds expect to meet their investment objectives, several factors may affect their ability to do so. Among these factors are: (1) a Fund’s expenses, including fees, transaction costs and the cost of the investment techniques employed by that Fund (such as costs related to the purchase, sale and storage of the commodities or currencies and the cost of leverage, all of which may be embedded in financial instruments used by a Fund); (2) less than all of the commodities in the relevant benchmark index being held by a Commodity Index Fund or its weighting of investment exposure to such commodities being different from that of the relevant benchmark index; (3) an imperfect correlation between the performance of instruments held by a Fund, such as swaps, futures contracts and/or forward contracts, and the performance of the applicable underlying indices, commodities or currencies in the cash market; (4) bid-ask spreads; (5) holding instruments traded in a market that has become illiquid or disrupted; (6) a Fund’s share prices being rounded to the nearest cent; (7) changes to a benchmark index that are not disseminated in advance; (8) the need to conform a Fund’s portfolio holdings to comply with investment restrictions or policies or regulatory or tax law requirements; (9) early and unanticipated closings of the markets on which the holdings of a Fund trade, resulting in the inability of the Fund to execute intended portfolio transactions.

A number of factors may affect a Geared Fund’s ability to achieve a high degree of correlation with its benchmark, and there can be no guarantee that a Fund will achieve a high degree of correlation. Failure to achieve a high degree of correlation may prevent a Geared Fund from achieving its investment objective. A number of factors may adversely affect a Geared Fund’s correlation with its benchmark, including fees, expenses, transaction costs, costs and risks associated with the use of leveraged investment techniques, income items, accounting standards and disruptions or illiquidity in the markets for the commodities or Financial Instruments (i.e., commodity-based or currency-based instruments whose value is derived from the value of an underlying asset, rate or index) in which the Fund invests. A Geared Fund may not have investment exposure to all of the commodities or currencies in its underlying benchmark index, or its weighting of investment exposure to such commodities or currencies may be different from that of the index. In addition, a Geared Fund may invest in commodities or currencies or Financial Instruments not included in the index underlying its benchmark. A Geared Fund may be subject to large movements of assets into and out of the Fund, potentially resulting in the Fund being over- or under-exposed to its benchmark. Activities surrounding annual index reconstitutions and other index rebalancing or reconstitution events may hinder a Geared Fund’s ability to meet its daily investment objective on or around that day. Each Geared Fund seeks to rebalance its portfolio daily to keep leverage consistent with its daily investment objective.

Compounding affects all investments, but has a more significant impact on a Geared Fund. The Geared Funds are “geared” in the sense that they have investment objectives to match a multiple, the inverse or a multiple of the inverse of the performance of an index on a given day. These Funds are subject to all of the correlation risks described above. In addition, there is a special form of correlation risk that derives from such Funds’ having a single day investment objective in combination with the use of leverage, which is that for periods greater than one day, the effect of compounding may cause the performance of a Fund to be either greater than or less than the index performance (or the inverse of the index performance) times the stated multiple in the Fund objective, before accounting for fees and fund expenses. This effect can be even more significant in the case of the Leveraged Funds due to the use of leverage. The Geared Funds are designed to provide leveraged (e.g. 2x), inverse (e.g. -1x) or inverse leveraged (e.g. -2x) results on a daily basis (before fees and expenses). Investors should monitor their holdings consistent with their strategies, as frequently as daily.

 

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Counterparty Risk

A Fund will be subject to credit risk with respect to the amount it expects to receive from counterparties to Financial Instruments entered into by the Fund. The Funds structure the agreements such that either party can terminate the contract without penalty prior to the termination date. A Fund may be negatively impacted if a counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties. A Fund may experience significant delays in obtaining any recovery in a bankruptcy or other reorganization proceeding and a Fund may obtain only limited recovery or may obtain no recovery in such circumstances. The Funds have sought to mitigate risks by generally requiring that the counterparties for each Fund agree to post collateral for the benefit of the Fund, marked to market daily, in an amount approximately equal to what the counterparty owes the Fund. In the event of the bankruptcy of a counterparty, the Fund will have direct access to the collateral received from the counterparty, generally as of the day prior to the bankruptcy, because there is a one day time lag between the Fund’s request for collateral and the delivery of such collateral. To the extent any such collateral is insufficient, the Funds will be exposed to counterparty risk as described above, including the possible delays in recovering amounts as a result of bankruptcy proceedings. The Funds typically enter into transactions with counterparties whose credit rating, at the time of the transaction, is investment grade, as determined by a nationally recognized statistical rating organization, or, if unrated, judged by the Sponsor to be of comparable quality.

Leverage Risk

The Funds use investment techniques that may be considered aggressive, including the use of futures contracts, swap agreements and forward agreements. The Funds’ investment in Financial Instruments may involve a small investment relative to the amount of investment exposure assumed and may result in losses exceeding the amounts invested. Such instruments, particularly when used to create leverage, may expose the Funds to potentially dramatic changes (losses or gains) in the value of the instruments.

Liquidity Risk

In certain circumstances, such as the disruption of the orderly markets for the commodities or Financial Instruments in which a Fund invests, a Fund might not be able to dispose of certain holdings quickly or at prices that represent true market value in the judgment of the Sponsor. Such a situation may prevent a Fund from limiting losses, realizing gains or achieving a high correlation or inverse correlation with its underlying index.

“Contango” and “Backwardation” Risk

In Funds that hold futures contracts, as the futures contracts near expiration, they are generally replaced by contracts that have a later expiration. Thus, for example, a contract purchased and held in August 2010 may specify an October 2010 expiration. For an Ultra Fund and a VIX Fund, as that contract nears expiration, it may be replaced by selling the October 2010 contract and purchasing the contract expiring in December 2010. This process is referred to as “rolling.” Rolling may have a positive or negative impact on performance. For example, historically, the prices of certain types of futures contracts have frequently been higher for contracts with shorter-term expirations than for contracts with longer-term expirations, which is referred to as “backwardation.” In these circumstances, absent other factors, the sale of the October 2010 contract would take place at a price that is higher than the price at which the December 2010 contract is purchased, thereby creating a gain in connection with rolling. While certain types of futures contracts have historically exhibited consistent periods of backwardation, backwardation will likely not exist in these markets at all times. The presence of contango (where prices of contracts are higher in the distant delivery months than in the nearer delivery months due to the costs of long-term storage of a physical commodity prior to delivery or other factors) in certain futures contracts at the time of rolling would be expected to adversely affect an Ultra Fund or a VIX Fund that invests in such futures and positively affect an UltraShort Fund or Short Fund that invests in such futures. Similarly, the presence of backwardation in certain futures contracts at the time of rolling such contracts would be expected to adversely affect the Short Funds and UltraShort Funds and positively affect the Ultra Funds and existing VIX Funds.

Since the introduction of VIX futures contracts, there have frequently been periods where VIX futures prices reflect higher expected volatility levels further out in time. This can result in a loss from “rolling” the VIX futures to maintain the constant weighted average maturity of the VIX Futures Index. Losses from exchanging a lower priced

 

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VIX future for a higher priced longer-term future in the rolling process would adversely affect the value of each VIX Futures Index and the VIX Funds and, accordingly, decrease the return of the VIX Funds.

Gold and silver historically exhibit persistent “contango” markets rather than backwardation. Natural gas, like crude oil, moves in and out of backwardation and contango but historically has been in contango most commonly. It is generally believed this is because the market needs to build inventories for most of the year in order to have enough storage to make it through a normal winter. Periods of backwardation are typically thought to be caused by demand shocks or supply shortages such as an unusually cold winter or a hurricane.

NOTE 9 – LEGAL PROCEEDINGS

The Trust and certain officers are defendants (along with several other parties) in a consolidated class action styled In re ProShares Trust Securities Litigation, Civ. No. 09-cv-6935, filed in the United States District Court for the Southern District of New York. The complaint, as amended, alleges that the defendants violated Sections 11 and 15 of the Securities Act of 1933 by including untrue statements of material fact and omitting material facts in the Registration Statement for one or more ProShares ETFs, allegedly failing to adequately disclose the Funds’ investment objectives and risks. The six Funds of the Trust named in the complaint are ProShares Ultra Silver, ProShares UltraShort Gold, ProShares Ultra Gold, ProShares UltraShort DJ-UBS Crude Oil, ProShares Ultra DJ-UBS Crude Oil and ProShares UltraShort Silver. The Trust believes the complaint is without merit and that the anticipated outcome will not adversely impact the operation of the Trust or any of its Funds. Accordingly, no loss contingency has been recorded in the balance sheet and the amount of loss, if any, cannot be reasonably estimated at this time.

NOTE 10 – SUBSEQUENT EVENTS

Management has evaluated the possibility of subsequent events existing in the Trust’s and the Funds’ financial statements through the date the financial statements were issued. Management has determined that there are no material events that would require disclosure in the Trust’s or the Funds’ financial statements through this date.

 

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

This information should be read in conjunction with the financial statements and notes to the financial statements included with this Quarterly Report on Form 10-Q. The discussion and analysis that follows may contain statements that relate to future events or future performance. In some cases, such forward-looking statements can be identified by terminology such as “will,” “may,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or the negative of these terms or other comparable terminology. None of the Trust, the Sponsor or the Trustee (as each term is defined below) assumes responsibility for the accuracy or completeness of any forward-looking statements. Except as expressly required by federal securities laws, none of the Trust, the Sponsor or the Trustee is under a duty to update any of the forward-looking statements to conform such statements to actual results or to a change in expectations or predictions.

Introduction

ProShares Trust II (formerly known as the Commodities and Currencies Trust) (the “Trust”) is a Delaware statutory trust formed on October 9, 2007 and currently organized into separate series (each, a “Fund” and collectively, the “Funds”). The following fourteen series of the Trust, ProShares Ultra DJ-UBS Commodity, ProShares UltraShort DJ-UBS Commodity, ProShares Ultra DJ-UBS Crude Oil, ProShares UltraShort DJ-UBS Crude Oil, ProShares Ultra Gold, ProShares UltraShort Gold, ProShares Ultra Silver, ProShares UltraShort Silver, ProShares Ultra Euro, ProShares UltraShort Euro, ProShares Ultra Yen and ProShares UltraShort Yen (each, a “Leveraged Fund” and collectively, the “Leveraged Funds”), ProShares VIX Short-Term Futures ETF and ProShares VIX Mid-Term Futures ETF (each, a “VIX Fund” and collectively, the “VIX Funds”) issue common units of beneficial interest (“Shares”), which represent units of fractional undivided beneficial interest in and ownership of only that Leveraged or VIX Fund. The Shares of each Leveraged and VIX Fund are listed on the New York Stock Exchange Archipelago (“NYSE Arca”). The Trust has also registered shares for ten additional series: ProShares Short DJ-UBS Natural Gas and ProShares Short Gold (each, a “Short Fund” and collectively, the “Short Funds”), ProShares Ultra DJ-UBS Natural Gas, ProShares UltraShort DJ-UBS Natural Gas (each, a “New Natural Gas Fund” and collectively, the “New Natural Gas Funds”), ProShares Ultra VIX Short-Term Futures ETF, ProShares Short VIX Short-Term Futures ETF, ProShares UltraShort VIX Short-Term Futures ETF, ProShares Ultra VIX Mid-Term Futures ETF, ProShares Short VIX Mid-Term Futures ETF and ProShares UltraShort VIX Mid-Term Futures ETF (each, a “New VIX Fund” and collectively, the “New VIX Funds”). The Short Funds, the New Natural Gas Funds and the New VIX Funds are collectively referred to herein as the “New Funds”. As of June 30, 2011, each of the Short Funds had seed capital of $200, but neither of the Short Funds had commenced investment operations, and each of the New Natural Gas Funds and the New VIX Funds had seed capital of $400, but none of the New Natural Gas Funds or the New VIX Funds had commenced investment operations; therefore, the Financial Statements in this Quarterly Report on Form 10-Q do not include Schedules of Investments, Statements of Operations, Statements of Changes in Shareholders’ Equity or Statements of Cash Flows for the New Funds. The Short Funds and the New Natural Gas Funds, together with the Leveraged Funds, are referred to as the “Geared Funds” in this Quarterly Report on Form 10-Q. The Trust had no operations prior to November 24, 2008 other than matters relating to its organization, the registration of each series under the Securities Act of 1933, as amended, and the sale and issuance to ProShare Capital Management LLC (the “Sponsor”) of fourteen Shares of each Leveraged Fund at an aggregate purchase price of $350 in each of the Funds.

Eight of the Funds, ProShares Ultra DJ-UBS Commodity, ProShares UltraShort DJ-UBS Commodity, ProShares Ultra DJ-UBS Crude Oil, ProShares UltraShort DJ-UBS Crude Oil, ProShares Ultra Euro, ProShares UltraShort Euro, ProShares Ultra Yen and ProShares UltraShort Yen, commenced trading on the NYSE Arca on November 25, 2008. Four of the Funds, ProShares Ultra Gold, ProShares UltraShort Gold, ProShares Ultra Silver and ProShares UltraShort Silver, commenced trading on the NYSE Arca on December 3, 2008. The VIX Funds commenced trading on the NYSE Arca on January 3, 2011. As of June 30, 2011, ProShares Short DJ-UBS Natural Gas and ProShares Short Gold had not yet commenced investment operations.

ProShare Capital Management LLC serves as the Trust’s Sponsor (the “Sponsor”), commodity pool operator and commodity trading advisor. Wilmington Trust Company serves as the Trustee of the Trust (the “Trustee”). The Funds are commodity pools, as defined under the Commodity Exchange Act and the applicable regulations of the Commodity Futures Trading Commission (the “CFTC”) and are operated by the Sponsor, a commodity pool

 

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operator registered with the CFTC. The Trust is not an investment company registered under the Investment Company Act of 1940, as amended.

Groups of Funds are collectively referred to in this Quarterly Report on Form 10-Q in several different ways. References to “Ultra Funds,” “Short Funds” or “UltraShort Funds” refer to the different Funds based upon their investment objectives, but without distinguishing among the Funds’ benchmarks. References to “Commodity Index Funds,” “Commodity Funds” and “Currency Funds” refer to the different Funds according to their general benchmark categories without distinguishing among the Funds’ investment objectives or Fund-specific benchmarks. References to “VIX Funds” refer to the different Funds based upon their investment objective and their general benchmark categories.

Each “Ultra” Fund seeks daily investment results (before fees and expenses) that correspond to twice (2x) the daily performance of its corresponding benchmark, as measured from the calculation of one NAV to the next. Each “Short” Fund will seek daily investment results (before fees and expenses) that correspond to the inverse (-1x) of the daily performance of its corresponding benchmark. Each “UltraShort” Fund seeks daily investment results (before fees and expenses) that correspond to twice the inverse (-2x) of the daily performance of its corresponding benchmark. Each of the Geared Funds generally invests or will invest in Financial Instruments (i.e., commodity-based or currency-based instruments whose value is derived from the value of an underlying asset, rate or index, including futures contracts and options on futures contracts, swap agreements, forward contracts and other commodity-based or currency-based options contracts) as a substitute for investing directly in a commodity or currency in order to gain exposure to the commodity index, commodity or currency. The Financial Instruments in which ProShares Short DJ-UBS Natural Gas will invest are limited to futures contracts. Financial Instruments also are used to produce economically “leveraged” or “inverse” investment results for the Funds. Each “VIX Fund” seeks daily investment results (before fees and expenses) that match the performance of a benchmark. Each VIX Fund obtains exposure to its benchmark by investing in futures contracts (“VIX futures contracts”) based on the Chicago Board Options Exchange (“CBOE”) Volatility Index (the “VIX”).

Each Geared Fund seeks investment results for a single day only, not for longer periods. This is different from most exchange-traded funds and means that the return of such Fund for a period longer than a single trading day will be the result of each day’s returns compounded over the period, which will very likely differ from 2x, -1x or -2x of the return of the index to which such Fund is benchmarked for that period. In periods of higher market volatility, the volatility of the benchmark may be at least as important to a Geared Fund’s return for the period as the return of the benchmark. Geared Funds are riskier than similarly benchmarked exchange-traded funds that are not geared. Accordingly, these funds may not be suitable for all investors and should be used only by knowledgeable investors who understand the potential consequences of seeking daily inverse investment results. Shareholders should actively monitor their investments.

The VIX Funds seek to achieve their stated investment objective both over a single day and over time.

ProShares Ultra DJ-UBS Commodity, ProShares UltraShort DJ-UBS Commodity, ProShares Ultra DJ-UBS Crude Oil and ProShares UltraShort DJ-UBS Crude Oil each have a benchmark designed to track the performance of commodity futures contracts. The daily performance of these indexes and the corresponding funds will likely be very different from the daily performance of the price of the related physical commodities.

Each Geared Fund continuously offers and redeems or will offer and redeem its Shares in blocks of 50,000 Shares and each VIX Fund continuously offers and redeems shares in blocks of 25,000 Shares (each such block a “Creation Unit”). Only Authorized Participants may purchase and redeem Shares from a Fund and then only in Creation Units. An Authorized Participant is an entity that has entered into an Authorized Participant Agreement with one or more of the Funds. Shares of the Funds are offered to Authorized Participants in Creation Units at each Fund’s respective net asset value per Share (“NAV”). Authorized Participants may then offer to the public, from time to time, Shares from any Creation Unit they create at a per-Share market price that varies depending on, among other factors, the trading price of the Shares of each Fund on the NYSE Arca, the NAV and the supply of and demand for the Shares at the time of the offer. Shares from the same Creation Unit may be offered at different times and may have different offering prices based upon the above factors. The form of Authorized Participant Agreement and related Authorized Participant Handbook set forth the terms and conditions under which an Authorized Participant may purchase or redeem a Creation Unit. Authorized Participants do not receive from any Fund, the Sponsor, or any of their affiliates, any underwriting fees or compensation in connection with their sale of Shares to the public.

 

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Liquidity and Capital Resources

In order to collateralize derivatives positions in indices, commodities or currencies, a significant portion of the NAV of each Fund is held in cash and/or U.S. Treasury Securities, agency securities, or other high credit quality short-term fixed-income or similar securities (such as shares of money market funds, bank deposits, bank money market accounts, certain variable rate-demand notes and repurchase agreements collateralized by government securities, whether denominated in U.S. dollars or the applicable foreign currency with respect to a Currency Fund). A portion of these investments may be posted as collateral in connection with swap agreements and each Fund’s trading in futures and forward contracts. The percentage that U.S. Treasury bills and other short-term fixed-income securities bear to the shareholders’ equity of each Fund varies from period to period as the market values of the underlying swaps, futures contracts and forward contracts change. During the three-month and six-month periods ended June 30, 2011 and June 30, 2010, each of the Leveraged and VIX Funds earned interest income as follows:

 

Fund

  Interest Income
Three  Months Ended
June 30, 2011
    Interest Income
Three  Months Ended
June 30, 2010
    Interest Income
Six  Months Ended
June 30, 2011
    Interest Income
Six  Months Ended
June 30, 2010
 

ProShares Ultra DJ-UBS Commodity

  $ 3,412      $ 6,549      $ 9,271      $ 11,318   

ProShares UltraShort DJ-UBS Commodity

    2,051        1,438        2,791        2,318   

ProShares Ultra DJ-UBS Crude Oil

    39,410        132,798        137,728        174,054   

ProShares UltraShort DJ-UBS Crude Oil

    25,984        33,056        62,434        55,494   

ProShares Ultra Gold

    46,720        77,349        118,504        102,169   

ProShares UltraShort Gold

    12,751        26,319        44,027        39,753   

ProShares Ultra Silver

    172,821        80,805        358,916        117,250   

ProShares UltraShort Silver

    57,651        24,355        104,548        39,267   

ProShares Ultra Euro

    1,431        4,342        3,842        5,822   

ProShares UltraShort Euro

    74,406        194,264        218,767        233,219   

ProShares Ultra Yen

    470        1,633        1,495        2,546   

ProShares UltraShort Yen

    63,492        69,595        152,103        86,129   

ProShares VIX Short-Term Futures ETF

    6,917        —          9,937        —     

ProShares VIX Mid-Term Futures ETF

    1,738        —          3,015        —     

Each Fund’s underlying swaps, futures and forward contracts, as the case may be, are subject to periods of illiquidity because of market conditions, regulatory considerations and other reasons. For example, swaps and forward contracts are not traded on an exchange, do not have uniform terms and conditions, and in general are not transferable without the consent of the counterparty. In the case of futures contracts, commodity exchanges may limit fluctuations in certain futures contract prices during a single day by regulations referred to as “daily limits.” During a single day, no futures 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 such futures contracts can neither be taken nor liquidated unless the traders are willing to effect trades at or within the limit. Futures contract prices have occasionally moved the daily limit for several consecutive days with little or no trading. Such market conditions could prevent a Fund from promptly liquidating its futures positions.

Entry into swap agreements or forward contracts may further impact liquidity because these contractual agreements are executed “off-exchange” between private parties and, therefore, the time required to offset or “unwind” these positions may be greater than that for exchange-traded instruments. This potential delay could be exacerbated to the extent a counterparty is not a United States person.

The Trust is unaware of any other trends, demands, conditions or events that are reasonably likely to result in material changes to the Trust’s liquidity needs.

 

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Because each Fund may enter into swaps and may trade futures and forward contracts, its capital is at risk due to changes in the value of these contracts (market risk) or the inability of counterparties to perform under the terms of the contracts (credit risk).

Results of Operations for the Three Months Ended June 30, 2011 Compared to the Three Months Ended June 30, 2010

NAV of ProShares Ultra DJ-UBS Commodity

Fund Performance

The following table provides summary performance information for the Fund for the three months ended June 30, 2011 and 2010:

 

     Three Months Ended
June  30, 2011
    Three Months Ended
June  30, 2010
 

NAV beginning of period

   $ 21,701,886      $ 12,515,659   

NAV end of period

   $ 16,695,263      $ 12,304,949   

Percentage change in NAV

     (23.1 )%      (1.7 )% 

Shares outstanding beginning of period

     550,014        500,014   

Shares outstanding end of period

     500,014        550,014   

Percentage change in shares outstanding

     (9.1 )%      10.0

Shares created

     —          150,000   

Shares redeemed

     50,000        100,000   

Per share NAV beginning of period

   $ 39.46      $ 25.03   

Per share NAV end of period

   $ 33.39      $ 22.37   

Percentage change in per share NAV

     (15.4 )%      (10.6 )% 

Percentage change in benchmark

     (6.7 )%      (4.9 )% 

Benchmark annualized volatility

     18.8     17.1

During the three months ended June 30, 2011, the decrease in the Fund’s NAV resulted in part from a decrease from 550,014 outstanding Shares at March 31, 2011 to 500,014 outstanding Shares at June 30, 2011. The decrease in the Fund’s NAV resulted primarily from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of the Dow Jones-UBS Commodity Index. By comparison, during the three months ended June 30, 2010 the decrease in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of the Dow Jones-UBS Commodity Index. The decrease in the Fund’s NAV was offset by an increase from 500,014 outstanding Shares at March 31, 2010 to 550,014 outstanding Shares at June 30, 2010.

For the three months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the daily performance of its benchmark. The Fund’s per share NAV decrease of 15.4% for the period ended June 30, 2011 as compared to the decrease of 10.6% for the period ended June 30, 2010, was primarily due to a relatively higher depreciation in the value of the assets of the Fund during the three months ended June 30, 2011.

During the three months ended June 30, 2011, the Fund’s NAV reached its high for the period on April 29, 2011 at $41.87 per Share and reached its low for the period on June 27, 2011 at $32.21 per Share. By comparison, during the three months ended June 30, 2010, the Fund’s NAV reached its high for the period on April 15, 2010 at $26.76 per Share and reached its low for the period on June 4, 2010 at $21.14 per Share.

The benchmark’s decline of 6.7% for the three months ended June 30, 2011, as compared to the benchmark’s decline of 4.9% for the three months ended June 30, 2010, can be attributed to a relatively higher depreciation of the underlying components of the index, primarily Crude Oil, during the three months ended June 30, 2011.

 

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Net Income/Loss

For the three months ended June 30, 2011, the Fund’s net loss was $3,396,636, resulting from a net investment loss of $45,024, inclusive of management fees of $48,436 (.95% of the Fund’s average daily net assets of $20,450,194, a net realized loss of $1,213,831 and a change in net unrealized appreciation/depreciation of $(2,137,781). By comparison, for the three months ended June 30, 2010, the Fund’s net loss was $1,398,082, resulting from a net investment loss of $22,326, inclusive of management fees of $28,875 (.95% of the Fund’s average weighted assets of $12,191,448), a net realized loss of $2,396,196 and a change in net unrealized appreciation/depreciation of $1,020,440. The Fund’s net income decreased for the three months ended June 30, 2011, as compared to the three months ended June 30, 2010 primarily due to the relative performance of the Fund’s benchmark index during the three months ended June 30, 2011.

NAV of ProShares UltraShort DJ-UBS Commodity*

Fund Performance

The following table provides summary performance information for the Fund for the three months ended June 30, 2011 and 2010:

 

     Three Months Ended
June  30, 2011
    Three Months Ended
June  30, 2010
 

NAV beginning of period

   $ 2,560,673      $ 4,717,758   

NAV end of period

   $ 29,495,769      $ 3,381,653   

Percentage change in NAV

     1,051.9     (28.3 )% 

Shares outstanding beginning of period

     59,997        60,003   

Shares outstanding end of period

     609,997        40,003   

Percentage change in shares outstanding

     916.7     (33.3 )% 

Shares created

     1,750,000        20,000   

Shares redeemed

     1,200,000        40,000   

Per share NAV beginning of period

   $ 42.68      $ 78.63   

Per share NAV end of period

   $ 48.35      $ 84.53   

Percentage change in per share NAV

     13.3     7.5

Percentage change in benchmark

     (6.7 )%      (4.9 )% 

Benchmark annualized volatility

     18.8     17.1

During the three months ended June 30, 2011, the increase in the Fund’s NAV resulted primarily from an increase from 59,997 outstanding Shares at March 31, 2011 to 609,997 outstanding Shares at June 30, 2011. The increase in the Fund’s NAV also resulted in part from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of the Dow Jones-UBS Commodity Index. By comparison, during the three months ended June 30, 2010, the decrease in the Fund’s NAV resulted from a decrease from 60,003 outstanding Shares at March 31, 2010 to 40,003 outstanding Shares at June 30, 2010. The decrease in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of the Dow Jones-UBS Commodity Index.

For the three months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the inverse of the daily performance of its benchmark. The Fund’s per share NAV increase of 13.3% for the three months ended June 30, 2011, as compared to the increase of 7.5% for the three months ended June 30, 2010, was primarily due to a relatively higher appreciation in the value of the assets of the Fund during the three months ended June 30, 2011.

During the three months ended June 30, 2011, the Fund’s NAV reached its high for the period on June 27, 2011 at $50.24 per Share and reached its low for the period on April 29, 2011 at $39.91 per Share. By comparison, during the three months ended June 30, 2010, the Fund’s NAV reached its high for the period on June 4, 2010 at $90.42 per Share and reached its low for the period on April 15, 2010 at $73.24 per Share.

 

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The benchmark’s decline of 6.7% for the three months ended June 30, 2011, as compared to the benchmark’s decline of 4.9% for the three months ended June 30, 2010, can be attributed to a relatively higher depreciation of the underlying components of the index, primarily Crude Oil, during the three months ended June 30, 2011.

Net Income/Loss

For the three months ended June 30, 2011, the Fund’s net loss was $2,868,222, resulting from a net investment loss of $71,509, inclusive of management fees of $73,560 (.95% of the Fund’s average daily net assets of $31,057,670), a net realized loss of $5,130,520 and a change in net unrealized appreciation/depreciation of $2,333,807. By comparison, for the three months ended June 30, 2010, the Fund’s net income was $130,730, resulting from a net investment loss of $9,296, inclusive of management fees of $10,734 (.95% of the Fund’s average weighted assets of $4,532,331), a net realized gain of $688,684 and a change in net unrealized appreciation/depreciation of $(548,658). The Fund’s net income decreased for the three months ended June 30, 2011, as compared to the three months ended June 30, 2010 primarily due to the performance of the Fund’s benchmark index and the timing of capital share transactions during the three months ended June 30, 2011.

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I regarding the reverse share split for the ProShares UltraShort DJ-UBS Commodity Fund.

NAV of ProShares Ultra DJ-UBS Crude Oil*

Fund Performance

The following table provides summary performance information for the Fund for the three months ended June 30, 2011 and 2010:

 

     Three Months Ended
June  30, 2011
    Three Months Ended
June  30, 2010
 

NAV beginning of period

   $ 271,225,000      $ 199,930,040   

NAV end of period

   $ 426,397,237      $ 501,252,171   

Percentage change in NAV

     57.2     150.7

Shares outstanding beginning of period

     4,749,170        3,775,004   

Shares outstanding end of period

     9,999,170        13,012,504   

Percentage change in shares outstanding

     110.5     244.7

Shares created

     7,900,000        13,175,000   

Shares redeemed

     2,650,000        3,937,500   

Per share NAV beginning of period

   $ 57.11      $ 52.96   

Per share NAV end of period

   $ 42.64      $ 38.52   

Percentage change in per share NAV

     (25.3 )%      (27.3 )% 

Percentage change in benchmark

     (12.0 )%      (13.6 )% 

Benchmark annualized volatility

     35.9     30.4

During the three months ended June 30, 2011, the increase in the Fund’s NAV resulted primarily from an increase from 4,749,170 outstanding Shares at March 31, 2011 to 9,999,170 outstanding Shares at June 30, 2011. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of the Dow Jones-UBS Crude Oil Sub-Index. By comparison, during the three months ended June 30, 2010, the increase in the Fund’s NAV resulted from an increase from 3,775,004 outstanding Shares at March 31, 2010 to 13,012,504 outstanding Shares at June 30, 2010. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of the Dow Jones-UBS Crude Oil Sub-Index.

For the three months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the daily performance of its benchmark. The Fund’s per share NAV decrease of 25.3% for the three months ended June 30, 2011, as compared to the decrease of 27.3% for the three months ended June 30, 2010, was primarily due to a relatively lower depreciation in the value of the assets of the Fund during the three months ended June 30, 2011.

 

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During the three months ended June 30, 2011, the Fund’s NAV reached its high for the period on April 29, 2011 at $63.90 per Share and reached its low for the period on June 27, 2011 at $38.53 per Share. By comparison, during the three months ended June 30, 2010, the Fund’s NAV reached its high for the period on May 3, 2010 at $57.29 per Share and reached its low for the period on May 25, 2010 at $33.73 per Share.

The benchmark’s decline of 12.0% for the three months ended June 30, 2011, as compared to the benchmark’s decline of 13.6% for the three months ended June 30, 2010, can be attributed to a relatively lower decrease in the price of WTI Crude Oil during the three months ended June 30, 2011.

Net Income/Loss

For the three months ended June 30, 2011, the Fund’s net loss was $42,667,160, resulting from a net investment loss of $642,875, inclusive of management fees of $657,181 (.95% of the Fund’s average daily net assets of $277,468,112) and brokerage commissions of $25,104, a net realized loss of $7,838,499 and a change in net unrealized appreciation/depreciation of $(34,185,786). By comparison, for the three months ended June 30, 2010, the Fund’s net loss was $49,284,787, resulting from a net investment loss of $760,361, inclusive of management fees of $841,537 (.95% of the Fund’s average weighted assets of $355,304,759) and brokerage commissions of $51,622, a net realized loss of $57,211,080 and a change in net unrealized appreciation/depreciation of $8,686,654. The Fund’s net income increased for the three months ended June 30, 2011, as compared to the three months ended June 30, 2010 primarily due the relative performance of the Fund’s benchmark index during the three months ended June 30, 2011.

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I regarding the reverse share split for the ProShares Ultra DJ-UBS Crude Oil Fund.

NAV of ProShares UltraShort DJ-UBS Crude Oil*

Fund Performance

The following table provides summary performance information for the Fund for the three months ended June 30, 2011 and 2010:

 

     Three Months Ended
June  30, 2011
    Three Months Ended
June  30, 2010
 

NAV beginning of period

   $ 136,813,099      $ 124,055,704   

NAV end of period

   $ 160,288,442      $ 51,326,108   

Percentage change in NAV

     17.2     (58.6 )% 

Shares outstanding beginning of period

     3,319,944        2,050,003   

Shares outstanding end of period

     3,319,944        680,003   

Percentage change in shares outstanding

     0.0     (66.8 )% 

Shares created

     4,350,000        1,000,000   

Shares redeemed

     4,350,000        2,370,000   

Per share NAV beginning of period

   $ 41.21      $ 60.51   

Per share NAV end of period

   $ 48.28      $ 75.48   

Percentage change in per share NAV

     17.2     24.7

Percentage change in benchmark

     (12.0 )%      (13.6 )% 

Benchmark annualized volatility

     35.9     30.4

During the three months ended June 30, 2011, the increase in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of the Dow Jones-UBS Crude Oil Sub-Index. There was no net change in the Fund’s outstanding

 

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Shares from March 31, 2011 to June 30, 2011. By comparison, during the three months ended June 30, 2010, the decrease in the Fund’s NAV resulted from a decrease from 2,050,003 outstanding Shares at March 31, 2010 to 680,003 outstanding Shares at June 30, 2010. The decrease in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of the Dow Jones-UBS Crude Oil Sub-Index.

For the three months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the inverse of the daily performance of its benchmark. The Fund’s per share NAV increase of 17.2% for the three months ended June 30, 2011, as compared to the increase of 24.7% for the three months ended June 30, 2010, was primarily due to a relatively lower appreciation in the value of the assets of the Fund during the three months ended June 30, 2011.

During the three months ended June 30, 2011, the Fund’s NAV reached its high for the period on June 27, 2011 at $53.66 per Share and reached its low for the period on April 29, 2011 at $36.11 per Share. By comparison, during the three months ended June 30, 2010, the Fund’s NAV reached its high for the period on May 25, 2010 at $90.21 per Share and reached its low for the period on May 3, 2010 at $55.10 per Share.

The benchmark’s decline of 12.0% for the three months ended June 30, 2011, as compared to the benchmark’s decline of 13.6% for the three months ended June 30, 2010, can be attributed to a relatively lower decrease in the price of WTI Crude Oil during the three months ended June 30, 2011.

Net Income/Loss

For the three months ended June 30, 2011, the Fund’s net income was $44,043,386, resulting from a net investment loss of $392,008, inclusive of management fees of $401,339 (.95% of the Fund’s average daily net assets of $169,449,353) and brokerage commissions of $16,653, a net realized gain of $31,538,827 and a change in net unrealized appreciation/depreciation of $12,896,567. By comparison, for the three months ended June 30, 2010, the Fund’s net income was $26,262,431, resulting from a net investment loss of $171,589, inclusive of management fees of $189,102 (.95% of the Fund’s average weighted assets of $79,840,521) and brokerage commissions of $15,543, a net realized gain of $22,008,106 and a change in net unrealized appreciation/depreciation of $4,425,914. The Fund’s net income increased for the three months ended June 30, 2011, as compared to the three months ended June 30, 2010 primarily due to the performance of the Fund’s benchmark index and the number of outstanding shares during the three months ended June 30, 2011.

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I regarding the reverse share split for the ProShares UltraShort DJ-UBS Crude Oil Fund.

 

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NAV of ProShares Ultra Gold

Fund Performance

The following table provides summary performance information for the Fund for the three months ended June 30, 2011 and 2010:

 

     Three Months Ended
June  30, 2011
    Three Months Ended
June  30, 2010
 

NAV beginning of period

   $ 250,762,400      $ 164,101,484   

NAV end of period

   $ 282,765,412      $ 209,324,263   

Percentage change in NAV

     12.8     27.6

Shares outstanding beginning of period

     3,500,014        3,600,014   

Shares outstanding end of period

     3,650,014        3,750,014   

Percentage change in shares outstanding

     4.3     4.2

Shares created

     300,000        550,000   

Shares redeemed

     150,000        400,000   

Per share NAV beginning of period

   $ 71.65      $ 45.58   

Per share NAV end of period

   $ 77.47      $ 55.82   

Percentage change in per share NAV

     8.1     22.5

Percentage change in benchmark

     4.6     11.5

Benchmark annualized volatility

     13.7     16.0

During the three months ended June 30, 2011, the increase in the Fund’s NAV resulted in part from an increase from 3,500,014 outstanding Shares at March 31, 2011 to 3,650,014 outstanding Shares at June 30, 2011. The increase in the Fund’s NAV resulted primarily from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of gold bullion as measured by the U.S. Dollar p.m. fixing price for delivery in London. By comparison, during the three months ended June 30, 2010, the increase in the Fund’s NAV resulted primarily from an increase from 3,600,014 outstanding Shares at March 31, 2010 to 3,750,014 outstanding Shares at June 30, 2010. The increase in the Fund’s NAV also resulted in part from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of gold bullion as measured by the U.S. Dollar p.m. fixing price for delivery in London.

For the three months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the daily performance of its benchmark. The Fund’s per share NAV increase of 8.1% for the three months ended June 30, 2011, as compared to the increase of 22.5% for the three months ended June 30, 2010, was primarily due to a relatively lower appreciation in the value of the assets of the Fund during the three months ended June 30, 2011.

During the three months ended June 30, 2011, the Fund’s NAV reached its high for the period on June 22, 2011 at $82.49 per Share and reached its low for the period on April 1, 2011 at $69.54 per Share. By comparison, during the three months ended June 30, 2010, the Fund’s NAV reached its high for the period on June 28, 2010 at $57.39 per Share and reached its low for the period on April 1, 2010 at $46.24 per Share.

The benchmark’s rise of 4.6% for the three months ended June 30, 2011, as compared to the benchmark’s rise of 11.5% for the three months ended June 30, 2010, can be attributed to a relatively lower increase in the price of spot gold in U.S. Dollar terms during the three months ended June 30, 2011.

Net Income/Loss

For the three months ended June 30, 2011, the Fund’s net income was $19,545,446, resulting from a net investment loss of $609,284, inclusive of management fees of $655,099 (.95% of the Fund’s average daily net assets of $276,588,985) and brokerage commissions of $905, a net realized gain of $42,611,365 and a change in net unrealized appreciation/depreciation of $(22,456,635). By comparison, for the three months ended June 30, 2010, the Fund’s net income was $37,965,689, resulting from a net investment loss of $370,912, inclusive of management fees of $447,194 (.95% of the Fund’s average weighted assets of $188,809,509) and brokerage commissions of $1,067, a net realized gain of $46,276,817 and a change in net unrealized appreciation/depreciation of $(7,940,216). The Fund’s net income decreased for the three months ended June 30, 2011, as compared to the three months ended June 30, 2010 primarily due the relative performance of the Fund’s benchmark and the significant increase in net asset value during the three months ended June 30, 2011.

 

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NAV of ProShares UltraShort Gold*

Fund Performance

The following table provides summary performance information for the Fund for the three months ended June 30, 2011 and 2010:

 

     Three Months Ended
June  30, 2011
    Three Months Ended
June  30, 2010
 

NAV beginning of period

   $ 81,086,510      $ 64,798,115   

NAV end of period

   $ 95,525,554      $ 71,715,632   

Percentage change in NAV

     17.8     10.7

Shares outstanding beginning of period

     3,039,901        1,340,003   

Shares outstanding end of period

     3,989,901        1,889,901   

Percentage change in shares outstanding

     31.3     41.0

Shares created

     950,000        850,000   

Shares redeemed

     —          300,102   

Per share NAV beginning of period

   $ 26.67      $ 48.36   

Per share NAV end of period

   $ 23.94      $ 37.95   

Percentage change in per share NAV

     (10.2 )%      (21.5 )% 

Percentage change in benchmark

     4.6     11.5

Benchmark annualized volatility

     13.7     16.0

During the three months ended June 30, 2011, the increase in the Fund’s NAV resulted primarily from an increase from 3,039,901 outstanding Shares at March 31, 2011 to 3,989,901 outstanding Shares at June 30, 2011. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of gold bullion as measured by the U.S. Dollar p.m. fixing price for delivery in London. By comparison, during the three months ended June 30, 2010, the increase in the Fund’s NAV resulted from an increase from 1,340,003 outstanding Shares at March 31, 2010 to 1,889,901 outstanding Shares at June 30, 2010. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of gold bullion as measured by the U.S. Dollar p.m. fixing price for delivery in London.

For the three months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the inverse of the daily performance of its benchmark. The Fund’s per share NAV decrease of 10.2% for the three months ended June 30, 2011, as compared to the decrease of 21.5% for the three months ended June 30, 2010, was primarily due to a relatively lower depreciation in the value of the assets of the Fund during the three months ended June 30, 2011.

During the three months ended June 30, 2011, the Fund’s NAV reached its high for the period on April 1, 2011 at $27.46 per Share and reached its low for the period on June 22, 2011 at $22.56 per Share. By comparison, during the three months ended June 30, 2010, the Fund’s NAV reached its high for the period on April 1, 2010 at $47.65 per Share and reached its low for the period on June 28, 2010 at $36.99 per Share.

The benchmark’s rise of 4.6% for the three months ended June 30, 2011, as compared to the benchmark’s rise of 11.5% for the three months ended June 30, 2010, can be attributed to a relatively lower increase in the price of spot gold in U.S. Dollar terms during the three months ended June 30, 2011.

Net Income/Loss

For the three months ended June 30, 2011, the Fund’s net loss was $8,534,232, resulting from a net investment loss of $189,137, inclusive of management fees of $201,127 (.95% of the Fund’s average daily net assets of $84,917,533) and brokerage commissions of $761, a net realized loss of $15,435,723 and a change in net unrealized appreciation/depreciation of $7,090,628. By comparison, for the three months ended June 30, 2010, the Fund’s net loss was $16,130,220, resulting from a net investment loss of $126,659, inclusive of management fees of $152,203 (.95% of the Fund’s average weighted assets of $64,261,261) and brokerage commissions of $775, a net realized loss of $18,692,774 and a change in net unrealized appreciation/depreciation of $2,689,213. The Fund’s net income increased for the three months ended June 30, 2011, as compared to the three months ended June 30, 2010 primarily due to the relative performance of the Fund’s benchmark and the significant increase in net asset value during the three months ended June 30, 2011.

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I regarding the reverse share split for the ProShares UltraShort Gold Fund.

 

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NAV of ProShares Ultra Silver

Fund Performance

The following table provides summary performance information for the Fund for the three months ended June 30, 2011 and 2010:

 

     Three Months Ended
June  30, 2011
    Three Months Ended
June  30, 2010
 

NAV beginning of period

   $ 1,057,075,755      $ 171,235,987   

NAV end of period

   $ 881,928,826      $ 181,076,130   

Percentage change in NAV

     (16.6 )%      5.7

Shares outstanding beginning of period

     4,650,014        2,950,014   

Shares outstanding end of period

     5,250,014        2,850,014   

Percentage change in shares outstanding

     12.9     (3.4 )% 

Shares created

     1,800,000        650,000   

Shares redeemed

     1,200,000        750,000   

Per share NAV beginning of period

   $ 227.33      $ 58.05   

Per share NAV end of period

   $ 167.99      $ 63.54   

Percentage change in per share NAV

     (26.1 )%      9.5

Percentage change in benchmark

     (7.5 )%      7.1

Benchmark annualized volatility

     73.7     35.6

During the three months ended June 30, 2011, the decrease in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of silver bullion as measured by the U.S. Dollar fixing price for delivery in London. The decrease in the Fund’s NAV was offset by an increase from 4,650,014 outstanding Shares at March 31, 2011 to 5,250,014 outstanding Shares at June 30, 2011. By comparison, during the three months ended June 30, 2010, the increase in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x daily performance of silver bullion as measured by the U.S. Dollar fixing price for delivery in London. The increase in the Fund’s NAV was offset by a decrease from 2,950,014 outstanding Shares at March 31, 2010 to 2,850,014 outstanding Shares at June 30, 2010.

For the three months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the daily performance of its benchmark. The Fund’s per share NAV decrease of 26.1% for the three months ended June 30, 2011, as compared to the increase of 9.5% for the three months ended June 30, 2010, was primarily due to a depreciation in the value of the assets of the Fund during the three months ended June 30, 2011.

During the three months ended June 30, 2011, the Fund’s NAV reached its high for the period on April 28, 2011 at $369.22 per Share and reached its low for the period on May 12, 2011 at $150.45 per Share. By comparison, during the three months ended June 30, 2010, the Fund’s NAV reached its high for the period on May 14, 2010 at $71.40 per Share and reached its low for the period on June 7, 2010 at $55.23 per Share.

The benchmark’s decline of 7.5% for the three months ended June 30, 2011, as compared to the benchmark’s rise of 7.1% for the three months ended June 30, 2010, can be attributed to a decrease in the price of spot silver in U.S. Dollar terms during the three months ended June 30, 2011.

Net Income/Loss

For the three months ended June 30, 2011, the Fund’s net loss was $313,683,501, resulting from a net investment loss of $2,429,975, inclusive of management fees of $2,599,506 (.95% of the Fund’s average daily net assets of $1,097,535,822) and brokerage commissions of $3,290, a net realized loss of $206,293,344 and a change in net unrealized appreciation/depreciation of $(104,960,182). By comparison, for the three months ended June 30, 2010, the Fund’s net income was $17,820,834, resulting from a net investment loss of $340,190, inclusive of management

 

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fees of $419,415 (.95% of the Fund’s average weighted assets of $177,080,943) and brokerage commissions of $1,580, a net realized gain of $32,890,020 and a change in net unrealized appreciation/depreciation of $(14,728,996). The Fund’s net income decreased for the three months ended June 30, 2011, as compared to the three months ended June 30, 2010 primarily due to the relative performance of the Fund’s benchmark during the three months ended June 30, 2011.

NAV of ProShares UltraShort Silver*

Fund Performance

The following table provides summary performance information for the Fund for the three months ended June 30, 2011 and 2010:

 

     Three Months Ended
June  30, 2011
    Three Months Ended
June  30, 2010
 

NAV beginning of period

   $ 130,258,740      $ 69,330,778   

NAV end of period

   $ 657,213,364      $ 60,185,658   

Percentage change in NAV

     404.5     (13.2 )% 

Shares outstanding beginning of period

     5,644,369        426,250   

Shares outstanding end of period

     35,194,369        469,979   

Percentage change in shares outstanding

     523.5     10.3

Shares created

     41,100,000        200,000   

Shares redeemed

     11,550,000        156,271   

Per share NAV beginning of period

   $ 23.08      $ 162.65   

Per share NAV end of period

   $ 18.67      $ 128.06   

Percentage change in per share NAV

     (19.1 )%      (21.3 )% 

Percentage change in benchmark

     (7.5 )%      7.1

Benchmark annualized volatility

     73.7     35.6

During the three months ended June 30, 2011, the increase in the Fund’s NAV resulted primarily from an increase from 5,644,369 outstanding Shares at March 31, 2011 to 35,194,369 outstanding Shares at June 30, 2011. The increase in the Fund’s NAV also resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x inverse of the daily performance of silver bullion as measured by the U.S. Dollar fixing price for delivery in London. By comparison, during the three months ended June 30, 2010, the decrease in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of silver bullion as measured by the U.S. Dollar fixing price for delivery in London. The decrease in the Fund’s NAV was offset by an increase from 426,250 outstanding Shares at March 31, 2010 to 469,979 outstanding Shares at June 30, 2010.

For the three months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the inverse of the daily performance of its benchmark. The Fund’s per share NAV decrease of 19.1% for the three months ended June 30, 2011, as compared to the decrease of 21.3% for the three months ended June 30, 2010 was primarily due to a relatively lower depreciation in the value of the assets of the Fund during the three months ended June 30, 2011.

During the three months ended June 30, 2011, the Fund’s NAV reached its high for the period on May 6, 2011 at $24.75 per Share and reached its low for the period on April 28, 2011 at $13.29 per Share. By comparison, during the three months ended June 30, 2010, the Fund’s NAV reached its high for the period on April 19, 2010 at $160.59 per Share and reached its low for the period on June 21, 2010 at $121.37 per Share.

The benchmark’s decline of 7.5% for the three months ended June 30, 2011, as compared to the benchmark’s rise of 7.1% for the three months ended June 30, 2010, can be attributed to a decrease in the price of spot silver in U.S. Dollar terms during the three months ended June 30, 2011.

 

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Net Income/Loss

For the three months ended June 30, 2011, the Fund’s net income was $53,622,554, resulting from a net investment loss of $1,087,002, inclusive of management fees of $1,142,997 (.95% of the Fund’s average daily net assets of $482,584,039) and brokerage commissions of $1,656, a net realized gain of $28,945,685 and a change in net unrealized appreciation/depreciation of $25,763,871. By comparison, for the three months ended June 30, 2010, the Fund’s net loss was $14,495,974, resulting from a net investment loss of $106,584, inclusive of management fees of $129,704 (.95% of the Fund’s average weighted assets of $54,762,239) and brokerage commissions of $1,235, a net realized loss of $19,454,873 and a change in net unrealized appreciation/depreciation of $5,065,483. The Fund’s net income increased for the three months ended June 30, 2011, as compared to the three months ended June 30, 2010 primarily due to the relative performance of the Fund’s benchmark during the three months ended June 30, 2011.

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I regarding the reverse share splits for the ProShares UltraShort Silver Fund.

NAV of ProShares Ultra Euro

Fund Performance

The following table provides summary performance information for the Fund for the three months ended June 30, 2011 and 2010:

 

     Three Months Ended
June  30, 2011
    Three Months Ended
June  30, 2010
 

NAV beginning of period

   $ 8,665,331      $ 9,342,863   

NAV end of period

   $ 9,061,264      $ 16,329,042   

Percentage change in NAV

     4.6     74.8

Shares outstanding beginning of period

     300,014        350,014   

Shares outstanding end of period

     300,014        750,014   

Percentage change in shares outstanding

     0.0     114.3

Shares created

     —          750,000   

Shares redeemed

     —          350,000   

Per share NAV beginning of period

   $ 28.88      $ 26.69   

Per share NAV end of period

   $ 30.20      $ 21.77   

Percentage change in per share NAV

     4.6     (18.4 )% 

Percentage change in benchmark

     2.3     (9.5 )% 

Benchmark annualized volatility

     11.4     12.5

During the three months ended June 30, 2011, the increase in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of the spot price of the Euro versus the U.S. Dollar. There was no net change in the Fund’s outstanding Shares from March 31, 2011 to June 30, 2011. By comparison, during the three months ended June 30, 2010, the increase in the Fund’s NAV resulted from an increase from 350,014 outstanding Shares at March 31, 2010 to 750,014 outstanding Shares at June 30, 2010. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of the spot price of the Euro versus the U.S. Dollar.

For the three months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the daily performance of its benchmark. The Fund’s per share NAV increase of 4.6% for the three months ended June 30, 2011, as compared to the decrease of 18.4% for the three months ended June 30, 2010 was primarily due to an appreciation in the value of the assets of the Fund during the three months ended June 30, 2011.

 

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During the three months ended June 30, 2011, the Fund’s NAV reached its high for the period on May 3, 2011 at $31.63 per Share and reached its low for the period on May 23, 2011 at $28.35 per Share. By comparison, during the three months ended June 30, 2010, the Fund’s NAV reached its high for the period on April 14, 2010 at $27.27 per Share and reached its low for the period on June 7, 2010 at $20.70 per Share.

The benchmark’s rise of 2.3% for the three months ended June 30, 2011, as compared to the benchmark’s decline of 9.5% for the three months ended June 30, 2010, can be attributed to an increase in the value of the Euro versus the U.S. Dollar during the three months ended June 30, 2011.

Net Income/Loss

For the three months ended June 30, 2011, the Fund’s net income was $395,933, resulting from a net investment loss of $19,703, inclusive of management fees of $21,134 (.95% of the Fund’s average daily net assets of $8,922,775), a net realized gain of $688,738 and a change in net unrealized appreciation/depreciation of $(273,102). By comparison, for the three months ended June 30, 2010, the Fund’s net loss was $2,040,653, resulting from a net investment loss of $26,289, inclusive of management fees of $30,631 (.95% of the Fund’s average weighted assets of $12,932,729), a net realized loss of $2,103,203 and a change in net unrealized appreciation/depreciation of $88,839. The Fund’s net income increased for the three months ended June 30, 2011, as compared to the three months ended June 30, 2010 primarily due to the performance of the Fund’s benchmark during the three months ended June 30, 2011.

NAV of ProShares UltraShort Euro

Fund Performance

The following table provides summary performance information for the Fund for the three months ended June 30, 2011 and 2010:

 

     Three Months Ended
June  30, 2011
    Three Months Ended
June  30, 2010
 

NAV beginning of period

   $ 390,773,777      $ 295,228,354   

NAV end of period

   $ 632,327,167      $ 462,324,726   

Percentage change in NAV

     61.8     56.6

Shares outstanding beginning of period

     21,900,014        14,200,014   

Shares outstanding end of period

     37,750,014        18,500,014   

Percentage change in shares outstanding

     72.4     30.3

Shares created

     16,200,000        9,200,000   

Shares redeemed

     350,000        4,900,000   

Per share NAV beginning of period

   $ 17.84      $ 20.79   

Per share NAV end of period

   $ 16.75      $ 24.99   

Percentage change in per share NAV

     (6.1 )%      20.2

Percentage change in benchmark

     2.3     (9.5 )% 

Benchmark annualized volatility

     11.4     12.5

During the three months ended June 30, 2011, the increase in the Fund’s NAV resulted primarily from an increase from 21,900,014 outstanding Shares at March 31, 2011 to 37,750,014 outstanding Shares at June 30, 2011. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of the spot price of the Euro versus the U.S. Dollar. By comparison, during the three months ended June 30, 2010, the increase in the Fund’s NAV resulted primarily from an increase from 14,200,014 outstanding Shares at March 31, 2010 to 18,500,014 outstanding Shares at June 30, 2010. The increase in the Fund’s NAV also resulted in part from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of the spot price of the Euro versus the U.S. Dollar.

 

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For the three months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the inverse of the daily performance of its benchmark. The Fund’s per share NAV decrease of 6.1% for the three months ended June 30, 2011, as compared to the increase of 20.2% for the three months ended June 30, 2010 was primarily due to a depreciation in the value of the assets held by the Fund during the three months ended June 30, 2011.

During the three months ended June 30, 2011, the Fund’s NAV reached its high for the period on May 23, 2011 at $17.99 per Share and reached its low for the period on May 3, 2011 at $16.22 per Share. By comparison, during the three months ended June 30, 2010, the Fund’s NAV reached its high for the period on June 7, 2010 at $26.39 per Share and reached its low for the period on April 14, 2010 at $20.31 per Share.

The benchmark’s rise of 2.3% for the three months ended June 30, 2011, as compared to the benchmark’s decline of 9.5% for the three months ended June 30, 2010, can be attributed to an increase in the value of the Euro versus the U.S. Dollar during the three months ended June 30, 2011.

Net Income/Loss

For the three months ended June 30, 2011, the Fund’s net loss was $33,847,310, resulting from a net investment loss of $1,012,362, inclusive of management fees of $1,086,768 (.95% of the Fund’s average daily net assets of $458,843,540), a net realized loss of $39,283,147 and a change in net unrealized appreciation/depreciation of $6,448,199. By comparison, for the three months ended June 30, 2010, the Fund’s net income was $71,738,894, resulting from a net investment loss of $814,585, inclusive of management fees of $1,008,849 (.95% of the Fund’s average weighted assets of $425,945,547), a net realized gain of $74,541,248 and a change in net unrealized appreciation/depreciation of $(1,987,769). The Fund’s net income decreased for the three months ended June 30, 2011, as compared to the three months ended June 30, 2010 primarily due to the performance of the Fund’s benchmark during the three months ended June 30, 2011.

NAV of ProShares Ultra Yen

Fund Performance

The following table provides summary performance information for the Fund for the three months ended June 30, 2011 and 2010:

 

     Three Months Ended
June  30, 2011
    Three Months Ended
June  30, 2010
 

NAV beginning of period

   $ 3,176,821      $ 3,866,243   

NAV end of period

   $ 3,376,952      $ 4,292,085   

Percentage change in NAV

     6.3     11.0

Shares outstanding beginning of period

     100,014        150,014   

Shares outstanding end of period

     100,014        150,014   

Percentage change in shares outstanding

     0.0     0.0

Shares created

     —          —     

Shares redeemed

     —          —     

Per share NAV beginning of period

   $ 31.76      $ 25.77   

Per share NAV end of period

   $ 33.76      $ 28.61   

Percentage change in per share NAV

     6.3     11.0

Percentage change in benchmark

     3.3     5.8

Benchmark annualized volatility

     7.6     12.6

During the three months ended June 30, 2011, the increase in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of the spot price of the Japanese Yen versus the U.S. Dollar. There was no net change in the Fund’s outstanding Shares from March 31, 2011 to June 30, 2011. By comparison, during the three months ended June 30, 2010, the increase in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment

 

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results (before fees and expenses) that correspond to 2x of the daily performance of the spot price of the Japanese Yen versus the U.S. Dollar.

For the three months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the daily performance of its benchmark. The Fund’s per share NAV increase of 6.3% for the three months ended June 30, 2011, as compared to the increase of 11.0% for the three months ended June 30, 2010 was primarily due to a relatively lower appreciation in the value of the assets held by the Fund during the three months ended June 30, 2011.

During the three months ended June 30, 2011, the Fund’s NAV reached its high for the period on June 8, 2011 at $34.31 per Share and reached its low for the period on April 6, 2011 at $30.09 per Share. By comparison, during the three months ended June 30, 2010, the Fund’s NAV reached its high for the period on June 30, 2010 at $28.61 per Share and reached its low for the period on May 3, 2010 at $25.14 per Share.

The benchmark’s rise of 3.3% for the three months ended June 30, 2011, as compared to the benchmark’s rise of 5.8% for the three months ended June 30, 2010, can be attributed to a relatively lower increase in the value of Japanese Yen versus the U.S. Dollar during the three months ended June 30, 2011.

Net Income/Loss

For the three months ended June 30, 2011, the Fund’s net income was $200,131, resulting from a net investment loss of $7,343, inclusive of management fees of $7,813 (.95% of the Fund’s average daily net assets of $3,298,833), a net realized gain of $70,476 and a change in net unrealized appreciation/depreciation of $136,998. By comparison, for the three months ended June 30, 2010, the Fund’s net income was $425,842, resulting from a net investment loss of $7,785, inclusive of management fees of $9,418 (.95% of the Fund’s average weighted assets of $3,976,030), a net realized loss of $102,356 and a change in net unrealized appreciation/depreciation of $535,983. The Fund’s net income decreased for the three months ended June 30, 2011, as compared to the three months ended June 30, 2010 primarily due to the relative performance of the Fund’s benchmark during the three months ended June 30, 2011.

NAV of ProShares UltraShort Yen

Fund Performance

The following table provides summary performance information for the Fund for the three months ended June 30, 2011 and 2010:

 

     Three Months Ended
June  30, 2011
    Three Months Ended
June  30, 2010
 

NAV beginning of period

   $ 368,431,315      $ 130,528,652   

NAV end of period

   $ 356,417,645      $ 145,332,808   

Percentage change in NAV

     (3.3 )%      11.3

Shares outstanding beginning of period

     22,650,014        6,100,014   

Shares outstanding end of period

     23,550,014        7,700,014   

Percentage change in shares outstanding

     4.0     26.2

Shares created

     2,750,000        2,250,000   

Shares redeemed

     1,850,000        650,000   

Per share NAV beginning of period

   $ 16.27      $ 21.40   

Per share NAV end of period

   $ 15.13      $ 18.87   

Percentage change in per share NAV

     (7.0 )%      (11.8 )% 

Percentage change in benchmark

     3.3     5.8

Benchmark annualized volatility

     7.6     12.6

During the three months ended June 30, 2011, the decrease in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of

 

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the daily performance of the spot price of the Japanese Yen versus the U.S. Dollar. The decrease in the Fund’s NAV was offset by an increase from 22,650,014 outstanding Shares at March 31, 2011 to 23,550,014 outstanding Shares at June 30, 2011. By comparison, during the three months ended June 30, 2010, the increase in the Fund’s NAV resulted from an increase from 6,100,014 outstanding Shares at March 31, 2010 to 7,700,014 outstanding Shares at June 30, 2010. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of the spot price of the Japanese Yen versus the U.S. Dollar.

For the three months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the inverse of the daily performance of its benchmark. The Fund’s per share NAV decrease of 7.0% for the three months ended June 30, 2011, as compared to the decrease of 11.8% for the three months ended June 30, 2010 was primarily due to a relatively

lower depreciation in the value of the assets held by the Fund during the three months ended June 30, 2011.

During the three months ended June 30, 2011, the Fund’s NAV reached its high for the period on April 6, 2011 at $17.15 per Share and reached its low for the period on June 8, 2011 at $14.93 per Share. By comparison, during the three months ended June 30, 2010, the Fund’s NAV reached its high for the period on May 3, 2010 at $21.85 per Share and reached its low for the period on June 30, 2010 at $18.87 per Share.

The benchmark’s rise of 3.3% for the three months ended June 30, 2011, as compared to the benchmark’s rise of 5.8% for the three months ended June 30, 2010, can be attributed to a relatively lower increase in the value of the Japanese Yen versus the U.S. Dollar during the three months ended June 30, 2011.

Net Income/Loss

For the three months ended June 30, 2011, the Fund’s net loss was $24,518,752, resulting from a net investment loss of $789,356, inclusive of management fees of $852,848 (.95% of the Fund’s average daily net assets of $360,080,192), a net realized loss of $4,066,983 and a change in net unrealized appreciation/depreciation of $(19,662,413). By comparison, for the three months ended June 30, 2010, the Fund’s net loss was $18,694,398, resulting from a net investment loss of $294,844, inclusive of management fees of $364,439 (.95% of the Fund’s average weighted assets of $153,869,350), a net realized loss of $431,087 and a change in net unrealized appreciation/depreciation of $(17,968,467). The Fund’s net income decreased for the three months ended June 30, 2011, as compared to the three months ended June 30, 2010 primarily due to the performance of the Fund’s benchmark and the change in capital shares outstanding during the three months ended June 30, 2011.

NAV of ProShares VIX Short-Term Futures ETF

Since the Fund commenced investment operations on January 3, 2011, a comparison of the Fund’s results of operations for the three months ended June 30, 2010 has not been provided.

 

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Fund Performance

The following table provides summary performance information for the Fund for the three months ended June 30, 2011:

 

     Three Months Ended
June  30, 2011
 

NAV beginning of period

   $ 32,034,957   

NAV end of period

   $ 46,602,361   

Percentage change in NAV

     45.5

Shares outstanding beginning of period

     500,005   

Shares outstanding end of period

     1,025,005   

Percentage change in shares outstanding

     105.0

Shares created

     1,450,000   

Shares redeemed

     925,000   

Per share NAV beginning of period

   $ 64.07   

Per share NAV end of period

   $ 45.47   

Percentage change in per share NAV

     (29.0 )% 

Percentage change in benchmark

     (28.6 )% 

Benchmark annualized volatility

     46.7

During the three months ended June 30, 2011, the increase in the Fund’s NAV resulted from an increase from 500,005 outstanding Shares at March 31, 2011 to 1,025,005 outstanding Shares at June 30, 2011. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to the daily performance of the S&P 500 VIX Short-Term Futures Index.

For the three months ended June 30, 2011, the Fund’s daily performance had a statistical correlation over 0.99 of the daily performance of its benchmark.

During the three months ended June 30, 2011, the Fund’s NAV reached its high for the period on April 1, 2011 at $63.27 per Share and reached its low for the period on June 30, 2011 at $45.47 per Share.

The benchmark’s decline of 28.6% for the three months ended June 30, 2011 can be attributed to the cost of holding and rolling VIX short-term futures contracts over the period.

Net Income/Loss

For the three months ended June 30, 2011, the Fund’s net loss was $14,511,643, resulting from a net investment loss of $100,295, inclusive of management fees of $57,326 and offering costs of $49,886, a net realized loss of $12,440,654 and a change in net unrealized appreciation/depreciation of $(1,970,694).

NAV of ProShares VIX Mid-Term Futures ETF

Since the Fund commenced investment operations on January 3, 2011, a comparison of the Fund’s results of operations for the three months ended June 30, 2010 has not been provided.

Fund Performance

The following table provides summary performance information for the Fund for the three months ended June 30, 2011:

 

     Three Months Ended
June  30, 2011
 

NAV beginning of period

   $ 6,739,633   

NAV end of period

   $ 13,895,731   

Percentage change in NAV

     106.2

Shares outstanding beginning of period

     100,005   

Shares outstanding end of period

     225,005   

Percentage change in shares outstanding

     125.0

Shares created

     325,000   

Shares redeemed

     200,000   

Per share NAV beginning of period

   $ 67.39   

Per share NAV end of period

   $ 61.76   

Percentage change in per share NAV

     (8.4 )% 

Percentage change in benchmark

     (8.0 )% 

Benchmark annualized volatility

     23.4

During the three months ended June 30, 2011, the increase in the Fund’s NAV resulted from an increase from 100,005 outstanding Shares at March 31, 2011 to 225,005 outstanding Shares at June 30, 2011. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to the daily performance of the S&P 500 VIX Mid-Term Futures Index.

 

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For the three months ended June 30, 2011, the Fund’s daily performance had a statistical correlation over 0.99 of the daily performance of its benchmark.

During the three months ended June 30, 2011, the Fund’s NAV reached its high for the period on April 18, 2011 at $69.20 per Share and reached its low for the period on May 31, 2011 at $61.06 per Share.

The benchmark’s decline of 8.0% for the three months ended June 30, 2011 can be attributed to the cost of holding and rolling VIX mid-term futures contracts over the period.

Net Income/Loss

For the three months ended June 30, 2011, the Fund’s net loss was $1,524,157, resulting from a net investment loss of $20,454, inclusive of offering costs of $31,179 offset by limitation by Sponsor of $8,987, a net realized loss of $1,172,411 and a change in net unrealized appreciation/depreciation of $(331,292).

Results of Operations for the Six Months Ended June 30, 2011 Compared to the Six Months Ended June 30, 2010

NAV of ProShares Ultra DJ-UBS Commodity

Fund Performance

The following table provides summary performance information for the Fund for the six months ended June 30, 2011 and 2010:

 

     Six Months Ended
June 30, 2011
    Six Months Ended
June 30, 2010
 

NAV beginning of period

   $ 18,186,658      $ 19,743,932   

NAV end of period

   $ 16,695,263      $ 12,304,949   

Percentage change in NAV

     (8.2 )%      (37.7 )% 

Shares outstanding beginning of period

     500,014        700,014   

Shares outstanding end of period

     500,014        550,014   

Percentage change in shares outstanding

     0.0     (21.4 )% 

Shares created

     50,000        250,000   

Shares redeemed

     50,000        400,000   

Per share NAV beginning of period

   $ 36.37      $ 28.21   

Per share NAV end of period

   $ 33.39      $ 22.37   

Percentage change in per share NAV

     (8.2 )%      (20.7 )% 

Percentage change in benchmark

     (2.6 )%      (9.7 )% 

Benchmark annualized volatility

     17.4     17.3

During the six months ended June 30, 2011, the decrease in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of the Dow Jones-UBS Commodity Index. There was no net change in the Fund’s outstanding Shares from December 31, 2010 to June 30, 2011. By comparison, during the six months ended June 30, 2010, the decrease in the Fund’s NAV resulted primarily from a decrease from 700,014 outstanding Shares at December 31, 2009 to 550,014 outstanding Shares at June 30, 2010. The decrease in the Fund’s NAV also resulted in part from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of the Dow Jones-UBS Commodity Index.

For the six months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the daily performance of its benchmark. The Fund’s per share NAV decrease of 8.2% for the period ended June 30, 2011 as compared to the decrease of 20.7% for the period ended June 30, 2010, was primarily

 

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due to a relatively lower depreciation in the value of the assets of the Fund during the six months ended June 30, 2011.

During the six months ended June 30, 2011, the Fund’s NAV reached its high for the period on April 29, 2011 at $41.87 per Share and reached its low for the period on June 27, 2011 at $32.21 per Share. By comparison, during the six months ended June 30, 2010, the Fund’s NAV reached its high for the period on January 6, 2010 at $30.58 per Share and reached its low for the period on June 4, 2010 at $21.14 per Share.

The benchmark’s decline of 2.6% for the six months ended June 30, 2011, as compared to the benchmark’s decline of 9.7% for the six months ended June 30, 2010, can be attributed to a relatively lower depreciation of the underlying components of the index, primarily Crude Oil, during the six months ended June 30, 2011.

Net Income/Loss

For the six months ended June 30, 2011, the Fund’s net loss was $1,664,163, resulting from a net investment loss of $85,278, inclusive of management fees of $94,549 (.95% of the Fund’s average daily net assets of $20,069,993, a net realized gain of $1,990,290 and a change in net unrealized appreciation/depreciation of $(3,569,175). By comparison, for the six months ended June 30, 2010, the Fund’s net loss was $3,420,804, resulting from a net investment loss of $49,608, inclusive of management fees of $60,926 (.95% of the Fund’s average weighted assets of $12,932,832), a net realized loss of $2,737,178 and a change in net unrealized appreciation/depreciation of $(634,018). The Fund’s net income increased for the six months ended June 30, 2011, as compared to the six months ended June 30, 2010 primarily due to the relative performance of the Fund’s benchmark index during the six months ended June 30, 2011.

NAV of ProShares UltraShort DJ-UBS Commodity*

Fund Performance

The following table provides summary performance information for the Fund for the six months ended June 30, 2011 and 2010:

 

     Six Months Ended
June 30, 2011
    Six Months Ended
June 30, 2010
 

NAV beginning of period

   $ 1,440,073      $ 2,924,426   

NAV end of period

   $ 29,495,769      $ 3,381,653   

Percentage change in NAV

     1,948.2     15.6

Shares outstanding beginning of period

     30,003        40,003   

Shares outstanding end of period

     609,997        40,003   

Percentage change in shares outstanding

     1,933.1     0.0

Shares created

     1,780,000        40,000   

Shares redeemed

     1,200,006        40,000   

Per share NAV beginning of period

   $ 48.00      $ 73.11   

Per share NAV end of period

   $ 48.35      $ 84.53   

Percentage change in per share NAV

     0.7     15.6

Percentage change in benchmark

     (2.6 )%      (9.7 )% 

Benchmark annualized volatility

     17.4     17.3

During the six months ended June 30, 2011, the increase in the Fund’s NAV resulted primarily from an increase from 30,003 outstanding Shares at December 31, 2010 to 609,997 outstanding Shares at June 30, 2011. The increase in the Fund’s NAV also resulted in part from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of the Dow Jones-UBS Commodity Index. By comparison, during the six months ended June 30, 2010, the increase in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of the Dow Jones-UBS Commodity Index. There was no net change in the Fund’s outstanding Shares from December 31, 2009 to June 30, 2010.

 

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For the six months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the inverse of the daily performance of its benchmark. The Fund’s per share NAV increase of 0.7% for the six months ended June 30, 2011, as compared to the increase of 15.6% for the six months ended June 30, 2010, was primarily due to a relatively lower appreciation in the value of the assets of the Fund during the six months ended June 30, 2011.

During the six months ended June 30, 2011, the Fund’s NAV reached its high for the period on January 7, 2011 at $50.71 per Share and reached its low for the period on April 29, 2011 at $39.91 per Share. By comparison, during the six months ended June 30, 2010, the Fund’s NAV reached its high for the period on June 4, 2010 at $90.42 per Share and reached its low for the period on January 6, 2010 at $67.11 per Share.

The benchmark’s decline of 2.6% for the six months ended June 30, 2011, as compared to the benchmark’s decline of 9.7% for the six months ended June 30, 2010, can be attributed to a relatively lower depreciation of the underlying components of the index, primarily Crude Oil, during the six months ended June 30, 2011.

Net Income/Loss

For the six months ended June 30, 2011, the Fund’s net loss was $3,174,183, resulting from a net investment loss of $76,246, inclusive of management fees of $79,037 (.95% of the Fund’s average daily net assets of $16,777,198), a net realized loss of $5,514,836 and a change in net unrealized appreciation/depreciation of $2,416,899. By comparison, for the six months ended June 30, 2010, the Fund’s net income was $313,649, resulting from a net investment loss of $17,173, inclusive of management fees of $19,491 (.95% of the Fund’s average weighted assets of $4,137,411), a net realized gain of $551,338 and a change in net unrealized appreciation/depreciation of $(220,516). The Fund’s net income decreased for the six months ended June 30, 2011, as compared to the six months ended June 30, 2010 primarily due to the performance of the Fund’s benchmark index and the timing of capital share transactions during the six months ended June 30, 2011.

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I regarding the reverse share split for the ProShares UltraShort DJ-UBS Commodity Fund.

NAV of ProShares Ultra DJ-UBS Crude Oil*

Fund Performance

The following table provides summary performance information for the Fund for the six months ended June 30, 2011 and 2010:

 

     Six Months Ended
June 30, 2011
    Six Months Ended
June 30, 2010
 

NAV beginning of period

   $ 228,133,077      $ 323,819,670   

NAV end of period

   $ 426,397,237      $ 501,252,171   

Percentage change in NAV

     86.9     54.8

Shares outstanding beginning of period

     4,562,504        6,412,504   

Shares outstanding end of period

     9,999,170        13,012,504   

Percentage change in shares outstanding

     119.2     102.9

Shares created

     17,475,000        17,162,500   

Shares redeemed

     12,038,334        10,562,500   

Per share NAV beginning of period

   $ 50.00      $ 50.50   

Per share NAV end of period

   $ 42.64      $ 38.52   

Percentage change in per share NAV

     (14.7 )%      (23.7 )% 

Percentage change in benchmark

     (5.0 )%      (10.6 )% 

Benchmark annualized volatility

     31.9     28.8

During the six months ended June 30, 2011, the increase in the Fund’s NAV resulted primarily from an increase from 4,562,504 outstanding Shares at December 31, 2010 to 9,999,170 outstanding Shares at June 30, 2011. The

 

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increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of the Dow Jones-UBS Crude Oil Sub-Index. By comparison, during the six months ended June 30, 2010, the increase in the Fund’s NAV resulted from an increase from 6,412,504 outstanding Shares at December 31, 2009 to 13,012,504 outstanding Shares at June 30, 2010. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of the Dow Jones-UBS Crude Oil Sub-Index.

For the six months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the daily performance of its benchmark. The Fund’s per share NAV decrease of 14.7% for the three months ended June 30, 2011, as compared to the decrease of 23.7% for the six months ended June 30, 2010, was primarily due to a relatively lower depreciation in the value of the assets of the Fund during the six months ended June 30, 2011.

During the six months ended June 30, 2011, the Fund’s NAV reached its high for the period on April 29, 2011 at $63.90 per Share and reached its low for the period on June 27, 2011 at $38.53 per Share. By comparison, during the six months ended June 30, 2010, the Fund’s NAV reached its high for the period on May 3, 2010 at $57.29 per Share and reached its low for the period on May 25, 2010 at $33.73 per Share.

The benchmark’s decline of 5.0% for the six months ended June 30, 2011, as compared to the benchmark’s decline of 10.6% for the six months ended June 30, 2010, can be attributed to a relatively lower decrease in the price of WTI Crude Oil during the six months ended June 30, 2011.

Net Income/Loss

For the six months ended June 30, 2011, the Fund’s net income was $43,666,241, resulting from a net investment loss of $1,373,269, inclusive of management fees of $1,456,224 (.95% of the Fund’s average daily net assets of $309,114,160) and brokerage commissions of $54,773, a net realized gain of $74,350,857 and a change in net unrealized appreciation/depreciation of $(29,311,347). By comparison, for the six months ended June 30, 2010, the Fund’s net loss was $19,500,833, resulting from a net investment loss of $1,351,373, inclusive of management fees of $1,445,462 (.95% of the Fund’s average weighted assets of $306,829,726) and brokerage commissions of $79,965, a net realized loss of $4,146,751 and a change in net unrealized appreciation/depreciation of $(14,002,709). The Fund’s net income increased for the six months ended June 30, 2011, as compared to the six months ended June 30, 2010 primarily due to the performance of the Fund’s benchmark index and the timing of capital share transactions during the six months ended June 30, 2011.

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I regarding the reverse share split for the ProShares Ultra DJ-UBS Crude Oil Fund.

 

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NAV of ProShares UltraShort DJ-UBS Crude Oil*

Fund Performance

The following table provides summary performance information for the Fund for the six months ended June 30, 2011 and 2010:

 

     Six Months Ended
June 30, 2011
    Six Months Ended
June 30, 2010
 

NAV beginning of period

   $ 132,214,257      $ 76,656,626   

NAV end of period

   $ 160,288,442      $ 51,326,108   

Percentage change in NAV

     21.2     (33.0 )% 

Shares outstanding beginning of period

     2,600,003        1,120,003   

Shares outstanding end of period

     3,319,944        680,003   

Percentage change in shares outstanding

     27.7     (39.3 )% 

Shares created

     7,080,000        3,670,000   

Shares redeemed

     6,360,059        4,110,000   

Per share NAV beginning of period

   $ 50.85      $ 68.44   

Per share NAV end of period

   $ 48.28      $ 75.48   

Percentage change in per share NAV

     (5.1 )%      10.3

Percentage change in benchmark

     (5.0 )%      (10.6 )% 

Benchmark annualized volatility

     31.9     28.8

During the six months ended June 30, 2011, the increase in the Fund’s NAV resulted primarily from an increase from 2,600,003 outstanding Shares at December 31, 2010 to 3,319,944 outstanding Shares at June 30, 2011. The increase in the Fund’s NAV also resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of the Dow Jones-UBS Crude Oil Sub-Index. By comparison, during the six months ended June 30, 2010, the decrease in the Fund’s NAV resulted from a decrease from 1,120,003 outstanding Shares at December 31, 2009 to 680,003 outstanding Shares at June 30, 2010. The decrease in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of the Dow Jones-UBS Crude Oil Sub-Index.

For the six months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the inverse of the daily performance of its benchmark. The Fund’s per share NAV decrease of 5.1% for the six months ended June 30, 2011, as compared to the increase of 10.3% for the six months ended June 30, 2010, was primarily due to a depreciation in the value of the assets of the Fund during the six months ended June 30, 2011.

During the six months ended June 30, 2011, the Fund’s NAV reached its high for the period on February 15, 2011 at $58.77 per Share and reached its low for the period on April 29, 2011 at $36.11 per Share. By comparison, during the six months ended June 30, 2010, the Fund’s NAV reached its high for the period on May 25, 2010 at $90.21 per Share and reached its low for the period on May 3, 2010 at $55.10 per Share.

The benchmark’s decline of 5.0% for the six months ended June 30, 2011, as compared to the benchmark’s decline of 10.6% for the six months ended June 30, 2010, can be attributed to a relatively lower decrease in the price of WTI Crude Oil during the six months ended June 30, 2011.

Net Income/Loss

For the six months ended June 30, 2011, the Fund’s net income was $32,613,791, resulting from a net investment loss of $669,419, inclusive of management fees of $699,551 (.95% of the Fund’s average daily net assets of $148,494,450) and brokerage commissions of $32,302, a net realized gain of $17,604,025 and a change in net unrealized appreciation/depreciation of $15,679,185. By comparison, for the six months ended June 30, 2010, the Fund’s net income was $26,469,806, resulting from a net investment loss of $379,012, inclusive of management fees of $406,784 (.95% of the Fund’s average weighted assets of $86,348,299) and brokerage commissions of $27,722, a net realized gain of $23,593,223 and a change in net unrealized appreciation/depreciation of $3,255,595. The Fund’s net income increased for the six months ended June 30, 2011, as compared to the six months ended June 30, 2010 primarily due to the performance of the Fund’s benchmark index and the timing of capital share transactions during the six months ended June 30, 2011.

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I regarding the reverse share split for the ProShares UltraShort DJ-UBS Crude Oil Fund.

 

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NAV of ProShares Ultra Gold

Fund Performance

The following table provides summary performance information for the Fund for the six months ended June 30, 2011 and 2010:

 

     Six Months Ended
June 30, 2011
    Six Months Ended
June 30, 2010
 

NAV beginning of period

   $ 259,562,075      $ 156,476,709   

NAV end of period

   $ 282,765,412      $ 209,324,263   

Percentage change in NAV

     8.9     33.8

Shares outstanding beginning of period

     3,750,014        3,550,014   

Shares outstanding end of period

     3,650,014        3,750,014   

Percentage change in shares outstanding

     (2.7 )%      5.6

Shares created

     350,000        1,150,000   

Shares redeemed

     450,000        950,000   

Per share NAV beginning of period

   $ 69.22      $ 44.08   

Per share NAV end of period

   $ 77.47      $ 55.82   

Percentage change in per share NAV

     11.9     26.6

Percentage change in benchmark

     7.1     14.4

Benchmark annualized volatility

     13.2     17.2

During the six months ended June 30, 2011, the increase in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of gold bullion as measured by the U.S. Dollar p.m. fixing price for delivery in London. The increase in the Fund’s NAV was offset by a decrease from 3,750,014 outstanding Shares at December 31, 2010 to 3,650,014 outstanding Shares at June 30, 2011. By comparison, during the six months ended June 30, 2010, the increase in the Fund’s NAV resulted primarily from an increase from 3,550,014 outstanding Shares at December 31, 2009 to 3,750,014 outstanding Shares at June 30, 2010. The increase in the Fund’s NAV also resulted in part from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of gold bullion as measured by the U.S. Dollar p.m. fixing price for delivery in London.

For the six months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the daily performance of its benchmark. The Fund’s per share NAV increase of 11.9% for the six months ended June 30, 2011, as compared to the increase of 26.6% for the six months ended June 30, 2010, was primarily due to a relatively lower appreciation in the value of the assets of the Fund during the six months ended June 30, 2011.

During the six months ended June 30, 2011, the Fund’s NAV reached its high for the period on June 22, 2011 at $82.49 per Share and reached its low for the period on January 28, 2011 at $60.68 per Share. By comparison, during the six months ended June 30, 2010, the Fund’s NAV reached its high for the period on June 28, 2010 at $57.39 per Share and reached its low for the period on February 5, 2010 at $41.35 per Share.

The benchmark’s rise of 7.1% for the six months ended June 30, 2011, as compared to the benchmark’s rise of 14.4% for the six months ended June 30, 2010, can be attributed to a relatively lower increase in the price of spot gold in U.S. Dollar terms during the six months ended June 30, 2011.

Net Income/Loss

For the six months ended June 30, 2011, the Fund’s net income was $25,613,572, resulting from a net investment loss of $1,091,740, inclusive of management fees of $1,208,434 (.95% of the Fund’s average daily net assets of $256,515,511) and brokerage commissions of $1,810, a net realized gain of $50,632,624 and a change in net unrealized appreciation/depreciation of $(23,927,312). By comparison, for the six months ended June 30, 2010, the Fund’s net income was $42,798,354, resulting from a net investment loss of $730,328, inclusive of management fees of $830,426 (.95% of the Fund’s average weighted assets of $176,275,397) and brokerage commissions of $2,071, a net realized gain of $43,718,694 and a change in net unrealized appreciation/depreciation of $(190,012). The Fund’s net income decreased for the six months ended June 30, 2011, as compared to the six months ended June 30, 2010 primarily due to the relative performance of the Fund’s benchmark and the significant increase in net asset value during the six months ended June 30, 2011.

 

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NAV of ProShares UltraShort Gold*

Fund Performance

The following table provides summary performance information for the Fund for the six months ended June 30, 2011 and 2010:

 

     Six Months Ended
June 30, 2011
    Six Months Ended
June 30, 2010
 

NAV beginning of period

   $ 77,732,507      $ 67,602,811   

NAV at end of period

   $ 95,525,554      $ 71,715,632   

Percentage change in NAV

     22.9     6.1

Shares outstanding beginning of period

     2,739,901        1,290,003   

Shares outstanding end of period

     3,989,901        1,889,901   

Percentage change in shares outstanding

     45.6     46.5

Shares created

     2,000,000        1,150,000   

Shares redeemed

     750,000        550,102   

Per share NAV beginning of period

   $ 28.37      $ 52.41   

Per share NAV end of period

   $ 23.94      $ 37.95   

Percentage change in per share NAV

     (15.6 )%      (27.6 )% 

Percentage change in benchmark

     7.1     14.4

Benchmark annualized volatility

     13.2     17.2

During the six months ended June 30, 2011, the increase in the Fund’s NAV resulted primarily from an increase from 2,739,901 outstanding Shares at December 31, 2010 to 3,989,901 outstanding Shares at June 30, 2011. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of gold bullion as measured by the U.S. Dollar p.m. fixing price for delivery in London. By comparison, the increase in the Fund’s NAV resulted from an increase from 1,290,003 outstanding Shares at December 31, 2009 to 1,889,901 outstanding Shares at June 30, 2010. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of gold bullion as measured by the U.S. Dollar p.m. fixing price for delivery in London.

For the six months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the inverse of the daily performance of its benchmark. The Fund’s per share NAV decrease of 15.6% for the six months ended June 30, 2011, as compared to the decrease of 27.6% for the six months ended June 30, 2010, was primarily due to a relatively lower depreciation in the value of the assets of the Fund during the six months ended June 30, 2011.

During the six months ended June 30, 2011, the Fund’s NAV reached its high for the period on January 28, 2011 at $32.10 per Share and reached its low for the period on June 22, 2011 at $22.56 per Share. By comparison, during the six months ended June 30, 2010, the Fund’s NAV reached its high for the period on February 5, 2010 at $54.47 per Share and reached its low for the period on June 28, 2010 at $36.99 per Share.

The benchmark’s rise of 7.1% for the six months ended June 30, 2011, as compared to the benchmark’s rise of 14.4% for the six months ended June 30, 2010, can be attributed to a relatively lower increase in the price of spot gold in U.S. Dollar terms during the six months ended June 30, 2011.

Net Income/Loss

For the six months ended June 30, 2011, the Fund’s net loss was $16,006,008, resulting from a net investment loss of $388,467, inclusive of management fees of $430,641 (.95% of the Fund’s average daily net assets of $91,412,533) and brokerage commissions of $1,853, a net realized loss of $23,388,790 and a change in net unrealized appreciation/depreciation of $7,771,249. By comparison, for the six months ended June 30, 2010, the Fund’s net loss was $21,114,499, resulting from a net investment loss of $276,610, inclusive of management fees of

 

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$314,538 (.95% of the Fund’s average weighted assets of $66,767,248) and brokerage commissions of $1,825, a net realized loss of $20,401,558 and a change in net unrealized appreciation/depreciation of $(436,331). The Fund’s net income increased for the six months ended June 30, 2011, as compared to the six months ended June 30, 2010 primarily due to the relative performance of the Fund’s benchmark and the significant increase in net asset value during the six months ended June 30, 2011.

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I regarding the reverse share split for the ProShares UltraShort Gold Fund.

NAV of ProShares Ultra Silver

Fund Performance

The following table provides summary performance information for the Fund for the six months ended June 30, 2011 and 2010:

 

     Six Months Ended
June 30, 2011
    Six Months Ended
June 30, 2010
 

NAV beginning of period

   $ 547,003,919      $ 145,416,382   

NAV end of period

   $ 881,928,826      $ 181,076,130   

Percentage change in NAV

     61.2     24.5

Shares outstanding beginning of period

     3,500,014        2,550,014   

Shares outstanding end of period

     5,250,014        2,850,014   

Percentage change in shares outstanding

     50.0     11.8

Shares created

     3,700,000        1,350,000   

Shares redeemed

     1,950,000        1,050,000   

Per share NAV beginning of period

   $ 156.29      $ 57.03   

Per share NAV end of period

   $ 167.99      $ 63.54   

Percentage change in per share NAV

     7.5     11.4

Percentage change in benchmark

     14.3     10.3

Benchmark annualized volatility

     58.6     34.0

During the six months ended June 30, 2011, the increase in the Fund’s NAV resulted primarily from an increase from 3,500,014 outstanding Shares at December 31, 2010 to 5,250,014 outstanding Shares at June 30, 2011. The increase in the Fund’s NAV also resulted in part from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of silver bullion as measured by the U.S. Dollar fixing price for delivery in London. By comparison, during the six months ended June 30, 2010, the increase in the Fund’s NAV resulted primarily from an increase from 2,550,014 outstanding Shares at December 31, 2009 to 2,850,014 outstanding Shares at June 30, 2010. The increase in the Fund’s NAV also resulted in part from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of silver bullion as measured by the U.S. Dollar fixing price for delivery in London.

For the six months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the daily performance of its benchmark. The Fund’s per share NAV increase of 7.5% for the six months ended June 30, 2011, as compared to the increase of 11.4% for the six months ended June 30, 2010, was primarily due to a relatively lower appreciation in the value of the assets of the Fund during the six months ended June 30, 2011.

During the six months ended June 30, 2011, the Fund’s NAV reached its high for the period on April 28, 2011 at $369.22 per Share and reached its low for the period on January 28, 2011 at $116.80 per Share. By comparison, during the six months ended June 30, 2010, the Fund’s NAV reached its high for the period on May 14, 2010 at $71.40 per Share and reached its low for the period on February 8, 2010 at $44.40 per Share.

 

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The benchmark’s rise of 14.3% for the six months ended June 30, 2011, as compared to the benchmark’s rise of 10.3% for the six months ended June 30, 2010, can be attributed to a relatively higher increase in the price of spot silver in U.S. Dollar terms during the six months ended June 30, 2011.

Net Income/Loss

For the six months ended June 30, 2011, the Fund’s net loss was $16,680,619, resulting from a net investment loss of $3,753,681, inclusive of management fees of $4,107,369 (.95% of the Fund’s average daily net assets of $871,875,314) and brokerage commissions of $5,228, a net realized gain of $67,052,747 and a change in net unrealized appreciation/depreciation of $(79,979,685). By comparison, for the six months ended June 30, 2010, the Fund’s net income was $25,097,256, resulting from a net investment loss of $677,956, inclusive of management fees of $791,851 (.95% of the Fund’s average weighted assets of $168,086,969) and brokerage commissions of $3,355, a net realized gain of $25,059,162 and a change in net unrealized appreciation/depreciation of $716,050. The Fund’s net income decreased for the six months ended June 30, 2011, as compared to the six months ended June 30, 2010 primarily due to the relative performance of the Fund’s benchmark and the change in capital shares outstanding during the six months ended June 30, 2011.

NAV of ProShares UltraShort Silver*

Fund Performance

The following tables provides summary performance information for the Fund for the six months ended June 30, 2011 and 2010:

 

     Six Months Ended
June 30, 2011
    Six Months Ended
June 30, 2010
 

NAV beginning of period

   $ 99,032,781      $ 64,516,145   

NAV end of period

   $ 657,213,364      $ 60,185,658   

Percentage change in NAV

     563.6     (6.7 )% 

Shares outstanding beginning of period

     2,482,479        342,500   

Shares outstanding end of period

     35,194,369        469,979   

Percentage change in shares outstanding

     1,317.7     37.2

Shares created

     45,687,500        355,000   

Shares redeemed

     12,975,610        227,521   

Per share NAV beginning of period

   $ 39.89      $ 188.37   

Per share NAV end of period

   $ 18.67      $ 128.06   

Percentage change in per share NAV

     (53.2 )%      (32.0 )% 

Percentage change in benchmark

     14.3     10.3

Benchmark annualized volatility

     58.6     34.0

During the six months ended June 30, 2011, the increase in the Fund’s NAV resulted primarily from an increase from 2,482,479 outstanding Shares at December 31, 2010 to 35,194,369 outstanding Shares at June 30, 2011. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of silver bullion as measured by the U.S. Dollar fixing price for delivery in London. By comparison, during the six months ended June 30, 2010, the decrease in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of silver bullion as measured by the U.S. Dollar fixing price for delivery in London. The decrease in the Fund’s NAV was offset by an increase from 342,500 outstanding Shares at December 31, 2009 to 469,979 outstanding Shares at June 30, 2010.

For the six months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the inverse of the daily performance of its benchmark. The Fund’s per share NAV decrease of 53.2% for the six months ended June 30, 2011, as compared to the decrease of 32.0% for the six months ended June 30, 2010 was primarily due to a relatively higher depreciation in the value of the assets of the Fund during the six months ended June 30, 2011.

 

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During the six months ended June 30, 2011, the Fund’s NAV reached its high for the period on January 25, 2011 at $51.11 per Share and reached its low for the period on April 28, 2011 at $13.29 per Share. By comparison, during the six months ended June 30, 2010, the Fund’s NAV reached its high for the period on February 8, 2010 at $227.03 per Share and reached its low for the period on June 21, 2010 at $121.37 per Share.

The benchmark’s rise of 14.3% for the six months ended June 30, 2011, as compared to the benchmark’s rise of 10.3% for the six months ended June 30, 2010, can be attributed to a relatively higher increase in the price of spot silver in U.S. Dollar terms during the six months ended June 30, 2011.

Net Income/Loss

For the six months ended June 30, 2011, the Fund’s net loss was $26,713,062, resulting from a net investment loss of $1,380,998, inclusive of management fees of $1,483,259 (.95% of the Fund’s average daily net assets of $314,852,861) and brokerage commissions of $2,287, a net realized loss of $52,341,860 and a change in net unrealized appreciation/depreciation of $27,009,796. By comparison, for the six months ended June 30, 2010, the Fund’s net loss was $23,458,500, resulting from a net investment loss of $259,719, inclusive of management fees of $297,094 (.95% of the Fund’s average weighted assets of $63,064,482) and brokerage commissions of $1,892, a net realized loss of $22,177,971 and a change in net unrealized appreciation/depreciation of $(1,020,810). The Fund’s net income decreased for the six months ended June 30, 2011, as compared to the six months ended June 30, 2010 primarily due to the relative performance of the Fund’s benchmark during the six months ended June 30, 2011.

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I regarding the reverse share splits for the ProShares UltraShort Silver Fund.

NAV of ProShares Ultra Euro

Fund Performance

The following table provides summary performance information for the Fund for the six months ended June 30, 2011 and 2010:

 

     Six Months Ended
June 30, 2011
    Six Months Ended
June 30, 2010
 

NAV beginning of period

   $ 7,729,684      $ 7,531,857   

NAV end of period

   $ 9,061,264      $ 16,329,042   

Percentage change in NAV

     17.2     116.8

Shares outstanding beginning of period

     300,014        250,014   

Shares outstanding end of period

     300,014        750,014   

Percentage change in shares outstanding

     0.0     200

Shares created

     —          850,000   

Shares redeemed

     —          350,000   

Per share NAV beginning of period

   $ 25.76      $ 30.13   

Per share NAV end of period

   $ 30.20      $ 21.77   

Percentage change in per share NAV

     17.2     (27.7 )% 

Percentage change in benchmark

     8.5     (14.6 )% 

Benchmark annualized volatility

     10.7     11.0

During the six months ended June 30, 2011, the increase in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of the spot price of the Euro versus the U.S. Dollar. There was no net change in the Fund’s outstanding Shares from December 31, 2010 to June 30, 2011. By comparison, the increase in the Fund’s NAV resulted from an increase from 250,014 outstanding Shares at December 31, 2009 to 750,014 outstanding Shares at June 30, 2010. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results

 

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(before fees and expenses) that correspond to 2x of the daily performance of the spot price of the Euro versus the U.S. Dollar.

For the six months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the daily performance of its benchmark. The Fund’s per share NAV increase of 17.2% for the six months ended June 30, 2011, as compared to the decrease of 27.7% for the six months ended June 30, 2010 was primarily due to an appreciation in the value of the assets of the Fund during the six months ended June 30, 2011.

During the six months ended June 30, 2011, the Fund’s NAV reached its high for the period on May 3, 2011 at $31.63 per Share and reached its low for the period on January 7, 2011 at $24.01 per Share. By comparison, during the six months ended June 30, 2010, the Fund’s NAV reached its high for the period on January 11, 2010 at $30.98 per Share and reached its low for the period on June 7, 2010 at $20.70 per Share.

The benchmark’s rise of 8.5% for the six months ended June 30, 2011, as compared to the benchmark’s decline of 14.6% for the six months ended June 30, 2010, can be attributed to an increase in the value of the Euro versus the U.S. Dollar during the six months ended June 30, 2011.

Net Income/Loss

For the six months ended June 30, 2011, the Fund’s net income was $1,331,580, resulting from a net investment loss of $36,218, inclusive of management fees of $40,060 (.95% of the Fund’s average daily net assets of $8,503,461), a net realized gain of $1,607,107 and a change in net unrealized appreciation/depreciation of $(239,309). By comparison, for the six months ended June 30, 2010, the Fund’s net loss was $2,940,910, resulting from a net investment loss of $44,109, inclusive of management fees of $49,931 (.95% of the Fund’s average weighted assets of $10,598,885), a net realized loss of $2,944,861 and a change in net unrealized appreciation/depreciation of $48,060. The Fund’s net income increased for the six months ended June 30, 2011, as compared to the six months ended June 30, 2010 primarily due to the relative performance of the Fund’s benchmark during the six months ended June 30, 2010.

NAV of ProShares UltraShort Euro

Fund Performance

The following table provides summary performance information for the Fund for the six months ended June 30, 2011 and 2010:

 

     Six Months Ended
June 30, 2011
    Six Months Ended
June 30, 2010
 

NAV beginning of period

   $ 444,412,995      $ 100,847,786   

NAV end of period

   $ 632,327,167      $ 462,324,726   

Percentage change in NAV

     42.3     358.4

Shares outstanding beginning of period

     21,900,014        5,400,014   

Shares outstanding end of period

     37,750,014        18,500,014   

Percentage change in shares outstanding

     72.4     242.6

Shares created

     20,050,000        18,000,000   

Shares redeemed

     4,200,000        4,900,000   

Per share NAV beginning of period

   $ 20.29      $ 18.68   

Per share NAV end of period

   $ 16.75      $ 24.99   

Percentage change in per share NAV

     (17.5 )%      33.8

Percentage change in benchmark

     8.5     (14.6 )% 

Benchmark annualized volatility

     10.7     11.0

During the six months ended June 30, 2011, the increase in the Fund’s NAV resulted primarily from an increase from 21,900,014 outstanding Shares at December 31, 2010 to 37,750,014 outstanding Shares at June 30, 2011. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results

 

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(before fees and expenses) that correspond to 2x of the inverse of the daily performance of the spot price of the Euro versus the U.S. Dollar. By comparison, during the six months ended June 30, 2010, the increase in the Fund’s NAV resulted primarily from an increase from 5,400,014 outstanding Shares at December 31, 2009 to 18,500,014 outstanding Shares at June 30, 2010. The increase in the Fund’s NAV also resulted in part from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of the spot price of the Euro versus the U.S. Dollar.

For the six months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the inverse of the daily performance of its benchmark. The Fund’s per share NAV decrease of 17.5% for the six months ended June 30, 2011, as compared to the increase of 33.8% for the six months ended June 30, 2010 was primarily due to a depreciation in the value of the assets held by the Fund during the six months ended June 30, 2011.

During the six months ended June 30, 2011, the Fund’s NAV reached its high for the period on January 7, 2011 at $21.74 per Share and reached its low for the period on May 3, 2011 at $16.22 per Share. By comparison, during the six months ended June 30, 2010, the Fund’s NAV reached its high for the period on June 7, 2010 at $26.39 per Share and reached its low for the period on January 11, 2010 at $18.14 per Share.

The benchmark’s rise of 8.5% for the six months ended June 30, 2011, as compared to the benchmark’s decline of 14.6% for the six months ended June 30, 2010, can be attributed to an increase in the value of the Euro versus the U.S. Dollar during the six months ended June 30, 2011.

Net Income/Loss

For the six months ended June 30, 2011, the Fund’s net loss was $92,714,026, resulting from a net investment loss of $1,901,910, inclusive of management fees of $2,120,677 (.95% of the Fund’s average daily net assets of $450,158,271), a net realized loss of $101,430,775 and a change in net unrealized appreciation/depreciation of $10,618,659. By comparison, for the six months ended June 30, 2010, the Fund’s net income was $90,961,390, resulting from a net investment loss of $1,256,752, inclusive of management fees of $1,489,971 (.95% of the Fund’s average weighted assets of $316,277,686), a net realized gain of $88,493,608 and a change in net unrealized appreciation/depreciation of $3,724,534. The Fund’s net income decreased for the six months ended June 30, 2011, as compared to the six months ended June 30, 2010 primarily due to the relative performance of the Fund’s benchmark during the six months ended June 30, 2011.

NAV of ProShares Ultra Yen

Fund Performance

The following table provides summary performance information for the Fund for the six months ended June 30, 2011 and 2010:

 

     Six Months Ended
June 30, 2011
    Six Months Ended
June 30, 2010
 

NAV beginning of period

   $ 5,024,240      $ 3,921,267   

NAV end of period

   $ 3,376,952      $ 4,292,085   

Percentage change in NAV

     (32.8 )%      9.5

Shares outstanding beginning of period

     150,014        150,014   

Shares outstanding end of period

     100,014        150,014   

Percentage change in shares outstanding

     (33.3 )%      0.0

Shares created

     —          —     

Shares redeemed

     50,000        —     

Per share NAV beginning of period

   $ 33.49      $ 26.14   

Per share NAV end of period

   $ 33.76      $ 28.61   

Percentage change in per share NAV

     0.8     9.5

Percentage change in benchmark

     0.8     5.3

Benchmark annualized volatility

     8.9     11.7

 

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During the six months ended June 30, 2011, the decrease in the Fund’s NAV resulted primarily from a decrease from 150,014 outstanding Shares at December 31, 2010 to 100,014 outstanding Shares at June 30, 2011. The decrease in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of the spot price of the Japanese Yen versus the U.S. Dollar. By comparison, during the six months ended June 30, 2010, the increase in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of the spot price of the Japanese Yen versus the U.S. Dollar. The Fund had no creation or redemption activity during the period.

For the six months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the daily performance of its benchmark. The Fund’s per share NAV increase of 0.8% for the six months ended June 30, 2011, as compared to the increase of 9.5% for the six months ended June 30, 2010 was primarily due to a relatively lower appreciation in the value of the assets held by the Fund during the six months ended June 30, 2011.

During the six months ended June 30, 2011, the Fund’s NAV reached its high for the period on March 17, 2011 at $35.34 per Share and reached its low for the period on April 6, 2011 at $30.09 per Share. By comparison, during the six months ended June 30, 2010, the Fund’s NAV reached its high for the period on March 3, 2010 at $28.87 per Share and reached its low for the period on May 3, 2010 at $25.14 per Share.

The benchmark’s rise of 0.8% for the six months ended June 30, 2011, as compared to the benchmark’s rise of 5.3% for the six months ended June 30, 2010, can be attributed to a relatively lower increase in the value of the Japanese Yen versus the U.S. Dollar during the six months ended June 30, 2011.

Net Income/Loss

For the six months ended June 30, 2011, the Fund’s net loss was $53,699, resulting from a net investment loss of $14,422, inclusive of management fees of $15,917 (.95% of the Fund’s average daily net assets of $3,378,819), a net realized gain of $226,199 and a change in net unrealized appreciation/depreciation of $(265,476). By comparison, for the six months ended June 30, 2010, the Fund’s net income was $370,818, resulting from a net investment loss of $16,523, inclusive of management fees of $19,069 (.95% of the Fund’s average weighted assets of $4,047,742), a net realized loss of $198,362 and a change in net unrealized appreciation/depreciation of $585,703. The Fund’s net income decreased for the six months ended June 30, 2011, as compared to the six months ended June 30, 2010 primarily due to the performance of the Fund’s benchmark and the timing of capital share transactions during the six months ended June 30, 2011.

 

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NAV of ProShares UltraShort Yen

Fund Performance

The following table provides summary performance information for the Fund for the six months ended June 30, 2011 and 2010:

 

     Six Months Ended
June 30, 2011
    Six Months Ended
June 30, 2010
 

NAV at beginning of period

   $ 207,685,813      $ 67,487,917   

NAV at end of period

   $ 356,417,645      $ 145,332,808   

Percentage change in NAV

     71.6     115.3

Shares outstanding beginning of period

     13,250,014        3,150,014   

Shares outstanding end of period

     23,550,014        7,700,014   

Percentage change in shares outstanding

     77.7     144.4

Shares created

     19,600,000        5,450,000   

Shares redeemed

     9,300,000        900,000   

Per share NAV beginning of period

   $ 15.67      $ 21.42   

Per share NAV end of period

   $ 15.13      $ 18.87   

Percentage change in per share NAV

     (3.4 )%      (11.9 )% 

Percentage change in benchmark

     0.8     5.3

Benchmark annualized volatility

     8.9     11.7

During the six months ended June 30, 2011, the increase in the Fund’s NAV resulted primarily from an increase from 13,250,014 outstanding Shares at December 31, 2010 to 23,550,014 outstanding Shares at June 30, 2011. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of the spot price of the Japanese Yen versus the U.S. Dollar. By comparison, during the six months ended June 30, 2010, the increase in the Fund’s NAV resulted from an increase from 3,150,014 outstanding Shares at December 31, 2009 to 7,700,014 outstanding Shares at June 30, 2010. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of the spot price of the Japanese Yen versus the U.S. Dollar.

For the six months ended June 30, 2011 and June 30, 2010, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the inverse of the daily performance of its benchmark. The Fund’s per share NAV decrease of 3.4% for the six months ended June 30, 2011, as compared to the decrease of 11.9% for the six months ended June 30, 2010 was primarily due to a relatively lower depreciation in the value of the assets held by the Fund during the six months ended June 30, 2011.

During the six months ended June 30, 2011, the Fund’s NAV reached its high for the period on April 6, 2011 at $17.15 per Share and reached its low for the period on March 17, 2011 at $14.69 per Share. By comparison, during the six months ended June 30, 2010, the Fund’s NAV reached its high for the period on May 3, 2010 at $21.85 per Share and reached its low for the period on June 30, 2010 at $18.87 per Share.

The benchmark’s rise of 0.8% for the six months ended June 30, 2011, as compared to the benchmark’s rise of 5.3% for the six months ended June 30, 2010, can be attributed to a relatively lower increase in the value of the Japanese Yen versus the U.S. Dollar during the six months ended June 30, 2011.

Net Income/Loss

For the six months ended June 30, 2011, the Fund’s net loss was $9,389,388, resulting from a net investment loss of $1,375,798, inclusive of management fees of $1,527,901 (.95% of the Fund’s average daily net assets of $324,329,059), a net realized loss of $21,725,210 and a change in net unrealized appreciation/depreciation of $13,711,620. By comparison, for the six months ended June 30, 2010, the Fund’s net loss was $14,951,344, resulting from a net investment loss of $512,641, inclusive of management fees of $598,770 (.95% of the Fund’s average weighted assets of $127,101,390), a net realized gain of $303,850 and a change in net unrealized appreciation/depreciation of $(14,742,553). The Fund’s net income increased for the six months ended June 30, 2011, as compared to the six months ended June 30, 2010 primarily due to the relative performance of the Fund’s benchmark during the six months ended June 30, 2011.

 

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NAV of ProShares VIX Short-Term Futures ETF

Since the Fund commenced investment operations on January 3, 2011, a comparison of the Fund’s results of operations for the six months ended June 30, 2010 has not been provided.

Fund Performance

The following table provides summary performance information for the Fund for the six months ended June 30, 2011:

 

     Six Months Ended
June  30, 2011
 

NAV beginning of period

   $ 400   

NAV end of period

   $ 46,602,361   

Percentage change in NAV

     11,650,490.3

Shares outstanding beginning of period

     5   

Shares outstanding end of period

     1,025,005   

Percentage change in shares outstanding

     20,500,000.0

Shares created

     2,125,000   

Shares redeemed

     1,100,000   

Per share NAV beginning of period

   $ 80.00   

Per share NAV end of period

   $ 45.47   

Percentage change in per share NAV

     (43.2 )% 

Percentage change in benchmark

     (43.8 )% 

Benchmark annualized volatility

     53.3

During the six months ended June 30, 2011, the increase in the Fund’s NAV resulted from an increase from 5 outstanding Shares at December 31, 2010 to 1,025,005 outstanding Shares at June 30, 2011. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to the daily performance of the S&P 500 VIX Short-Term Futures Index.

For the six months ended June 30, 2011, the Fund’s daily performance had a statistical correlation over 0.99 of the daily performance of its benchmark.

During the six months ended June 30, 2011, the Fund’s NAV reached its high for the period on March 16, 2011 at $81.40 per Share and reached its low for the period on June 30, 2011 at $45.47 per Share.

The benchmark’s decline of 43.8% for the six months ended June 30, 2011 can be attributed to the cost of holding and rolling VIX short-term futures contracts over the period.

Net Income/Loss

For the six months ended June 30, 2011, the Fund’s net loss was $17,368,636, resulting from a net investment loss of $124,479, inclusive of management fees of $36,288 and offering costs of $98,128, a net realized loss of $12,792,140 and a change in net unrealized appreciation/depreciation of $(4,452,017).

NAV of ProShares VIX Mid-Term Futures ETF

Since the Fund commenced investment operations on January 3, 2011, a comparison of the Fund’s results of operations for the six months ended June 30, 2010 has not been provided.

 

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Fund Performance

The following table provides summary performance information for the Fund for the six months ended June 30, 2011:

 

     Six Months Ended
June 30, 2011
 

NAV beginning of period

   $ 400   

NAV end of period

   $ 13,895,731   

Percentage change in NAV

     3,473,832.8

Shares outstanding beginning of period

     5   

Shares outstanding end of period

     225,005   

Percentage change in shares outstanding

     4,500,000.0

Shares created

     475,000   

Shares redeemed

     250,000   

Per share NAV beginning of period

   $ 80.00   

Per share NAV end of period

   $ 61.76   

Percentage change in per share NAV

     (22.8 )% 

Percentage change in benchmark

     (23.4 )% 

Benchmark annualized volatility

     27.1

During the six months ended June 30, 2011, the increase in the Fund’s NAV resulted from an increase from 5 outstanding Shares at December 31, 2010 to 225,005 outstanding Shares at June 30, 2011. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to the daily performance of the S&P 500 VIX Mid-Term Futures Index.

For the six months ended June 30, 2011, the Fund’s daily performance had a statistical correlation over 0.99 of the daily performance of its benchmark.

During the six months ended June 30, 2011, the Fund’s NAV reached its high for the period on January 3, 2011 at $80.00 per Share and reached its low for the period on May 31, 2011 at $61.06 per Share.

The benchmark’s decline of 23.4% for the six months ended June 30, 2011 can be attributed to the cost of holding and rolling VIX mid-term futures contracts over the period.

Net Income/Loss

For the six months ended June 30, 2011, the Fund’s net loss was $2,306,438, resulting from a net investment loss of $31,763, inclusive of offering costs of $61,330 offset by limitation by Sponsor of $26,552, a net realized loss of $1,860,602 and a change in net unrealized appreciation/depreciation of $(414,073).

Off-Balance Sheet Arrangements and Contractual Obligations

As of August 9, 2011, the Funds have not used, nor do they expect to use in the future, special purpose entities to facilitate off-balance sheet financing arrangements and have no loan guarantee arrangements or off-balance sheet arrangements of any kind other than agreements entered into in the normal course of business, which may include indemnification provisions related to certain risks service providers undertake in performing services which are in the best interests of the Funds. While each Fund’s exposure under such indemnification provisions cannot be estimated, these general business indemnifications are not expected to have a material impact on a Fund’s financial position.

Management fee payments made to the Sponsor are calculated as a fixed percentage of each Fund’s NAV. As such, the Sponsor cannot anticipate the amount of payments that will be required under these arrangements for future periods as NAVs are not known until a future date. The agreement with the Sponsor may be terminated by either party upon 30 days written notice to the other party. One officer of the Trust also serves as an officer and owner of the Sponsor.

 

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Market Risk

Trading in futures contracts involves each Fund entering into contractual commitments to purchase or sell a commodity underlying the Fund’s benchmark at a specified date and price, should it hold such futures contract into the deliverable period. Should a Fund enter into a contractual commitment to sell a physical commodity, it would be required to make delivery of that commodity at the contract price and then repurchase the contract at prevailing market prices or settle in cash. Since the repurchase price to which the value of a commodity can rise is unlimited, entering into commitments to sell commodities would expose a Fund to theoretically unlimited risk.

Each Fund’s exposure to market risk is influenced by a number of factors, including the liquidity of the markets in which the contracts are traded and the relationships among the contracts held. The inherent uncertainty of each Fund’s trading as well as the development of drastic market occurrences could ultimately lead to a loss of all or substantially all of investors’ capital.

Credit Risk

When a Fund enters into swap agreements, futures contracts or forward contracts, the Fund is exposed to credit risk that the counterparty to the contract will not meet its obligations.

The counterparty for futures contracts traded on United States and most foreign futures exchanges is the clearing house associated with the particular exchange. In general, clearing houses are backed by their corporate members who may be required to share in the financial burden resulting from the nonperformance by one of their members and, as such, should significantly reduce this credit risk. In cases where the clearing house is not backed by the clearing members (i.e., some foreign exchanges, which may become applicable in the future), it may be backed by a consortium of banks or other financial institutions.

Swap and forward agreements are contracted for directly with counterparties. There can be no assurance that any counterparty, clearing member or clearing house will meet its obligations to a Fund.

Swap agreements do not generally involve the delivery of underlying assets either at the outset of a transaction or upon settlement. Accordingly, if the counterparty to a swap agreement defaults, the Fund’s risk of loss consists of the net amount of payments that the Fund is contractually entitled to receive, if any. Swap counterparty risk is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovery collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

Forward agreements do not involve the delivery of assets at the onset of a transaction, but may be settled physically in the underlying asset if such contracts are held to expiration, particularly in the case of currency forwards. Thus, prior to settlement, if the counterparty to a forward contract defaults, a Fund’s risk of loss consists of the net amount of payments that the Fund is contractually entitled to receive, if any. However, if physically settled forwards are held until expiration (presently, there is no plan to do this), at the time of settlement, a Fund may be at risk for the full notional value of the forward contracts depending on the type of settlement procedures used.

The Sponsor attempts to minimize certain of these market and credit risks by normally:

 

   

executing and clearing trades with creditworthy counterparties, as determined by the Sponsor;

 

   

limiting the outstanding amounts due from counterparties to the Funds;

 

   

not posting margin directly with a counterparty;

 

   

generally requiring that the counterparty posts collateral in amounts approximately equal to that owed to the Funds, as marked to market;

 

   

limiting the amount of margin or premium posted at a futures commission merchant (“FCM”); and

 

   

ensuring that deliverable contracts are not held to such a date when delivery of the underlying asset could be called for.

 

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The FCM for each Fund, in accepting orders for the purchase or sale of domestic futures contracts, is required by CFTC regulations to separately account for and segregate as belonging to the Fund, all assets of the Fund relating to domestic futures trading, and the FCM is not allowed to commingle such assets with other assets of the FCM. In addition, CFTC regulations also require the FCM to hold in a secure account assets of each Fund related to foreign futures trading.

The Funds could lose money if the issuer of a debt security is unable to meet its financial obligations or goes bankrupt. The Funds could also lose money if the issuer of a debt security in which it has a short position is upgraded or generally improves its standing. Changes in an issuer’s financial strength or in an issuer’s or debt security’s credit rating also may affect a security’s value and thus have an impact on a Fund’s performance. Credit risk usually applies to most debt securities, but generally is not a factor for U.S. government obligations.

Critical Accounting Policies

The Funds’ critical accounting policies are as follows:

Preparation of the 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. The Funds’ application of these policies involves judgments and actual results may differ from the estimates used.

Each Fund has significant exposure to Financial Instruments. The Funds hold a significant portion of their assets in swaps, futures or forward contracts, all of which are recorded on a trade date basis and at fair value in the financial statements, with changes in fair value reported in the Statements of Operations.

The use of fair value to measure Financial Instruments, with related unrealized gains or losses recognized in earnings in each period, is fundamental to the Trust’s and the Funds’ financial statements. The fair value of a Financial Instrument is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price).

For financial reporting purposes, the Leveraged Funds and VIX Funds value transactions based upon the final closing price in their primary markets. Accordingly, the investment valuations in these financial statements differ from those used in the calculation of some Leveraged Funds’ and VIX Funds’ final creation/redemption NAV for the three and six months ended June 30, 2011.

Short-term investments are valued at market price. Treasury securities having a maturity of greater than sixty days are valued at market price.

Derivatives (e.g., futures, swaps and forward agreements) are generally valued using independent sources and/or agreements with counterparties or other procedures as determined by the Sponsor. Futures contracts, except for those entered into by the Gold and Silver Funds, are generally valued at the last settled price on the applicable exchange on which that future trades. Futures contracts entered into by the Gold and Silver Funds are valued at the last sales price prior to the time at which the NAV per Share of a Fund is determined. If there was no sale on that day, and for non-exchange-traded derivatives, the Sponsor may in its sole discretion choose to determine a fair value price as the basis for determining the market value of such position for such day. Such fair value prices would be generally determined based on available inputs about the current value of the underlying financial instrument or commodity and would be based on principles that the Sponsor deems fair and equitable so long as such principles are consistent with normal industry standards. When market closing prices are not available, the Sponsor may value an asset of a Fund pursuant to the policies the Sponsor has adopted, which are consistent with normal industry standards.

Fair value pricing may require subjective determinations about the value of an investment. While each Leveraged and VIX Fund’s policy is intended to result in a calculation of the Leveraged or VIX Fund’s NAV that fairly reflects investment values as of the time of pricing, the Leveraged and VIX Funds cannot ensure that fair values determined by the Sponsor or persons acting at their direction would accurately reflect the price that the Leveraged or VIX Fund could obtain for an investment if it were to dispose of that investment as of the time of pricing (for instance, in a forced or distressed sale). The prices used by the Leveraged or VIX Fund may differ from the value that would be realized if the investments were sold and the differences could be material to the financial statements.

 

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The Funds disclose the fair value of their investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. See Note 2 in Item 1 of this Quarterly Report on Form 10-Q for further information.

Discounts on short-term securities purchased are amortized and reflected as Interest Income in the Statements of Operations.

Realized gains (losses) and changes in unrealized gain (loss) on open positions are determined on a specific identification basis and recognized in the Statements of Operations in the period in which the contract is closed or the changes occur, respectively.

Each Geared Fund pays its respective brokerage commissions, including applicable exchange fees, NFA fees, give-up fees, pit brokerage fees and other transaction related fees and expenses charged in connection with trading activities for each Fund’s investment in U.S. Commodity Futures Trading Commission regulated investments. Brokerage commissions on futures contracts are recognized on a half-turn basis.

 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Quantitative Disclosure

Commodity Price Sensitivity

Each of the Commodity Funds and the Commodity Index Funds is exposed to commodity price risk through its holdings of Financial Instruments. The following tables provide information about each of the Commodity Funds’ and the Commodity Index Funds’ Financial Instruments, which are sensitive to commodity price risk. As of June 30, 2011 and June 30, 2010, each of the Commodity Funds and the Commodity Index Funds’ positions were as follows:

ProShares Ultra DJ-UBS Commodity:

As of June 30, 2011, the ProShares Ultra DJ-UBS Commodity Fund was exposed to commodity price risk through its holding of swap agreements linked to the Dow Jones-UBS Commodity Index. The following table provides information about the Fund’s swap positions as of June 30, 2011, which are sensitive to commodity price risk.

 

Reference Index

   Counterparty    Long or
Short
   Index Close      Notional Amount
at Value
 

Dow Jones-UBS Commodity Index

   Goldman Sachs International    Long    $ 157.5247       $ 8,152,130   

Dow Jones-UBS Commodity Index

   UBS AG    Long      157.5247         25,337,039   

The June 30, 2011 swap notional amount is calculated by multiplying units times the closing level of the Index. The notional amount will increase (decrease) proportionally with increases (decreases) in the level of the Index. Additional gains (losses) associated with these contracts will be equal to any such subsequent increases (decreases) in notional amount, before accounting for spreads or financing costs associated with the swaps. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have $2.00 of exposure to the Index for every $1.00 of net assets. While the above information properly represents the then current commodity price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the return of the Index and multiplying by two. See “Item 1A. Risk Factors” in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2010, filed with the U.S. Securities and Exchange Commission on March 1, 2011 (the “Form 10-K”) for additional information regarding performance for periods longer than one day. Swap counterparty risk is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

As of June 30, 2010, the ProShares Ultra DJ-UBS Commodity Fund was exposed to commodity price risk through its holding of swap agreements linked to the Dow Jones-UBS Commodity Index. The following table provides information about the Fund’s swap positions as of June 30, 2010, which are sensitive to commodity price risk.

Swap Agreements

 

Reference Index

   Counterparty    Long or
Short
   Index Close      Notional Amount
at Value
 

Dow Jones-UBS Commodity Index

   Goldman Sachs International    Long    $ 125.7471       $ 6,292,846   

Dow Jones-UBS Commodity Index

   UBS AG    Long      125.7471         18,324,499   

The June 30, 2010 swap notional amount is calculated by multiplying units times the closing level of the Index. The notional amount will increase (decrease) proportionally with increases (decreases) in the level of the Index. Additional gains (losses) associated with these contracts will be equal to any such subsequent increases (decreases) in notional amount, before accounting for spreads or financing costs associated with the swaps. The Fund will

 

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generally attempt to adjust its positions in Financial Instruments each day to have $2.00 of exposure to the Index for every $1.00 of net assets. While the above information properly represents the then current commodity price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the return of the Index and multiplying by two. See “Item 1A. Risk Factors” in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2009, filed with the U.S. Securities and Exchange Commission on March 1, 2010 (the “Form 10-K”) for additional information regarding performance for periods longer than one day. Swap counterparty risk is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

ProShares UltraShort DJ-UBS Commodity:

As of June 30, 2011, the ProShares UltraShort DJ-UBS Commodity Fund was exposed to inverse commodity price risk through its holding of swap agreements linked to the Dow Jones-UBS Commodity Index. The following table provides information about the Fund’s short swap positions as of June 30, 2011, which are sensitive to commodity price risk.

 

Reference Index

   Counterparty      Long or
Short
   Index Close      Notional Amount
at Value
 

Dow Jones-UBS Commodity Index

     Goldman Sachs International       Short    $ 157.5247       $ (14,458,798

Dow Jones-UBS Commodity Index

     UBS AG       Short      157.5247         (44,002,256

The June 30, 2011 short swap notional amount is calculated by multiplying units times the closing level of the Index. The short notional amount will increase (decrease) proportionally with increases (decreases) in the level of the Index. Additional losses (gains) associated with these contracts will be equal to any such subsequent increases (decreases) in short notional amount, before accounting for any spreads or financing costs associated with the swaps. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have negative $2.00 of exposure to the Index for every $1.00 of net assets. While the above information properly represents the then current commodity price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the return of the Index and multiplying by negative two. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day. Swap counterparty risk is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

As of June 30, 2010, the ProShares UltraShort DJ-UBS Commodity Fund was exposed to inverse commodity price risk through its holding of swap agreements linked to the Dow Jones-UBS Commodity Index. The following table provides information about the Fund’s short swap positions as of June 30, 2010, which are sensitive to commodity price risk.

Swap Agreements

 

Reference Index

   Counterparty      Long or
Short
     Index Close      Notional Amount
at Value
 

Dow Jones-UBS Commodity Index

     Goldman Sachs International         Short       $ 125.7471       $ (1,504,460

Dow Jones-UBS Commodity Index

     UBS AG         Short         125.7471         (5,246,244

 

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The June 30, 2010 short swap notional amount is calculated by multiplying units times the closing level of the Index. The short notional amount will increase (decrease) proportionally with increases (decreases) in the level of the Index. Additional losses (gains) associated with these contracts will be equal to any such subsequent increases (decreases) in short notional amount, before accounting for any spreads or financing costs associated with the swaps. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have negative $2.00 of exposure to the Index for every $1.00 of net assets. While the above information properly represents the then current commodity price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the return of the Index and multiplying by minus two. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day. Swap counterparty risk is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

ProShares Ultra DJ-UBS Crude Oil:

As of June 30, 2011, the ProShares Ultra DJ-UBS Crude Oil Fund was exposed to inverse commodity price risk through its holding of Crude Oil futures contracts and its holding of swap agreements linked to the Dow Jones-UBS Crude Oil Sub-Index. The following table provides information about the Fund’s positions in these Financial Instruments as of June 30, 2011, which are sensitive to commodity price risk.

Futures Positions

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Crude Oil

                 

(NYMEX)

     Long         September 2011         3,681       $ 95.96         1,000       $ 353,228,760   

Swap Agreements

 

Reference Index

   Counterparty      Long or
Short
     Index Close      Notional Amount
at Value
 

Dow Jones-UBS Crude Oil Sub-Index

     Goldman Sachs International         Long       $ 256.1940       $ 167,208,929   

Dow Jones-UBS Crude Oil Sub-Index

     UBS AG         Long         256.1940         332,370,201   

The June 30, 2011 futures notional amount is calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The June 30, 2011 swap notional amount is calculated by multiplying the number of units times the closing level of the Index. These notional amounts will increase (decrease) proportionally with increases (decreases) in the price of the futures contract or the level of the Index, as applicable. Additional gains (losses) associated with these contracts will be equal to any such subsequent increases (decreases) in notional amount, before accounting for spreads or transaction or financing costs. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have $2.00 of exposure to the Index for every $1.00 of net assets. While the above information properly represents the then current commodity price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the return of the Index and multiplying by two. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day. Swap counterparty risk is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

As of June 30, 2010, the ProShares Ultra DJ-UBS Crude Oil Fund was exposed to commodity price risk through its holding of Crude Oil futures contracts and its holding of swap agreements linked to the Dow Jones-UBS Crude Oil Sub-Index. The following table provides information about the Fund’s positions in these Financial Instruments as of June 30, 2010, which are sensitive to commodity price risk.

 

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Futures Positions

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Crude Oil (NYMEX)

     Long         September 2010         4,598       $ 76.16         1,000       $ 350,183,680   

Swap Agreements

 

Reference Index

   Counterparty      Long or
Short
     Index Close      Notional Amount
at Value
 

Dow Jones-UBS Crude Oil Sub-Index

     Goldman Sachs International         Long       $ 232.4933       $ 240,847,937   

Dow Jones-UBS Crude Oil Sub-Index

     UBS AG         Long         232.4933         411,408,299   

The June 30, 2010 futures notional amount is calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The June 30, 2010 swap notional amount is calculated by multiplying the number of units times the closing level of the Index. These notional amounts will increase (decrease) proportionally with increases (decreases) in the price of the futures contract or the level of the Index, as applicable. Additional gains (losses) associated with these contracts will be equal to any such subsequent increases (decreases) in notional amount, before accounting for spreads or transaction or financing costs. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have $2.00 of exposure to the Index for every $1.00 of net assets. While the above information properly represents the then current commodity price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the return of the Index and multiplying by two. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day. Swap counterparty risk is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

ProShares UltraShort DJ-UBS Crude Oil:

As of June 30, 2011, the ProShares UltraShort DJ-UBS Crude Oil Fund was exposed to inverse commodity price risk through its holding of Crude Oil futures contracts and its holding of swap agreements linked to the Dow Jones-UBS Crude Oil Sub-Index. The following table provides information about the Fund’s positions in these Financial Instruments as of June 30, 2011, which are sensitive to commodity price risk.

Futures Positions

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Crude Oil (NYMEX)

     Short         September 2011         1,146       $ 95.96         1,000       $ (109,970,160

Swap Agreements

 

Reference Index

   Counterparty    Long or
Short
     Index Close      Notional Amount
at Value
 

Dow Jones-UBS Crude Oil Sub-Index

   Goldman Sachs International      Short       $ 256.1940       $ (73,730,860

Dow Jones-UBS Crude Oil Sub-Index

   UBS AG      Short         256.1940         (136,879,095

 

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The June 30, 2011 short futures notional amount is calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The June 30, 2011 short swap notional amount is calculated by multiplying the number of units times the closing level of the Index. These short notional amounts will increase (decrease) proportionally with increases (decreases) in the price of the futures contract or the level of the Index, as applicable. Additional losses (gains) associated with these contracts will be equal to any such subsequent increases (decreases) in short notional amount, before accounting for spreads or transaction or financing costs. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have negative $2.00 of exposure to the Index for every $1.00 of net assets. While the above information properly represents the then current commodity price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the return of the Index and multiplying by negative two. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day. Swap counterparty risk is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

As of June 30, 2010, the ProShares UltraShort DJ-UBS Crude Oil Fund was exposed to inverse commodity price risk through its holding of Crude Oil futures contracts and its holding of swap agreements linked to the Dow Jones-UBS Crude Oil Sub-Index. The following table provides information about the Fund’s positions in these Financial Instruments as of June 30, 2010, which are sensitive to commodity price risk.

Futures Positions

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Crude Oil (NYMEX)

     Short         September 2010         445       $ 76.16         1,000       $ (33,891,200

Swap Agreements

 

Reference Index

   Counterparty      Long or
Short
     Index Close      Notional Amount
at Value
 

Dow Jones-UBS Crude Oil Sub-Index

     Goldman Sachs International         Short       $ 232.4933       $ (26,682,771

Dow Jones-UBS Crude Oil Sub-Index

     UBS AG         Short         232.4933         (42,068,224

The June 30, 2010 short futures notional amount is calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The June 30, 2010 short swap notional amount is calculated by multiplying the number of units times the closing level of the Index. These short notional amounts will increase (decrease) proportionally with increases (decreases) in the price of the futures contract or the level of the Index, as applicable. Additional losses (gains) associated with these contracts will be equal to any such subsequent increases (decreases) in short notional amount, before accounting for spreads or transaction or financing costs. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have negative $2.00 of exposure to the Index for every $1.00 of net assets. While the above information properly represents the then current commodity price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the return of the Index and multiplying by two. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day. Swap counterparty risk is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

 

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ProShares Ultra Gold:

As of June 30, 2011, the ProShares Ultra Gold Fund was exposed to inverse commodity price risk through its holding of Gold futures contracts and Gold forward agreements. The following table provides information about the Fund’s positions in these Financial Instruments as of June 30, 2011, which are sensitive to commodity price risk.

Futures Positions

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Gold Futures (COMEX)

     Long         August 2011         84       $ 1,502.80         100       $ 12,623,520   

Forward Agreements

 

Reference Index

   Counterparty    Long or
Short
     Valuation
Price
     Notional Amount
at Value
 

0.995 Fine Troy Ounce Gold

   Goldman Sachs International      Long       $ 1,505.55       $ 141,401,256   

0.995 Fine Troy Ounce Gold

   UBS AG      Long         1,505.55         411,466,815   

The June 30, 2011 futures notional amount is calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The June 30, 2011 forward notional amount equals units multiplied by the forward price. These notional amounts will increase (decrease) proportionally with increases (decreases) in the price of the futures contract or forward price, as applicable. Additional gains (losses) associated with these contracts will be equal to any such subsequent increases (decreases) in notional amount, before accounting for spreads or transaction or financing costs. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have $2.00 of exposure to the Index for every $1.00 of net assets. While the above information properly represents the then current commodity price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the return of the Index and multiplying by two. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day. Counterparty risk related to the forward agreements is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

As of June 30, 2010, the ProShares Ultra Gold Fund was exposed to inverse commodity price risk through its holding of Gold futures contracts and Gold forward agreements. The following table provides information about the Fund’s positions in these Financial Instruments as of June 30, 2010, which are sensitive to commodity price risk.

Futures Positions

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Gold Futures (COMEX)

     Long         August 2010         116       $ 1,245.90         100       $ 14,452,440   

Forward Agreements

 

Reference Index

   Counterparty    Long or
Short
     Valuation
Price
     Notional Amount
at Value
 

0.995 Fine Troy Ounce Gold

   Goldman Sachs International      Long       $ 1,244.10       $ 46,554,222   

0.995 Fine Troy Ounce Gold

   UBS AG      Long         1,244.10         355,563,780   

The June 30, 2010 futures notional amount is calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The June 30, 2010 forward notional amount equals units multiplied by

 

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the forward price. These notional amounts will increase (decrease) proportionally with increases (decreases) in the price of the futures contract or forward price, as applicable. Additional gains (losses) associated with these contracts will be equal to any such subsequent increases (decreases) in notional amount, before accounting for spreads or transaction or financing costs. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have $2.00 of exposure to the Index for every $1.00 of net assets. While the above information properly represents the then current commodity price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the return of the Index and multiplying by two. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day. Counterparty risk related to the forward agreements is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

ProShares UltraShort Gold:

As of June 30, 2011, the ProShares UltraShort Gold Fund was exposed to inverse commodity price risk through its holding of Gold futures contracts and Gold forward agreements. The following table provides information about the Fund’s positions in these Financial Instruments as of June 30, 2011, which are sensitive to commodity price risk.

Futures Positions

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Gold Futures (COMEX)

     Short         August 2011         32       $ 1,502.80         100       $ (4,808,960

Forward Agreements

 

Reference Index

   Counterparty    Long or
Short
     Valuation
Price
     Notional Amount
at Value
 

0.995 Fine Troy Ounce Gold

   Goldman Sachs International      Short       $ 1,505.55       $ (45,916,264

0.995 Fine Troy Ounce Gold

   UBS AG      Short         1,505.55         (140,317,260

The June 30, 2011 short futures notional amount is calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The June 30, 2011 short forward notional amount equals units multiplied by the forward price. These short notional amounts will increase (decrease) proportionally with increases (decreases) in the price of the futures contract or forward price, as applicable. Additional losses (gains) associated with these contracts will be equal to any such subsequent increases (decreases) in notional amount, before accounting for spreads or transaction or financing costs. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have negative $2.00 of short exposure to the Index for every $1.00 of net assets. While the above information properly represents the then current commodity price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the return of the Index and multiplying by negative two. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day. Counterparty risk related to the forward agreements is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

As of June 30, 2010, the ProShares UltraShort Gold Fund was exposed to inverse commodity price risk through its holding of Gold futures contracts and Gold forward agreements. The following table provides information about the Fund’s positions in these Financial Instruments as of June 30, 2010, which are sensitive to commodity price risk.

 

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Futures Positions

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Gold Futures (COMEX)

     Short         August 2010         22       $ 1,245.90         100       $ (2,740,980

Forward Agreements

 

Reference Index

   Counterparty      Long or
Short
     Valuation
Price
     Notional Amount
at Value
 

0.995 Fine Troy Ounce Gold

     Goldman Sachs International         Short       $ 1,244.10       $ (18,410,192

0.995 Fine Troy Ounce Gold

     UBS AG         Short         1,244.10         (122,917,080

The June 30, 2010 short futures notional amount is calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The June 30, 2010 short forward notional amount equals units multiplied by the forward price. These short notional amounts will increase (decrease) proportionally with increases (decreases) in the price of the futures contract or forward price, as applicable. Additional losses (gains) associated with these contracts will be equal to any such subsequent increases (decreases) in notional amount, before accounting for spreads or transaction or financing costs. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have negative $2.00 of short exposure to the Index for every $1.00 of net assets. While the above information properly represents the then current commodity price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the return of the Index and multiplying by two. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day. Counterparty risk related to the forward agreements is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

ProShares Ultra Silver:

As of June 30, 2011, the ProShares Ultra Silver Fund was exposed to commodity price risk through its holding of Silver futures contracts and Silver forward agreements. The following table provides information about the Fund’s positions in these Financial Instruments as of June 30, 2011, which are sensitive to commodity price risk.

Futures Positions

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Silver Futures (COMEX)

     Long         September 2011         287       $ 34.832         5,000       $ 49,983,920   

Forward Agreements

 

Reference Index

   Counterparty    Long or
Short
     Valuation
Price
     Notional Amount
at Value
 

0.999 Fine Troy Ounce Silver

   Goldman Sachs International      Long       $ 35.0210       $ 421,855,962   

0.999 Fine Troy Ounce Silver

   UBS AG      Long         35.0210         1,292,765,194   

 

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The June 30, 2011 futures notional amount is calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The June 30, 2011 forward notional amount equals units multiplied by the forward price. These notional amounts will increase (decrease) proportionally with increases (decreases) in the price of the futures contract or forward price, as applicable. Additional gains (losses) associated with these contracts will be equal to any such subsequent increases (decreases) in notional amount, before accounting for spreads or transaction or financing costs. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have $2.00 of exposure to the Index for every $1.00 of net assets. While the above information properly represents the then current commodity price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the return of the Index and multiplying by two. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day. Counterparty risk related to the forward agreements is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

As of June 30, 2010, the ProShares Ultra Silver Fund was exposed to commodity price risk through its holding of Silver futures contracts and Silver forward agreements. The following table provides information about the Fund’s positions in these Financial Instruments as of June 30, 2010, which are sensitive to commodity price risk.

Futures Positions

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Silver Futures (COMEX)

     Long         September 2010         122       $ 18.708         5,000       $ 11,411,880   

Forward Agreements

 

Reference Index

   Counterparty      Long or
Short
     Valuation
Price
     Notional Amount
at Value
 

0.999 Fine Troy Ounce Silver

     Goldman Sachs International         Long       $ 18.7420       $ 88,477,234   

0.999 Fine Troy Ounce Silver

     UBS AG         Long         18.7420         262,275,548   

The June 30, 2010 futures notional amount is calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The June 30, 2010 forward notional amount equals units multiplied by the forward price. These notional amounts will increase (decrease) proportionally with increases (decreases) in the price of the futures contract or forward price, as applicable. Additional gains (losses) associated with these contracts will be equal to any such subsequent increases (decreases) in notional amount, before accounting for spreads or transaction or financing costs. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have $2.00 of exposure to the Index for every $1.00 of net assets. While the above information properly represents the then current commodity price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the return of the Index and multiplying by two. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day. Counterparty risk related to the forward agreements is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

 

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ProShares UltraShort Silver:

As of June 30, 2011, the ProShares UltraShort Silver Fund was exposed to inverse commodity price risk through its holding of Silver futures contracts and Silver forward agreements. The following table provides information about the Fund’s positions in these Financial Instruments as of June 30, 2011, which are sensitive to commodity price risk.

Futures Positions

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Silver Futures (COMEX)

     Short         September 2011         207       $ 34.832         5,000       $ (36,051,120

Forward Agreements

 

Reference Index

   Counterparty    Long or
Short
     Valuation
Price
     Notional Amount
at Value
 

0.999 Fine Troy Ounce Silver

   Goldman Sachs International      Short       $ 35.0210       $ (312,825,083

0.999 Fine Troy Ounce Silver

   UBS AG      Short         35.0210         (964,933,613

The June 30, 2011 short futures notional amount is calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The June 30, 2011 short forward notional amount equals units multiplied by the forward price. These short notional amounts will increase (decrease) proportionally with increases (decreases) in the price of the futures contract or forward price, as applicable. Additional losses (gains) associated with these contracts will be equal to any such subsequent increases (decreases) in notional amount, before accounting for spreads or transaction or financing costs. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have negative $2.00 of short exposure to the Index for every $1.00 of net assets. While the above information properly represents the then current commodity price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the return of the Index and multiplying by negative two. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day. Counterparty risk related to the forward agreements is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

As of June 30, 2010, the ProShares UltraShort Silver Fund was exposed to inverse commodity price risk through its holding of Silver futures contracts and Silver forward agreements. The following table provides information about the Fund’s positions in these Financial Instruments as of June 30, 2010, which are sensitive to commodity price risk.

Futures Positions

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Silver Futures (COMEX)

     Short         September 2010         33       $ 18.708         5,000       $ (3,086,820

Forward Agreements

 

Reference Index

   Counterparty    Long or
Short
     Valuation
Price
     Notional Amount
at Value
 

0.999 Fine Troy Ounce Silver

   Goldman Sachs International      Short       $ 18.7420       $ (30,502,605

0.999 Fine Troy Ounce Silver

   UBS AG      Short         18.7420         (86,737,976

The June 30, 2010 short futures notional amount is calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The June 30, 2010 short forward notional amount equals units

 

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multiplied by the forward price. These short notional amounts will increase (decrease) proportionally with increases (decreases) in the price of the futures contract or forward price, as applicable. Additional losses (gains) associated with these contracts will be equal to any such subsequent increases (decreases) in notional amount, before accounting for spreads or transaction or financing costs. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have negative $2.00 of short exposure to the Index for every $1.00 of net assets. While the above information properly represents the then current commodity price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the return of the Index and multiplying by two. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day. Counterparty risk related to the forward agreements is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

Exchange Rate Sensitivity

Each of the Currency Funds is exposed to exchange rate risk through its holdings of Financial Instruments. The following tables provide information about each of the Currency Funds’ Financial Instruments, which are sensitive to changes in exchange rates. As of June 30, 2011, each of the Currency Funds’ positions were as follows:

ProShares Ultra Euro:

As of June 30, 2011, the ProShares Ultra Euro Fund was exposed to exchange rate price risk through its holdings of Euro/USD foreign currency forward contracts. The following table provides information about the Fund’s positions in these Financial Instruments as of June 30, 2011, which are sensitive to exchange rate price risk.

Foreign Currency Forward Contracts

 

Reference Currency

   Counterparty    Long or
Short
     Settlement
Date
     Euro     Forward Rate      Market Value
USD
 

Euro

   Goldman Sachs International      Long         07/08/11         6,308,625        1 .4500       $ 9,147,615   

Euro

   UBS AG      Long         07/08/11         6,990,900        1 .4500         10,136,925   

Euro

   Goldman Sachs International      Short         07/08/11         (248,800     1 .4500         (360,764

Euro

   UBS AG      Short         07/08/11         (551,400     1 .4500         (799,540

The June 30, 2011 USD market value equals the number of Euros multiplied by the forward rate. These notional amounts will increase (decrease) proportionally with increases (decreases) in the forward price. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have $2.00 of exposure to the Euro for every $1.00 of net assets. While the above information properly represents the then current exchange rate price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the appreciation or depreciation of the Euro and multiplying by two. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day. Counterparty risk related to foreign currency forward contracts is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

As of June 30, 2010, the ProShares Ultra Euro Fund was exposed to exchange rate price risk through its holdings of Euro/USD foreign currency forward contracts. The following table provides information about the Fund’s positions in these Financial Instruments as of June 30, 2010, which are sensitive to exchange rate price risk.

 

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Foreign Currency Forward Contracts

 

Reference Currency

   Counterparty      Long or
Short
     Settlement
Date
     Euro     Forward Rate      Market Value
USD
 

Euro

     Goldman Sachs International         Long         07/02/10         12,336,325        1.2229       $ 15,086,098   

Euro

     UBS AG         Long         07/02/10         14,965,800        1.2229         18,301,685   

Euro

     Goldman Sachs International         Long         07/16/10         11,770,325        1.2229         14,393,937   

Euro

     UBS AG         Long         07/16/10         14,939,500        1.2229         18,269,522   

Euro

     Goldman Sachs International         Short         07/02/10         (12,336,325     1.2229         (15,086,098

Euro

     UBS AG         Short         07/02/10         (14,965,800     1.2229         (18,301,685

The June 30, 2010 USD market value equals the number of Euros multiplied by the forward rate. These notional amounts will increase (decrease) proportionally with increases (decreases) in the forward price. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have $2.00 of exposure to the Euro for every $1.00 of net assets. While the above information properly represents the then current exchange rate price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the appreciation or depreciation of the Euro and multiplying by two. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day. Counterparty risk related to foreign currency forward contracts is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

ProShares UltraShort Euro:

As of June 30, 2011, the ProShares UltraShort Euro Fund was exposed to exchange rate price risk through its holdings of Euro/USD foreign currency forward contracts. The following table provides information about the Fund’s positions in these Financial Instruments as of June 30, 2011, which are sensitive to exchange rate price risk.

Foreign Currency Forward Contracts

 

Reference Currency

   Counterparty    Long or
Short
     Settlement
Date
     Euro     Forward
Rate
     Market Value
USD
 

Euro

   Goldman Sachs International      Long         07/08/11         12,347,800        1.4500       $ 17,904,522   

Euro

   UBS AG      Long         07/08/11         105,580,800        1.4500         153,093,974   

Euro

   Goldman Sachs International      Short         07/08/11         (438,423,925     1.4500         (635,722,225

Euro

   UBS AG      Short         07/08/11         (550,659,000     1.4500         (798,465,012

The June 30, 2011 USD market value equals the number of Euros multiplied by the forward rate. These notional amounts will increase (decrease) proportionally with increases (decreases) in the forward price. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have negative $2.00 of short exposure to the Euro for every $1.00 of net assets. While the above information properly represents the then current exchange rate price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the appreciation or depreciation of the Euro and multiplying by negative two. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day. Counterparty risk related to foreign currency forward contracts is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

As of June 30, 2010, the ProShares UltraShort Euro Fund was exposed to exchange rate price risk through its holdings of Euro/USD foreign currency forward contracts. The following table provides information about the Fund’s positions in these Financial Instruments as of June 30, 2010, which are sensitive to exchange rate price risk.

 

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Foreign Currency Forward Contracts

 

Reference Currency

   Counterparty      Long or
Short
     Settlement
Date
     Euro     Forward Rate      Market Value
USD
 

Euro

     Goldman Sachs International         Long         07/02/10         388,264,025        1.2229       $ 474,808,280   

Euro

     UBS AG         Long         07/02/10         437,601,200        1.2229         535,142,737   

Euro

     UBS AG         Long         07/16/10         12,458,700        1.2229         15,235,751   

Euro

     Goldman Sachs International         Short         07/02/10         (388,264,025     1.2229         (474,808,280

Euro

     UBS AG         Short         07/02/10         (437,601,200     1.2229         (535,142,737

Euro

     Goldman Sachs International         Short         07/16/10         (346,717,925     1.2229         (424,001,532

Euro

     UBS AG         Short         07/16/10         (421,237,200     1.2229         (515,131,193

The June 30, 2010 USD market value equals the number of Euros multiplied by the forward rate. These notional amounts will increase (decrease) proportionally with increases (decreases) in the forward price. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have negative $2.00 of short exposure to the Euro for every $1.00 of net assets. While the above information properly represents the then current exchange rate price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the appreciation or depreciation of the Euro and multiplying by two. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day. Counterparty risk related to foreign currency forward contracts is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

ProShares Ultra Yen:

As of June 30, 2011, the ProShares Ultra Yen Fund was exposed to exchange rate price risk through its holdings of Yen/USD foreign currency forward contracts. The following table provides information about the Fund’s positions in these Financial Instruments as of June 30, 2011, which are sensitive to exchange rate price risk.

Foreign Currency Forward Contracts

 

Reference Currency

   Counterparty    Long or
Short
     Settlement
Date
     Yen     Forward
Rate
     Market
Value USD
 

Yen

   Goldman Sachs International      Long         07/08/11         324,120,000        0.012421       $ 4,025,945   

Yen

   UBS AG      Long         07/08/11         234,410,000        0.012421       $ 2,911,643   

Yen

   Goldman Sachs International      Short         07/08/11         (4,300,000     0.012421         (53,411

Yen

   UBS AG      Short         07/08/11         (10,490,000     0.012421         (130,298

The June 30, 2011 USD market value equals the number of Yen multiplied by the forward rate. These notional amounts will increase (decrease) proportionally with increases (decreases) in the forward price. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have $2.00 of exposure to the Yen for every $1.00 of net assets. While the above information properly represents the then current exchange rate price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the appreciation or depreciation of the Yen and multiplying by two. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day. Counterparty risk related to foreign currency forward contracts is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

 

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As of June 30, 2010, the ProShares Ultra Yen Fund was exposed to exchange rate price risk through its holdings of Yen/USD foreign currency forward contracts. The following table provides information about the Fund’s positions in these Financial Instruments as of June 30, 2010, which are sensitive to exchange rate price risk.

Foreign Currency Forward Contracts

 

Reference Currency

   Counterparty      Long or
Short
     Settlement
Date
     Yen     Forward Rate      Market Value
USD
 

Yen

     Goldman Sachs International         Long         07/02/10         409,000,000        0.011310       $ 4,625,954   

Yen

     UBS AG         Long         07/02/10         348,900,000        0.011310         3,946,199   

Yen

     Goldman Sachs International         Long         07/16/10         409,000,000        0.011310         4,625,954   

Yen

     UBS AG         Long         07/16/10         348,900,000        0.011310         3,946,199   

Yen

     Goldman Sachs International         Short         07/02/10         (409,000,000     0.011310         (4,625,954

Yen

     UBS AG         Short         07/02/10         (348,900,000     0.011310         (3,946,199

The June 30, 2010 USD market value equals the number of Yen multiplied by the forward rate. These notional amounts will increase (decrease) proportionally with increases (decreases) in the forward price. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have $2.00 of exposure to the Yen for every $1.00 of net assets. While the above information properly represents the then current exchange rate price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the appreciation or depreciation of the Yen and multiplying by two. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day. Counterparty risk related to foreign currency forward contracts is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

ProShares UltraShort Yen:

As of June 30, 2011, the ProShares UltraShort Yen Fund was exposed to exchange rate price risk through its holdings of Yen/USD foreign currency forward contracts. The following table provides information about the Fund’s positions in these Financial Instruments as of June 30, 2011, which are sensitive to exchange rate price risk.

Foreign Currency Forward Contracts

 

Reference Currency

   Counterparty    Long or
Short
     Settlement
Date
     Yen     Forward Rate      Market Value
USD
 

Yen

   Goldman Sachs International      Long         07/08/11         2,235,880,000        0.012421       $ 27,772,213   

Yen

   UBS AG      Long         07/08/11         6,524,880,000        0.012421         81,046,549   

Yen

   Goldman Sachs International      Short         07/08/11         (31,837,740,000     0.012421         (395,461,518

Yen

   UBS AG      Short         07/08/11         (34,312,880,000     0.012421         (426,205,617

The June 30, 2011 USD market value equals the number of Yen multiplied by the forward rate. These notional amounts will increase (decrease) proportionally with increases (decreases) in the forward price. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have negative $2.00 of short exposure to the Yen for every $1.00 of net assets. While the above information properly represents the then current exchange rate price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the appreciation or depreciation of the Yen and multiplying by negative two. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for

 

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periods longer than one day. Counterparty risk related to foreign currency forward contracts is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

As of June 30, 2010, the ProShares UltraShort Yen Fund was exposed to exchange rate price risk through its holdings of Yen/USD foreign currency forward contracts. The following table provides information about the Fund’s positions in these Financial Instruments as of June 30, 2010, which are sensitive to exchange rate price risk.

Foreign Currency Forward Contracts

 

Reference Currency

   Counterparty      Long or
Short
     Settlement
Date
     Yen     Forward Rate      Market Value
USD
 

Yen

     Goldman Sachs International         Long         07/02/10         14,174,880,000        0.011310       $ 160,323,562   

Yen

     UBS AG         Long         07/02/10         14,601,420,000        0.011310         165,147,901   

Yen

     UBS AG         Long         07/16/10         151,200,000        0.011310         1,710,132   

Yen

     Goldman Sachs International         Short         07/02/10         (14,174,880,000     0.011310         (160,323,562

Yen

     UBS AG         Short         07/02/10         (14,601,420,000     0.011310         (165,147,901

Yen

     Goldman Sachs International         Short         07/16/10         (12,675,790,000     0.011310         (143,368,255

Yen

     UBS AG         Short         07/16/10         (13,146,220,000     0.011310         (148,689,006

The June 30, 2010 USD market value equals the number of Yen multiplied by the forward rate. These notional amounts will increase (decrease) proportionally with increases (decreases) in the forward price. The Fund will generally attempt to adjust its positions in Financial Instruments each day to have negative $2.00 of short exposure to the Yen for every $1.00 of net assets. While the above information properly represents the then current exchange rate price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the appreciation or depreciation of the Yen and multiplying by two. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day. Counterparty risk related to foreign currency forward contracts is generally limited to the amount of any unrealized gains, although in the event of a counterparty bankruptcy, there could be delays and costs associated with recovering collateral posted in segregated tri-party accounts at the Fund’s custodian bank.

Equity Market Volatility Sensitivity

ProShares VIX Short-Term Futures ETF

As of June 30, 2011, the ProShares VIX Short-Term Futures ETF Fund was exposed to equity market volatility risk through its holding of VIX futures contracts. The following table provides information about the Fund’s positions in VIX futures contracts as of June 30, 2011, which are sensitive to equity market volatility risk.

Futures Positions

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

VIX (CBOE)

     Long         July 2011         1,280       $ 17.70         1,000       $ 22,656,000   

VIX (CBOE)

     Long         August 2011         1,278         18.75         1,000         23,962,500   

ProShares VIX Mid-Term Futures ETF

As of June 30, 2011, the ProShares VIX Mid-Term Futures ETF Fund was exposed to equity market volatility risk through its holding of VIX futures contracts. The following table provides information about the Fund’s positions in VIX futures contracts as of June 30, 2011, which are sensitive to equity market volatility risk.

 

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Futures Positions

 

Contract

   Long or
Short
     Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

VIX (CBOE)

     Long       October 2011      101       $ 22.00         1,000       $ 2,222,000   

VIX (CBOE)

     Long       November 2011      203         22.55         1,000         4,577,650   

VIX (CBOE)

     Long       December 2011      204         22.70         1,000         4,630,800   

VIX (CBOE)

     Long       January 2012      101         24.30         1,000         2,454,300   

Qualitative Disclosure

As described above in Item 2 of this Quarterly Report on Form 10-Q, it is the investment objective of each Leveraged Fund to seek daily investment results, before fees and expenses, which match twice (2x) the daily performance, whether positive or negative, of its corresponding benchmark. Each Ultra Fund seeks daily investment results (before fees and expenses) that match twice (2x) the daily performance of its corresponding benchmark. Each Short Fund will seek daily investment results (before fees and expenses) that match the inverse (-1x) of the daily performance of its corresponding benchmark. Each UltraShort Fund seeks daily investment results (before fees and expenses) that match twice the inverse (-2x) of the daily performance of its corresponding benchmark. Each VIX Fund seeks investment results (before fees and expenses) that match the performance of a benchmark. Daily performance is measured from the calculation of one NAV to the next. The Geared Funds do not seek to achieve these stated investment objectives over a period of time greater than one day because mathematical compounding prevents the Geared Funds from achieving such results. Performance over longer periods of time will be influenced not only by the cumulative period performance of the corresponding benchmark but equally by the intervening volatility of the benchmark as well as fees and expenses, including costs associated with the use of Financial Instruments such as financing costs and trading spreads. Future period returns, before fees and expenses, cannot be estimated simply by estimating the percent change in the corresponding benchmark and multiplying by two or negative two. Investors should monitor their ProShares holdings consistent with their strategies, as frequently as daily. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day.

Primary Market Risk Exposure

Each Fund’s investment objective and corresponding benchmark defines the primary market risks that the Funds are exposed to. For example, the primary market risk that the ProShares Ultra DJ-UBS Crude Oil and the ProShares UltraShort DJ-UBS Crude Oil Funds are exposed to are direct and inverse exposure, respectively, to the price of crude oil as measured by the return of holding and periodically rolling crude oil futures contracts (the Dow Jones-UBS Commodity Index and its sub-indexes are based on the price of rolling futures positions, rather than on the cash price for immediate delivery of the corresponding commodity).

Each Fund’s exposure to market risk is further influenced by a number of factors, including the liquidity of the markets in which the contracts are traded and the relationships among the contracts held. The inherent uncertainty of each Fund’s trading as well as the development of drastic market occurrences could ultimately lead to a loss of all or substantially all of investors’ capital.

As described above in Item 2 of this Quarterly Report on Form 10-Q, trading in certain futures contracts or forward agreements involves each Fund entering into contractual commitments to purchase or sell a commodity underlying a Fund’s benchmark at a specified date and price, should it hold such futures contracts or forward agreements into the deliverable period. Should a Fund enter into a contractual commitment to sell a physical commodity, it is required to make delivery of that commodity at the contract price and then repurchase the contract at prevailing market prices or settle in cash. Since the repurchase price to which the value of a commodity can rise is unlimited, entering into commitments to sell commodities would expose a Fund to theoretically unlimited risk.

Commodity Price Sensitivity

As further described in “Item 1A. Risk Factors” in the Form 10-K, the value of the Shares of each Fund relates directly to the value of, and realized profit or loss from, the Financial Instruments and other assets held by the Fund and fluctuations in the price of these assets could materially adversely affect an investment in the Shares. With

 

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regard to the Commodity Index Funds or the Commodity Funds, several factors may affect the price of a commodity underlying a Commodity Index Fund or a Commodity Fund, and in turn, the Financial Instruments and other assets, if any, owned by such a Fund. The impact of changes in the price of a physical commodity or of a commodity index (comprised of commodity futures contracts) will affect investors differently depending upon the Fund in which investors invest. Daily increases in the price of an underlying commodity or commodity index will negatively impact the daily performance of Shares of an UltraShort Fund and daily decreases in the price of an underlying commodity or commodity index will negatively impact the daily performance of Shares of an Ultra Fund.

Additionally, performance over time is a cumulative effect of geometrically linking each day’s leveraged or inverse leveraged returns. For instance, if a corresponding benchmark was up 10% and then down 10%, which would result in a (1.1*0.9)-1 = -1% period benchmark return, the two-day period return for a theoretical two-times fund would be equal to a (1.2 *0.8)-1 = -4% period Fund return (rather than simply two times the period return of the benchmark).

Exchange Rate Sensitivity

As further described in “Item 1A. Risk Factors” in the Form 10-K, the value of the Shares of each Fund relates directly to the value of, and realized profit or loss from, the Financial Instruments and other assets held by the Fund and fluctuations in the price of these assets could materially adversely affect an investment in the Shares. With regard to the Currency Funds, several factors may affect the value of the foreign currencies or the U.S. Dollar, and, in turn, the Financial Instruments and other assets, if any, owned by a Fund. The impact of changes in the price of a currency will affect investors differently depending upon the Fund in which investors invest. Daily increases in the price of a currency will negatively impact the daily performance of Shares of an UltraShort Fund and daily decreases in the price of a currency will negatively impact the daily performance of Shares of an Ultra Fund.

Additionally, performance over time is a cumulative effect of geometrically linking each day’s leveraged or inverse leveraged returns. For instance, if a corresponding benchmark was up 10% and then down 10%, which would result in a (1.1*0.9)-1 = -1% period benchmark return, the two-day period return for a theoretical two-times fund would be equal to a (1.2 *0.8)-1 = -4% period Fund return (rather than simply two times the period return of the benchmark).

Equity Market Volatility Sensitivity

As further described in “Item 1A. Risk Factors” in the Form 10-K, the value of the Shares of each VIX Fund relates directly to the value of, and realized profit or loss from, the Financial Instruments and other assets held by the Fund and fluctuations in the price of these assets could materially adversely affect an investment in the Shares. Several factors may affect the price and/or liquidity of VIX futures contracts and other assets, if any, owned by a VIX Fund. The impact of changes in the price of these assets will affect investors differently depending upon the Fund in which investors invest.

Managing Market Risks

Each Fund seeks to remain fully exposed to the corresponding benchmark at the levels implied by the relevant investment objective (1x, 2x, -1x or -2x), regardless of market direction or sentiment. At the close of the relevant markets each trading day (see NAV calculation times), each Fund will seek to position its portfolio so that its exposure to its benchmark is consistent with its investment objective. As described above in Item 2 of this Quarterly Report on Form 10-Q, these adjustments are done through the use of various Financial Instruments. No attempt is made to adjust market exposure in order to avoid changes to the benchmark that would cause the Funds to lose value. Factors common to all Funds that may require portfolio re-positioning are create/redeem activity and index rebalances.

For Geared Funds, the impact of the Index’s movements during the day also affects whether the Fund’s portfolio needs to be re-positioned. For example, if the Index for an Ultra Fund has risen on a given day, net assets of the Fund should rise, meaning that the Fund’s long exposure will need to be increased to the extent there are not offsetting factors such as redemption activity. Conversely, if the Index has fallen on a given day, net assets of an Ultra Fund should fall, meaning the Fund’s long exposure will generally need to be decreased. Net assets for Short Funds will generally decrease when the Index rises on a given day, meaning the Fund’s short exposure may need to be decreased. Conversely if the Index has fallen on a given day, a Short Fund’s assets should rise, meaning its short exposure may need to be increased.

 

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The use of certain Financial Instruments introduces counterparty risk. A Fund will be subject to credit risk with respect to the amount it expects to receive from counterparties to Financial Instruments entered into by the Fund. A Fund may be negatively impacted if a counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties. Each Fund intends to enter into swap and forward agreements only with large, established and well capitalized financial institutions that meet certain credit quality standards and monitoring policies. Each Fund may use various techniques to minimize credit risk including early termination or reset and payment, limiting the net amount due from any individual counterparty, and generally requiring that the counterparty post collateral with respect to amounts owed to the Funds, marked to market daily.

Most Financial Instruments held by the Funds are “unfunded” meaning that the Fund will obtain exposure to the corresponding benchmark while still being in possession of its original cash assets. The cash positions that result from use of such Financial Instruments are held in a manner to minimize both interest rate and credit risk. During the reporting period, cash positions were maintained in a non-interest bearing demand deposit account. The Funds also invest a portion of this cash in cash equivalents (such as shares of money market funds, bank deposits, bank money market accounts, certain variable rate-demand notes and repurchase agreements collateralized by government securities).

 

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

Under the supervision and with the participation of the principal executive officer and principal financial officer of the Trust, Trust management has evaluated the effectiveness of the Trust’s and the Funds’ disclosure controls and procedures, and have concluded that the disclosure controls and procedures of the Trust and the Funds (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “1934 Act”)) were effective, as of June 30, 2011, to provide reasonable assurance that information required to be disclosed in the reports that the Trust files or submits under the 1934 Act on behalf of the Trust and the Funds is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that it is accumulated and communicated to the duly authorized officers of the Trust as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in the Trust’s or the Funds’ internal control over financial reporting that occurred during the quarter ended June 30, 2011 that have materially affected, or are reasonably likely to materially affect, the Trust’s or the Funds’ internal control over financial reporting.

 

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Part II. OTHER INFORMATION

 

Item 1. Legal Proceedings.

The Trust and certain officers are defendants (along with several other parties) in a consolidated class action styled In re ProShares Trust Securities Litigation, Civ. No. 09-cv-6935, filed in the United States District Court for the Southern District of New York. The complaint, as amended, alleges that the defendants violated Sections 11 and 15 of the Securities Act of 1933 by including untrue statements of material fact and omitting material facts in the Registration Statement for one or more ProShares ETFs, allegedly failing to adequately disclose the Funds’ investment objectives and risks. The six Funds of the Trust named in the complaint are ProShares Ultra Silver, ProShares UltraShort Gold, ProShares Ultra Gold, ProShares UltraShort DJ-UBS Crude Oil, ProShares Ultra DJ-UBS Crude Oil and ProShares UltraShort Silver. The Trust believes the complaint is without merit and that the anticipated outcome will not adversely impact the operation of the Trust or any of its Funds.

 

Item 1A. Risk Factors.

There has not been a material change to the Risk Factors previously disclosed in Part I, Item 1A in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2010 and Part II, Item 1A in the Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011.

 

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

 

(a) None.

 

(b) The Trust initially registered Shares on Form S-1 (No. 333-146801), which was declared effective on November 21, 2008, and registered additional Shares on its Registration Statement on Form S-1 (No. 333-156888), which was declared effective on February 13, 2009. The Trust terminated these two offerings before the sale of all Shares registered and re-allocated the remaining amount of the Shares registered among the Funds pursuant to its Registration Statement on Form S-3 (No. 333-163511), which became effective on December 4, 2009, and registered additional Shares and Funds pursuant to Post-Effective Amendments to that Registration Statement, which became effective on May 28, 2010 and December 23, 2010. Additional amounts were registered pursuant to subsequent Prospectus Supplements, which aggregate total amounts are reflected in the “Amount Registered” column below. Substantially all of the proceeds received by each Fund from the issuance and sale of Shares to Authorized Participants are used by each Fund to enter into Financial Instruments relating to that Fund’s benchmark in combination with cash or cash equivalents and/or U.S. Treasury Securities or other high credit quality short-term fixed-income or similar securities (such as shares of money market funds, bank deposits, bank money market accounts, certain variable rate-demand notes and repurchase agreements collateralized by government securities, whether denominated in U.S. or the applicable foreign currency with respect to a Currency Fund) that may be used to collateralize swap agreements or forward contracts or deposited with FCMs as margin in connection with any futures transactions. Each Leveraged Fund continuously offers and redeems its Shares in blocks of 50,000 Shares. Each VIX Fund continuously offers and redeems its Shares in blocks of 25,000 Shares.

 

Title of Securities Registered

   Amount Registered      Shares Sold
for the three
months ended

June 30, 2011
     Sale Price of Shares  Sold
for the three
months  ended
June 30, 2011
 

ProShares Ultra DJ-UBS Commodity
Common Units of Beneficial Interest

   $ 300,000,000         —         $ —     

ProShares UltraShort DJ-UBS Commodity
Common Units of Beneficial Interest

   $ 500,000,000         1,750,000       $ 83,123,025   

ProShares Ultra DJ-UBS Crude Oil
Common Units of Beneficial Interest

   $ 3,000,000,000         7,900,000       $ 349,316,382   

ProShares UltraShort DJ-UBS Crude Oil
Common Units of Beneficial Interest

   $ 1,500,000,000         4,350,000       $ 182,280,150   

 

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ProShares Short DJ-UBS Natural Gas
Common Units of Beneficial Interest

   $ 1,000,000,000         —         $ —     

ProShares Ultra Gold
Common Units of Beneficial Interest

   $ 1,000,000,000         300,000       $ 24,272,201   

ProShares Short Gold
Common Units of Beneficial Interest

   $ 500,000,000         —         $ —     

ProShares UltraShort Gold
Common Units of Beneficial Interest

   $ 1,000,000,000         950,000       $ 22,973,276   

ProShares Ultra Silver
Common Units of Beneficial Interest

   $ 2,000,000,000         1,800,000       $ 397,487,054   

ProShares UltraShort Silver
Common Units of Beneficial Interest

   $ 2,100,000,000         41,100,000       $ 704,930,954   

ProShares Ultra Euro
Common Units of Beneficial Interest

   $ 500,000,000         —         $ —     

ProShares UltraShort Euro
Common Units of Beneficial Interest

   $ 2,103,506,872         16,200,000       $ 281,392,056   

ProShares Ultra Yen
Common Units of Beneficial Interest

   $ 500,000,000         —         $ —     

ProShares UltraShort Yen
Common Units of Beneficial Interest

   $ 1,300,000,000         2,750,000       $ 42,048,858   

ProShares VIX Short-Term Futures ETF
Common Units of Beneficial Interest

   $ 800,000,000         1,450,000       $ 75,845,453   

ProShares VIX Mid-Term Futures ETF
Common Units of Beneficial Interest

   $ 500,000,000         325,000       $ 21,205,650   

Total:

   $ 18,603,506,872         78,875,000       $ 2,184,875,059   

 

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(c) From April 1, 2011 through June 30, 2011, the number of Shares redeemed and average price per Share for each Fund were as follows:

 

Fund

   Total Number of
Shares  Redeemed
     Average Price
Per Share
 

ProShares Ultra DJ-UBS Commodity

     

04/01/11 to 04/30/11

     —         $ —     

05/01/11 to 05/31/11

     —           —     

06/01/11 to 06/30/11

     50,000         32.20   

ProShares UltraShort DJ-UBS Commodity

     

04/01/11 to 04/30/11

     —           —     

05/01/11 to 05/31/11

     —           —     

06/01/11 to 06/30/11

     1,200,000         44.43   

ProShares Ultra DJ-UBS Crude Oil

     

04/01/11 to 04/30/11

     1,650,000         61.81   

05/01/11 to 05/31/11

     800,000         49.50   

06/01/11 to 06/30/11

     200,000         49.50   

ProShares UltraShort DJ-UBS Crude Oil

     

04/01/11 to 04/30/11

     —           —     

05/01/11 to 05/31/11

     3,700,000         46.42   

06/01/11 to 06/30/11

     650,000         47.83   

ProShares Ultra Gold

     

04/01/11 to 04/30/11

     —           —     

05/01/11 to 05/31/11

     150,000         78.76   

06/01/11 to 06/30/11

     —           —     

ProShares UltraShort Gold

     

04/01/11 to 04/30/11

     —           —     

05/01/11 to 05/31/11

     —           —     

06/01/11 to 06/30/11

     —           —     

ProShares Ultra Silver

     

04/01/11 to 04/30/11

     400,000         257.76   

05/01/11 to 05/31/11

     300,000         206.38   

06/01/11 to 06/30/11

     500,000         187.87   

ProShares UltraShort Silver

     

04/01/11 to 04/30/11

     —           —     

05/01/11 to 05/31/11

     10,250,000         20.16   

06/01/11 to 06/30/11

     1,300,000         19.22   

ProShares Ultra Euro

     

04/01/11 to 04/30/11

     —           —     

05/01/11 to 05/31/11

     —           —     

06/01/11 to 06/30/11

     —           —     

ProShares UltraShort Euro

     

04/01/11 to 04/30/11

     —           —     

05/01/11 to 05/31/11

     350,000         17.12   

06/01/11 to 06/30/11

     —           —     

ProShares Ultra Yen

     

04/01/11 to 04/30/11

     —           —     

05/01/11 to 05/31/11

     —           —     

06/01/11 to 06/30/11

     —           —     

ProShares UltraShort Yen

     

04/01/11 to 04/30/11

     1,400,000         16.24   

05/01/11 to 05/31/11

     —           —     

06/01/11 to 06/30/11

     450,000         15.13   

ProShares VIX Short-Term Futures ETF

     

04/01/11 to 04/30/11

     —           —     

05/01/11 to 05/31/11

     150,000         51.12   

06/01/11 to 06/30/11

     775,000         50.45   

ProShares VIX Mid-Term Futures ETF

     

04/01/11 to 04/30/11

     25,000         69.03   

05/01/11 to 05/31/11

     175,000         61.71   

06/01/11 to 06/30/11

     —           —     

Total:

     24,475,000         41.12   

 

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Item 3. Defaults Upon Senior Securities.

None.

 

Item 4. (Removed and Reserved).

 

Item 5. Other Information.

None.

 

Item 6. Exhibits.

 

Exhibit No.

    

Description of Document

31.1      Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(1)
31.2      Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(1)
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(2)
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(2)
101.INS      XBRL Instance Document(3)
101.SCH      XBRL Taxonomy Extension Schema(3)
101.CAL      XBRL Taxonomy Extension Calculation Linkbase(3)
101.DEF      XBRL Taxonomy Extension Definition Linkbase(3)
101.LAB      XBRL Taxonomy Extension Label Linkbase(3)
101.PRE      XBRL Taxonomy Extension Presentation Linkbase(3)

 

(1) Filed herewith.
(2) Furnished herewith.
(3) The information in these exhibits will be furnished within 30 days after the earlier of the due date or filing date of this quarterly report on Form 10-Q by an amendment to this quarterly report on Form 10-Q.

 

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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.

 

PROSHARES TRUST II

/s/ Louis Mayberg

By: Louis Mayberg
Principal Executive Officer
Date: August 9, 2011

/s/ Edward Karpowicz

By: Edward Karpowicz
Principal Financial Officer
Date: August 9, 2011