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ProShares Trust II - Quarter Report: 2012 September (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 September 30, 2012.

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

 

     Page  

Part I. FINANCIAL INFORMATION

  

Item 1. Condensed Financial Statements.

     1   

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

     150   

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

     207   

Item 4. Controls and Procedures.

     225   

Part II. OTHER INFORMATION

  

Item 1. Legal Proceedings.

     226   

Item 1A. Risk Factors.

     226   

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

     226   

Item 3. Defaults Upon Senior Securities.

     231   

Item 4. Mine Safety Disclosures.

     231   

Item 5. Other Information.

     231   

Item 6. Exhibits.

     231   


Table of Contents

Part I. FINANCIAL INFORMATION

 

Item 1. Condensed Financial Statements.

Index

 

Documents

   Page  

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 UltraShort DJ-UBS Natural Gas

     27   

ProShares Ultra Gold

     32   

ProShares UltraShort Gold

     37   

ProShares Ultra Silver

     42   

ProShares UltraShort Silver

     47   

ProShares Ultra Australian Dollar

     52   

ProShares UltraShort Australian Dollar

     57   

ProShares Ultra Euro

     62   

ProShares Short Euro

     67   

ProShares UltraShort Euro

     72   

ProShares Ultra Yen

     77   

ProShares UltraShort Yen

     82   

ProShares Ultra VIX Short-Term Futures ETF

     87   

ProShares VIX Short-Term Futures ETF

     92   

ProShares Short VIX Short-Term Futures ETF

     97   

ProShares VIX Mid-Term Futures ETF

     102   

ProShares Managed Futures Strategy

     107   

ProShares Commodity Managed Futures Strategy

     108   

ProShares Financial Managed Futures Strategy

     109   

ProShares Trust II

     110   

Notes to Financial Statements

     114   

 

See accompanying notes to financial statements.

 

- 1 -


Table of Contents

PROSHARES ULTRA DJ-UBS COMMODITY

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012         
     (unaudited)      December 31, 2011  

Assets

     

Cash

   $ 238,147       $ 59,453   

Short-term U.S. government and agency obligations (Note 3)
(cost $7,901,505 and $9,713,956, respectively)

     7,901,820         9,713,685   

Unrealized appreciation on swap agreements

     267,485         —     
  

 

 

    

 

 

 

Total assets

     8,407,452         9,773,138   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     6,474         7,432   

Unrealized depreciation on swap agreements

     —           707,177   
  

 

 

    

 

 

 

Total liabilities

     6,474         714,609   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     8,400,978         9,058,529   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 8,407,452       $ 9,773,138   
  

 

 

    

 

 

 

Shares outstanding

     300,014         350,014   
  

 

 

    

 

 

 

Net asset value per share

   $ 28.00       $ 25.88   
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 27.71       $ 25.64   
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

- 2 -


Table of Contents

PROSHARES ULTRA DJ-UBS COMMODITY

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2012

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(94% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.080% due 10/04/12†

   $ 1,749,000       $ 1,748,997   

0.105% due 11/23/12

     710,000         709,926   

0.095% due 01/03/13†

     2,914,000         2,913,447   

0.092% due 01/10/13†

     2,530,000         2,529,450   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $7,901,505)

      $ 7,901,820   
     

 

 

 

Swap Agreements^

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

DJ-UBS Commodity Index Swap—Goldman Sachs International

     10/08/12       $ 11,686,812       $ 186,416   

DJ-UBS Commodity Index Swap—UBS AG

     10/08/12         5,108,198         81,069   
        

 

 

 
         $ 267,485   
        

 

 

 

 

All or partial amount segregated as collateral for swap agreements.
^ The positions and counterparties herein are as of September 30, 2012. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* 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 NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Three months
ended
September 30,
2012
    Three months
ended
September 30,
2011
    Nine months
ended
September 30,
2012
    Nine months
ended
September 30,
2011
 

Investment Income

        

Interest

   $ 1,472      $ 993      $ 3,401      $ 10,264   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     21,020        37,054        62,966        131,603   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     21,020        37,054        62,966        131,603   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (19,548     (36,061     (59,565     (121,339
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Swap agreements

     1,946,086        (1,050,671     (234,500     939,496   

Short-term U.S. government and agency obligations

     (7     78        (7     201   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     1,946,079        (1,050,593     (234,507     939,697   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Swap agreements

     (418,834     (2,076,464     974,662        (5,645,596

Short-term U.S. government and agency obligations

     278        (548     586        (591
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (418,556     (2,077,012     975,248        (5,646,187
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     1,527,523        (3,127,605     740,741        (4,706,490
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 1,507,975      $ (3,163,666   $ 681,176      $ (4,827,829
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ 4.53      $ (6.92   $ 1.98      $ (9.40
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     333,166        457,079        344,357        513,750   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

- 4 -


Table of Contents

PROSHARES ULTRA DJ-UBS COMMODITY

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

Shareholders’ equity, at December 31, 2011

   $ 9,058,529   

Redemption of 50,000 shares

     (1,338,727
  

 

 

 

Net investment income (loss)

     (59,565

Net realized gain (loss)

     (234,507

Change in net unrealized appreciation/depreciation

     975,248   
  

 

 

 

Net income (loss)

     681,176   
  

 

 

 

Shareholders’ equity, at September 30, 2012

   $ 8,400,978   
  

 

 

 

 

See accompanying notes to financial statements.

 

- 5 -


Table of Contents

PROSHARES ULTRA DJ-UBS COMMODITY

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Nine months ended     Nine months ended  
     September 30, 2012     September 30, 2011  

Cash flow from operating activities

    

Net income (loss)

   $ 681,176      $ (4,827,829

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

     1,812,451        810,424   

Change in unrealized appreciation/depreciation on investments

     (975,248     5,646,187   

Increase (Decrease) in management fee payable

     (958     10,155   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     1,517,421        1,638,937   
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     —          1,782,755   

Payment on shares redeemed

     (1,338,727     (3,430,636
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (1,338,727     (1,647,881
  

 

 

   

 

 

 

Net increase (decrease) in cash

     178,694        (8,944

Cash, beginning of period

     59,453        17,743   
  

 

 

   

 

 

 

Cash, end of period

   $ 238,147      $ 8,799   
  

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

- 6 -


Table of Contents

PROSHARES ULTRASHORT DJ-UBS COMMODITY

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012         
     (unaudited)      December 31, 2011  

Assets

     

Cash

   $ 297,340       $ 9,060   

Short-term U.S. government and agency obligations (Note 3)
(cost $2,699,947 and $8,534,904, respectively)

     2,699,968         8,534,690   

Unrealized appreciation on swap agreements

     —           570,751   
  

 

 

    

 

 

 

Total assets

     2,997,308         9,114,501   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     2,279         7,355   

Unrealized depreciation on swap agreements

     113,533         —     
  

 

 

    

 

 

 

Total liabilities

     115,812         7,355   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     2,881,496         9,107,146   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 2,997,308       $ 9,114,501   
  

 

 

    

 

 

 

Shares outstanding

     59,997         159,997   
  

 

 

    

 

 

 

Net asset value per share (Note 1)

   $ 48.03       $ 56.92   
  

 

 

    

 

 

 

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

   $ 48.25       $ 56.19   
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

- 7 -


Table of Contents

PROSHARES ULTRASHORT DJ-UBS COMMODITY

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2012

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(94% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.078% due 10/04/12†

   $ 2,553,000       $ 2,552,996   

0.095% due 01/03/13

     147,000         146,972   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $2,699,947)

      $ 2,699,968   
     

 

 

 

Swap Agreements^

 

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

DJ-UBS Commodity Index Swap—Goldman Sachs International

     10/08/12       $ (4,448,127   $ (87,044

DJ-UBS Commodity Index Swap—UBS AG

     10/08/12         (1,319,410     (26,489
       

 

 

 
        $ (113,533
       

 

 

 

 

All or partial amount segregated as collateral for swap agreements.
^ The positions and counterparties herein are as of September 30, 2012. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* 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 NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Three months     Three months     Nine months     Nine months  
     ended     ended     ended     ended  
     September 30,     September 30,     September 30,     September 30,  
     2012     2011     2012     2011  

Investment Income

        

Interest

   $ 568      $ 731      $ 2,227      $ 3,522   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     7,390        32,416        43,386        111,453   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     7,390        32,416        43,386        111,453   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (6,822     (31,685     (41,159     (107,931
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Swap agreements

     (861,786     2,148,146        653,141        (3,367,856

Short-term U.S. government and agency obligations

     —          566        62        1,732   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (861,786     2,148,712        653,203        (3,366,124
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Swap agreements

     206,641        (1,247,546     (684,284     1,169,138   

Short-term U.S. government and agency obligations

     (71     (870     235        (655
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     206,570        (1,248,416     (684,049     1,168,483   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (655,216     900,296        (30,846     (2,197,641
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (662,038   $ 868,611      $ (72,005   $ (2,305,572
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ (11.03   $ 3.01      $ (0.65   $ (6.76
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding (See Note 1)

     59,997        288,258        110,544        341,170   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

- 9 -


Table of Contents

PROSHARES ULTRASHORT DJ-UBS COMMODITY

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

Shareholders’ equity, at December 31, 2011

   $ 9,107,146   

Redemption of 100,000 shares

     (6,153,645
  

 

 

 

Net investment income (loss)

     (41,159

Net realized gain (loss)

     653,203   

Change in net unrealized appreciation/depreciation

     (684,049
  

 

 

 

Net income (loss)

     (72,005
  

 

 

 

Shareholders’ equity, at September 30, 2012

   $ 2,881,496   
  

 

 

 

 

See accompanying notes to financial statements.

 

- 10 -


Table of Contents

PROSHARES ULTRASHORT DJ-UBS COMMODITY

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Nine months ended     Nine months ended  
     September 30, 2012     September 30, 2011  

Cash flow from operating activities

    

Net income (loss)

   $ (72,005   $ (2,305,572

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

     5,834,957        (9,789,081

Change in unrealized appreciation/depreciation on investments

     684,049        (1,168,483

Increase (Decrease) in management fee payable

     (5,076     15,372   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     6,441,925        (13,247,764
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     —          84,549,839   

Payment on shares redeemed

     (6,153,645     (71,306,282
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (6,153,645     13,243,557   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     288,280        (4,207

Cash, beginning of period

     9,060        10,654   
  

 

 

   

 

 

 

Cash, end of period

   $ 297,340      $ 6,447   
  

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

- 11 -


Table of Contents

PROSHARES ULTRA DJ-UBS CRUDE OIL

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash

   $ 739,977       $ 495,671   

Segregated cash balances with brokers for futures contracts

     17,318,070         14,202,793   

Short-term U.S. government and agency obligations (Note 3)
(cost $366,158,697 and $246,926,093, respectively)

     366,172,164         246,919,569   

Receivable from capital shares sold

     10,447,382         —     

Receivable on open futures contracts

     1,043,668         —     
  

 

 

    

 

 

 

Total assets

     395,721,261         261,618,033   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     266,602         215,315   

Unrealized depreciation on swap agreements

     13,480,730         10,007,396   
  

 

 

    

 

 

 

Total liabilities

     13,747,332         10,222,711   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     381,973,929         251,395,322   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 395,721,261       $ 261,618,033   
  

 

 

    

 

 

 

Shares outstanding

     12,199,170         6,149,170   
  

 

 

    

 

 

 

Net asset value per share (Note 1)

   $ 31.31       $ 40.88   
  

 

 

    

 

 

 

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

   $ 31.21       $ 40.94   
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

- 12 -


Table of Contents

PROSHARES ULTRA DJ-UBS CRUDE OIL

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2012

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(96% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.058% due 10/04/12†

   $ 51,336,000       $ 51,335,918   

0.092% due 11/23/12†

     22,927,000         22,924,606   

0.095% due 01/03/13†

     198,291,000         198,253,384   

0.088% due 01/10/13†

     57,604,000         57,591,483   

0.100% due 02/07/13

     36,080,000         36,066,773   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $366,158,697)

      $ 366,172,164   
     

 

 

 

Futures Contracts Purchased††

 

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

WTI Crude Oil Future 11/15/2012 (CLX2)

     3,087       $ 284,590,530      $ (5,140,430

Swap Agreements^

 

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

DJ-UBS WTI Crude Oil Subindex Swap—Goldman Sachs International

     10/08/12       $ 184,858,973       $ (4,028,050

DJ-UBS WTI Crude Oil Subindex Swap—Societe Generale

     10/08/12         148,481,998         (4,688,902

DJ-UBS WTI Crude Oil Subindex Swap—UBS AG

     10/08/12         146,064,844         (4,763,778
        

 

 

 
         $ (13,480,730
        

 

 

 

 

All or partial amount segregated as collateral for swap agreements.
†† Cash collateral in the amount of $17,318,070 was pledged to cover margin requirements for open futures contracts as of September 30, 2012.
^ The positions and counterparties herein are as of September 30, 2012. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* 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 NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Three months
ended
September 30,
2012
    Three months
ended
September 30,
2011
    Nine months
ended
September 30,
2012
    Nine months
ended
September 30,
2011
 

Investment Income

        

Interest

   $ 63,544      $ 16,734      $ 126,796      $ 154,462   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     914,474        960,393        2,267,600        2,416,617   

Brokerage commissions

     17,756        21,032        51,677        75,805   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     932,230        981,425        2,319,277        2,492,422   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (868,686     (964,691     (2,192,481     (2,337,960
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Futures contracts

     39,863,006        (42,050,522     (3,106,383     (7,585,638

Swap agreements

     53,732,254        (45,717,064     85,922        (5,844,053

Short-term U.S. government and agency obligations

     1,157        (250     3,970        12,712   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     93,596,417        (87,767,836     (3,016,491     (13,416,979
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Futures contracts

     (15,276,450     (14,534,400     (3,775,100     (28,508,020

Swap agreements

     (17,443,924     (31,006,847     (3,473,334     (46,336,294

Short-term U.S. government and agency obligations

     (123     (20,697     19,991        (28,977
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (32,720,497     (45,561,944     (7,228,443     (74,873,291
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     60,875,920        (133,329,780     (10,244,934     (88,290,270
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 60,007,234      $ (134,294,471   $ (12,437,415   $ (90,628,230
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 4.94      $ (11.91   $ (1.35   $ (11.35
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding (Note 1)

     12,151,344        11,280,148        9,201,542        7,982,238   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

- 14 -


Table of Contents

PROSHARES ULTRA DJ-UBS CRUDE OIL

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

Shareholders’ equity, at December 31, 2011

   $ 251,395,322   

Addition of 19,300,000 shares

     602,064,387   

Redemption of 13,250,000 shares

     (459,048,365
  

 

 

 

Net addition (redemption) of 6,050,000 shares

     143,016,022   
  

 

 

 

Net investment income (loss)

     (2,192,481

Net realized gain (loss)

     (3,016,491

Change in net unrealized appreciation/depreciation

     (7,228,443
  

 

 

 

Net income (loss)

     (12,437,415
  

 

 

 

Shareholders’ equity, at September 30, 2012

   $ 381,973,929   
  

 

 

 

 

See accompanying notes to financial statements.

 

- 15 -


Table of Contents

PROSHARES ULTRA DJ-UBS CRUDE OIL

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Nine months ended
September 30, 2012
    Nine months ended
September 30, 2011
 

Cash flow from operating activities

    

Net income (loss)

   $ (12,437,415   $ (90,268,230

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

     (3,115,277     (21,242,250

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

     (119,232,604     (164,591,790

Change in unrealized appreciation/depreciation on investments

     3,453,343        46,365,271   

Decrease (Increase) in receivable on futures contracts

     (1,043,668     3,035,150   

Increase (Decrease) in management fee payable

     51,287        450,884   

Increase (Decrease) in payable on futures contracts

     —          11,219,495   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (132,324,334     (215,391,470
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     591,617,005        1,139,475,837   

Payment on shares redeemed

     (459,048,365     (920,858,114
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     132,568,640        218,617,723   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     244,306        3,226,253   

Cash, beginning of period

     495,671        905,158   
  

 

 

   

 

 

 

Cash, end of period

   $ 739,977      $ 4,131,411   
  

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

- 16 -


Table of Contents

PROSHARES ULTRASHORT DJ-UBS CRUDE OIL

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash

   $ 211,847       $ 265,258   

Segregated cash balances with brokers for futures contracts

     4,753,654         9,078,683   

Short-term U.S. government and agency obligations (Note 3)
(cost $106,230,736 and $131,936,844, respectively)

     106,234,641         131,934,193   

Unrealized appreciation on swap agreements

     5,408,517         2,645,240   

Receivable on open futures contracts

     —           576,597   
  

 

 

    

 

 

 

Total assets

     116,608,659         144,499,971   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     91,897         110,078   
  

 

 

    

 

 

 

Total liabilities

     91,897         110,078   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     116,516,762         144,389,893   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 116,608,659       $ 144,499,971   
  

 

 

    

 

 

 

Shares outstanding

     2,869,944         3,719,944   
  

 

 

    

 

 

 

Net asset value per share (Note 1)

   $ 40.60       $ 38.82   
  

 

 

    

 

 

 

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

   $ 40.72       $ 38.69   
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

- 17 -


Table of Contents

PROSHARES ULTRASHORT DJ-UBS CRUDE OIL

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2012

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(91% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.062% due 10/04/12†

   $ 31,383,000       $ 31,382,950   

0.093% due 11/23/12

     7,197,000         7,196,249   

0.095% due 01/03/13†

     53,152,000         53,141,917   

0.092% due 01/10/13†

     12,374,000         12,371,311   

0.105% due 02/07/13

     2,143,000         2,142,214   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $106,230,736)

      $ 106,234,641   
     

 

 

 

Futures Contracts Sold††

 

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

WTI Crude Future 11/15/2012 (CLX2)

     899       $ 82,878,810       $ 1,926,470   

Swap Agreements^

 

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

DJ-UBS WTI Crude Oil Subindex Swap—Goldman Sachs International

     10/08/12       $ (60,694,381   $ 2,280,602   

DJ-UBS WTI Crude Oil Subindex Swap—Societe Generale

     10/08/12         (54,129,361     2,140,503   

DJ-UBS WTI Crude Oil Subindex Swap—UBS AG

     10/08/12         (35,377,663     987,412   
       

 

 

 
        $ 5,408,517   
       

 

 

 

 

All or partial amount segregated as collateral for swap agreements.
†† Cash collateral in the amount of $4,753,654 was pledged to cover margin requirements for open futures contracts as of September 30, 2012.
^ The positions and counterparties herein are as of September 30, 2012. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* 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 NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Three months
ended
September 30,
2012
    Three months
ended
September 30,
2011
    Nine months
ended
September 30,
2012
    Nine months
ended
September 30,
2011
 

Investment Income

        

Interest

   $ 19,218      $ 5,491      $ 49,995      $ 67,925   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     252,685        236,646        871,751        936,197   

Brokerage commissions

     8,254        8,341        24,596        40,643   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     260,939        244,987        896,347        976,840   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (241,721     (239,496     (846,352     (908,915
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Futures contracts

     (11,352,523     14,712,451        9,297,036        17,177,834   

Swap agreements

     (13,102,901     26,160,078        16,747,909        41,288,571   

Short-term U.S. government and agency obligations

     1,654        893        3,424        11,042   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (24,453,770     40,873,422        26,048,369        58,477,447   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Futures contracts

     5,021,020        1,855,210        1,679,430        6,527,530   

Swap agreements

     5,012,876        473,645        2,763,277        11,484,645   

Short-term U.S. government and agency obligations

     1,235        (2,573     6,556        (6,708
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     10,035,131        2,326,282        4,449,263        18,005,467   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (14,418,639     43,199,704        30,497,632        76,482,914   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (14,660,360   $ 42,960,208      $ 29,651,280      $ 75,573,999   
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ (5.67   $ 21.98      $ 9.23      $ 26.58   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding (Note 1)

     2,585,500        1,954,183        3,213,878        2,842,815   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

- 19 -


Table of Contents

PROSHARES ULTRASHORT DJ-UBS CRUDE OIL

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

Shareholders’ equity, at December 31, 2011

   $ 144,389,893   

Addition of 5,250,000 shares

     204,359,211   

Redemption of 6,100,000 shares

     (261,883,622
  

 

 

 

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

     (57,524,411
  

 

 

 

Net investment income (loss)

     (846,352

Net realized gain (loss)

     26,048,369   

Change in net unrealized appreciation/depreciation

     4,449,263   
  

 

 

 

Net income (loss)

     29,651,280   
  

 

 

 

Shareholders’ equity, at September 30, 2012

   $ 116,516,762   
  

 

 

 

 

See accompanying notes to financial statements.

 

- 20 -


Table of Contents

PROSHARES ULTRASHORT DJ-UBS CRUDE OIL

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Nine months ended
September 30, 2012
    Nine months ended
September 30, 2011
 

Cash flow from operating activities

    

Net income (loss)

   $ 29,651,280      $ 75,573,999   

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

     4,325,029        (1,150,200

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

     25,706,108        77,483,646   

Change in unrealized appreciation/depreciation on investments

     (2,769,833     (11,477,937

Decrease (Increase) in receivable on futures contracts

     576,597        (956,059

Increase (Decrease) in management fee payable

     (18,181     (8,959

Increase (Decrease) in payable on futures contracts

     —          (1,140,144
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     57,471,000        138,324,346   
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     204,359,211        352,799,851   

Payment on shares redeemed

     (261,883,622     (494,544,029
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (57,524,411     (141,744,178
  

 

 

   

 

 

 

Net increase (decrease) in cash

     (53,411     (3,419,832

Cash, beginning of period

     265,258        4,007,347   
  

 

 

   

 

 

 

Cash, end of period

   $ 211,847      $ 587,515   
  

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

- 21 -


Table of Contents

PROSHARES ULTRA DJ-UBS NATURAL GAS

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash

   $ 3,472,553       $ 3,361,868   

Segregated cash balances with brokers for futures contracts

     11,184,250         725,409   

Short-term U.S. government and agency obligations (Note 3)
(cost $65,921,169 and $0, respectively)

     65,922,744         —     

Receivable on open futures contracts

     2,218,701         —     

Offering costs (Note 5)

     576         20,150   
  

 

 

    

 

 

 

Total assets

     82,798,824         4,107,427   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     15,237,064         —     

Management fee payable

     56,120         1,454   

Payable for offering costs

     —           26,624   
  

 

 

    

 

 

 

Total liabilities

     15,293,184         28,078   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     67,505,640         4,079,349   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 82,798,824       $ 4,107,427   
  

 

 

    

 

 

 

Shares outstanding

     1,319,941         40,002   
  

 

 

    

 

 

 

Net asset value per share (Note 1)

   $ 51.14       $ 101.98   
  

 

 

    

 

 

 

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

   $ 51.09       $ 101.35   
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

- 22 -


Table of Contents

PROSHARES ULTRA DJ-UBS NATURAL GAS

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2012

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(98% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.066% due 10/04/12

   $ 7,911,000       $ 7,910,987   

0.090% due 11/23/12

     14,846,000         14,844,450   

0.095% due 01/03/13

     6,196,000         6,194,825   

0.092% due 01/10/13

     27,060,000         27,054,120   

0.093% due 02/07/13

     9,922,000         9,918,362   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $65,921,169)

      $ 65,922,744   
     

 

 

 

Futures Contracts Purchased††

 

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

Natural Gas Future 11/15/2012 (NGX2)

     4,067       $ 135,024,400       $ 12,769,070   

 

†† Cash collateral in the amount of $11,184,250 was pledged to cover margin requirements for open futures contracts as of September 30, 2012.

 

See accompanying notes to financial statements.

 

- 23 -


Table of Contents

PROSHARES ULTRA DJ-UBS NATURAL GAS*

STATEMENT OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

     Three months ended
September 30, 2012
    Nine months ended
September 30, 2012
 

Investment Income

    

Interest

   $ 9,896      $ 18,894   
  

 

 

   

 

 

 

Expenses

    

Management fee

     137,754        260,956   

Brokerage commissions

     31,584        90,703   

Offering costs

     17,694        63,342   
  

 

 

   

 

 

 

Total expenses

     187,032        415,001   
  

 

 

   

 

 

 

Net investment income (loss)

     (177,136     (396,107
  

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

    

Net realized gain (loss) on

    

Futures contracts

     20,880,016        (5,782,759

Short-term U.S. government and agency obligations

     451        1,705   
  

 

 

   

 

 

 

Net realized gain (loss)

     20,880,467        (5,781,054
  

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

    

Futures contracts

     (5,822,190     13,594,580   

Short-term U.S. government and agency obligations

     (319     1,575   
  

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (5,822,509     13,596,155   
  

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     15,057,958        7,815,101   
  

 

 

   

 

 

 

Net income (loss)

   $ 14,880,822      $ 7,418,994   
  

 

 

   

 

 

 

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

   $ 10.27      $ 7.15   
  

 

 

   

 

 

 

Weighted-average shares outstanding (Note 1)

     1,448,274        1,037,473   
  

 

 

   

 

 

 

 

* Since the Fund commenced investment operations on October 4, 2011, statements of operations for the three and nine months ended September 30, 2011 have not been provided.

 

See accompanying notes to financial statements.

 

- 24 -


Table of Contents

PROSHARES ULTRA DJ-UBS NATURAL GAS

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

Shareholders’ equity, at December 31, 2011

   $ 4,079,349   

Addition of 2,080,000 shares

     97,320,934   

Redemption of 800,061 shares

     (41,313,637
  

 

 

 

Net addition (redemption) of 1,279,939 shares

     56,007,297   
  

 

 

 

Net investment income (loss)

     (396,107

Net realized gain (loss)

     (5,781,054

Change in net unrealized appreciation/depreciation

     13,596,155   
  

 

 

 

Net income (loss)

     7,418,994   
  

 

 

 

Shareholders’ equity, at September 30, 2012

   $ 67,505,640   
  

 

 

 

 

See accompanying notes to financial statements.

 

- 25 -


Table of Contents

PROSHARES ULTRA DJ-UBS NATURAL GAS

STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

     Nine months ended
September 30, 2012
 

Cash flow from operating activities

  

Net income (loss)

   $ 7,418,994   

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

     (10,458,841

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

     (65,921,169

Change in unrealized appreciation/depreciation on investments

     (1,575

Decrease (Increase) in receivable on futures contracts

     (2,218,701

Change in offering cost

     19,574   

Increase (Decrease) in management fee payable

     54,666   

Increase (Decrease) in payable for offering costs

     (26,624
  

 

 

 

Net cash provided by (used in) operating activities

     (71,133,676
  

 

 

 

Cash flow from financing activities

  

Proceeds from addition of shares

     97,320,934   

Payment on shares redeemed

     (26,076,573
  

 

 

 

Net cash provided by (used in) financing activities

     71,244,361   
  

 

 

 

Net increase (decrease) in cash

     110,685   

Cash, beginning of period

     3,361,868   
  

 

 

 

Cash, end of period

   $ 3,472,553   
  

 

 

 

 

See accompanying notes to financial statements.

 

- 26 -


Table of Contents

PROSHARES ULTRASHORT DJ-UBS NATURAL GAS

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash

   $ 308,591       $ 2,969,266   

Segregated cash balances with brokers for futures contracts

     2,200,000         1,439,775   

Short-term U.S. government and agency obligations (Note 3)
(cost $9,990,646 and $2,621,895, respectively)

     9,991,158         2,621,684   

Receivable from capital shares sold

     1,106,975         —     

Receivable on open futures contracts

     —           123,128   

Offering costs (Note 5)

     576         20,150   
  

 

 

    

 

 

 

Total assets

     13,607,300         7,174,003   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable on open futures contracts

     312,649         —     

Management fee payable

     11,730         5,069   

Payable for offering costs

     —           26,624   
  

 

 

    

 

 

 

Total liabilities

     324,379         31,693   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     13,282,921         7,142,310   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 13,607,300       $ 7,174,003   
  

 

 

    

 

 

 

Shares outstanding

     600,030         300,030   
  

 

 

    

 

 

 

Net asset value per share (Note 1)

   $ 22.14       $ 23.81   
  

 

 

    

 

 

 

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

   $ 22.14       $ 23.96   
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

- 27 -


Table of Contents

PROSHARES ULTRASHORT DJ-UBS NATURAL GAS

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2012

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(75% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.070% due 10/04/12

   $ 262,000       $ 262,000   

0.093% due 11/23/12

     517,000         516,946   

0.095% due 01/03/13

     7,759,000         7,757,528   

0.090% due 01/10/13

     1,455,000         1,454,684   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $9,990,646)

      $ 9,991,158   
     

 

 

 

Futures Contracts Sold††

 

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

Natural Gas Future 11/15/ 2012 (NGX2)

     800       $ 26,560,000       $ (2,802,080

 

†† Cash collateral in the amount of $2,200,000 was pledged to cover margin requirements for open futures contracts as of September 30, 2012.

 

See accompanying notes to financial statements.

 

- 28 -


Table of Contents

PROSHARES ULTRASHORT DJ-UBS NATURAL GAS*

STATEMENT OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

     Three months ended
September 30, 2012
    Nine months ended
September 30, 2012
 

Investment Income

    

Interest

   $ 1,854      $ 4,883   
  

 

 

   

 

 

 

Expenses

    

Management fee

     14,762        39,735   

Brokerage commissions

     10,986        52,462   

Offering costs

     17,694        63,342   
  

 

 

   

 

 

 

Total expenses

     43,442        155,539   
  

 

 

   

 

 

 

Net investment income (loss)

     (41,588     (150,656
  

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

    

Net realized gain (loss) on

    

Futures contracts

     (4,766,026     1,537,148   

Short-term U.S. government and agency obligations

     185        27   
  

 

 

   

 

 

 

Net realized gain (loss)

     (4,765,841     1,537,175   
  

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

    

Futures contracts

     1,018,440        (4,183,090

Short-term U.S. government and agency obligations

     259        723   
  

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     1,018,699        (4,182,367
  

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (3,747,142     (2,645,192
  

 

 

   

 

 

 

Net income (loss)

   $ (3,788,730   $ (2,795,848
  

 

 

   

 

 

 

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

   $ (7.68   $ (6.54
  

 

 

   

 

 

 

Weighted-average shares outstanding (Note 1)

     493,508        427,402   
  

 

 

   

 

 

 

 

* Since the Fund commenced investment operations on October 4, 2011, statements of operations for the three and nine months ended September 30, 2011 have not been provided.

 

See accompanying notes to financial statements.

 

- 29 -


Table of Contents

PROSHARES ULTRASHORT DJ-UBS NATURAL GAS

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

Shareholders’ equity, at December 31, 2011

   $ 7,142,310   

Addition of 850,000 shares

     29,236,979   

Redemption of 550,000 shares

     (20,300,520
  

 

 

 

Net addition (redemption) of 300,000 shares

     8,936,459   
  

 

 

 

Net investment income (loss)

     (150,656

Net realized gain (loss)

     1,537,175   

Change in net unrealized appreciation/depreciation

     (4,182,367
  

 

 

 

Net income (loss)

     (2,795,848
  

 

 

 

Shareholders’ equity, at September 30, 2012

   $ 13,282,921   
  

 

 

 

 

See accompanying notes to financial statements.

 

- 30 -


Table of Contents

PROSHARES ULTRASHORT DJ-UBS NATURAL GAS

STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

     Nine months ended
September 30, 2012
 

Cash flow from operating activities

  

Net income (loss)

   $ (2,795,848

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

     (760,225

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

     (7,368,751

Change in unrealized appreciation/depreciation on investments

     (723

Decrease (Increase) in receivable on futures contracts

     123,128   

Change in offering cost

     19,574   

Increase (Decrease) in management fee payable

     6,661   

Increase (Decrease) in payable on futures contracts

     312,649   

Increase (Decrease) in payable for offering costs

     (26,624
  

 

 

 

Net cash provided by (used in) operating activities

     (10,490,159
  

 

 

 

Cash flow from financing activities

  

Proceeds from addition of shares

     28,130,004   

Payment on shares redeemed

     (20,300,520
  

 

 

 

Net cash provided by (used in) financing activities

     7,829,484   
  

 

 

 

Net increase (decrease) in cash

     (2,660,675

Cash, beginning of period

     2,969,266   
  

 

 

 

Cash, end of period

   $ 308,591   
  

 

 

 

 

See accompanying notes to financial statements.

 

- 31 -


Table of Contents

PROSHARES ULTRA GOLD

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash

   $ 88,750       $ 400,533   

Segregated cash balances with brokers for futures contracts

     16,905         22,950   

Short-term U.S. government and agency obligations (Note 3)
(cost $358,218,835 and $399,322,327, respectively)

     358,231,650         399,317,740   

Unrealized appreciation on forward agreements

     30,642,789         —     

Receivable from capital shares sold

     —           7,796,997   

Receivable on open futures contracts

     —           540   
  

 

 

    

 

 

 

Total assets

     388,980,094         407,538,760   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     290,186         303,120   

Unrealized depreciation on forward agreements

     —           80,836,280   
  

 

 

    

 

 

 

Total liabilities

     290,186         81,139,400   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     388,689,908         326,399,360   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 388,980,094       $ 407,538,760   
  

 

 

    

 

 

 

Shares outstanding

     4,000,014         4,300,014   
  

 

 

    

 

 

 

Net asset value per share

   $ 97.17       $ 75.91   
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 96.92       $ 79.01   
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

- 32 -


Table of Contents

PROSHARES ULTRA GOLD

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2012

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(92% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.075% due 10/04/12†

   $ 124,855,000       $ 124,854,800   

0.081% due 11/23/12

     4,770,000         4,769,502   

0.096% due 01/03/13†

     182,374,000         182,339,404   

0.087% due 01/10/13†

     46,278,000         46,267,944   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $358,218,835)

      $ 358,231,650   
     

 

 

 

Futures Contracts Purchased††

 

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

Gold 100 OZ Future 12/15/2012 (GCZ2)

     2       $ 354,780       $ 35,120   

Forward Agreements^

 

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

London Gold PM Fixing Forward—Deutsche Bank AG London

     10/08/12       $ 73,500       $ 130,552,170       $ 614,706   

London Gold PM Fixing Forward—Goldman Sachs International

     10/08/12         118,320         210,162,350         8,610,282   

London Gold PM Fixing Forward—Societe Generale S.A.

     10/08/12         118,800         211,014,936         8,385,857   

London Gold PM Fixing Forward—UBS AG

     10/08/12         126,800         225,224,696         13,031,944   
           

 

 

 
            $ 30,642,789   
           

 

 

 

 

All or partial amount segregated as collateral for forward agreements.
†† Cash collateral in the amount of $16,905 was pledged to cover margin requirements for open futures contracts as of September 30, 2012.
^ The positions and counterparties herein are as of September 30, 2012. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* 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.

 

- 33 -


Table of Contents

PROSHARES ULTRA GOLD

STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Three months
ended
September 30,
2012
    Three months
ended
September 30,
2011
    Nine months
ended
September 30,
2012
    Nine months
ended
September 30,
2011
 

Investment Income

        

Interest

   $ 62,437      $ 20,274      $ 151,337      $ 138,778   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     825,270        958,522        2,546,445        2,166,956   

Brokerage commissions

     8        1,020        33        2,830   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     825,278        959,542        2,546,478        2,169,786   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (762,841     (939,268     (2,395,141     (2,031,008
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Futures contracts

     1,600        1,329,813        (37,880     2,152,978   

Forward agreements

     23,187,603        3,464,320        (27,034,257     53,273,927   

Short-term U.S. government and agency obligations

     1,030        2,407        1,664        2,259   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     23,190,233        4,796,540        (27,070,473     55,429,164   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Futures contracts

     31,360        (340,810     76,780        (863,660

Forward agreements

     47,286,260        23,670,553        111,479,069        265,797   

Short-term U.S. government and agency obligations

     5,738        (25,972     17,402        (25,678
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     47,323,358        23,303,771        111,573,251        (623,541
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     70,513,591        28,100,311        84,502,778        54,805,623   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 69,750,750      $ 27,161,043      $ 82,107,637      $ 52,774,615   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ 17.08      $ 6.72      $ 19.69      $ 14.23   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     4,083,166        4,042,405        4,169,722        3,709,721   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

- 34 -


Table of Contents

PROSHARES ULTRA GOLD

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

Shareholders’ equity, at December 31, 2011

   $ 326,399,360   

Addition of 500,000 shares

     49,880,610   

Redemption of 800,000 shares

     (69,697,699
  

 

 

 

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

     (19,817,089
  

 

 

 

Net investment income (loss)

     (2,395,141

Net realized gain (loss)

     (27,070,473

Change in net unrealized appreciation/depreciation

     111,573,251   
  

 

 

 

Net income (loss)

     82,107,637   
  

 

 

 

Shareholders’ equity, at September 30, 2012

   $ 388,689,908   
  

 

 

 

 

See accompanying notes to financial statements.

 

- 35 -


Table of Contents

PROSHARES ULTRA GOLD

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Nine months ended
September 30, 2012
    Nine months ended
September 30, 2011
 

Cash flow from operating activities

    

Net income (loss)

   $ 82,107,637      $ 52,774,615   

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

     6,045        180,900   

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

     41,103,492        (114,744,087

Change in unrealized appreciation/depreciation on investments

     (111,496,471     (240,119

Decrease (Increase) in receivable on futures contracts

     540        48,339   

Increase (Decrease) in management fee payable

     (12,934     507,015   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     11,708,309        (61,473,337
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     57,677,607        120,484,630   

Payment on shares redeemed

     (69,697,699     (58,811,099
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (12,020,092     61,673,531   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     (311,783     200,194   

Cash, beginning of period

     400,533        1,262,424   
  

 

 

   

 

 

 

Cash, end of period

   $ 88,750      $ 1,462,618   
  

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

- 36 -


Table of Contents

PROSHARES ULTRASHORT GOLD

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31,
2011
 

Assets

     

Cash

   $ 104,874       $ 330,841   

Segregated cash balances with brokers for futures contracts

     18,225         17,770   

Short-term U.S. government and agency obligations (Note 3)
(cost $101,832,787 and $164,677,030, respectively)

     101,837,917         164,673,175   

Unrealized appreciation on forward agreements

             33,401,358   

Receivable on open futures contracts

     1,320           
  

 

 

    

 

 

 

Total assets

     101,962,336         198,423,144   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     76,977         124,573   

Unrealized depreciation on forward agreements

     9,095,142           
  

 

 

    

 

 

 

Total liabilities

     9,172,119         124,573   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     92,790,217         198,298,571   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 101,962,336       $ 198,423,144   
  

 

 

    

 

 

 

Shares outstanding

     1,647,475         2,397,475   
  

 

 

    

 

 

 

Net asset value per share (Note 10)

   $ 56.32       $ 82.71   
  

 

 

    

 

 

 

Market value per share (Note 2) (Note 10)

   $ 56.48       $ 79.24   
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

- 37 -


Table of Contents

PROSHARES ULTRASHORT GOLD

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2012

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(110% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.068% due 10/04/12†

   $ 15,216,000       $ 15,215,976   

0.096% due 11/23/12

     4,411,000         4,410,539   

0.096% due 01/03/13†

     82,227,000         82,211,402   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $101,832,787)

      $ 101,837,917   
     

 

 

 

Futures Contracts Sold††

 

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

Gold 100 OZ Future 12/15/2012 (GCZ2)

     2       $ 354,780       $ (35,200

Forward Agreements^

 

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

London Gold PM Fixing Forward—Deutsche Bank AG London

     10/08/12       $ (67,400 )   $ (119,717,228   $ (1,039,119

London Gold PM Fixing Forward—Goldman Sachs International

     10/08/12         (13,598     (24,153,040     (1,728,487

London Gold PM Fixing Forward—Societe Generale S.A.

     10/08/12         (14,700     (26,110,434     (2,885,635

London Gold PM Fixing Forward—UBS AG

     10/08/12         (8,550     (15,186,681     (3,441,901
         

 

 

 
          $ (9,095,142
         

 

 

 

 

All or partial amount segregated as collateral for forward agreements.
†† Cash collateral in the amount of $18,225 was pledged to cover margin requirements for open futures contracts as of September 30, 2012.
^ The positions and counterparties herein are as of September 30, 2012. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* 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.

 

- 38 -


Table of Contents

PROSHARES ULTRASHORT GOLD

STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Three months
ended
September 30,
2012
    Three months
ended
September 30,
2011
    Nine months
ended
September 30,
2012
    Nine months
ended
September 30,
2011
 

Investment Income

        

Interest

   $ 21,407      $ 6,156      $ 52,562      $ 50,183   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     277,898        299,227        954,699        729,868   

Brokerage commissions

     8        613        33        2,466   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     277,906        299,840        954,732        732,334   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (256,499     (293,684     (902,170     (682,151
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Futures contracts

     (1,600     89,535        38,100        (807,800

Forward agreements

     (10,988,696     7,191,381        (9,316,144     (15,300,608

Short-term U.S. government and agency obligations

     383        1,287        1,226        1,821   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (10,989,913     7,282,203        (9,276,818     (16,106,587
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Futures contracts

     (31,480     17,500        (77,000     390,910   

Forward agreements

     (13,858,647     (12,243,530     (42,496,500     (4,843,199

Short-term U.S. government and agency obligations

     2,461        (13,994     8,985        (16,486
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (13,887,666     (12,240,024     (42,564,515     (4,468,775
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (24,877,579     (4,957,821     (51,841,333     (20,575,362
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (25,134,078   $ (5,251,505   $ (52,743,503   $ (21,257,513
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share (Note 10)

   $ (14.32   $ (2.97   $ (26.76   $ (18.20
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding (Note 10)

     1,754,812        1,769,758        1,970,970        1,167,942   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

- 39 -


Table of Contents

PROSHARES ULTRASHORT GOLD

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

Shareholders’ equity, at December 31, 2011

   $ 198,298,571   

Redemption of 750,000 shares

     (52,764,851
  

 

 

 

Net investment income (loss)

     (902,170

Net realized gain (loss)

     (9,276,818

Change in net unrealized appreciation/depreciation

     (42,564,515
  

 

 

 

Net income (loss)

     (52,743,503
  

 

 

 

Shareholders’ equity, at September 30, 2012

   $ 92,790,217   
  

 

 

 

 

See accompanying notes to financial statements.

 

- 40 -


Table of Contents

PROSHARES ULTRASHORT GOLD

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Nine months ended
September 30, 2012
    Nine months ended
September 30, 2011
 

Cash flow from operating activities

    

Net income (loss)

   $ (52,743,503   $ (21,257,513

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

     (455     232,800   

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

     62,844,243        (104,942,795

Change in unrealized appreciation/depreciation on investments

     42,487,515        4,859,685   

Decrease (Increase) in receivable on futures contracts

     (1,320       

Increase (Decrease) in management fee payable

     (47,596     162,825   

Increase (Decrease) in payable on futures contracts

            (94,800
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     52,538,884        (121,039,798
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

            172,768,537   

Payment on shares redeemed

     (52,764,851     (51,204,036
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (52,764,851     121,564,501   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     (225,967     524,703   

Cash, beginning of period

     330,841        404,683   
  

 

 

   

 

 

 

Cash, end of period

   $ 104,874      $ 929,386   
  

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

- 41 -


Table of Contents

PROSHARES ULTRA SILVER

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash

   $ 357,468       $ 772,442   

Segregated cash balances with brokers for futures contracts

     31,740         49,950   

Short-term U.S. government and agency obligations (Note 3)
(cost $900,572,040 and $771,936,564, respectively)

     900,594,881         771,925,669   

Unrealized appreciation on forward agreements

     90,241,197         —     

Receivable from capital shares sold

     —           13,966,567   

Receivable on open futures contracts

     —           6,000   
  

 

 

    

 

 

 

Total assets

     991,225,286         786,720,628   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     11,525,198         —     

Management fee payable

     712,181         569,435   

Unrealized depreciation on forward agreements

     —           179,326,773   
  

 

 

    

 

 

 

Total liabilities

     12,237,379         179,896,208   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     978,987,907         606,824,420   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 991,225,286       $ 786,720,628   
  

 

 

    

 

 

 

Shares outstanding

     16,650,028         14,050,028   
  

 

 

    

 

 

 

Net asset value per share (Note 1)

   $ 58.80       $ 43.19   
  

 

 

    

 

 

 

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

   $ 58.35       $ 41.65   
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

- 42 -


Table of Contents

PROSHARES ULTRA SILVER

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2012

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(92% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.075% due 10/04/12†

   $ 253,003,000       $ 253,002,595   

0.094% due 11/23/12†

     354,555,000         354,517,985   

0.089% due 01/10/13†

     293,138,000         293,074,301   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $900,572,040)

      $ 900,594,881   
     

 

 

 

Futures Contracts Purchased††

 

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

Silver Future 12/15/2012 (SIZ2)

     2       $ 345,770       $ 64,920   

Forward Agreements^

 

 

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

London Silver Fixing Forward—Deutsche Bank AG London

     10/08/12       $ 3,410,000       $ 118,179,006       $ 747,748   

London Silver Fixing Forward—Goldman Sachs International

     10/08/12         19,120,800         662,661,917         33,593,442   

London Silver Fixing Forward—Societe Generale S.A.

     10/08/12         21,547,000         746,745,760         35,016,552   

London Silver Fixing Forward—UBS AG

     10/08/12         12,410,000         430,088,406         20,883,455   
           

 

 

 
            $ 90,241,197   
           

 

 

 

 

All or partial amount segregated as collateral for forward agreements.
†† Cash collateral in the amount of $31,740 was pledged to cover margin requirements for open futures contracts as of September 30, 2012.
^ The positions and counterparties herein are as of September 30, 2012. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* 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.

 

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Table of Contents

PROSHARES ULTRA SILVER

STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Three months
ended
September 30,
2012
    Three months
ended
September 30,
2011
    Nine months
ended
September 30,
2012
    Nine months
ended
September 30,
2011
 

Investment Income

        

Interest

   $ 136,002      $ 54,294      $ 313,266      $ 413,210   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     1,795,410        2,423,377        5,416,759        6,530,746   

Brokerage commissions

     9        2,126        38        7,354   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     1,795,419        2,425,503        5,416,797        6,538,100   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (1,659,417     (2,371,209     (5,103,531     (6,124,890
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Futures contracts

     (8,250     (1,862,254     (66,550     6,745,262   

Forward agreements

     159,551,951        (348,455,898     (51,676,872     (290,050,993

Short-term U.S. government and agency obligations

     167        5,732        3,218        46,058   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     159,543,868        (350,312,420     (51,740,204     (283,259,673
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Futures contracts

     77,050        (2,236,345     125,770        (6,379,880

Forward agreements

     205,570,169        86,729,592        269,567,970        10,887,601   

Short-term U.S. government and agency obligations

     7,110        (68,357     33,736        (62,516
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     205,654,329        84,424,890        269,727,476        4,445,205   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     365,198,197        (265,887,530     217,987,272        (278,814,468
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 363,538,780      $ (268,258,739   $ 212,883,741      $ (284,939,358
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ 21.31      $ (26.45   $ 13.40      $ (30.69
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding (Note 1)

     17,063,071        10,140,245        15,891,269        9,285,742   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

- 44 -


Table of Contents

PROSHARES ULTRA SILVER

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

Shareholders’ equity, at December 31, 2011

   $ 606,824,420   

Addition of 6,800,000 shares

     359,577,138   

Redemption of 4,200,000 shares

     (200,297,392
  

 

 

 

Net addition (redemption) of 2,600,000 shares

     159,279,746   
  

 

 

 

Net investment income (loss)

     (5,103,531

Net realized gain (loss)

     (51,740,204

Change in net unrealized appreciation/depreciation

     269,727,476   
  

 

 

 

Net income (loss)

     212,883,741   
  

 

 

 

Shareholders’ equity, at September 30, 2012

   $ 978,987,907   
  

 

 

 

 

See accompanying notes to financial statements.

 

- 45 -


Table of Contents

PROSHARES ULTRA SILVER

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Nine months ended
September 30, 2012
    Nine months ended
September 30, 2011
 

Cash flow from operating activities

    

Net income (loss)

   $ 212,883,741      $ (284,939,358

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

     18,210        710,687   

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

     (128,635,476     (146,256,704

Change in unrealized appreciation/depreciation on investments

     (269,601,706     (10,825,085

Decrease (Increase) in receivable on futures contracts

     6,000        391,421   

Increase (Decrease) in management fee payable

     142,746        1,217,267   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (185,186,485     (439,701,772
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     373,543,705        1,056,014,151   

Payment on shares redeemed

     (188,772,194     (617,207,533
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     184,771,511        438,806,618   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     (414,974     (895,154

Cash, beginning of period

     772,442        2,505,032   
  

 

 

   

 

 

 

Cash, end of period

   $ 357,468      $ 1,609,878   
  

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

- 46 -


Table of Contents

PROSHARES ULTRASHORT SILVER

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash

   $ 522,925       $ 648,166   

Segregated cash balances with brokers for futures contracts

     27,380         43,140   

Short-term U.S. government and agency obligations (Note 3)
(cost $129,986,609 and $215,358,257, respectively)

     129,989,973         215,352,919   

Unrealized appreciation on forward agreements

     —           43,015,723   

Receivable from capital shares sold

     9,971,196         8,437,981   
  

 

 

    

 

 

 

Total assets

     140,511,474         267,497,929   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     —           20,503,124   

Management fee payable

     86,547         180,884   

Unrealized depreciation on forward agreements

     14,477,256         —     
  

 

 

    

 

 

 

Total liabilities

     14,563,803         20,684,008   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     125,947,671         246,813,921   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 140,511,474       $ 267,497,929   
  

 

 

    

 

 

 

Shares outstanding

     3,158,489         3,218,874   
  

 

 

    

 

 

 

Net asset value per share (Note 1)

   $ 39.88       $ 76.68   
  

 

 

    

 

 

 

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

   $ 40.14       $ 79.35   
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

- 47 -


Table of Contents

PROSHARES ULTRASHORT SILVER

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2012

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(103% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.070% due 10/04/12

   $ 47,513,000       $ 47,512,924   

0.095% due 11/23/12†

     46,663,000         46,658,128   

0.094% due 01/10/13†

     33,854,000         33,846,644   

0.093% due 02/07/13

     1,973,000         1,972,277   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $129,986,609)

      $ 129,989,973   
     

 

 

 

Futures Contracts Sold††

 

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

Silver Future 12/15/2012 (SIZ2)

     2       $ 345,770       $ (65,020

Forward Agreements^

 

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

London Silver Fixing Forward—Deutsche Bank AG London

     10/08/12       $ (2,747,000   $ (95,201,680   $ (1,759,252

London Silver Fixing Forward—Goldman Sachs International

     10/08/12         (1,336,500     (46,318,546     (4,030,029

London Silver Fixing Forward—Societe Generale S.A.

     10/08/12         (1,718,000     (59,540,039     (5,965,806

London Silver Fixing Forward—UBS AG

     10/08/12         (1,457,000     (50,494,666     (2,722,169
         

 

 

 
          $ (14,477,256
         

 

 

 

 

All or partial amount segregated as collateral for forward agreements.
†† Cash collateral in the amount of $27,380 was pledged to cover margin requirements for open futures contracts as of September 30, 2012.
^ The positions and counterparties herein are as of September 30, 2012. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* 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.

 

- 48 -


Table of Contents

PROSHARES ULTRASHORT SILVER

STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Three months
ended
September 30,
2012
    Three months
ended
September 30,
2011
    Nine months
ended
September 30,
2012
    Nine months
ended
September 30,
2011
 

Investment Income

        

Interest

   $ 25,338      $ 36,609      $ 69,765      $ 141,157   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     315,479        1,328,783        1,219,073        2,812,042   

Brokerage commissions

     8        1,431        33        3,718   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     315,487        1,330,214        1,219,106        2,815,760   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (290,149     (1,293,605     (1,149,341     (2,674,603
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Futures contracts

     8,100        2,681,280        61,500        2,891,784   

Forward agreements

     (30,594,433     181,877,651        (27,269,372     129,322,766   

Short-term U.S. government and agency obligations

     911        1,907        869        4,428   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (30,585,422     184,560,838        (27,207,003     132,218,978   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Futures contracts

     (77,050     (356,000     (125,870     1,011,945   

Forward agreements

     (36,484,084     (216,853,973     (57,492,979     (191,220,968

Short-term U.S. government and agency obligations

     (270     (41,346     8,702        (32,500
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (36,561,404     (217,251,319     (57,610,147     (190,241,523
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (67,146,826     (32,690,481     (84,817,150     (58,022,545
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (67,436,975   $ (33,984,086   $ (85,966,491   $ (60,697,148
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ (29.10   $ (4.24   $ (28.59   $ (12.85
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding (Note 1)

     2,317,728        8,021,917        3,006,900        4,722,657   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

- 49 -


Table of Contents

PROSHARES ULTRASHORT SILVER

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

Shareholders’ equity, at December 31, 2011

   $ 246,813,921   

Addition of 5,660,000 shares

     298,100,407   

Redemption of 5,720,385 shares

     (333,000,166
  

 

 

 

Net addition (redemption) of (60,385) shares

     (34,899,759
  

 

 

 

Net investment income (loss)

     (1,149,341

Net realized gain (loss)

     (27,207,003

Change in net unrealized appreciation/depreciation

     (57,610,147
  

 

 

 

Net income (loss)

     (85,966,491
  

 

 

 

Shareholders’ equity, at September 30, 2012

   $ 125,947,671   
  

 

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES ULTRASHORT SILVER

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Nine months ended     Nine months ended  
     September 30, 2012     September 30, 2011  

Cash flow from operating activities

    

Net income (loss)

   $ (85,966,491   $ (60,697,148

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

     15,760        (236,587

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

     85,371,648        (640,531,441

Change in unrealized appreciation/depreciation on investments

     57,484,277        191,253,468   

Decrease (Increase) in receivable on futures contracts

     —          (2,244,439

Increase (Decrease) in management fee payable

     (94,337     776,099   

Increase (Decrease) in payable on futures contracts

     —          (227,423
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     56,810,857        (511,907,471
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     296,567,192        1,089,916,599   

Payment on shares redeemed

     (353,503,290     (577,774,676
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (56,936,098     512,141,923   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     (125,241     234,452   

Cash, beginning of period

     648,166        3,514,285   
  

 

 

   

 

 

 

Cash, end of period

   $ 522,925      $ 3,748,737   
  

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES ULTRA AUSTRALIAN DOLLAR

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash

   $ 471,796       $ 200   

Segregated cash balances with brokers for futures contracts

     217,250         —     

Short-term U.S. government and agency obligations (Note 3)
(cost $3,463,947 and $0, respectively)

     3,463,974         —     

Offering costs (Note 5)

     32,463         41,000   

Limitation by Sponsor

     522         —     
  

 

 

    

 

 

 

Total assets

     4,186,005         41,200   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable on open futures contracts

     55,632         —     

Payable for offering costs

     41,000         41,000   
  

 

 

    

 

 

 

Total liabilities

     96,632         41,000   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     4,089,373         200   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 4,186,005       $ 41,200   
  

 

 

    

 

 

 

Shares outstanding

     100,005         5   
  

 

 

    

 

 

 

Net asset value per share

   $ 40.89       $ 40.00   
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 40.90       $ 40.00   
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

- 52 -


Table of Contents

PROSHARES ULTRA AUSTRALIAN DOLLAR

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2012

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(85% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.083% due 10/04/12

   $ 3,265,000       $ 3,264,995   

0.105% due 11/23/12

     199,000         198,979   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $3,463,947)

      $ 3,463,974   
     

 

 

 

Futures Contracts Purchased††

 

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

AUD/US Dollar Future 12/17/2012 (ADZ2)

     79       $ 8,139,370       $  (1,930)   

 

†† Cash collateral in the amount of $217,250 was pledged to cover margin requirements for open futures contracts as of September 30, 2012.

 

See accompanying notes to financial statements.

 

- 53 -


Table of Contents

PROSHARES ULTRA AUSTRALIAN DOLLAR*

STATEMENT OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

     Three months ended     Nine months ended  
     September 30, 2012     September 30, 2012  

Investment Income

    

Interest

   $ 618      $ 618   
  

 

 

   

 

 

 

Expenses

    

Brokerage commissions

     556        556   

Offering costs

     8,537        8,537   

Limitation by Sponsor

     (522     (522
  

 

 

   

 

 

 

Total expenses

     8,571        8,571   
  

 

 

   

 

 

 

Net investment income (loss)

     (7,953     (7,953
  

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

    

Net realized gain (loss) on

    

Futures contracts

     99,030        99,030   

Short-term U.S. government and agency obligations

     (1     (1
  

 

 

   

 

 

 

Net realized gain (loss)

     99,029        99,029   
  

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

    

Futures contracts

     (1,930     (1,930

Short-term U.S. government and agency obligations

     27        27   
  

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (1,903     (1,903
  

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     97,126        97,126   
  

 

 

   

 

 

 

Net income (loss)

     89,173        89,173   
  

 

 

   

 

 

 

Net income (loss) per weighted-average share

     0.90        0.90   
  

 

 

   

 

 

 

Weighted-average shares outstanding

     98,689        98,689   
  

 

 

   

 

 

 

 

* Since the Fund commenced investment operations on July 17, 2012, statements of operations for the three and nine months ended September 30, 2011 have not been provided.

 

See accompanying notes to financial statements.

 

- 54 -


Table of Contents

PROSHARES ULTRA AUSTRALIAN DOLLAR

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

Shareholders’ equity, at December 31, 2011

     200   

Addition of 100,000 shares

     4,000,000   
  

 

 

 

Net investment income (loss)

     (7,953

Net realized gain (loss)

     99,029   

Change in net unrealized appreciation/depreciation

     (1,903
  

 

 

 

Net income (loss)

     89,173   
  

 

 

 

Shareholders’ equity, at September 30, 2012

   $ 4,089,373   
  

 

 

 

 

See accompanying notes to financial statements.

 

- 55 -


Table of Contents

PROSHARES ULTRA AUSTRALIAN DOLLAR

STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

     Nine months ended  
     September 30, 2012  

Cash flow from operating activities

  

Net income (loss)

   $ 89,173   

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

     (217,250

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

     (3,463,947

Change in unrealized appreciation/depreciation on investments

     (27

Decrease (Increase) in Limitation by Sponsor

     (522

Change in offering cost

     8,537   

Increase (Decrease) in payable on futures contracts

     55,632   
  

 

 

 

Net cash provided by (used in) operating activities

     (3,528,404
  

 

 

 

Cash flow from financing activities

  

Proceeds from addition of shares

     4,000,000   
  

 

 

 

Net cash provided by (used in) financing activities

     4,000,000   
  

 

 

 

Net increase (decrease) in cash

     471,596   

Cash, beginning of period

     200   
  

 

 

 

Cash, end of period

   $ 471,796   
  

 

 

 

 

See accompanying notes to financial statements.

 

- 56 -


Table of Contents

PROSHARES ULTRASHORT AUSTRALIAN DOLLAR

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash

   $ 317,318       $ 200   

Segregated cash balances with brokers for futures contracts

     206,250         —     

Short-term U.S. government and agency obligations (Note 3)
(cost $3,302,978 and $0, respectively)

     3,302,995         —     

Receivable on open futures contracts

     51,288         —     

Offering costs (Note 5)

     32,463         41,000   

Limitation by Sponsor

     1,012         —     
  

 

 

    

 

 

 

Total assets

     3,911,326         41,200   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for offering costs

     41,000         41,000   
  

 

 

    

 

 

 

Total liabilities

     41,000         41,000   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     3,870,326         200   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 3,911,326       $ 41,200   
  

 

 

    

 

 

 

Shares outstanding

     100,005         5   
  

 

 

    

 

 

 

Net asset value per share

   $ 38.70       $ 40.00   
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 38.62       $ 40.00   
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

- 57 -


Table of Contents

PROSHARES ULTRASHORT AUSTRALIAN DOLLAR

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2012

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(85% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.083% due 10/04/12

   $ 3,303,000       $ 3,302,995   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $3,302,978)

      $ 3,302,995   
     

 

 

 

Futures Contracts Sold††

 

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

AUD/US Dollar Future 12/17/2012 (ADZ2)

     75       $ 7,727,250       $  1,140   

 

†† Cash collateral in the amount of $206,250 was pledged to cover margin requirements for open futures contracts as of September 30, 2012.

 

See accompanying notes to financial statements.

 

- 58 -


Table of Contents

PROSHARES ULTRASHORT AUSTRALIAN DOLLAR*

STATEMENT OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

     Three months ended
September 30, 2012
    Nine months ended
September 30, 2012
 

Investment Income

    

Interest

   $ 586      $ 586   
  

 

 

   

 

 

 

Expenses

    

Brokerage commissions

     605        605   

Offering costs

     8,537        8,537   

Limitation by Sponsor

     (1,012     (1,012
  

 

 

   

 

 

 

Total expenses

     8,130        8,130   
  

 

 

   

 

 

 

Net investment income (loss)

     (7,544     (7,544
  

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

    

Net realized gain (loss) on

    

Futures contracts

     (123,485     (123,485

Short-term U.S. government and agency obligations

     (2     (2
  

 

 

   

 

 

 

Net realized gain (loss)

     (123,487     (123,487
  

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

    

Futures contracts

     1,140        1,140   

Short-term U.S. government and agency obligations

     17        17   
  

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     1,157        1,157   
  

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (122,330     (122,330
  

 

 

   

 

 

 

Net income (loss)

     (129,874     (129,874
  

 

 

   

 

 

 

Net income (loss) per weighted-average share

     (1.32     (1.32
  

 

 

   

 

 

 

Weighted-average shares outstanding

     98,689        98,689   
  

 

 

   

 

 

 

 

* Since the Fund commenced investment operations on July 17, 2012, statements of operations for the three and nine months ended September 30, 2011 have not been provided.

 

See accompanying notes to financial statements.

 

- 59 -


Table of Contents

PROSHARES ULTRASHORT AUSTRALIAN DOLLAR

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

Shareholders’ equity, at December 31, 2011

     200   

Addition of 100,000 shares

     4,000,000   
  

 

 

 

Net investment income (loss)

     (7,544

Net realized gain (loss)

     (123,487

Change in net unrealized appreciation/depreciation

     1,157   
  

 

 

 

Net income (loss)

     (129,874
  

 

 

 

Shareholders’ equity, at September 30, 2012

   $ 3,870,326   
  

 

 

 

 

See accompanying notes to financial statements.

 

- 60 -


Table of Contents

PROSHARES ULTRASHORT AUSTRALIAN DOLLAR

STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

     Nine months ended
September 30, 2012
 

Cash flow from operating activities

  

Net income (loss)

   $ (129,874

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

     (206,250

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

     (3,302,978

Change in unrealized appreciation/depreciation on investments

     (17

Decrease (Increase) in receivable on futures contracts

     (51,288

Decrease (Increase) in Limitation by Sponsor

     (1,012

Change in offering cost

     8,537   
  

 

 

 

Net cash provided by (used in) operating activities

     (3,682,882
  

 

 

 

Cash flow from financing activities

  

Proceeds from addition of shares

     4,000,000   
  

 

 

 

Net cash provided by (used in) financing activities

     4,000,000   
  

 

 

 

Net increase (decrease) in cash

     317,118   

Cash, beginning of period

     200   
  

 

 

 

Cash, end of period

   $ 317,318   
  

 

 

 

 

See accompanying notes to financial statements.

 

- 61 -


Table of Contents

PROSHARES ULTRA EURO

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash

   $ 275,879       $ 10,469   

Short-term U.S. government and agency obligations (Note 3)
(cost $5,308,568 and $10,068,969, respectively)

     5,308,846         10,068,707   

Unrealized appreciation on foreign currency forward contracts

     222,278         —     
  

 

 

    

 

 

 

Total assets

     5,807,003         10,079,176   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     4,532         6,216   

Unrealized depreciation on foreign currency forward contracts

     —           518,212   
  

 

 

    

 

 

 

Total liabilities

     4,532         524,428   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     5,802,471         9,554,748   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 5,807,003       $ 10,079,176   
  

 

 

    

 

 

 

Shares outstanding

     250,014         400,014   
  

 

 

    

 

 

 

Net asset value per share

   $ 23.21       $ 23.89   
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 23.18       $ 23.87   
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

- 62 -


Table of Contents

PROSHARES ULTRA EURO

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2012

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(91% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.096% due 01/10/13†

   $ 5,310,000       $ 5,308,846   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $5,308,568)

      $ 5,308,846   
     

 

 

 

Foreign Currency Forward Contracts^

 

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

Contracts to Purchase

         

Euro/US Dollar Forward—Goldman Sachs International

     10/05/12         3,181,525      $ 4,089,012      $ 74,740   

Euro/US Dollar Forward—UBS AG

     10/05/12         6,105,000        7,846,368        145,949   
         

 

 

 
          $ 220,689   
         

 

 

 

Contracts to Sell

         

Euro/US Dollar Forward—Goldman Sachs International

     10/05/12         (179,800   $ (231,086   $ 1,913   

Euro/US Dollar Forward—UBS AG

     10/05/12         (77,600     (99,734     (324
         

 

 

 
          $ 1,589   
         

 

 

 

 

All or partial amount segregated as collateral for foreign currency forward contracts
^ The positions and counterparties herein are as of September 30, 2012. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.

 

See accompanying notes to financial statements.

 

- 63 -


Table of Contents

PROSHARES ULTRA EURO

STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Three months
ended
September 30,
2012
    Three months
ended
September 30,
2011
    Nine months
ended
September 30,
2012
    Nine months
ended
September 30,
2011
 

Investment Income

        

Interest

   $ 975      $ 511      $ 2,550      $ 4,353   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     13,183        20,668        52,001        60,728   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     13,183        20,668        52,001        60,728   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (12,208     (20,157     (49,451     (56,375
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Foreign currency forward contracts

     55,097        (3,200     (811,701     1,603,888   

Short-term U.S. government and agency obligations

     2        —          45        19   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     55,099        (3,200     (811,656     1,603,907   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Foreign currency forward contracts

     100,337        (1,321,372     740,490        (1,560,539

Short-term U.S. government and agency obligations

     87        (602     540        (744
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     100,424        (1,321,974     741,030        (1,561,283
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     155,523        (1,325,174     (70,626     42,624   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 143,315      $ (1,345,331   $ (120,077   $ (13,751
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ 0.57      $ (4.48   $ (0.39   $ (0.05
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     250,014        300,014        310,963        300,014   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

- 64 -


Table of Contents

PROSHARES ULTRA EURO

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

Shareholders’ equity, at December 31, 2011

   $ 9,554,748   

Addition of 50,000 shares

     1,209,580   

Redemption of 200,000 shares

     (4,841,780
  

 

 

 

Net addition (redemption) of (150,000) shares

     (3,632,200
  

 

 

 

Net investment income (loss)

     (49,451

Net realized gain (loss)

     (811,656

Change in net unrealized appreciation/depreciation

     741,030   
  

 

 

 

Net income (loss)

     (120,077
  

 

 

 

Shareholders’ equity, at September 30, 2012

   $ 5,802,471   
  

 

 

 

 

 

See accompanying notes to financial statements.

 

- 65 -


Table of Contents

PROSHARES ULTRA EURO

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Nine months ended
September 30, 2012
    Nine months ended
September 30, 2011
 

Cash flow from operating activities

    

Net income (loss)

   $ (120,077   $ (13,751

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

     4,760,401        (1,563,913

Change in unrealized appreciation/depreciation on investments

     (741,030     1,561,283   

Increase (Decrease) in management fee payable

     (1,684     7,455   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     3,897,610        (8,926
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     1,209,580        —     

Payment on shares redeemed

     (4,841,780     —     
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (3,632,200     —     
  

 

 

   

 

 

 

Net increase (decrease) in cash

     265,410        (8,926

Cash, beginning of period

     10,469        13,447   
  

 

 

   

 

 

 

Cash, end of period

   $ 275,879      $ 4,521   
  

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

- 66 -


Table of Contents

PROSHARES SHORT EURO

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash

   $ 336,793       $ 200   

Segregated cash balances with brokers for futures contracts

     79,200         —     

Short-term U.S. government and agency obligations (Note 3)
(cost $3,446,976 and $0, respectively)

     3,446,994         —     

Receivable on open futures contracts

     19,500         —     

Offering costs (Note 5)

     30,104         41,000   

Limitation by Sponsor

     964         —     
  

 

 

    

 

 

 

Total assets

     3,913,555         41,200   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for offering costs

     41,000         41,000   
  

 

 

    

 

 

 

Total liabilities

     41,000         41,000   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     3,872,555         200   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 3,913,555       $ 41,200   
  

 

 

    

 

 

 

Shares outstanding

     100,005         5   
  

 

 

    

 

 

 

Net asset value per share

   $ 38.72       $ 40.00   
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 38.64       $ 40.00   
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

- 67 -


Table of Contents

PROSHARES SHORT EURO

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2012

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(89% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.083% due 10/04/12

   $ 3,447,000       $ 3,446,994   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $3,446,976)

      $ 3,446,994   
     

 

 

 

Futures Contracts Sold††

 

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

Euro/US Dollar Future 12/17/2012 (ECZ2)

     24       $ 3,858,600       $ (13,619

 

†† Cash collateral in the amount of $79,200 was pledged to cover margin requirements for open futures contracts as of September 30, 2012.

 

See accompanying notes to financial statements.

 

- 68 -


Table of Contents

PROSHARES SHORT EURO*

STATEMENT OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

     Three months ended
September 30, 2012
    Nine months ended
September 30, 2012
 

Investment Income

    

Interest

   $ 641      $ 641   
  

 

 

   

 

 

 

Expenses

    

Brokerage commissions

     134        197   

Offering costs

     10,334        10,896   

Limitation by Sponsor

     (816     (964
  

 

 

   

 

 

 

Total expenses

     9,652        10,129   
  

 

 

   

 

 

 

Net investment income (loss)

     (9,011     (9,488
  

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

    

Net realized gain (loss) on

    

Futures contracts

     (102,555     (104,555

Short-term U.S. government and agency obligations

     (1     (1
  

 

 

   

 

 

 

Net realized gain (loss)

     (102,556     (104,556
  

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

    

Futures contracts

     36,694        (13,619

Short-term U.S. government and agency obligations

     18        18   
  

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     36,712        (13,601
  

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (65,844     (118,157
  

 

 

   

 

 

 

Net income (loss)

   $ (74,855   $ (127,645
  

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ (0.75   $ (1.29
  

 

 

   

 

 

 

Weighted-average shares outstanding

     100,005        98,974   
  

 

 

   

 

 

 

 

* Since the Fund commenced investment operations on June 26, 2012, statements of operations for the three and nine months ended September 30, 2011 have not been provided.

 

See accompanying notes to financial statements.

 

- 69 -


Table of Contents

PROSHARES SHORT EURO

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

Shareholders’ equity, at December 31, 2011

   $ 200   

Addition of 100,000 shares

     4,000,000   
  

 

 

 

Net investment income (loss)

     (9,488

Net realized gain (loss)

     (104,556

Change in net unrealized appreciation/depreciation

     (13,601
  

 

 

 

Net income (loss)

     (127,645
  

 

 

 

Shareholders’ equity, at September 30, 2012

   $ 3,872,555   
  

 

 

 

 

See accompanying notes to financial statements.

 

- 70 -


Table of Contents

PROSHARES SHORT EURO

STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

     Nine months ended
September 30, 2012
 

Cash flow from operating activities

  

Net income (loss)

   $ (127,645

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

     (79,200

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

     (3,446,976

Change in unrealized appreciation/depreciation on investments

     (18

Decrease (Increase) in receivable on futures contracts

     (19,500

Decrease (Increase) in Limitation by Sponsor

     (964

Change in offering cost

     10,896   
  

 

 

 

Net cash provided by (used in) operating activities

     (3,663,407
  

 

 

 

Cash flow from financing activities

  

Proceeds from addition of shares

     4,000,000   
  

 

 

 

Net cash provided by (used in) financing activities

     4,000,000   
  

 

 

 

Net increase (decrease) in cash

     336,593   

Cash, beginning of period

     200   
  

 

 

 

Cash, end of period

   $ 336,793   
  

 

 

 

 

See accompanying notes to financial statements.

 

- 71 -


Table of Contents

PROSHARES ULTRASHORT EURO

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash

   $ 395,540       $ 102,088   

Short-term U.S. government and agency obligations (Note 3)
(cost $792,130,294 and $1,012,198,282, respectively)

     792,156,391         1,012,174,281   

Unrealized appreciation on foreign currency forward contracts

     —           67,430,954   

Receivable from capital shares sold

     14,089,383         21,299,733   
  

 

 

    

 

 

 

Total assets

     806,641,314         1,101,007,056   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     604,781         847,510   

Unrealized depreciation on foreign currency forward contracts

     35,174,220         —     
  

 

 

    

 

 

 

Total liabilities

     35,779,001         847,510   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     770,862,313         1,100,159,546   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 806,641,314       $ 1,101,007,056   
  

 

 

    

 

 

 

Shares outstanding

     38,300,014         54,100,014   
  

 

 

    

 

 

 

Net asset value per share

   $ 20.13       $ 20.34   
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 20.12       $ 20.35   
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

- 72 -


Table of Contents

PROSHARES ULTRASHORT EURO

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2012

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(103% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.064% due 10/04/12

   $ 117,590,000       $ 117,589,812   

0.081% due 11/23/12†

     169,979,000         169,961,254   

0.094% due 01/10/13†

     504,715,000         504,605,325   
     

 

 

 

Total short-term U.S. government and agency obligations (cost $792,130,294)

      $ 792,156,391   
     

 

 

 

Foreign Currency Forward Contracts^

 

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

Contracts to Purchase

         

Euro/US Dollar Forward—Goldman Sachs International

     10/05/12         121,663,800      $ 156,366,739      $ (20,908

Euro/US Dollar Forward—UBS AG

     10/05/12         146,354,700        188,100,382        (2,042,583
         

 

 

 
          $ (2,063,491
         

 

 

 

Contracts to Sell

         

Euro/US Dollar Forward—Goldman Sachs International

     10/05/12         (700,644,925   $ (900,494,334   $ (15,254,155

Euro/US Dollar Forward—UBS AG

     10/05/12         (767,109,200     (985,916,637     (17,856,574
         

 

 

 
          $ (33,110,729
         

 

 

 

 

All or partial amount segregated as collateral for foreign currency forward contracts.
^ The positions and counterparties herein are as of September 30, 2012. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.

 

See accompanying notes to financial statements.

 

- 73 -


Table of Contents

PROSHARES ULTRASHORT EURO

STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Three months
ended
September 30,
2012
    Three months
ended
September 30,
2011
    Nine months
ended
September 30,
2012
    Nine months
ended
September 30,
2011
 

Investment Income

        

Interest

   $ 160,447      $ 36,861      $ 359,466      $ 255,628   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     2,052,823        1,728,002        6,345,979        3,848,679   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     2,052,823        1,728,002        6,345,979        3,848,679   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (1,892,376     (1,691,141     (5,986,513     (3,593,051
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Foreign currency forward contracts

     (14,572,815     (11,049,379     106,381,285        (112,483,351

Short-term U.S. government and agency obligations

     (442     131        (877     3,328   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (14,573,257     (11,049,248     106,380,408        (112,480,023
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Foreign currency forward contracts

     (12,582,909     122,372,805        (102,605,174     132,997,720   

Short-term U.S. government and agency obligations

     744        (54,049     50,098        (60,305
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (12,582,165     122,318,756        (102,555,076     132,937,415   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (27,155,422     111,269,508        3,825,332        20,457,392   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (29,047,798   $ 109,578,367      $ (2,161,181   $ 16,864,341   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ (0.72   $ 2.66      $ (0.05   $ 0.56   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     40,283,166        41,215,231        43,594,175        30,309,538   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

- 74 -


Table of Contents

PROSHARES ULTRASHORT EURO

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

Shareholders’ equity, at December 31, 2011

   $ 1,100,159,546   

Addition of 12,100,000 shares

     247,754,259   

Redemption of 27,900,000 shares

     (574,890,311
  

 

 

 

Net addition (redemption) of (15,800,000) shares

     (327,136,052
  

 

 

 

Net investment income (loss)

     (5,986,513

Net realized gain (loss)

     106,380,408   

Change in net unrealized appreciation/depreciation

     (102,555,076
  

 

 

 

Net income (loss)

     (2,161,181
  

 

 

 

Shareholders’ equity, at September 30, 2012

   $ 770,862,313   
  

 

 

 

 

See accompanying notes to financial statements.

 

- 75 -


Table of Contents

PROSHARES ULTRASHORT EURO

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Nine months ended
September 30, 2012
    Nine months ended
September 30, 2011
 

Cash flow from operating activities

    

Net income (loss)

   $ (2,161,181   $ 16,864,341   

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

     220,067,988        (376,266,395

Change in unrealized appreciation/depreciation on investments

     102,555,076        (132,937,415

Increase (Decrease) in management fee payable

     (242,729     837,229   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     320,219,154        (491,502,240
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     254,964,609        674,444,672   

Payment on shares redeemed

     (574,890,311     (182,770,372
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (319,925,702     491,674,300   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     293,452        172,060   

Cash, beginning of period

     102,088        251,588   
  

 

 

   

 

 

 

Cash, end of period

   $ 395,540      $ 423,648   
  

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

- 76 -


Table of Contents

PROSHARES ULTRA YEN

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash

   $ 127,359       $ 5,798   

Short-term U.S. government and agency obligations (Note 3)
(cost $5,079,976 and $5,366,951, respectively)

     5,080,206         5,366,875   

Unrealized appreciation on foreign currency forward contracts

     46,377         102,727   
  

 

 

    

 

 

 

Total assets

     5,253,942         5,475,400   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     4,076         4,325   
  

 

 

    

 

 

 

Total liabilities

     4,076         4,325   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     5,249,866         5,471,075   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 5,253,942       $ 5,475,400   
  

 

 

    

 

 

 

Shares outstanding

     150,014         150,014   
  

 

 

    

 

 

 

Net asset value per share

   $ 35.00       $ 36.47   
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 35.28       $ 36.50   
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

- 77 -


Table of Contents

PROSHARES ULTRA YEN

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2012

(unaudited)

 

     Principal
Amount
     Value  

Short-term U.S. government and agency obligations

     

(97% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.080% due 10/04/12†

   $ 996,000       $ 995,999   

0.105% due 11/23/12

     841,000         840,912   

0.098% due 01/10/13†

     3,244,000         3,243,295   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $5,079,976)

      $ 5,080,206   
     

 

 

 

Foreign Currency Forward Contracts^

 

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

Contracts to Purchase

          

Yen/US Dollar Forward—Goldman Sachs

          

International

   10/05/12      387,568,100      $  4,967,567       $ 21,888   

Yen/US Dollar Forward—UBS AG

   10/05/12      453,633,300        5,814,343         26,376   
          

 

 

 
           $ 48,264   
          

 

 

 

Contracts to Sell

          

Yen/US Dollar Forward—Goldman Sachs

          

International

   10/05/12      (6,526,600   $ (83,653)       $ (944)   

Yen/US Dollar Forward—UBS AG

   10/05/12      (15,729,000     (201,603)         (943)   
          

 

 

 
           $  (1,887)   
          

 

 

 

 

All or partial amount segregated as collateral for foreign currency forward contracts.
^ The positions and counterparties herein are as of September 30, 2012. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.

 

See accompanying notes to financial statements.

 

- 78 -


Table of Contents

PROSHARES ULTRA YEN

STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Three months
ended
September 30,
2012
    Three months
ended
September 30,
2011
    Nine months
ended
September 30,
2012
    Nine months
ended
September 30,
2011
 

Investment Income

        

Interest

   $ 1,009      $ 216      $ 2,253      $ 1,711   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     12,368        12,492        36,387        28,409   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     12,368        12,492        36,387        28,409   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (11,359     (12,276     (34,134     (26,698
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Foreign currency forward contracts

     90,137        496,377        (131,047     722,557   

Short-term U.S. government and agency obligations

     —          —          16        19   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     90,137        496,377        (131,031     722,576   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Foreign currency forward contracts

     146,755        (71,257     (56,350     (336,623

Short-term U.S. government and agency obligations

     65        (314     306        (424
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     146,820        (71,571     (56,044     (337,047
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     236,957        424,806        (187,075     385,529   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 225,598      $ 412,530      $ (221,209   $ 358,831   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ 1.50      $ 2.86      $ (1.47   $ 3.07   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     150,014        144,036        150,014        116,864   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

- 79 -


Table of Contents

PROSHARES ULTRA YEN

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

Shareholders’ equity, at December 31, 2011

   $  5,471,075   

Net investment income (loss)

     (34,134

Net realized gain (loss)

     (131,031

Change in net unrealized appreciation/depreciation

     (56,044
  

 

 

 

Net income (loss)

     (221,209
  

 

 

 

Shareholders’ equity, at September 30, 2012

   $ 5,249,866   
  

 

 

 

 

See accompanying notes to financial statements.

 

- 80 -


Table of Contents

PROSHARES ULTRA YEN

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Nine months ended
September 30, 2012
    Nine months ended
September 30, 2011
 

Cash flow from operating activities

    

Net income (loss)

   $ (221,209   $ 358,831   

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

     286,975        (811,370

Change in unrealized appreciation/depreciation on investments

     56,044        337,047   

Increase (Decrease) in management fee payable

     (249     5,164   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     121,561        (110,328
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     —          1,696,147   

Payment on shares redeemed

     —          (1,593,589
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     —          102,558   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     121,561        (7,770

Cash, beginning of period

     5,798        10,637   
  

 

 

   

 

 

 

Cash, end of period

   $ 127,359      $ 2,867   
  

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES ULTRASHORT YEN

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash

   $ 54,782       $ 22,338   

Short-term U.S. government and agency obligations (Note 3)
(cost $231,937,371 and $219,407,765, respectively)

     231,943,724         219,404,292   

Receivable from capital shares sold

     20,652,555         6,249,734   
  

 

 

    

 

 

 

Total assets

     252,651,061         225,676,364   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     178,803         180,224   

Unrealized depreciation on foreign currency forward contracts

     2,643,851         4,364,146   
  

 

 

    

 

 

 

Total liabilities

     2,822,654         4,544,370   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     249,828,407         221,131,994   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 252,651,061       $ 225,676,364   
  

 

 

    

 

 

 

Shares outstanding

     6,049,294         5,399,294   
  

 

 

    

 

 

 

Net asset value per share (Note 1)

   $ 41.30       $ 40.96   
  

 

 

    

 

 

 

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

   $ 41.33       $ 40.95   
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES ULTRASHORT YEN

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2012

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(93% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.072% due 10/04/12†

   $ 121,143,000       $ 121,142,806   

0.096% due 01/10/13†

     110,825,000         110,800,918   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $231,937,371)

      $ 231,943,724   
     

 

 

 

Foreign Currency Forward Contracts^

 

     Settlement Date      Local Currency     Notional
Amount at

Value (USD)
    Unrealized
Appreciation
(Depreciation)
 

Contracts to Purchase

         

Yen/US Dollar Forward—Goldman Sachs International

     10/05/12         2,209,153,600      $ 28,315,328      $ (72,641

Yen/US Dollar Forward—UBS AG

     10/05/12         1,869,997,800        23,968,275        66,938   
         

 

 

 
          $ (5,703
         

 

 

 

Contracts to Sell

         

Yen/US Dollar Forward—Goldman Sachs International

     10/05/12         (16,016,951,000   $

 

 

(205,293,657

  

  $ (1,239,214

Yen/US Dollar Forward—UBS AG

     10/05/12         (27,086,156,900     (347,170,708     (1,398,934
         

 

 

 
          $ (2,638,148
         

 

 

 

 

All or partial amount segregated as collateral for foreign currency forward contracts.
^ The positions and counterparties herein are as of September 30, 2012. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES ULTRASHORT YEN

STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Three months
ended
September 30,
2012
    Three months
ended
September 30,
2011
    Nine months
ended
September 30,
2012
    Nine months
ended
September 30,
2011
 

Investment Income

        

Interest

   $ 41,475      $ 23,905      $ 104,677      $ 176,008   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     537,172        725,344        1,699,389        2,253,245   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     537,172        725,344        1,699,389        2,253,245   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (495,697     (701,439     (1,594,712     (2,077,237
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Foreign currency forward contracts

     (4,756,665     (34,105,768     5,696,143        (55,833,787

Short-term U.S. government and agency obligations

     205        487        897        3,296   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (4,756,460     (34,105,281     5,697,040        (55,830,491
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Foreign currency forward contracts

     (6,717,569     4,607,971        1,720,295        18,318,673   

Short-term U.S. government and agency obligations

     1,760        (17,889     9,826        (16,971
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (6,715,809     4,590,082        1,730,121        18,301,702   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (11,472,269     (29,515,199     7,427,161        (37,528,789
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (11,967,966   $ (30,216,638   $ 5,832,449      $ (39,606,026
  

 

 

   

 

 

   

 

 

   

 

 

 

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

   $ (2.24   $ (4.22   $ 1.05      $ (5.69
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding (Note 1)

     5,349,294        7,162,686        5,542,177        6,966,549   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES ULTRASHORT YEN

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

Shareholders’ equity, at December 31, 2011

   $ 221,131,994   

Addition of 3,750,000 shares

     161,174,700   

Redemption of 3,100,000 shares

     (138,310,736
  

 

 

 

Net addition (redemption) of 650,000 shares

     22,863,964   
  

 

 

 

Net investment income (loss)

     (1,594,712

Net realized gain (loss)

     5,697,040   

Change in net unrealized appreciation/depreciation

     1,730,121   
  

 

 

 

Net income (loss)

     5,832,449   
  

 

 

 

Shareholders’ equity, at September 30, 2012

   $ 249,828,407   
  

 

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES ULTRASHORT YEN

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Nine months ended
September 30, 2012
    Nine months ended
September 30, 2011
 

Cash flow from operating activities

    

Net income (loss)

   $ 5,832,449      $ (39,606,026

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

     (12,529,606     (52,571,098

Change in unrealized appreciation/depreciation on investments

     (1,730,121     (18,301,702

Increase (Decrease) in management fee payable

     (1,421     277,088   
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (8,428,699     (110,201,738
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     146,771,879        302,417,904   

Payment on shares redeemed

     (138,310,736     (192,197,741
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     8,461,143        110,220,163   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     32,444        18,425   

Cash, beginning of period

     22,338        120,494   
  

 

 

   

 

 

 

Cash, end of period

   $ 54,782      $ 138,919   
  

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES ULTRA VIX SHORT-TERM FUTURES ETF

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash

   $ 2,267,367       $ 2,972,032   

Segregated cash balances with brokers for futures contracts

     90,494,892         6,303,800   

Short-term U.S. government and agency obligations (Note 3)
(cost $111,374,656 and $0, respectively)

     111,376,419         —     

Receivable from capital shares sold

     7,492,623         2,469,584   

Receivable on open futures contracts

     2,955,509         —     

Offering costs (Note 5)

     421         21,691   
  

 

 

    

 

 

 

Total assets

     214,587,231         11,767,107   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     19,333,608         —     

Payable on open futures contracts

     —           1,852,966   

Management fee payable

     171,009         4,264   

Payable for offering costs

     —           28,764   

Unrealized depreciation on swap agreements

     1,826,122         —     
  

 

 

    

 

 

 

Total liabilities

     21,330,739         1,885,994   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     193,256,492         9,881,113   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 214,587,231       $ 11,767,107   
  

 

 

    

 

 

 

Shares outstanding

     6,359,151         13,334   
  

 

 

    

 

 

 

Net asset value per share (Note 1)

   $ 30.39       $ 741.05   
  

 

 

    

 

 

 

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

   $ 30.92       $ 729.60   
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES ULTRA VIX SHORT-TERM FUTURES ETF

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2012

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(58% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.091% due 11/23/12

   $ 22,472,000       $ 22,469,654   

0.089% due 01/10/13†

     49,346,000         49,335,277   

0.099% due 02/07/13

     39,586,000         39,571,488   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $111,374,656)

      $ 111,376,419   
     

 

 

 

Futures Contracts Purchased††

 

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

CBOE VIX Future 10/16/2012 (UXV2)

     13,083       $ 214,561,200       $ (18,741,938

CBOE VIX Future 11/20/2012 (UXX2)

     8,723         157,450,150         (30,804
        

 

 

 
         $ (18,772,742
        

 

 

 

Swap Agreements^

 

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

S&P 500 VIX Short-Term Futures Index Swap - Societe Generale S.A

     10/08/12       $ 15,386,719       $ (1,826,122

 

All or partial amount segregated as collateral for swap agreements.
†† Cash collateral in the amount of $90,494,892 was pledged to cover margin requirements for open futures contracts as of September 30, 2012.
^ The positions and counterparties herein are as of September 30, 2012. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* 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.

 

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Table of Contents

PROSHARES ULTRA VIX SHORT-TERM FUTURES ETF*

STATEMENT OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

     Three months ended
September 30, 2012
    Nine months ended
September 30, 2012
 

Investment Income

    

Interest

   $ 22,293      $ 40,074   
  

 

 

   

 

 

 

Expenses

    

Management fee

     586,150        1,216,603   

Brokerage commissions

     462,005        1,074,133   

Offering costs

     19,313        69,341   
  

 

 

   

 

 

 

Total expenses

     1,067,468        2,360,077   
  

 

 

   

 

 

 

Net investment income (loss)

     (1,045,175     (2,320,003
  

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

    

Net realized gain (loss) on

    

Futures contracts

     (282,640,076     (461,102,812

Swap agreements

     (16,548,798     (16,817,661

Short-term U.S. government and agency obligations

     2,865        9,728   
  

 

 

   

 

 

 

Net realized gain (loss)

     (299,186,009     (477,910,745
  

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

    

Futures contracts

     33,721,060        (18,009,952

Swap agreements

     5,869,689        (1,826,122

Short-term U.S. government and agency obligations

     (1,578     1,763   
  

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     39,589,171        (19,834,311
  

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (259,596,838     (497,745,056
  

 

 

   

 

 

 

Net income (loss)

   $ (260,642,013   $ (500,065,059
  

 

 

   

 

 

 

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

   $ (54.81   $ (231.81
  

 

 

   

 

 

 

Weighted-average shares outstanding (Note 1)

     4,755,673        2,157,234   
  

 

 

   

 

 

 

 

* Since the Fund commenced investment operations on October 3, 2011, statements of operations for the three and nine months ended September 30, 2011 have not been provided.

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES ULTRA VIX SHORT-TERM FUTURES ETF

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

Shareholders’ equity, at December 31, 2011

   $ 9,881,113   

Addition of 11,837,500 shares

     1,247,208,537   

Redemption of 5,491,683 shares

     (563,768,099
  

 

 

 

Net addition (redemption) of 6,345,817 shares

     683,440,438   
  

 

 

 

Net investment income (loss)

     (2,320,003

Net realized gain (loss)

     (477,910,745

Change in net unrealized appreciation/depreciation

     (19,834,311
  

 

 

 

Net income (loss)

     (500,065,059
  

 

 

 

Shareholders’ equity, at September 30, 2012

   $ 193,256,492   
  

 

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES ULTRA VIX SHORT-TERM FUTURES ETF

STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

     Nine months ended
September 30, 2012
 

Cash flow from operating activities

  

Net income (loss)

   $ (500,065,059

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

     (84,191,092

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

     (111,374,656

Change in unrealized appreciation/depreciation on investments

     1,824,359   

Decrease (Increase) in receivable on futures contracts

     (2,955,509

Change in offering cost

     21,270   

Increase (Decrease) in management fee payable

     166,745   

Increase (Decrease) in payable on futures contracts

     (1,852,966

Increase (Decrease) in payable for offering costs

     (28,764
  

 

 

 

Net cash provided by (used in) operating activities

     (698,455,672
  

 

 

 

Cash flow from financing activities

  

Proceeds from addition of shares

     1,242,185,498   

Payment on shares redeemed

     (544,434,491
  

 

 

 

Net cash provided by (used in) financing activities

     697,751,007   
  

 

 

 

Net increase (decrease) in cash

     (704,665

Cash, beginning of period

     2,972,032   
  

 

 

 

Cash, end of period

   $ 2,267,367   
  

 

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES VIX SHORT-TERM FUTURES ETF

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash

   $ 2,537,861       $ 563,350   

Segregated cash balances with brokers for futures contracts

     40,524,749         —     

Short-term U.S. government and agency obligations (Note 3)
(cost $121,715,324 and $27,358,785, respectively)

     121,719,579         27,357,824   

Receivable from capital shares sold

     950,120         1,909,463   

Receivable on open futures contracts

     3,168,549         742,451   

Offering costs (Note 5)

     —           1,090   
  

 

 

    

 

 

 

Total assets

     168,900,858         30,574,178   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     2,985,303         —     

Management fee payable

     112,005         24,275   
  

 

 

    

 

 

 

Total liabilities

     3,097,308         24,275   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     165,803,550         30,549,903   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 168,900,858       $ 30,574,178   
  

 

 

    

 

 

 

Shares outstanding

     8,725,005         400,005   
  

 

 

    

 

 

 

Net asset value per share

   $ 19.00       $ 76.37   
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 19.22       $ 75.74   
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES VIX SHORT-TERM FUTURES ETF

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2012

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(73% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.077% due 10/04/12

   $ 62,000       $ 62,000   

0.099% due 11/23/12

     62,621,000         62,614,462   

0.091% due 01/10/13

     45,329,000         45,319,150   

0.101% due 02/07/13

     13,729,000         13,723,967   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $121,715,324)

      $ 121,719,579   
     

 

 

 

Futures Contracts Purchased††

 

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

CBOE VIX Future 10/16/2012 (UXV2)

     5,861       $ 96,120,400       $ (5,123,035

CBOE VIX Future 11/20/2012 (UXX2)

     3,904         70,467,200         249,064   
        

 

 

 
         $ (4,873,971
        

 

 

 

 

†† Cash collateral in the amount of $40,524,749 was pledged to cover margin requirements for open futures contracts as of September 30, 2012.

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES VIX SHORT-TERM FUTURES ETF

STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Three months
ended
September 30,
2012
    Three months
ended
September 30,
2011
    Nine months
ended
September 30,
2012
    Nine months
ended
September 30,
2011
 

Investment Income

        

Interest

   $ 21,142      $ 1,884      $ 47,219      $ 11,821   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     315,055        26,672        788,072        62,960   

Offering costs

     —          49,621        1,090        147,749   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     315,055        76,293        789,162        210,709   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (293,913     (74,409     (741,943     (198,888
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Futures contracts

     (85,611,502     24,351,300        (137,705,726     11,557,660   

Short-term U.S. government and agency obligations

     (782     —          365        1,500   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (85,612,284     24,351,300        (137,705,361     11,559,160   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Futures contracts

     13,014,580        7,994,010        (3,298,001     3,541,350   

Short-term U.S. government and agency obligations

     1,910        (2,318     5,216        (1,675
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     13,016,490        7,991,692        (3,292,785     3,539,675   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (72,595,794     32,342,992        (140,998,146     15,098,835   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (72,889,707   $ 32,268,583      $ (141,740,089   $ 14,899,947   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ (12.01   $ 56.28      $ (37.10   $ 25.51   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     6,071,472        573,375        3,820,717        584,172   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES VIX SHORT-TERM FUTURES ETF

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

Shareholders’ equity, at December 31, 2011

   $ 30,549,903   

Addition of 20,725,000 shares

     675,673,404   

Redemption of 12,400,000 shares

     (398,679,668
  

 

 

 

Net addition (redemption) of 8,325,000 shares

     276,993,736   
  

 

 

 

Net investment income (loss)

     (741,943

Net realized gain (loss)

     (137,705,361

Change in net unrealized appreciation/depreciation

     (3,292,785
  

 

 

 

Net income (loss)

     (141,740,089
  

 

 

 

Shareholders’ equity, at September 30, 2012

   $ 165,803,550   
  

 

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES VIX SHORT-TERM FUTURES ETF

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Nine months ended
September 30, 2012
    Nine months ended
September 30, 2011
 

Cash flow from operating activities

    

Net income (loss)

   $ (141,740,089   $ 14,899,947   

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

     (40,524,749     —     

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

     (94,356,539     (28,062,806

Change in unrealized appreciation/depreciation on investments

     (5,216     1,675   

Decrease (Increase) in receivable on futures contracts

     (2,426,098     (2,250,019

Change in offering cost

     1,090        147,749   

Increase (Decrease) in management fee payable

     87,730        62,960   

Increase (Decrease) in payable for offering costs

     —          (198,998
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (278,963,871     (15,399,492
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     676,632,747        254,334,644   

Payment on shares redeemed

     (395,694,365     (237,843,693
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     280,938,382        16,490,951   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     1,974,511        1,091,459   

Cash, beginning of period

     563,350        400   
  

 

 

   

 

 

 

Cash, end of period

   $ 2,537,861      $ 1,091,859   
  

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

- 96 -


Table of Contents

PROSHARES SHORT VIX SHORT-TERM FUTURES ETF

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash

   $ 1,461,733       $ 5,521,055   

Segregated cash balances with brokers for futures contracts

     13,176,254         2,252,358   

Short-term U.S. government and agency obligations (Note 3)
(cost $35,052,708 and $0, respectively)

     35,053,223         —     

Receivable from capital shares sold

     6,806,066         —     

Offering costs (Note 5)

     421         21,691   
  

 

 

    

 

 

 

Total assets

     56,497,697         7,795,104   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable on open futures contracts

     2,031,024         —     

Management fee payable

     24,949         5,916   

Payable for offering costs

     —           28,764   
  

 

 

    

 

 

 

Total liabilities

     2,055,973         34,680   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     54,441,724         7,760,424   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 56,497,697       $ 7,795,104   
  

 

 

    

 

 

 

Shares outstanding

     800,020         300,020   
  

 

 

    

 

 

 

Net asset value per share (Note 10)

   $ 68.05       $ 25.87   
  

 

 

    

 

 

 

Market value per share (Note 10) (Note 2)

   $ 67.37       $ 26.14   
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

- 97 -


Table of Contents

PROSHARES SHORT VIX SHORT-TERM FUTURES ETF

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2012

(unaudited)

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(64% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.090% due 11/23/12

   $ 436,000       $ 435,954   

0.089% due 01/10/13

     19,845,000         19,840,688   

0.100% due 02/07/13

     14,782,000         14,776,581   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $35,052,708)

      $ 35,053,223   
     

 

 

 

Futures Contracts Sold††

 

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

CBOE VIX Future 10/16/2012 (UXV2)

     1,908       $ 31,291,200       $ 516,210   

CBOE VIX Future 11/20/2012 (UXX2)

     1,267         22,869,350         13,407   
        

 

 

 
         $  529,617   

 

†† Cash collateral in the amount of $13,176,254 was pledged to cover margin requirements for open futures contracts as of September 30, 2012.

 

See accompanying notes to financial statements.

 

- 98 -


Table of Contents

PROSHARES SHORT VIX SHORT-TERM FUTURES ETF*

STATEMENT OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

     Three months ended
September 30, 2012
    Nine months ended
September 30, 2012
 

Investment Income

    

Interest

   $ 4,522      $ 8,717   
  

 

 

   

 

 

 

Expenses

    

Management fee

     37,125        73,103   

Brokerage commissions

     71,818        139,690   

Offering costs

     19,314        69,342   
  

 

 

   

 

 

 

Total expenses

     128,257        282,135   
  

 

 

   

 

 

 

Net investment income (loss)

     (123,735     (273,418
  

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

    

Net realized gain (loss) on

    

Futures contracts

     10,269,196        14,345,508   

Short-term U.S. government and agency obligations

     1,435        2,221   
  

 

 

   

 

 

 

Net realized gain (loss)

     10,270,631        14,347,729   
  

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

    

Futures contracts

     (146,485     439,437   

Short-term U.S. government and agency obligations

     91        515   
  

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (146,394     439,952   
  

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     10,124,237        14,787,681   
  

 

 

   

 

 

 

Net income (loss)

   $ 10,000,502      $ 14,514,263   
  

 

 

   

 

 

 

Net income (loss) per weighted-average share (Note 10)

   $ 23.35      $ 32.15   
  

 

 

   

 

 

 

Weighted-average shares outstanding (Note 10)

     428,281        451,480   
  

 

 

   

 

 

 

 

* Since the Fund commenced investment operations on October 3, 2011, statements of operations for the three and nine months ended September 30, 2011 have not been provided.

 

See accompanying notes to financial statements.

 

- 99 -


Table of Contents

PROSHARES SHORT VIX SHORT-TERM FUTURES ETF

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

Shareholders’ equity, at December 31, 2011

   $ 7,760,424   

Addition of 9,100,000 shares

     443,744,858   

Redemption of 8,600,000 shares

     (411,577,821
  

 

 

 

Net addition (redemption) of 500,000 shares

     32,167,037   
  

 

 

 

Net investment income (loss)

     (273,418

Net realized gain (loss)

     14,347,729   

Change in net unrealized appreciation/depreciation

     439,952   
  

 

 

 

Net income (loss)

     14,514,263   
  

 

 

 

Shareholders’ equity, at September 30, 2012

   $ 54,441,724   
  

 

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES SHORT VIX SHORT-TERM FUTURES ETF

STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

     Nine months ended
September 30, 2012
 

Cash flow from operating activities

  

Net income (loss)

   $ 14,514,263   

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

     (10,923,896

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

     (35,052,708

Change in unrealized appreciation/depreciation on investments

     (515

Change in offering cost

     21,270   

Increase (Decrease) in management fee payable

     19,033   

Increase (Decrease) in payable on futures contracts

     2,031,024   

Increase (Decrease) in payable for offering costs

     (28,764
  

 

 

 

Net cash provided by (used in) operating activities

     (29,420,293
  

 

 

 

Cash flow from financing activities

  

Proceeds from addition of shares

     436,938,792   

Payment on shares redeemed

     (411,577,821
  

 

 

 

Net cash provided by (used in) financing activities

     25,360,971   
  

 

 

 

Net increase (decrease) in cash

     (4,059,322

Cash, beginning of period

     5,521,055   
  

 

 

 

Cash, end of period

   $ 1,461,733   
  

 

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES VIX MID-TERM FUTURES ETF

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash

   $ 1,949,276       $ 627,557   

Segregated cash balances with brokers for futures contracts

     18,471,651         —     

Short-term U.S. government and agency obligations (Note 3)
(cost $75,763,187 and $89,398,343, respectively)

     75,764,033         89,392,389   

Receivable from capital shares sold

     6,225,912         —     

Receivable on open futures contracts

     —           798,319   

Offering costs (Note 5)

     —           682   

Limitation by Sponsor

     —           2,481   
  

 

 

    

 

 

 

Total assets

     102,410,872         90,821,428   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     1,058,818         —     

Payable on open futures contracts

     626,539         —     

Management fee payable

     70,197         —     
  

 

 

    

 

 

 

Total liabilities

     1,755,554         —     
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     100,655,318         90,821,428   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 102,410,872       $ 90,821,428   
  

 

 

    

 

 

 

Shares outstanding

     2,425,005         1,225,005   
  

 

 

    

 

 

 

Net asset value per share

   $ 41.51       $ 74.14   
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 41.66       $ 74.13   
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

- 102 -


Table of Contents

PROSHARES VIX MID-TERM FUTURES ETF

SCHEDULE OF INVESTMENTS

SEPTEMBER 30, 2012

(unaudited)

 

     Principal
Amount
     Value  

Short-term U.S. government and agency obligations

     

(75% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.059% due 10/04/12

   $ 50,460,000       $ 50,459,919   

0.095% due 11/23/12

     17,909,000         17,907,130   

0.089% due 01/10/13

     4,662,000         4,660,987   

0.093% due 02/07/13

     2,737,000         2,735,997   
     

 

 

 

Total short-term U.S. government and agency obligations
(cost $75,763,187)

      $ 75,764,033   
     

 

 

 

Futures Contracts Purchased††

 

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

CBOE VIX Future 01/15/2013 (UXF3)

     890       $ 18,601,000       $ (3,799,169

CBOE VIX Future 02/12/2013 (UXG3)

     1,484         32,870,600         (5,664,510

CBOE VIX Future 03/19/2013 (UXH3)

     1,484         34,651,400         (4,194,830

CBOE VIX Future 04/16/2013 (UXJ3)

     593         14,528,500         (65,930
        

 

 

 
         $ (13,724,439
        

 

 

 

 

†† Cash collateral in the amount of $18,471,651 was pledged to cover margin requirements for open futures contracts as of September 30, 2012.

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES VIX MID-TERM FUTURES ETF

STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Three months
ended
September 30,
2012
    Three months
ended
September 30,
2011
    Nine months
ended
September 30,
2012
    Nine months
ended
September 30,
2011
 

Investment Income

        

Interest

   $ 12,846      $ 569      $ 31,096      $ 3,584   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     202,688        —          634,119        —     

Offering costs

     —          31,013        682        92,343   

Limitation by Sponsor

     —          (4,041     —          (30,593
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     202,688        26,972        634,801        61,750   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (189,842     (26,403     (603,705     (58,166
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Futures contracts

     (19,925,729     2,364,290        (45,669,199     503,490   

Short-term U.S. government and agency obligations

     188        79        (1,822     277   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (19,925,541     2,364,369        (45,671,021     503,767   
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Futures contracts

     (7,586,879     2,244,750        (7,611,689     1,830,600   

Short-term U.S. government and agency obligations

     (1,753     (1,584     6,800        (1,507
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (7,588,632     2,243,166        (7,604,889     1,829,093   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (27,514,173     4,607,535        (53,275,910     2,332,860   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (27,704,015   $ 4,581,132      $ (53,879,615   $ 2,274,694   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ (14.21   $ 25.66      $ (30.91   $ 15.87   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     1,950,005        178,538        1,743,162        143,338   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES VIX MID-TERM FUTURES ETF

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

Shareholders’ equity, at December 31, 2011

   $ 90,821,428   

Addition of 1,900,000 shares

     107,050,176   

Redemption of 700,000 shares

     (43,336,671
  

 

 

 

Net addition (redemption) of 1,200,000 shares

     63,713,505   
  

 

 

 

Net investment income (loss)

     (603,705

Net realized gain (loss)

     (45,671,021

Change in net unrealized appreciation/depreciation

     (7,604,889
  

 

 

 

Net income (loss)

     (53,879,615
  

 

 

 

Shareholders’ equity, at September 30, 2012

   $ 100,655,318   
  

 

 

 

 

See accompanying notes to financial statements.

 

- 105 -


Table of Contents

PROSHARES VIX MID-TERM FUTURES ETF

STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Nine months  ended
September 30, 2012
    Nine months  ended
September 30, 2011
 

Cash flow from operating activities

    

Net income (loss)

   $ (53,879,615   $ 2,274,694   

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

     (18,471,651     —     

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

     13,635,156        (14,412,785

Change in unrealized appreciation/depreciation on investments

     (6,800     1,507   

Decrease (Increase) in receivable on futures contracts

     798,319        (550,076

Decrease (Increase) in Limitation by Sponsor

     2,481        (30,593

Change in offering cost

     682        92,343   

Increase (Decrease) in management fee payable

     70,197        —     

Increase (Decrease) in payable on futures contracts

     626,539        —     

Increase (Decrease) in payable for offering costs

     —          (124,374
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (57,224,692     (12,749,284
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     100,824,264        32,434,524   

Payment on shares redeemed

     (42,277,853     (19,177,123
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     58,546,411        13,257,401   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     1,321,719        508,117   

Cash, beginning of period

     627,557        400   
  

 

 

   

 

 

 

Cash, end of period

   $ 1,949,276      $ 508,517   
  

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

- 106 -


Table of Contents

PROSHARES MANAGED FUTURES STRATEGY*

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash

   $ 200       $ 200   

Offering costs (Note 5)

     90,800         90,800   
  

 

 

    

 

 

 

Total assets

     91,000         91,000   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for offering costs

     90,800         90,800   
  

 

 

    

 

 

 

Total liabilities

     90,800         90,800   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

   $ 200       $ 200   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 91,000       $ 91,000   
  

 

 

    

 

 

 

 

* See Note 1.

 

See accompanying notes to financial statements.

 

- 107 -


Table of Contents

PROSHARES COMMODITY MANAGED FUTURES STRATEGY*

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash

   $ 200       $ 200   

Offering costs (Note 5)

     62,100         62,100   
  

 

 

    

 

 

 

Total assets

     62,300         62,300   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for offering costs

     62,100         62,100   
  

 

 

    

 

 

 

Total liabilities

     62,100         62,100   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

   $ 200       $ 200   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 62,300       $ 62,300   
  

 

 

    

 

 

 

 

* See Note 1.

 

See accompanying notes to financial statements.

 

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PROSHARES FINANCIAL MANAGED FUTURES STRATEGY*

STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash

   $ 200       $ 200   

Offering costs (Note 5)

     62,100         62,100   
  

 

 

    

 

 

 

Total assets

     62,300         62,300   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for offering costs

     62,100         62,100   
  

 

 

    

 

 

 

Total liabilities

     62,100         62,100   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

   $ 200       $ 200   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 62,300       $ 62,300   
  

 

 

    

 

 

 

 

* See Note 1.

 

See accompanying notes to financial statements.

 

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PROSHARES TRUST II

COMBINED STATEMENTS OF FINANCIAL CONDITION

 

     September 30, 2012
(unaudited)
     December 31, 2011  

Assets

     

Cash

   $ 16,538,776       $ 19,145,045   

Segregated cash balances with brokers for futures contracts

     198,720,470         34,136,628   

Short-term U.S. government and agency obligations (Note 3)
(cost $3,438,088,956 and $3,314,826,965, respectively)

     3,438,193,300         3,314,757,692   

Unrealized appreciation on swap agreements

     5,676,002         3,215,991   

Unrealized appreciation on forward agreements

     120,883,986         76,417,081   

Unrealized appreciation on foreign currency forward contracts

     268,655         67,533,681   

Receivable from capital shares sold

     77,742,212         62,130,059   

Receivable on open futures contracts

     9,458,535         2,247,035   

Offering costs (Note 5)

     312,024         1,481,880   

Limitation by Sponsor

     2,498         2,481   
  

 

 

    

 

 

 

Total Assets

     3,867,796,458         3,581,067,573   
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     50,139,991         20,503,124   

Payable on open futures contracts

     3,025,844         1,852,966   

Management fee payable

     2,771,345         2,597,445   

Payable for Offering Costs

     338,000         1,507,202   

Unrealized depreciation on swap agreements

     15,420,385         10,714,573   

Unrealized depreciation on forward agreements

     23,572,398         260,163,053   

Unrealized depreciation on foreign currency forward contracts

     37,818,071         4,882,358   
  

 

 

    

 

 

 

Total liabilities

     133,086,034         302,220,721   
  

 

 

    

 

 

 

Shareholders’ equity

     

Shareholders’ equity

     3,734,710,424         3,278,846,852   
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 3,867,796,458       $ 3,581,067,573   
  

 

 

    

 

 

 

Shares outstanding

     106,163,634         96,673,263   
  

 

 

    

 

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES TRUST II

COMBINED STATEMENTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Three months
ended
September 30,
2012
    Three months
ended
September 30,
2011
    Nine months
ended
September 30,
2012
    Nine months
ended
September 30,
2011
 

Investment Income

        

Interest

     608,290      $ 205,228        1,391,023      $ 1,432,606   
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses

        

Management fee

     8,318,706        8,789,596        24,529,023        22,089,503   

Brokerage commissions

     603,731        34,563        1,434,756        132,816   

Offering costs

     101,423        80,634        295,109        240,092   

Limitation by Sponsor

     (2,350     (4,041     (2,498     (30,593
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     9,021,510        8,900,752        26,256,390        22,431,818   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (8,413,220     (8,695,524     (24,865,367     (20,999,212
  

 

 

   

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Futures contracts

     (333,410,798     1,615,893        (628,321,027     32,635,570   

Swap agreements

     25,164,855        (18,459,511     434,811        33,016,158   

Forward agreements

     141,156,425        (155,922,546     (115,296,645     (122,754,908

Foreign currency forward contracts

     (19,184,246     (44,661,970     111,134,680        (165,990,693

Short-term U.S. government and agency obligations

     9,398        13,317        26,727        88,692   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (186,264,366     (217,414,817     (632,021,454     (223,005,181
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

        

Futures contracts

     23,978,880        (5,356,085     (21,179,114     (22,449,225

Swap agreements

     (6,773,552     (33,857,212     (2,245,801     (39,328,107

Forward agreements

     202,513,698        (118,697,358     281,057,560        (184,910,769

Foreign currency forward contracts

     (19,053,386     125,588,147        (100,200,739     149,419,231   

Short-term U.S. government and agency obligations

     17,686        (251,113     173,617        (255,737
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     200,683,326        (32,573,621     157,605,523        (97,524,607
  

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     14,418,960        (249,988,438     (474,415,931     (320,529,788
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     6,005,740      $ (258,683,962     (499,281,298   $ (341,529,000
  

 

 

   

 

 

   

 

 

   

 

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES TRUST II

COMBINED STATEMENTS OF CHANGES IN SHAREHOLDER’S EQUITY

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012

(unaudited)

 

Shareholders’ equity, at December 31, 2011

     3,278,846,852   

Addition of 100,202,500 shares

     4,536,355,180   

Redemption of 90,712,129 shares*

     (3,581,210,310
  

 

 

 

Net addition (redemption) of 9,490,371 shares

     955,144,870   
  

 

 

 

Net investment income (loss)

     (24,865,367

Net realized gain (loss)

     (632,021,454

Change in net unrealized appreciation/depreciation

     157,605,523   
  

 

 

 

Net income (loss)

     (499,281,298
  

 

 

 

Shareholders’ equity, at September 30, 2012

     3,734,710,424   
  

 

 

 

 

* Amount includes $6,600 of redemptions related to de-registration of certain Funds. Refer to Note 1.

 

See accompanying notes to financial statements.

 

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PROSHARES TRUST II

COMBINED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 AND 2011

(unaudited)

 

     Nine months ended
September 30, 2012
    Nine months ended
September 30, 2011
 

Cash flow from operating activities

    

Net income (loss)

     (499,281,298   $ (341,529,000

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

     (164,583,842     (21,504,650

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

     (123,261,991     (1,576,250,195

Change in unrealized appreciation/depreciation on investments

     (178,784,637     75,075,382   

Decrease (Increase) in receivable on futures contracts

     (7,211,500     (2,525,683

Decrease (Increase) in Limitation by Sponsor

     (17     (30,593

Change in offering cost

     111,430        240,092   

Increase (Decrease) in management fee payable

     173,900        4,320,554   

Increase (Decrease) in payable on futures contracts

     1,172,878        9,757,128   

Increase (Decrease) in payable for offering costs

     (110,776     (323,372
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (971,775,853     (1,852,770,337
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     4,520,743,027        5,283,123,290   

Payment on shares redeemed*

     (3,551,573,443     (3,428,718,923
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     969,169,584        1,854,404,367   
  

 

 

   

 

 

 

Net increase (decrease) in cash

     (2,606,269     1,634,030   

Cash, beginning of period

     19,145,045        13,024,692   
  

 

 

   

 

 

 

Cash, end of period

     16,538,776      $ 14,658,722   
  

 

 

   

 

 

 

 

* Amount includes $6,600 of redemptions related to de-registration of certain Funds. Refer to Note 1.

 

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PROSHARES TRUST II

NOTES TO FINANCIAL STATEMENTS

September 30, 2012

(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”). As of September 30, 2012, the following twenty-one series of the Trust have commenced investment operations: (i) ProShares Ultra DJ-UBS Commodity, ProShares UltraShort DJ-UBS Commodity, ProShares Ultra DJ-UBS Crude Oil, ProShares UltraShort DJ-UBS Crude Oil, ProShares Ultra DJ-UBS Natural Gas, ProShares UltraShort DJ-UBS Natural Gas, ProShares Ultra Gold, ProShares UltraShort Gold, ProShares Ultra Silver, ProShares UltraShort Silver, ProShares Ultra Australian Dollar, ProShares UltraShort Australian Dollar, ProShares Ultra Euro, ProShares UltraShort Euro, ProShares Ultra Yen and ProShares UltraShort Yen (each, a “Leveraged Fund” and collectively, the “Leveraged Funds”); (ii) ProShares Short Euro (the “Short Euro Fund”); (iii) ProShares Ultra VIX Short-Term Futures ETF and ProShares Short VIX Short-Term Futures ETF (each, a “Geared VIX Fund” and collectively, the “Geared VIX Funds”); and (iv) ProShares VIX Short-Term Futures ETF and ProShares VIX Mid-Term Futures ETF (each, a “Matching VIX Fund” and collectively, the “Matching VIX Funds”). Each of the Funds listed above issues common units of beneficial interest (“Shares”), which represent units of fractional undivided beneficial interest in and ownership of only that Leveraged Fund, Short Euro Fund, Geared VIX Fund or Matching VIX Fund. The Shares of each Leveraged Fund, the Short Euro Fund, each Geared VIX Fund and each Matching VIX Fund are listed on the New York Stock Exchange Archipelago (“NYSE Arca”).

The Trust has also registered shares for thirty-two additional series: (i) ProShares Short DJ-UBS Natural Gas and ProShares Short Gold (each, a “Short Fund” and collectively, the “Short Funds”); (ii) 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 Geared VIX Fund” and collectively, the “New Geared VIX Funds”); (iii) ProShares Managed Futures Strategy, ProShares Commodity Managed Futures Strategy and ProShares Financial Managed Futures Strategy (each, a “Managed Futures Fund” and collectively, the “Managed Futures Funds”); (iv) ProShares UltraPro Australian Dollar, ProShares Short Australian Dollar, ProShares UltraPro Short Australian Dollar, ProShares UltraPro Canadian Dollar, ProShares Ultra Canadian Dollar, ProShares Short Canadian Dollar, ProShares UltraShort Canadian Dollar, ProShares UltraPro Short Canadian Dollar, ProShares UltraPro Euro, ProShares UltraPro Short Euro, ProShares UltraPro Swiss Franc, ProShares Ultra Swiss Franc, ProShares Short Swiss Franc, ProShares UltraShort Swiss Franc, ProShares UltraPro Short Swiss Franc, ProShares UltraPro Yen, ProShares Short Yen and ProShares UltraPro Short Yen (each, a “New Currency Fund” and collectively, the “New Currency Funds”); and (v) ProShares UltraPro U.S. Dollar, ProShares Ultra U.S. Dollar, ProShares Short U.S. Dollar, ProShares UltraShort U.S. Dollar and ProShares UltraPro Short U.S. Dollar (each, a “Currency Index Fund” and collectively, the “Currency Index Funds”). The Geared VIX Funds and the Matching VIX Funds are collectively referred to as the “VIX Funds” in these Notes to Financial Statements. The Leveraged Funds, the Short Euro Fund and the Geared VIX Funds, are collectively referred to as the “Geared Funds” in these Notes to Financial Statements.

On June 25, 2012, the registered offerings for ProShares UltraPro Australian Dollar, ProShares Short Australian Dollar, ProShares UltraPro Short Australian Dollar, ProShares UltraPro Canadian Dollar, ProShares Short Canadian Dollar, ProShares UltraPro Short Canadian Dollar, ProShares UltraPro Euro, ProShares UltraPro Short Euro, ProShares UltraPro Swiss Franc, ProShares Short Swiss Franc, ProShares UltraPro Short Swiss Franc, ProShares UltraPro Yen, ProShares UltraPro Short Yen and the Currency Index Funds, each of which had never been publicly offered, were terminated. On June 26, 2012, the registered offerings for the Short Funds and the New Geared VIX Funds, each of which had never been publicly offered, were terminated. On September 28, 2012, the registered offerings for ProShares Ultra Canadian Dollar, ProShares UltraShort Canadian Dollar, ProShares Ultra Swiss Franc, ProShares UltraShort Swiss Franc and ProShares Short Yen, each of which had never been publicly offered, were terminated. Thus, as of September 30, 2012, the only Funds that have remaining registered amounts are the Managed Futures Funds.

 

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As of September 30, 2012, each of the Managed Futures Funds had seed capital, but none of the Managed Futures 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 Managed Futures Funds.

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 at an aggregate purchase price of $350 in each of the following 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 Gold, ProShares UltraShort Gold, ProShares Ultra Silver, ProShares UltraShort Silver, ProShares Ultra Euro, ProShares UltraShort Euro, ProShares Ultra Yen and ProShares UltraShort Yen.

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. Two of the Funds, ProShares VIX Short-Term Futures ETF and ProShares VIX Mid-Term Futures ETF, commenced trading on the NYSE Arca on January 3, 2011. Two of the Funds, ProShares Ultra VIX Short-Term Futures ETF and ProShares Short VIX Short-Term Futures ETF, commenced trading on the NYSE Arca on October 3, 2011. Two of the Funds, ProShares Ultra DJ-UBS Natural Gas and ProShares UltraShort DJ-UBS Natural Gas, commenced trading on the NYSE Arca on October 4, 2011. One of the Funds, ProShares Short Euro, commenced trading on the NYSE Arca on June 26, 2012. Two of the Funds, ProShares Ultra Australian Dollar and ProShares UltraShort Australian Dollar, commenced trading on the NYSE Arca on July 17, 2012. As of September 30, 2012, the Managed Futures Funds had not yet commenced trading.

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. References to “Managed Futures Funds” refer to the different Funds according to which index the Fund intends to gain exposure.

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 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 in Financial Instruments (i.e., commodity-based, currency-based or equity market volatility-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 commodities, currencies, or equity market volatility products in order to gain exposure to the commodity index, currency benchmark, commodity, currency or to an equity market volatility index. Financial Instruments also are used to produce economically “leveraged” or “inverse” investment results for the Funds. Each Matching VIX Fund seeks daily investment results (before fees and expenses) that match the performance of a benchmark. Each Geared VIX Fund seeks daily investment results (before fees and expenses) that correspond to a multiple, the inverse or inverse multiple of the daily performance of a benchmark. Each VIX Fund intends to obtain exposure to its benchmark by investing primarily in futures contracts (“VIX futures contracts”) based on the Chicago Board Options Exchange (“CBOE”) Volatility Index (the “VIX”). The Managed Futures Funds will seek to provide investment results (before fees and expenses) that

 

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correspond to the performance of the S&P Dynamic Futures Index (the “DFI” or the “Index”), the S&P Dynamic Commodities Futures Index (the “DCFI”) or the S&P Dynamic Financial Futures Index (the “DFFI”) (each a “Sub-Index” and collectively, the “Sub-Indexes”). Each Managed Futures Fund intends to obtain exposure to the Index or to a Sub-Index, as applicable, by investing primarily in unleveraged positions in U.S. exchange-traded futures contracts on sixteen different tangible commodities (the “Commodity Futures Contracts”) or futures contracts on eight different financials, such as major currencies and U.S. Treasury securities (the “Financial Futures Contracts” and together with the Commodity Futures Contracts, the “Index Components”).

The Geared Funds do not seek to achieve their stated investment objective over a period of time greater than a single 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, -1 or -2x) of the period return of the corresponding benchmark and will likely differ significantly. The Matching VIX Funds and the Managed Futures 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, ProShares UltraShort DJ-UBS Crude Oil, ProShares Ultra DJ-UBS Natural Gas and ProShares UltraShort DJ-UBS Natural Gas each have a benchmark that is an index designed to track the performance of commodity futures contracts, as applicable. 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 Index

Effective as of January 2, 2012, the official name for the Dow Jones-UBS Crude Oil Sub-IndexSM (Ticker: DJUBSCL) changed to the Dow Jones-UBS WTI Crude Oil Sub-IndexSM. The ticker did not change as a result of the name change.

Share Splits and Reverse Share Splits

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 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.

Prior to the opening of trading on the NYSE Arca on October 13, 2011, ProShares Ultra Silver executed a 2-for-1 split of Shares and ProShares UltraShort Yen executed a 1-for-3 reverse split of Shares. The funds traded at their post-split prices on October 13, 2011. 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 March 8, 2012, ProShares Ultra VIX Short-Term Futures ETF executed a 1-for-6 reverse split of Shares. The fund traded at its post-split price on March 8, 2012. The ticker symbol for the fund did not change, and it continues to trade on the NYSE Arca.

Prior to the opening of trading on the NYSE Arca on May 11, 2012, ProShares UltraShort DJ-UBS Natural Gas executed a 3-for-1 split of Shares and ProShares Ultra DJ-UBS Natural Gas and ProShares UltraShort Silver executed a 1-for-5 reverse split of Shares. The funds traded at their post-split prices on May 11, 2012. 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 September 7, 2012, ProShares Ultra VIX Short-Term Futures ETF executed a 1-for-10 reverse split of Shares. The fund traded at its post-split price on September 7, 2012. The ticker symbol for the fund did not change, and it continues 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 ProShares UltraShort DJ-UBS Commodity, ProShares UltraShort DJ-UBS Crude Oil, ProShares UltraShort Silver, ProShares Ultra DJ-UBS Crude Oil, ProShares UltraShort Yen, ProShares Ultra VIX Short-Term Futures ETF and ProShares Ultra DJ-UBS Natural Gas, and resulted in a proportionate increase in the price per Share and per Share information of each such Fund. Therefore, the reverse splits did not change the aggregate net asset value of a shareholder’s investment at the time of the split.

 

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The splits were applied retroactively for all periods presented, increasing the number of Shares outstanding for ProShares Ultra Silver and ProShares UltraShort DJ-UBS Natural Gas, and resulted in a proportionate decrease in the price per Share and per Share information of each such Fund. Therefore, the 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 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 year ended December 31, 2011, as filed with the SEC on February 29, 2012.

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 Shares 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 September 30, 2012, and represents non-segregated cash with the custodian and does not include short-term investments.

Final Net Asset Value for Fiscal Period

The times of the calculation of the Leveraged Funds’, the Short Euro Fund’s, the Geared VIX Funds’ and the Matching VIX Funds’ final net asset value for creation and redemption of fund Shares for the three months ended September 30, 2012 were as follows. All times are Eastern Standard Time:

 

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     NAV Calculation Time      NAV Calculation Date  

Ultra Silver, UltraShort Silver

     7:00 A.M.         September 30   

Ultra Gold, UltraShort Gold

     10:00 A.M.         September 30   

Ultra DJ-UBS Commodity, UltraShort DJ-UBS Commodity

     2:30 P.M.         September 30   

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

     2:30 P.M.         September 30   

Ultra DJ-UBS Natural Gas, UltraShort DJ-UBS Natural Gas

     2:30 P.M.         September 30   

Ultra Australian Dollar, UltraShort Australian Dollar

     4:00 P.M.         September 30   

Ultra Euro, Short Euro, UltraShort Euro

     4:00 P.M.         September 30   

Ultra Yen, UltraShort Yen

     4:00 P.M.         September 30   

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

     4:15 P.M.         September 30   

Although the Leveraged Funds’, the Short Euro Fund, the Geared VIX Funds’ and the Matching 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 months ended September 30, 2012.

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, the Short Euro Fund, the Geared VIX Funds and the Matching VIX Funds value transactions based upon the final closing price in their primary markets. Accordingly, the investment valuations in these financial statements may differ from those used in the calculation of certain Leveraged Funds’, Short Euro Fund’s, Geared VIX Funds’ and Matching VIX Funds’ final creation/redemption NAV for the three months ended September 30, 2012.

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 I in the fair value hierarchy.

Derivatives (futures contracts, swap agreements, forward agreements and foreign currency forward contracts) 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, Silver, Australian Dollar and Short Euro 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, Silver, Australian Dollar and Short Euro Funds are valued at the last sales price prior to the time at which the NAV per Share of a Fund is determined. For financial reporting purposes, all futures contracts are valued at last settled price. Futures contracts valuations are typically categorized as Level I in the fair value hierarchy. Swap agreements, forward agreements and foreign currency forward contracts valuations are typically categorized as Level II 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 II or Level III in the fair value hierarchy.

Fair value pricing may require subjective determinations about the value of an investment. While the Leveraged Funds’, the Short Euro Fund’s, the Geared VIX Funds’ and the Matching VIX Funds’ policies are intended to result in a calculation of a Leveraged Fund’s, the Short Euro Fund’s, a Geared VIX Fund’s or a Matching VIX Fund’s NAV that fairly reflects investment values as of the time of pricing, a Leveraged Fund, the Short Euro Fund, a Geared VIX Fund or a Matching 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, the Short Euro Fund, a Geared VIX Fund or a Matching 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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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 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 September 30, 2012 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

   $ 7,901,820       $ —        $ —        $ —        $ 267,485      $ 8,169,305   

UltraShort DJ-UBS Commodity

     2,699,968         —          —          —          (113,533     2,586,435   

Ultra DJ-UBS Crude Oil

     366,172,164         (5,140,430     —          —          (13,480,730     347,551,004   

UltraShort DJ-UBS Crude Oil

     106,234,641         1,926,470        —          —          5,408,517        113,569,628   

Ultra DJ-UBS Natural Gas

     65,922,744         12,769,070        —          —          —          78,691,814   

UltraShort DJ-UBS Natural Gas

     9,991,158         (2,802,080     —          —          —          7,189,078   

Ultra Gold

     358,231,650         35,120        30,642,789        —          —          388,909,559   

UltraShort Gold

     101,837,917         (35,200     (9,095,142     —          —          92,707,575   

Ultra Silver

     900,594,881         64,920        90,241,197        —          —          990,900,998   

UltraShort Silver

     129,989,973         (65,020     (14,477,256     —          —          115,447,697   

Ultra Australian Dollar

     3,463,974         (1,930     —          —          —          3,462,044   

UltraShort Australian Dollar

     3,302,995         1,140        —          —          —          3,304,135   

Ultra Euro

     5,308,846         —          —          222,278        —          5,531,124   

Short Euro

     3,446,994         (13,619     —          —          —          3,433,375   

UltraShort Euro

     792,156,391         —          —          (35,174,220     —          756,982,171   

Ultra Yen

     5,080,206         —          —          46,377        —          5,126,583   

UltraShort Yen

     231,943,724         —          —          (2,643,851     —          229,299,873   

Ultra VIX Short-Term Futures ETF

     111,376,419         (18,772,742     —          —          (1,826,122     90,777,555   

VIX Short-Term Futures ETF

     121,719,579         (4,873,971     —          —          —          116,845,608   

Short VIX Short-Term Futures ETF

     35,053,223         529,617        —          —          —          35,582,840   

VIX Mid-Term Futures ETF

     75,764,033         (13,724,439     —          —          —          62,039,594   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Trust

   $ 3,438,193,300       $ (30,103,094   $ 97,311,588      $ (37,549,416   $ (9,744,383   $ 3,458,107,995   

 

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At September 30, 2012, there were no Level III portfolio investments for which significant unobservable inputs were used to determine fair value.

At September 30, 2012, there were no 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.

The following table summarizes the valuation of investments at December 31, 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

   $ 9,713,685       $ —        $ —        $ —        $ (707,177   $ 9,006,508   

UltraShort DJ-UBS Commodity

     8,534,690         —          —          —          570,751        9,105,441   

Ultra DJ-UBS Crude Oil

     246,919,569         (1,365,330     —          —          (10,007,396     235,546,843   

UltraShort DJ-UBS Crude Oil

     131,934,193         247,040        —          —          2,645,240        134,826,473   

Ultra DJ-UBS Natural Gas

     —           (825,510     —          —          —          (825,510

UltraShort DJ-UBS Natural Gas

     2,621,684         1,381,010        —          —          —          4,002,694   

Ultra Gold

     399,317,740         (41,660     (80,836,280     —          —          318,439,800   

UltraShort Gold

     164,673,175         41,800        33,401,358        —          —          198,116,333   

Ultra Silver

     771,925,669         (60,850     (179,326,773     —          —          592,538,046   

UltraShort Silver

     215,352,919         60,850        43,015,723        —          —          258,429,492   

Ultra Euro

     10,068,707         —          —          (518,212     —          9,550,495   

UltraShort Euro

     1,012,174,281         —          —          67,430,954        —          1,079,605,235   

Ultra Yen

     5,366,875         —          —          102,727        —          5,469,602   

UltraShort Yen

     219,404,292         —          —          (4,364,146     —          215,040,146   

Ultra VIX Short-Term Futures ETF

     —           (762,790     —          —          —          (762,790

VIX Short-Term Futures ETF

     27,357,824         (1,575,970     —          —          —          25,781,854   

Short VIX Short-Term Futures ETF

     —           90,180        —          —          —          90,180   

VIX Mid-Term Futures ETF

     89,392,389         (6,112,750     —          —          —          83,279,639   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Trust

   $ 3,314,757,692       $ (8,923,980   $ (183,745,972   $ 62,651,323      $ (7,498,582   $ 3,177,240,481   

At December 31, 2011, there were no Level III portfolio investments for which significant unobservable inputs were used to determine fair value.

At December 31, 2011, there were no 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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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 Fund pays or will pay 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 nine months ended September 30, 2012, the Sponsor paid and is currently paying brokerage commissions on VIX futures contracts for the Matching VIX Funds.

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 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, 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.

 

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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, or as a substitute for investing directly in (or shorting), an underlying index, currency 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 asset 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 Funds that enter into futures contracts maintain collateral at the broker in the form of cash. Pursuant to the futures contract, each Fund generally agrees to receive from or pay to the broker(s) 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 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 but some 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/indices, or to create an economic hedge against a position. Swap agreements are two-party contracts entered into primarily with major global financial institutions 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.

 

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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 an 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 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 counterparty. A Fund will enter into swap agreements only with major global 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 September 30, 2012 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, subject to certain minimum thresholds. 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 September 30, 2012, the collateral posted by counterparties consisted of cash and 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 an asset 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.

 

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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.

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, subject to minimum thresholds. 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 September 30, 2012, the collateral posted by counterparties consisted of cash and U.S. Treasury Securities.

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. In recent years, however, many OTC market participants in foreign exchange trading have begun to require that their counterparties post margin.

A Fund will enter into forward contracts only with major global 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 September 30, 2012

 

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
 

Commodity Contracts

   Receivables on open futures contracts, unrealized appreciation on swap and/or forward agreements    ProShares Ultra DJ-UBS Commodity    $ 267,485      Payable on open futures contracts, unrealized depreciation on swap and/or forward agreements    ProShares UltraShort DJ-UBS Commodity    $ 113,533   
      ProShares UltraShort DJ-UBS Crude Oil      7,334,987      ProShares UltraShort DJ-UBS Crude Oil      18,621,160
      ProShares Ultra DJ-UBS Natural Gas      12,769,070      ProShares UltraShort DJ-UBS Natural Gas      2,802,080
      ProShares Ultra Gold      30,677,909      ProShares UltraShort Gold      9,130,342
      ProShares UltraSilver      90,306,117      ProShares UltraShort Silver      14,542,276

Foreign Exchange Contracts

   Unrealized appreciation on foreign currency forward contracts    ProShares UltraShort      1,140   Unrealized depreciation on foreign currency forward contracts and payable on futures contracts    ProShares Ultra Australian Dollar      1,930
      Australian Dollar ProShares Ultra Euro      222,278         ProShares Short Euro      13,619
      ProShares Ultra Yen      48,264         ProShares UltraShort Euro      35,174,220   
              ProShares Ultra Yen      1,887   
              ProShares UltraShort Yen      2,643,851   

VIX Futures Contracts

   Receivables on open futures contracts    ProShares Short VIX Short-Term Futures ETF      529,617   Payable on open futures contracts and swap agreements    ProShares Ultra VIX Short-Term Futures ETF      20,598,864
              ProShares VIX Short-Term Futures ETF      4,873,971
              ProShares VIX Mid-Term Futures ETF      13,724,439
        

 

 

         

 

 

 
      Total Trust    $ 142,156,867      Total Trust    $ 122,242,172

 

* 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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Table of Contents

Fair Value of Derivative Instruments

as of December 31, 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
 

Commodity Contracts

   Receivables
on open
futures
contracts,
unrealized
appreciation
on swap
and/or
forward
agreements
   ProShares UltraShort DJ-
UBS Commodity
   $ 570,751      Payable on
open
futures
contracts,
unrealized
depreciation
on swap
and/or
forward
agreements
   ProShares Ultra DJ-UBS
Commodity
   $ 707,177   
      ProShares UltraShort DJ-
UBS Crude Oil
     3,145,557      ProShares Ultra DJ-UBS
Crude Oil
     11,372,726
      ProShares UltraShort DJ-
UBS Natural Gas
     1,381,010      ProShares UltraShort DJ-
UBS Crude Oil
     253,277   
      ProShares UltraShort Gold      33,443,158      ProShares Ultra DJ-UBS
Natural Gas
     825,510
      ProShares UltraShort Silver      45,078,871      ProShares Ultra Gold      80,877,940
              ProShares Ultra Silver      179,387,623
              ProShares UltraShort Silver      2,002,298   

Foreign Exchange Contracts

   Unrealized
appreciation
on foreign
currency
forward
contracts
   ProShares Ultra Euro      6,850      Unrealized
depreciation
on foreign
currency
forward
contracts
   ProShares Ultra Euro      525,062   
      ProShares UltraShort Euro      69,475,850         ProShares UltraShort Euro      2,044,896   
      ProShares Ultra Yen      103,610         ProShares Ultra Yen      883   
      ProShares UltraShort Yen      234,106         ProShares UltraShort Yen      4,598,252   

VIX Futures Contracts

   Receivables
on open
futures
contracts
   ProShares Ultra VIX Short-
Term Futures ETF
     141,600   Payable on
open
futures
contracts
   ProShares Ultra VIX Short-
Term Futures ETF
     904,390
      ProShares VIX Short-Term
Futures ETF
     295,500      ProShares VIX Short-Term
Futures ETF
     1,871,470
      ProShares Short VIX
Short-Term Futures ETF
     181,280      ProShares Short VIX
Short-Term Futures ETF
     91,100
      ProShares VIX Mid-Term
Futures ETF
     93,000      ProShares VIX Mid-Term
Futures ETF
     6,205,750
        

 

 

         

 

 

 
      Total Trust    $ 154,151,143      Total Trust    $ 291,668,354

 

* 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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Table of Contents

The Effect of Derivative Instruments on the Statements of Operations

For the three months ended September 30, 2012

 

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    $ 1,946,086      $ (418,834
      ProShares UltraShort DJ-UBS Commodity      (861,786     206,641   
      ProShares Ultra DJ-UBS Crude Oil      93,595,260        (32,720,374
      ProShares UltraShort DJ-UBS Crude Oil      (24,455,424     10,033,896   
      ProShares Ultra DJ-UBS Natural Gas      20,880,016        (5,822,190
      ProShares UltraShort DJ-UBS Natural Gas      (4,766,026     1,018,440   
      ProShares Ultra Gold      23,189,203        47,317,620   
      ProShares UltraShort Gold      (10,990,296     (13,890,127
      ProShares Ultra Silver      159,543,701        205,647,219   
      ProShares UltraShort Silver      (30,586,333     (36,561,134

Foreign Exchange Contracts

  

Net realized gain (loss) on foreign currency forward and futures contracts/changes in

unrealized appreciation/ depreciation on foreign

currency forward and futures contracts

   ProShares Ultra Australian Dollar      99,030        (1,930
      ProShares UltraShort Australian Dollar      (123,485     1,140   
      ProShares Ultra Euro      55,097        100,337   
      ProShares Short Euro      (102,555     36,694   
      ProShares UltraShort Euro      (14,572,815     (12,582,909
      ProShares Ultra Yen      90,137        146,755   
      ProShares UltraShort Yen      (4,756,665     (6,717,569

VIX Futures Contracts

   Net realized gain (loss) on futures contracts and swap agreements/ changes in unrealized appreciation/ depreciation on futures contracts and swap agreements    ProShares Ultra VIX Short-Term Futures ETF      (299,188,874     39,590,749   
      ProShares VIX Short-Term Futures ETF      (85,611,502     13,014,580   
      ProShares Short VIX Short-Term Futures ETF      10,269,196        (146,485
      ProShares VIX Mid-Term Futures ETF      (19,925,729     (7,586,879
        

 

 

   

 

 

 
      Total Trust    $ (186,273,764   $ 200,665,640   

 

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Table of Contents

The Effect of Derivative Instruments on the Statements of Operations

For the three months ended September 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    $ (1,050,671   $ (2,076,464
      ProShares UltraShort DJ- UBS Commodity      2,148,146        (1,247,546
      ProShares Ultra DJ-UBS Crude Oil      (87,767,586     (45,541,247
      ProShares UltraShort DJ- UBS Crude Oil      40,872,529        2,328,855   
      ProShares Ultra Gold      4,794,133        23,329,743   
      ProShares UltraShort Gold      7,280,916        (12,226,030
      ProShares Ultra Silver      (350,318,152     84,493,247   
      ProShares UltraShort Silver      184,558,931        (217,209,973

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      (3,200     (1,321,372
          
      ProShares UltraShort Euro      (11,049,379     122,372,805   
      ProShares Ultra Yen      496,377        (71,257
          
      ProShares UltraShort Yen      (34,105,768     4,607,971   

VIX Futures Contracts

  

Net realized gain (loss)

on futures contracts/

changes in unrealized

appreciation/ depreciation

on futures contracts

   ProShares VIX Short- Term Futures ETF      24,351,300        7,994,010   
      ProShares VIX Mid-Term Futures ETF      2,364,290        2,244,750   
          
        

 

 

   

 

 

 
      Total Trust    $ (217,428,134   $ (32,322,508

 

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Table of Contents

The Effect of Derivative Instruments on the Statements of Operations

For the nine months ended September 30, 2012

 

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    $ (234,500   $ 974,662   
      ProShares UltraShort DJ-UBS Commodity      653,141        (684,284
      ProShares Ultra DJ-UBS Crude Oil      (3,020,461     (7,248,434
      ProShares UltraShort DJ-UBS Crude Oil      26,044,945        4,442,707   
      ProShares Ultra DJ-UBS Natural Gas      (5,782,759     13,594,580   
      ProShares UltraShort DJ-UBS Natural Gas      1,537,148        (4,183,090
      ProShares Ultra Gold      (27,072,137     111,555,849   
      ProShares UltraShort Gold      (9,278,044     (42,573,500
      ProShares Ultra Silver      (51,743,422     269,693,740   
      ProShares UltraShort Silver      (27,207,872     (57,618,849

Foreign Exchange Contracts

  

Net realized gain (loss) on foreign currency forward and futures contracts/changes in

unrealized appreciation/ depreciation on foreign

currency forward and futures contracts

   ProShares Ultra Australian Dollar      99,030        (1,930
      ProShares UltraShort Australian Dollar      (123,485     1,140   
      ProShares Ultra Euro      (811,701     740,490   
      ProShares Short Euro      (104,555     (13,619
      ProShares UltraShort Euro      106,381,285        (102,605,174
      ProShares Ultra Yen      (131,047     (56,350
      ProShares UltraShort Yen      5,696,143        1,720,295   

VIX Futures Contracts

   Net realized gain (loss) on futures contracts and swap agreements/ changes in unrealized appreciation/ depreciation on futures contracts and swap agreements    ProShares Ultra VIX Short-Term Futures ETF      (477,920,473     (19,836,074
      ProShares VIX Short-Term Futures ETF      (137,705,726     (3,298,001
      ProShares Short VIX Short-Term Futures ETF      14,345,508        439,437   
      ProShares VIX Mid-Term Futures ETF      (45,669,199     (7,611,689
        

 

 

   

 

 

 
      Total Trust    $ (632,048,181   $ 157,431,906   

 

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Table of Contents

The Effect of Derivative Instruments on the Statements of Operations

For the nine months ended September 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    $ 939,496      $ (5,645,596
      ProShares UltraShort DJ-UBS Commodity      (3,367,856     1,169,138   
      ProShares Ultra DJ-UBS Crude Oil      (13,429,691     (74,844,314
      ProShares UltraShort DJ- UBS Crude Oil      58,466,405        18,012,175   
      ProShares Ultra Gold      55,426,905        (597,863
      ProShares UltraShort Gold      (16,108,408     (4,452,289
      ProShares Ultra Silver      (283,305,731     4,507,721   
      ProShares UltraShort Silver      132,214,550        (190,209,023

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      1,603,888        (1,560,539
      ProShares UltraShort Euro      (112,483,351     132,997,720   
      ProShares Ultra Yen      722,557        (336,623
      ProShares UltraShort Yen      (55,833,787     18,318,673   

VIX Futures Contracts

  

Net realized gain (loss)

on futures contracts/

changes in unrealized

appreciation/ depreciation

on futures contracts

   ProShares VIX Short- Term Futures ETF      11,557,660        3,541,350   
      ProShares VIX Mid-Term Futures ETF      503,490        1,830,600   
        

 

 

   

 

 

 
      Total Trust    $ (223,093,873   $ (97,268,870

 

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NOTE 4—AGREEMENTS

Management Fee

Each Leveraged Fund, the Short Euro Fund and each Geared VIX 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’, the Short Euro Fund’s and the VIX Funds’ operations, the Sponsor did not charge its fee in an amount equal to the organization and offering costs. The Sponsor reimbursed or will reimburse each Leveraged Fund, the Short Euro Fund and each Geared VIX Fund, if applicable, to the extent that its offering costs exceeded or exceed 0.95% of its average daily NAV of each Fund for the first year of operations. Each Matching 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 Fund in an amount equal to the offering costs. The Sponsor has agreed to reimburse each 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 Funds. From the Management Fee, the Sponsor pays or will pay the fees and expenses of the Administrator, Custodian, Distributor, ProFunds Distributors, Inc. (“PDI”), an affiliated broker-dealer of the Sponsor, Transfer Agent and any index licensors for the Funds, 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 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, Financial Industry Regulatory Authority (“FINRA”) filing fees, individual K-1 preparation and mailing fees not exceeding 0.10% per annum of the net assets of a Fund, and report preparation and mailing expenses. For the nine months ended September 30, 2012, the Sponsor paid and is currently paying brokerage commissions on VIX futures contracts for the Matching VIX Funds. Each Fund incurs and pays, and each Managed Futures 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 the 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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Table of Contents

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, PDI, Transfer Agent, fees payable to index providers, 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 Schedule 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 Fund pays or will pay all non-recurring and unusual fees and expenses, if any, as determined by the Sponsor. Non-recurring and unusual 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 and will not charge its Management Fee in the first year of operations of each Leveraged Fund, the Short Euro Fund, each Geared VIX Fund or each Matching VIX Fund in an amount equal to the organization and offering costs. The Sponsor reimbursed or will reimburse each Fund to the extent that its organization and offering costs exceeded 0.95% of each Leveraged Fund’s, the Short Euro Fund’s or each Geared VIX Fund’s and 0.85% of each Matching VIX Fund’s average daily NAV for the first year of operations.

The Sponsor will not charge its Management Fee in the first year of operations of each Fund in an amount equal to the offering costs. The Sponsor has agreed to reimburse each Managed Futures Fund to the extent that its offering costs exceed 0.95% of its average daily NAV for the first year of operations. At September 30, 2012, amounts payable for offering costs are reflected in the Statement of Financial Condition for each Managed Futures Fund.

NOTE 6—CREATION AND REDEMPTION OF CREATION UNITS

Each Fund issues and redeems or will issue and redeem Shares from time to time, but only in one or more Creation Units. A Creation Unit is or will be a block of 50,000 Shares of a Geared Fund or a Managed Futures Fund and 25,000 Shares of a Matching VIX Fund. Creation Units may be created or redeemed only by Authorized Participants. As a result of the share splits and 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.

 

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Table of Contents

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 the Custodian; and (2) if permitted by the Sponsor in its sole discretion, enter into or arrange for an exchange of futures contract for related position or block trade whereby the Authorized Participant would also transfer to such Fund a number and type of exchange-traded futures contracts at or near the closing settlement price for such contracts on the purchase order date.

Authorized Participants may pay a fixed transaction fee of up to $500 in connection with each order to create or redeem a Creation Unit in order to compensate BBH&Co., as the Administrator, the Custodian and the Transfer Agent of each Fund and its Shares, for services in processing the creation and redemption of Creation Units. Authorized Participants also may pay a variable transaction fee to the Fund of up to 0.10% of the value of the Creation Unit that is purchased or redeemed unless the transaction fee is waived or otherwise adjusted by the Sponsor. The Sponsor provides such Authorized Participant with prompt notice in advance of any such waiver or adjustment of the transaction fee. Authorized Participants may sell the Shares included in the Creation Units they purchase from the Funds to other investors in the secondary market.

Transaction fees for the three and nine months ended September 30, 2012, which 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
September 30, 2012
     Nine Months  Ended
September 30, 2012
 

Ultra DJ-UBS Commodity

   $ 295       $ 295   

UltraShort DJ-UBS Commodity

     —           1,344   

Ultra DJ-UBS Crude Oil

     84,368         229,965   

UltraShort DJ-UBS Crude Oil

     19,230         102,424   

Ultra DJ-UBS Natural Gas

     6,620         13,915   

UltraShort DJ-UBS Natural Gas

     368         5,083   

Ultra Gold

     6,841         26,057   

UltraShort Gold

     2,506         11,705   

Ultra Silver

     32,115         122,357   

UltraShort Silver

     24,006         130,934   

Ultra Australian Dollar

     —           —     

UltraShort Australian Dollar

     —           —     

Ultra Euro

     —           —     

Short Euro

     —           —     

UltraShort Euro

     —           —     

Ultra Yen

     —           —     

UltraShort Yen

     —           —     

Ultra VIX Short-Term Futures

     120,326         441,291   

VIX Short-Term Futures

     —           —     

Short VIX Short-Term Futures

     56,513         101,662   

VIX Mid-Term Futures

     —           —     
  

 

 

    

 

 

 

Total Trust

   $  353,188       $  1,187,032   

 

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Table of Contents

NOTE 7—FINANCIAL HIGHLIGHTS

Selected data for a Share outstanding throughout the three months ended September 30, 2012:

Ultra ProShares

For the Three Months Ended September 30, 2012 (unaudited)

 

Per Share Operating Performance

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

Net asset value, at June 30, 2012

   $ 23.5183      $ 27.7130      $  45.6921      $ 79.7618      $ 37.0313      $ 22.6354      $ 33.4920   

Net investment income (loss)

     (0.0587     (0.0715     (0.1223     (0.1868     (0.0973     (0.0488     (0.0757

Net realized and unrealized gain (loss)

     4.5424        3.6700        5.5731        17.5971        21.8640        0.6220        1.5795   

Change in net asset value from operations

     4.4837        3.5985        5.4508        17.4103        21.7667        0.5732        1.5038   

Net asset value, at September 30, 2012

   $ 28.0020      $ 31.3115      $  51.1429      $ 97.1721      $ 58.7980      $ 23.2086      $ 34.9958   

Market value per Share, at June 30, 2012†

   $ 23.66      $ 27.54      $ 45.75      $ 79.74      $ 38.13      $ 22.62      $ 33.39   

Market value per Share, at September 30, 2012†

   $ 27.71      $ 31.21      $ 51.09      $ 96.92      $ 58.35      $ 23.18      $ 35.28   

Total Return, at net asset value^

     19.1     13.0     11.9     21.8     58.8     2.5     4.5

Total Return, at market value^

     17.1     13.3     11.7     21.5     53.0     2.5     5.7

Ratios to Average Net Assets**

              

Expense ratio

     (0.95 )%      (0.97 )%      (1.14 )%      (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 )%      (0.95 )% 

Net investment income (loss)

     (0.88 )%      (0.90 )%      (1.08 )%      (0.88 )%      (0.88 )%      (0.88 )%      (0.87 )% 

 

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 September 30, 2012.
** Percentages are annualized.

 

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Table of Contents

UltraShort ProShares

For the Three Months Ended September 30, 2012 (unaudited)

 

Per Share Operating Performance

   UltraShort
DJ-UBS
Commodity
    UltraShort
DJ-UBS
Crude Oil
    UltraShort
DJ-UBS
Natural Gas
    UltraShort
Gold^^^
    UltraShort
Silver
    UltraShort
Euro
    UltraShort
Yen
 

Net asset value, at June 30, 2012

   $ 59.0619      $ 49.2304      $  30.3173      $ 70.9895      $ 69.9250      $ 20.9071      $ 43.5348   

Net investment income (loss)

     (0.1137     (0.0935     (0.0843     (0.1462     (0.1252     (0.0470     (0.0927

Net realized and unrealized gain (loss)

     (10.9209     (8.5379     (8.0959     (14.5206     (29.9239     (0.7332     (2.1433

Change in net asset value from operations

     (11.0346     (8.6314     (8.1802     (14.6668     (30.0491     (0.7802     (2.2360

Net asset value, at September 30, 2012

   $ 48.0273      $ 40.5990      $ 22.1371      $ 56.3227      $ 39.8759      $ 20.1269      $ 41.2988   

Market value per Share, at June 30, 2012†

   $ 58.64      $ 49.42      $ 30.13      $ 70.92      $ 67.82      $ 20.90      $ 43.51   

Market value per Share, at

              

September 30, 2012†

   $ 48.25      $ 40.72      $ 22.14      $ 56.48      $ 40.14      $ 20.12      $ 41.33   

Total Return, at net asset value^

     (18.7 )%      (17.5 )%      (27.0 )%      (20.7 )%      (43.0 )%      (3.7 )%      (5.1 )% 

Total Return, at market value^

     (17.7 )%      (17.6 )%      (26.5 )%      (20.4 )%      (40.8 )%      (3.7 )%      (5.0 )% 

Ratios to Average Net Assets**

              

Expense ratio

     (0.95 )%      (0.98 )%      (1.27 )%      (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 )%      (0.95 )% 

Net investment income (loss)

     (0.88 )%      (0.91 )%      (1.22 )%      (0.88 )%      (0.87 )%      (0.88 )%      (0.88 )% 

 

^^^ See Note 10 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 September 30, 2012.
** Percentages are annualized.

 

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Table of Contents

New Currency and VIX ProShares

For the Three Months Ended September 30, 2012 (unaudited)

 

Per Share Operating Performance

   Ultra
Australian
Dollar+
    UltraShort
Australian
Dollar+
    Short Euro     Ultra VIX
Short-Term
Futures
ETF^^
    VIX Short-
Term
Futures

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

Net asset value, at June 30, 2012

   $ 40.0000      $  40.0000      $  39.4721      $ 96.2105      $  32.0088      $  45.2817      $ 55.0359   

Net investment income (loss)

     (0.0806     (0.0764     (0.0901     (0.2198     (0.0484     (0.2889     (0.0974

Net realized and unrealized gain (loss)

     0.9723        (1.2223     (0.6584     (65.6004     (12.9571     23.0577        (13.4312

Change in net asset value from operations

     0.8917        (1.2987     (0.7485     (65.8202     (13.0055     22.7688        (13.5286

Net asset value, at September 30, 2012

   $ 40.8917      $ 38.7013      $ 38.7236      $ 30.3903      $ 19.0033      $ 68.0505      $ 41.5073   

Market value per Share, at June 30, 2012†

   $ 40.00      $ 40.00      $ 39.49      $ 98.40      $ 32.32      $ 44.92      $ 55.08   

Market value per Share, at September 30, 2012†

   $ 40.90      $ 38.62      $ 38.64      $ 30.92      $ 19.22      $ 67.37      $ 41.66   

Total Return, at net asset value^

     2.2     (3.2 )%      (1.9 )%      (68.4 )%      (40.6 )%      50.3     (24.6 )% 

Total Return, at market value^

     2.3     (3.5 )%      (2.2 )%      (68.6 )%      (40.5 )%      50.0     (24.4 )% 

Ratios to Average Net Assets**

              

Expense ratio

     (1.02 )%      (1.03 )%      (0.96 )%      (1.67 )%      (0.85 )%      (2.16 )%      (0.85 )% 

Expense ratio, excluding brokerage commissions

     (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.85 )%      (0.95 )%      (0.85 )% 

Net investment income (loss)

     (0.94 )%      (0.95 )%      (0.90 )%      (1.64 )%      (0.79 )%      (2.08 )%      (0.80 )% 

 

+ From commencement of operations, July 17, 2012, through September 30, 2012.
^^ See Note 1 of these Notes to Financial Statements.
^^^ See Note 10 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 September 30, 2012.
** Percentages are annualized.

 

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Table of Contents

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

Ultra ProShares

For the Three Months Ended September 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 June 30, 2011

   $ 33.3896      $ 42.6433      $ 77.4697      $ 83.9930      $ 30.2028      $ 33.7648   

Net investment income (loss)

     (0.0789     (0.0855     (0.2324     (0.2338     (0.0672     (0.0852

Net realized and unrealized gain (loss)

     (7.2872     (15.2523     9.7415        (29.0350     (4.4170     2.8878   

Change in net asset value from operations

     (7.3661     (15.3378     9.5091        (29.2688     (4.4842     2.8026   

Net asset value, at September 30, 2011

   $ 26.0235      $ 27.3055      $ 86.9788      $ 54.7242      $ 25.7186      $ 36.5674   

Market value per Share, at June 30, 2011†

   $ 33.38      $ 42.18      $ 76.78      $ 82.47      $ 30.16      $ 33.78   

Market value per Share, at September 30, 2011†

   $ 25.67      $ 27.09      $ 87.34      $ 51.84      $ 25.75      $ 36.60   

Total Return, at net asset value^

     (22.1 )%      (36.0 )%      12.3     (34.8 )%      (14.8 )%      8.3

Total Return, at market value^

     (23.1 )%      (35.8 )%      13.8     (37.1 )%      (14.6 )%      8.3

Ratios to Average Net Assets**

            

Expense ratio

     (0.95 )%      (0.97 )%      (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 )%      (0.95 )%      (0.93 )%      (0.93 )%      (0.93 )%      (0.93 )% 

 

^^ 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 September 30, 2011.
** Percentages are annualized.

 

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Table of Contents

UltraShort ProShares

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

 

     UltraShort     UltraShort                          
     DJ-UBS     DJ-UBS     UltraShort     UltraShort     UltraShort     UltraShort  

Per Share Operating Performance

   Commodity     Crude Oil     Gold^^^     Silver^^     Euro     Yen^^  

Net asset value, at June 30, 2011

   $ 48.3540      $ 48.2805      $ 95.7674      $ 93.3691      $ 16.7504      $ 45.4035   

Net investment income (loss)

     (0.1099     (0.1226     (0.1659     (0.1613     (0.0410     (0.0979

Net realized and unrealized gain (loss)

     10.6999        16.4505        (18.5273     (11.6350     2.5692        (3.9694

Change in net asset value from operations

     10.5900        16.3279        (18.6932     (11.7963     2.5282        (4.0673

Net asset value, at September 30, 2011

   $ 58.9440      $ 64.6084      $ 77.0742      $ 81.5728      $ 19.2786      $ 41.3362   

Market value per Share, at June 30, 2011†

   $ 48.67      $ 48.80      $ 96.56      $ 94.95      $ 16.76      $ 45.39   

Market value per Share, at September 30, 2011†

   $ 59.30      $ 65.25      $ 76.68      $ 85.55      $ 19.28      $ 41.34   

Total Return, at net asset value^

     21.9     33.8     (19.5 )%      (12.6 )%      15.1     (9.0 )% 

Total Return, at market value^

     21.8     33.7     (20.6 )%      (9.9 )%      15.0     (8.9 )% 

Ratios to Average Net Assets**

            

Expense ratio

     (0.95 )%      (0.98 )%      (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)

     (0.93 )%      (0.96 )%      (0.93 )%      (0.92 )%      (0.93 )%      (0.92 )% 

 

^^ See Note 1 of these Notes to Financial Statements.
^^^ See Note 10 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 September 30, 2011.
** Percentages are annualized.

 

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Table of Contents

VIX ProShares

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

 

Per Share Operating Performance

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

Net asset value, at June 30, 2011

   $ 45.4655      $ 61.7574   

Net investment income (loss)

     (0.1298     (0.1479

Net realized and unrealized gain (loss)

     70.2529        27.9623   

Change in net asset value from operations

     70.1231        27.8144   

Net asset value, at September 30, 2011

   $ 115.5886      $ 89.5718   

Market value per Share, at June 30, 2011†

   $ 45.68      $ 61.78   

Market value per Share, at September 30, 2011†

   $ 114.52      $ 89.46   

Total Return, at net asset value^

     154.2     45.0

Total Return, at market value^

     150.7     44.8

Ratios to Average Net Assets**

    

Expense ratio

     (0.85 )%      (0.85 )% 

Expense ratio, excluding brokerage commissions

     (0.85 )%      (0.85 )% 

Net investment income (loss)

     (0.83 )%      (0.83 )% 

 

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 September 30, 2011.
** Percentages are annualized.

 

-139-


Table of Contents

Selected data for a Share outstanding throughout the nine months ended September 30, 2012:

Ultra ProShares

For the Nine Months Ended September 30, 2012 (unaudited)

 

Per Share Operating Performance

   Ultra DJ-
UBS
Commodity
    Ultra DJ-
UBS
Crude Oil
    Ultra DJ-
UBS
Natural
Gas^^
    Ultra Gold     Ultra
Silver
    Ultra Euro     Ultra Yen  

Net asset value, at December 31, 2011

   $ 25.8805      $ 40.8828      $ 101.9786      $ 75.9066      $ 43.1903      $ 23.8860      $ 36.4704   

Net investment income (loss)

     (0.1730     (0.2383     (0.3818     (0.5744     (0.3212     (0.1590     (0.2275

Net realized and unrealized gain (loss)#

     2.2945        (9.3330     (50.4539     21.8399        15.9289        (0.5184     (1.2471

Change in net asset value from operations

     2.1215        (9.5713     (50.8357     21.2655        15.6077        (0.6774     (1.4746

Net asset value, at September 30, 2012

   $ 28.0020      $ 31.3115      $ 51.1429      $ 97.1721      $ 58.7980      $ 23.2086      $ 34.9958   

Market value per Share, at December 31, 2011†

   $ 25.64      $ 40.94      $ 101.35      $ 79.01      $ 41.65      $ 23.87      $ 36.50   

Market value per Share, at September 30, 2012†

   $ 27.71      $ 31.21      $ 51.09      $ 96.92      $ 58.35      $ 23.18      $ 35.28   

Total Return, at net asset value^

     8.2     (23.4 )%      (49.8 )%      28.0     36.1     (2.8 )%      (4.0 )% 

Total Return, at market value^

     8.1     (23.8 )%      (49.6 )%      22.7     40.1     (2.9 )%      (3.3 )% 

Ratios to Average Net Assets**

              

Expense ratio

     (0.95 )%      (0.97 )%      (1.22 )%      (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 )%      (0.95 )% 

Net investment income (loss)

     (0.90 )%      (0.92 )%      (1.16 )%      (0.89 )%      (0.90 )%      (0.90 )%      (0.89 )% 

 

^^ 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 September 30, 2012.
** Percentages are annualized.

 

-140-


Table of Contents

UltraShort ProShares

For the Nine Months Ended September 30, 2012 (unaudited)

 

                 UltraShort                          
     UltraShort     UltraShort     DJ-UBS                          
     DJ-UBS     DJ-UBS     Natural     UltraShort     UltraShort     UltraShort     UltraShort  

Per Share Operating Performance

   Commodity     Crude Oil     Gas^^     Gold^^^     Silver^^     Euro     Yen  

Net asset value, at December 31, 2011

   $ 56.9207      $ 38.8151      $ 23.8053      $ 82.7114      $ 76.6771      $ 20.3357      $ 40.9557   

Net investment income (loss)

     (0.3723     (0.2633     (0.3525     (0.4577     (0.3822     (0.1373     (0.2877

Net realized and unrealized gain (loss)#

     (8.5211     2.0472        (1.3157     (25.9310     (36.4190     (0.0715     0.6308   

Change in net asset value from operations

     (8.8934     1.7839        (1.6682     (26.3887     (36.8012     (0.2088     0.3431   

Net asset value, at September 30, 2012

   $ 48.0273      $ 40.5990      $ 22.1371      $ 56.3227      $ 39.8759      $ 20.1269      $ 41.2988   

Market value per Share, at December 31, 2011†

   $ 56.19      $ 38.69      $ 23.96      $ 79.24      $ 79.35      $ 20.35      $ 40.95   

Market value per Share, at September 30, 2012†

   $ 48.25      $ 40.72      $ 22.14      $ 56.48      $ 40.14      $ 20.12      $ 41.33   

Total Return, at net asset value^

     (15.6 )%      4.6     (7.0 )%      (31.9 )%      (48.0 )%      (1.0 )%      0.8

Total Return, at market value^

     (14.1 )%      5.2     (7.6 )%      (28.7 )%      (49.4 )%      (1.1 )%      0.9

Ratios to Average Net Assets**

              

Expense ratio

     (0.95 )%      (0.98 )%      (1.43 )%      (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 )%      (0.95 )% 

Net investment income (loss)

     (0.90 )%      (0.92 )%      (1.39 )%      (0.90 )%      (0.90 )%      (0.90 )%      (0.89 )% 

 

^^ See Note 1 of these Notes to Financial Statements.
^^^ See Note 10 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 September 30, 2012.
** Percentages are annualized.

 

-141-


Table of Contents

New Currency and VIX ProShares

For the Nine Months Ended September 30, 2012 (unaudited)

 

Per Share Operating Performance

   Ultra
Australian
Dollar+
    UltraShort
Australian
Dollar+
    Short Euro++     Ultra VIX
Short- Term
Futures
ETF^^
    VIX Short-
Term
Futures
ETF
    Short VIX
Short-
Term
Futures
ETF^^^
    VIX Mid-
Term
Futures
ETF
 

Net asset value, at December 31, 2011

   $  40.0000      $ 40.0000      $  40.0000      $ 741.0464      $ 76.3738      $ 25.8664      $ 74.1396   

Net investment income (loss)

     (0.0806     (0.0764     (0.0959     (1.0755     (0.1942     (0.6056     (0.3463

Net realized and unrealized gain (loss)

     0.9723        (1.2223     (1.1805     (709.5806     (57.1763     42.7897        (32.2860

Change in net asset value from operations

     0.8917        (1.2987     (1.2764     (710.6561     (57.3705     42.1841        (32.6323

Net asset value, at September 30, 2012

   $ 40.8917      $  38.7013      $ 38.7236      $ 30.3903      $ 19.0033      $ 68.0505      $ 41.5073   

Market value per Share, at December 31, 2011†

   $ 40.00      $ 40.00      $ 40.00      $ 729.60      $ 75.74      $ 26.14      $ 74.13   

Market value per Share, at September 30, 2012†

   $ 40.90      $ 38.62      $ 38.64      $ 30.92      $ 19.22      $ 67.37      $ 41.66   

Total Return, at net asset value^

     2.2     (3.2 )%      (3.2 )%      (95.9 )%      (75.1 )%      163.1        (44.0 )% 

Total Return, at market value^

     2.3     (3.5 )%      (3.4 )%      (95.8 )%      (74.6 )%      157.7     (43.8 )% 

Ratios to Average Net Assets**

              

Expense ratio

     (1.02 )%      (1.03 )%      (0.97 )%      (1.74 )%      (0.85 )%      (1.88 )%      (0.85 )% 

Expense ratio, excluding brokerage commissions

     (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.85 )%      (0.95 )%      (0.85 )% 

Net investment income (loss)

     (0.94 )%      (0.95 )%      (0.91 )%      (1.71 )%      (0.80 )%      (1.82 )%      (0.81 )% 

 

+ From commencement of operations, July 17, 2012, through September 30, 2012.
++ From commencement of operations, June 26, 2012, through September 30, 2012.
^^ See Note 1 of these Notes to Financial Statements.
^^^ See Note 10 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 September 30, 2012.
** Percentages are annualized.

 

-142-


Table of Contents

Selected data for a Share outstanding throughout the nine months ended September 30, 2011:

Ultra ProShares

For the Nine Months Ended September 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      $ 78.1431      $ 25.7644      $ 33.4918   

Net investment income (loss)

     (0.2362     (0.2929     (0.5475     (0.6596     (0.1879     (0.2285

Net realized and unrealized gain (loss)

     (10.1126     (22.4033     18.3100        (22.7593     0.1421        3.3041   

Change in net asset value from operations

     (10.3488     (22.6962     17.7625        (23.4189     (0.0458     3.0756   

Net asset value, at September 30, 2011

   $ 26.0235      $ 27.3055      $ 86.9788      $ 54.7242      $ 25.7186      $ 36.5674   

Market value per Share, at December 31, 2010†

   $ 36.27      $ 49.98      $ 70.72      $ 79.30      $ 25.86      $ 33.29   

Market value per Share, at September 30, 2011†

   $ 25.67      $ 27.09      $ 87.34      $ 51.84      $ 25.75      $ 36.60   

Total Return, at net asset value^

     (28.5 )%      (45.4 )%      25.7     (30.0 )%      (0.2 )%      9.2

Total Return, at market value^

     (29.2 )%      (45.8 )%      23.5     (34.6 )%      (0.4 )%      9.9

Ratios to Average Net Assets**

            

Expense ratio

     (0.95 )%      (0.98 )%      (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 )%      (0.92 )%      (0.89 )%      (0.89 )%      (0.88 )%      (0.89 )% 

 

^^ 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 September 30, 2011.
** Percentages are annualized.

 

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UltraShort ProShares

For the Nine Months Ended September 30, 2011 (unaudited)

 

     UltraShort     UltraShort                          
     DJ-UBS     DJ-UBS     UltraShort     UltraShort     UltraShort     UltraShort  

Per Share Operating Performance

   Commodity^^     Crude Oil^^     Gold^^^     Silver^^     Euro     Yen^^  

Net asset value, at December 31, 2010

   $ 47.9976      $ 50.8516      $ 113.4823      $ 199.4634      $ 20.2928      $ 47.0232   

Net investment income (loss)

     (0.3164     (0.3197     (0.5841     (0.5663     (0.1185     (0.2982

Net realized and unrealized
gain (loss)#

     11.2628        14.0765        (35.8240     (117.3243     (0.8957     (5.3888

Change in net asset value from operations

     10.9464        13.7568        (36.4081     (117.8906     (1.0142     (5.6870

Net asset value, at September 30, 2011

   $ 58.9440      $ 64.6084      $ 77.0742      $ 81.5728      $ 19.2786      $ 41.3362   

Market value per Share, at December 31, 2010†

   $ 48.30      $ 50.85      $ 111.20      $ 196.40      $ 20.31      $ 47.01   

Market value per Share, at September 30, 2011†

   $ 59.30      $ 65.25      $ 76.68      $ 85.55      $ 19.28      $ 41.34   

Total Return, at net asset value^

     22.8     27.1     (32.1 )%      (59.1 )%      (5.0 )%      (12.1 )% 

Total Return, at market value^

     22.8     28.3     (31.0 )%      (56.4 )%      (5.1 )%      (12.1 )% 

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

 

^^ See Note 1 of these Notes to Financial Statements.
^^^ See Note 10 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 September 30, 2011.
** Percentages are annualized.

 

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VIX ProShares

For the Nine Months Ended September 30, 2011 (unaudited)

 

     VIX Short-     VIX Mid-  
     Term     Term  

Per Share Operating Performance

   Futures ETF     Futures ETF  

Net asset value, at December 31, 2010

   $ 80.0000      $ 80.0000   

Net investment income (loss)

     (0.3405     (0.4058

Net realized and unrealized gain (loss)

     35.9291        9.9776   

Change in net asset value from operations

     35.5886        9.5718   

Net asset value, at September 30, 2011

   $ 115.5886      $ 89.5718   

Market value per Share, at December 31, 2010†

   $ 80.00      $ 80.00   

Market value per Share, at September 30, 2011†

   $ 114.52      $ 89.46   

Total Return, at net asset value^

     44.5     12.0

Total Return, at market value^

     43.2     11.8

Ratios to Average Net Assets**

    

Expense ratio

     (0.85 )%      (0.85 )% 

Expense ratio, excluding brokerage commissions

     (0.85 )%      (0.85 )% 

Net investment income (loss)

     (0.80 )%      (0.80 )% 

 

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 September 30, 2011.
** 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 (as measured from NAV calculation time to NAV calculation time), and not for any other period. The return of a Geared Fund for a period longer than a day is the result of its return for each day compounded over the period and usually will differ from the multiple (2x), the inverse (-1x) or the inverse multiple (-2x) of the return of the Geared Fund’s benchmark for the period. A Fund will lose money if its index performance is flat over time, and it is possible for a Geared Fund to lose money over time even if the performance of its index increases (or decreases in the case of UltraShort or Short Funds), as a result of daily rebalancing, the benchmark’s volatility and compounding. Longer holding periods, higher index volatility and greater leverage each affect the impact of compounding on a Fund’s returns. Daily compounding of a Geared Fund’s investment returns can dramatically and adversely affect its longer-term performance during periods of high volatility. Volatility may be at least as important to a Geared Fund’s return for a period as the return of the Fund’s underlying index. The Matching VIX Funds and Managed Futures Funds seek to achieve their stated investment objective both over a single day and over time.

Each Ultra or UltraShort Fund uses leverage and should produce daily returns that are more volatile than that of its benchmark. For example, the daily return of an Ultra Fund with a 2x multiple should be approximately twice as volatile on a daily basis as is the return of a fund with an objective of matching the same benchmark. The daily return of an UltraShort Fund with a -2x multiple is designed to return twice the inverse (-2x) of the return that would be expected of a fund with an objective of matching the same benchmark. The Geared Funds are not appropriate for all investors and present different risks than other funds. The Leveraged Funds use leverage and are riskier than similarly benchmarked exchange-traded funds that do not use leverage. An investor should only consider an investment in a Geared Fund if he or she understands the consequences of seeking daily leveraged, daily inverse or daily inverse leveraged investment results. Daily objective Geared Funds, if used properly and in conjunction with the investor’s view on the future direction and volatility of the markets, can be useful tools for investors who want to manage their exposure to various markets and market segments and who are willing to monitor and/or periodically rebalance their portfolios. Shareholders who invest in the Funds should actively manage and monitor their investments, as frequently as daily.

While the Funds expect to meet their investment objectives, several factors may affect their ability to do so. Among these factors are: (1) the Sponsor’s ability to purchase and sell Financial Instruments in a manner that correlates to a Fund’s objective; (2) 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; (3) bid-ask spreads on such instruments; (4) fees, expenses, transaction costs, financing costs associated with the use of derivatives and commission costs; (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 and/or valuation methodology; (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; and (10) accounting standards.

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. In order to achieve a high degree of correlation with their underlying benchmarks, the Geared Funds seek to rebalance their portfolios daily to keep exposure consistent with their investment objectives. Being materially over- or under-exposed to the benchmark may prevent such Funds from achieving a high degree of correlation with such benchmark. Market disruptions or closure, large amounts of assets into or out of the Geared Funds, regulatory restrictions or extreme market volatility will adversely affect such Funds’ ability to adjust exposure to requisite levels. The target amount of portfolio exposure is impacted dynamically by the benchmarks’ movements during each day. Because of this, it is unlikely that the Geared Funds will be perfectly exposed (e.g., 2x or -2x) to its benchmark at the end of each day, and the likelihood of being materially under- or over-exposed is higher on days when the benchmark levels are volatile near the close of the trading day.

 

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Counterparty Risk

Certain of the Funds will use swap agreements and/or forward contracts as a means to achieve their respective investment objectives. Such Funds will use either swap agreements and/or forward contracts referencing their respective benchmarks. These Funds may also invest in other swap agreements or forward contracts if such instruments tend to exhibit trading prices or returns that correlate with the benchmark or a component of the benchmark and will further the investment objective of the Fund. Certain Funds may invest in swap agreements if position accountability rules or position limits are reached with respect to specific futures contracts or the market for a specific futures contract experiences emergencies (e.g., natural disaster, terrorist attack or an act of God) or disruptions (e.g., a trading halt or a flash crash) that prevent the Funds from obtaining the appropriate amount of investment exposure to the affected futures contract or certain other futures contracts. Although unlikely, those Funds, under these circumstances, could have 100% exposure to swap agreements.

Swap agreements and forward contracts are generally traded over the counter and are essentially unregulated by the CFTC. Investors, therefore, do not receive the protection of CFTC regulation or the statutory scheme of the CEA in connection with each Fund’s swap agreements or forward contracts. The lack of regulation in these markets could expose investors to significant losses under certain circumstances including in the event of trading abuses or financial failure by participants.

Unlike in futures contracts, the counterparty to swap agreements or forward contracts is generally a single bank or other financial institution, rather than a clearing organization backed by a group of financial institutions. As a result, a Fund is subject to credit risk with respect to the amount it expects to receive from counterparties to swaps and forward contracts entered into as part of that Fund’s principal investment strategy. If a counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, a Fund could suffer significant losses on these contracts and the value of an investor’s investment in a Fund may decline.

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. To the extent any such collateral is insufficient or there are delays in accessing the collateral, the Funds will be exposed to counterparty risk as described above, including possible delays in recovering amounts as a result of bankruptcy proceedings. The Funds typically enter into transactions only with major global financial institutions.

Swaps or forward contracts are less liquid than futures contracts because they are not traded on an exchange, do not have uniform terms and conditions, and are generally entered into based upon the creditworthiness of the parties and the availability of credit support, such as collateral, and in general, are not transferable without the consent of the counterparty.

If the level of the Fund’s benchmark has a dramatic intraday move that would cause a material decline in the Fund’s NAV, the terms of the swap may permit the counterparty to immediately close out the transaction with the Fund. In that event, it may not be possible for the Fund to enter into another swap agreement or to invest in other Financial Instruments necessary to achieve the desired exposure consistent with the Fund’s objective. This, in turn, may prevent the Fund from achieving its investment objective, particularly if the level of the Fund’s benchmark reverses all or part of its intraday move by the end of the day.

Although the counterparty to a futures contract is often a clearing organization backed by a group of financial institutions, there may also be instances in which the counterparty could fail to perform its obligations, causing significant losses to a Fund.

Leverage Risk

The Funds may utilize leverage in seeking to achieve their respective investment objectives and will lose more money in market environments adverse to their respective daily investment objectives than funds that do not employ leverage. The use of leveraged and/or inverse leveraged positions could result in the total loss of an investor’s investment.

 

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For example, because the Ultra and UltraShort Funds include a two times (2x) or two times the inverse (-2x) multiplier, a single-day movement in the relevant benchmark approaching 50% at any point in the day could result in the total loss or almost total loss of an investor’s investment if that movement is contrary to the investment objective of the Fund in which an investor has invested, even if such Fund’s benchmark subsequently moves in an opposite direction, eliminating all or a portion of the movement. This would be the case with downward single-day or intraday movements in the underlying benchmark of an Ultra Fund or upward one-day or intraday movements in the benchmark of an UltraShort Fund, even if the underlying benchmark maintains a level greater than zero at all times.

Liquidity Risk

Financial Instruments cannot always be liquidated at the desired price. It is difficult to execute a trade at a specific price when there is a relatively small volume of buy and sell orders in a market. A market disruption can also make it difficult to liquidate a position or find a swap or forward contract counterparty at a reasonable cost. Market illiquidity may cause losses for the Funds. The large size of the positions which the Funds may acquire increases the risk of illiquidity by both making their positions more difficult to liquidate and increasing the losses incurred while trying to do so. Any type of disruption or illiquidity will potentially be exacerbated due to the fact that the Funds will typically invest in Financial Instruments related to one benchmark, which in many cases is highly concentrated.

“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 2012 may specify an October 2012 expiration. For an Ultra Fund and a Matching VIX Fund, as that contract nears expiration, it may be replaced by selling the October 2012 contract and purchasing the contract expiring in December 2012. 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 2012 contract would take place at a price that is higher than the price at which the December 2012 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 Matching VIX Fund that invests in such futures, and positively affect a Short Fund or an UltraShort 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 Matching 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 VIX future for a higher priced longer-term future in the rolling process would adversely affect the value of each VIX Futures Index and, accordingly, decrease the return of the Ultra VIX Short-Term Futures ETF and the Matching 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.

 

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NOTE 9—LEGAL PROCEEDINGS

The Trust and certain principals of the Sponsor have been named as defendants (along with several other parties) in a consolidated class action lawsuit filed in the United States District Court for the Southern District of New York, styled In re ProShares Trust Securities Litigation, Civ. No. 09-cv-6935. The complaint, as amended, alleged 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 and allegedly failing to adequately disclose the Funds’ investment objectives and risks. The six Funds of the Trust named in the complaint were 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. On September 10, 2012, the District Court issued an Opinion and Order dismissing the class action lawsuit in its entirety. On October 3, 2012, the plaintiffs filed a Notice of Appeal appealing the dismissal. 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. The subsequent events were as follows:

On September 20, 2012, the Trust announced a 2-for-1 split of the Shares of beneficial interest of ProShares Short VIX Short-Term Futures (NYSE Arca symbol “SVXY”). Prior to the opening of trading on the NYSE Arca on October 5, 2012, ProShares Short VIX Short-Term Futures executed a 2-for-1 split of Shares.

The split was effective for shareholders of record after the close of the markets on October 2, 2012, and payable after the close of the markets on October 4, 2012. The fund traded at its post-split price on October 5, 2012. The ticker symbol for the Fund did not change, and it continues to trade on the NYSE Arca.

The split was applied retroactively for all periods presented, increasing the number of Shares outstanding for ProShares Short VIX Short-Term Futures, and resulted in a proportionate decrease in the price per Share and per Share information of ProShares Short VIX Short-Term Futures. Therefore, the split did not change the aggregate net asset value of a shareholder’s investment at the time of the split.

On September 20, 2012, the Trust announced a 1-for-4 reverse split of the Shares of beneficial interest of ProShares UltraShort Gold (NYSE Arca symbol “GLL”). Prior to the opening of trading on the NYSE Arca on October 5, 2012, ProShares UltraShort Gold executed a 1-for-4 reverse split of Shares.

The reverse split was effective for shareholders of record after the close of the markets on October 4, 2012. The fund traded at its post-split price on October 5, 2012. The ticker symbol for the Fund did not change, and it continues to trade on the NYSE Arca.

The reverse split was applied retroactively for all periods presented, reducing the number of Shares outstanding for ProShares UltraShort Gold, and resulted in a proportionate increase in the price per Share and per Share information of ProShares UltraShort Gold. Therefore, the reverse split did not change the aggregate net asset value of a shareholder’s investment at the time of the split.

 

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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”). As of September 30, 2012, the following twenty-one series of the Trust have commenced investment operations: (i) ProShares Ultra DJ-UBS Commodity, ProShares UltraShort DJ-UBS Commodity, ProShares Ultra DJ-UBS Crude Oil, ProShares UltraShort DJ-UBS Crude Oil, ProShares Ultra DJ-UBS Natural Gas, ProShares UltraShort DJ-UBS Natural Gas, ProShares Ultra Gold, ProShares UltraShort Gold, ProShares Ultra Silver, ProShares UltraShort Silver, ProShares Ultra Australian Dollar, ProShares UltraShort Australian Dollar, ProShares Ultra Euro, ProShares UltraShort Euro, ProShares Ultra Yen and ProShares UltraShort Yen (each, a “Leveraged Fund” and collectively, the “Leveraged Funds”); (ii) ProShares Short Euro (the “Short Euro Fund”); (iii) ProShares Ultra VIX Short-Term Futures ETF and ProShares Short VIX Short-Term Futures ETF (each, a “Geared VIX Fund” and collectively, the “Geared VIX Funds”); and (iv) ProShares VIX Short-Term Futures ETF and ProShares VIX Mid-Term Futures ETF (each, a “Matching VIX Fund” and collectively, the “Matching VIX Funds”). Each of the Funds listed above issues common units of beneficial interest (“Shares”), which represent units of fractional undivided beneficial interest in and ownership of only that Leveraged Fund, Short Euro Fund, Geared VIX Fund or Matching VIX Fund. The Shares of each Leveraged Fund, the Short Euro Fund, each Geared VIX Fund and each Matching VIX Fund are listed on the New York Stock Exchange Archipelago (“NYSE Arca”), as further described below.

The Trust has also registered Shares for thirty-two additional series: (i) ProShares Short DJ-UBS Natural Gas and ProShares Short Gold (each, a “Short Fund” and collectively, the “Short Funds”); (ii) 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 Geared VIX Fund” and collectively, the “New Geared VIX Funds”); (iii) ProShares Managed Futures Strategy, ProShares Commodity Managed Futures Strategy and ProShares Financial Managed Futures Strategy (each, a “Managed Futures Fund” and collectively, the “Managed Futures Funds”); (iv) ProShares UltraPro Australian Dollar, ProShares Short Australian Dollar, ProShares UltraPro Short Australian Dollar, ProShares UltraPro Canadian Dollar, ProShares Ultra Canadian Dollar, ProShares Short Canadian Dollar, ProShares UltraShort Canadian Dollar, ProShares UltraPro Short Canadian Dollar, ProShares UltraPro Euro, ProShares UltraPro Short Euro, ProShares UltraPro Swiss Franc, ProShares Ultra Swiss Franc, ProShares Short Swiss Franc, ProShares UltraShort Swiss Franc, ProShares UltraPro Short Swiss Franc, ProShares UltraPro Yen, ProShares Short Yen and ProShares UltraPro Short Yen (each, a “New Currency Fund” and collectively, the “New Currency Funds”); and (v) ProShares UltraPro U.S. Dollar, ProShares Ultra U.S. Dollar, ProShares Short U.S. Dollar, ProShares UltraShort U.S. Dollar and ProShares UltraPro Short U.S. Dollar (each, a “Currency Index Fund” and collectively, the “Currency Index Funds”). The Geared VIX Funds and the Matching VIX Funds are collectively referred to as the “VIX Funds” in this Quarterly Report on Form 10-Q. The Leveraged Funds, the Short Euro Fund and the Geared VIX Funds are collectively referred to as the “Geared Funds” in this Quarterly Report on Form 10-Q.

 

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On June 25, 2012, the registered offerings for ProShares UltraPro Australian Dollar, ProShares Short Australian Dollar, ProShares UltraPro Short Australian Dollar, ProShares UltraPro Canadian Dollar, ProShares Short Canadian Dollar, ProShares UltraPro Short Canadian Dollar, ProShares UltraPro Euro, ProShares UltraPro Short Euro, ProShares UltraPro Swiss Franc, ProShares Short Swiss Franc, ProShares UltraPro Short Swiss Franc, ProShares UltraPro Yen, ProShares UltraPro Short Yen and the Currency Index Funds, each of which had never been publicly offered, were terminated. On June 26, 2012, the registered offerings for the Short Funds and the New Geared VIX Funds, each of which had never been publicly offered, were terminated. On September 28, 2012, the registered offerings for ProShares Ultra Canadian Dollar, ProShares UltraShort Canadian Dollar, ProShares Ultra Swiss Franc, ProShares UltraShort Swiss Franc and ProShares Short Yen, each of which had never been publicly offered, were terminated. Thus, as of September 30, 2012, the only Funds that have remaining registered amounts are the Managed Futures Funds.

As of September 30, 2012, each of the Managed Futures Funds had seed capital, but none of the Managed Futures Funds had commenced investment operations; therefore, this Quarterly Report on Form 10-Q does not include Schedules of Investments, Statements of Operations, Statements of Changes in Shareholders’ Equity, Statements of Cash Flows, results of operations or any other financial information for the Managed Futures Funds.

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 at an aggregate purchase price of $350 in each of the following 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 Gold, ProShares UltraShort Gold, ProShares Ultra Silver, ProShares UltraShort Silver, ProShares Ultra Euro, ProShares UltraShort Euro, ProShares Ultra Yen and ProShares UltraShort Yen.

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. Two of the Funds, ProShares VIX Short-Term Futures ETF and ProShares VIX Mid-Term Futures ETF, commenced trading on the NYSE Arca on January 3, 2011. Two of the Funds, ProShares Ultra VIX Short-Term Futures ETF and ProShares Short VIX Short-Term Futures ETF, commenced trading on the NYSE Arca on October 3, 2011. Two of the Funds, ProShares Ultra DJ-UBS Natural Gas and ProShares UltraShort DJ-UBS Natural Gas, commenced trading on the NYSE Arca on October 4, 2011. One of the Funds, ProShares Short Euro, commenced trading on the NYSE Arca on June 26, 2012. Two of the Funds, ProShares Ultra Australian Dollar and ProShares UltraShort Australian Dollar, commenced trading on the NYSE Arca on July 17, 2012. As of September 30, 2012, the Managed Futures Funds had not yet commenced trading.

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 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. References to “Managed Futures Funds” refer to the different Funds according to which index the Fund intends to gain exposure.

Each “Ultra” Fund seeks daily investment results (before fees and expenses) that correspond to twice (2x) the daily performance of its corresponding

 

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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 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 in Financial Instruments (i.e., commodity-based, currency-based or equity market volatility-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 commodities, currencies or equity market volatility products in order to gain exposure to the commodity index, currency benchmark, commodity, currency or to an equity market volatility index. Financial Instruments also are used to produce economically “leveraged” or “inverse” investment results for the Funds. Each Matching VIX Fund seeks daily investment results (before fees and expenses) that match the performance of a benchmark. Each Geared VIX Fund seeks daily investment results (before fees and expenses) that correspond to a multiple, the inverse or inverse multiple of the daily 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 Managed Futures Funds will seek to provide investment results (before fees and expenses) that correspond to the performance of the S&P Dynamic Futures Index (“DFI”), the S&P Dynamic Commodities Futures Index (“DCFI”) or the S&P Dynamic Financial Futures Index (“DFFI”) (each a “Sub-Index” and collectively, the “Sub-Indexes”). Each Managed Futures Fund intends to obtain exposure to the Index or to a Sub-Index, as applicable, by investing primarily in unleveraged positions in U.S. exchange-traded futures contracts on sixteen different tangible commodities (the “Commodity Futures Contracts”) or futures contracts on eight different financials, such as major currencies and U.S. Treasury securities (the “Financial Futures Contracts” and together with the Commodity Futures Contracts, the “Index Components”).

Each Geared Fund seeks investment results for a single day only, not for longer periods. A “single day” is measured from the time a Fund calculates its respective net asset value per Share (“NAV”) to the time of the Fund’s next NAV calculation. 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 Geared VIX Funds do not seek to achieve their stated objective over a period greater than one day. The Matching VIX Funds and the Managed Futures 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, ProShares UltraShort DJ-UBS Crude Oil, ProShares Ultra DJ-UBS Natural Gas and ProShares UltraShort DJ-UBS Natural Gas each have a benchmark that is an index 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 and Managed Futures Fund continuously offers and redeems or will offer and redeem its Shares in blocks of 50,000 Shares and each Matching VIX Fund continuously offers and redeems its 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 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

 

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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.

Liquidity and Capital Resources

In order to collateralize derivatives positions in indices, commodities or currencies, a significant portion of the net assets 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 and nine months ended September 30, 2012 and 2011, each of the Funds earned interest income as follows:

 

Fund

  Interest Income
Three Months Ended
September 30, 2012
    Interest Income
Three Months Ended
September 30, 2011
    Interest Income
Nine Months Ended
September 30, 2012
    Interest Income
Nine Months Ended
September 30, 2011
 

ProShares Ultra DJ-UBS Commodity

  $ 1,472      $ 993      $ 3,401      $ 10,264   

ProShares UltraShort DJ-UBS Commodity

    568        731        2,227        3,522   

ProShares Ultra DJ-UBS Crude Oil

    63,544        16,734        126,796        154,462   

ProShares UltraShort DJ-UBS Crude Oil

    19,218        5,491        49,995        67,925   

ProShares Ultra DJ-UBS Natural Gas

    9,896        —          18,894        —     

ProShares UltraShort DJ-UBS Natural Gas

    1,854        —          4,883        —     

ProShares Ultra Gold

    62,437        20,274        151,337        138,778   

ProShares UltraShort Gold

    21,407        6,156        52,562        50,183   

ProShares Ultra Silver

    136,002        54,294        313,266        413,210   

ProShares UltraShort Silver

    25,338        36,609        69,765        141,157   

ProShares Ultra Australian Dollar

    618        —          618        —     

ProShares UltraShort Australian Dollar

    586        —          586        —     

ProShares Ultra Euro

    975        511        2,550        4,353   

ProShares Short Euro

    641        —          641        —     

ProShares UltraShort Euro

    160,447        36,861        359,466        255,628   

ProShares Ultra Yen

    1,009        216        2,253        1,711   

ProShares UltraShort Yen

    41,475        23,905        104,677        176,008   

ProShares Ultra VIX Short-Term Futures ETF

    22,293        —          40,074        —     

ProShares VIX Short-Term Futures ETF

    21,142        1,884        47,219        11,821   

ProShares Short VIX Short-Term Futures ETF

    4,522        —          8,717        —     

ProShares VIX Mid-Term Futures ETF

    12,846        569        31,096        3,584   

Each Fund’s underlying swaps, futures and forward contracts, as applicable, may be 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 to 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.

 

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The large size of the positions in which a Fund may acquire increases the risk of illiquidity by both making their positions more difficult to liquidate and increasing the losses incurred while trying to do so. Any type of disruption or illiquidity will potentially be exacerbated due to the fact that the Funds will typically invest in Financial Investments related to one benchmark, which in many cases is highly concentrated.

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 September 30, 2012 Compared to the Three Months Ended September 30, 2011

ProShares Ultra DJ-UBS Commodity

Fund Performance

The following table provides summary performance information for the Fund for the three months ended September 30, 2012 and 2011:

 

      Three Months  Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

NAV beginning of period

   $ 8,231,730      $ 16,695,263   

NAV end of period

   $ 8,400,978      $ 11,710,948   

Percentage change in NAV

     2.1     (29.9 )% 

Shares outstanding beginning of period

     350,014        500,014   

Shares outstanding end of period

     300,014        450,014   

Percentage change in Shares outstanding

     (14.3 )%      (10.0 )% 

Shares created

     —          —     

Shares redeemed

     50,000        50,000   

Per Share NAV beginning of period

   $ 23.52      $ 33.39   

Per Share NAV end of period

   $ 28.00      $ 26.02   

Percentage change in per Share NAV

     19.1     (22.1 )% 

Percentage change in benchmark

     9.7     (11.3 )% 

Benchmark annualized volatility

     15.7     20.2

During the three months ended September 30, 2012, 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 Dow Jones-UBS Commodity Index. The increase in the Fund’s NAV was offset by a decrease from 350,014 outstanding Shares at June 30, 2012 to 300,014 outstanding Shares at September 30, 2012. By comparison, during the three months ended September 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. The decrease in the Fund’s NAV also resulted in part from a decrease from 500,014 outstanding Shares at June 30, 2011 to 450,014 outstanding Shares at September 30, 2011.

For the three months ended September 30, 2012 and 2011, 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 19.1% for the period ended September 30, 2012, as compared to the decrease of 22.1% for the period ended September 30, 2011, was primarily due to an appreciation in the value of the assets of the Fund during the three months ended September 30, 2012.

During the three months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on September 14, 2012 at $29.39 per Share and reached its low for the period on July 2, 2012 at $23.60 per Share. By comparison, during the three months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on July 26, 2011 at $36.90 per Share and reached its low for the period on September 30, 2011 at $26.02 per Share.

 

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The benchmark’s rise of 9.7% for the three months ended September 30, 2012, as compared to the benchmark’s decline of 11.3% for the three months ended September 30, 2011, can be attributed to appreciation of the underlying components of the index during the three months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the three months ended September 30, 2012 and 2011:

 

     Three Months  Ended
September 30, 2012
    Three Months  Ended
September 30, 2011
 

Net investment income (loss)

   $ (19,548   $ (36,061

Management fee

     21,020        37,054   

Net realized gain (loss)

     1,946,079        (1,050,593

Change in net unrealized appreciation/depreciation

     (418,556     (2,077,012

Net income (loss)

   $ 1,507,975      $ (3,163,666

The Fund’s net income increased for the three months ended September 30, 2012, as compared to the three months ended September 30, 2011, primarily due to an increase in the Fund’s benchmark index from the three months ended September 30, 2011 to the three months ended September 30, 2012.

ProShares UltraShort DJ-UBS Commodity*

Fund Performance

The following table provides summary performance information for the Fund for the three months ended September 30, 2012 and 2011:

 

      Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

NAV beginning of period

   $ 3,543,535      $ 29,495,769   

NAV end of period

   $ 2,881,496      $ 12,378,058   

Percentage change in NAV

     (18.7 )%      (58.0 )% 

Shares outstanding beginning of period

     59,997        609,997   

Shares outstanding end of period

     59,997        209,997   

Percentage change in Shares outstanding

     0.0     (65.6 )% 

Shares created

     —          —     

Shares redeemed

     —          400,000   

Per Share NAV beginning of period

   $ 59.06      $ 48.35   

Per Share NAV end of period

   $ 48.03      $ 58.94   

Percentage change in per Share NAV

     (18.7 )%      21.9

Percentage change in benchmark

     9.7     (11.3 )% 

Benchmark annualized volatility

     15.7     20.2

During the three months ended September 30, 2012, 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 the Dow Jones-UBS Commodity Index. There was no net change in outstanding Shares from June 30, 2012 to September 30, 2012. By comparison, during the three months ended September 30, 2011, the decrease in the Fund’s NAV resulted from a decrease from 609,997 outstanding Shares at June 30, 2011 to 209,997

 

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outstanding Shares at September 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 inverse of the daily performance of the Dow Jones-UBS Commodity Index.

For the three months ended September 30, 2012 and 2011, 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 18.7% for the three months ended September 30, 2012, as compared to the increase of 21.9% for the three months ended September 30, 2011, was primarily due to a depreciation in the value of the assets of the Fund during the three months ended September 30, 2012.

During the three months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on July 2, 2012 at $58.83 per Share and reached its low for the period on September 14, 2012 at $46.01 per Share. By comparison, during the three months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on September 30, 2011 at $58.94 per Share and reached its low for the period on July 26, 2011 at $43.39 per Share.

The benchmark’s rise of 9.7% for the three months ended September 30, 2012, as compared to the benchmark’s decline of 11.3% for the three months ended September 30, 2011, can be attributed to appreciation of the underlying components of the index during the three months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the three months ended September 30, 2012 and 2011:

 

     Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (6,822   $ (31,685

Management fee

     7,390        32,416   

Net realized gain (loss)

     (861,786     2,148,712   

Change in net unrealized appreciation/depreciation

     206,570        (1,248,416

Net income (loss)

   $ (662,038   $ 868,611   

The Fund’s net income decreased for the three months ended September 30, 2012, as compared to the three months ended September 30, 2011, primarily due to an increase in the Fund’s benchmark index from the three months ended September 30, 2011 to the three months ended September 30, 2012.

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q regarding the reverse Share split for the ProShares UltraShort DJ-UBS Commodity Fund.

ProShares Ultra DJ-UBS Crude Oil*

Fund Performance

The following table provides summary performance information for the Fund for the three months ended September 30, 2012 and 2011:

 

     Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

NAV beginning of period

   $ 489,111,964      $ 426,397,237   

NAV end of period

   $ 381,973,929      $ 380,889,526   

Percentage change in NAV

     (21.9 )%      (10.7 )% 

Shares outstanding beginning of period

     17,649,170        9,999,170   

Shares outstanding end of period

     12,199,170        13,949,170   

 

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      Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

Percentage change in Shares outstanding

     (30.9 )%      39.5

Shares created

     3,400,000        10,900,000   

Shares redeemed

     8,850,000        6,950,000   

Per Share NAV beginning of period

   $ 27.71      $ 42.64   

Per Share NAV end of period

   $ 31.31      $ 27.31   

Percentage change in per Share NAV

     13.0     (36.0 )% 

Percentage change in benchmark

     7.3     (18.3 )% 

Benchmark annualized volatility

     25.5     38.5

During the three months ended September 30, 2012, the decrease in the Fund’s NAV resulted primarily from a decrease from 17,649,170 outstanding Shares at June 30, 2012 to 12,199,170 outstanding Shares at September 30, 2012. 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 Dow Jones-UBS WTI Crude Oil Sub-Index. By comparison, during the three months ended September 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 WTI Crude Oil Sub-Index. The decrease in the Fund’s NAV was offset by an increase from 9,999,170 outstanding Shares at June 30, 2011 to 13,949,170 outstanding Shares at September 30, 2011.

For the three months ended September 30, 2012 and 2011, 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 13.0% for the three months ended September 30, 2012, as compared to the decrease of 36.0% for the three months ended September 30, 2011, was primarily due to appreciation in the value of the assets of the Fund during the three months ended September 30, 2012.

During the three months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on September 14, 2012 at $36.47 per Share and reached its low for the period on July 10, 2012 at $26.90 per Share. By comparison, during the three months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on July 22, 2011 at $45.99 per Share and reached its low for the period on September 30, 2011 at $27.31 per Share.

The benchmark’s rise of 7.3% for the three months ended September 30, 2012, as compared to the benchmark’s decline of 18.3% for the three months ended September 30, 2011, can be attributed to an increase in the price of WTI Crude Oil during the three months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the three months ended September 30, 2012 and 2011:

 

     Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (868,686   $ (964,691

Management fee

     914,474        960,393   

Brokerage commissions

     17,756        21,032   

Net realized gain (loss)

     93,596,417        (87,767,836

Change in net unrealized appreciation/depreciation

     (32,720,497     (45,561,944

Net income (loss)

   $ 60,007,234      $ (134,294,471

The Fund’s net income increased for the three months ended September 30, 2012, as compared to the three months ended September 30, 2011, primarily due to an increase in the price of WTI Crude Oil during the three months ended September 30, 2012.

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q regarding the reverse Share split for the ProShares Ultra DJ-UBS Crude Oil Fund.

 

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ProShares UltraShort DJ-UBS Crude Oil*

Fund Performance

The following table provides summary performance information for the Fund for the three months ended September 30, 2012 and 2011:

 

     Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

NAV beginning of period

   $ 82,211,941      $ 160,288,442   

NAV end of period

   $ 116,516,762      $ 72,357,831   

Percentage change in NAV

     41.7     (54.9 )% 

Shares outstanding beginning of period

     1,669,944        3,319,944   

Shares outstanding end of period

     2,869,944        1,119,944   

Percentage change in Shares outstanding

     71.9     (66.3 )% 

Shares created

     1,650,000        950,000   

Shares redeemed

     450,000        3,150,000   

Per Share NAV beginning of period

   $ 49.23      $ 48.28   

Per Share NAV end of period

   $ 40.60      $ 64.61   

Percentage change in per Share NAV

     (17.5 )%      33.8

Percentage change in benchmark

     7.3     (18.3 )% 

Benchmark annualized volatility

     25.5     38.5

During the three months ended September 30, 2012, the increase in the Fund’s NAV resulted primarily from an increase from 1,669,944 outstanding Shares at June 30, 2012 to 2,869,944 outstanding Shares at September 30, 2012. 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 Dow Jones-UBS WTI Crude Oil Sub-Index. By comparison, during the three months ended September 30, 2011, the decrease in the Fund’s NAV resulted from a decrease from 3,319,944 outstanding Shares at June 30, 2011 to 1,119,944 outstanding Shares at September 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 inverse of the daily performance of the Dow Jones-UBS WTI Crude Oil Sub-Index.

For the three months ended September 30, 2012 and 2011, 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 three months ended September 30, 2012, as compared to the increase of 33.8% for the three months ended September 30, 2011, was primarily due to depreciation in the value of the assets of the Fund during the three months ended September 30, 2012.

During the three months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on July 2, 2012 at $50.63 per Share and reached its low for the period on September 14, 2012 at $35.28 per Share. By comparison, during the three months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on August 9, 2011 at $67.93 per Share and reached its low for the period on July 22, 2011 at $44.06 per Share.

The benchmark’s rise of 7.3% for the three months ended September 30, 2012, as compared to the benchmark’s decline of 18.3% for the three months ended September 30, 2011, can be attributed to an increase in the price of WTI Crude Oil during the three months ended September 30, 2012.

 

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Net Income/Loss

The following table provides summary income information for the Fund for the three months ended September 30, 2012 and 2011:

 

     Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (241,721   $ (239,496

Management fee

     252,685        236,646   

Brokerage commissions

     8,254        8,341   

Net realized gain (loss)

     (24,453,770     40,873,422   

Change in net unrealized appreciation/depreciation

     10,035,131        2,326,282   

Net income (loss)

   $ (14,660,360   $ 42,960,208   

The Fund’s net income decreased for the three months ended September 30, 2012, as compared to the three months ended September 30, 2011, primarily due to an increase in the price of WTI Crude Oil during the three months ended September 30, 2012.

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q regarding the reverse Share split for the ProShares UltraShort DJ-UBS Crude Oil Fund.

ProShares Ultra DJ-UBS Natural Gas*

Since the Fund commenced investment operations on October 4, 2011, a comparison of the Fund’s results of operations for the three months ended September 30, 2011 has not been provided.

Fund Performance

The following table provides summary performance information for the Fund for the three months ended September 30, 2012:

 

      Three Months Ended
September 30, 2012
 

NAV beginning of period

   $ 62,595,441   

NAV end of period

   $ 67,505,640   

Percentage change in NAV

     7.8

Shares outstanding beginning of period

     1,369,941   

Shares outstanding end of period

     1,319,941   

Percentage change in Shares outstanding

     (3.6 )% 

Shares created

     700,000   

Shares redeemed

     750,000   

Per Share NAV beginning of period

   $ 45.69   

Per Share NAV end of period

   $ 51.14   

Percentage change in per Share NAV

     11.9

Percentage change in benchmark

     8.6

Benchmark annualized volatility

     44.6

During the three months ended September 30, 2012, the increase in the Fund’s NAV 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 Natural Gas Sub-indexSM. The increase in the Fund’s NAV was offset by a decrease from 1,369,941 outstanding Shares at June 30, 2012 to 1,319,941 outstanding Shares at September 30, 2012.

For the three months ended September 30, 2012, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the daily performance of its benchmark.

During the three months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period July 30, 2012 at $57.51 per Share and reached its low for the period on August 28, 2012 at $37.17 per Share.

The benchmark’s rise of 8.6% for the three months ended September 30, 2012, can be attributed to an increase in the price of Henry Hub Natural Gas during the three months ended September 30, 2012.

 

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Net Income/Loss

The following table provides summary income information for the Fund for the three months ended September 30, 2012:

 

     Three Months Ended
September 30, 2012
 

Net investment income (loss)

   $ (177,136

Management fee

     137,754   

Brokerage commissions

     31,584   

Offering costs

     17,694   

Net realized gain (loss)

     20,880,467   

Change in net unrealized appreciation/depreciation

     (5,822,509

Net income (loss)

   $ 14,880,822   

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q regarding the reverse Share split for the ProShares Ultra DJ-UBS Natural Gas Fund.

ProShares UltraShort DJ-UBS Natural Gas*

Since the Fund commenced investment operations on October 4, 2011, a comparison of the Fund’s results of operations for the three months ended September 30, 2011 has not been provided.

Fund Performance

The following table provides summary performance information for the Fund for the three months ended September 30, 2012:

 

      Three Months Ended
September 30, 2012
 

NAV beginning of period

   $ 13,643,687   

NAV end of period

   $ 13,282,921   

Percentage change in NAV

     (2.6 )% 

Shares outstanding beginning of period

     450,030   

Shares outstanding end of period

     600,030   

Percentage change in Shares outstanding

     33.3

Shares created

     150,000   

Shares redeemed

     —     

Per Share NAV beginning of period

   $ 30.32   

Per Share NAV end of period

   $ 22.14   

Percentage change in per Share NAV

     (27.0 )% 

Percentage change in benchmark

     8.6

Benchmark annualized volatility

     44.6

During the three months ended September 30, 2012, 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 the Dow Jones-UBS Natural Gas Sub-indexSM. The decrease in the Fund’s NAV was offset by an increase from 450,030 outstanding Shares at June 30, 2012 to 600,030 outstanding Shares at September 30, 2012.

For the three months ended September 30, 2012, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the inverse of the daily performance of its benchmark.

During the three months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period August 28, 2012 at $32.20 per Share and reached its low for the period on July 30, 2012 at $22.02 per Share.

The benchmark’s rise of 8.6% for the three months ended September 30, 2012, can be attributed to an increase in the price of Henry Hub Natural Gas during the three months ended September 30, 2012.

 

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Net Income/Loss

The following table provides summary income information for the Fund for the three months ended September 30, 2012:

 

     Three Months Ended
September 30, 2012
 

Net investment income (loss)

   $ (41,588

Management fee

     14,762   

Brokerage commissions

     10,986   

Offering costs

     17,694   

Net realized gain (loss)

     (4,765,841

Change in net unrealized appreciation/depreciation

     1,018,699   

Net income (loss)

   $ (3,788,730

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q regarding the Share split for the ProShares UltraShort DJ-UBS Natural Gas Fund.

ProShares Ultra Gold

Fund Performance

The following table provides summary performance information for the Fund for the three months ended September 30, 2012 and 2011:

 

      Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

NAV beginning of period

   $ 331,012,682      $ 282,765,412   

NAV end of period

   $ 388,689,908      $ 374,010,221   

Percentage change in NAV

     17.4     32.3

Shares outstanding beginning of period

     4,150,014        3,650,014   

Shares outstanding end of period

     4,000,014        4,300,014   

Percentage change in Shares outstanding

     (3.6 )%      17.8

Shares created

     100,000        900,000   

Shares redeemed

     250,000        250,000   

Per Share NAV beginning of period

   $ 79.76      $ 77.47   

Per Share NAV end of period

   $ 97.17      $ 86.98   

Percentage change in per Share NAV

     21.8     12.3

Percentage change in benchmark

     11.1     7.6

Benchmark annualized volatility

     14.8     30.0

During the three months ended September 30, 2012, 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 4,150,014 outstanding Shares at June 30, 2012 to 4,000,014 outstanding Shares at September 30, 2012. By comparison, during the three months ended September 30, 2011, the increase in the Fund’s NAV resulted primarily from an increase from 3,650,014 outstanding Shares at June 30, 2011 to 4,300,014 outstanding Shares at September 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 gold bullion as measured by the U.S. Dollar p.m. fixing price for delivery in London.

For the three months ended September 30, 2012 and 2011, 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 21.8% for the three months ended September 30, 2012, as compared to the increase of 12.3% for the three months ended September 30, 2011, was primarily due to the greater appreciation in the value of the assets of the Fund during the three months ended September 30, 2012.

 

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During the three months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period September 21, 2012 at $98.22 per Share and reached its low for the period on July 12, 2012 at $75.46 per Share. By comparison, during the three months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on September 6, 2011 at $120.56 per Share and reached its low for the period on July 1, 2011 at $75.15 per Share.

The benchmark’s rise of 11.1% the three months ended September 30, 2012, as compared to the benchmark’s rise of 7.6% for the three months ended September 30, 2011, can be attributed to a greater increase in the price of spot gold in U.S. Dollar terms during the three months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the three months ended September 30, 2012 and 2011:

 

     Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (762,841   $ (939,268

Management fee

     825,270        958,522   

Brokerage commissions

     8        1,020   

Net realized gain (loss)

     23,190,233        4,796,540   

Change in net unrealized appreciation/depreciation

     47,323,358        23,303,771   

Net income (loss)

   $ 69,750,750      $ 27,161,043   

The Fund’s net income increased for the three months ended September 30, 2012, as compared to the three months ended September 30, 2011, primarily due to a greater increase in the price of spot gold in U.S. Dollar terms during the three months ended September 30, 2012.

ProShares UltraShort Gold*

Fund Performance

The following table provides summary performance information for the Fund for the three months ended September 30, 2012 and 2011:

 

     Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

NAV beginning of period

   $ 129,376,591      $ 95,525,554   

NAV end of period

   $ 92,790,217      $ 178,039,495   

Percentage change in NAV

     (28.3 )%      86.4

Shares outstanding beginning of period

     1,822,475        997,475   

Shares outstanding end of period

     1,647,475        2,309,975   

Percentage change in Shares outstanding

     (9.6 )%      131.6

Shares created

     —          1,725,000   

Shares redeemed

     175,000        412,500   

Per Share NAV beginning of period

   $ 70.99      $ 95.77   

Per Share NAV end of period

   $ 56.32      $ 77.07   

Percentage change in per Share NAV

     (20.7 )%      (19.5 )% 

Percentage change in benchmark

     11.1     7.6

Benchmark annualized volatility

     14.8     30.0

During the three months ended September 30, 2012, the decrease in the Fund’s NAV resulted primarily from a decrease from 1,822,475 outstanding Shares at June 30, 2012 to 1,647,475 outstanding Shares at September 30, 2012. 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 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

 

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months ended September 30, 2011, the increase in the Fund’s NAV resulted from an increase from 997,475 outstanding Shares at June 30, 2011 to 2,309,975 outstanding Shares at September 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.

For the three months ended September 30, 2012 and 2011, 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 20.7% for the three months ended September 30, 2012, as compared to the decrease of 19.5% for the three months ended September 30, 2011, was primarily due to a greater depreciation in the value of the assets of the Fund during the three months ended September 30, 2012.

During the three months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on July 12, 2012 at $74.67 per Share and reached its low for the period on September 21, 2012 at $55.89 per Share. By comparison, during the three months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on July 1, 2011 at $98.61 per Share and reached its low for the period on September 6, 2011 at $58.07 per Share.

The benchmark’s rise of 11.1% for the three months ended September 30, 2012, as compared to the benchmark’s rise of 7.6% for the three months ended September 30, 2011, can be attributed to a greater increase in the price of spot gold in U.S. Dollar terms during the three months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the three months ended September 30, 2012 and 2011:

 

     Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (256,499   $ (293,684

Management fee

     277,898        299,227   

Brokerage commissions

     8        613   

Net realized gain (loss)

     (10,989,913     7,282,203   

Change in net unrealized appreciation/depreciation

     (13,887,666     (12,240,024

Net income (loss)

   $ (25,134,078   $ (5,251,505

The Fund’s net income decreased for the three months ended September 30, 2012, as compared to the three months ended September 30, 2011, primarily due to a greater increase in the price of spot gold in U.S. Dollar terms during the three months ended September 30, 2012.

 

* See Note 10 of the Notes to Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q regarding the reverse Share split for the ProShares UltraShort Gold Fund.

ProShares Ultra Silver*

Fund Performance

The following table provides summary performance information for the Fund for the three months ended September 30, 2012 and 2011:

 

      Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

NAV beginning of period

   $ 661,009,190      $ 881,928,826   

NAV end of period

   $ 978,987,907      $ 705,943,332   

Percentage change in NAV

     48.1     (20.0 %) 

Shares outstanding beginning of period

     17,850,028        10,500,028   

 

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      Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

Shares outstanding end of period

     16,650,028        12,900,028   

Percentage change in Shares outstanding

     (6.7 )%      22.9

Shares created

     1,000,000        4,800,000   

Shares redeemed

     2,200,000        2,400,000   

Per Share NAV beginning of period

   $ 37.03      $ 83.99   

Per Share NAV end of period

   $ 58.80      $ 54.72   

Percentage change in per Share NAV

     58.8     (34.8 )% 

Percentage change in benchmark

     28.0     (13.1 )% 

Benchmark annualized volatility

     28.3     73.0

During the three months ended September 30, 2012, 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 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 17,850,028 outstanding Shares at June 30, 2012 to 16,650,028 outstanding Shares at September 30, 2012. By comparison, during the three months ended September 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 10,500,028 outstanding Shares at June 30, 2011 to 12,900,028 outstanding Shares at September 30, 2011.

For the three months ended September 30, 2012 and 2011, 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 58.8% for the three months ended September 30, 2012, as compared to the decrease of 34.8% for the three months ended September 30, 2011, was primarily due to an appreciation in the value of the assets of the Fund during the three months ended September 30, 2012.

During the three months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on September 14, 2012 at $59.23 per Share and reached its low for the period on July 12, 2012 at $35.76 per Share. By comparison, during the three months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on August 22, 2011 at $124.74 per Share and reached its low for the period on September 26, 2011 at $48.48 per Share.

The benchmark’s rise of 28.0% for the three months ended September 30, 2012, as compared to the benchmark’s decline of 13.1% for the three months ended September 30, 2011, can be attributed to an increase in the price of spot silver in U.S. Dollar terms during the three months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the three months ended September 30, 2012 and 2011:

 

      Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (1,659,417   $ (2,371,209

Management fee

     1,795,410        2,423,377   

Brokerage commissions

     9        2,126   

Net realized gain (loss)

     159,543,868        (350,312,420

Change in net unrealized appreciation/depreciation

     205,654,329        84,424,890   

Net income (loss)

   $ 363,538,780      $ (268,258,739

The Fund’s net income increased for the three months ended September 30, 2012, as compared to the three months ended September 30, 2011, primarily due to an increase in the price of spot silver in U.S. Dollar terms during the three months ended September 30, 2012.

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q regarding the Share split for the ProShares Ultra Silver Fund.

 

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ProShares UltraShort Silver*

Fund Performance

The following table provides summary performance information for the Fund for the three months ended September 30, 2012 and 2011:

 

      Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

NAV beginning of period

   $ 161,421,100      $ 657,213,364   

NAV end of period

   $ 125,947,671      $ 533,394,247   

Percentage change in NAV

     (22.0 )%      (18.8 )% 

Shares outstanding beginning of period

     2,308,489        7,038,874   

Shares outstanding end of period

     3,158,489        6,538,874   

Percentage change in Shares outstanding

     36.8     (7.1 )% 

Shares created

     1,500,000        3,440,000   

Shares redeemed

     650,000        3,940,000   

Per Share NAV beginning of period

   $ 69.93      $ 93.37   

Per Share NAV end of period

   $ 39.88      $ 81.57   

Percentage change in per Share NAV

     (43.0 )%      (12.6 )% 

Percentage change in benchmark

     28.0     (13.1 )% 

Benchmark annualized volatility

     28.3     73.0

During the three months ended September 30, 2012, 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 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 2,308,489 outstanding Shares at June 30, 2012 to 3,158,489 outstanding Shares at September 30, 2012. By comparison, during the three months ended September 30, 2011, the decrease in the Fund’s NAV resulted primarily from a decrease from 7,038,874 outstanding Shares at June 30, 2011 to 6,538,874 outstanding Shares at September 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 inverse of the daily performance of silver bullion as measured by the U.S. Dollar fixing price for delivery in London.

For the three months ended September 30, 2012 and 2011, 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 43.0% for the three months ended September 30, 2012, as compared to the decrease of 12.6% for the three months ended September 30, 2011, was primarily due to a depreciation in the value of the assets of the Fund during the three months ended September 30, 2012.

During the three months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on July 12, 2012 at $71.45 per Share and reached its low for the period on September 28, 2012 at $39.88 per Share. By comparison, during the three months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on September 26, 2011 at $110.46 per Share and reached its low for the period on August 22, 2011 at $54.63 per Share.

The benchmark’s rise of 28.0% for the three months ended September 30, 2012, as compared to the benchmark’s decline of 13.1% for the three months ended September 30, 2011, can be attributed to an increase in the price of spot silver in U.S. Dollar terms during the three months ended September 30, 2012.

 

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Net Income/Loss

The following table provides summary income information for the Fund for the three months ended September 30, 2012 and 2011:

 

     Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (290,149   $ (1,293,605

Management fee

     315,479        1,328,783   

Brokerage commissions

     8        1,431   

Net realized gain (loss)

     (30,585,422     184,560,838   

Change in net unrealized appreciation/depreciation

     (36,561,404     (217,251,319

Net income (loss)

   $ (67,436,975   $ (33,984,086

The Fund’s net income decreased for the three months ended September 30, 2012, as compared to the three months ended September 30, 2011, primarily due to an increase in the price of spot silver in U.S. Dollar terms during the three months ended September 30, 2012 .

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q regarding the reverse Share splits for the ProShares UltraShort Silver Fund.

ProShares Ultra Australian Dollar

Since the Fund commenced investment operations on July 17, 2012, a comparison of the Fund’s results of operations for the three months ended September 30, 2011 has not been provided. In addition, since the Fund commenced investment operations on July 17, 2012, the Fund’s results of operations for the period ended September 30, 2012 may not be meaningful.

Fund Performance

The following table provides summary performance information for the Fund from commencement of operations to September 30, 2012:

 

     Period Ended
September  30, 2012
 

NAV beginning of period

   $ 200   

NAV end of period

   $ 4,089,373   

Percentage change in NAV

     2,044,586.5

Shares outstanding beginning of period

     5   

Shares outstanding end of period

     100,005   

Percentage change in Shares outstanding

     2,000,000.0

Shares created

     100,000   

Shares redeemed

     —     

Per Share NAV beginning of period

   $ 40.00   

Per Share NAV end of period

   $ 40.89   

Percentage change in per Share NAV

     2.2

Percentage change in benchmark

     0.6

Benchmark annualized volatility

     8.6

During the period ended September 30, 2012, the increase in the Fund’s NAV resulted from an increase from 5 outstanding Shares at June 30, 2012 to 100,005 outstanding Shares at September 30, 2012. 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 the spot price of the Australian Dollar versus the U.S. Dollar.

 

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For the period ended September 30, 2012, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the daily performance of its benchmark.

During the period ended September 30, 2012, the Fund’s per Share NAV reached its high for the period September 14, 2012 at $42.25 per Share and reached its low for the period on September 5, 2012 at $39.29 per Share.

The benchmark’s rise of 0.6% for the period ended September 30, 2012, can be attributed to an increase in the value of the Australian Dollar versus the U.S. Dollar during the period ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund from commencement of operations to September 30, 2012:

 

      Period Ended
September 30, 2012
 

Net investment income (loss)

   $ (7,953

Brokerage commission

     556   

Offering costs

     8,537   

Limitation by Sponsor

     (522

Net realized gain (loss)

     99,029   

Change in net unrealized appreciation/depreciation

     (1,903

Net income (loss)

   $ 89,173   

ProShares UltraShort Australian Dollar

Since the Fund commenced investment operations on July 17, 2012, a comparison of the Fund’s results of operations for the three months ended September 30, 2011 has not been provided. In addition, since the Fund commenced investment operations on July 17, 2012, the Fund’s results of operations for the period ended September 30, 2012 may not be meaningful.

The following table provides summary performance information for the Fund from commencement of operations to September 30, 2012:

 

     Period Ended
September 30, 2012
 

NAV beginning of period

   $ 200   

NAV end of period

   $ 3,870,326   

Percentage change in NAV

     1,935,063.0

Shares outstanding beginning of period

     5   

Shares outstanding end of period

     100,005   

Percentage change in Shares outstanding

     2,000,000.0

Shares created

     100,000   

Shares redeemed

     —     

Per Share NAV beginning of period

   $ 40.00   

Per Share NAV end of period

   $ 38.70   

Percentage change in per Share NAV

     (3.2 )% 

Percentage change in benchmark

     0.6

Benchmark annualized volatility

     8.6

During the period ended September 30, 2012, the increase in the Fund’s NAV resulted from an increase from 5 outstanding Shares at June 30, 2012 to 100,005 outstanding Shares at September 30, 2012. 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 Australian Dollar versus the U.S. Dollar.

 

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For the period ended September 30, 2012, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the inverse of the daily performance of its benchmark.

During the period ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on September 5, 2012 at $40.44 per Share and reached its low for the period on September 14, 2012 at $37.52 per Share.

The benchmark’s rise of 0.6 % for the period ended September 30, 2012, can be attributed to a rise in the value of the Australian Dollar versus the U.S. Dollar during the period ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund from commencement of operations to September 30, 2012:

 

     Period Ended
September 30, 2012
 

Net investment income (loss)

   $ (7,544

Brokerage commission

     605   

Offering costs

     8,537   

Limitation by Sponsor

     (1,012

Net realized gain (loss)

     (123,487

Change in net unrealized appreciation/depreciation

     1,157   

Net income (loss)

   $ (129,874

ProShares Ultra Euro

Fund Performance

The following table provides summary performance information for the Fund for the three months ended September 30, 2012 and 2011:

 

     Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

NAV beginning of period

   $ 5,659,156      $ 9,061,264   

NAV end of period

   $ 5,802,471      $ 7,715,933   

Percentage change in NAV

     2.5     (14.8 )% 

Shares outstanding beginning of period

     250,014        300,014   

Shares outstanding end of period

     250,014        300,014   

Percentage change in Shares outstanding

     0.0     0.0

Shares created

     —          —     

Shares redeemed

     —          —     

Per Share NAV beginning of period

   $ 22.64      $ 30.20   

Per Share NAV end of period

   $ 23.21      $ 25.72   

Percentage change in per Share NAV

     2.5     (14.8 )% 

Percentage change in benchmark

     1.6     (7.6 )% 

Benchmark annualized volatility

     9.0     11.7

During the three months ended September 30, 2012, 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 June 30, 2012 to September 30, 2012. By comparison, during the three months ended September 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 spot price of the Euro versus the U.S. Dollar. There was no net change in the Fund’s outstanding Shares from June 30, 2011 to September 30, 2011.

 

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For the three months ended September 30, 2012 and 2011, 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 2.5% for the three months ended September 30, 2012, as compared to the decrease of 14.8% for the three months ended September 30, 2011 was primarily due to an increase in the value of the assets held by the Fund during the three months ended September 30, 2012.

During the three months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period September 14, 2012 at $24.20 per Share and reached its low for the period on July 24, 2012 at $20.56 per Share. By comparison, during the three months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on July 1, 2011 at $30.31 per Share and reached its low for the period on September 30, 2011 at $25.72 per Share.

The benchmark’s rise of 1.6% for the three months ended September 30, 2012, as compared to the benchmark’s decline of 7.6% for the three months ended September 30, 2011, can be attributed to an increase in the value of the Euro versus the U.S. Dollar during the three months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the three months ended September 30, 2012 and 2011:

 

     Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (12,208   $ (20,157

Management fee

     13,183        20,668   

Net realized gain (loss)

     55,099        (3,200

Change in net unrealized appreciation/depreciation

     100,424        (1,321,974

Net income (loss)

   $ 143,315      $ (1,345,331

The Fund’s net income increased for the three months ended September 30, 2012, as compared to the three months ended September 30, 2011, primarily due to an increase in the value of the Euro versus the U.S. Dollar during the three months ended September 30, 2012.

ProShares Short Euro

Since the Fund commenced investment operations on June 26, 2012, a comparison of the Fund’s results of operations for the three months ended September 30, 2011 has not been provided.

Fund Performance

The following table provides summary performance information for the Fund for the three months ended September 30, 2012:

 

     Period Ended
September  30, 2012
 

NAV beginning of period

   $ 3,947,410   

NAV end of period

   $ 3,872,555   

Percentage change in NAV

     (1.9 )% 

Shares outstanding beginning of period

     100,005   

Shares outstanding end of period

     100,005   

Percentage change in Shares outstanding

     0.0

Shares created

     —     

Shares redeemed

     —     

Per Share NAV beginning of period

   $ 39.47   

Per Share NAV end of period

   $ 38.72   

Percentage change in per Share NAV

     (1.9 )% 

Percentage change in benchmark

     1.6

Benchmark annualized volatility

     9.0

 

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During the period ended September 30, 2012, 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 the inverse 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 June 30, 2012 to September 30, 2012.

For the period ended September 30, 2012, the Fund’s daily performance had a statistical correlation over 0.99 of the inverse of the daily performance of its benchmark.

During the period ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on July 24, 2012 at $41.33 per Share and reached its low for the period on September 14, 2012 at $37.95 per Share.

The benchmark’s rise of 1.6% for the period ended September 30, 2012, can be attributed to an increase in the value of the Euro versus the U.S. Dollar during the three months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the three months ended September 30, 2012:

 

     Three Months Ended
September 30, 2012
 

Net investment income (loss)

   $ (9,011

Brokerage commission

     134   

Offering costs

     10,334   

Limitation by Sponsor

     (816

Net realized gain (loss)

     (102,556

Change in net unrealized appreciation/depreciation

     36,712   

Net income (loss)

   $ (74,855

ProShares UltraShort Euro

Fund Performance

The following table provides summary performance information for the Fund for the three months ended September 30, 2012 and 2011:

 

      Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

NAV beginning of period

   $ 896,915,348      $ 632,327,167   

NAV end of period

   $ 770,862,313      $ 936,941,013   

Percentage change in NAV

     (14.1 )%      48.2

Shares outstanding beginning of period

     42,900,014        37,750,014   

Shares outstanding end of period

     38,300,014        48,600,014   

Percentage change in Shares outstanding

     (10.7 )%      28.7

Shares created

     1,750,000        17,550,000   

Shares redeemed

     6,350,000        6,700,000   

Per Share NAV beginning of period

   $ 20.91      $ 16.75   

Per Share NAV end of period

   $ 20.13      $ 19.28   

Percentage change in per Share NAV

     (3.7 )%      15.1

Percentage change in benchmark

     1.6     (7.6 )% 

Benchmark annualized volatility

     9.0     11.7

 

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During the three months ended September 30, 2012, the decrease in the Fund’s NAV resulted from a decrease from 42,900,014 outstanding Shares at June 30, 2012 to 38,300,014 outstanding Shares at September 30, 2012. The decrease 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 spot price of the Euro versus the U.S. Dollar. By comparison, during the three months ended September 30, 2011, the increase in the Fund’s NAV resulted primarily from an increase from 37,750,014 outstanding Shares at June 30, 2011 to 48,600,014 outstanding Shares at September 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 spot price of the Euro versus the U.S. Dollar.

For the three months ended September 30, 2012 and 2011, 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 3.7% for the three months ended September 30, 2012, as compared to the per Share NAV increase of 15.1% for the three months ended September 30, 2011 was primarily due to a depreciation in the value of the assets held by the Fund during the three months ended September 30, 2012.

During the three months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on July 24, 2012 at $22.94 per Share and reached its low for the period on September 14, 2012 at $19.33 per Share. By comparison, during the three months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on September 30, 2011 at $19.28 per Share and reached its low for the period on August 29, 2011 at $16.54 per Share.

The benchmark’s rise of 1.6% for the three months ended September 30, 2012, as compared to the benchmark’s decline of 7.6% for the three months ended September 30, 2011, can be attributed to a rise in the value of the Euro versus the U.S. Dollar during the three months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the three months ended September 30, 2012 and 2011:

 

     Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (1,892,376   $ (1,691,141

Management fee

     2,052,823        1,728,002   

Net realized gain (loss)

     (14,573,257     (11,049,248

Change in net unrealized appreciation/depreciation

     (12,582,165     122,318,756   

Net income (loss)

   $ (29,047,798   $ 109,578,367   

The Fund’s net income decreased for the three months ended September 30, 2012, as compared to the three months ended September 30, 2011, primarily due to a rise in the value of the Euro versus the U.S. Dollar for the three months ended September 30, 2012.

 

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ProShares Ultra Yen

Fund Performance

The following table provides summary performance information for the Fund for the three months ended September 30, 2012 and 2011:

 

     Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

NAV beginning of period

   $ 5,024,268      $ 3,376,952   

NAV end of period

   $ 5,249,866      $ 5,485,629   

Percentage change in NAV

     4.5     62.4

Shares outstanding beginning of period

     150,014        100,014   

Shares outstanding end of period

     150,014        150,014   

Percentage change in Shares outstanding

     0.0     50.0

Shares created

     —          50,000   

Shares redeemed

     —          —     

Per Share NAV beginning of period

   $ 33.49      $ 33.76   

Per Share NAV end of period

   $ 35.00      $ 36.57   

Percentage change in per Share NAV

     4.5     8.3

Percentage change in benchmark

     2.5     4.4

Benchmark annualized volatility

     6.1     8.9

During the three months ended September 30, 2012, 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 June 30, 2012 to September 30, 2012. By comparison, during the three months ended September 30, 2011, the increase in the Fund’s NAV resulted primarily from an increase from 100,014 outstanding Shares at June 30, 2011 to 150,014 outstanding Shares at September 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 the spot price of the Japanese Yen versus the U.S. Dollar.

For the three months ended September 30, 2012 and 2011, 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 4.5% for the three months ended September 30, 2012, as compared to the increase of 8.3% for the three months ended September 30, 2011, was primarily due to a lesser appreciation in the value of the assets held by the Fund during the three months ended September 30, 2012.

During the three months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on September 13, 2012 at $35.47 per Share and reached its low for the period on July 5, 2012 at $33.52 per Share. By comparison, during the three months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on September 22, 2011 at $37.40 per Share and reached its low for the period on July 7, 2011 at $33.17 per Share.

The benchmark’s rise of 2.5% for the three months ended September 30, 2012, as compared to the benchmark’s rise of 4.4% for the three months ended September 30, 2011, can be attributed to a lesser increase in the value of the Japanese Yen versus the U.S. Dollar during the three months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the three months ended September 30, 2012 and 2011:

 

     Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (11,359   $ (12,276

Management fee

     12,368        12,492   

Net realized gain (loss)

     90,137        496,377   

Change in net unrealized appreciation/depreciation

     146,820        (71,571

Net income (loss)

   $ 225,598      $ 412,530   

 

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The Fund’s net income decreased for the three months ended September 30, 2012, as compared to the three months ended September 30, 2011, primarily due to a lesser increase in the value of the Japanese Yen versus the U.S. Dollar during the three months ended September 30, 2012.

ProShares UltraShort Yen*

Fund Performance

The following table provides summary performance information for the Fund for the three months ended September 30, 2012 and 2011:

 

     Three Months
Ended September 30,
2012
    Three Months
Ended September 30,
2011
 

NAV beginning of period

   $ 230,703,599      $ 356,417,645   

NAV end of period

   $ 249,828,407      $ 271,440,942   

Percentage change in NAV

     8.3     (23.8 )% 

Shares outstanding beginning of period

     5,299,294        7,850,004   

Shares outstanding end of period

     6,049,294        6,566,671   

Percentage change in Shares outstanding

     14.2     (16.3 )% 

Shares created

     1,450,000        —     

Shares redeemed

     700,000        1,283,333   

Per Share NAV beginning of period

   $ 43.53      $ 45.40   

Per Share NAV end of period

   $ 41.30      $ 41.34   

Percentage change in per Share NAV

     (5.1 )%      (9.0 )% 

Percentage change in benchmark

     2.5     4.4

Benchmark annualized volatility

     6.1     8.9

During the three months ended September 30, 2012, the increase in the Fund’s NAV resulted primarily from an increase from 5,299,294 outstanding Shares at June 30, 2012 to 6,049,294 outstanding Shares at September 30, 2012. 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 three months ended September 30, 2011, the decrease in the Fund’s NAV resulted primarily from a decrease from 7,850,004 outstanding Shares at June 30, 2011 to 6,566,671 outstanding Shares at September 30, 2011. 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 inverse of the daily performance of the spot price of the Japanese Yen versus the U.S. Dollar.

For the three months ended September 30, 2012 and 2011, 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 three months ended September 30, 2012, as compared to the decrease of 9.0% for the three months ended September 30, 2011 was primarily due to a lesser depreciation in the value of the assets held by the Fund during the three months ended September 30, 2012.

During the three months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on July 5, 2012 at $43.48 per Share and reached its low for the period on September 13, 2012 at $40.82 per Share. By comparison, during the three months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on July 7, 2011 at $46.20 per Share and reached its low for the period on September 22, 2011 at $40.45 per Share.

The benchmark’s rise of 2.5% for the three months ended September 30, 2012, as compared to the benchmark’s rise of 4.4% for the three months ended September 30, 2011, can be attributed to a lesser increase in the value of the Japanese Yen versus the U.S. Dollar during the three months ended September 30, 2012.

 

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Net Income/Loss

The following table provides summary income information for the Fund for the three months ended September 30, 2012 and 2011:

 

     Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (495,697   $ (701,439

Management fee

     537,172        725,344   

Net realized gain (loss)

     (4,756,460     (34,105,281

Change in net unrealized appreciation/depreciation

     (6,715,809     4,590,082   

Net income (loss)

   $ (11,967,966   $ (30,216,638

The Fund’s net income increased for the three months ended September 30, 2012, as compared to the three months ended September 30, 2011, primarily due to a lesser increase in the value of the Japanese Yen versus the U.S. Dollar during the three months ended September 30, 2012.

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q regarding the reverse Share split for the ProShares UltraShort Yen Fund.

ProShares Ultra VIX Short-Term Futures ETF*

Since the Fund commenced investment operations on October 3, 2011, a comparison of the Fund’s results of operations for the three months ended September 30, 2011 has not been provided.

Fund Performance

The following table provides summary performance information for the Fund for the three months ended September 30, 2012:

 

     Three Months Ended
September 30, 2012
 

NAV beginning of period

   $ 299,133,075   

NAV end of period

   $ 193,256,492   

Percentage change in NAV

     (35.4 )% 

Shares outstanding beginning of period

     3,109,151   

Shares outstanding end of period

     6,359,151   

Percentage change in Shares outstanding

     104.5

Shares created

     6,390,000   

Shares redeemed

     3,140,000   

Per Share NAV beginning of period

   $ 96.21   

Per Share NAV end of period

   $ 30.39   

Percentage change in per Share NAV

     (68.4 )% 

Percentage change in benchmark

     (40.6)

Benchmark annualized volatility

     64.1

During the three months ended September 30, 2012, 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 S&P 500 VIX Short-Term Futures Index. The decrease in the Fund’s NAV was offset by an increase from 3,109,151 outstanding Shares at June 30, 2012 to 6,359,151 outstanding Shares at September 30, 2012.

For the three months ended September 30, 2012, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the daily performance of its benchmark.

During the three months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on July 24, 2012 at $92.00 per Share and reached its low for the period on September 24, 2012 at $28.85 per Share.

 

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The benchmark’s decline of 40.6% for the three months ended September 30, 2012, can be attributed to decreasing prices of the near-term futures contracts on the VIX futures curve.

Net Income/Loss

The following table provides summary income information for the Fund for the three months ended September 30, 2012:

 

     Three Months Ended
September 30, 2012
 

Net investment income (loss)

   $ (1,045,175

Management fee

     586,150   

Brokerage commissions

     462,005   

Offering costs

     19,313   

Net realized gain (loss)

     (299,186,009

Change in net unrealized appreciation/depreciation

     39,589,171   

Net income (loss)

   $ (260,642,013

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q regarding the reverse Share splits for the ProShares Ultra VIX Short-Term Futures ETF.

ProShares VIX Short-Term Futures ETF

Fund Performance

The following table provides summary performance information for the Fund for the three months ended September 30, 2012 and 2011:

 

     Three Months
Ended September 30,
2012
    Three Months
Ended September 30,
2011
 

NAV beginning of period

   $ 137,638,067      $ 46,602,361   

NAV end of period

   $ 165,803,550      $ 28,897,739   

Percentage change in NAV

     20.5     (38.0 )% 

Shares outstanding beginning of period

     4,300,005        1,025,005   

Shares outstanding end of period

     8,725,005        250,005   

Percentage change in Shares outstanding

     102.9     (75.6 )% 

Shares created

     11,225,000        2,250,000   

Shares redeemed

     6,800,000        3,025,000   

Per Share NAV beginning of period

   $ 32.01      $ 45.47   

Per Share NAV end of period

   $ 19.00      $ 115.59   

Percentage change in per Share NAV

     (40.6 )%      154.2

Percentage change in benchmark

     (40.6 )%      157.3

Benchmark annualized volatility

     64.1     97.2

During the three months ended September 30, 2012, the increase in the Fund’s NAV resulted from an increase from 4,300,005 outstanding Shares at June 30, 2012 to 8,725,005 outstanding Shares at September 30, 2012. 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. By comparison, during the three months ended September 30, 2011, the decrease in the Fund’s NAV resulted from a decrease from 1,025,005 outstanding Shares at June 30, 2011 to 250,005 outstanding Shares at September 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 the daily performance of the S&P 500 VIX Short-Term Futures Index.

For the three months ended September 30, 2012 and 2011, the Fund’s daily performance had a statistical correlation over 0.99 of the daily performance of its benchmark. The Fund’s per Share NAV decrease of 40.6% for the three months ended September 30, 2012, as compared to the increase of 154.2% for the three months ended September 30, 2011, was primarily due to a depreciation in the value of the assets of the Fund during the three months ended September 30, 2012.

 

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During the three months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on July 24, 2012 at $31.72 per Share and reached its low for the period on September 24, 2012 at $18.38 per Share. By comparison, during the three months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on September 30, 2011 at $115.59 per Share and reached its low for the period on July 7, 2011 at $43.15 per Share.

The benchmark’s decline of 40.6% for the three months ended September 30, 2012, as compared to the benchmark’s rise of 157.3% for the three months ended September 30, 2011, can be attributed to declining prices of the near-term futures contracts on the VIX futures curve during the three months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the three months ended September 30, 2012 and 2011:

 

     Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (293,913   $ (74,409

Management fee

     315,055        26,672   

Offering costs

     —          49,621   

Net realized gain (loss)

     (85,612,284     24,351,300   

Change in net unrealized appreciation/depreciation

     13,016,490        7,991,692   

Net income (loss)

   $ (72,889,707   $ 32,268,583   

The Fund’s net income decreased for the three months ended September 30, 2012, as compared to the three months ended September 30, 2011, primarily due to the decline in the Fund’s benchmark during the three months ended September 30, 2012.

ProShares Short VIX Short-Term Futures ETF*

Since the Fund commenced investment operations on October 3, 2011, a comparison of the Fund’s results of operations for the three months ended September 30, 2011 has not been provided.

Fund Performance

The following table provides summary performance information for the Fund for the three months ended September 30, 2012:

 

     Three Months Ended
September 30, 2012
 

NAV beginning of period

   $ 13,585,406   

NAV end of period

   $ 54,441,724   

Percentage change in NAV

     300.7

Shares outstanding beginning of period

     300,020   

Shares outstanding end of period

     800,020   

Percentage change in Shares outstanding

     166.7

Shares created

     4,400,000   

Shares redeemed

     3,900,000   

Per Share NAV beginning of period

   $ 45.28   

Per Share NAV end of period

   $ 68.05   

Percentage change in per Share NAV

     50.3

Percentage change in benchmark

     (40.6)

Benchmark annualized volatility

     64.1

 

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During the three months ended September 30, 2012, the increase in the Fund’s NAV resulted primarily from an increase from 300,020 outstanding Shares at June 30, 2012 to 800,020 outstanding Shares at September 30, 2012. 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 the inverse of the daily performance of the S&P 500 VIX Short-Term Futures Index.

For the three months ended September 30, 2012, the Fund’s daily performance had a statistical correlation over 0.99 of the inverse of the daily performance of its benchmark.

During the three months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on September 24, 2012 at $71.25 per Share and reached its low for the period on July 24, 2012 at $44.11 per Share.

The benchmark’s decline of 40.6% for the three months ended September 30, 2012, can be attributed to declining prices of the near-term futures contracts on the VIX Futures curve.

Net Income/Loss

The following table provides summary income information for the Fund for the three months ended September 30, 2012:

 

     Three Months Ended
September 30, 2012
 

Net investment income (loss)

   $ (123,735

Management fee

     37,125   

Brokerage commissions

     71,818   

Offering costs

     19,314   

Net realized gain (loss)

     10,270,631   

Change in net unrealized appreciation/depreciation

     (146,394

Net income (loss)

   $ 10,000,502   

 

* See Note 10 of the Notes to Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q regarding the Share split for the ProShares Short VIX Short-Term Futures ETF.

ProShares VIX Mid-Term Futures ETF

Fund Performance

The following table provides summary performance information for the Fund for the three months ended September 30, 2012 and 2011:

 

     Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

NAV beginning of period

   $ 85,305,861      $ 13,895,731   

NAV end of period

   $ 100,655,318      $ 13,436,216   

Percentage change in NAV

     18.0     (3.3 )% 

Shares outstanding beginning of period

     1,550,005        225,005   

Shares outstanding end of period

     2,425,005        150,005   

Percentage change in Shares outstanding

     56.5     (33.3 )% 

Shares created

     975,000        50,000   

Shares redeemed

     100,000        125,000   

Per Share NAV beginning of period

   $ 55.04      $ 61.76   

Per Share NAV end of period

   $ 41.51      $ 89.57   

Percentage change in per Share NAV

     (24.6 )%      45.0

Percentage change in benchmark

     (24.4 )%      45.4

Benchmark annualized volatility

     25.9     48.5

 

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During the three months ended September 30, 2012, the increase in the Fund’s NAV resulted primarily from an increase from 1,550,005 outstanding Shares at June 30, 2012 to 2,425,005 outstanding Shares at September 30, 2012. 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. By comparison, during the three months ended September 30, 2011, the decrease in the Fund’s NAV resulted from a decrease from 225,005 outstanding Shares at June 30, 2011 to 150,005 outstanding Shares at September 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 the daily performance of the S&P 500 VIX Mid-Term Futures Index.

For the three months ended September 30, 2012 and 2011, the Fund’s daily performance had a statistical correlation over 0.99 of the daily performance of its benchmark. The Fund’s per Share NAV decrease of 24.6% for the three months ended September 30, 2012, as compared to the increase of 45.0% for the three months ended September 30, 2011, was primarily due to a depreciation in the value of the assets of the Fund during the three months ended September 30, 2012.

During the three months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period July 2, 2012 at $53.90 per Share and reached its low for the period on September 27, 2012 at $41.30 per Share. By comparison, during the three months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on September 30, 2011 at $89.57 per Share and reached its low for the period on July 7, 2011 at $57.37 per Share.

The benchmark’s decline of 24.4% for the three months ended September 30, 2012, as compared to the benchmark’s rise of 45.4% for the three months ended September 30, 2011, can be attributed to a decline in prices of the futures contracts that made up the S&P 500 VIX Mid-Term Futures Index during the three months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the three months ended September 30, 2012 and 2011:

 

     Three Months Ended
September 30, 2012
    Three Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (189,842   $ (26,403

Offering costs

     202,688        31,013   

Limitation by Sponsor

     —          (4,041

Net realized gain (loss)

     (19,925,541     2,364,369   

Change in net unrealized appreciation/depreciation

     (7,588,632     2,243,166   

Net income (loss)

   $ (27,704,015   $ 4,581,132   

The Fund’s net income decreased for the three months ended September 30, 2012, as compared to the three months ended September 30, 2011, primarily due to a decline in the Fund’s benchmark during the three months ended September 30, 2012.

 

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Results of Operations for the Nine Months Ended September 30, 2012 Compared to the Nine Months Ended September 30, 2011

ProShares Ultra DJ-UBS Commodity

Fund Performance

The following table provides summary performance information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

NAV beginning of period

   $ 9,058,529      $ 18,186,658   

NAV end of period

   $ 8,400,978      $ 11,710,948   

Percentage change in NAV

     (7.3 )%      (35.6 )% 

Shares outstanding beginning of period

     350,014        500,014   

Shares outstanding end of period

     300,014        450,014   

Percentage change in Shares outstanding

     (14.3 )%      (10.0 %) 

Shares created

     —          50,000   

Shares redeemed

     50,000        100,000   

Per Share NAV beginning of period

   $ 25.88      $ 36.37   

Per Share NAV end of period

   $ 28.00      $ 26.02   

Percentage change in per Share NAV

     8.2     (28.5 )% 

Percentage change in benchmark

     5.6     (13.6 )% 

Benchmark annualized volatility

     14.8     18.4

During the nine months ended September 30, 2012, the decrease in the Fund’s NAV resulted from a decrease from 350,014 outstanding Shares at December 31, 2011 to 300,014 outstanding Shares at September 30, 2012. 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 Dow Jones-UBS Commodity Index. By comparison, during the nine months ended September 30, 2011, the decrease in the Fund’s NAV resulted primarily from a decrease from 500,014 outstanding Shares at December 31, 2010 to 450,014 outstanding Shares at September 30, 2011. 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 nine months ended September 30, 2012 and 2011, 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 8.2% for the period ended September 30, 2012, as compared to the decrease of 28.5% for the period ended September 30, 2011, was primarily due to an appreciation in the value of the assets of the Fund during the nine months ended September 30, 2012.

During the nine months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on September 14, 2012 at $29.39 per Share and reached its low for the period on June 1, 2012 at $20.71 per Share. By comparison, during the nine months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on April 29, 2011 at $41.87 per Share and reached its low for the period on September 30, 2011 at $26.02 per Share.

The benchmark’s rise of 5.6% for the nine months ended September 30, 2012, as compared to the benchmark’s decline of 13.6% for the nine months ended September 30, 2011, can be attributed to an appreciation of the underlying components of the index during the nine months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (59,565   $ (121,339

Management fee

     62,966        131,603   

Net realized gain (loss)

     (234,507     939,697   

Change in net unrealized appreciation/depreciation

     975,248        (5,646,187

Net income (loss)

   $ 681,176      $ (4,827,829

 

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The Fund’s net income increased for the nine months ended September 30, 2012, as compared to the nine months ended September 30, 2011, primarily due to an increase in the Fund’s benchmark index during the nine months ended September 30, 2012.

ProShares UltraShort DJ-UBS Commodity*

Fund Performance

The following table provides summary performance information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

NAV beginning of period

   $ 9,107,146      $ 1,440,073   

NAV end of period

   $ 2,881,496      $ 12,378,058   

Percentage change in NAV

     (68.4 )%      759.5

Shares outstanding beginning of period

     159,997        30,003   

Shares outstanding end of period

     59,997        209,997   

Percentage change in Shares outstanding

     (62.5 )%      599.9

Shares created

     —          1,780,000   

Shares redeemed

     100,000        1,600,006   

Per Share NAV beginning of period

   $ 56.92      $ 48.00   

Per Share NAV end of period

   $ 48.03      $ 58.94   

Percentage change in per Share NAV

     (15.6 )%      22.8

Percentage change in benchmark

     5.6     (13.6 )% 

Benchmark annualized volatility

     14.8     18.4

During the nine months ended September 30, 2012, the decrease in the Fund’s NAV resulted from a decrease from 159,997 outstanding Shares at December 31, 2011 to 59,997 Shares at September 30, 2012. The decrease 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 Commodity Index. By comparison, during the nine months ended September 30, 2011, the increase in the Fund’s NAV resulted primarily from an increase from 30,003 outstanding Shares at December 31, 2010 to 209,997 outstanding Shares at September 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.

For the nine months ended September 30, 2012 and 2011, 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 nine months ended September 30, 2012, as compared to the increase of 22.8% for the nine months ended September 30, 2011, was primarily due to a depreciation in the value of the assets of the Fund during the nine months ended September 30, 2012.

During the nine months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on June 1, 2012 at $68.06 per Share and reached its low for the period on September 14, 2012 at $46.01 per Share. By comparison, during the nine months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on September 30, 2011 at $58.94 per Share and reached its low for the period on April 29, 2011 at $39.91 per Share.

The benchmark’s rise of 5.6% for the nine months ended September 30, 2012, as compared to the benchmark’s decline of 13.6% for the nine months ended September 30, 2011, can be attributed to an appreciation of the underlying components of the index during the nine months ended September 30, 2012.

 

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Net Income/Loss

The following table provides summary income information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (41,159   $ (107,931

Management fee

     43,386        111,453   

Net realized gain (loss)

     653,203        (3,366,124

Change in net unrealized appreciation/depreciation

     (684,049     1,168,483   

Net income (loss)

   $ (72,005   $ (2,305,572

The Fund’s net income increased for the nine months ended September 30, 2012, as compared to the nine months ended September 30, 2011, primarily due to an increase in the Fund’s benchmark index in conjunction with a significant decline in outstanding shares from the nine months ended September 30, 2011 to the nine months ended September 30, 2012.

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q regarding the reverse Share split for the ProShares UltraShort DJ-UBS Commodity Fund.

 

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ProShares Ultra DJ-UBS Crude Oil*

Fund Performance

The following table provides summary performance information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

NAV beginning of period

   $ 251,395,322      $ 228,133,077   

NAV end of period

   $ 381,973,929      $ 380,889,526   

Percentage change in NAV

     51.9     67.0

Shares outstanding beginning of period

     6,149,170        4,562,504   

Shares outstanding end of period

     12,199,170        13,949,170   

Percentage change in Shares outstanding

     98.4     205.7

Shares created

     19,300,000        28,375,000   

Shares redeemed

     13,250,000        18,988,334   

Per Share NAV beginning of period

   $ 40.88      $ 50.00   

Per Share NAV end of period

   $ 31.31      $ 27.31   

Percentage change in per Share NAV

     (23.4 )%      (45.4 )% 

Percentage change in benchmark

     (9.8 )%      (22.3 )% 

Benchmark annualized volatility

     26.0     34.3

During the nine months ended September 30, 2012, the increase in the Fund’s NAV resulted primarily from an increase from 6,149,170 outstanding Shares at December 31, 2011 to 12,199,170 outstanding Shares at September 30, 2012. 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 WTI Crude Oil Sub-Index. By comparison, during nine months ended September 30, 2011, the increase in the Fund’s NAV resulted from an increase from 4,562,504 outstanding Shares at December 31, 2010 to 13,949,170 outstanding Shares at September 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 WTI Crude Oil Sub-Index.

For the nine months ended September 30, 2012 and 2011, 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 23.4% for the nine months ended September 30, 2012, as compared to the decrease of 45.4% for the nine months ended September 30, 2011, was primarily due to a lesser depreciation in the value of the assets of the Fund during the nine months ended September 30, 2012.

During the nine months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on July 19, 2012 at $49.25 per Share and reached its low for the period on June 28, 2012 at $23.36 per Share. By comparison, during the nine months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on April 29, 2011 at $63.90 per Share and reached its low for the period on September 30, 2011 at $27.31 per Share.

The benchmark’s decline of 9.8% for the nine months ended September 30, 2012, as compared to the benchmark’s decline of 22.3% for the nine months ended September 30, 2011, can be attributed to a lesser decrease in the price of WTI Crude Oil during the nine months ended September 30, 2012.

 

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Net Income/Loss

The following table provides summary income information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (2,192,481   $ (2,337,960

Management fee

     2,267,600        2,416,617   

Brokerage commission

     51,677        75,805   

Net realized gain (loss)

     (3,016,491     (13,416,979

Change in net unrealized appreciation/depreciation

     (7,228,443     (74,873,291

Net income (loss)

   $ (12,437,415   $ (90,628,230

The Fund’s net income increased for the nine months ended September 30, 2012, as compared to the nine months ended September 30, 2011, primarily due to a lesser decrease in the price of WTI Crude Oil during the nine months ended September 30, 2012.

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q regarding the reverse Share split for the ProShares Ultra DJ-UBS Crude Oil Fund.

ProShares UltraShort DJ-UBS Crude Oil*

Fund Performance

The following table provides summary performance information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

NAV beginning of period

   $ 144,389,893      $ 132,214,257   

NAV end of period

   $ 116,516,762      $ 72,357,831   

Percentage change in NAV

     (19.3 )%      (45.3 )% 

Shares outstanding beginning of period

     3,719,944        2,600,003   

Shares outstanding end of period

     2,869,944        1,119,944   

Percentage change in Shares outstanding

     (22.8 )%      (56.9 )% 

Shares created

     5,250,000        8,030,000   

Shares redeemed

     6,100,000        9,510,059   

Per Share NAV beginning of period

   $ 38.82      $ 50.85   

Per Share NAV end of period

   $ 40.60      $ 64.61   

Percentage change in per Share NAV

     4.6     27.1

Percentage change in benchmark

     (9.8 )%      (22.3 )% 

Benchmark annualized volatility

     26.0     34.3

During the nine months ended September 30, 2012, the decrease in the Fund’s NAV resulted from a decrease from 3,719,944 outstanding Shares at December 31, 2011 to 2,869,944 outstanding Shares at September 30, 2012. 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 WTI Crude Oil Sub-Index. By comparison, during the nine months ended September 30, 2011, the decrease in the Fund’s NAV resulted from a decrease from 2,600,003 outstanding Shares at December 31, 2010 to 1,119,944 outstanding Shares at September 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 inverse of the daily performance of the Dow Jones-UBS WTI Crude Oil Sub-Index.

For the nine months ended September 30, 2012 and 2011, 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 4.6% for the nine months ended September 30, 2012, as compared to the increase of 27.1% for the nine months ended September 30, 2011, was primarily due to a lesser appreciation in the value of the assets of the Fund during the nine months ended September 30, 2012.

During the nine months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on June 28, 2012 at $60.49 per Share and reached its low for the period on February 24, 2012 at $31.27 per Share. By comparison, during the nine months ended September 30, 2011, the Fund’s NAV reached its high for the period on August 9, 2011 at $67.93 per Share and reached its low for the period on April 29, 2011 at $36.11 per Share.

 

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The benchmark’s decline of 9.8% for the nine months ended September 30, 2012, as compared to the benchmark’s decline of 22.3% for the nine months ended September 30, 2011, can be attributed to a lesser decrease in the price of WTI Crude Oil during the nine months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (846,352   $ (908,915

Management fee

     871,751        936,197   

Brokerage commission

     24,596        40,643   

Net realized gain (loss)

     26,048,369        58,477,447   

Change in net unrealized appreciation/depreciation

     4,449,263        18,005,467   

Net income (loss)

   $ 29,651,280      $ 75,573,999   

The Fund’s net income decreased for the nine months ended September 30, 2012, as compared to the nine months ended September 30, 2011, primarily due to a lesser decrease in the price of WTI Crude Oil during the nine months ended September 30, 2012.

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q regarding the reverse Share split for the ProShares UltraShort DJ-UBS Crude Oil Fund.

ProShares Ultra DJ-UBS Natural Gas*

Since the Fund commenced investment operations on October 4, 2011, a comparison of the Fund’s results of operations for the nine months ended September 30, 2011 has not been provided.

Fund Performance

The following table provides summary performance information for the Fund for the nine months ended September 30, 2012:

 

     Nine Months Ended
September 30, 2012
 

NAV beginning of period

   $ 4,079,349   

NAV end of period

   $ 67,505,640   

Percentage change in NAV

     1,554.8

Shares outstanding beginning of period

     40,002   

Shares outstanding end of period

     1,319,941   

Percentage change in Shares outstanding

     3,199.7

Shares created

     2,080,000   

Shares redeemed

     800,061   

Per Share NAV beginning of period

   $ 101.98   

Per Share NAV end of period

   $ 51.14   

Percentage change in per Share NAV

     (49.8 )% 

Percentage change in benchmark

     (21.9 )% 

Benchmark annualized volatility

     49.5

During the nine months ended September 30, 2012, the increase in the Fund’s NAV resulted from an increase from 40,002 outstanding Shares at December 31, 2011 to 1,319,941 outstanding Shares at September 30, 2012. 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 Natural Gas Sub-indexSM.

For the nine months ended September 30, 2012, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the daily performance of its benchmark.

 

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During the nine months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on January 4, 2012 at $109.49 per Share and reached its low for the period on April 19, 2012 at $29.42 per Share.

The benchmark’s decline of 21.9% for the nine months ended September 30, 2012, can be attributed to a decrease in the price of Henry Hub Natural Gas during the nine months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the nine months ended September 30, 2012:

 

     Nine Months Ended
September 30, 2012
 

Net investment income (loss)

   $ (396,107

Management fee

     260,956   

Brokerage commission

     90,703   

Offering costs

     63,342   

Net realized gain (loss)

     (5,781,054

Change in net unrealized appreciation/depreciation

     13,596,155   

Net income (loss)

   $ 7,418,994   

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q regarding the reverse Share split for the ProShares Ultra DJ-UBS Natural Gas Fund.

ProShares UltraShort DJ-UBS Natural Gas*

Since the Fund commenced investment operations on October 4, 2011, a comparison of the Fund’s results of operations for the nine months ended September 30, 2011 has not been provided.

Fund Performance

The following table provides summary performance information for the Fund for the nine months ended September 30, 2012:

 

     Nine Months Ended
September 30, 2012
 

NAV beginning of period

   $ 7,142,310   

NAV end of period

   $ 13,282,921   

Percentage change in NAV

     86.0

Shares outstanding beginning of period

     300,030   

Shares outstanding end of period

     600,030   

Percentage change in Shares outstanding

     100.0

Shares created

     850,000   

Shares redeemed

     550,000   

Per Share NAV beginning of period

   $ 23.81   

Per Share NAV end of period

   $ 22.14   

Percentage change in per Share NAV

     (7.0 )% 

Percentage change in benchmark

     (21.9 )% 

Benchmark annualized volatility

     49.5

During the nine months ended September 30, 2012, the increase in the Fund’s NAV resulted primarily from an increase from 300,030 outstanding Shares at December 31, 2011 to 600,030 outstanding Shares at September 30, 2012. 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 Dow Jones-UBS Natural Gas Sub-indexSM.

For the nine months ended September 30, 2012, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the inverse of the daily performance of its benchmark.

 

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During the nine months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period April 19, 2012 at $61.42 per Share and reached its low for the period on July 30, 2012 at $22.02 per Share.

The benchmark’s decline of 21.9% for the nine months ended September 30, 2012, can be attributed to a decrease in the price of Henry Hub Natural Gas during the nine months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the nine months ended September 30, 2012:

 

     Nine Months Ended
September 30, 2012
 

Net investment income (loss)

   $ (150,656

Management fee

     39,735   

Brokerage commission

     52,462   

Offering costs

     63,342   

Net realized gain (loss)

     1,537,175   

Change in net unrealized appreciation/depreciation

     (4,182,367

Net income (loss)

   $ (2,795,848

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q regarding the Share split for the ProShares UltraShort DJ-UBS Natural Gas Fund.

ProShares Ultra Gold

Fund Performance

The following table provides summary performance information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

NAV beginning of period

   $ 326,399,360      $ 259,562,075   

NAV end of period

   $ 388,689,908      $ 374,010,221   

Percentage change in NAV

     19.1     44.1

Shares outstanding beginning of period

     4,300,014        3,750,014   

Shares outstanding end of period

     4,000,014        4,300,014   

Percentage change in Shares outstanding

     (7.0 )%      14.7

Shares created

     500,000        1,250,000   

Shares redeemed

     800,000        700,000   

Per Share NAV beginning of period

   $ 75.91      $ 69.22   

Per Share NAV end of period

   $ 97.17      $ 86.98   

Percentage change in per Share NAV

     28.0     25.7

Percentage change in benchmark

     16.0     15.3

Benchmark annualized volatility

     18.1     20.5

During the nine months ended September 30, 2012, 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 4,300,014 outstanding Shares at December 31, 2011 to 4,000,014 outstanding Shares at September 30, 2012. By comparison, during the nine months ended September 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. The increase in the Fund’s NAV also resulted from an increase from 3,750,014 outstanding Shares at December 31, 2010 to 4,300,014 outstanding Shares at September 30, 2011.

 

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For the nine months ended September 30, 2012 and 2011, 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 28.0% for the nine months ended September 30, 2012, as compared to the increase of 25.7% for the nine months ended September 30, 2011, was primarily due to a greater appreciation in the value of the assets of the Fund during the nine months ended September 30, 2012.

During the nine months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on February 28, 2012 at $101.40 per Share and reached its low for the period on May 30, 2012 at $74.51 per Share. By comparison, during the nine months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on September 6, 2011 at $120.56 per Share and reached its low for the period on January 28, 2011 at $60.68 per Share.

The benchmark’s rise of 16.0% for the nine months ended September 30, 2012, as compared to the benchmark’s rise of 15.3% for the nine months ended September 30, 2011, can be attributed to a greater increase in the price of spot gold in U.S. Dollar terms during the nine months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (2,395,141   $ (2,031,008

Management fee

     2,546,445        2,166,956   

Brokerage commission

     33        2,830   

Net realized gain (loss)

     (27,070,473     55,429,164   

Change in net unrealized appreciation/depreciation

     111,573,251        (623,541

Net income (loss)

   $ 82,107,637      $ 52,774,615   

The Fund’s net income increased for the nine months ended September 30, 2012, as compared to the nine months ended September 30, 2011, primarily due to a greater increase in the price of spot gold in U.S. Dollar terms during the nine months ended September 30, 2012.

ProShares UltraShort Gold*

Fund Performance

The following table provides summary performance information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

NAV beginning of period

   $ 198,298,571      $ 77,732,507   

NAV end of period

   $ 92,790,217      $ 178,039,495   

Percentage change in NAV

     (53.2 )%      129.0

Shares outstanding beginning of period

     2,397,475        684,975   

Shares outstanding end of period

     1,647,475        2,309,975   

Percentage change in Shares outstanding

     (31.3 )%      237.2

Shares created

     —          2,225,000   

Shares redeemed

     750,000        600,000   

Per Share NAV beginning of period

   $ 82.71      $ 113.48   

Per Share NAV end of period

   $ 56.32      $ 77.07   

Percentage change in per Share NAV

     (31.9 )%      (32.1 )% 

Percentage change in benchmark

     16.0     15.3

Benchmark annualized volatility

     18.1     20.5

 

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During the nine months ended September 30, 2012, the decrease in the Fund’s NAV resulted primarily from a decrease from 2,397,475 outstanding Shares at December 31, 2011 to 1,647,475 outstanding Shares at September 30, 2012. 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 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 nine months ended September 30, 2011, the increase in the Fund’s NAV resulted from an increase from 684,975 outstanding Shares at December 31, 2010 to 2,309,975 outstanding Shares at September 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.

For the nine months ended September 30, 2012 and 2011, 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 31.9% for the nine months ended September 30, 2012, as compared to the decrease of 32.1% for the nine months ended September 30, 2011, was primarily due to depreciation in the value of the assets of the Fund in conjunction with significant fluctuations in outstanding shares during the nine months ended September 30, 2012.

During the nine months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on May 30, 2012 at $77.48 per Share and reached its low for the period on September 21, 2012 at $55.89 per Share. By comparison, during the nine months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on January 28, 2011 at $128.39 per Share and reached its low for the period on September 6, 2011 at $58.07 per Share.

The benchmark’s rise of 16.0% for the nine months ended September 30, 2012, as compared to the benchmark’s rise of 15.3% for the nine months ended September 30, 2011, can be attributed to a greater increase in the price of spot gold in U.S. Dollar terms during the nine months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (902,170   $ (682,151

Management fee

     954,699        729,868   

Brokerage commission

     33        2,466   

Net realized gain (loss)

     (9,276,818     (16,106,587

Change in net unrealized appreciation/depreciation

     (42,564,515     (4,468,775

Net income (loss)

   $ (52,743,503   $ (21,257,513

The Fund’s net income decreased for the nine months ended September 30, 2012, as compared to the nine months ended September 30, 2011, primarily due to a greater increase in the price of spot gold in U.S. Dollar terms during the nine months ended September 30, 2012.

 

* See Note 10 of the Notes to Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q regarding the reverse Share split for the ProShares UltraShort Gold Fund.

 

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ProShares Ultra Silver*

Fund Performance

The following table provides summary performance information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

NAV beginning of period

   $ 606,824,420      $ 547,003,919   

NAV end of period

   $ 978,987,907      $ 705,943,332   

Percentage change in NAV

     61.3     29.1

Shares outstanding beginning of period

     14,050,028        7,000,028   

Shares outstanding end of period

     16,650,028        12,900,028   

Percentage change in Shares outstanding

     18.5     84.3

Shares created

     6,800,000        12,200,000   

Shares redeemed

     4,200,000        6,300,000   

Per Share NAV beginning of period

   $ 43.19      $ 78.14   

Per Share NAV end of period

   $ 58.80      $ 54.72   

Percentage change in per Share NAV

     36.1     (30.0 )% 

Percentage change in benchmark

     23.0     (0.6 )% 

Benchmark annualized volatility

     31.0     63.8

During the nine months ended September 30, 2012, the increase in the Fund’s NAV resulted from an increase from 14,050,028 outstanding Shares at December 31, 2011 to 16,650,028 outstanding Shares at September 30, 2012. 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 nine months ended September 30, 2011, the increase in the Fund’s NAV resulted from an increase from 7,000,028 outstanding Shares at December 31, 2010 to 12,900,028 outstanding Shares at September 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 silver bullion as measured by the U.S. Dollar fixing price for delivery in London.

For the nine months ended September 30, 2012 and 2011, 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 36.1% for the nine months ended September 30, 2012, as compared to the decrease of 30.0% for the nine months ended September 30, 2011, was primarily due to an appreciation in the value of the assets of the Fund during the nine months ended September 30, 2012.

During the nine months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on February 29, 2012 at $73.52 per Share and reached its low for the period on July 12, 2012 at $35.76 per Share. By comparison, during the nine months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on April 28, 2011 at $184.61 per Share and reached its low for the period on September 26, 2011 at $48.48 per Share.

The benchmark’s rise of 23.0% for the nine months ended September 30, 2012, as compared to the benchmark’s decline of 0.6% for the nine months ended September 30, 2011, can be attributed to an increase in the price of spot silver in U.S. Dollar terms during the nine months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (5,103,531   $ (6,124,890

Management fee

     5,416,759        6,530,746   

Brokerage commission

     38        7,354   

Net realized gain (loss)

     (51,740,204     (283,259,673

Change in net unrealized appreciation/depreciation

     269,727,476        4,445,205   

Net income (loss)

   $ 212,883,741      $ (284,939,358

 

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The Fund’s net income increased for the nine months ended September 30, 2012, as compared to the nine months ended September 30, 2011, primarily due to an increase in the price of spot silver in U.S. Dollar terms during the nine months ended September 30, 2012.

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q regarding the Share split for the ProShares Ultra Silver Fund.

ProShares UltraShort Silver*

Fund Performance

The following table provides summary performance information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

NAV beginning of period

   $ 246,813,921      $ 99,032,781   

NAV end of period

   $ 125,947,671      $ 533,394,247   

Percentage change in NAV

     (49.0 )%      438.6

Shares outstanding beginning of period

     3,218,874        496,496   

Shares outstanding end of period

     3,158,489        6,538,874   

Percentage change in Shares outstanding

     (1.9 )%      1,217.0

Shares created

     5,660,000        12,577,500   

Shares redeemed

     5,720,385        6,535,122   

Per Share NAV beginning of period

   $ 76.68      $ 199.46   

Per Share NAV end of period

   $ 39.88      $ 81.57   

Percentage change in per Share NAV

     (48.0 )%      (59.1 )% 

Percentage change in benchmark

     23.0     (0.6 )% 

Benchmark annualized volatility

     31.0     63.8

During the nine months ended September 30, 2012, the decrease in the Fund’s NAV resulted from a decrease from 3,218,874 outstanding Shares at December 31, 2011 to 3,158,489 outstanding Shares at September 30, 2012. 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 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 nine months ended September 30, 2011, the increase in the Fund’s NAV resulted from an increase from 496,496 outstanding Shares at December 31, 2010 to 6,538,874 outstanding Shares at September 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.

For the nine months ended September 30, 2012 and 2011, 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 48.0% for the nine months ended September 30, 2012, as compared to the decrease of 59.1% for the nine months ended September 30, 2011 was primarily due to a lesser depreciation in the value of the assets of the Fund during the nine months ended September 30, 2012.

During the nine months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on January 3, 2012 at $73.38 per Share and reached its low for the period on September 28, 2012 at $39.88 per Share. By comparison, during the nine months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on January 25, 2011 at $255.54 per Share and reached its low for the period on August 22, 2011 at $54.63 per Share.

The benchmark’s rise of 23.0% for the nine months ended September 30, 2012, as compared to the benchmark’s decline of 0.6% for the nine months ended September 30, 2011, can be attributed to an increase in the price of spot silver in U.S. Dollar terms during the nine months ended September 30, 2012.

 

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Net Income/Loss

The following table provides summary income information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (1,149,341   $ (2,674,603

Management fee

     1,219,073        2,812,042   

Brokerage commission

     33        3,718   

Net realized gain (loss)

     (27,207,003     132,218,978   

Change in net unrealized appreciation/depreciation

     (57,610,147     (190,241,523

Net income (loss)

   $ (85,966,491   $ (60,697,148

The Fund’s net income decreased for the nine months ended September 30, 2012, as compared to the nine months ended September 30, 2011, primarily due to an increase in the price of spot silver in U.S. Dollar terms during the nine months ended September 30, 2012.

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q regarding the reverse Share splits for the ProShares UltraShort Silver Fund.

ProShares Ultra Australian Dollar

Since the Fund commenced investment operations on July 17, 2012, a comparison of the Fund’s results of operations for the nine months ended September 30, 2011 has not been provided. In addition, since the Fund commenced investment operations on July 17, 2012, the Fund’s results of operations for the period ended September 30, 2012 may not be meaningful.

Fund Performance

The following table provides summary performance information for the Fund from commencement of operations to September 30, 2012:

 

     Period Ended
September 30, 2012
 

NAV beginning of period

   $ 200   

NAV end of period

   $ 4,089,373   

Percentage change in NAV

     2,044,586.5

Shares outstanding beginning of period

     5   

Shares outstanding end of period

     100,005   

Percentage change in Shares outstanding

     2,000,000.0

Shares created

     100,000   

Shares redeemed

     —     

Per Share NAV beginning of period

   $ 40.00   

Per Share NAV end of period

   $ 40.89   

Percentage change in per Share NAV

     2.2

Percentage change in benchmark

     0.6

Benchmark annualized volatility

     8.6

During the period ended September 30, 2012, the increase in the Fund’s NAV resulted from an increase from 5 outstanding Shares at December 31, 2011 to 100,005 outstanding Shares at September 30, 2012. 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 the spot price of the Australian Dollar versus the U.S. Dollar.

 

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For the period ended September 30, 2012, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the daily performance of its benchmark.

During the period ended September 30, 2012, the Fund’s per Share NAV reached its high for the period September 14, 2012 at $42.25 per Share and reached its low for the period on September 5, 2012 at $39.29 per Share.

The benchmark’s rise of 0.6% for the period ended September 30, 2012, can be attributed to an increase in the value of the Australian Dollar versus the U.S. Dollar during the period ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund from commencement of operations to September 30, 2012:

 

     Period Ended
September 30, 2012
 

Net investment income (loss)

   $ (7,953

Brokerage commission

     556   

Offering costs

     8,537   

Limitation by Sponsor

     (522

Net realized gain (loss)

     99,029   

Change in net unrealized appreciation/depreciation

     (1,903

Net income (loss)

   $ 89,173   

ProShares UltraShort Australian Dollar

Since the Fund commenced investment operations on July 17, 2012, a comparison of the Fund’s results of operations for the nine months ended September 30, 2011 has not been provided. In addition, since the Fund commenced investment operations on July 17, 2012, the Fund’s results of operations for the period ended September 30, 2012 may not be meaningful.

The following table provides summary performance information for the Fund from commencement of operations to September 30, 2012:

 

     Period Ended
September 30, 2012
 

NAV beginning of period

   $ 200   

NAV end of period

   $ 3,870,326   

Percentage change in NAV

     1,935,063.0

Shares outstanding beginning of period

     5   

Shares outstanding end of period

     100,005   

Percentage change in Shares outstanding

     2,000,000.0

Shares created

     100,000   

Shares redeemed

     —     

Per Share NAV beginning of period

   $ 40.00   

Per Share NAV end of period

   $ 38.70   

Percentage change in per Share NAV

     (3.2 )% 

Percentage change in benchmark

     0.6

Benchmark annualized volatility

     8.6

During the period ended September 30, 2012, the increase in the Fund’s NAV resulted from an increase from 5 outstanding Shares at December 31, 2011 to 100,005 outstanding Shares at September 30, 2012. 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 Australian Dollar versus the U.S. Dollar.

 

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For the period ended September 30, 2012, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the inverse of the daily performance of its benchmark.

During the period ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on September 5, 2012 at $40.44 per Share and reached its low for the period on September 14, 2012 at $37.52 per Share.

The benchmark’s rise of 0.6% for the period ended September 30, 2012, can be attributed to an increase in the value of the Australian Dollar versus the U.S. Dollar during the period ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund from commencement of operations to September 30, 2012:

 

     Nine Months Ended
September 30, 2012
 

Net investment income (loss)

   $ (7,544

Brokerage commission

     605   

Offering costs

     8,537   

Limitation by Sponsor

     (1,012

Net realized gain (loss)

     (123,487

Change in net unrealized appreciation/depreciation

     1,157   

Net income (loss)

   $ (129,874

ProShares Ultra Euro

Fund Performance

The following table provides summary performance information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

NAV beginning of period

   $ 9,554,748      $ 7,729,684   

NAV end of period

   $ 5,802,471      $ 7,715,933   

Percentage change in NAV

     (39.3 )%      (0.2 )% 

Shares outstanding beginning of period

     400,014        300,014   

Shares outstanding end of period

     250,014        300,014   

Percentage change in Shares outstanding

     (37.5 )%      0.0

Shares created

     50,000        —     

Shares redeemed

     200,000        —     

Per Share NAV beginning of period

   $ 23.89      $ 25.76   

Per Share NAV end of period

   $ 23.21      $ 25.72   

Percentage change in per Share NAV

     (2.8 )%      (0.2 )% 

Percentage change in benchmark

     (0.7)     0.2

Benchmark annualized volatility

     8.9     11.2

During the nine months ended September 30, 2012, the decrease in the Fund’s NAV resulted primarily from a decrease from 400,014 outstanding Shares at December 31, 2011 to 250,014 outstanding Shares at September 30, 2012. 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 spot price of the Euro versus the U.S. Dollar. By comparison, during the nine months ended September 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 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 September 30, 2011.

 

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For the nine months ended September 30, 2012 and 2011, 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 2.8% for the nine months ended September 30, 2012, as compared to the decrease of 0.2% for the nine months ended September 30, 2011 was primarily due to a greater decrease in the value of the assets held by the Fund during the nine months ended September 30, 2012.

During the nine months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on February 24, 2012 at $25.78 per Share and reached its low for the period on July 24, 2012 at $20.56 per Share. By comparison, during the nine months ended September 30, 2011, the Fund’s per Share 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.

The benchmark’s decline of 0.7% for the nine months ended September 30, 2012, as compared to the benchmark’s rise of 0.2% for the nine months ended September 30, 2011, can be attributed to a decrease in the value of the Euro versus the U.S. Dollar during the nine months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (49,451   $ (56,375

Management fee

     52,001        60,728   

Net realized gain (loss)

     (811,656     1,603,907   

Change in net unrealized appreciation/depreciation

     741,030        (1,561,283

Net income (loss)

   $ (120,077   $ (13,751

The Fund’s net income decreased for the nine months ended September 30, 2012, as compared to the nine months ended September 30, 2011, primarily due to a decline in the value of the Euro versus the U.S. Dollar during the nine months ended September 30, 2012.

ProShares Short Euro

Since the Fund commenced investment operations on June 26, 2012, a comparison of the Fund’s results of operations for the nine months ended September 30, 2011 has not been provided. In addition, since the Fund commenced investment operations on June 26, 2012, the Fund’s results of operations for the period ended September 30, 2012 may not be meaningful.

Fund Performance

The following table provides summary performance information for the Fund from commencement of operations to September 30, 2012:

 

     Period Ended
September 30, 2012
 

NAV beginning of period

   $ 200   

NAV end of period

   $ 3,872,555   

Percentage change in NAV

     1,936,177.5

Shares outstanding beginning of period

     5   

Shares outstanding end of period

     100,005   

Percentage change in Shares outstanding

     2,000,000.0

Shares created

     100,000   

Shares redeemed

     —     

Per Share NAV beginning of period

   $ 40.00   

Per Share NAV end of period

   $ 38.72   

Percentage change in per Share NAV

     (3.2 )% 

Percentage change in benchmark

     2.9

Benchmark annualized volatility

     9.4

 

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During the period ended September 30, 2012, the increase in the Fund’s NAV resulted from an increase from 5 outstanding Shares at June 26, 2012 to 100,005 outstanding Shares at September 30, 2012. 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 inverse of the daily performance of the spot price of the Euro versus the U.S. Dollar.

For the period ended September 30, 2012, the Fund’s daily performance had a statistical correlation over 0.99 of the inverse of the daily performance of its benchmark.

During the period ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on July 24, 2012 at $41.33 per Share and reached its low for the period on September 14, 2012 at $37.95 per Share.

The benchmark’s rise of 2.9% for the period ended September 30, 2012, can be attributed to an increase in the value of the Euro versus the U.S. Dollar during the period ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund from commencement of operations to September 30, 2012:

 

     Period Ended
September 30, 2012
 

Net investment income (loss)

   $ (9,488

Brokerage commissions

     197   

Offering costs

     10,896   

Limitation by Sponsor

     (964

Net realized gain (loss)

     (104,556

Change in net unrealized appreciation/depreciation

     (13,601

Net income (loss)

   $ (127,645

ProShares UltraShort Euro

Fund Performance

The following table provides summary performance information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

NAV beginning of period

   $ 1,100,159,546      $ 444,412,995   

NAV end of period

   $ 770,862,313      $ 936,941,013   

Percentage change in NAV

     (29.9 )%      110.8

Shares outstanding beginning of period

     54,100,014        21,900,014   

Shares outstanding end of period

     38,300,014        48,600,014   

Percentage change in Shares outstanding

     (29.2 )%      121.9

Shares created

     12,100,000        37,600,000   

Shares redeemed

     27,900,000        10,900,000   

Per Share NAV beginning of period

   $ 20.34      $ 20.29   

Per Share NAV end of period

   $ 20.13      $ 19.28   

Percentage change in per Share NAV

     (1.0 )%      (5.0 )% 

Percentage change in benchmark

     (0.7)     0.2

Benchmark annualized volatility

     8.9     11.2

 

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During the nine months ended September 30, 2012, the decrease in the Fund’s NAV resulted from a decrease from 54,100,014 outstanding Shares at December 31, 2011 to 38,300,014 outstanding Shares at September 30, 2012. 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 inverse of the daily performance of the spot price of the Euro versus the U.S. Dollar. By comparison, during the nine months ended September 30, 2011, the increase in the Fund’s NAV resulted from an increase from 21,900,014 outstanding Shares at December 31, 2010 to 48,600,014 outstanding Shares at September 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.

For the nine months ended September 30, 2012 and 2011, 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 1.0% for the nine months ended September 30, 2012, as compared to the per Share NAV decrease of 5.0% for the nine months ended September 30, 2011 was primarily due to a relatively lesser depreciation in the value of the assets held by the Fund during the nine months ended September 30, 2012.

During the nine months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on July 24, 2012 at $22.94 per Share and reached its low for the period on February 24, 2012 at $18.67 per Share. By comparison, during the six September 30, 2011, the Fund’s per Share 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.

The benchmark’s decline of 0.7% for the nine months ended September 30, 2012, as compared to the benchmark’s rise of 0.2% for the nine months ended September 30, 2011, can be attributed to a decline in the value of the Euro versus the U.S. Dollar during the nine months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (5,986,513   $ (3,593,051

Management fee

     6,345,979        3,848,679   

Net realized gain (loss)

     106,380,408        (112,480,023

Change in net unrealized appreciation/depreciation

     (102,555,076     132,937,415   

Net income (loss)

   $ (2,161,181   $ 16,864,341   

The Fund’s net income decreased for the nine months ended September 30, 2012, as compared to the nine months ended September 30, 2011, primarily due to a decline in the value of the Euro versus the U.S. Dollar during the nine months ended September 30, 2012.

ProShares Ultra Yen

Fund Performance

The following table provides summary performance information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

NAV beginning of period

   $ 5,471,075      $ 5,024,240   

NAV end of period

   $ 5,249,866      $ 5,485,629   

Percentage change in NAV

     (4.0 )%      9.2

Shares outstanding beginning of period

     150,014        150,014   

Shares outstanding end of period

     150,014        150,014   

Percentage change in Shares outstanding

     0.0     0.0

 

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     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

Shares created

     —          50,000   

Shares redeemed

     —          50,000   

Per Share NAV beginning of period

   $ 36.47      $ 33.49   

Per Share NAV end of period

   $ 35.00      $ 36.57   

Percentage change in per Share NAV

     (4.0 )%      9.2

Percentage change in benchmark

     (1.4)     5.3

Benchmark annualized volatility

     7.8     9.0

During the nine months ended September 30, 2012, 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 spot price of the Japanese Yen versus the U.S. Dollar. There was no net change in the Fund’s outstanding Shares from December 31, 2011 to September 30, 2012. By comparison, during the nine months ended September 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 December 31, 2010 to September 30, 2011.

For the nine months ended September 30, 2012 and 2011, 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 4.0% for the nine months ended September 30, 2012, as compared to the increase of 9.2% for the nine months ended September 30, 2011, was primarily due to a depreciation in the value of the assets held by the Fund during the nine months ended September 30, 2012.

During the nine months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on February 2, 2012 at $37.15 per Share and reached its low for the period on March 14, 2012 at $30.68 per Share. By comparison, during the nine months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on September 22, 2011 at $37.40 per Share and reached its low for the period on April 6, 2011 at $30.09 per Share.

The benchmark’s decline of 1.4% for the nine months ended September 30, 2012, as compared to the benchmark’s rise of 5.3% for the nine months ended September 30, 2011, can be attributed to a decline in the value of the Japanese Yen versus the U.S. Dollar during the nine months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (34,134   $ (26,698

Management fee

     36,387        28,409   

Net realized gain (loss)

     (131,031     722,576   

Change in net unrealized appreciation/depreciation

     (56,044     (337,047

Net income (loss)

   $ (221,209   $ 358,831   

The Fund’s net income decreased for the nine months ended September 30, 2012, as compared to the nine months ended September 30, 2011, primarily due to a decrease in the value of the Japanese Yen versus the U.S. Dollar during the nine months ended September 30, 2012.

 

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ProShares UltraShort Yen*

Fund Performance

The following table provides summary performance information for the Fund for the nine months ended September 30, 2012 and 2011:

 

                   
    Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

NAV beginning of period

  $ 221,131,994      $ 207,685,813   

NAV end of period

  $ 249,828,407      $ 271,440,942   

Percentage change in NAV

    13.0     30.7

Shares outstanding beginning of period

    5,399,294        4,416,671   

Shares outstanding end of period

    6,049,294        6,566,671   

Percentage change in Shares outstanding

    12.0     48.7

Shares created

    3,750,000        6,533,333   

Shares redeemed

    3,100,000        4,383,333   

Per Share NAV beginning of period

  $ 40.96      $ 47.02   

Per Share NAV end of period

  $ 41.30      $ 41.34   

Percentage change in per Share NAV

    0.8     (12.1 )% 

Percentage change in benchmark

    (1.4 )%      5.3

Benchmark annualized volatility

    7.8     9.0

During the nine months ended September 30, 2012, the increase in the Fund’s NAV resulted primarily from an increase from 5,399,294 outstanding Shares at December 31, 2011 to 6,049,294 outstanding Shares at September 30, 2012. 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 Japanese Yen versus the U.S. Dollar. By comparison, during the nine months ended September 30, 2011, the increase in the Fund’s NAV resulted from an increase from 4,416,671 outstanding Shares at December 31, 2010 to 6,566,671 outstanding Shares at September 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.

For the nine months ended September 30, 2012 and 2011, 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 0.8% for the nine months ended September 30, 2012, as compared to the decrease of 12.1% for the nine months ended September 30, 2011 was primarily due to an appreciation in the value of the assets held by the Fund during the nine months ended September 30, 2012.

During the nine months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on March 14, 2012 at $48.20 per Share and reached its low for the period on February 2, 2012 at $40.08 per Share. By comparison, during the nine months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on April 6, 2011 at $51.44 per Share and reached its low for the period on September 22, 2011 at $40.45 per Share.

The benchmark’s decline of 1.4% for the nine months ended September 30, 2012, as compared to the benchmark’s rise of 5.3% for the nine months ended September 30, 2011, can be attributed to a decline in the value of the Japanese Yen versus the U.S. Dollar during the nine months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (1,594,712   $ (2,077,237

Management fee

     1,699,389        2,253,245   

Net realized gain (loss)

     5,697,040        (55,830,491

Change in net unrealized appreciation/depreciation

     1,730,121        18,301,702   

Net income (loss)

   $ 5,832,449      $ (39,606,026

 

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The Fund’s net income increased for the nine months ended September 30, 2012, as compared to the nine months ended September 30, 2011, primarily due to a decrease in the value of the Japanese Yen versus the U.S. Dollar during the nine months ended September 30, 2012.

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q regarding the reverse Share split for the ProShares UltraShort Yen Fund.

ProShares Ultra VIX Short-Term Futures ETF*

Since the Fund commenced investment operations on October 3, 2011, a comparison of the Fund’s results of operations for the nine months ended September 30, 2011 has not been provided.

Fund Performance

The following table provides summary performance information for the Fund for the nine months ended September 30, 2012:

 

     Nine Months Ended
September 30, 2012
 

NAV beginning of period

   $ 9,881,113   

NAV end of period

   $ 193,256,492   

Percentage change in NAV

     1,855.8

Shares outstanding beginning of period

     13,334   

Shares outstanding end of period

     6,359,151   

Percentage change in Shares outstanding

     47,591.2

Shares created

     11,837,500   

Shares redeemed

     5,491,683   

Per Share NAV beginning of period

   $ 741.05   

Per Share NAV end of period

   $ 30.39   

Percentage change in per Share NAV

     (95.9 )% 

Percentage change in benchmark

     (75.0)

Benchmark annualized volatility

     72.7

During the nine months ended September 30, 2012, the increase in the Fund’s NAV resulted from an increase from 13,334 outstanding Shares at December 31, 2011 to 6,359,151 outstanding Shares at September 30, 2012. 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 S&P 500 VIX Short-Term Futures Index.

For the nine months ended September 30, 2012, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the daily performance of its benchmark.

During the nine months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on January 3, 2012 at $649.02 per Share and reached its low for the period on September 24, 2012 at $28.85 per Share.

The benchmark’s decline of 75.0% for the nine months ended September 30, 2012, can be attributed to decreasing prices of the near-term futures contracts on the VIX futures curve.

 

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Net Income/Loss

The following table provides summary income information for the Fund for the nine months ended September 30, 2012:

 

     Nine Months Ended
September 30, 2012
 

Net investment income (loss)

   $ (2,320,003

Management fee

     1,216,603   

Brokerage commission

     1,074,133   

Offering costs

     69,341   

Net realized gain (loss)

     (477,910,745

Change in net unrealized appreciation/depreciation

     (19,834,311

Net income (loss)

   $ (500,065,059

 

* See Note 1 of the Notes to Financial Statements in Item 1 of Part I in this Quarterly Report on Form 10-Q regarding the reverse Share split for the ProShares Ultra VIX Short-Term Futures ETF.

ProShares VIX Short-Term Futures ETF

Fund Performance

The following table provides summary performance information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

NAV beginning of period

   $ 30,549,903      $ 400   

NAV end of period

   $ 165,803,550      $ 28,897,739   

Percentage change in NAV

     442.7     7,224,334.8

Shares outstanding beginning of period

     400,005        5   

Shares outstanding end of period

     8,725,005        250,005   

Percentage change in Shares outstanding

     2,081.2     5,000,000.0

Shares created

     20,725,000        4,375,000   

Shares redeemed

     12,400,000        4,125,000   

Per Share NAV beginning of period

   $ 76.37      $ 80.00   

Per Share NAV end of period

   $ 19.00      $ 115.59   

Percentage change in per Share NAV

     (75.1 )%      44.5

Percentage change in benchmark

     (75.0 )%      47.1

Benchmark annualized volatility

     72.7     72.6

During the nine months ended September 30, 2012, the increase in the Fund’s NAV resulted from an increase from 400,005 outstanding Shares at December 31, 2011 to 8,725,005 outstanding Shares at September 30, 2012. 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. By comparison, during the nine months ended September 30, 2011, the increase in the Fund’s NAV resulted primarily from an increase from 5 outstanding Shares at December 31, 2010 to 250,005 outstanding Shares at September 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 the daily performance of the S&P 500 VIX Short-Term Futures Index.

For the nine months ended September 30, 2012 and 2011, the Fund’s daily performance had a statistical correlation over 0.99 of the daily performance of its benchmark. The Fund’s per Share NAV decrease of 75.1% for the nine months ended September 30, 2012, as compared to the increase of 44.5% for the nine months ended September 30, 2011, was primarily due to a depreciation in the value of the assets of the Fund during the nine months ended September 30, 2012.

During the nine months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on January 3, 2012 at $71.63 per Share and reached its low for the period on September 24, 2012 at $18.38 per Share. By comparison, during the nine months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on September 30, 2011 at $115.59 per Share and reached its low for the period on July 7, 2011 at $43.15 per Share.

The benchmark’s decline of 75.0% for the nine months ended September 30, 2012, as compared to the benchmark’s rise of 47.1% for the nine months ended September 30, 2011, can be attributed to a decline in prices of the near-term futures contracts on the VIX futures curve during the nine months ended September 30, 2012.

 

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Net Income/Loss

The following table provides summary income information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (741,943   $ (198,888

Management fee

     788,072        62,960   

Offering costs

     1,090        147,749   

Net realized gain (loss)

     (137,705,361     11,559,160   

Change in net unrealized appreciation/depreciation

     (3,292,785     3,539,675   

Net income (loss)

   $ (141,740,089   $ 14,899,947   

The Fund’s net income decreased for the nine months ended September 30, 2012, as compared to the nine months ended September 30, 2011, primarily due to the decrease in the Fund’s benchmark during the nine months ended September 30, 2012.

ProShares Short VIX Short-Term Futures ETF*

Since the Fund commenced investment operations on October 3, 2011, a comparison of the Fund’s results of operations for the nine months ended September 30, 2011 has not been provided.

Fund Performance

The following table provides summary performance information for the Fund for the nine months ended September 30, 2012:

 

     Nine Months Ended
September 30, 2012
 

NAV beginning of period

   $ 7,760,424   

NAV end of period

   $ 54,441,724   

Percentage change in NAV

     601.5

Shares outstanding beginning of period

     300,020   

Shares outstanding end of period

     800,020   

Percentage change in Shares outstanding

     166.7

Shares created

     9,100,000   

Shares redeemed

     8,600,000   

Per Share NAV beginning of period

   $ 25.87   

Per Share NAV end of period

   $ 68.05   

Percentage change in per Share NAV

     163.1

Percentage change in benchmark

     (75.0 )% 

Benchmark annualized volatility

     72.7

During the nine months ended September 30, 2012, the increase in the Fund’s NAV resulted primarily from an increase from 300,020 outstanding Shares at December 31, 2011 to 800,020 outstanding Shares at September 30, 2012. 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 the inverse of the daily performance of the S&P 500 VIX Short-Term Futures Index.

For the nine months ended September 30, 2012, the Fund’s daily performance had a statistical correlation over 0.99 of the inverse of the daily performance of its benchmark.

During the nine months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on September 24, 2012 at $71.25 per Share and reached its low for the period on January 3, 2012 at $27.48 per Share.

 

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The benchmark’s decline of 75.0% for the nine months ended September 30, 2012, can be attributed to declining prices of the near-term futures contracts on the VIX Futures curve.

Net Income/Loss

The following table provides summary income information for the Fund for the nine months ended September 30, 2012:

 

     Nine Months Ended
September 30, 2012
 

Net investment income (loss)

   $ (273,418

Management fee

     73,103   

Brokerage commission

     139,690   

Offering costs

     69,342   

Net realized gain (loss)

     14,347,729   

Change in net unrealized appreciation/depreciation

     439,952   

Net income (loss)

   $ 14,514,263   

 

* See Note 10 of the Notes to Financial Statements in Item 1 of Part I in this Quarterly Report of Form 10-Q regarding the Share split for the ProShares Short VIX Short-Term Futures ETF.

ProShares VIX Mid-Term Futures ETF

Fund Performance

The following table provides summary performance information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

NAV beginning of period

   $ 90,821,428      $ 400   

NAV end of period

   $ 100,655,318      $ 13,436,216   

Percentage change in NAV

     10.8     3,358,954.0

Shares outstanding beginning of period

     1,225,005        5   

Shares outstanding end of period

     2,425,005        150,005   

Percentage change in Shares outstanding

     98.0     3,000,000.0

Shares created

     1,900,000        525,000   

Shares redeemed

     700,000        375,000   

Per Share NAV beginning of period

   $ 74.14      $ 80.00   

Per Share NAV end of period

   $ 41.51      $ 89.57   

Percentage change in per Share NAV

     (44.0 )%      12.0

Percentage change in benchmark

     (43.8 )%      12.9

Benchmark annualized volatility

     32.3     36.2

During the nine months ended September 30, 2012, the increase in the Fund’s NAV resulted primarily from an increase from 1,225,005 outstanding Shares at December 31, 2011 to 2,425,005 outstanding Shares at September 30, 2012. 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. By comparison, during the nine months ended September 30, 2011, the increase in the Fund’s NAV resulted primarily from an increase from 5 outstanding Shares at December 31, 2010 to 150,005 outstanding Shares at September 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 the daily performance of the S&P 500 VIX Mid-Term Futures Index.

For the nine months ended September 30, 2012 and 2011, the Fund’s daily performance had a statistical correlation over 0.99 of the daily performance of its benchmark. The Fund’s per Share NAV decrease of 44.0% for the nine months ended September 30, 2012, as compared to the increase of 12.0% for the nine months ended September 30, 2011, was primarily due to a depreciation in the value of the assets of the Fund during the nine months ended September 30, 2012.

 

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During the nine months ended September 30, 2012, the Fund’s per Share NAV reached its high for the period on January 3, 2012 at $71.93 per Share and reached its low for the period on September 27, 2012 at $41.30 per Share. By comparison, during the nine months ended September 30, 2011, the Fund’s per Share NAV reached its high for the period on September 30, 2011 at $89.57 per Share and reached its low for the period on July 7, 2011 at $57.37 per Share.

The benchmark’s decline of 43.8% for the nine months ended September 30, 2012, as compared to the benchmark’s rise of 12.9% for the nine months ended September 30, 2011, can be attributed to a decline in prices of the futures contracts that made up the S&P 500 VIX Mid-Term Futures Index during the nine months ended September 30, 2012.

Net Income/Loss

The following table provides summary income information for the Fund for the nine months ended September 30, 2012 and 2011:

 

     Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 

Net investment income (loss)

   $ (603,705   $ (58,166

Management fee

     634,119        —     

Offering costs

     682        92,343   

Limitation by Sponsor

     —          (30,593

Net realized gain (loss)

     (45,671,021     503,767   

Change in net unrealized appreciation/depreciation

     (7,604,889     1,829,093   

Net income (loss)

   $ (53,879,615   $ 2,274,694   

The Fund’s net income decreased for the nine months ended September 30, 2012, as compared to the nine months ended September 30, 2011, primarily due to a decline in the Fund’s benchmark during the nine months ended September 30, 2012.

Off-Balance Sheet Arrangements and Contractual Obligations

As of November 9, 2012, 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.

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.

 

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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.

For more information, see “Item 3. Quantitative and Qualitative Disclosures About Market Risk” in this Quarterly Report on Form 10-Q.

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 will generally consist 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 daily;

 

   

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.

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.

 

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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.

Critical Accounting Policies

The Trust’s and 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 Trust’s and 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, the Short Euro Fund, the Geared VIX Funds and the Matching VIX Funds value transactions based upon the final closing price in their primary markets. Accordingly, the investment valuations in these financial statements may differ from those used in the calculation of certain Leveraged Funds’, Short Euro Fund’s, Geared VIX Funds’ and Matching VIX Funds’ final creation/redemption NAV for the three and nine months ended September 30, 2012.

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, Silver, Australian Dollar and Short Euro 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, Silver, Australian Dollar and Short Euro Funds are valued at the last sales price prior to the time at which the NAV per Share of a Fund is determined. For financial reporting purposes, all futures contracts are valued at last settled price. 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.

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 the VIX Fund’s NAV that fairly reflects investment values as of the time of pricing, the Leveraged and the 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 the 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 the 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.

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.

 

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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 Fund pays or will pay 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. The Sponsor is currently paying the brokerage commissions on the VIX futures contracts for the Matching VIX Funds.

 

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Since the ProShares Ultra DJ-UBS Natural Gas Fund, ProShares UltraShort DJ-UBS Natural Gas Fund, ProShares Short Euro, ProShares Ultra Australian Dollar, ProShares UltraShort Australian Dollar, ProShares Ultra VIX Short-Term Futures ETF and ProShares Short VIX Short-Term Futures ETF were not conducting operations as of September 30, 2011, comparisons of the positions in certain Financial Instruments for those funds as of September 30, 2011 have not been provided. As of September 30, 2012, each of the Managed Futures Funds had not commenced investment operations; therefore, these quantitative and qualitative disclosures about market risk do not include comparisons of positions in certain Financial Instruments for the Managed Futures Funds.

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 were sensitive to commodity price risk. As of September 30, 2012 and, as applicable, September 30, 2011, each of the Commodity Funds and the Commodity Index Funds’ positions were as follows:

ProShares Ultra DJ-UBS Commodity:

As of September 30, 2012 and 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 tables provide information about the Fund’s swap positions as of September 30, 2012 and 2011, which were sensitive to commodity price risk.

Swap Agreements as of September 30, 2012

 

Reference Index

   Counterparty    Long or
Short
     Index Close      Notional
Amount at
Value
 

DJ-UBS Commodity Index

   Goldman Sachs International      Long       $ 148.5061       $ 11,686,812   

DJ-UBS Commodity Index

   UBS AG      Long         148.5061         5,108,198   

Swap Agreements as of September 30, 2011

 

Reference Index

   Counterparty    Long or
Short
   Index Close      Notional
Amount at
Value
 

DJ-UBS Commodity Index

   Goldman Sachs International    Long    $ 140.1750       $ 6,650,383   

DJ-UBS Commodity Index

   UBS AG    Long      140.1750         16,811,409   

The September 30, 2012 and 2011 swap notional amounts are calculated by multiplying units times the closing level of the Index. These notional amounts 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, 2011 filed with the U.S. Securities and Exchange Commission (“SEC”) on February 29, 2012 (“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 UltraShort DJ-UBS Commodity:

As of September 30, 2012 and 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 tables provide information about the Fund’s short swap positions as of September 30, 2012 and 2011, which were sensitive to commodity price risk.

Swap Agreements as of September 30, 2012

 

Reference Index

   Counterparty    Long or
Short
   Index Close      Notional
Amount at
Value
 

DJ-UBS Commodity Index

   Goldman Sachs International    Short    $ 148.5061       $ (4,448,127

DJ-UBS Commodity Index

   UBS AG    Short      148.5061         (1,319,410

Swap Agreements as of September 30, 2011

 

Reference Index

   Counterparty    Long or
Short
   Index Close      Notional
Amount at
Value
 

DJ-UBS Commodity Index

   Goldman Sachs International    Short    $ 140.1750       $ (4,499,693

DJ-UBS Commodity Index

   UBS AG    Short      140.1750         (20,136,530

The September 30, 2012 and 2011 short swap notional amounts are calculated by multiplying units times the closing level of the Index. These short notional amounts 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 amounts, 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.

ProShares Ultra DJ-UBS Crude Oil:

As of September 30, 2012 and 2011, 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 WTI Crude Oil Sub-Index. The following tables provide information about the Fund’s positions in these Financial Instruments as September 30, 2012 and 2011, which were sensitive to commodity price risk.

Futures Positions as of September 30, 2012

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

WTI Crude Oil Future

     Long         November 2012         3,087       $ 92.19         1,000       $ 284,590,530   

 

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Swap Agreements as of September 30, 2012

 

Reference Index

   Counterparty    Long or
Short
   Index Close      Notional
Amount at Value
 

DJ-UBS WTI Crude Oil Subindex

   Goldman Sachs International    Long    $ 233.9973       $ 184,858,973   

DJ-UBS WTI Crude Oil Subindex

   Societe Generale S.A    Long      233.9973         148,481,998   

DJ-UBS WTI Crude Oil Subindex

   UBS AG    Long      233.9973         146,064,844   

Futures Positions as of September 30, 2011

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

WTI Crude Oil Future

     Long         November 2011         3,935       $ 79.20         1,000       $ 311,652,000   

Swap Agreements as of September 30, 2011

 

Reference Index

   Counterparty    Long or
Short
   Index Close      Notional
Amount at
Value
 

DJ-UBS WTI Crude Oil Subindex

   Goldman Sachs International    Long    $ 209.3412       $ 188,482,103   

DJ-UBS WTI Crude Oil Subindex

   UBS AG    Long      209.3412         261,660,350   

The September 30, 2012 and 2011 futures notional amounts are calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The September 30, 2012 and 2011 swap notional amounts are 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 September 30, 2012 and 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 WTI Crude Oil Sub-Index. The following tables provide information about the Fund’s positions in these Financial Instruments as of September 30, 2012 and 2011, which were sensitive to commodity price risk.

 

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Futures Positions as of September 30, 2012

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

WTI Crude Oil Future

     Short         November 2012         899       $ 92.19         1,000       $ (82,878,810

Swap Agreements as of September 30, 2012

 

Reference Index

   Counterparty    Long or
Short
   Index Close      Notional
Amount at
Value
 

DJ-UBS WTI Crude Oil Subindex

   Goldman Sachs International    Short    $ 233.9973       $ (60,694,381

DJ-UBS WTI Crude Oil Subindex

   Societe Generale S.A.    Short      233.9973         (54,129,361

DJ-UBS WTI Crude Oil Subindex

   UBS AG    Short      233.9973         (35,377,663

Futures Positions as of September 30, 2011

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

WTI Crude Oil Future

     Short         November 2011         667       $ 79.20         1,000       $ (52,826,400

Swap Agreements as of September 30, 2011

 

Reference Index

   Counterparty    Long or
Short
   Index Close      Notional
Amount at
Value
 

DJ-UBS WTI Crude Oil Subindex

   Goldman Sachs International    Short    $ 209.3412       $ (35,501,505

DJ-UBS WTI Crude Oil Subindex

   UBS AG    Short      209.3412         (56,394,476

The September 30, 2012 and 2011 short futures notional amounts are calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The September 30, 2012 and 2011 short swap notional amounts are 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.

ProShares Ultra DJ-UBS Natural Gas:

As of September 30, 2012, the ProShares DJ-UBS Natural Gas Fund was exposed to commodity price risk through its holding of Natural Gas futures contracts. The following tables provide information about the Fund’s positions in these Financial Instruments as of September 30, 2012, which were sensitive to commodity price risk.

 

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Futures Positions as of September 30, 2012

 

Contract

   Long or
Short
   Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Natural Gas Future

   Long    November 2012      4,067       $ 3.32         10,000       $ 135,024,400   

The September 30, 2012 futures notional amount is calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The notional amount will increase (decrease) proportionally with increases (decreases) in the price of the futures contract, 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 $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.

ProShares UltraShort DJ-UBS Natural Gas:

As of September 30, 2012, the ProShares UltraShort DJ-UBS Natural Gas Fund was exposed to inverse commodity price risk through its holding of Natural Gas futures contracts. The following tables provide information about the Fund’s positions in these Financial Instruments as of September 30, 2012, which were sensitive to commodity price risk.

Futures Positions as of September 30, 2012

 

Contract

   Long or
Short
   Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Natural Gas Future

   Short    November 2012      800       $ 3.32         10,000       $ (26,560,000

The September 30, 2012 short futures notional amount is calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The short notional amount will increase (decrease) proportionally with increases (decreases) in the price of the futures contract. 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.

ProShares Ultra Gold:

As of September 30, 2012 and 2011, the ProShares Ultra Gold Fund was exposed to commodity price risk through its holding of Gold futures contracts and Gold forward agreements. The following tables provide information about the Fund’s positions in these Financial Instruments as of September 30, 2012 and 2011, which were sensitive to commodity price risk.

 

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Futures Positions as of September 30, 2012

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Gold 100 OZ Future

     Long         December 2012         2       $ 1,773.90         100       $ 354,780   

Forward Agreements as of September 30, 2012

 

Reference Index

   Counterparty    Long or
Short
     Valuation
Price
     Notional Amount
at Value
 

London Gold PM Fixing Forward

   Deutsche Bank AG London      Long       $ 1,776.20       $ 130,552,170   

London Gold PM Fixing Forward

   Goldman Sachs International      Long         1,776.20         210,162,350   

London Gold PM Fixing Forward

   Societe Generale S.A.      Long         1,776.20         211,014,936   

London Gold PM Fixing Forward

   UBS AG      Long         1,776.20         225,224,696   

Futures Positions as of September 30, 2011

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Gold 100 OZ Future

     Long         December 2011         25       $ 1,622.30         100       $ 4,055,750   

Forward Agreements as of September 30, 2011

 

Reference Index

   Counterparty    Long or
Short
     Valuation
Price
     Notional Amount
at Value
 

London Gold PM Fixing Forward

   Goldman Sachs International      Long       $ 1,620.23       $ 183,928,510   

London Gold PM Fixing Forward

   UBS AG      Long         1,620.23         560,113,511   

The September 30, 2012 and 2011 futures notional amounts are calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The September 30, 2012 and 2011 forward notional amounts equal 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.

ProShares UltraShort Gold:

As of September 30, 2012 and 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 tables provide information about the Fund’s positions in these Financial Instruments as of September 30, 2012 and 2011, which were sensitive to commodity price risk.

 

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Futures Positions as of September 30, 2012

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Gold 100 OZ Future

     Short         December 2012         2       $ 1,773.90         100          $ (354,780

Forward Agreements as of September 30, 2012

 

Reference Index

   Counterparty    Long or
Short
     Valuation
Price
     Notional Amount
at Value
 

London Gold PM Fixing Forward

   Deutsche Bank AG London      Short       $ 1,776.20       $ (119,717,228

London Gold PM Fixing Forward

   Goldman Sachs International      Short         1,776.20         (24,153,040

London Gold PM Fixing Forward

   Societe Generale S.A.      Short         1,776.20         (26,110,434

London Gold PM Fixing Forward

   UBS AG      Short         1,776.20         (15,186,681

Futures Positions as of September 30, 2011

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Gold 100 OZ Future

     Short         December 2011         12       $ 1,622.30         100       $ (1,946,760

Forward Agreements as of September 30, 2011

 

Reference Index

   Counterparty    Long or
Short
     Valuation
Price
     Notional Amount
at Value
 

London Gold PM Fixing Forward

   Goldman Sachs International      Short       $ 1,620.23       $ (85,058,835

London Gold PM Fixing Forward

   UBS AG      Short         1,620.23         (269,120,203

The September 30, 2012 and 2011 short futures notional amounts are calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The September 30, 2012 and 2011 short forward notional amounts equal 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 amounts, 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.

ProShares Ultra Silver:

As of September 30, 2012 and 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 tables provide information about the Fund’s positions in these Financial Instruments as of September 30, 2012 and 2011, which were sensitive to commodity price risk.

 

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Futures Positions as of September 30, 2012

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Silver Future

     Long         December 2012         2       $ 34.577         5,000       $ 345,770   

Forward Agreements as of September 30, 2012

 

Reference Index

   Counterparty    Long or
Short
     Valuation
Price
     Notional Amount
at Value
 

London Silver PM Fixing Forward

   Deutsche Bank AG London      Long       $ 34.6566       $ 118,179,006   

London Silver PM Fixing Forward

   Goldman Sachs International      Long         34.6566         662,661,917   

London Silver PM Fixing Forward

   Societe Generale S.A.      Long         34.6566         746,745,760   

London Silver PM Fixing Forward

   UBS AG      Long         34.6566         430,088,406   

Futures Positions as of September 30, 2011

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Silver Future

     Long         December 2011         74       $ 30.083         5,000       $ 11,130,710   

Forward Agreements as of September 30, 2011

 

Reference Index

   Counterparty    Long or
Short
     Valuation
Price
     Notional Amount
at Value
 

London Silver PM Fixing Forward

   Goldman Sachs International      Long       $ 30.4532       $ 367,899,019   

London Silver PM Fixing Forward

   UBS AG      Long         30.4532         1,033,094,357   

The September 30, 2012 and 2011 futures notional amounts are calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The September 30, 2012 and 2011 forward notional amounts equal 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 amounts, 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 Silver:

As of September 30, 2012 and 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 tables provide information about the Fund’s positions in these Financial Instruments as of September 30, 2012 and 2011, which were sensitive to commodity price risk.

 

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Futures Positions as of September 30, 2012

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Silver Future

     Short         December 2012         2       $ 34.577         5,000       $ (345,770

Forward Agreements as of September 30, 2012

 

Reference Index

   Counterparty    Long or
Short
     Valuation
Price
     Notional Amount
at Value
 

London Silver PM Fixing Forward

   Deutsche Bank AG London      Short       $ 34.6566       $ (95,201,680

London Silver PM Fixing Forward

   Goldman Sachs International      Short         34.6566         (46,318,546

London Silver PM Fixing Forward

   Societe Generale S.A.      Short         34.6566         (59,540,039

London Silver PM Fixing Forward

   UBS AG      Short         34.6566         (50,494,666

Futures Positions as of September 30, 2011

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Silver Future

     Short         December 2011         30       $ 30.083         5,000       $ (4,512,450

Forward Agreements as of September 30, 2011

 

Reference Index

   Counterparty    Long or
Short
     Valuation
Price
     Notional Amount
at Value
 

London Silver PM Fixing Forward

   Goldman Sachs International      Short       $ 30.4532       $ (231,520,453

London Silver PM Fixing Forward

   UBS AG      Short         30.4532         (830,550,124

The September 30, 2012 and 2011 short futures notional amounts are calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The September 30, 2012 and 2011 short forward notional amounts equal 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 short notional amounts, 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.

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 Fund’s Financial Instruments, which are sensitive to changes in exchange rates. As of September 30, 2012 and, as applicable, September 30, 2011, each of the Currency Fund’s positions were as follows:

 

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ProShares Ultra Australian Dollar:

As of September 30, 2012, the ProShares Ultra Australian Dollar Fund was exposed to exchange rate price risk through its holdings of AUD/USD foreign currency futures contracts. The following table provides information about the Fund’s positions in these Financial Instruments as of September 30, 2012, which were sensitive to exchange rate price risk.

Futures Positions as of September 30, 2012

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

AUD/US Dollar Future

     Long         December 2012         79       $ 103.03         1,000       $ 8,139,370   

The September 30, 2012 futures notional amount is calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The notional amount will increase (decrease) proportionally with increases (decreases) in the price of the futures contract. Additional losses (gains) associated with these contracts will be equal to any such subsequent increases (decreases) in notional amounts, 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 Australian Dollar 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 Australian Dollar 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.

ProShares UltraShort Australian Dollar:

As of September 30, 2012, the ProShares UltraShort Australian Dollar Fund was exposed to inverse exchange rate price risk through its holdings of AUD/USD foreign currency futures contracts. The following table provides information about the Fund’s positions in these Financial Instruments as of September 30, 2012, which were sensitive to exchange rate price risk.

Futures Positions as of September 30, 2012

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

AUD/US Dollar Future

     Short         December 2012         75       $ 103.03         1,000       $ 7,727,250   

The September 30, 2012 short futures notional amount is calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The short notional amount will increase (decrease) proportionally with increases (decreases) in the price of the futures contract. Additional losses (gains) associated with these contracts will be equal to any such subsequent increases (decreases) in short notional amounts, 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 Australian Dollar 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 Australian Dollar and multiplying by negative one. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day.

 

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ProShares Ultra Euro:

As of September 30, 2012 and 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 tables provide information about the Fund’s positions in these Financial Instruments as of September 30, 2012 and 2011, which were sensitive to exchange rate price risk.

Foreign Currency Forward Contracts as of September 30, 2012

 

Reference

Currency

   Counterparty    Long
or
Short
     Settlement
Date
     Euro     Forward
Rate
     Market Value
USD
 

Euro/US Dollar Forward

   Goldman Sachs International      Long         10/05/12         3,181,525        1.2852       $ 4,089,012   

Euro/US Dollar Forward

   UBS AG      Long         10/05/12         6,105,000        1.2852         7,846,368   

Euro/US Dollar Forward

   Goldman Sachs International      Short         10/05/12         (179,800     1.2852         (231,086

Euro/US Dollar Forward

   UBS AG      Short         10/05/12         (77,600     1.2852         (99,734

Foreign Currency Forward Contracts as of September 30, 2011

 

Reference

Currency

   Counterparty    Long
or
Short
     Settlement
Date
     Euro     Forward
Rate
     Market Value
USD
 

Euro/US Dollar Forward

   Goldman Sachs International      Long         10/07/11         6,232,725        1.3396       $ 8,349,073   

Euro/US Dollar Forward

   UBS AG      Long         10/07/11         6,659,500        1.3396         8,920,761   

Euro/US Dollar Forward

   Goldman Sachs International      Short         10/07/11         (721,200     1.3396         (966,087

Euro/US Dollar Forward

   UBS AG      Short         10/07/11         (646,900     1.3396         (866,558

The September 30, 2012 and 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.

ProShares Short Euro:

As of September 30, 2012, the ProShares Short Euro Fund was exposed to inverse exchange rate price risk through its holdings of Euro/USD foreign currency futures contracts. The following table provides information about the Fund’s positions in these Financial Instruments as of September 30, 2012, which were sensitive to exchange rate price risk.

 

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Futures Positions as of September 30, 2012

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Euro/US Dollar Future

     Short         December 2012         24       $ 1.2862         125,000       $ 3,858,600   

The September 30, 2012 short futures notional amount is calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The short notional amount will increase (decrease) proportionally with increases (decreases) in the price of the futures contract. Additional losses (gains) associated with these contracts will be equal to any such subsequent increases (decreases) in short notional amounts, 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 $1.00 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 one. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day.

ProShares UltraShort Euro:

As of September 30, 2012 and 2011, the ProShares UltraShort Euro Fund was exposed to inverse exchange rate price risk through its holdings of Euro/USD foreign currency forward contracts. The following tables provide information about the Fund’s positions in these Financial Instruments as of September 30, 2012 and 2011, which were sensitive to exchange rate price risk.

Foreign Currency Forward Contracts as of September 30, 2012

 

Reference

Currency

   Counterparty    Long
or
Short
     Settlement
Date
     Euro     Forward
Rate
     Market Value
USD
 

Euro/US Dollar Forward

   Goldman Sachs International      Long         10/05/12         121,663,800        1.2852       $ 156,366,739   

Euro/US Dollar Forward

   UBS AG      Long         10/05/12         146,354,700        1.2852         188,100,383   

Euro/US Dollar Forward

   Goldman Sachs International      Short         10/05/12         (700,644,925     1.2852         (900,494,334

Euro/US Dollar Forward

   UBS AG      Short         10/05/12         (767,109,200     1.2852         (985,916,637

Foreign Currency Forward Contracts as of September 30, 2011

 

Reference

Currency

   Counterparty    Long
or
Short
     Settlement
Date
     Euro     Forward
Rate
     Market Value
USD
 

Euro/US Dollar Forward

   Goldman Sachs International      Long         10/07/11         63,408,700        1.3396       $ 84,939,392   

Euro/US Dollar Forward

   UBS AG      Long         10/07/11         86,950,300        1.3396         116,474,642   

Euro/US Dollar Forward

   Goldman Sachs International      Short         10/07/11         (731,587,225     1.3396         (980,000,757

Euro/US Dollar Forward

   UBS AG      Short         10/07/11         (816,704,400     1.3396         (1,094,019,828

 

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The September 30, 2012 and 2011 USD market values equal the number of Euros multiplied by the forward rate. These short 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.

ProShares Ultra Yen:

As of September 30, 2012 and 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 September 30, 2012 and 2011, which were sensitive to exchange rate price risk.

Foreign Currency Forward Contracts as of September 30, 2012

 

Reference

Currency

   Counterparty    Long
or
Short
   Settlement
Date
     Yen     Forward
Rate
     Market Value
USD
 

Yen/US Dollar Forward

   Goldman Sachs International    Long      10/05/12         387,568,100        0.012817       $ 4,967,567   

Yen/US Dollar Forward

   UBS AG    Long      10/05/12         453,633,300        0.012817         5,814,342   

Yen/US Dollar Forward

   Goldman Sachs International    Short      10/05/12         (6,526,600     0.012817         (83,653

Yen/US Dollar Forward

   UBS AG    Short      10/05/12         (15,729,000     0.012817         (201,603

Foreign Currency Forward Contracts as of September 30, 2011

 

Reference

Currency

   Counterparty    Long
or
Short
   Settlement
Date
     Yen     Forward
Rate
     Market Value
USD
 

Yen/US Dollar Forward

   Goldman Sachs International    Long      10/07/11         355,590,000        0.012963       $ 4,609,665   

Yen/US Dollar Forward

   UBS AG    Long      10/07/11         516,060,000        0.012963         6,689,905   

Yen/US Dollar Forward

   Goldman Sachs International    Short      10/07/11         (19,800,000     0.012963         (256,676

Yen/US Dollar Forward

   UBS AG    Short      10/07/11         (5,630,000     0.012963         (72,984

The September 30, 2012 and 2011 USD market values equal 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

 

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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 September 30, 2012 and 2011, the ProShares UltraShort Yen Fund was exposed to inverse exchange rate price risk through its holdings of Yen/USD foreign currency forward contracts. The following tables provide information about the Fund’s positions in these Financial Instruments as of September 30, 2012 and 2011, which were sensitive to exchange rate price risk.

Foreign Currency Forward Contracts as of September 30, 2012

 

Reference

Currency

   Counterparty    Long
or
Short
   Settlement
Date
     Yen     Forward
Rate
     Market Value
USD
 

Yen/US Dollar Forward

   Goldman Sachs International    Long      10/05/12         2,209,153,600        0.012817       $ 28,315,328   

Yen/US Dollar Forward

   UBS AG    Long      10/05/12         1,869,997,800        0.012817         23,968,275   

Yen/US Dollar Forward

   Goldman Sachs International    Short      10/05/12         (16,016,951,000     0.012817         (205,293,657

Yen/US Dollar Forward

   UBS AG    Short      10/05/12         (27,086,156,900     0.012817         (347,170,708

Foreign Currency Forward Contracts as of September 30, 2011

 

Reference

Currency

   Counterparty    Long
or
Short
     Settlement
Date
     Yen     Forward
Rate
     Market Value
USD
 

Yen/US Dollar Forward

   Goldman Sachs International      Long         10/07/11         3,203,440,000        0.012963       $ 41,527,556   

Yen/US Dollar Forward

   UBS AG      Long         10/07/11         1,423,900,000        0.012963         18,458,622   

Yen/US Dollar Forward

   Goldman Sachs International      Short         10/07/11         (23,267,420,000     0.012963         (301,625,468

Yen/US Dollar Forward

   UBS AG      Short         10/07/11         (23,259,690,000     0.012963         (301,525,261

The September 30, 2012 and 2011 USD market values equal the number of Yen multiplied by the forward rate. These short 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 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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Equity Market Volatility Sensitivity

Each of the VIX Funds is exposed to equity market volatility risk through its holdings of Financial Instruments. The following tables provide information about each of the VIX Funds’ Financial Instruments, which are sensitive to changes in equity market volatility indexes. As of September 30, 2012 and, as applicable, September 30, 2011, each of the VIX Funds’ positions were as follows:

ProShares Ultra VIX Short-Term Futures ETF

As of September 30, 2012, the ProShares Ultra VIX Short-Term Futures ETF Fund was exposed to equity market volatility risk through its holding of VIX futures contracts and its holding of swap agreements linked to the S&P 500 VIX Short-Term Futures Index. The following tables provide information about the Fund’s positions in these Financial Instruments as of September 30, 2012, which were sensitive to equity market volatility risk.

Futures Positions as of September 30, 2012

 

Contract

   Long or
Short
   Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

CBOE VIX Future

   Long    October 2012      13,083       $ 16.40         1,000       $ 214,561,200   

CBOE VIX Future

   Long    November 2012      8,723         18.05         1,000         157,450,150   

Swap Agreements as of September 30, 2012

 

Reference Index

   Counterparty    Long or
Short
     Index
Close
     Notional Amount
at Value
 

S&P 500 VIX Short-Term Futures Index

   Societe Generale S.A      Long       $ 3,233.77       $ 15,386,719   

The September 30, 2012 futures notional amount is calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The September 30, 2012 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 VIX Short-Term Futures ETF

As of September 30, 2012 and 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 September 30, 2012 and 2011, which were sensitive to equity market volatility risk.

Futures Positions as of September 30, 2012

 

Contract

   Long or
Short
   Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

CBOE VIX Future

   Long    October 2012      5,861       $ 16.40         1,000       $ 96,120,400   

CBOE VIX Future

   Long    November 2012      3,904         18.05         1,000         70,467,200   

Futures Positions as of September 30, 2011

 

Contract

   Long or
Short
   Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

CBOE VIX Future

   Long    October 2011      429       $ 42.15         1,000       $ 18,082,350   

CBOE VIX Future

   Long    November 2011      286         37.75         1,000         10,796,500   

The September 30, 2012 short futures notional amount is calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The short notional amount will increase (decrease) proportionally with increases (decreases) in the price of the futures contract. Additional losses (gains) associated with these contracts will be equal to any such subsequent increases (decreases) in short notional amounts, before accounting for spreads or transaction or financing costs. The Fund will generally attempt to adjust its positions in Financial Instruments each day to match the performance of the Index. 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 one. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day.

ProShares Short VIX Short-Term Futures ETF

As of September 30, 2012, the ProShares Short VIX Short-Term Futures ETF Fund was exposed to inverse 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 September 30, 2012, which were sensitive to equity market volatility risk.

 

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Futures Positions as of September 30, 2012

 

Contract

   Long or
Short
   Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

CBOE VIX Future

   Short    October 2012      1,908       $ 16.40         1,000       $ (31,291,200

CBOE VIX Future

   Short    November 2012      1,267         18.05         1,000         (22,869,350

The September 30, 2012 short futures notional amount is calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The short notional amount will increase (decrease) proportionally with increases (decreases) in the price of the futures contract. Additional losses (gains) associated with these contracts will be equal to any such subsequent increases (decreases) in short notional amounts, 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 $1.00 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. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day.

ProShares VIX Mid-Term Futures ETF

As of September 30, 2012 and 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 September 30, 2012 and 2011, which were sensitive to equity market volatility risk.

Futures Positions as of September 30, 2012

 

Contract

   Long or
Short
   Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

CBOE VIX Future

   Long    January 2013      890       $ 20.90         1,000       $ 18,601,000   

CBOE VIX Future

   Long    February 2013      1,484         22.15         1,000         32,870,600   

CBOE VIX Future

   Long    March 2013      1,484         23.35         1,000         34,651,400   

CBOE VIX Future

   Long    April 2013      593         24.50         1,000         14,528,500   

Futures Positions as of September 30, 2011

 

Contract

   Long or
Short
   Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

CBOE VIX Future

   Long    January 2012      78       $ 35.50         1,000       $ 2,769,000   

CBOE VIX Future

   Long    February 2012      129         34.70         1,000         4,476,300   

CBOE VIX Future

   Long    March 2012      129         34.25         1,000         4,418,250   

CBOE VIX Future

   Long    April 2012      52         34.35         1,000         1,786,200   

The September 30, 2012 futures notional amount is calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The notional amount will increase (decrease) proportionally with increases (decreases) in the price of the futures contract. Additional losses (gains) associated with these contracts will be equal to any such subsequent increases (decreases) in short notional amounts, before accounting for spreads or transaction or financing costs. The Fund will generally attempt to adjust its positions in Financial Instruments each day to match the performance of the Index. 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. See “Item 1A. Risk Factors” in the Form 10-K for additional information regarding performance for periods longer than one day.

Qualitative Disclosure

As described above in Item 2 of this Quarterly Report on Form 10-Q, it is the investment objective of each Geared Fund to seek daily investment results, before fees and expenses, which correspond to a multiple, the inverse or an inverse multiple of the daily performance, whether positive or negative, of its corresponding benchmark. 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 inverse (-2x) of the daily performance of its corresponding benchmark. Each Matching VIX Fund seeks investment results (before fees and expenses) that match the performance of a benchmark. The Geared Funds do not seek to achieve these stated investment objectives over a period of time greater than a single 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. Shareholders who invest in the Funds should actively manage and monitor their investments, 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. The Matching VIX Funds and the Managed Futures Funds seek to achieve their stated investment objective both over a single day and over time.

 

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Primary Market Risk Exposure

The primary market risks that the Funds are exposed to depend on each Fund’s investment objective and corresponding benchmark. 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 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 a Short Fund or 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 a Short Fund or an UltraShort Fund and daily decreases in the price of a currency will negatively impact the daily performance of Shares of an Ultra Fund.

 

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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. As a result, 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. As a result, the Fund’s long exposure will generally need to be decreased. Net assets for Short Funds or UltraShort Funds will generally decrease when the Index rises on a given day. As a result, the Fund’s short exposure may need to be decreased. Conversely, if the Index has fallen on a given day, a Short Fund’s or an UltraShort Fund’s assets should rise. As a result, its short exposure may need to be increased.

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 fails to perform its obligations. Each Fund intends to enter into swap and forward agreements only with major global 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, subject to certain minimum thresholds.

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).

 

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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 September 30, 2012, including providing 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 such information 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 September 30, 2012, that have materially affected, or are reasonably likely to materially affect, the Trust’s or the Funds’ internal control over financial reporting.

Certifications

The certifications by the Principal Executive Officer and Principal Financial Officer of the Trust required by Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002, which are filed or furnished as exhibits to this Quarterly Report on Form 10-Q, apply both to the Trust taken as a whole and each Fund, and the Principal Executive Officer and Principal Financial Officer of the Trust are certifying both as to the Trust taken as a whole and each Fund.

 

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Part II. OTHER INFORMATION

 

Item 1. Legal Proceedings.

The Trust and certain principals of the Sponsor have been named as defendants (along with several other parties) in a consolidated class action lawsuit filed in the United States District Court for the Southern District of New York, styled In re ProShares Trust Securities Litigation, Civ. No. 09-cv-6935. The complaint, as amended, alleged 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 and allegedly failing to adequately disclose the Funds’ investment objectives and risks. The six Funds of the Trust named in the complaint were 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. On September 10, 2012, the District Court issued an Opinion and Order dismissing the class action lawsuit in its entirety. On October 3, 2012, the plaintiffs filed a Notice of Appeal appealing the dismissal. 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.

 

Item 1A. Risk Factors.

There has not been a material change to the Risk Factors previously disclosed in the Trust’s Annual Report on Form 10-K for the year ended for the year ended December 31, 2011, filed on February 29, 2012 and in the Trust’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, filed on August 9, 2012.

 

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

 

  (a) None.

 

  (b) The Trust initially registered Shares on a 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 listed on its Registration Statement on Form S-3 (No. 333-163511), which became effective on December 4, 2009 and registered additional Shares and/or added Funds pursuant to Post-Effective Amendments to that Registration Statement, which became effective on May 28, 2010, November 5, 2010, December 23, 2010 and April 13, 2011, as well as on a Registration Statement on Form S-1 (No. 333-178707), which became effective on June 25, 2012. On June 26, 2012, a Post-Effective Amendment to the Registration Statement on Form S-3 (No. 333-163511) was declared effective, which registered additional Shares for ProShares Ultra DJ-UBS Crude Oil and terminated the offerings for certain other Funds. New offerings for certain of those Funds were registered on an accompanying Registration Statement on Form S-1 (No. 333-176878), which was also declared effective on June 26, 2012. On September 24, 2012, a Registration Statement on Form S-1 (No. 333-183672) was declared effective, which registered additional Shares for ProShares Ultra VIX Short-Term Futures ETF, ProShares VIX Short-Term Futures ETF and ProShares Short VIX Short-Term Futures ETF. This registration statement (No. 333-183672) was a combined registration statement acting as a post-effective amendment to the Form S-1 (No. 333-176878), which offerings were terminated upon effectiveness. On September 27, 2012, a Registration Statement on Form S-3 (No. 333-183674) was declared effective, which registered additional Shares for ProShares Ultra DJ-UBS Crude Oil, ProShares UltraShort DJ-UBS Crude Oil and ProShares UltraShort Euro. This registration statement (No. 333-183674) was a combined registration statement acting as a post-effective amendment to the Form S-3 (No. 333-163511), which offerings were terminated upon effectiveness. On September 28, 2012, a post-effective amendment to an S-1 Registration Statement was declared effective, terminating the proposed offerings of ProShares Ultra Canadian Dollar, ProShares Ultra Swiss Franc, ProShares Short Yen, ProShares UltraShort Canadian Dollar and ProShares UltraShort Swiss Franc. Therefore, as of September 30, 2012, the Trust has four registration statements outstanding:

 

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1) an effective Form S-3 registration statement (No. 333-183674); 2) an effective Form S-1 registration statement (No. 333-183672); 3) another effective Form S-1 registration statement (No. 333-178707); and 4) a Form S-1 registration statement that has not been declared effective (No. 333-178212).

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 and collateralized repurchase agreements) that may be used to collateralize swap agreements or forward contracts or deposited with FCMs as margin in connection with any futures transactions. Each Geared Fund continuously offers and redeems or will continuously offer and redeem and each Managed Futures Fund will continuously offer and redeem its Shares in blocks of 50,000 Shares, and each Matching VIX Fund continuously offers and redeems Shares in blocks of 25,000 Shares. The Managed Futures Funds have not yet commenced investment operations.

 

Title of

Securities Registered

   Amount
Registered
As of September 30,
2012
     Shares Sold
For the
Three Months Ended
September 30, 2012
     Sale Price of Shares
Sold For the

Three Months Ended
September 30, 2012
 

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         —         $ —     

ProShares Ultra DJ-UBS Crude Oil Common Units of Beneficial Interest

   $ 4,008,246,073         3,400,000       $ 106,380,749   

ProShares UltraShort DJ-UBS Crude Oil Common Units of Beneficial Interest

   $ 1,875,000,000         1,650,000       $ 67,343,504   

ProShares Ultra DJ-UBS Natural Gas Common Units of Beneficial Interest

   $ 500,000,000         700,000       $ 29,055,774   

ProShares UltraShort DJ-UBS Natural Gas Common Units of Beneficial Interest

   $ 500,000,000         150,000       $ 3,427,964   

ProShares Ultra Gold Common Units of Beneficial Interest

   $ 1,000,000,000         100,000       $ 9,732,999   

ProShares UltraShort Gold Common Units of Beneficial Interest

   $ 1,000,000,000         —         $ —     

ProShares Ultra Silver Common Units of Beneficial Interest

   $ 2,500,000,000         1,000,000       $ 50,474,316   

ProShares UltraShort Silver Common Units of Beneficial Interest

   $ 2,300,000,000         1,500,000       $ 69,806,717   

ProShares Ultra Australian Dollar Common Units of Beneficial Interest

   $ 200,000,000         100,000       $ 4,000,000   

ProShares UltraShort Australian Dollar Common Units of Beneficial Interest

   $ 200,000,000         100,000       $ 4,000,000   

 

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ProShares Ultra Euro Common Units of Beneficial Interest

   $ 500,000,000        —         $ —     

ProShares Short Euro Common Units of Beneficial Interest

   $ 200,000,000        —         $ —     

ProShares UltraShort Euro Common Units of Beneficial Interest

   $ 2,653,506,872        1,750,000       $ 37,249,573   

ProShares Ultra Yen Common Units of Beneficial Interest

   $ 500,000,000        —         $ —     

ProShares UltraShort Yen Common Units of Beneficial Interest

   $ 1,300,000,000        1,450,000       $ 60,451,231   

ProShares Ultra VIX Short-Term Futures ETF Common Units of Beneficial Interest

   $ 2,000,000,000        6,390,000       $ 318,646,989   

ProShares VIX Short-Term Futures ETF Common Units of Beneficial Interest

   $ 1,300,000,000        11,225,000       $ 269,256,478   

ProShares Short VIX Short-Term Futures ETF Common Units of Beneficial Interest

   $ 700,000,000        4,400,000       $ 251,195,078   

ProShares VIX Mid-Term Futures ETF Common Units of Beneficial Interest

   $ 700,000,000        975,000       $ 47,439,424   

ProShares Managed Futures Strategy Common Units of Beneficial Interest

   $ 1,000,000 1      —         $ —     

ProShares Commodity Managed Futures Strategy Common Units of Beneficial Interest

   $ 1,000,000 1      —         $ —     

ProShares Financial Managed Futures Strategy Common Units of Beneficial Interest

   $ 1,000,000 1      —         $ —     

Total:

   $ 24,739,752,945        34,890,000       $ 1,328,460,796   

1 A registration statement on Form S-1 was filed with the SEC on November 29, 2011 and February 14, 2012, registering this amount. However, the registration statements had not yet been declared effective as of September 30, 2012.

 

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(c) From July 1, 2012 through September 30, 2012, 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

     

07/01/12 to 07/31/12

     —         $ —     

08/01/12 to 08/31/12

     50,000       $ 26.77   

09/01/12 to 09/30/12

     —         $ —     

ProShares UltraShort DJ-UBS Commodity

     

07/01/12 to 07/31/12

     —         $ —     

08/01/12 to 08/31/12

     —         $ —     

09/01/12 to 09/30/12

     —         $ —     

ProShares Ultra DJ-UBS Crude Oil

     

07/01/12 to 07/31/12

     5,350,000       $ 29.28   

08/01/12 to 08/31/12

     3,200,000       $ 33.15   

09/01/12 to 09/30/12

     300,000       $ 35.95   

ProShares UltraShort DJ-UBS Crude Oil

     

07/01/12 to 07/31/12

     —         $ —     

08/01/12 to 08/31/12

     —         $ —     

09/01/12 to 09/30/12

     450,000       $ 40.84   

ProShares Ultra DJ-UBS Natural Gas

     

07/01/12 to 07/31/12

     300,000       $ 55.95   

08/01/12 to 08/31/12

     —         $ —     

09/01/12 to 09/30/12

     450,000       $ 49.42   

ProShares UltraShort DJ-UBS Natural Gas

     

07/01/12 to 07/31/12

     —         $ —     

08/01/12 to 08/31/12

     —         $ —     

09/01/12 to 09/30/12

     —         $ —     

ProShares Ultra Gold

     

07/01/12 to 07/31/12

     —         $ —     

08/01/12 to 08/31/12

     150,000       $ 83.53   

09/01/12 to 09/30/12

     100,000       $ 92.77   

ProShares UltraShort Gold

     

07/01/12 to 07/31/12

     —         $ —     

08/01/12 to 08/31/12

     137,500       $ 67.79   

09/01/12 to 09/30/12

     37,500       $ 56.85   

ProShares Ultra Silver

     

07/01/12 to 07/31/12

     1,000,000       $ 38.19   

08/01/12 to 08/31/12

     750,000       $ 42.76   

09/01/12 to 09/30/12

     450,000       $ 57.28   

ProShares UltraShort Silver

     

07/01/12 to 07/31/12

     —         $ —     

08/01/12 to 08/31/12

     650,000       $ 58.22   

09/01/12 to 09/30/12

     —         $ —     

ProShares Ultra Australian Dollar

     

07/01/12 to 07/31/12

     —         $ —     

08/01/12 to 08/31/12

     —         $ —     

09/01/12 to 09/30/12

     —         $ —     

ProShares UltraShort Australian Dollar

     

07/01/12 to 07/31/12

     —         $ —     

08/01/12 to 08/31/12

     —         $ —     

09/01/12 to 09/30/12

     —         $ —     

ProShares Ultra Euro

     

07/01/12 to 07/31/12

     —         $ —     

08/01/12 to 08/31/12

     —         $ —     

09/01/12 to 09/30/12

     —         $ —     

ProShares Short Euro

     

07/01/12 to 07/31/12

     —         $ —     

08/01/12 to 08/31/12

     —         $ —     

09/01/12 to 09/30/12

     —         $ —     

 

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ProShares UltraShort Euro

     

07/01/12 to 07/31/12

     1,400,000       $ 22.00   

08/01/12 to 08/31/12

     2,650,000       $ 21.96   

09/01/12 to 09/30/12

     2,300,000       $ 19.68   

ProShares Ultra Yen

     

07/01/12 to 07/31/12

     —         $ —     

08/01/12 to 08/31/12

     —         $ —     

09/01/12 to 09/30/12

     —         $ —     

ProShares UltraShort Yen

     

07/01/12 to 07/31/12

     —         $ —     

08/01/12 to 08/31/12

     550,000       $ 41.93   

09/01/12 to 09/30/12

     150,000       $ 42.00   

ProShares Ultra VIX Short-Term Futures ETF

     

07/01/12 to 07/31/12

     915,000       $ 86.89   

08/01/12 to 08/31/12

     375,000       $ 56.29   

09/01/12 to 09/30/12

     1,850,000       $ 34.20   

ProShares VIX Short-Term Futures ETF

     

07/01/12 to 07/31/12

     1,875,000       $ 29.69   

08/01/12 to 08/31/12

     2,950,000       $ 24.69   

09/01/12 to 09/30/12

     1,975,000       $ 20.09   

ProShares Short VIX Short-Term Futures ETF

     

07/01/12 to 07/31/12

     1,300,000       $ 49.39   

08/01/12 to 08/31/12

     1,300,000       $ 55.20   

09/01/12 to 09/30/12

     1,300,000       $ 64.90   

ProShares VIX Mid-Term Futures ETF

     

07/01/12 to 07/31/12

     —         $ —     

08/01/12 to 08/31/12

     —         $ —     

09/01/12 to 09/30/12

     100,000       $ 43.86   

Total:

     34,365,000       $ 35.50   

 

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Item 3. Defaults Upon Senior Securities.

None.

 

Item 4. Mine Safety Disclosures.

Not applicable.

 

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) In accordance with Rule 406T of Regulation S-T, the information in these exhibits is furnished and deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 and 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 

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Table of Contents

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: November 9, 2012
/s/ Edward Karpowicz
By: Edward Karpowicz
Principal Financial Officer
Date: November 9, 2012