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ProShares Trust II - Annual Report: 2015 (Form 10-K)

Form 10-K
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-K

 

 

 

x Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2015.

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)

Securities registered pursuant to Section 12(b) of the Act:

 

     
Common Units of Beneficial Interest   NYSE Arca, Inc.
(Title of each class)   (Name of exchange on which registered)
                            (Title of class)                           (Name of exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act: None

 

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    x  Yes    ¨  No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     ¨  Yes    x  No

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 Website, 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

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

The aggregate market value of each Fund’s units held by non-affiliates as of June 30, 2015 and the number of outstanding units for each Fund as of February 18, 2016 are included in the table below.

 

 

 


Table of Contents
     Aggregate Market Value of
the Fund’s Units Held by
Non-Affiliates
as of
June 30, 2015
   

 

   Number of Outstanding Units
as of
February 18, 2016
 

ProShares Managed Futures Strategy

   $           9,405,209           350,010   

ProShares VIX Short-Term Futures ETF

     168,418,477           5,099,811   

ProShares VIX Mid-Term Futures ETF

     26,470,911           412,403   

ProShares Short VIX Short-Term Futures ETF

     189,747,162           14,350,000   

ProShares Ultra VIX Short-Term Futures ETF

     426,519,614           7,052,448   

ProShares UltraShort Bloomberg Commodity

     5,337,333           59,995   

ProShares UltraShort Bloomberg Crude Oil

     181,067,201           969,942   

ProShares UltraShort Bloomberg Natural Gas

     13,156,390           74,944   

ProShares UltraShort Gold

     73,816,366           596,977   

ProShares UltraShort Silver

     60,618,396           616,976   

ProShares Short Euro

     19,372,715           400,000   

ProShares UltraShort Australian Dollar

     19,281,775           350,000   

ProShares UltraShort Euro

     629,887,847           17,500,000   

ProShares UltraShort Yen

     405,570,914           2,499,290   

ProShares Ultra Bloomberg Commodity

     2,349,354           199,961   

ProShares Ultra Bloomberg Crude Oil

     988,879,588           103,827,866   

ProShares Ultra Bloomberg Natural Gas

     62,926,084           1,942,169   

ProShares Ultra Gold

     88,896,519           2,250,000   

ProShares Ultra Silver

     287,418,504           7,946,526   

ProShares Ultra Euro

     13,272,232           700,000   

ProShares Ultra Yen

     5,359,606           99,970   

DOCUMENTS INCORPORATED BY REFERENCE:

None.

THE FINANCIAL STATEMENT SCHEDULES CONTAINED IN PART IV OF THIS ANNUAL REPORT ON FORM 10-K CONSTITUTE THE ANNUAL REPORT WITH RESPECT TO THE COMMODITY POOLS FOR PURPOSES OF COMMODITY FUTURES TRADING COMMISSION RULE 4.22(C)


Table of Contents

PROSHARES TRUST II

Table of Contents

 

     Page  

Part I.

  

Item 1. Business.

     1   

Item 1A. Risk Factors.

     28   

Item 1B. Unresolved Staff Comments.

     56   

Item 2. Properties.

     56   

Item 3. Legal Proceedings.

     56   

Item 4. Mine Safety Disclosures.

     56   

Part II.

  

Item  5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

     56   

Item 6. Selected Financial Data.

     66   

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     73   

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

     108   

Item 8. Financial Statements and Supplementary Data.

     127   

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

     134   

Item 9A. Controls and Procedures.

     134   

Item 9B. Other Information.

     135   

Part III.

  

Item 10. Directors, Executive Officers and Corporate Governance.

     136   

Item 11. Executive Compensation.

     139   

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

     140   

Item 13. Certain Relationships and Related Transactions, and Director Independence.

     140   

Item 14. Principal Accounting Fees and Services.

     140   

Part IV.

  

Item 15. Exhibits and Financial Statement Schedules.

     141   

Exhibit Index

     141   

Signatures

     311   


Table of Contents

Part I

Item 1. Business.

Summary

ProShares Trust II (formerly known as the Commodities and Currencies Trust) (the “Trust”) is a Delaware statutory trust formed on October 9, 2007 and is currently organized into separate series (each, a “Fund” and collectively, the “Funds”). As of December 31, 2015, the following twenty-one series of the Trust have commenced investment operations: (i) ProShares Managed Futures Strategy (the “Managed Futures Fund”); (ii) ProShares VIX Short-Term Futures ETF and ProShares VIX Mid-Term Futures ETF (each, a “Matching VIX Fund” and collectively, the “Matching VIX Funds”); (iii) ProShares Short VIX Short-Term Futures ETF and ProShares Ultra VIX Short-Term Futures ETF (each, a “Geared VIX Fund” and collectively, the “Geared VIX Funds”); and (iv) ProShares UltraShort Bloomberg Commodity, ProShares UltraShort Bloomberg Crude Oil, ProShares UltraShort Bloomberg Natural Gas, ProShares UltraShort Gold, ProShares UltraShort Silver, ProShares UltraShort Australian Dollar, ProShares UltraShort Euro, ProShares UltraShort Yen, ProShares Ultra Bloomberg Commodity, ProShares Ultra Bloomberg Crude Oil, ProShares Ultra Bloomberg Natural Gas, ProShares Ultra Gold, ProShares Ultra Silver, ProShares Ultra Euro and ProShares Ultra Yen (each, a “Leveraged Fund” and collectively, the “Leveraged Funds”); and (v) ProShares Short Euro (the “Short Euro Fund”). 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 Fund. The Shares of each Fund are listed on the New York Stock Exchange Archipelago (“NYSE Arca”), as further described below. The Managed Futures Fund and the Matching VIX Funds are collectively referred to as the “Matching Funds” in this Annual Report on Form 10-K. The Geared VIX Funds and the Matching VIX Funds are collectively referred to as the “VIX Funds” in this Annual Report on Form 10-K. The Leveraged Funds, the Short Euro Fund and the Geared VIX Funds, are collectively referred to as the “Geared Funds” in this Annual Report on Form 10-K.

On May 22, 2015, the Trust announced plans to liquidate ProShares Ultra Australian Dollar (ticker symbol: GDAY). ProShares Ultra Australian Dollar was closed to purchases and redemptions as of the close of regular trading on the NYSE Arca on June 18, 2015. Beginning June 19, 2015, no secondary market for ProShares Ultra Australian Dollar’s Shares remained. Proceeds of the liquidation were distributed to shareholders on June 29, 2015. Any shareholders remaining in the fund on June 29, 2015 automatically had their shares redeemed for cash at ProShares Ultra Australian Dollar’s net asset value per Share as of June 19, 2015. On June 30, 2015, the NYSE Arca filed a Form 25 removing the listing of ProShares Ultra Australian Dollar on the NYSE Arca. On July 10, 2015, a Form 15 was filed with the U.S. Securities and Exchange Commission (“SEC”) terminating the registration of ProShares Ultra Australian Dollar.

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 UltraShort Bloomberg Commodity, ProShares UltraShort Bloomberg Crude Oil, ProShares UltraShort Gold, ProShares UltraShort Silver, ProShares UltraShort Euro, ProShares UltraShort Yen, ProShares Ultra Bloomberg Commodity, ProShares Ultra Bloomberg Crude Oil, ProShares Ultra Gold, ProShares Ultra Silver, ProShares Ultra Euro and ProShares Ultra Yen.

Groups of Funds are collectively referred to in this Annual Report on Form 10-K in several different ways. References to “Short Funds,” “UltraShort Funds,” or “Ultra 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” or the “Managed Futures Fund” refer to the different Funds based upon their investment objective and their general benchmark categories.

Each of the Funds generally invests in Financial Instruments (i.e., instruments whose value is derived from the value of an underlying asset, rate or index, including futures contracts, swap agreements, forward contracts and other instruments) as a substitute for investing directly in commodities, currencies, or spot volatility products in order to gain exposure to its applicable commodity futures index, commodity, currency exchange rate or equity volatility index. Financial Instruments also are used to produce economically “inverse,” “inverse leveraged” or “leveraged” investment results for the Geared Funds.

 

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As further described below, 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 two times the inverse (-2x) of the daily performance of its corresponding benchmark. Each “Ultra” Fund seeks daily investment results (before fees and expenses) that correspond to two times (2x) the daily performance of its corresponding benchmark. Each Matching VIX Fund and the Managed Futures Fund seek investment results (before fees and expenses), both over a single day and over time, that match the performance of its corresponding benchmark. Daily performance is measured from the calculation of one net asset value per Share (“NAV”) to the next.

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 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 Geared 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 -1x, -2x or 2x of the return of the index to which such Geared Fund is benchmarked for that period. A Geared Fund will lose money if its benchmark’s performance is flat over time, and it is possible for a Geared Fund to lose money over time even if its benchmark’s performance increases (or decreases, in the case of a Short or UltraShort Fund). Longer holding periods, higher benchmark volatility, inverse exposure and greater leverage each affect the impact of compounding on a Geared 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. 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 leveraged, inverse or inverse leveraged investment results. Shareholders who invest in the Funds should actively manage and monitor their investments, as frequently as daily.

Each Geared Fund and the Managed Futures Fund continuously offers and redeems its Shares in blocks of 50,000 Shares and each Matching VIX Fund continuously offers and redeems shares in blocks of 25,000 Shares (each such block a “Creation Unit”). Only Authorized Participants may purchase and redeem Shares from a Fund and then only in Creation Units. An Authorized Participant is an entity that has entered into an Authorized Participant Agreement with one or more of the Funds. Shares of the Funds are offered to Authorized Participants in Creation Units at each Fund’s respective 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 per Share 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. Additionally, the price at which an Authorized Participant sells a Share may be higher or lower than the price paid by such Authorized Participant in connection with the creation of such Share in a Creation Unit. The form of Authorized Participant Agreement and related Authorized Participant Handbook set forth the terms and conditions under which an Authorized Participant may purchase or redeem a Creation Unit. Authorized Participants do not receive from any Fund, the Sponsor, or any of their affiliates, any fees or compensation in connection with their sale of Shares to the public. An Authorized Participant may receive commissions or fees from investors who purchase Shares through their commission or fee-based brokerage accounts.

On March 19, 2015, the company that ran the London U.S. dollar gold fixing, ceased calculating the price of gold for the London Bullion Market Association (the “LBMA”). The LBMA selected ICE Benchmark Administration to calculate the price, which was renamed the LBMA Gold Price, and is based on an electronic, physically settled auction-based methodology, beginning on March 20, 2015.

As of December 31, 2015, ProShare Capital Management LLC, a Maryland limited liability company, served as the Trust’s Sponsor (the “Sponsor”) and commodity pool operator. On February 17, 2013, the Sponsor’s commodity trading advisor registration was withdrawn. Wilmington Trust Company serves as the Trustee of the Trust (the “Trustee”). The Funds are commodity pools, as defined in the Commodity Exchange Act (the “CEA”) 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 (the “1940 Act”).

 

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The Sponsor maintains an Internet website at www.ProShares.com, through which monthly account statements and the Trust’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”), can be accessed free of charge, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the U.S. Securities and Exchange Commission (the “SEC”). Additional information regarding the Trust may also be found on the SEC’s EDGAR database at www.sec.gov.

Investment Objectives and Principal Investment Strategies

Investment Objectives

The Matching Funds

Investment Objective of the Managed Futures Fund

The Managed Futures Fund seeks results that, both over a single day and over time, match (before fees and expenses) the performance of its index. If the Managed Futures Fund is successful in meeting its objective, its value (before fees and expenses) should gain approximately as much on a percentage basis as the level of the S&P Strategic Futures Index (the “SFI”) when the index rises. Conversely, its value (before fees and expenses) should lose approximately as much on a percentage basis as the level of the SFI when the index declines. The Managed Futures Fund attempts to profit in both rising and falling markets by obtaining investment exposure to its benchmark through the relevant futures contracts.

Investment Objectives of the “Matching VIX” Funds

Each “Matching VIX” Fund seeks results, both over a single day and over time, that match (before fees and expenses) the performance of the S&P 500 VIX Short-Term Futures Index (the “Short-Term VIX Index”) or the S&P 500 VIX Mid-Term Futures Index (the “Mid-Term VIX Index”) (each a “VIX Futures Index” and together, the “VIX Futures Indexes”). The VIX Futures Indexes seek to offer exposure to forward market equity volatility through publicly traded futures markets. If a Matching VIX Fund is successful in meeting its objective, its value (before fees and expenses) should gain approximately as much on a percentage basis as the level of its corresponding VIX Futures Index when the benchmark rises. Conversely, its value (before fees and expenses) should lose approximately as much on a percentage basis as the level of its benchmark when the benchmark declines. Each Matching VIX Fund acquires exposure through VIX futures contracts, such that each Matching VIX Fund has exposure intended to approximate its applicable VIX Futures Index at the time of its NAV calculation. The VIX Futures Indexes track the performance of VIX futures contracts; they do not track the performance of the Chicago Board Options Exchange (“CBOE”) Volatility Index (the “VIX”), and the Matching VIX Funds should not be expected to match the performance of the VIX.

The Geared Funds

Investment Objectives of the “Short” Funds

Each “Short” Fund seeks daily investment results (before fees and expenses) that correspond to the inverse (-1x) of the daily performance, whether positive or negative, of the corresponding benchmark shown below. Expenses may include, among other things, costs related to the purchase, sale and storage of commodities or currencies and the cost of leverage, all of which may be embedded in Financial Instruments used by that Fund. If a Short Fund is successful in meeting its objective, its value on a given day (before fees and expenses) should gain approximately as much on a percentage basis as its corresponding benchmark when the benchmark declines. Conversely, its value on a given day (before fees and expenses) should lose approximately as much on a percentage basis as the corresponding benchmark when the benchmark rises. Each Short Fund will acquire short exposure through any one of or combinations of Financial Instruments, including Financial Instruments with respect to the applicable Short Fund’s benchmark, such that each Short Fund has exposure intended to approximate the inverse (-1x) of its corresponding benchmark at the time of its NAV calculation.

 

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Investment Objectives of the “UltraShort” Funds

Each “UltraShort” Fund seeks daily investment results (before fees and expenses) that correspond to two times the inverse (-2x) of the daily performance, whether positive or negative, of the corresponding benchmark shown below. Expenses may include, among other things, costs related to the purchase, sale and storage of commodities or currencies and the cost of leverage, all of which may be embedded in Financial Instruments used by that Fund. If an UltraShort Fund is successful in meeting its objective, its value on a given day (before fees and expenses) should gain approximately two times as much on a percentage basis as its corresponding benchmark when the benchmark declines. Conversely, its value on a given day (before fees and expenses) should lose approximately two times as much on a percentage basis as the corresponding benchmark when the benchmark rises. Each UltraShort Fund acquires short exposure through any one of or combinations of Financial Instruments, including Financial Instruments with respect to the applicable UltraShort Fund’s benchmark, such that each UltraShort Fund has exposure intended to approximate two times the inverse (-2x) of its corresponding benchmark at the time of its NAV calculation.

Investment Objectives of the “Ultra” Funds

Each “Ultra” Fund seeks daily investment results (before fees and expenses) that correspond to two times (2x) the daily performance, whether positive or negative, of the corresponding benchmark shown below. Expenses may include, among other things, costs related to the purchase, sale and storage of commodities or currencies and the cost of leverage, all of which may be embedded in Financial Instruments used by that Fund. If an Ultra Fund is successful in meeting its objective, its value on a given day (before fees and expenses) should gain approximately two times as much on a percentage basis as its corresponding benchmark when the benchmark rises. Conversely, its value on a given day (before fees and expenses) should lose approximately two times as much on a percentage basis as the corresponding benchmark when the benchmark declines. Each Ultra Fund acquires long exposure through any one of or combinations of Financial Instruments, including Financial Instruments with respect to the applicable Ultra Fund’s benchmark such that each Ultra Fund has exposure intended to approximate two times (2x) its corresponding benchmark at the time of its NAV calculation.

The corresponding benchmark for each Fund is listed below:

ProShares Managed Futures Strategy: The S&P Strategic Futures Index (the “SFI”). The SFI is a long/short rules-based investable index that seeks to potentially capture the economic benefit derived from both rising and declining trends in futures prices.

ProShares VIX Short-Term Futures ProShares Short VIX Short-Term Futures and ProShares Ultra VIX Short-Term Futures: The S&P 500 VIX Short-Term Futures Index. The S&P 500 VIX Short-Term Futures Index seeks to offer exposure to market volatility through publicly traded futures markets and is designed to measure the return from a rolling long position in the first and second month VIX futures contracts.

ProShares VIX Mid-Term Futures: The S&P 500 VIX Mid-Term Futures Index. The S&P 500 VIX Mid-Term Futures Index seeks to offer exposure to market volatility through publicly traded futures markets and is designed to measure the return from a rolling long position in the fourth, fifth, sixth and seventh month VIX futures contracts.

ProShares UltraShort Bloomberg Commodity and ProShares Ultra Bloomberg Commodity: The Bloomberg Commodity IndexSM. The Bloomberg Commodity Index is designed to track commodity futures prices.

ProShares UltraShort Bloomberg Crude Oil and ProShares Ultra Bloomberg Crude Oil: The Bloomberg WTI Crude Oil SubindexSM. The Bloomberg WTI Crude Oil Subindex is designed to track crude oil futures prices.

ProShares UltraShort Bloomberg Natural Gas and ProShares Ultra Bloomberg Natural Gas: The Bloomberg Natural Gas SubindexSM. The Bloomberg Natural Gas Subindex is designed to track natural gas futures prices traded on the NYMEX.

 

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ProShares UltraShort Gold and ProShares Ultra Gold: The daily performance of gold bullion as measured by the U.S. dollar p.m. LBMA Gold Price.

ProShares UltraShort Silver and ProShares Ultra Silver: The daily performance of silver bullion as measured by the London Silver Price.

ProShares UltraShort Australian Dollar: The 4:00 p.m. (Eastern Time) spot price of the Australian dollar versus the U.S. dollar using Australian dollar/U.S. dollar exchange rate as provided by Bloomberg, expressed in terms of U.S. dollars per unit of foreign currency.

ProShares Short Euro, ProShares UltraShort Euro and ProShares Ultra Euro: The 4:00 p.m. (Eastern Time) spot price of the euro versus the U.S. dollar, using euro/U.S. dollar exchange rate as provided by Bloomberg, expressed in terms of U.S. dollars per unit of foreign currency.

ProShares UltraShort Yen and ProShares Ultra Yen: The 4:00 p.m. (Eastern Time) spot price of the Japanese yen versus the U.S. dollar using the Japanese yen/U.S. dollar exchange rate as provided by Bloomberg, expressed in terms of U.S. dollars per unit of foreign currency.

Principal Investment Strategies

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, which the Sponsor believes in combination, should produce daily returns consistent with a Fund’s objective. The Sponsor relies upon a pre-determined model to generate orders that result in repositioning each Fund’s investments in accordance with their respective investment objectives. Each Geared Fund invests principally in any one of or combinations of Financial Instruments, including swap agreements, futures contracts, forward contracts and other instruments with respect to the applicable Fund’s benchmark to the extent determined appropriate by the Sponsor. The types of commodity or currency interests in which each Commodity Fund, Commodity Index Fund or Currency Fund invests may vary daily. The Funds do not currently intend to invest directly in any commodity or currency. Each VIX Fund intends to obtain exposure to the applicable equity market volatility index by primarily investing in VIX futures contracts based on the VIX. Each Fund will also hold cash or cash equivalents such as 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) for direct investment or as collateral for Financial Instruments. Each Fund may invest up to 100% of its assets in any of these types of cash or cash equivalent securities.

The Sponsor does not invest the assets of the Funds based on its view of the investment merit of a particular investment, other than for cash management purposes, nor does it conduct conventional volatility, commodity or currency research or analysis, or forecast market movement or trends, in managing the assets of the Funds. Each Fund seeks to remain fully invested at all times in Financial Instruments and money market instruments that, in combination, provide exposure to its underlying benchmark consistent with its investment objective without regard to market conditions, trends or direction.

Certain of the Funds may obtain exposure through Financial Instruments to a representative sample of the components in its underlying index, which have aggregate characteristics similar to those of the underlying index. This “sampling” process typically involves selecting a representative sample of components in an index principally to enhance liquidity and reduce transaction costs while seeking to maintain high correlation with, and similar aggregate characteristics (e.g., underlying commodities and valuations) to, the underlying index. In addition, the Funds may obtain exposure to components not included in the underlying index, invest in assets that are not included in the underlying index or may overweight or underweight certain components contained in the underlying index. For further discussion of the Financial Instruments, see “Information About Financial Instruments and Commodities Markets” below.

 

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Information About Financial Instruments and Commodities Markets

Swap Agreements

Swap agreements are two-party contracts that have traditionally been entered into primarily by institutional investors in over the counter (“OTC”) markets for a specified period ranging from a day to more than a year. However, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) provides for significant reforms of the OTC derivatives markets, including a requirement to execute certain swap and forward transactions on a CFTC-regulated market and/or to clear such transactions through a CFTC-regulated central clearing organization. In a standard swap transaction, the parties agree to exchange the returns on a particular predetermined investment, instrument or index for a fixed or floating rate of return (the “interest rate leg,” which will also include the cost of borrowing for short swaps) in respect of a predetermined notional amount. The notional amount of the agreement reflects the extent of a Fund’s total investment exposure under the swap agreement. Transaction or commission costs are reflected in the benchmark level at which the transaction is entered into. The gross returns to be exchanged are calculated with respect to the notional amount and the benchmark returns to which the swap is linked. Swaps are usually closed out on a net basis, i.e., the two payment streams are netted out in a cash settlement on the payment date specified in the agreement, with the parties receiving or paying, as the case may be, only the net amount of the two payments. Thus, while the notional amount reflects a Fund’s total investment exposure under the swap agreement (i.e., the entire face amount or principal of a swap agreement), the net amount is a Fund’s current obligations (or rights) under the swap agreement, which is the net amount to be paid or received under the agreement based on the relative values of the positions held by each party to the agreement on any given termination date. In a typical swap agreement entered into by an UltraShort Fund or a Short Fund, absent fees, transaction costs and interest, such Fund would be required to make payments to the swap counterparty in the event the benchmark increases and would be entitled to settlement payments in the event the benchmark decreases. In a typical swap agreement entered into by an Ultra Fund, absent fees, transaction costs and interest, 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 counterparty in the event the benchmark decreases. In the case of futures contracts-based indexes, such as those used by the VIX Fund, the Managed Futures Fund and the Commodity Index Funds, the reference interest rate is zero, although a financing spread or fee is normally still applied.

Swap agreements involve, to varying degrees, elements of market risk and exposure to loss in excess of the amount which would be reflected on the Statement of Financial Condition. The notional amounts of the agreement reflect the extent of each Ultra Fund’s total investment exposure under the swap agreement. An UltraShort Fund’s or a Short Fund’s exposure is not limited by the notional amount and its exposure is in theory potentially infinite as there is no fixed limit on the increase in any index value. The primary risks associated with the use of swap agreements arise from the inability of counterparties to perform. Each Fund that invests in swaps bears the risk of loss of the net amount, if any, expected to be received under a swap agreement in the event of the default or bankruptcy of a swap counterparty. Each such Fund enters or intends to enter into swap agreements only with major, global financial institutions; however, there are no limitations on the percentage of its assets each Fund may invest in swap agreements with a particular counterparty. Each Fund that invests in swaps may use various techniques to minimize credit risk including early termination or reset and payment, using different counterparties and limiting the net amount due from any individual counterparty.

Each Fund that invests in swaps generally collateralizes the swap agreements with cash and/or certain securities. Collateral posted in connection with uncleared derivative transactions is generally 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 Fund. The counterparty also may collateralize the uncleared swap agreements with cash and/or certain securities, which collateral is typically held for the benefit of the Fund in a segregated tri-party account at the Custodian. In the event of a default by the counterparty, and the Fund is owed money in the uncleared swap transaction, such Fund will seek withdrawal of this collateral from the segregated account and may incur certain costs exercising its right with respect to the collateral. These Funds remain subject to credit risk with respect to the amount it expects to receive from counterparties.

The Funds have sought to mitigate these risks in connection with the uncleared OTC swaps by generally requiring that the counterparties for each Fund agree to post collateral for the benefit of the Fund, marked to market daily, subject to certain minimum thresholds; however there are no limitations on the percentage of its assets each Fund may invest in swap agreements with a particular counterparty. 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.

 

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The counterparty risk for cleared derivative transactions is generally lower than for uncleared OTC derivatives since generally a clearing organization becomes substituted for each counterparty to a cleared derivative contract and, in effect, guarantees the parties’ performance under the contract as each party to a trade looks only to the clearing house for performance of financial obligations. In addition, cleared derivative transactions benefit from daily marking-to-market and settlement, and segregation and minimum capital requirements applicable to intermediaries.

Forward Contracts

A forward contract is a contractual obligation to purchase or sell a specified quantity of a particular underlying asset at or before a specified date in the future at a specified price and, therefore, is economically similar to a futures contract. Unlike futures contracts, however, forward contracts are typically traded in the OTC markets and are not standardized contracts. Forward contracts for a given commodity or currency are generally available for various amounts and maturities and are subject to individual negotiation between the parties involved. Moreover, there is generally no direct means of offsetting or closing out a forward contract by taking an offsetting position as one would a futures contract on a U.S. exchange. If a trader desires to close out a forward contract position, he generally will establish an opposite position in the contract but will settle and recognize the profit or loss on both positions simultaneously on the delivery date. Thus, unlike in the futures contract market where a trader who has offset positions will recognize profit or loss immediately, in the forward market a trader with a position that has been offset at a profit will generally not receive such profit until the delivery date, and likewise a trader with a position that has been offset at a loss will generally not have to pay money until the delivery date. In recent years, however, the terms of forward contracts have become more standardized, and in some instances such contracts now provide a right of offset or cash settlement as an alternative to making or taking delivery of the underlying commodity or currency. The primary risks associated with the use of forward contracts arise from the inability of the counterparty to perform.

Each Fund that invests in forward contracts generally collateralizes the uncleared forward contracts with cash and/or certain securities. Such collateral is generally 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 Fund. The counterparty also may collateralize the uncleared forward contracts with cash and/or certain securities, which collateral is typically held for the benefit of the Fund in a segregated tri-party account at the Custodian. In the event of a default by the counterparty, and the Fund is owed money in the uncleared forward transaction, such Fund will seek withdrawal of this collateral from the segregated account and may incur certain costs exercising its right with respect to the collateral. These Funds remain subject to credit risk with respect to the amount it expects to receive from OTC counterparties.

The Funds have sought to mitigate these risks with respect to uncleared OTC forwards by generally requiring that the counterparties for each Fund agree to post collateral for the benefit of the Fund, marked to market daily, subject to certain minimum thresholds; however, there are no limitations on the percentage of its assets each Fund may invest in forward contracts with a particular counterparty. 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 forward markets provide what has typically been a highly liquid market for foreign exchange trading, and in certain cases the prices quoted for foreign exchange forward contracts may be more favorable than the prices for foreign exchange futures contracts traded on U.S. exchanges. Forward contracts have traditionally not been cleared or guaranteed by a third party. However, the Dodd-Frank Act provides for significant reforms of OTC derivatives markets. As a result of the Dodd-Frank Act, the CFTC now regulates non-deliverable forwards (including deliverable forwards where the parties do not take delivery). Certain non-deliverable forward contracts, such as non-deliverable foreign exchange forwards, may be subject to regulation as swap agreements, including mandatory clearing. All foreign exchange forwards, including non-deliverable foreign exchange forwards as well as physically settled foreign exchange forwards, are subject to new reporting requirements. Changes in the forward markets may entail increased costs and result in burdensome reporting requirements.

 

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Commercial banks participating in trading OTC 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.

Futures Contracts

A futures contract is a standardized contract traded on, or subject to the rules of, an exchange that calls for the future delivery of a specified quantity and type of commodity at a specified time and place or alternatively, may call for cash settlement as is the case with VIX futures contracts. Futures contracts are traded on a wide variety of commodities, including bonds, interest rates, agricultural products, stock indexes, currencies, energy, metals, economic indicators and statistical measures. The notional size and calendar term of futures contracts on a particular commodity are identical and are not subject to any negotiation, other than with respect to price and the number of contracts traded between the buyer and seller. Each Fund generally deposits cash with a Futures Commission Merchant (“FCM”) for its open positions in futures contracts, which may, in turn, transfer such deposits to the clearing house to protect the clearing house against non-payment by the Fund. The clearing house becomes substituted for each counterparty to a futures contract, and, in effect, guarantees performance. In addition, the FCM may require the Funds to deposit collateral in excess of the clearing house’s margin requirements for the FCM’s own protection.

Certain futures contracts, such as VIX futures contracts (including the futures contracts that comprise each of the VIX Futures Indexes), as well as stock index contracts and certain commodity futures contracts, settle in cash, reflecting the difference between the contract purchase/sale price and the contract settlement price. The cash settlement mechanism avoids the potential for either side to have to deliver the underlying asset. For other futures contracts, the contractual obligations of a buyer or seller may generally be satisfied by taking or making physical delivery of the underlying asset or by making an offsetting sale or purchase of an identical futures contract on the same or linked exchange before the designated date of delivery. The difference between the price at which the futures contract is purchased or sold and the price paid for the offsetting sale or purchase, after allowance for brokerage commissions, constitutes the profit or loss to the trader.

Regulations

Derivatives exchanges in the United States are subject to regulation under the CEA, by the CFTC, the governmental agency having responsibility for regulation of derivatives exchanges and trading on those exchanges. Following the adoption of the Dodd-Frank Act, the CFTC also has authority to regulate OTC derivative markets, including certain OTC foreign exchange markets. The CFTC has exclusive authority to designate exchanges for the trading of specific futures contracts and options on futures contracts and to prescribe rules and regulations of the marketing of each. The CFTC also regulates the activities of “commodity pool operators” and the CFTC has adopted regulations with respect to certain of such persons’ activities. Pursuant to its authority, the CFTC requires a commodity pool operator, such as the Sponsor, to keep accurate, current and orderly records with respect to each pool it operates. The CFTC may suspend, modify or terminate the registration of any registrant for failure to comply with CFTC rules or regulations. Suspension, restriction or termination of the Sponsor’s registration as a commodity pool operator would prevent it, until such time (if any) as such registration were to be reinstated, from managing, and might result in the termination of the Funds. If the Sponsor were unable to provide services and/or advice to the Funds, the Funds would be unable to pursue their investment objectives unless and until the Sponsor’s ability to provide services and advice to the Funds was reinstated or a replacement for the Sponsor as commodity pool operator could be found. Such an event could result in termination of the Funds.

The CEA requires all FCMs to meet and maintain specified fitness and financial requirements, segregate customer funds from proprietary funds and account separately for all customers’ funds and positions, and to maintain specified books and records open to inspection by the staff of the CFTC. See “Item 1A. Risk Factors. Risks Related to Regulatory Requirements and Potential Legislative Changes-Failure of the FCMs to segregate assets may increase losses in the Funds” in this Annual Report on Form 10-K.

The CEA also gives the states certain powers to enforce its provisions and the regulations of the CFTC.

Under certain circumstances, the CEA grants shareholders the right to institute a reparations proceeding before the CFTC against the Sponsor (as a registered commodity pool operator), an FCM, as well as those of their respective employees who are required to be registered under the CEA. Shareholders may also be able to maintain a private right of action for certain violations of the CEA.

 

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Pursuant to authority in the CEA, the National Futures Association (the “NFA”) has been formed and registered with the CFTC as a registered futures association. At the present time, the NFA is the only self-regulatory organization for commodities professionals other than exchanges. As such, the NFA promulgates rules governing the conduct of commodity professionals and disciplines those professionals that do not comply with such standards. The CFTC has delegated to the NFA responsibility for the registration of commodity pool operators, FCMs, swap dealers, commodity trading advisors, introducing brokers and their respective associated persons and floor brokers. The Sponsor is a member of the NFA (the Funds themselves are not required to become members of the NFA). As an NFA member, the Sponsor is subject to NFA standards relating to fair trade practices, financial condition, and consumer protection. The CFTC is prohibited by statute from regulating trading on foreign commodity exchanges and markets.

The CEA and CFTC regulations prohibit market abuse and generally require that all futures exchange-based trading be conducted in compliance with rules designed to ensure the integrity of market prices and without any intent to manipulate prices. CFTC regulations and futures exchange rules also impose limits on the size of the positions that a person may hold or control as well as standards for aggregating certain positions. The rules of the CFTC and the futures exchanges also authorize special emergency actions to halt, suspend or limit trading overall or to restrict, halt, suspend or limit the trading of an individual trader or to otherwise impose special reporting or margin requirements. See also “Item 1A. Risk Factors. Regulatory changes or actions, including the implementation of new Legislation, may alter the operations and profitability of the Funds” and “Item 1A. Risk Factors. Regulatory and exchange accountability levels may restrict the creation of Creation Units and the operation of the Trust” in this Annual Report on Form 10-K.

Description of the S&P Strategic Futures Index (“SFI”)

Developed by S&P and launched on August 14, 2014, the SFI is a long/short rules-based investable index that seeks to capture the economic benefit derived from both rising and declining trends in futures prices. The SFI is currently composed of 24 underlying futures contracts (each, a SFI Futures Contract, collectively, the SFI Futures Contracts), representing unleveraged long or short positions in futures contracts in the commodity and financial markets. The SFI includes both commodity futures contracts (the “Commodity Futures Contracts”) as well as currency and U.S. Treasury futures contracts (the “Financial Futures Contracts”) that were deemed to have sufficient liquidity.

The weight assigned to each SFI Futures Contract is determined on a monthly basis, and implemented as of each monthly repositioning. Weights are determined using a proprietary risk-weighting methodology that measures the risk exposure of the SFI Futures Contracts and then weights each SFI Futures Contract so that it contributes the same level of risk to the SFI.

The SFI’s exposure to the SFI Futures Contracts are not long-only, but will be either long or short based on a comparison of the current price input of each SFI Futures Contract with its own seven-month weighted moving average of its price input.

The following chart reflects the December 31, 2015 weight (rounded to the nearest one-hundredth) for each SFI Futures Contract of the SFI. The weights will be determined each month and implemented as of the next monthly rebalancing.

 

SFI

 

SFI Futures Contracts

   Base Weight
(Rounded to
the
Nearest 0.01)
 

Light Crude

     1.23 %

Heating Oil

     1.59 %

RBOB Gas

     1.54 %

Natural Gas

     2.15 %

Copper

     2.75 %

Gold

     3.81 %

Silver

     1.91 %

Lean Hogs

     3.03 %

Live Cattle

     4.61 %

 

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Corn

     2.99 %

Soybeans

     3.27 %

Wheat

     2.72 %

Coffee

     2.20 %

Cocoa

     4.46 %

Sugar

     2.62 %

Cotton

     3.51 %

Australian dollar

     3.77 %

British pound

     5.37 %

Canadian dollar

     5.13 %

Euro

     4.35 %

Japanese yen

     7.37 %

Swiss franc

     3.44 %

U.S. Treasury Notes

     16.23 %

U.S. Treasury Bonds

     9.95 %
  

 

 

 
     100 %

Determining the Long/Short Positioning of each SFI Futures Contract

Each month, S&P will determine whether an SFI Futures Contract should be either a long or short position by comparing the price change of the most recent month (the “First Month Price Change”) of the SFI Futures Contract to the seven-month exponential weighted moving average price change (the “Seven Month Price Change”). Long positions are tracked when an SFI Futures Contract’s First Month Price Change is greater than or equal to the Seven Month Price Change. Short positions are tracked when an SFI Futures Contract’s First Month Price Change is less than the Seven Month Price Change. The First Month Price Change of each SFI Futures Contract is calculated by calculating the percentage difference of each SFI Futures Contract’s price on the last PDD (as defined below) relative to the current PDD.

When calculating the Seven Month Price Change, each month’s price input is represented as the monthly percentage change of an SFI Futures Contract’s price which is calculated in the same manner as the First Month Price Change. Monthly positions are determined on the second to last SFI business day of the month (defined as the position determination date, or “PDD”) when the monthly percentage change of an SFI Future Contract’s price is compared to past monthly price changes, exponentially weighted to give greatest weight to the most recent return and least weight to the return seven months prior. The weighted sum of the percentage changes of all SFI Futures Contract prices equals the daily movement of the SFI. To create an exponential average for comparison, price inputs (percentage change from current and previous PDDs) are weighted per the schedule below. Due to this weighting methodology, current price movements are more important than those of the more distant past.

 

Number of Months

   Weight
(Rounded to the
Nearest 0.01)
 

7

     2.32 %

6

     3.71 %

5

     5.94 %

4

     9.51 %

3

     15.22 %

2

     24.34 %

1

     38.96 %
  

 

 

 

Total

     100 %

Rolling

During this monthly rebalancing, the SFI will also “roll” certain of its positions from the current contract to a contract further from settlement. In order to maintain consistent exposure to the SFI Futures Contracts that compose the SFI, each SFI Futures Contract must be sold prior to its expiration date and replaced by a contract maturing at a specified date in the future. This process is known as “rolling.” SFI Futures Contracts are rolled periodically. The rolls are implemented pursuant to a roll schedule over a five-day period from the first (1st) through the fifth (5th) index business days of the month. An index business day is any day on which the majority of the SFI Futures Contracts are open for official trading and official settlement prices are provided, excluding holidays and weekends.

 

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In order to mitigate the potential negative impact of contango on long commodity positions, certain Commodity Futures Contracts will be rolled according to an “enhanced” rolling methodology. This methodology seeks to modify the normal roll methodology for futures contracts in the energy sector when such long position would be materially and negatively impacted by contango. In addition, the methodology identifies seasonal factors applicable to both the energy and agricultural futures markets and implements a modified roll to mitigate potential costs of such seasonal impacts.

Information about the Index Licensor

The “S&P Strategic Futures” is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and has been licensed for use by ProShares. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). The trademarks have been licensed to SPDJI and have been sublicensed for use for certain purposes by ProShares. The Managed Futures Fund is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, any of their respective affiliates (collectively, “S&P Dow Jones Indices”). S&P Dow Jones Indices does not make any representation or warranty, express or implied, to the owners of the Managed Futures Fund or any member of the public regarding the advisability of investing in securities generally or in the Managed Futures Fund particularly or the ability of the SFI to track general market performance. S&P Dow Jones Indices’ only relationship to ProShares with respect to the SFI is the licensing of the Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its licensors. The SFI is determined, composed and calculated by S&P Dow Jones Indices without regard to ProShares or the Managed Futures Fund. S&P Dow Jones Indices has no obligation to take the needs of ProShares or the owners of the Managed Futures Fund into consideration in determining, composing or calculating the SFI. S&P Dow Jones Indices is not responsible for and has not participated in the determination of the prices, and amount of the Managed Futures Fund or the timing of the issuance or sale of the Managed Futures Fund or in the determination or calculation of the equation by which the Managed Futures Fund is to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices has no obligation or liability in connection with the administration, marketing or trading of the Managed Futures Fund. There is no assurance that investment products based on the SFI will accurately track index performance or provide positive investment returns. S&P Dow Jones Indices LLC is not an investment advisor. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice.

NEITHER S&P DOW JONES INDICES NOR THIRD PARTY LICENSOR GUARANTEES THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE SFI OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY PROSHARES, OWNERS OF THE MANAGED FUTURES FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE SFI OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND PROSHARES, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.

 

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Description of the Bloomberg Commodity Index SM and its Sub-Indexes

Overview of the Bloomberg Family of Indices

Bloomberg Commodity IndexSM

The Bloomberg Commodity IndexSM (the “Bloomberg Commodity Index”) is designed to be a highly liquid and diversified benchmark for the commodity futures market. It is intended to reflect the overall commodity sector by measuring the performance of commodity futures contracts. The performance of the commodity futures market is often very different than the performance of the physical, or “spot”, commodities market. See “Item 1A. Risk Factors. The Commodity Index Funds are linked to an index comprised of commodity futures contracts, and are not linked to the spot prices of the underlying physical commodities. Commodity futures contracts may perform very differently from the spot price of the underlying physical commodities” in this Annual Report on Form 10-K. Unlike equities, which entitle the holder to a continuing stake in a corporation, commodity futures contracts specify a delivery date for the underlying physical commodity or its cash equivalent. The Bloomberg Commodity Index is a “rolling index,” which means that the Bloomberg Commodity Index does not take actual physical possession of any commodities; rather, it tracks a rolling futures position. An investor with a rolling futures position is able to avoid delivering (or taking delivery of) underlying physical commodities while maintaining exposure to those commodities. The roll for each index component occurs over a period of five Bloomberg Commodity Index business days in certain months according to a pre-determined schedule, generally beginning on the fifth business day of the month and ending on the ninth business day. Each day, approximately 20% of each rolling futures position that is included in the month’s roll is rolled, increasing from 0% to 20%, 40%, 60%, 80% and finally 100%. The Bloomberg Commodity Index is calculated by applying the weighting adjustments at the close of each day, with the adjusted weights used for the next day’s calculation. Not all contracts are rolled every month; generally the futures that underlie the indexes within the Bloomberg Commodity Index family roll approximately every other month. The exact roll methodology differs between certain commodities. The index will reflect the performance of its underlying commodities, including the impact of rolling, without regard to income earned on cash positions. For more information about the risks associated with rolling futures positions, see “Item 1A. Risk Factors. Potential negative impact from rolling futures positions” in this Annual Report on Form 10-K.

The Bloomberg Commodity Index is comprised of five different commodity sectors: energy, livestock, industrial metals, precious metals and agriculture. These five sectors track futures contracts prices of 22 specific commodities: natural gas, WTI crude oil, brent crude, RBOB gasoline, ULS Diesel, live cattle, lean hogs, Chicago wheat, Kansas City wheat, corn, soybeans, soybean oil, soybean meal, aluminum, COMEX copper, zinc, nickel, gold, silver, sugar, cotton and coffee. The Bloomberg Commodity Index is designed to minimize concentration in any one commodity or sector. No single commodity can constitute more than 15% of the Bloomberg Commodity Index and no related group of commodities (e.g., energy, precious metals, livestock or grains) may constitute more than 33% of the index as of the annual reweighting of the components. The Bloomberg Commodity Index family of indices also includes ten subindexes that group commodities based on type, as well as single commodity subindexes representing each of the commodities that are currently tracked by the Bloomberg Commodity Index. As discussed below, ProShares UltraShort Bloomberg Crude Oil and ProShares Ultra Bloomberg Crude Oil are designed to track one of these subindexes, the Bloomberg WTI Crude Oil SubindexSM and ProShares UltraShort Bloomberg Natural Gas and ProShares Ultra Bloomberg Natural Gas are designed to track another one of these sub-indexes, the Bloomberg Natural Gas SubindexSM.

To determine its component weightings, the Bloomberg Commodity Index relies primarily on liquidity data, or the relative amount of trading activity of a particular commodity. Liquidity is an important indicator of the value placed on a commodity by financial and physical market participants. The index also relies to a lesser extent on dollar-adjusted production data. The index thus relies on data that is endogenous to the futures markets (liquidity) and exogenous to the futures markets (production) in determining relative weightings. All data used in both the liquidity and production calculations is averaged over a five-year period.

In consultation with the Bloomberg Commodity Index Advisory Committee, the Bloomberg Commodity Index Supervisory Committee meets annually to determine the composition of the index in accordance with the rules established in the Bloomberg Handbook. The Supervisory Committee consists of employees of Bloomberg. Bloomberg Commodity Index Advisory Committee members are drawn from the academic, financial and legal communities. The Bloomberg Commodity Index is re-weighted and rebalanced each year in January on a price-percentage basis. The annual weightings for the Index are determined each year in June or July by Bloomberg under the supervision of the Bloomberg Commodity Index Oversight Committee, announced after approval by the Committee and implemented the following January.

 

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The Bloomberg Commodity Index is composed of commodities traded on U.S. exchanges, with the exception of aluminum, nickel and zinc, which trade on the London Metal Exchange. Trading hours for the U.S. commodity exchanges are between 8:00 a.m. and 3:00 p.m. (Eastern Time). The Bloomberg Commodity Index contract trades exclusively on the Chicago Board of Trade’s (“CBOT”) electronic trading platform. A daily settlement price for the Bloomberg Commodity Index is published at approximately 5:00 p.m. (Eastern Time).

The Bloomberg Commodity Index is designed to provide:

 

    Weightings that reflect economic significance

 

    Diversification

 

    Annual reweighting and rebalancing

 

    Liquidity

The Bloomberg Commodity Index is a proprietary index that Bloomberg calculates. The methodology for determining the composition and weighting of the Bloomberg Commodity Index and for calculating its level is subject to modification at any time. Bloomberg disseminates the Index level at least every 15 seconds from 8:00 a.m. to 3:00 p.m. (Eastern Time), and publishes a daily Index level at approximately 5:00 p.m. (Eastern Time), each business day.

As of December 31, 2015, the individual commodity weightings for the Bloomberg Commodity Index components were as follows:

 

Commodity    Target Weights (%)  

Gold

     12.68 %

Corn

     7.98 %

Natural Gas

     8.77 %

COMEX Copper

     7.09 %

Aluminum

     4.72 %

WTI Crude Oil

     7.42 %

Soybeans

     5.65 %

Live Cattle

     3.34 %

Sugar

     5.00 %

Brent Crude Oil

     6.28 %

Coffee

     1.95

Chicago Wheat

     3.28 %

Silver

     4.34 %

Zinc

     2.21 %

Soybean Oil

     3.17 %

Nickel

     1.46 %

ULS Diesel

     3.14 %

Soybean Meal

     2.50 %

RBOB Gasoline

     4.23 %

Lean Hogs

     1.78 %

Kansas City Wheat

     1.08 %

Cotton

     1.93

Bloomberg WTI Crude Oil SubindexSM

ProShares UltraShort Bloomberg Crude Oil and ProShares Ultra Bloomberg Crude Oil are designed to correspond (before fees and expenses) to two times the inverse (-2x) or two times (2x), respectively, of the daily performance of the Bloomberg WTI Crude Oil SubindexSM, a sub-index of the Bloomberg Commodity Index. The Bloomberg WTI Crude Oil SubindexSM is intended to reflect the performance of crude oil as measured by the price of futures contracts of West Texas Intermediate sweet, light crude oil traded on the NYMEX, including the impact of rolling, without regard to income earned on cash positions. The performance of the crude oil futures market is normally very different than the performance of the physical crude oil market (e.g., the price of crude oil at port). See “Item 1A. Risk Factors. The Commodity Index Funds are linked to an index comprised of commodity futures contracts, and are not directly linked to the spot prices of the underlying physical commodities. Commodity futures contracts may perform very differently from the spot price of the underlying physical commodities” in this Annual Report on Form 10-K.

 

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The Bloomberg WTI Crude Oil SubindexSM is based on the Crude Oil component of the Bloomberg Commodity Index, which is described above under “Bloomberg Commodity IndexSM,” and tracks what is known as a rolling futures position. The roll occurs over a period of five Bloomberg business days in certain months according to a pre-determined schedule, generally beginning on the fifth business day of the month and ending on the ninth business day. Each day, approximately 20% of each rolling futures position that is included in the month’s roll is rolled, increasing from 0% to 20%, 40%, 60%, 80% and finally 100%. The exact roll methodology differs between certain commodities. The Bloomberg WTI Crude Oil SubindexSM will reflect the performance of its underlying crude oil futures contracts, including the impact of rolling, without regard to income earned on cash positions. For more information about the risks associated with rolling futures positions, see “Item 1A. Risk Factors. Potential negative impact from rolling futures positions” in this Annual Report on Form 10-K.

Bloomberg Natural Gas SubindexSM

ProShares UltraShort Bloomberg Natural Gas and ProShares Ultra Bloomberg Natural Gas are designed to correspond (before fees and expenses) to two times the inverse (-2x) or two times (2x) of the daily performance of the Bloomberg Natural Gas SubindexSM, respectively. The Bloomberg Natural Gas SubindexSM is intended to reflect the performance of a rolling position in natural gas futures contracts traded on the NYMEX without regard to income earned on cash positions. An investment in natural gas futures contracts may often perform very differently than the price of physical natural gas (e.g., the wellhead or end-user price of natural gas). See “Item 1A. Risk Factors. The Commodity Index Funds are linked to an index comprised of commodity futures contracts, and are not linked to the spot prices of the underlying physical commodities. Commodity futures contracts may perform very differently from the spot price of the underlying physical commodities” in this Annual Report on Form 10-K.

The Bloomberg Natural Gas SubindexSM is based on the Natural Gas component of the Bloomberg Commodity Index, which is described above under “Bloomberg Commodity IndexSM,” and tracks what is known as a rolling futures position. The roll occurs over a period of five Bloomberg Commodity Index business days in certain months according to a pre-determined schedule, generally beginning on the fifth business day of the month and ending on the ninth business day. Each day, approximately 20% of each rolling futures position that is included in the month’s roll is rolled, increasing from 0% to 20%, 40%, 60%, 80% and finally 100%. The exact roll methodology differs between certain commodities. The index will reflect the performance of its underlying natural gas contracts, including the impact of rolling, without regard to income earned on cash positions. For more information about the risks associated with rolling futures positions, see “Item 1A. Risk Factors. Potential negative impact from rolling futures positions” in this Annual Report on Form 10-K.

Information About the Index Licensor

“BLOOMBERG®”, “BLOOMBERG WTI CRUDE OIL SUBINDEXSM” and “BLOOMBERG NATURAL GAS SUBINDEXSM” ARE SERVICE MARKS OF BLOOMBERG FINANCE L.P. AND ITS AFFILIATES (COLLECTIVELY, “BLOOMBERG”) AND HAVE BEEN LICENSED FOR USE FOR CERTAIN PURPOSES BY PROSHARES TRUST II (“LICENSEE”).

The Funds are not sponsored, endorsed, sold or promoted by Bloomberg UBS AG, UBS Securities LLC (“UBS Securities”), or any of their subsidiaries or affiliates. None of Bloomberg, UBS AG, UBS Securities, or any of their subsidiaries or affiliates makes any representation or warranty, express or implied, to the owners of or counterparts to the Funds or any member of the public regarding the advisability of investing in securities or commodities generally or in the Funds particularly. The only relationship of Bloomberg, UBS AG, UBS Securities, or any of their subsidiaries or affiliates to the Licensee is the licensing of certain trademarks, trade names and service marks and of the Bloomberg Commodity IndexSM, Bloomberg WTI Crude Oil SubindexSM and Bloomberg Natural Gas SubindexSM, which are determined, composed and calculated by Bloomberg in conjunction with UBS Securities without regard to the Licensee or the Funds. Bloomberg and UBS Securities have no obligation to take the needs of the Licensee or the shareholders of the Funds into consideration in determining, composing or calculating the Bloomberg Commodity IndexSM, the Bloomberg WTI Crude Oil SubindexSM or the Bloomberg Natural Gas SubindexSM. None of Bloomberg, UBS AG, UBS Securities, or any of their respective subsidiaries or affiliates is

 

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responsible for or has participated in the determination of the timing of, prices at, or quantities of the shares of the Funds that have been or are to be issued or in the determination or calculation of the equation by which the Shares of the Funds are converted into cash. None of Bloomberg, UBS AG, UBS Securities or any of their subsidiaries or affiliates shall have any obligation or liability, including, without limitation, to Fund shareholders, in connection with the administration, marketing or trading of the Funds. Notwithstanding any of the foregoing, UBS AG, UBS Securities and their respective subsidiaries and affiliates may independently issue and/or sponsor financial products unrelated to the Shares currently being issued by the Licensee, but which may be similar to and competitive with the Funds. In addition, UBS AG, UBS Securities and their subsidiaries and affiliates actively trade commodities, commodity indexes and commodity futures (including the Bloomberg Commodity IndexSM, Bloomberg WTI Crude Oil SubindexSM and Bloomberg Natural Gas SubindexSM), as well as swaps, options and derivatives which are linked to the performance of such commodities, commodity indexes and commodity futures. It is possible that this trading activity will affect the value of the Bloomberg Commodity IndexSM, the Bloomberg WTI Crude Oil SubindexSM, the Bloomberg Natural Gas SubindexSM and Fund shares.

This Annual Report on Form 10-K relates only to the Funds and does not relate to the exchange-traded physical commodities underlying any of the Bloomberg Commodity IndexSM, the Bloomberg WTI Crude Oil SubindexSM or the Bloomberg Natural Gas SubindexSM components. Purchasers of the Shares should not conclude that the inclusion of a futures contract in the Bloomberg Commodity IndexSM, the Bloomberg WTI Crude Oil SubindexSM or the Bloomberg Natural Gas SubindexSM is any form of investment recommendation of the futures contract or the underlying exchange-traded physical commodity by Bloomberg, UBS AG, UBS Securities or any of their subsidiaries or affiliates. The information in this Annual Report on Form 10-K regarding the components of the Bloomberg Commodity IndexSM, the Bloomberg WTI Crude Oil SubindexSM and the Bloomberg Natural Gas SubindexSM has been derived solely from publicly available documents. None of Bloomberg, UBS AG, UBS Securities or any of their subsidiaries or affiliates has made any due diligence inquiries with respect to the Bloomberg Commodity IndexSM, the Bloomberg WTI Crude Oil SubindexSM or the Bloomberg Natural Gas SubindexSM components in connection with the Funds. None of Bloomberg, UBS AG, UBS Securities or any of their subsidiaries or affiliates makes any representation that these publicly available documents or any other publicly available information regarding the Bloomberg Commodity IndexSM, the Bloomberg WTI Crude Oil SubindexSM or the Bloomberg Natural Gas SubindexSM components, including without limitation a description of factors that affect the prices of such components, are accurate or complete.

NONE OF BLOOMBERG, UBS AG, UBS SECURITIES OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS OF THE BLOOMBERG COMMODITY INDEXSM, THE BLOOMBERG WTI CRUDE OIL SUBINDEXSM OR THE BLOOMBERG NATURAL GAS SUBINDEXSM OR ANY DATA RELATED THERETO AND NONE OF BLOOMBERG, UBS AG, UBS SECURITIES OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES SHALL HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. NONE OF BLOOMBERG, UBS AG, UBS SECURITIES OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE LICENSEE, FUND SHAREHOLDERS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE BLOOMBERG COMMODITY INDEXSM, THE BLOOMBERG WTI CRUDE OIL SUBINDEXSM OR THE BLOOMBERG NATURAL GAS SUBINDEXSM OR ANY DATA RELATED THERETO. NONE OF BLOOMBERG, UBS AG, UBS SECURITIES OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES MAKES ANY EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE BLOOMBERG COMMODITY INDEXSM, THE BLOOMBERG WTI CRUDE OIL SUBINDEXSM, THE BLOOMBERG NATURAL GAS SUBINDEXSM OR ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, TO THE MAXIMUM EXTENT ALLOWED BY LAW, BLOOMBERG ITS LICENSORS (INCLUDING UBS AG AND UBS SECURITIES) AND THEIR RESPECTIVE EMPLOYEES, CONTRACTORS, AGENTS, SUPPLIERS AND VENDORS SHALL HAVE NO LIABILITY OR RESPONSIBILITY WHATSOEVER FOR ANY INJURY OR DAMAGES WHETHER DIRECT, INDIRECT, CONSEQUENTIAL, INCIDENTAL, PUNITIVE OR OTHERWISE ARISING IN CONNECTION WITH THE PRODUCTS OR THE BLOOMBERG COMMODITY INDEXSM, THE BLOOMBERG NATURAL GAS SUBINDEXSM OR ANY DATA OR VALUES RELATING THERETO WHETHER ARISING FROM THEIR NEGLIGENCE OR OTHERWISE, EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS AMONG BLOOMBERG, UBS SECURITIES AND THE LICENSEE, OTHER THAN UBS AG.

 

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Description of the Commodity Benchmarks

Gold

ProShares UltraShort Gold and ProShares Ultra Gold are designed to correspond (before fees and expenses) to two times the inverse (-2x) or two times (2x), respectively, of the daily performance of gold bullion as measured by the U.S. dollar p.m. LBMA Gold Price. The Funds do not directly or physically hold the underlying gold, but instead, seek exposure to gold through the use of Financial Instruments whose value is based on the underlying price of gold to pursue their investment objective. The benchmark price of gold is the U.S. dollar price of gold bullion as measured by the London afternoon fixing price per troy ounce of unallocated gold bullion for delivery in London through a member of the LBMA authorized to affect such delivery. On March 19, 2015, the company that ran the London U.S. dollar gold fixing, ceased calculating the price of gold for the LBMA. The LBMA selected ICE Benchmark Administration to calculate the price, which was renamed the LBMA Gold Price, and is based on an electronic, physically settled auction-based methodology, beginning on March 20, 2015.

The price of gold is volatile with fluctuations expected to affect the value of the Shares of the Fund. The price movement of gold may be influenced by a variety of factors, including announcements from central banks regarding reserve gold holdings, agreements among central banks, political uncertainties and economic concerns. The gold market is a global marketplace consisting of both OTC transactions and exchange-traded products. The OTC market generally consists of transactions in spot, forwards, options and other derivatives, while exchange-traded transactions consist of futures and options.

The LBMA Gold Price is determined each trading day at 3:00 p.m. London time providing a reference gold price for that day’s trading. Many long-term contracts are priced on the basis of the LBMA Gold Price and market participants will usually refer to the LBMA Gold Price when looking for a basis for valuation.

Silver

ProShares UltraShort Silver and ProShares Ultra Silver are designed to correspond (before fees and expenses) to two times the inverse (-2x) or two times (2x), respectively, of the daily performance of silver bullion as measured by the London Silver Price. The Funds do not directly or physically hold the underlying silver, but instead seek exposure to silver through the use of Financial Instruments whose value is based on the underlying price of silver to pursue their investment objective. The benchmark price of silver is the daily performance silver bullion as measured by the London Silver Price.

The price of silver is volatile with fluctuations expected to affect the value of the Shares of the Fund. The largest industrial users of silver are the photographic, jewelry, and electronic industries and developments in these industries among other factors may influence the price of silver. Like gold, the silver market is a global marketplace consisting of both OTC transactions and exchange-traded products. The OTC market generally consists of transactions in spot, forwards, options and other derivatives, while exchange-traded transactions consist of futures and options.

The London Silver Price is determined each trading day at 12:00 p.m. London time providing a reference silver price for that day’s trading. Many long-term contracts are priced on the basis of the London Silver Price and market participants will usually refer to the London Silver Price when looking for a basis for valuation.

Description of the Currencies Benchmarks

The Currency Funds are designed to correspond (before fees and expenses) to the inverse (-1), two times the inverse (-2x), or two times (2x) of the daily performance of the spot price of the applicable currency versus the U.S. dollar. The spot price of each currency is measured by the 4:00 p.m. (Eastern Time) spot prices as provided by Bloomberg, expressed in terms of U.S. dollars per unit of foreign currency. The Currency Funds do not necessarily directly or physically hold the underlying currency and will instead seek exposure through the use of certain Financial Instruments whose value is based on the price of the underlying currency to pursue its investment objective.

 

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Australian Dollar

ProShares UltraShort Australian Dollar is designed to correspond (before fees and expenses) to two times the inverse (-2x) of the daily performance of the Australian dollar spot price versus the U.S. dollar, respectively. This Fund uses the 4:00 p.m. (Eastern Time) Australian dollar/U.S. dollar exchange rate as provided by Bloomberg, expressed in terms of U.S. dollars per unit of foreign currency, as the basis for the underlying benchmark.

The Australian dollar is the national currency of Australia and the currency of the accounts of the Reserve Bank of Australia, the Australian central bank. The official currency code for the Australian dollar is “AUD.” The Australian dollar is referred to in Australia as “dollar.” As with U.S. currency, 100 Australian cents are equal to one Australian dollar. In Australia, unlike most other countries, cash transactions are rounded to the nearest five cents. The most commonly used symbol used to represent the Australian dollar is “A$.”

In 1913, the Commonwealth Bank of Australia issued the first Australian currency notes. In 1915, the Commonwealth Bank of Australia became the exclusive issuer of currency in Australia. From 1930 through the 1960s, the Australian banking system underwent substantial transformation. In 1960, the Reserve Bank of Australia was established. In 1966, a new decimalized currency was introduced. At various times throughout the 1900s, the value of Australian currency was based on a fixed quantity of gold; at other times, the Australian dollar was pegged to foreign currencies, including the U.S. dollar. Beginning in 1983, the Australian dollar’s value was allowed to float, with the result that its value now depends almost entirely on market forces. The foregoing information is compiled from the Reserve Bank of Australia’s website (www.rba.gov.au).

Euro

ProShares Short Euro, ProShares UltraShort Euro and ProShares Ultra Euro are designed to correspond (before fees and expenses) to the inverse (-1), two times the inverse (-2x), or two times (2x) of the daily performance of the euro spot price versus the U.S. dollar, respectively. These Funds use the 4:00 p.m. (Eastern Time) euro/U.S. dollar exchange rate as provided by Bloomberg, expressed in terms of U.S. dollars per unit of foreign currency, as the basis for the underlying benchmark.

In 1998, the European Central Bank in Frankfurt was organized by Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain in order to establish a common currency-the euro. Unlike the U.S. Federal Reserve System, the Bank of Japan and other comparable central banks, the European Central Bank is a central authority that conducts monetary policy for an economic area consisting of many otherwise largely autonomous states.

At its inception on January 1, 1999, the euro was launched as an electronic currency used by banks, foreign exchange dealers and stock markets. In 2002, the euro became cash currency for approximately 300 million citizens of twelve European countries (the eleven countries mentioned above, in addition to Greece). As of December 31, 2015, 23 countries used the euro, including Andorra, Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Monaco, the Netherlands, Portugal, San Marino, Slovakia, Slovenia, Spain and the Vatican City.

Although the European countries that have adopted the euro are members of the European Union (“EU”), the United Kingdom, Denmark and Sweden are EU members that have not adopted the euro as their national currency.

Japanese Yen

ProShares UltraShort Yen and ProShares Ultra Yen are designed to correspond (before fees and expenses) to two times the inverse (-2x) or two times (2x), respectively, of the daily performance of the Japanese yen spot price versus the U.S. dollar. These Funds use the 4:00 p.m. (Eastern Time) Japanese yen/U.S. dollar exchange rate as provided by Bloomberg, expressed in terms of U.S. dollars per unit of foreign currency, as the basis for the underlying benchmark.

The Japanese yen has been the official currency of Japan since 1871. The Bank of Japan has been operating as the central bank of Japan since 1882.

 

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Description of the VIX Futures Indexes

The VIX Funds seek to offer exposure to forward equity market volatility by obtaining exposure to the VIX Futures Indexes, which are based on publicly traded VIX futures contracts. The VIX Futures Indexes are intended to reflect the returns that are potentially available through an unleveraged investment in the VIX futures contracts comprising each VIX Futures Index. The VIX, which is not the index underlying the VIX Funds, is calculated based on the prices of put and call options on the S&P 500. The VIX Funds can be expected to perform very differently from the VIX.

The Short-Term VIX Index employs rules for selecting VIX futures contracts comprising the Short-Term VIX Index and a formula to calculate a level for that index from the prices of these VIX futures contracts. Specifically, the VIX futures contracts comprising the Short-Term VIX Index represent the prices of two near-term VIX futures contracts, replicating a position that rolls the nearest month VIX futures to the next month VIX futures on a daily basis in equal fractional amounts. This results in a constant weighted average maturity of one-month. The roll period begins on the Tuesday prior to the monthly CBOE VIX futures settlement and runs through the Tuesday prior to the subsequent month’s CBOE VIX futures settlement date.

The Mid-Term VIX Index also employs rules for selecting its VIX futures contracts comprising the Mid-Term VIX Index and a formula to calculate a level for that index from the prices of these VIX futures contracts. Specifically, the VIX futures contracts comprising the Mid-Term VIX Index represent the prices for four contract months of VIX futures contracts, representing a rolling long position in the fourth, fifth, sixth and seventh month VIX futures contracts. The Mid-Term VIX Index rolls continuously throughout each month while maintaining positions in the fifth and sixth month contracts. This results in a constant weighted average maturity of five months.

The level of each VIX Futures Index will be published by Bloomberg L.P. in real time and at the close of trading on each VIX Futures Index business day under the following ticker symbols:

 

Index

  

Bloomberg Ticker Symbol

S&P 500 VIX Short-Term Futures Index    SPVXSPID
S&P 500 VIX Mid-Term Futures Index    SPVXMPID

The performance of the VIX Futures Indexes is influenced by the S&P 500 (and options thereon) and the VIX. A description of VIX futures contracts, the VIX and the S&P 500 follows:

VIX Futures Contracts

Both VIX Futures Indexes are comprised of VIX futures contracts. VIX futures contracts were first launched for trading by the CBOE in 2004. VIX futures contracts have expirations ranging from the front month consecutively out to the tenth month. VIX futures contracts allow investors the ability to invest based on their view of forward implied market volatility. Investors that believe the forward implied market volatility of the S&P 500, as represented by VIX futures contracts, will increase may buy VIX futures contracts. Conversely, investors that believe that the forward implied market volatility of the S&P 500, as represented by VIX futures contracts, will decline may sell VIX futures contracts. VIX futures contracts are reported by Bloomberg under the ticker symbol “VX.”

While the VIX represents a measure of the current expected volatility of the S&P 500 over the next 30 days, the prices of VIX futures contracts are based on the current expectation of what the expected 30-day volatility will be at a particular time in the future (on the expiration date). The VIX and VIX futures contracts generally behave quite differently. To illustrate, on November 30, 2015, the VIX was 16.13 and the price of the December 2015 VIX futures contracts expiring on December 16, 2015 was 16.98. In this example, the price of the VIX represented the 30-day implied, or “spot,” volatility (the volatility expected for the period from November 30, 2015 to December 1, 2015) of the S&P 500 and the February VIX futures contracts represented forward implied volatility (the volatility expected for the period from December 16, 2015 to January 15, 2016 of the S&P 500. The spot/forward relationship between the VIX and VIX futures contracts has two noteworthy consequences: (1) the price of a VIX futures contract can be lower, equal to or higher than the VIX, depending on whether the market expects volatility to be lower, equal to or higher in the 30-day forward period covered by the VIX futures contract than in the 30-day spot period covered by the VIX; and (2) an investor cannot create a position equivalent to one in VIX futures contracts by buying the VIX and holding the position to the futures expiration date while financing the transaction.

 

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The VIX

The VIX Funds are not linked to the VIX and can be expected to perform very differently from the VIX. The VIX is an index designed to measure the implied volatility of the S&P 500 over 30 days in the future, and is calculated based on the prices of certain put and call options on the S&P 500. The VIX is reflective of the premium paid by investors for certain options linked to the level of the S&P 500. During periods of rising investor uncertainty, including periods of market instability, the implied level of volatility of the S&P 500 typically increases and, consequently, the prices of options linked to the S&P 500 typically increase (assuming all other relevant factors remain constant or have negligible changes). This, in turn, causes the level of the VIX to increase. The VIX has historically had a negative correlation to the S&P 500. The VIX was developed by the CBOE and is calculated, maintained and published by the CBOE. The CBOE has no obligation to continue to publish, and may discontinue the publication of, the VIX. The VIX is reported by Bloomberg under the ticker symbol “VIX.”

The calculation of the VIX involves a formula that uses the prices of a weighted series of out-of-the-money put and call options on the level of the S&P 500 (“SPX Options”) with two adjacent expiry terms to derive a constant 30-day forward measure of market volatility. The VIX is calculated independent of any particular option pricing model and in doing so seeks to eliminate any biases which may otherwise be included in using options pricing methodology based on certain assumptions. Although the VIX measures the 30-day forward volatility of the S&P 500 as implied by the SPX Options, 30-day options are only available once a month. To arrive at the VIX level, a broad range of out-of-the-money SPX Options expiring on the two closest nearby months (“near term options” and “next term options,” respectively) are selected in order to bracket a 30-day calendar period. SPX Options having a maturity of less than eight days are excluded at the outset and, when the near term options have eight days or less left to expiration, the VIX rolls to the second and third contract months in order to minimize pricing anomalies that occur close to expiration. The model-free implied volatility using prices of the near term options and next term options are then calculated on a strike price weighted average basis in order to arrive at a single average implied volatility value for each month. The results of each of the two months are then interpolated to arrive at a single value with a constant maturity of 30 days to expiration.

The S&P 500

The S&P 500 is an index that measures large-cap U.S. stock market performance. It is a float-adjusted market capitalization weighted index of 500 U.S. operating companies and real estate investment trusts selected by the S&P U.S. Index Committee through a non-mechanical process that factors in criteria such as liquidity, price, market capitalization and financial viability. Reconstitution occurs both on a quarterly and ongoing basis. As of December 31, 2015, the S&P 500 included companies with capitalizations between $1.8 billion and $586.9 billion. The average capitalization of the companies comprising the Index was approximately $38.9 billion. S&P publishes the S&P 500. The daily calculation of the current value of the S&P 500 is based on the relative value of the aggregate market value of the common stocks of 500 companies as of a particular time compared to the aggregate average initial market value of the common stocks of 500 similar companies at the time of the inception of the S&P 500. The 500 companies are not the 500 largest publicly traded companies and not all 500 companies are listed on the NYSE. S&P chooses companies for inclusion in the S&P 500 with the objective of achieving a distribution by broad industry groupings that approximates the distribution of these groupings in the common stock population of the U.S. equity market. S&P may from time-to-time, in its sole discretion, add companies to, or delete companies from, the S&P 500 to achieve the objectives stated above. Relevant criteria employed by S&P include the viability of the particular company, the extent to which that company represents the industry group to which it is assigned, the extent to which the company’s common stock is widely held and the market value and trading activity of the common stock of that company.

THE VIX FUNDS ARE NOT SPONSORED, ENDORSED, SOLD OR PROMOTED BY S&P AND ITS AFFILIATES OR CBOE. S&P AND CBOE MAKE NO REPRESENTATION, CONDITION OR WARRANTY, EXPRESS OR IMPLIED, TO THE OWNERS OF THE VIX FUNDS OR ANY MEMBER OF THE PUBLIC REGARDING THE ADVISABILITY OF INVESTING IN SECURITIES GENERALLY OR IN THE VIX FUNDS PARTICULARLY OR THE ABILITY OF THE INDEXES TO TRACK MARKET PERFORMANCE AND/OR

 

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OF GROUPS OF ASSETS OR ASSET CLASSES AND/OR TO ACHIEVE ITS STATED OBJECTIVE AND/OR TO FORM THE BASIS OF A SUCCESSFUL INVESTMENT STRATEGY, AS APPLICABLE. S&P’S AND CBOE’S ONLY RELATIONSHIP TO THE TRUST ON BEHALF OF ITS APPLICABLE SERIES AND THE SPONSOR IS THE LICENSING OF CERTAIN TRADEMARKS AND TRADE NAMES AND OF THE VIX FUTURES INDEXES WHICH ARE DETERMINED, COMPOSED AND CALCULATED BY S&P WITHOUT REGARD TO THE TRUST ON BEHALF OF ITS APPLICABLE SERIES AND THE SPONSOR OR THE VIX FUNDS. S&P HAS NO OBLIGATION TO TAKE THE NEEDS OF THE TRUST ON BEHALF OF ITS APPLICABLE SERIES AND THE SPONSOR OR THE OWNERS OF THE VIX FUNDS INTO CONSIDERATION IN DETERMINING, COMPOSING OR CALCULATING THE VIX FUTURES INDEXES. S&P AND CBOE ARE NOT ADVISORS TO THE VIX FUNDS AND ARE NOT RESPONSIBLE FOR AND HAVE NOT PARTICIPATED IN THE DETERMINATION OF THE PRICES AND AMOUNT OF THE VIX FUNDS OR THE TIMING OF THE ISSUANCE OR SALE OF THE VIX FUNDS OR IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH THE VIX FUND SHARES ARE TO BE CONVERTED INTO CASH. S&P AND CBOE HAVE NO OBLIGATION OR LIABILITY IN CONNECTION WITH THE ADMINISTRATION, MARKETING, OR TRADING OF THE VIX FUNDS.

NEITHER S&P, ITS AFFILIATES NOR THIRD PARTY LICENSORS, INCLUDING CBOE, GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS OF THE VIX FUTURES INDEXES OR ANY DATA INCLUDED THEREIN AND S&P, ITS AFFILIATES AND THEIR THIRD PARTY LICENSORS, INCLUDING CBOE, SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P AND CBOE MAKE NO WARRANTY, CONDITION OR REPRESENTATION, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE TRUST ON BEHALF OF ITS APPLICABLE SERIES AND THE SPONSOR, OWNERS OF THE VIX FUNDS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE VIX FUTURES INDEXES OR ANY DATA INCLUDED THEREIN. S&P AND CBOE MAKE NO EXPRESS OR IMPLIED WARRANTIES, REPRESENTATIONS OR CONDITIONS, AND EXPRESSLY DISCLAIM ALL WARRANTIES OR CONDITIONS OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE AND ANY OTHER EXPRESS OR IMPLIED WARRANTY OR CONDITION WITH RESPECT TO THE VIX FUTURES INDEXES OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P, ITS AFFILIATES OR THEIR THIRD PARTY LICENSORS, INCLUDING CBOE, HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS) RESULTING FROM THE USE OF THE VIX FUTURES INDEXES OR ANY DATA INCLUDED THEREIN, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

Creation and Redemption of Shares

Each Fund creates and redeems Shares from time to time, but only in one or more Creation Units. A Creation Unit is a block of 50,000 Shares of the Managed Futures Fund or a Geared Fund or a block of 25,000 Shares of a Matching VIX Fund. Creation Units may be created or redeemed only by Authorized Participants. Except when aggregated in Creation Units, the Shares are not redeemable securities.

The manner by which Creation Units are purchased and 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 deposit cash (unless as provided otherwise in the prospectus) with the Custodian of the Funds.

If permitted by the Sponsor in its sole discretion with respect to a Fund, an Authorized Participant may also agree to enter into or arrange for an exchange of a futures contract for related position (“EFCRP”) or block trade with the relevant Fund 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. Similarly, the Sponsor in its sole discretion may agree with an Authorized Participant to use an EFCRP to affect an order to redeem Creation Units.

An EFCRP is a technique permitted by the rules of the applicable futures exchange that, as utilized by a Fund in the Sponsor’s discretion, would allow such Fund to take a position in a futures contract from an Authorized Participant, or give futures contracts to an Authorized Participant, in the case of a redemption, rather than to enter the futures exchange markets to obtain such a position. An EFCRP by itself will not change either party’s net risk position

 

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materially. Because the futures position that a Fund would otherwise need to take in order to meet its investment objective can be obtained without unnecessarily impacting the financial or futures markets or their pricing, EFCRPs can generally be viewed as transactions beneficial to a Fund. A block trade is a technique that permits certain Funds to obtain a futures position without going through the market auction system and can generally be viewed as a transaction beneficial to the Fund.

Authorized Participants 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 Brown Brothers Harriman & Co. (“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 and to offset the costs of increasing or decreasing derivative positions. Authorized Participants also may pay a variable transaction fee to the Funds of up to 0.10% (and a variable transaction fee to the Matching VIX Funds of 0.05%) 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.

The form of Authorized Participant Agreement and the related Authorized Participant Handbook set forth the procedures for the creation and redemption of Creation Units and for the payment of cash required for such creations and redemptions. The Sponsor may delegate its duties and obligations under the form of Authorized Participant Agreement to SEI Investments Distribution Co. (“SEI”) or BBH&Co., in its capacity as the Administrator, without consent from any shareholder or Authorized Participant. The form of Authorized Participant Agreement and the related procedures attached thereto may be amended by the Sponsor without the consent of any shareholder or Authorized Participant. Authorized Participants who purchase Creation Units from a Fund receive no fees, commissions or other form of compensation or inducement of any kind from either the Sponsor or the Fund, and no such person has any obligation or responsibility to the Sponsor or the Fund to affect any sale or resale of Shares.

Authorized Participants are cautioned that some of their activities may result in their being deemed participants in a distribution in a manner which would render them statutory underwriters and subject them to the prospectus delivery and liability provisions of the Securities Act of 1933, as amended (the “1933 Act”).

Each Authorized Participant must be registered as a broker-dealer under the 1934 Act and regulated by Financial Industry Regulatory Authority (“FINRA”), or exempt from being, or otherwise not required to be, so regulated or registered, and must be qualified to act as a broker or dealer in the states or other jurisdictions where the nature of its business so requires. Certain Authorized Participants may be regulated under federal and state banking laws and regulations. Each Authorized Participant must have its own set of rules and procedures, internal controls and information barriers as it determines is appropriate in light of its own regulatory regime.

Authorized Participants may act for their own accounts or as agents for broker-dealers, custodians and other securities market participants that wish to create or redeem Creation Units.

Persons interested in purchasing Creation Units should contact the Sponsor or the Administrator to obtain the contact information for the Authorized Participants. Shareholders who are not Authorized Participants are only able to redeem their Shares through an Authorized Participant.

Pursuant to the Authorized Participant Agreement, the Sponsor agreed to indemnify the Authorized Participants against certain liabilities, including liabilities under the 1933 Act, and to contribute to the payments the Authorized Participants may be required to make in respect of those liabilities.

The following description of the procedures for the creation and redemption of Creation Units is only a summary and an investor should refer to the relevant provisions of the Amended and Restated Trust Agreement of the Trust, as may be further amended from time to time (the “Trust Agreement”) and the form of Authorized Participant Agreement for more detail. The Trust Agreement and the form of Authorized Participant Agreement are incorporated by reference into this Annual Report on Form 10-K.

 

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Creation Procedures

On any Business Day, an Authorized Participant may place an order with the Distributor to create one or more Creation Units. For purposes of processing both purchase and redemption orders, a “Business Day” for each Fund means any day on which the NAV of such Fund is determined. Purchase orders must be placed by the cut-off time shown below or earlier if the NYSE, a Fund’s primary listing exchange, or other exchange material to the valuation or operation of such Fund (an “Exchange” as defined below) closes before the cut-off time. If a purchase order is received prior to the applicable cut-off time, the day on which SEI receives a valid purchase order is the purchase order date. If the purchase order is received after the applicable cut-off time, the purchase order date will be the next day. Purchase orders are irrevocable. By placing a purchase order, and prior to delivery of such Creation Units, an Authorized Participant’s DTC account will be charged the non-refundable transaction fee due for the purchase order.

Determination of Required Payment

The total payment required to create each Creation Unit is the NAV of 50,000 Shares of the Managed Futures Fund or the applicable Geared Fund or 25,000 Shares of the applicable Matching VIX Fund on the purchase order date plus the applicable transaction fee. For each Fund, Authorized Participants have create/redeem cut-off times prior to the NAV calculation time, which may be different from the close of the U.S. markets, as shown in the table below.

 

Underlying Benchmark

  

Create/Redeem Cutoff

  

NAV Calculation Time

Silver    6:30 a.m. (Eastern Time)    7:00 a.m. (Eastern Time)*
Gold    9:30 a.m. (Eastern Time)    10:00 a.m. (Eastern Time)*
Bloomberg Commodity IndexSM    10:45 a.m. (Eastern Time)    2:30 p.m. (Eastern Time)
S&P Strategic Futures Index    10:45 a.m. (Eastern Time)    3:00 p.m. (Eastern Time)
S&P 500 VIX Short-Term Futures Index    2:00 p.m. (Eastern Time)    4:15 p.m. (Eastern Time)
S&P 500 VIX Mid-Term Futures Index    2:00 p.m. (Eastern Time)    4:15 p.m. (Eastern Time)
Bloomberg WTI Crude Oil SubindexSM    2:00 p.m. (Eastern Time)    2:30 p.m. (Eastern Time)
Bloomberg Natural Gas SubindexSM    2:00 p.m. (Eastern Time)    2:30 p.m. (Eastern Time)
Australian dollar    3:00 p.m. (Eastern Time)    4:00 p.m. (Eastern Time)
Euro    3:00 p.m. (Eastern Time)    4:00 p.m. (Eastern Time)
Yen    3:00 p.m. (Eastern Time)    4:00 p.m. (Eastern Time)

 

* For silver and gold, this time may vary due to differences in when daylight savings time is effective between London and New York. The actual times equate to noon London time for silver and 3:00 p.m. London time for gold.

Delivery of Cash

Cash required for settlement will typically be transferred to the Custodian through: (1) the Continuous Net Settlement (“CNS”) clearing process of the National Securities Clearing Corporation (“NSCC”), as such processes have been enhanced to effect creations and redemptions of Creation Units; or (2) the facilities of DTC on a Delivery Versus Payment (“DVP”) basis, which is the procedure in which the buyer’s payment for securities is due at the time of delivery. Security delivery and payment are simultaneous. If the Custodian does not receive the cash by the market close on the first Business Day following the purchase order date (T+1), such order may be charged interest for delayed settlement or cancelled. The Sponsor reserves the right to extend the deadline for the Custodian to receive the cash required for settlement up to the third Business Day following the purchase order date (T+3). In the event a purchase order is cancelled, the Authorized Participant will be responsible for reimbursing the Fund for all costs associated with cancelling the order including costs for repositioning the portfolio. At its sole discretion, the Sponsor may agree to a delivery date other than T+3. Additional fees may apply for special settlement. The Creation Unit will be delivered to the Authorized Participant upon the Custodian’s receipt of the purchase amount.

Delivery of Exchange of Futures Contract for Related Position (“EFCRP”) Futures Contracts or Block Trades

In the event that the Sponsor shall have determined to permit the Authorized Participant to transfer futures contracts pursuant to an EFCRP or to engage in a block trade purchase of futures contracts from the Authorized Participant with respect to a Fund, as well as to deliver cash, in the creation process, futures contracts required for settlement must be transferred directly to the Fund’s account at its FCM. If the cash is not received by the market close on the third Business Day following the purchase order date (T+3); such order may be charged interest for delayed

 

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settlements or cancelled. In the event a purchase order is cancelled, the Authorized Participant will be responsible for reimbursing a Fund for all costs associated with cancelling the order including costs for repositioning the portfolio. At its sole discretion, the Sponsor may agree to a delivery date other than T+3. The Creation Unit will be delivered to the Authorized Participant upon the Custodian’s receipt of the cash purchase amount and the futures contracts.

Suspension or Rejection of Purchase Orders

In respect of any Fund, the Sponsor may, in its discretion, suspend the right to purchase, or postpone the purchase settlement date, (1) for any period during which any of the NYSE, NYSE Arca, CBOE, CFE, CME (including CBOT and NYMEX) or ICE or other exchange material to the valuation or operation of the Funds (each, an “Exchange”) is closed or when trading is suspended or restricted on such exchanges in any of the underlying commodities; (2) for any period during which an emergency exists as a result of which the fulfillment of a purchase order is not reasonably practicable; or (3) for such other period as the Sponsor determines to be necessary for the protection of the shareholders. The Sponsor will not be liable to any person or in any way for any loss or damages that may result from any such suspension or postponement.

The Sponsor also may reject a purchase order if:

 

    it determines that the purchase order is not in proper form;

 

    the Sponsor believes that the purchase order would have adverse tax consequences to a Fund or its shareholders;

 

    the order would be illegal; or

 

    circumstances outside the control of the Sponsor make it, for all practical purposes, not feasible to process creations of Creation Units.

None of the Sponsor, the Administrator or the Custodian will be liable for the suspension or rejection of any purchase order.

Redemption Procedures

The procedures by which an Authorized Participant can redeem one or more Creation Units mirror the procedures for the creation of Creation Units. On any Business Day, an Authorized Participant may place an order with the Distributor to redeem one or more Creation Units. If a redemption order is received prior to the applicable cut-off time, or earlier if the Exchange, or other exchange material to the valuation or operation of such Fund, closes before the cut-off time, the day on which SEI receives a valid redemption order is the redemption order date. If the redemption order is received after the applicable cut-off time, the redemption order date will be the next day. Redemption orders are irrevocable. The redemption procedures allow Authorized Participants to redeem Creation Units. Individual shareholders may not redeem directly from a Fund.

By placing a redemption order, an Authorized Participant agrees to deliver the Creation Units to be redeemed through DTC’s book-entry system to the applicable Fund not later than noon (Eastern Time), on the first Business Day immediately following the redemption order date (T+1). The Sponsor reserves the right to extend the deadline for the Fund to receive the Creation Units required for settlement up to the third Business Day following the redemption order date (T+3). By placing a redemption order, and prior to receipt of the redemption proceeds, an Authorized Participant must wire to the Custodian the non-refundable transaction fee due for the redemption order or any proceeds due will be reduced by the amount of the fee payable. At its sole discretion, the Sponsor may agree to a delivery date other than T+3. Additional fees may apply for special settlement.

Upon request of an Authorized Participant made at the time of a redemption order, the Sponsor at its sole discretion may determine, in addition to delivering redemption proceeds, to transfer futures contracts to the Authorized Participant pursuant to an EFCRP or to a block trade sale of futures contracts to the Authorized Participant.

 

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Determination of Redemption Proceeds

The redemption proceeds from a Fund consist of the cash redemption amount and, if permitted by the Sponsor in its sole discretion with respect to a Fund, an EFCRP or block trade with the relevant Fund, as described in “Creation and Redemption of Shares” above. The cash redemption amount is equal to the NAV of the number of Creation Unit(s) of such Fund requested in the Authorized Participant’s redemption order as of the time of the calculation of such Fund’s NAV on the redemption order date, less transaction fees and any amounts attributable to any applicable EFCRP or block trade.

Delivery of Redemption Proceeds

The redemption proceeds due from a Fund are delivered to the Authorized Participant at noon (Eastern Time), on the third Business Day immediately following the redemption order date if, by such time on such Business Day immediately following the redemption order date, a Fund’s DTC account has been credited with the Creation Units to be redeemed. The Fund should be credited through: (1) the CNS clearing process of NSCC, as such processes have been enhanced to effect creations and redemptions of Creation Units; or (2) the facilities of DTC on a Delivery Versus Payment basis. If a Fund’s DTC account has not been credited with all of the Creation Units to be redeemed by such time, the redemption distribution is delivered to the extent whole Creation Units are received. Any remainder of the redemption distribution is delivered on the next Business Day to the extent any remaining whole Creation Units are received if: (1) the Sponsor receives the fee applicable to the extension of the redemption distribution date which the Sponsor may, from time to time, determine, and; (2) the remaining Creation Units to be redeemed are credited to the Fund’s DTC account by noon (Eastern Time), on such next Business Day. Any further outstanding amount of the redemption order may be cancelled. The Authorized Participant will be responsible for reimbursing a Fund for all costs associated with cancelling the order including costs for repositioning the portfolio.

The Sponsor is also authorized to deliver the redemption distribution notwithstanding that the Creation Units to be redeemed are not credited to a Fund’s DTC account by noon (Eastern Time), on the third Business Day immediately following the redemption order date if the Authorized Participant has collateralized its obligation to deliver the Creation Units through DTC’s book-entry system on such terms as the Sponsor may determine from time-to-time.

In the event that the Authorized Participant shall have requested, and the Sponsor shall have determined to permit the Authorized Participant to receive futures contracts pursuant to an EFCRP, as well as the cash redemption proceeds, in the redemption process, futures contracts required for settlement shall be transferred directly from the Fund’s account at its FCM to the account of the Authorized Participant at its FCM.

Suspension or Rejection of Redemption Orders

In respect of any Fund, the Sponsor may, in its discretion, suspend the right of redemption, or postpone the redemption settlement date: (1) for any period during which any Exchange, or other exchange material to the valuation or operation of the Fund, is closed or when trading is suspended or restricted on such Exchanges in any of the underlying commodities; (2) for any period during which an emergency exists as a result of which the redemption distribution is not reasonably practicable; or (3) for such other period as the Sponsor determines to be necessary for the protection of the shareholders. The Sponsor will not be liable to any person or in any way for any loss or damages that may result from any such suspension or postponement.

The Sponsor will reject a redemption order if the order is not in proper form as described in the form of Authorized Participant Agreement or if the fulfillment of the order might be unlawful.

Creation and Redemption Transaction Fee

To compensate BBH&Co. for services in processing the creation and redemption of Creation Units and to offset some or all of the transaction costs, an Authorized Participant may be required to pay a fixed transaction fee to BBH&Co. of up to $500 per order to create or redeem Creation Units and may pay a variable transaction fee to a Fund of up to 0.10% (and a variable transaction fee to the Matching VIX Funds of 0.05%) of the value of a Creation Unit. An order may include multiple Creation Units. The transaction fee(s) may be reduced, increased or otherwise changed by the Sponsor at its sole discretion.

 

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Special Settlement

The Sponsor may allow for early settlement of purchase or redemption orders. Such arrangements may result in additional charges to the Authorized Participant.

NAV

The NAV in respect of a Fund means the total assets of the Fund including, but not limited to, all cash and cash equivalents or other debt securities less total liabilities of such Fund, each determined on the basis of generally accepted accounting principles in the United States, consistently applied under the accrual method of accounting. In particular, the NAV includes any unrealized profit or loss on open Financial Instruments, and any other credit or debit accruing to a Fund but unpaid or not received by a Fund. The NAV per Share of each Fund is computed by dividing the value of the net assets of such Fund (i.e., the value of its total assets less total liabilities) by its total number of Shares outstanding. Expenses and fees are accrued daily and taken into account for purposes of determining the NAV. Each Fund’s NAV is calculated on each day other than a day when the Exchange is closed for regular trading. The Funds compute their NAVs at the times set forth below, or an earlier time as set forth on www.ProShares.com if necessitated by the Exchange or other exchange material to the valuation or operation of such Fund closing early. Each Fund’s NAV is calculated only once each trading day.

 

Fund

  

NAV Calculation Time

UltraShort Silver, Ultra Silver

   7:00 a.m. (Eastern Time)*

UltraShort Gold, Ultra Gold

   10:00 a.m. (Eastern Time)*

UltraShort Bloomberg Commodity,

  

Ultra Bloomberg Commodity

   2:30 p.m. (Eastern Time)

UltraShort Bloomberg Crude Oil,

  

Ultra Bloomberg Crude Oil

   2:30 p.m. (Eastern Time)

UltraShort Bloomberg Natural Gas,

  

Ultra Bloomberg Natural Gas

   2:30 p.m. (Eastern Time)

Managed Futures Strategy

   3:00 p.m. (Eastern Time)

Short Euro,

  

UltraShort Euro,

  

Ultra Euro

   4:00 p.m. (Eastern Time)

UltraShort Australian Dollar

   4:00 p.m. (Eastern Time)

UltraShort Yen,

  

Ultra Yen

   4:00 p.m. (Eastern Time)

VIX Short-Term Futures ETF,

  

Ultra VIX Short-Term Futures ETF,

  

Short VIX Short-Term Futures ETF

   4:15 p.m. (Eastern Time)

VIX Mid-Term Futures ETF

   4:15 p.m. (Eastern Time)

 

* For silver and gold, this time may vary due to differences in when daylight savings time is effective between London and New York. The actual times equate to noon London time for silver and 3:00 p.m. London time for gold.

In calculating the NAV of a Fund, the settlement value of the Fund’s non-exchange traded Financial Instruments, is determined by applying the then-current disseminated value for the applicable benchmark to the terms of such Fund’s non-exchange traded Financial Instruments. However, in the event that an underlying reference asset is not trading due to the operation of daily limits or otherwise, the Sponsor may, in its sole discretion, choose to fair value the index level in order to value the Fund’s non-exchange traded Financial Instruments for purposes of the NAV calculation. Such fair value prices would generally be determined based on available inputs about the current value of the underlying reference assets and would be based on principles that the Sponsor deems fair and equitable so long as such principles are consistent with normal industry standards.

 

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Futures contracts traded on a U.S. exchange are calculated at their then-current market value, which is based upon the settlement price (for the VIX Funds, the Managed Futures Fund and the Commodity Index Funds) or the last traded price before the NAV time (for the Currency Funds), for that particular futures contract traded on the applicable U.S. exchange on the date with respect to which the NAV is being determined. If a futures contract traded on a U.S. exchange could not be liquidated on such day, due to the operation of daily limits or other rules of the exchange upon which that position is traded or otherwise, 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 generally be determined based on available inputs about the current value of the underlying reference assets and would be based on principles that the Sponsor deems fair and equitable so long as such principles are consistent with normal industry standards.

The Funds may use a variety of money market instruments to invest excess cash. Short-term debt instruments used in this capacity and expected to be held-to-maturity will be priced for NAV purposes at amortized cost.

Indicative Optimized Portfolio Value (“IOPV”)

The IOPV is an indicator of the value of a Fund’s net assets at the time the IOPV is disseminated. The IOPV is calculated and disseminated every 15 seconds throughout the trading day. The IOPV is generally calculated using the prior day’s closing net assets of a Fund as a base and updating throughout the trading day changes in the value of the Financial Instruments held by a Fund. The IOPV should not be viewed as an actual real time update of the NAV because NAV is calculated only once at the end of each trading day. The IOPV also should not be viewed as a precise value of the Shares. The IOPV for Funds based on the Bloomberg WTI Crude Oil SubindexSM and the Bloomberg Natural Gas IndexSM will not update following the determination of the 2:30 p.m. settlement price of the futures contracts underlying those indexes. The IOPVs for Funds based on the Bloomberg Commodity IndexSM will receive progressively more limited updates during a trading day as the settlement price for each individual component is determined, and such IOPVs will not update after all of the underlying components have determined settlement prices.

The NYSE Arca disseminates the IOPV. In addition, the IOPV is published on the NYSE Arca’s website and is available through on-line information services such as Bloomberg and Reuters.

Dissemination of the IOPV provides additional information that is not otherwise available to the public and may be useful to investors and market professionals in connection with the trading of Shares. Investors and market professionals are able throughout the trading day to compare the market price of a Fund and the IOPV. If the market price of Shares diverges significantly from the IOPV, market professionals may have an incentive to execute arbitrage trades. Such arbitrage trades can tighten the tracking between the market price of a Fund and the IOPV and thus can be beneficial to all market participants.

Purchases and Sales in the Secondary Market on the NYSE Arca

The Shares of each Fund are listed on the NYSE Arca. The Shares of each Fund that has commenced investment operations, began trading on the NYSE Arca on the respective dates below under the following symbols:

 

Fund

  

Commencement of Operations

  

Ticker Symbol

ProShares Managed Futures Strategy

   October 1, 2014    FUTS

ProShares VIX Short-Term Futures ETF

   January 3, 2011    VIXY

ProShares VIX Mid-Term Futures ETF

   January 3, 2011    VIXM

ProShares Short VIX Short-Term Futures ETF

   October 3, 2011    SVXY

ProShares Ultra VIX Short-Term Futures ETF

   October 3, 2011    UVXY

ProShares UltraShort Bloomberg Commodity

   November 25, 2008    CMD

ProShares UltraShort Bloomberg Crude Oil

   November 25, 2008    SCO

ProShares UltraShort Bloomberg Natural Gas

   October 4, 2011    KOLD

ProShares UltraShort Gold

   December 3, 2008    GLL

 

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Fund

  

Commencement of Operations

  

Ticker Symbol

ProShares UltraShort Silver

   December 3, 2008    ZSL

ProShares Short Euro

   June 26, 2012    EUFX

ProShares UltraShort Australian Dollar

   July 17, 2012    CROC

ProShares UltraShort Euro

   November 25, 2008    EUO

ProShares UltraShort Yen

   November 25, 2008    YCS

ProShares Ultra Bloomberg Commodity

   November 25, 2008    UCD

ProShares Ultra Bloomberg Crude Oil

   November 25, 2008    UCO

ProShares Ultra Bloomberg Natural Gas

   October 4, 2011    BOIL

ProShares Ultra Gold

   December 3, 2008    UGL

ProShares Ultra Silver

   December 3, 2008    AGQ

ProShares Ultra Euro

   November 25, 2008    ULE

ProShares Ultra Yen

   November 25, 2008    YCL

Secondary market purchases and sales of Shares are subject to ordinary brokerage commissions and charges. The Shares of each Fund trade like any other exchange-listed security.

Fees and Expenses

Offering Expenses

The Trust has paid expenses incurred in connection with organizing the initial offering of each Fund’s Shares, and the Sponsor did not charge its fee in the first year of operations of each Fund in an amount equal to the offering costs. The Sponsor reimbursed each Geared Fund and the Short Euro Fund to the extent that its organizational and offering costs exceeded 0.95% of its average daily NAV for the first year of operations. The Sponsor reimbursed each Matching VIX Fund to the extent that its organizational and offering costs exceeded 0.85% of its average daily NAV for the first year of operations. The Sponsor reimbursed the Managed Futures Fund to the extent that its initial offering costs exceed 0.75% of its average daily net assets for the first year of operations. Normal and expected expenses incurred in connection with the continuous offering of Shares of each Fund are paid by the Sponsor.

Offering expenses mean those expenses incurred in connection with the qualification and registration of the Shares of each Fund and in offering, distributing and processing the Shares of each Fund under applicable federal law, and any other expenses actually incurred and, directly or indirectly, related to the organization of each offering of the Shares of such Fund, including, but not limited to, expenses such as:

 

    initial SEC registration fees and SEC and FINRA filing fees;

 

    costs of preparing, printing (including typesetting), amending, supplementing, mailing and distributing the Trust’s Registration Statements, the exhibits thereto and the related prospectuses;

 

    the costs of qualifying, printing (including typesetting), amending, supplementing and mailing sales materials used in connection with the offering and issuance of the Shares; and

 

    accounting, auditing and legal fees (including disbursements related thereto) incurred in connection therewith.

Management Fee

Each Geared Fund pays 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. 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 Managed Futures Fund pays the Sponsor a Management Fee, monthly in arrears, in an amount equal to 0.75% per annum of its average daily NAV. For the first year of the Managed Futures Fund’s operations, the Sponsor will not charge its fee in an amount equal to the offering costs. The Sponsor reimbursed the Managed Futures Fund to the extent that its offering costs exceeded the Management Fee for the first year of operations. No other management fee is paid by the Funds. The Management Fee is paid in consideration of the Sponsor’s trading advisory services and the other services provided to the Funds that the Sponsor pays directly.

 

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Licensing Fee

The Sponsor pays S&P a licensing fee for use of the VIX Futures Indexes as the benchmarks for the VIX Funds and a licensing fee for the S&P Strategic Futures Index as the benchmark for the Managed Futures Fund. The Sponsor pays Bloomberg a licensing fee for the Bloomberg Commodity IndexSM, as well as each subindex that serves as a benchmark for a Commodity Index Fund.

Routine Operational, Administrative and Other Ordinary Expenses

The Sponsor pays 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, ProFunds Distributors, Inc., an affiliated broker-dealer of the Sponsor, and Transfer Agent, licensing fees, accounting and audit 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, Financial Industry Regulatory Authority (“FINRA”) filing fees, individual K-1 preparation and mailing fees not exceeding 0.10% per annum of the NAV of a Fund, and report preparation and mailing expenses.

Non-Recurring Fees and Expenses

Each Fund pays all its 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 which are unexpected or unusual in nature, such as legal claims and liabilities, litigation costs or indemnification or other material expenses which are not currently anticipated obligations of the Funds. Routine operational, administrative and other ordinary expenses are not deemed extraordinary expenses.

Selling Commission

Retail investors may purchase and sell Shares through traditional brokerage accounts. Investors are expected to be charged a customary commission by their brokers in connection with purchases of Shares that will vary from investor to investor. Investors are encouraged to review the terms of their brokerage accounts for applicable charges. The price at which an Authorized Participant sells a Share may be higher or lower than the price paid by such Authorized Participant in connection with the creation of such Share in a Creation Unit.

Brokerage Commissions and Fees

Each Fund, with the exception of the Matching VIX Funds, pays all of its brokerage commissions, including applicable exchange fees, NFA fees and give-up fees, pit brokerage fees and other transaction related fees and expenses charged in connection with trading activities for each Fund’s investments in CFTC regulated investments. The Sponsor is currently paying brokerage commissions on VIX futures contracts for the Matching VIX Funds in amounts that exceed variable create/redeem fees collected by more than 0.02% of the Matching VIX Fund’s average net assets annually.

Other Transaction Costs

The Funds bear other transaction costs including the effects of trading spreads and financing costs/fees, if any, associated with the use of 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 (such as shares of money market funds and collateralized repurchase agreements).

Employees

The Trust has no employees.

Item 1A. Risk Factors.

These risk factors should be read in connection with the other information included in this Annual Report on Form 10-K, including Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Funds’ Financial Statements and the related Notes to the Funds’ Financial Statements. For purposes of this section:

 

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    The term “Managed Futures Fund” refers to ProShares Managed Futures Strategy;

 

    The term “Matching VIX Fund” refers to ProShares VIX Short-Term Futures ETF and ProShares VIX Mid-Term Futures ETF;

 

    The term “Geared VIX Fund” refers to ProShares Ultra VIX Short-Term Futures ETF and ProShares Short VIX Short-Term Futures ETF;

 

    The term “VIX Fund” refers to each Geared VIX Fund and each Matching VIX Fund;

 

    The term “Geared Fund” refers to ProShares UltraShort Bloomberg Commodity, ProShares UltraShort Bloomberg Crude Oil, ProShares UltraShort Bloomberg Natural Gas, ProShares UltraShort Gold, ProShares UltraShort Silver, ProShares Short Euro, ProShares UltraShort Australian Dollar, ProShares UltraShort Euro, ProShares UltraShort Yen, ProShares Ultra Bloomberg Commodity, ProShares Ultra Bloomberg Crude Oil, ProShares Ultra Bloomberg Natural Gas, ProShares Ultra Gold, ProShares Ultra Silver, ProShares Ultra Euro and ProShares Ultra Yen, and each Geared VIX Fund;

 

    The term “Commodity Index Fund” refers to ProShares UltraShort Bloomberg Commodity, ProShares UltraShort Bloomberg Crude Oil, ProShares UltraShort Bloomberg Natural Gas, ProShares Ultra Bloomberg Commodity, ProShares Ultra Bloomberg Crude Oil and ProShares Ultra Bloomberg Natural Gas;

 

    The term “Commodity Fund” refers to ProShares UltraShort Gold, ProShares UltraShort Silver, ProShares Ultra Gold and ProShares Ultra Silver; and

 

    The term “Currency Fund” refers to ProShares Short Euro, ProShares UltraShort Australian Dollar, ProShares UltraShort Euro, ProShares UltraShort Yen, ProShares Ultra Euro and ProShares Ultra Yen.

Risks Specific to the Geared Funds

In addition to the risks described elsewhere in this “Risk Factors” section, the following risks apply to the Geared Funds.

Due to the compounding of daily returns, the Geared Funds’ returns over periods longer than a single day will likely differ in amount and possibly even direction from the Geared Fund multiple times the benchmark return for the period.

Each of the Geared Funds is “geared” in the sense that each has an investment objective to correspond (before fees and expenses) to the inverse (e.g., -1x), an inverse multiple (e.g., -2x), or a multiple (e.g., 2x), of the performance of a benchmark on a given day. Each Geared Fund seeks investment results for a single day only, as measured from its NAV calculation time to its next NAV calculation time, and not for any other period. The return of a Geared Fund for a period longer than a single day is the result of its return for each day compounded over the period and usually will differ from the inverse (-1x), two times the inverse (-2x), or two times (2x) the return of the Geared Fund’s benchmark for the period. A Geared Fund will lose money if its benchmark’s performance is flat over time, and it is possible for a Geared Fund to lose money over time regardless of the performance of an underlying benchmark, as a result of daily rebalancing, the benchmark’s volatility and compounding. Longer holding periods, higher benchmark volatility, inverse exposure and greater leverage each affect the impact of compounding on a Geared 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 Geared Fund’s underlying benchmark.

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 two times as volatile on a daily basis as the return of a fund with an objective of matching the same benchmark. The daily return of a Short or an UltraShort Fund is designed to return the inverse (-1x) or two times the inverse (-2x) of the return, respectively, 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 Geared Funds that use leverage are riskier than similarly benchmarked exchange-traded funds that do not use leverage. An investor should

 

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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 Geared Funds should actively manage and monitor their investments, as frequently as daily.

The hypothetical examples below illustrate how daily geared fund returns can behave for periods longer than a single day. Each involves a hypothetical fund XYZ that seeks to double the daily performance of benchmark XYZ. On each day, fund XYZ performs in line with its objective (two times (2x) the benchmark’s daily performance before fees and expenses). Notice that, in the first example (showing an overall benchmark loss for the period), over the entire seven-day period, the fund’s total return is more than two times the loss of the period return of the benchmark. For the seven-day period, benchmark XYZ lost 3.26% while fund XYZ lost 7.01% (versus -6.52% or 2 x -3.26%).

 

     Benchmark XYZ     Fund XYZ  
     Level      Daily
Performance
    Daily
Performance
    Net Asset
Value
 

Start

     100.00           $ 100.00   

Day 1

     97.00         -3.00     -6.00   $ 94.00   

Day 2

     99.91         3.00     6.00   $ 99.64   

Day 3

     96.91         -3.00     -6.00   $ 93.66   

Day 4

     99.82         3.00     6.00   $ 99.28   

Day 5

     96.83         -3.00     -6.00   $ 93.32   

Day 6

     99.73         3.00     6.00   $ 98.92   

Day 7

     96.74         -3.00     -6.00   $ 92.99   
     

 

 

   

 

 

   

Total Return

        -3.26     -7.01  
     

 

 

   

 

 

   

Similarly, in another example (showing an overall benchmark gain for the period), over the entire seven-day period, the fund’s total return is considerably less than double that of the period return of the benchmark. For the seven-day period, benchmark XYZ gained 2.72% while fund XYZ gained 4.86% (versus 5.44% (or 2 x 2.72%)).

 

     Benchmark XYZ     Fund XYZ  
     Level      Daily
Performance
    Daily
Performance
    Net Asset
Value
 

Start

     100.00           $ 100.00   

Day 1

     103.00         3.00     6.00   $ 106.00   

Day 2

     99.91         -3.00     -6.00   $ 99.64   

Day 3

     102.91         3.00     6.00   $ 105.62   

Day 4

     99.82         -3.00     -6.00   $ 99.28   

Day 5

     102.81         3.00     6.00   $ 105.24   

Day 6

     99.73         -3.00     -6.00   $ 98.92   

Day 7

     102.72         3.00     6.00   $ 104.86   
     

 

 

   

 

 

   

Total Return

        2.72     4.86  
     

 

 

   

 

 

   

These effects are caused by compounding, which exists in all investments, but has a more significant impact in geared funds. In general, during periods of higher benchmark volatility, compounding will cause an Ultra Fund’s results for periods longer than a single day to be less than two times (2x) the return of the benchmark (or less than the inverse (-1x) or two times the inverse (-2x) times the return of the benchmark for the Short Funds and UltraShort Funds, respectively). This effect becomes more pronounced as volatility increases. Conversely, in periods of lower benchmark volatility (particularly when combined with higher benchmark returns), an Ultra Fund’s returns over longer periods can be higher than two times (2x) the return of the benchmark. Actual results for a particular period, before fees and expenses, are also dependent on the magnitude of the benchmark return in addition to the benchmark volatility. Similar effects exist for the Short Funds and UltraShort Funds, and the significance of these effects may be even greater with such inverse or inverse leveraged funds.

 

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The graphs that follow illustrate this point. Each of the graphs shows a simulated hypothetical one-year performance of a benchmark compared with the performance of a geared fund that perfectly achieves its geared daily investment objective. The graphs demonstrate that, for periods greater than a single day, a geared fund is likely to underperform or overperform (but not match) the benchmark performance (or the inverse of the benchmark performance) times the multiple stated as the daily fund objective. Investors should understand the consequences of holding daily rebalanced funds for periods longer than a single day and should actively manage and monitor their investments, as frequently as daily. A one-year period is used solely for illustrative purposes. Deviations from the benchmark return (or the inverse of the benchmark return) times the fund multiple can occur over periods as short as two days (each day as measured from NAV to NAV) and may also occur in periods shorter than a single day (when measured intraday as opposed to NAV to NAV). See “Intraday Price Performance Risk” below for additional details. To isolate the impact of daily leveraged, inverse or inverse leveraged exposure, these graphs assume: a) no fund expenses or transaction costs; b) borrowing/lending rates (to obtain required inverse, inverse leveraged or leveraged exposure) and cash reinvestment rates of zero percent; and c) the fund consistently maintaining perfect exposure (-1x, -2x or 2x) as of the fund’s NAV time each day. If these assumptions were different, the fund’s performance would be different than that shown. If fund expenses, transaction costs and financing expenses greater than zero percent were included, the fund’s performance would also be different than that shown. Each of the graphs also assumes a volatility rate of 70%, which is an approximate average of the five-year historical volatility rate of the most volatile benchmark referenced herein (the S&P 500 VIX Short-Term Futures Index). A benchmark’s volatility rate is a statistical measure of the magnitude of fluctuations in its returns.

 

LOGO

The graph above shows a scenario where the benchmark, which exhibits day-to-day volatility, is flat or trendless over the year (i.e., provides a return of 0% over the course of the year), but the Short Fund (-1x) is down.

 

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LOGO

The graph above shows a scenario where the benchmark, which exhibits day-to-day volatility, is up over the year, but the Short Fund (-1x) is down more than the inverse of the benchmark.

 

LOGO

 

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The graph above shows a scenario where the benchmark, which exhibits day-to-day volatility, is down over the year, but the Short Fund (-1x) is up less than the inverse of the benchmark.

 

LOGO

The graph above shows a scenario where the benchmark, which exhibits day-to-day volatility, is flat or trendless over the year (i.e., provides a return of 0% over the course of the year), but the Ultra Fund (2x) and the UltraShort Fund (-2x) are both down.

 

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LOGO

The graph above shows a scenario where the benchmark, which exhibits day-to-day volatility, is up over the year, but the Ultra Fund (2x) is up less than two times the benchmark and the UltraShort Fund (-2x) is down less than two times the inverse of the benchmark.

 

LOGO

 

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The graph above shows a scenario where the benchmark, which exhibits day-to-day volatility, is down over the year, but the Ultra Fund (2x) is down less than two times the benchmark and the UltraShort Fund (-2x) is up less than two times the inverse of the benchmark.

The historical five year average volatility of the benchmarks utilized by the Funds ranges from 4.70% to 70.08%, as set forth in the table below.

 

Index

   Identifier    Historical Five-Year
Average Volatility Rate
As of December 31, 2015

S&P Strategic Futures Index*

   SPSFIT    4.70%

S&P 500 VIX Short-Term Futures Index

   SPVXSPID    70.08%

S&P 500 VIX Mid-Term Futures Index

   SPVXMPID    33.25%

Bloomberg Commodity IndexSM

   BCOM    13.91%

Bloomberg WTI Crude Oil SubindexSM

   BCOMCL    30.84%

Bloomberg Natural Gas SubindexSM

   BCOMNG    44.67%

The daily performance of gold bullion as measured by the U.S. dollar p.m. LBMA Gold Price

   GOLDLNPM    17.80%

The daily performance of silver bullion as measured by the London Silver Price

   SLVRLN    36.26%

The U.S. dollar price of the euro

   USDEUR    9.36%

The U.S. dollar price of the Japanese yen

   USDJPY    8.93%

The U.S. dollar price of the Australian dollar

   USDAUD    10.77%

 

* The S&P Strategic Futures Index launched on August 14, 2014. Accordingly, the Index has not been in existence for five years.

The tables below illustrate the impact of two factors that affect a Geared Fund’s performance, benchmark volatility and benchmark return. Benchmark volatility is a statistical measure of the magnitude of fluctuations in the returns of a benchmark and is calculated as the standard deviation of the natural logarithms of one plus the benchmark return (calculated daily), multiplied by the square root of the number of trading days per year (assumed to be 252). The tables show estimated fund returns for a number of combinations of benchmark volatility and benchmark return over a one-year period. To isolate the impact of daily leveraged, inverse or inverse leveraged exposure, these graphs assume: a) no fund expenses or transaction costs; b) borrowing/lending rates of zero percent (to obtain required inverse, inverse leveraged or leveraged exposure) and cash reinvestment rates of zero percent; and c) the fund consistently maintaining perfect exposure (-1x, -2x or 2x) as of the fund’s NAV time each day. If these assumptions were different, the fund’s performance would be different than that shown. If fund expenses, transaction costs and financing expenses were included, the fund’s performance would be different than that shown. The tables below show examples in which a Geared Fund has an investment objective to correspond (before fees and expenses) to the inverse (-1), two times the inverse (-2x) or two times (2x) the daily performance of a benchmark. The Geared Fund that has an investment objective to correspond to two times (2x) the daily performance of a benchmark could incorrectly be expected to achieve a 20% return on a yearly basis if the benchmark return was 10%, absent the effects of compounding. However, as the tables below show, with a benchmark volatility of 40%, such a fund would return 3.1%. In the charts below, shaded areas represent those scenarios where a geared fund with the investment objective described will outperform (i.e., return more than) the benchmark performance times the stated multiple in the fund’s investment objective; conversely areas not shaded represent those scenarios where the fund will underperform (i.e., return less than) the benchmark performance times the multiple stated as the daily fund objective.

 

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Estimated Fund Return Over One Year When the Fund Objective is to Seek Daily Investment Results, Before Fees and Expenses, that Correspond to the Inverse (-1x) of the Daily Performance of a Benchmark.

 

One Year

Benchmark

Performance

   Inverse
(-1x) of
One  Year
Benchmark
Performance
               Benchmark Volatility  
      0%     5%     10%     15%     20%     25%     30%     35%     40%     45%     50%     55%     60%     65%     70%  

-60%

   60%      150.0 %     149.4 %     147.5 %     144.4 %     140.2 %     134.9 %     128.5 %     121.2 %     113.0 %     104.2 %     94.7 %     84.7 %     74.4 %     63.9 %     53.2 %

-55%

   55%      122.2 %     121.7 %     120.0 %     117.3 %     113.5 %     108.8 %     103.1 %     96.6 %     89.4 %     81.5 %     73.1 %     64.2 %     55.0 %     45.6 %     36.1 %

-50%

   50%      100.0 %     99.5 %     98.0 %     95.6 %     92.2 %     87.9 %     82.8 %     76.9 %     70.4 %     63.3 %     55.8 %     47.8 %     39.5 %     31.1 %     22.5 %

-45%

   45%      81.8 %     81.4 %     80.0 %     77.8 %     74.7 %     70.8 %     66.2 %     60.9 %     54.9 %     48.5 %     41.6 %     34.4 %     26.9 %     19.2 %     11.4 %

-40%

   40%      66.7 %     66.3 %     65.0 %     63.0 %     60.1 %     56.6 %     52.3 %     47.5 %     42.0 %     36.1 %     29.8 %     23.2 %     16.3 %     9.2 %     2.1 %

-35%

   35%      53.8 %     53.5 %     52.3 %     50.4 %     47.8 %     44.5 %     40.6 %     36.1 %     31.1 %     25.6 %     19.8 %     13.7 %     7.3 %     0.8 %     -5.7 %

-30%

   30%      42.9 %     42.5 %     41.4 %     39.7 %     37.3 %     34.2 %     30.6 %     26.4 %     21.7 %     16.7 %     11.3 %     5.6 %     -0.3 %     -6.4 %     -12.5 %

-25%

   25%      33.3 %     33.0 %     32.0 %     30.4 %     28.1 %     25.3 %     21.9 %     18.0 %     13.6 %     8.9 %     3.8 %     -1.5 %     -7.0 %     -12.6 %     -18.3 %

-20%

   20%      25.0 %     24.7 %     23.8 %     22.2 %     20.1 %     17.4 %     14.2 %     10.6 %     6.5 %     2.1 %     -2.6 %     -7.6 %     -12.8 %     -18.1 %     -23.4 %

-15%

   15%      17.6 %     17.4 %     16.5 %     15.0 %     13.0 %     10.5 %     7.5 %     4.1 %     0.3 %     -3.9 %     -8.4 %     -13.1 %     -17.9 %     -22.9 %     -27.9 %

-10%

   10%      11.1 %     10.8 %     10.0 %     8.6 %     6.8 %     4.4 %     1.5 %     -1.7 %     -5.3 %     -9.3 %     -13.5 %     -17.9 %     -22.5 %     -27.2 %     -31.9 %

-5%

   5%      5.3 %     5.0 %     4.2 %     2.9 %     1.1 %     -1.1 %     -3.8 %     -6.9 %     -10.3 %     -14.0 %     -18.0 %     -22.2 %     -26.6 %     -31.0 %     -35.5 %

0%

   0%      0.0 %     -0.2 %     -1.0 %     -2.2 %     -3.9 %     -6.1 %     -8.6 %     -11.5 %     -14.8 %     -18.3 %     -22.1 %     -26.1 %     -30.2 %     -34.5 %     -38.7 %

5%

   -5%      -4.8 %     -5.0 %     -5.7 %     -6.9 %     -8.5 %     -10.5 %     -13.0 %     -15.7 %     -18.8 %     -22.2 %     -25.8 %     -29.6 %     -33.6 %     -37.6 %     -41.7 %

10%

   -10%      -9.1 %     -9.3 %     -10.0 %     -11.1 %     -12.7 %     -14.6 %     -16.9 %     -19.6 %     -22.5 %     -25.8 %     -29.2 %     -32.8 %     -36.6 %     -40.4 %     -44.3 %

15%

   -15%      -13.0 %     -13.3 %     -13.9 %     -15.0 %     -16.5 %     -18.3 %     -20.5 %     -23.1 %     -25.9 %     -29.0 %     -32.3 %     -35.7 %     -39.3 %     -43.0 %     -46.7 %

20%

   -20%      -16.7 %     -16.9 %     -17.5 %     -18.5 %     -19.9 %     -21.7 %     -23.8 %     -26.3 %     -29.0 %     -31.9 %     -35.1 %     -38.4 %     -41.9 %     -45.4 %     -48.9 %

25%

   -25%      -20.0 %     -20.2 %     -20.8 %     -21.8 %     -23.1 %     -24.8 %     -26.9 %     -29.2 %     -31.8 %     -34.7 %     -37.7 %     -40.9 %     -44.2 %     -47.6 %     -51.0 %

30%

   -30%      -23.1 %     -23.3 %     -23.8 %     -24.8 %     -26.1 %     -27.7 %     -29.7 %     -31.9 %     -34.5 %     -37.2 %     -40.1 %     -43.2 %     -46.3 %     -49.6 %     -52.9 %

35%

   -35%      -25.9 %     -26.1 %     -26.7 %     -27.6 %     -28.8 %     -30.4 %     -32.3 %     -34.5 %     -36.9 %     -39.5 %     -42.3 %     -45.3 %     -48.3 %     -51.5 %     -54.6 %

40%

   -40%      -28.6 %     -28.7 %     -29.3 %     -30.2 %     -31.4 %     -32.9 %     -34.7 %     -36.8 %     -39.1 %     -41.7 %     -44.4 %     -47.2 %     -50.2 %     -53.2 %     -56.2 %

45%

   -45%      -31.0 %     -31.2 %     -31.7 %     -32.6 %     -33.7 %     -35.2 %     -37.0 %     -39.0 %     -41.2 %     -43.7 %     -46.3 %     -49.0 %     -51.9 %     -54.8 %     -57.7 %

50%

   -50%      -33.3 %     -33.5 %     -34.0 %     -34.8 %     -35.9 %     -37.4 %     -39.1 %     -41.0 %     -43.2 %     -45.6 %     -48.1 %     -50.7 %     -53.5 %     -56.3 %     -59.2 %

55%

   -55%      -35.5 %     -35.6 %     -36.1 %     -36.9 %     -38.0 %     -39.4 %     -41.0 %     -42.9 %     -45.0 %     -47.3 %     -49.8 %     -52.3 %     -55.0 %     -57.7 %     -60.5 %

60%

   -60%      -37.5 %     -37.7 %     -38.1 %     -38.9 %     -40.0 %     -41.3 %     -42.9 %     -44.7 %     -46.7 %     -49.0 %     -51.3 %     -53.8 %     -56.4 %     -59.0 %     -61.7 %

Estimated Fund Return Over One Year When the Fund Objective is to Seek Daily Investment Results, Before Fees and Expenses, that Correspond to Two Times the Inverse (-2x) of the Daily Performance of a Benchmark.

 

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One Year

Benchmark

Performance

  Two
Times
Inverse
(-2x) of
One  Year
Benchmark
Performance
              Benchmark Volatility  
    0%     5%     10%     15%     20%     25%     30%     35%     40%     45%     50%     55%     60%     65%     70%  

-60%

  120%     525.0%       520.3%       506.5%       484.2%       454.3%       418.1%       377.1%       332.8%       286.7%       240.4%       195.2%       152.2%       112.2%       76.0%       43.7%  

-55%

  110%     393.8%       390.1%       379.2%       361.6%       338.0%       309.4%       277.0%       242.0%       205.6%       169.0%       133.3%       99.3%       67.7%       39.0%       13.5%  

-50%

  100%     300.0%       297.0%       288.2%       273.9%       254.8%       231.6%       205.4%       177.0%       147.5%       117.9%       88.9%       61.4%       35.8%       12.6%       -8.0%  

-45%

  90%     230.6%       228.1%       220.8%       209.0%       193.2%       174.1%       152.4%       128.9%       104.6%       80.1%       56.2%       33.4%       12.3%       -6.9%       -24.0%  

-40%

  80%     177.8%       175.7%       169.6%       159.6%       146.4%       130.3%       112.0%       92.4%       71.9%       51.3%       31.2%       12.1%       -5.7%       -21.8%       -36.1%  

-35%

  70%     136.7%       134.9%       129.7%       121.2%       109.9%       96.2%       80.7%       63.9%       46.5%       28.9%       11.8%       -4.5%       -19.6%       -33.4%       -45.6%  

-30%

  60%     104.1%       102.6%       98.1%       90.8%       81.0%       69.2%       55.8%       41.3%       26.3%       11.2%       -3.6%       -17.6%       -30.7%       -42.5%       -53.1%  

-25%

  50%     77.8%       76.4%       72.5%       66.2%       57.7%       47.4%       35.7%       23.1%       10.0%       -3.2%       -16.0%       -28.3%       -39.6%       -49.9%       -59.1%  

-20%

  40%     56.3%       55.1%       51.6%       46.1%       38.6%       29.5%       19.3%       8.2%       -3.3%       -14.9%       -26.2%       -36.9%       -46.9%       -56.0%       -64.1%  

-15%

  30%     38.4%       37.4%       34.3%       29.4%       22.8%       14.7%       5.7%       -4.2%       -14.4%       -24.6%       -34.6%       -44.1%       -53.0%       -61.0%       -68.2%  

-10%

  20%     23.5%       22.5%       19.8%       15.4%       9.5%       2.3%       -5.8%       -14.5%       -23.6%       -32.8%       -41.7%       -50.2%       -58.1%       -65.2%       -71.6%  

-5%

  10%     10.8%       10.0%       7.5%       3.6%       -1.7%       -8.1%       -15.4%       -23.3%       -31.4%       -39.6%       -47.7%       -55.3%       -62.4%       -68.8%       -74.5%  

0%

  0%     0.0%       -0.7%       -3.0%       -6.5%       -11.3%       -17.1%       -23.7%       -30.8%       -38.1%       -45.5%       -52.8%       -59.6%       -66.0%       -71.8%       -77.0%  

5%

  -10%     -9.3%       -10.0%       -12.0%       -15.2%       -19.6%       -24.8%       -30.8%       -37.2%       -43.9%       -50.6%       -57.2%       -63.4%       -69.2%       -74.5%       -79.1%  

10%

  -20%     -17.4%       -18.0%       -19.8%       -22.7%       -26.7%       -31.5%       -36.9%       -42.8%       -48.9%       -55.0%       -61.0%       -66.7%       -71.9%       -76.7%       -81.0%  

15%

  -30%     -24.4%       -25.0%       -26.6%       -29.3%       -32.9%       -37.3%       -42.3%       -47.6%       -53.2%       -58.8%       -64.3%       -69.5%       -74.3%       -78.7%       -82.6%  

20%

  -40%     -30.6%       -31.1%       -32.6%       -35.1%       -38.4%       -42.4%       -47.0%       -51.9%       -57.0%       -62.2%       -67.2%       -72.0%       -76.4%       -80.4%       -84.0%  

25%

  -50%     -36.0%       -36.5%       -37.9%       -40.2%       -43.2%       -46.9%       -51.1%       -55.7%       -60.4%       -65.1%       -69.8%       -74.2%       -78.3%       -82.0%       -85.3%  

30%

  -60%     -40.8%       -41.3%       -42.6%       -44.7%       -47.5%       -50.9%       -54.8%       -59.0%       -63.4%       -67.8%       -72.0%       -76.1%       -79.9%       -83.3%       -86.4%  

35%

  -70%     -45.1%       -45.5%       -46.8%       -48.7%       -51.3%       -54.5%       -58.1%       -62.0%       -66.0%       -70.1%       -74.1%       -77.9%       -81.4%       -84.6%       -87.4%  

40%

  -80%     -49.0%       -49.4%       -50.5%       -52.3%       -54.7%       -57.7%       -61.1%       -64.7%       -68.4%       -72.2%       -75.9%       -79.4%       -82.7%       -85.6%       -88.3%  

45%

  -90%     -52.4%       -52.8%       -53.8%       -55.5%       -57.8%       -60.6%       -63.7%       -67.1%       -70.6%       -74.1%       -77.5%       -80.8%       -83.8%       -86.6%       -89.1%  

50%

  -100%     -55.6%       -55.9%       -56.9%       -58.5%       -60.6%       -63.2%       -66.1%       -69.2%       -72.5%       -75.8%       -79.0%       -82.1%       -84.9%       -87.5%       -89.8%  

55%

  -110%     -58.4%       -58.7%       -59.6%       -61.1%       -63.1%       -65.5%       -68.2%       -71.2%       -74.2%       -77.3%       -80.3%       -83.2%       -85.9%       -88.3%       -90.4%  

60%

  -120%     -60.9%       -61.2%       -62.1%       -63.5%       -65.4%       -67.6%       -70.2%       -73.0%       -75.8%       -78.7%       -81.5%       -84.2%       -86.7%       -89.0%       -91.0%  

 

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Estimated Fund Return Over One Year When the Fund Objective is to Seek Daily Investment Results, Before Fees and Expenses, that Correspond to Two Times (2x) the Daily Performance of a Benchmark.

 

One Year
Benchmark
Performance

   Two
Times
(2x)
One Year
Benchmark
Performance
               Benchmark Volatility  
      0%     5%     10%     15%     20%     25%     30%     35%     40%     45%     50%     55%     60%     65%     70%  

-60%

   -120%      -84.0 %     -84.0 %     -84.2 %     -84.4 %     -84.6 %     -85.0 %     -85.4 %     -85.8 %     -86.4 %     -86.9 %     -87.5 %     -88.2 %     -88.8 %     -89.5 %     -90.2 %

-55%

   -110%      -79.8 %     -79.8 %     -80.0 %     -80.2 %     -80.5 %     -81.0 %     -81.5 %     -82.1 %     -82.7 %     -83.5 %     -84.2 %     -85.0 %     -85.9 %     -86.7 %     -87.6 %

-50%

   -100%      -75.0 %     -75.1 %     -75.2 %     -75.6 %     -76.0 %     -76.5 %     -77.2 %     -77.9 %     -78.7 %     -79.6 %     -80.5 %     -81.5 %     -82.6 %     -83.6 %     -84.7 %

-45%

   -90%      -69.8 %     -69.8 %     -70.1 %     -70.4 %     -70.9 %     -71.6 %     -72.4 %     -73.2 %     -74.2 %     -75.3 %     -76.4 %     -77.6 %     -78.9 %     -80.2 %     -81.5 %

-40%

   -80%      -64.0 %     -64.1 %     -64.4 %     -64.8 %     -65.4 %     -66.2 %     -67.1 %     -68.2 %     -69.3 %     -70.6 %     -72.0 %     -73.4 %     -74.9 %     -76.4 %     -77.9 %

-35%

   -70%      -57.8 %     -57.9 %     -58.2 %     -58.7 %     -59.4 %     -60.3 %     -61.4 %     -62.6 %     -64.0 %     -65.5 %     -67.1 %     -68.8 %     -70.5 %     -72.3 %     -74.1 %

-30%

   -60%      -51.0 %     -51.1 %     -51.5 %     -52.1 %     -52.9 %     -54.0 %     -55.2 %     -56.6 %     -58.2 %     -60.0 %     -61.8 %     -63.8 %     -65.8 %     -67.9 %     -70.0 %

-25%

   -50%      -43.8 %     -43.9 %     -44.3 %     -45.0 %     -46.0 %     -47.2 %     -48.6 %     -50.2 %     -52.1 %     -54.1 %     -56.2 %     -58.4 %     -60.8 %     -63.1 %     -65.5 %

-20%

   -40%      -36.0 %     -36.2 %     -36.6 %     -37.4 %     -38.5 %     -39.9 %     -41.5 %     -43.4 %     -45.5 %     -47.7 %     -50.2 %     -52.7 %     -55.3 %     -58.1 %     -60.8 %

-15%

   -30%      -27.8 %     -27.9 %     -28.5 %     -29.4 %     -30.6 %     -32.1 %     -34.0 %     -36.1 %     -38.4 %     -41.0 %     -43.7 %     -46.6 %     -49.6 %     -52.6 %     -55.7 %

-10%

   -20%      -19.0 %     -19.2 %     -19.8 %     -20.8 %     -22.2 %     -23.9 %     -26.0 %     -28.3 %     -31.0 %     -33.8 %     -36.9 %     -40.1 %     -43.5 %     -46.9 %     -50.4 %

-5%

   -10%      -9.8 %     -10.0 %     -10.6 %     -11.8 %     -13.3 %     -15.2 %     -17.5 %     -20.2 %     -23.1 %     -26.3 %     -29.7 %     -33.3 %     -37.0 %     -40.8 %     -44.7 %

0%

   0%      0.0 %     -0.2 %     -1.0 %     -2.2 %     -3.9 %     -6.1 %     -8.6 %     -11.5 %     -14.8 %     -18.3 %     -22.1 %     -26.1 %     -30.2 %     -34.5 %     -38.7 %

5%

   10%      10.3 %     10.0 %     9.2 %     7.8 %     5.9 %     3.6 %     0.8 %     -2.5 %     -6.1 %     -10.0 %     -14.1 %     -18.5 %     -23.1 %     -27.7 %     -32.5 %

10%

   20%      21.0 %     20.7 %     19.8 %     18.3 %     16.3 %     13.7 %     10.6 %     7.0 %     3.1 %     -1.2 %     -5.8 %     -10.6 %     -15.6 %     -20.7 %     -25.9 %

15%

   30%      32.3 %     31.9 %     30.9 %     29.3 %     27.1 %     24.2 %     20.9 %     17.0 %     12.7 %     8.0 %     3.0 %     -2.3 %     -7.7 %     -13.3 %     -19.0 %

20%

   40%      44.0 %     43.6 %     42.6 %     40.8 %     38.4 %     35.3 %     31.6 %     27.4 %     22.7 %     17.6 %     12.1 %     6.4 %     0.5 %     -5.6 %     -11.8 %

25%

   50%      56.3 %     55.9 %     54.7 %     52.8 %     50.1 %     46.8 %     42.8 %     38.2 %     33.1 %     27.6 %     21.7 %     15.5 %     9.0 %     2.4 %     -4.3 %

30%

   60%      69.0 %     68.6 %     67.3 %     65.2 %     62.4 %     58.8 %     54.5 %     49.5 %     44.0 %     38.0 %     31.6 %     24.9 %     17.9 %     10.8 %     3.5 %

35%

   70%      82.3 %     81.8 %     80.4 %     78.2 %     75.1 %     71.2 %     66.6 %     61.2 %     55.3 %     48.8 %     41.9 %     34.7 %     27.2 %     19.4 %     11.7 %

40%

   80%      96.0 %     95.5 %     94.0 %     91.6 %     88.3 %     84.1 %     79.1 %     73.4 %     67.0 %     60.1 %     52.6 %     44.8 %     36.7 %     28.5 %     20.1 %

45%

   90%      110.3 %     109.7 %     108.2 %     105.6 %     102.0 %     97.5 %     92.2 %     86.0 %     79.2 %     71.7 %     63.7 %     55.4 %     46.7 %     37.8 %     28.8 %

50%

   100%      125.0 %     124.4 %     122.8 %     120.0 %     116.2 %     111.4 %     105.6 %     99.1 %     91.7 %     83.8 %     75.2 %     66.3 %     57.0 %     47.5 %     37.8 %

55%

   110%      140.3 %     139.7 %     137.9 %     134.9 %     130.8 %     125.7 %     119.6 %     112.6 %     104.7 %     96.2 %     87.1 %     77.5 %     67.6 %     57.5 %     47.2 %

60%

   120%      156.0 %     155.4 %     153.5 %     150.3 %     146.0 %     140.5 %     134.0 %     126.5 %     118.1 %     109.1 %     99.4 %     89.2 %     78.6 %     67.8 %     56.8 %

The foregoing tables are intended to isolate the effect of benchmark volatility and benchmark performance on the return of inverse, inverse leveraged or leveraged funds. The Geared Funds’ actual returns may be significantly greater or less than the returns shown above as a result of any of the factors discussed above or under the below risk factor describing correlation risks.

Correlation Risks Specific to the Geared Funds.

In order to achieve a high degree of correlation with their applicable underlying benchmarks, the Geared Funds seek to rebalance their portfolios daily to keep exposure consistent with their investment objectives. Being materially under- or overexposed to the benchmarks may prevent such Geared Funds from achieving a high degree of correlation with their applicable underlying benchmarks. Market disruptions or closures, large movements of assets into or out of the Geared Funds, regulatory restrictions or extreme market volatility will adversely affect such Geared 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 (i.e., -1x, -2x or 2x, as applicable) at the end of each day, and the likelihood of being materially under- or overexposed is higher on days when the benchmark levels are volatile near the close of the trading day. In addition, unlike other funds that do not rebalance their portfolios as frequently, each Geared Fund may be subject to increased trading costs associated with daily portfolio rebalancing in order to maintain appropriate exposure to the underlying benchmarks. Such costs include commissions paid to the FCMs, and may vary by FCM.

 

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These risks are particularly acute for the Geared VIX Funds due to the high degree of volatility in VIX futures contracts. Investors in the Geared VIX Funds should be aware that these Funds bear a greater risk of not achieving their investment objective on a daily basis, a risk that increases with the level of volatility on a particular day.

For general correlation risks of the Funds, please see “Correlation Risks For All Funds.” below.

Intraday Price Performance Risk.

Each Geared Fund is typically rebalanced at or about the time of its NAV calculation time (which may be other than at the close of the U.S. equity markets). As such, the intraday position of the Geared Fund will generally be different from the Geared Fund’s stated daily investment objective (i.e., -1x, -2x or 2x). When Shares are bought intraday, the performance of a Geared Fund’s Shares until the Fund’s next NAV calculation will generally be greater than or less than the Geared Fund’s stated daily inverse, inverse multiple or multiple.

The use of leveraged, inverse and/or inverse leveraged positions could result in the total loss of an investor’s investment.

Each of the UltraShort and Ultra Funds utilize inverse leveraged or leveraged positions, respectively, 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 inverse leveraged and/or leveraged positions could result in the total loss of an investor’s investment.

For example, because the UltraShort and Ultra Funds include a two times the inverse (-2x) or two times (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 upward single-day or intraday movements in the underlying benchmark of the UltraShort Funds or downward single-day or intraday movements in the underlying benchmark of the Ultra Funds, even if the underlying benchmark maintains a level greater than zero at all times.

Inverse positions can also result in the total loss of an investor’s investment. For the Short Funds, a single-day or intraday increase in the level of the Fund’s benchmark approaching 100% could result in the total loss or almost total loss of an investor’s investment even if such Fund’s benchmark subsequently moves lower.

Risks Specific to the Managed Futures Fund

The level of the S&P Strategic Futures Index (the “SFI”) and the returns attributable to the underlying SFI index components (the “SFI Futures Contracts”) depend on whether a particular SFI Futures Contract is positioned long or short.

The impact of changes in the prices of the SFI Futures Contracts will affect the Managed Futures Fund differently depending upon whether such SFI Futures Contract is positioned long or short. Increases in the price of an underlying SFI Futures Contract will negatively impact the Managed Futures Fund’s performance when the SFI Futures Contract is positioned short and decreases in the price of an underlying SFI Futures Contract will negatively impact the Managed Futures Fund’s performance when the SFI Futures Contract is positioned long.

Short positions should be considered to be speculative and could result in the total loss of an investor’s investment.

The Managed Futures Fund may take short positions in the SFI Futures Contracts. Because the holder of a short position is exposed to losses upon any increase in price, and a price increase is potentially unlimited, short positions will expose the Managed Futures Fund to potentially unlimited losses, which could result in a total loss of investment.

 

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Monthly repositioning may expose the Managed Futures Fund to increased losses in volatile markets.

The SFI is designed to potentially capture the economic benefit derived from both rising and declining trends in futures prices. In order to accomplish this, the SFI positions are rebalanced and repositioned, either long or short, on a monthly basis. Long positions or short positions in each SFI Futures Contract are determined based on price movements over the past seven months. In volatile markets, this may result in the SFI Futures Contracts frequently being repositioned from long to short and vice versa. If the price movements that caused a particular SFI Futures Contract to be repositioned subsequently reverse themselves, the Managed Futures Fund’s index will be negatively impacted. For example, if Gold is positioned long for the month of March, and the underlying SFI Futures Contracts decline in price, the SFI will experience losses. Depending on the magnitude of the price decline, Gold may reposition itself to short at month end. If, in April, the market reverses and appreciates in price, Gold will again experience losses, even if the price of Gold futures contracts measured across both months is flat from a performance perspective. Such activity can cause the Managed Futures Fund to lose more, and possibly significantly more, than an investment focused only on long or short positions in the same futures contracts.

The Managed Futures Fund has a limited operating history, and, as a result, investors have a limited performance history to serve as a factor for evaluating an investment in the Managed Futures Fund.

The Managed Futures Fund has a limited performance history upon which to evaluate an investor’s investment in the Managed Futures Fund. Although past performance is not necessarily indicative of future results, if the Managed Futures Fund had a longer performance history, such performance history might (or might not) provide investors with more information on which to evaluate an investment in the Managed Futures Fund. Likewise, the SFI has a limited history which might (or might not) provide investors with more information on which to evaluate an investment in the Managed Futures Fund.

Risks Specific to the Managed Futures Fund, the Commodity Index Funds, the Commodity Funds, the Currency Funds and the VIX Funds.

With regard to the Managed Futures Fund, the Commodity Index Funds and the Commodity Fund, several factors may affect the price of commodities and, in turn, the Financial Instruments and other assets, if any, owned by such a Fund, including, but not limited to:

 

    Significant increases or decreases in the available supply of a physical commodity due to natural or technological factors. Natural factors would include depletion of known cost-effective sources for a commodity or the impact of severe weather on the ability to produce or distribute the commodity. Technological factors, such as increases in availability created by new or improved extraction, refining and processing equipment and methods or decreases caused by failure or unavailability of major refining and processing equipment (for example, shutting down or constructing oil refineries), also materially influence the supply of commodities.

 

    Significant increases or decreases in the demand for a physical commodity due to natural or technological factors. Natural factors would include such events as unusual climatological conditions impacting the demand for commodities. Technological factors may include such developments as substitutes for particular commodities.

 

    A significant change in the attitude of speculators and investors towards a commodity. Should the speculative community take a negative or positive view towards any given commodity, it could cause a change in world prices of any given commodity and the price of Shares based upon a benchmark related to that commodity will be affected.

 

    Large purchases or sales of physical commodities by the official sector. Governments and large institutions have large commodities holdings or may establish major commodities positions. For example, a significant portion of the aggregate world gold holdings is owned by governments, central banks and related institutions. Similarly, nations with centralized or nationalized oil production and organizations such as the Organization of Petroleum Exporting Countries control large physical quantities of crude oil. If one or more of these institutions decides to buy or sell any commodity in amounts large enough to cause a change in world prices, the price of Shares based upon a benchmark related to that commodity will be affected.

 

    Other political factors. In addition to the organized political and institutional trading-related activities described above, peaceful political activity such as imposition of regulations or entry into trade treaties, as well as political disruptions caused by societal breakdown, insurrection and/or war may greatly influence commodities prices.

 

 

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    A significant increase or decrease in commodity hedging activity by commodity producers. Should there be an increase or decrease in the level of hedge activity of commodity producing companies, countries and/or organizations, it could cause a change in world prices of any given commodity, causing the price of Shares based upon a benchmark related to that commodity to be affected.

 

    The recent proliferation of commodity-linked products and their unknown effect on the commodity markets.

With regard to the Managed Futures Fund and the Currency Funds, several factors may affect the value of foreign currencies or the U.S. dollar and, in turn, Financial Instruments and other assets, if any, owned by a Fund, including, but not limited to:

 

    Debt level and trade deficit of the relevant foreign countries;

 

    Inflation rates of the United States and the relevant foreign countries and investors’ expectations concerning inflation rates;

 

    Interest rates of the United States and the relevant foreign countries and investors’ expectations concerning interest rates;

 

    Investment and trading activities of mutual funds, hedge funds and currency funds;

 

    Global or regional political, economic or financial events and situations;

 

    Sovereign action to set or restrict currency conversion; and

 

    Monetary policies and other related activities of central banks within the U.S. and other relevant foreign markets.

With regard to the Managed Futures Fund, several factors may affect the value of U.S. Treasury securities and, in turn, certain Financial Instruments and related assets, if any, owned by the Managed Futures Fund, including, but not limited to:

 

    Perception of risk, or the lack thereof, in assets other than U.S. Treasury securities;

 

    Debt level and trade deficit of the United States;

 

    Inflation rates of the United States and the relevant foreign countries and investors’ expectations concerning inflation rates;

 

    Interest rates of the United States and the relevant foreign countries and investors’ expectations concerning interest rates;

 

    Fluctuations in the value of the U.S. dollar relative to other currencies; and

 

    Fluctuations in the supply of, and demand for, the underlying U.S. Treasury securities.

 

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With regard to the VIX Funds, several factors may affect the price and/or liquidity of VIX futures contracts and other assets, if any, owned by a VIX Fund, including, but not limited to:

 

    Prevailing market prices and forward volatility levels of the U.S. stock markets, the S&P 500, the equity securities included in the S&P 500 and prevailing market prices of options on the S&P 500, the VIX, options on the VIX, the relevant VIX futures contracts, or any other financial instruments related to the S&P 500 and the VIX or VIX futures contracts;

 

    Interest rates;

 

    Inflation rates and investors’ expectations concerning inflation rates;

 

    Economic, financial, political, regulatory, geographical, biological or judicial events that affect the level of the Index or the market price or forward volatility of the U.S. stock markets, the equity securities included in the S&P 500, the S&P 500, the VIX or the relevant futures or option contracts on the VIX;

 

    Supply and demand as well as hedging activities in the listed and OTC equity derivatives markets;

 

    Disruptions in trading of the S&P 500, futures contracts on the S&P 500 or options on the S&P 500; and

 

    The level of contango or backwardation in the VIX futures contracts market.

These factors interrelate in complex ways, and the effect of one factor on the market value of a Fund may offset or enhance the effect of another factor. In addition, the impact of changes in the level of a commodity index or the value of a commodity or currency will affect investors differently depending upon the Managed Futures Fund, Commodity Index Fund, Commodity Fund, Currency Fund or VIX Fund in which an investor invests. Daily increases in the level of a commodity index or a VIX futures index or the value of a commodity or currency will negatively impact the daily performance of Shares of the Short and UltraShort Commodity Index, Commodity, Currency or VIX Funds.

The Managed Futures Fund and the Commodity Index Funds are linked to indexes comprised of commodity futures contracts and/or financial futures contracts, and are not directly linked to the “spot” prices of the underlying physical commodities or financial assets. Futures contracts may perform very differently from the spot price of the underlying physical commodities or financial assets.

The Managed Futures Fund and each Commodity Index Fund are designed to correspond (before fees and expenses) to the performance of, or a multiple or an inverse multiple of, the daily performance of its applicable benchmark, which is intended to reflect the performance of the prices of futures contracts on certain physical commodities and/or financial assets. The Managed Futures Fund and the Commodity Index Funds are not directly linked to the “spot” price of the physical commodities. While prices of swaps, futures contracts and other derivatives contracts are, as a rule, related to the prices of an underlying cash market, they are not perfectly correlated and often can perform very differently. It is possible that during certain time periods, the performance of different derivatives contracts may be substantially lower or higher than cash market prices for the underlying commodity or financial asset due to differences in derivatives contract terms or as supply, demand or other economic or regulatory factors become more pronounced in either the cash or derivatives markets. Depending upon the direction and level of the benchmark changes, the Funds may underperform or outperform a portfolio of cash market commodities or financial assets.

 

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Risks specific to ProShares UltraShort Euro, ProShares Short Euro and ProShares Ultra Euro

The European financial markets and the value of the euro have experienced significant volatility, in part related to unemployment, budget deficits and economic downturns. In addition, several member countries of the Economic and Monetary Union of the EU have experienced credit rating downgrades, rising government debt levels and, for certain EU member countries (including Greece, Spain, Portugal, Ireland and Italy), weaknesses in sovereign debt. These events, along with decreasing imports or exports, changes in governmental or EU regulations on trade, the default or threat of default by an EU member country on its sovereign debt and/or an economic recession in an EU member country may continue to cause prolonged volatility in euro-related investments.

In addition, given recent events, it is possible that the euro could be abandoned in the future by countries that have already adopted its use. If this were to occur, the value of the euro could fluctuate or decline drastically. Increased volatility related to the euro could exacerbate the effects of daily compounding on the performance of each of ProShares UltraShort Euro, ProShares Short Euro and ProShares Ultra Euro over periods longer than a single day. If the euro is abandoned by all countries that have adopted its use, the Fund may be forced to switch benchmarks or liquidate.

Risks Specific to the VIX Funds

In addition to the risks described elsewhere in this “Risk Factors” section, the following risks apply to the VIX Funds.

The VIX Funds are benchmarked to a VIX Futures Index. They are not benchmarked to the VIX or actual realized volatility of the S&P 500.

The level of each VIX Futures Index is based on the value of the relevant VIX futures contracts based on the Chicago Board Options Exchange, Incorporated Volatility Index (the “VIX”) comprising the applicable VIX Futures Index. Each VIX Fund is benchmarked to its respective VIX Futures Index. The VIX Funds are not linked to the VIX (which is a measure of implied volatility of the S&P 500 over the next 30 days derived from option prices), to realized volatility of the S&P 500 or to the options that underlie the VIX calculation. Each VIX Fund should be expected to perform very differently from the VIX over all periods of time. In many cases, the VIX Futures Indexes will significantly underperform the VIX.

VIX futures contracts are not directly based on a tradable underlying asset.

The VIX is not directly investable. The settlement price at maturity of VIX futures contracts are based on the calculation that determines the level of the VIX. As a result, the behavior of the VIX futures contracts may be different from traditional futures contracts whose settlement price is based on a specific tradable asset.

The level of the VIX has historically reverted to a long-term mean level and is subject to the risk associated with reversion to its mean. Accordingly, investors should not expect the VIX Funds to retain any appreciation in value over extended periods of time.

In the past, the level of the VIX has typically reverted over the longer term to a historical mean, and its absolute level has been constrained within a band. As such, the potential upside of long or short exposure to VIX futures contracts may be limited, and any gains may be subject to sharp reversals during such reversions to the mean.

When economic uncertainty increases and there is an associated increase in expected volatility, the value of VIX futures contracts will likely also increase and the potential upside of an investment in a VIX Short Fund will correspondingly be limited as a result. Similarly, when economic uncertainty recedes, and there is an associated decrease in expected volatility, the value of VIX futures contracts will likely also decrease and the potential upside of an investment in a VIX Ultra Fund or a Matching VIX Fund will correspondingly be limited as a result.

 

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Risks Related to All Funds

Correlation Risks for all Funds.

While the Funds seek to meet their investment objectives, there is no guarantee they will do so. Factors that may affect a Fund’s ability to meet its investment objective include: (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 the Financial Instruments held by a Fund and the performance of the applicable benchmark; (3) bid-ask spreads on such Financial Instruments; (4) fees, expenses, transaction costs, financing costs associated with the use of Financial Instruments and commission costs; (5) holding Financial 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 methodologies; (7) changes to a benchmark 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; (10) accounting standards; and (11) differences caused by a Fund obtaining exposure to only a representative sample of the components of a benchmark, overweighting or underweighting certain components of a benchmark or obtaining exposure to assets that are not included in a benchmark.

Being materially over- or under-exposed to its benchmark may prevent such Funds from achieving a high degree of correlation with their applicable underlying benchmark. Market disruptions or closures, large movements of assets into or out of a Fund, regulatory restrictions or extreme market volatility will adversely affect such Fund’s ability to maintain a high degree of correlation. The number of components included in the applicable benchmark index across which a Fund needs to allocate, and the frequency at which it rebalances its portfolio (and related costs), may also impact correlation.

Each Fund seeks to provide investment results that correspond (before fees and expenses) to the performance of, or a multiple of, the inverse or an inverse multiple the daily performance of a benchmark at all times, even during periods when the applicable benchmark is flat as well as when the benchmark is moving in a manner which causes the Fund’s NAV to decline, thereby causing losses to such Fund.

Other than for cash management purposes, the Funds are not actively managed by traditional methods (e.g., by effecting changes in the composition of a portfolio on the basis of judgments relating to economic, financial and market considerations with a view toward obtaining positive results under all market conditions). Rather, the sponsor seeks to cause the NAV to track the daily performance of a benchmark in accordance with each Fund’s investment objective, even during periods in which the benchmark is flat or moving in a manner which causes the NAV of a Fund to decline. It is possible to lose money over time regardless of the performance of an underlying benchmark, due to the effects of daily rebalancing, volatility and compounding, as applicable (see “Correlation Risks Specific to the Geared Funds” in this Annual Report on Form 10-K for additional details).

The assets that the Funds invest in can be highly volatile and the Funds may experience large losses when buying, selling or holding such instruments.

Investments linked to volatility, commodity, currency or fixed income markets can be highly volatile compared to investments in traditional securities and the Funds may experience large losses. The value of these investments may be affected by changes in overall market movements, commodity or currency benchmarks (as the case may be), volatility, changes in interest rates, changes in inflation rates and investors’ expectations concerning inflation rates or factors affecting a particular industry, commodity or currency. For example, commodity futures contracts (as may be held by the Managed Futures Fund or the Commodity Index Funds) may be affected by numerous factors, including drought, floods, fires, weather, livestock diseases, pipeline ruptures or spills, embargoes, tariffs and international, economic, political or regulatory developments. In particular, trading in VIX futures contracts and trading in natural gas futures contracts (or other Financial Instruments linked to natural gas) have been very volatile and can be expected to be very volatile in the future. High volatility may have an adverse impact on the Funds beyond the impact of any performance-based losses of the underlying benchmark.

Potential negative impact from rolling futures positions.

Certain of the Funds invest in or have exposure to futures contracts and are subject to risks related to rolling. The contractual obligations of a buyer or seller holding a futures contract to expiration may generally be satisfied by settling in cash as designated in the contract specifications. Alternatively, futures contracts may be closed out prior

 

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to expiration by making an offsetting sale or purchase of an identical futures contract on the same or linked exchange before the designated date of settlement. Once this date is reached, the futures contract “expires.” As the futures contracts held by a Fund near expiration, they are generally closed out and replaced by contracts with a later expiration. This process is referred to as “rolling.” The Funds do not intend to hold futures contracts through expiration, but instead to “roll” their respective positions.

When the market for these contracts is such that the prices are higher in the more distant delivery months than in the nearer delivery months, the sale during the course of the “rolling process” of the more nearby contract would take place at a price that is lower than the price of the more distant contract. This pattern of higher futures prices for longer expiration futures contracts is often referred to as “contango.” Alternatively, when the market for these contracts is such that the prices are higher in the nearer months than in the more distant months, the sale during the course of the “rolling process” of the more nearby contract would take place at a price that is higher than the price of the more distant contract. This pattern of higher futures prices for shorter expiration futures contracts is referred to as “backwardation.”

The presence of contango in certain futures contracts at the time of rolling would be expected to adversely affect the relevant Funds with long positions, and positively affect the Funds with short positions. Similarly, the presence of backwardation in certain futures contracts at the time of rolling such contracts would be expected to adversely affect the Funds with short positions and positively affect the Funds with long positions.

There have been extended periods in which contango or backwardation has existed in the futures contract markets for various types of futures contracts, and such periods can be expected to occur in the future. These extended periods have in the past and can in the future cause significant losses for the Funds, and the periods can have as much or more impact over time than movements in the level of a Fund’s benchmark.

The Commodity Funds do not invest in bullion itself as certain other exchange-traded products do. Rather, the Commodity Funds use Financial Instruments to gain exposure to these precious metals. Not investing directly in bullion may introduce additional tracking error and these Commodity Funds are subject to the effects of contango and backwardation described above.

Using Financial Instruments such as forwards and futures in an effort to replicate the performance (or inverse performance) of gold and silver bullion may introduce tracking error to the performance of the Commodity Funds. While prices of Financial Instruments are, as a rule, related to the prices of an underlying cash market, they are not perfectly correlated. In addition, the use of Financial Instruments causes the need to roll futures or forward contracts as described above and the resulting possibility that contango or backwardation can occur Gold and silver historically exhibit contango markets during most periods. The existence of historically prevalent contango markets would be expected to adversely impact the Ultra Funds. Alternatively, the existence of historically prevalent backwardated markets would be expected to adversely impact the Ultra Funds.

Credit and liquidity risks associated with collateralized repurchase agreements.

A portion of each Fund’s assets may be 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 and collateralized repurchase agreements). These securities may be used for direct investment or serve as collateral for such Fund’s trading in Financial Instruments, as applicable, and may include collateralized repurchase agreements. Collateralized repurchase agreements involve an agreement to purchase a security and to sell that security back to the original seller at an agreed-upon price. The resale price reflects the purchase price plus an agreed-upon incremental amount which is unrelated to the coupon rate or maturity of the purchased security. As protection against the risk that the original seller will not fulfill its obligation, the buyer receives collateral marked-to-market daily, and maintained at a value at least equal to the sale price plus the accrued incremental amount. Although the collateralized repurchase agreements that the Funds enter into require that counterparties (which act as original sellers) over-collateralize the amount owed to a Fund with U.S. Treasury securities and/or agency securities, there is a risk that such collateral could decline in price at the same time that the counterparty defaults on its obligation to repurchase the security. If this occurs, a Fund may incur losses or delays in receiving proceeds. To minimize these risks, the Funds typically enter into transactions only with major global financial institutions.

 

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Possible illiquid markets may exacerbate losses.

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.

It may not be possible to gain exposure to the benchmarks using exchange-traded Financial Instruments in the future.

The Funds may utilize exchange-traded Financial Instruments. It may not be possible to gain exposure to the benchmarks with these Financial Instruments in the future. If these Financial Instruments cease to be traded on regulated exchanges, they may be replaced with Financial Instruments traded on trading facilities that are subject to lesser degrees of regulation or, in some cases, no substantive regulation. As a result, trading in such Financial Instruments, and the manner in which prices and volumes are reported by the relevant trading facilities, may not be subject to the provisions of, and the protections afforded by, the Commodity Exchange Act (the “CEA”), or other applicable statutes and related regulations, that govern trading on regulated U.S. futures exchanges, or similar statutes and regulations that govern trading on regulated U.K. futures exchanges. In addition, many electronic trading facilities have only recently initiated trading and do not have significant trading histories. As a result, the trading of contracts on such facilities, and the inclusion of such contracts in a benchmark, may be subject to certain risks not presented by U.S. or U.K. exchange-traded futures contracts, including risks related to the liquidity and price histories of the relevant contracts.

Fees are charged regardless of a Fund’s returns and may result in depletion of assets.

The Funds are subject to the fees and expenses described herein which are payable irrespective of a Fund’s returns, as well as the effects of commissions, trading spreads, and embedded financing, borrowing costs and fees associated with applicable swaps, forwards, futures contracts, and costs relating to the purchase of U.S. Treasury securities or similar high credit quality, short-term fixed-income or similar securities. Additional charges may include other fees as applicable.

For the Funds linked to an index, changes implemented by the index provider or the CBOE that affect the composition and valuation of the index could adversely affect the value of an investment in a Fund’s Shares.

The VIX Fund, the Managed Futures Fund and the Commodity Index Funds are linked to indexes maintained by an index provider, either Standard & Poor’s (“S&P”) or Bloomberg, as applicable, each of which is unaffiliated with the Funds or the Sponsor. The policies implemented by each index provider concerning the calculation of the level of an index or the composition of an index could affect the level of an index and, therefore, the value of the corresponding Fund’s Shares. An index provider may change the composition of the indexes, or make other methodological changes that could change the level of an index. Additionally, an index provider may alter, discontinue or suspend calculation or dissemination of an index. Any of these actions could adversely affect the value of Shares of a Fund using that index as a benchmark. An index provider has no obligation to consider Fund shareholder interests in calculating or revising an index. In addition, for the VIX Fund, the CBOE can make methodological changes to the calculation of the VIX that could affect the value of VIX futures contracts and, consequently, the value of the VIX Fund’s Shares. There can be no assurance that the CBOE will not change the VIX calculation methodology in a way which may affect the value of the VIX Fund’s Shares. The CBOE may also alter, discontinue or suspend calculation or dissemination of the VIX and/or exercise settlement value. Any of these actions could adversely affect the value of such Fund’s Shares.

Calculation of an index may not be possible or feasible under certain events or circumstances that are beyond the reasonable control of the Sponsor, which in turn may adversely impact both the index and/or the Shares, as applicable. Additionally, index calculations may be disrupted by rollover disruptions, rebalancing disruptions and/or market emergencies, which may have an adverse effect on the value of the Shares.

 

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The Funds may be subject to counterparty risks.

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 or in other swap agreements or forward contracts if such instruments tend to exhibit trading prices or returns that correlate with its benchmark or a component of the benchmark and will further the investment objective of the Fund. Each of the other Funds may invest in swap agreements (for the Managed Futures Fund, the VIX Funds and the Natural Gas Funds) or forward contracts (for the other Currency Funds: ProShares Short Euro, and ProShares UltraShort Australian Dollar) 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 such Fund from obtaining the appropriate amount of investment exposure to the affected futures contract or certain other futures contracts. Although unlikely, the Funds, under these circumstances, could have 100% exposure to swap agreements or forward contracts, as applicable.

Swap agreements and forward contracts are generally traded in over-the–counter markets and have only recently become subject to regulation by the by the Commodity Futures Trading Commission (the “CFTC”). CFTC rules, however, do not cover all types of swap agreements and forward contracts. Investors, therefore, may 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.

The Funds will be subject to credit risk with respect to the counterparties to the derivatives contracts (whether a clearing corporation in the case of cleared instruments or another third party in the case of OTC uncleared instruments). Unlike in futures contracts, the counterparty to uncleared 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 increased credit risk with respect to the amount it expects to receive from counterparties to uncleared 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, subject to certain minimum thresholds; however there are no limitations on the percentage of its assets each Fund may invest in swap agreements or forward contracts with a particular counterparty. 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.

OTC swaps and forward contracts of the type that may be utilized by the Funds 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. 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. For example, 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. In addition, cleared derivatives transactions benefit from daily

 

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marking-to-market and settlement, and segregation and minimum capital requirements applicable to intermediaries. Transactions entered into directly between two counterparties generally do not benefit from such protections. This exposes the Funds to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions because of a dispute over the terms of the contract (whether or not bona fide) or because of a credit or liquidity problem, thus causing the Funds to suffer a loss.

As of December 31, 2015, the Funds’ approved counterparties for swap agreements and forward contracts are: Deutsche Bank AG, Citibank N.A., UBS AG, Goldman Sachs International and Société Générale. The Sponsor regularly reviews the performance of its counterparties for, among other things, creditworthiness and execution quality. In addition, the Sponsor periodically considers the addition of new counterparties. Thus, the list of counterparties noted above may change at any time. Each day, the Funds disclose their portfolio holdings as of the prior Business Day (as such term is defined in “Creation and Redemption of Shares-Creation Procedures” in Part I, Item 1 of this Annual Report on Form 10-K). Each Fund’s portfolio holdings identifies its counterparties, as applicable. This portfolio holdings information may be accessed through the web on the Sponsor’s website at www.ProShares.com.

More information about Deutsche Bank AG, including its current financial statements, may be found on the SEC’s EDGAR website under Central Index Key No (“CIK No.”) 0001159508 (for Deutsche Bank AG). More information about Citibank N.A., including its current financial statements, may also be found on the SEC’s EDGAR website under CIK No. 0000036684 (for Citibank N.A.). More information about UBS AG, including its current financial statements, may also be found on the SEC’s EDGAR website under CIK No. 0001114446 (for UBS AG). More information about Goldman Sachs International, a U.K. broker-dealer and subsidiary of The Goldman Sachs Group, Inc., may also be found on the SEC’s EDGAR website under CIK No. 0000886982 (for The Goldman Sachs Group, Inc.). The Goldman Sachs Group, Inc. consolidates the financial statements of each of its subsidiaries, including Goldman Sachs International, with its own. More information about Société Générale, a French public limited company, including its current financial statements as filed with the AMF (the French securities regulator), may be found on Société Générale’s website. Please note that the references to third-party websites have been provided solely for informational purposes. Neither the Funds nor the Sponsor endorses or is responsible for the content or information contained on any third-party website, including with respect to any financial statements. In addition, neither the Funds nor the Sponsor makes any warranty, express or implied or assumes any legal liability or responsibility for the accuracy, completeness or usefulness of any such information.

Each counterparty and/or any of its affiliates may be an Authorized Participant or shareholder of a Fund, subject to applicable law.

The counterparty risk for cleared derivatives transactions is generally lower than for uncleared OTC derivatives since generally a clearing organization becomes substituted for each counterparty to a cleared derivatives contract and, in effect, guarantees the parties’ performance under the contract as each party to a trade looks only to the clearing house for performance of financial obligations. However, there can be no assurance that the clearing house, or its members, will satisfy its obligations to the Fund.

Historical correlation trends between Fund benchmarks and other asset classes may not continue or may reverse, limiting or eliminating any potential diversification or other benefit from owning a Fund.

To the extent that an investor purchases a Fund seeking diversification benefits based on the historic correlation (whether positive or negative) between the returns of that Fund or its underlying benchmark and other asset classes, such historic correlation may not continue or may reverse itself. In this circumstance, the diversification or other benefits sought may be limited or nonexistent.

Investors cannot be assured of the Sponsor’s continued services, the discontinuance of which may be detrimental to the Funds.

Investors cannot be assured that the Sponsor will be able to continue to service the Funds for any length of time. If the Sponsor discontinues its activities on behalf of the Funds, the Funds may be adversely affected, as there may be no entity servicing the Funds for a period of time. If the Sponsor’s registrations with the CFTC or memberships in the NFA were revoked or suspended, the Sponsor would no longer be able to provide services and/or to render

 

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advice to the Funds. If the Sponsor were unable to provide services and/or advice to the Funds, the Funds would be unable to pursue their investment objectives unless and until the Sponsor’s ability to provide services and advice to the Funds was reinstated or a replacement for the Sponsor as commodity pool operator could be found. Such an event could result in termination of the Funds.

The lack of active trading markets for any of the Shares of the Funds may result in losses on investors’ investments at the time of disposition of such Shares.

Although the Shares of the Funds are publicly listed and traded on the applicable Exchange, there can be no guarantee that an active trading market for the Shares of any Fund will develop or be maintained. In this regard, if a Fund is not able to meet the continued listing standards of NYSE Arca and is delisted, there will not be an active trading market for such Fund’s Shares. If investors need to sell their Shares at a time when no active market for them exists, the price investors receive for their Shares, assuming that investors are able to sell them, likely will be lower than the price that investors would receive if an active market did exist. In addition, if there is no active trading market for the Shares of a Fund for an extended period of time, the Fund would likely be forced to liquidate.

A Fund may terminate and liquidate at a time that is disadvantageous to shareholders.

If a Fund lacks the demand necessary to remain open, then the Fund will likely be terminated and liquidated. For example, the ProShares Ultra Australian Dollar Fund was terminated and liquidated in June 2015 because it lacked the demand necessary to remain open. Termination and liquidation of a Fund could occur at a time that is disadvantageous to shareholders. When the Fund’s assets are sold as part of the Fund’s liquidation, the resulting proceeds distributed to shareholders may be less than those that may be realized in a sale outside of a liquidation context.

Investors may be adversely affected by redemption or creation orders that are subject to postponement, suspension or rejection under certain circumstances.

A Fund may, in its discretion, suspend the right of creation or redemption or may postpone the redemption or purchase settlement date, for (1) any period during which the NYSE Arca, NYSE, Chicago Mercantile Exchange (including the Chicago Board of Trade and the New York Mercantile Exchange), the Intercontinental Exchange, CBOE, CFE or any other exchange, marketplace or trading center, deemed to affect the normal operations of the Funds, is closed, or when trading is restricted or suspended or restricted on such exchanges in any of the Funds’ futures contracts, (2) any period during which an emergency exists as a result of which the fulfillment of a purchase order or the redemption distribution is not reasonably practicable, or (3) such other period as the Sponsor determines to be necessary for the protection of the shareholders of the Funds. In addition, a Fund will reject a redemption order if the order is not in proper form as described in the Authorized Participant Agreement or if the fulfillment of the order might be unlawful. Any such postponement, suspension or rejection could adversely affect a redeeming Authorized Participant. For example, the resulting delay may adversely affect the value of the Authorized Participant’s redemption proceeds if the NAV of the Funds decline during the period of delay. The Funds disclaim any liability for any loss or damage that may result from any such suspension or postponement. Suspension of creation privileges may adversely impact how the Shares are traded and arbitraged on the applicable Exchange, which could cause them to trade at levels materially different (premiums and discounts) from the fair value of their underlying holdings.

The NAV may not always correspond to market price and, as a result, investors may be adversely affected by the creation or redemption of Creation Units at a value that differs from the market price of the Shares.

The NAV per Share of a Fund changes as fluctuations occur in the market value of a Fund’s portfolio. Investors should be aware the public trading price per Share of a Fund may be different from the NAV per Share of the Fund (i.e., the secondary market price may trade at a premium or discount to NAV). Consequently, an Authorized Participant may be able to create or redeem a Creation Unit of a Fund at a discount or a premium to the public trading price per Share of that Fund.

 

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Authorized Participants or their clients or customers may have an opportunity to realize a profit if they can purchase a Creation Unit at a discount to the public trading price of the Shares of a Fund or can redeem a Creation Unit at a premium over the public trading price of the Shares of a Fund. The Sponsor expects that the exploitation of such arbitrage opportunities by Authorized Participants and their clients and customers will tend to cause the public trading price to track the NAV per Share of the Funds closely over time.

The value of a Share may be influenced by non-concurrent trading hours between the applicable Exchange and the market in which the Financial Instruments (or related reference assets) held by a Fund are traded. The Shares of each Fund trade on the applicable Exchange, from 9:30 a.m. to 4:00 p.m. (Eastern Time). The Financial Instruments (and/or the related reference assets) held by a particular Fund, however, may have different fixing or settlement times. Consequently, liquidity in the Financial Instruments (and/or the reference assets) may be reduced after such fixing or settlement time. As a result, during the time when the applicable Exchange is open but after the applicable fixing or settlement time of an underlying component, trading spreads and the resulting premium or discount on the Shares of a Fund may widen, and, therefore, may increase the difference between the price of the Shares of a Fund and the NAV of such Shares. Furthermore, the NAVs for certain Funds are determined prior to the close of the applicable Exchange, and the NAVs for certain Funds are determined at 4:15 p.m. (Eastern Time) after the close of its applicable Exchange. Consequently, for those Funds, the closing market price per Share may differ from the NAV per Share at the end of each day. Also, during the time when the Exchange is open but the Fund’s NAV has already been determined (or, in the case of a VIX Fund, closed but before the determination of its NAV), there could be market developments or other events that cause or exacerbate the difference between the price of the Shares of such Funds and the NAV of such Shares.

The number of underlying components included in a Fund’s benchmark may impact volatility, which could adversely affect an investment in the Shares.

The number of underlying components in a Fund’s benchmark may also impact volatility, which could adversely affect an investment in the Shares. For example, each of the indexes for the Commodity Index Funds is concentrated in terms of the number and type of commodities represented, and some of the subindexes are solely concentrated in a single commodity futures contract. In addition, the benchmarks for the Currency Funds are concentrated solely on a single currency and the benchmarks for the VIX Funds are concentrated solely in VIX futures contracts. Investors should be aware that other benchmarks are more diversified in terms of both the number and variety of investments included. Concentration in fewer underlying components may result in a greater degree of volatility in a benchmark and the NAV of the Fund which corresponds to that benchmark under specific market conditions and over time.

Trading on exchanges outside the United States is generally not subject to U.S. regulation and may result in different or diminished investor protections.

Some of the Funds’ trading may be conducted on exchanges outside the United States. Trading on such exchanges is generally not regulated by any U.S. governmental agency and may involve certain risks not applicable to trading on U.S. exchanges, including different or diminished investor protections. In trading contracts denominated in currencies other than U.S. dollars, the Shares are subject to the risk of adverse exchange rate movements between the dollar and the functional currencies of such contracts. Investors could incur substantial losses from trading on foreign exchanges which such investors would not have otherwise been subject had the Funds’ trading been limited to U.S. markets.

Competing claims of intellectual property rights may adversely affect the Funds and an investment in the Shares.

Although the Sponsor does not anticipate that such claims will adversely impact the Funds, it is impossible to provide definite assurances that no such negative impact will occur. The Sponsor believes that it has properly licensed or obtained the appropriate consent of all necessary parties with respect to intellectual property rights. However, other third parties could allege ownership as to such rights and may bring an action in asserting their claims. To the extent any action is brought by a third party asserting such rights, the expenses in litigating, negotiating, cross-licensing or otherwise settling such claims may adversely affect the Funds.

 

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Investors may be adversely affected by an overstatement or understatement of the NAV calculation of the Funds due to the valuation method employed on the date of the NAV calculation.

Calculating the NAV of the Funds includes, in part, any unrealized profits or losses on open Financial Instrument positions. Under normal circumstances, the NAV of a Fund reflects the value of the Financial Instruments held by a Fund, as of the time the NAV is calculated. However, if any of the Financial Instruments held by a Fund could not be purchased or sold on a day when a Fund is accepting creation and redemption orders (due to the operation of daily limits or other rules of an exchange or otherwise), a Fund may be improperly exposed which could cause it to fail to meet its stated investment objective. Alternatively, a Fund may attempt to calculate the fair value of such Financial Instruments. In such a situation, there is a risk that the calculation of the relevant benchmark, and therefore, the NAV of the applicable Fund on such day, may not accurately reflect the realizable market value of the Financial Instruments underlying such benchmark.

The liquidity of the Shares may also be affected by the withdrawal from participation of Authorized Participants, which could adversely affect the market price of the Shares.

In the event that one or more Authorized Participants which have substantial interests in the Shares withdraw from participation, the liquidity of the Shares will likely decrease, which could adversely affect the market price of the Shares and result in investors incurring a loss on their investment.

Shareholders that are not Authorized Participants may only purchase or sell their Shares in secondary trading markets, and the conditions associated with trading in secondary markets may adversely affect investors’ investment in the Shares.

Only Authorized Participants may create or redeem Creation Units. All other investors that desire to purchase or sell Shares must do so through the NYSE Arca or in other markets, if any, in which the Shares may be traded. Shares may trade at a premium or discount to NAV per Share.

The applicable Exchange may halt trading in the Shares of a Fund which would adversely impact investors’ ability to sell Shares.

Trading in Shares of a Fund may be halted due to market conditions or, in light of the applicable Exchange rules and procedures, for reasons that, in the view of the applicable Exchange, make trading in Shares of a Fund inadvisable. In addition, trading is subject to trading halts caused by extraordinary market volatility pursuant to “circuit breaker” rules that require trading to be halted for a specified period based on a specified decline or rise in a market index (e.g., the Dow Jones Industrial Average) or in the price of a Fund’s Shares. Additionally, the ability to short sell a Fund’s Shares may be restricted when there is a 10% or greater change from the previous day’s official closing price. There can be no assurance that the requirements necessary to maintain the listing of the Shares of a Fund will continue to be met or will remain unchanged.

Shareholders do not have the protections associated with ownership of shares in an investment company registered under the 1940 Act.

None of the Funds are subject to registration or regulation under the 1940 Act. Consequently, shareholders do not have the regulatory protections provided to investors in investment companies.

Shareholders do not have the rights enjoyed by investors in certain other vehicles and may be adversely affected by a lack of statutory rights and by limited voting and distribution rights.

The Shares have limited voting and distribution rights. For example, shareholders do not have the right to elect directors, the Funds may enact splits or reverse splits without shareholder approval and the Funds are not required to pay regular distributions, although the Funds may pay distributions at the discretion of the Sponsor.

The value of the Shares will be adversely affected if the Funds are required to indemnify the Trustee.

Under the Amended and Restated Trust Agreement of the Trust, as may be further amended and restated from time to time (the “Trust Agreement”), the Trustee has the right to be indemnified for any liability or expense incurred without gross negligence or willful misconduct. That means the Sponsor may require the assets of a Fund to be sold in order to cover losses or liability suffered by it or by the Trustee. Any sale of that kind would reduce the NAV of one or more of the Funds.

 

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Although the Shares of the Funds are limited liability investments, certain circumstances such as bankruptcy of a Fund will increase a shareholder’s liability.

The Shares of the Funds are limited liability investments; investors may not lose more than the amount that they invest plus any profits recognized on their investment. However, shareholders could be required, as a matter of bankruptcy law, to return to the estate of a Fund any distribution they received at a time when such Fund was in fact insolvent or in violation of the Trust Agreement.

Failure of the FCMs to segregate assets may increase losses in the Funds.

The CEA requires a clearing broker to segregate all funds received from customers from such broker’s proprietary assets. There is a risk that assets deposited by the Sponsor on behalf of the Funds as margin with the FCMs may, in certain circumstances, be used to satisfy losses of other clients of the FCMs. If an FCM fails to segregate the funds received from the Sponsor, the assets of the Funds might not be fully protected in the event of the FCM’s bankruptcy. Furthermore, in the event of an FCM’s bankruptcy, Fund Shares could be limited to recovering only a pro rata share of all available funds segregated on behalf of the FCM’s combined customer accounts, even though certain property specifically traceable to a particular Fund was held by the FCM. Each FCM may, from time to time, be the subject of certain regulatory and private causes of action.

Similarly, the CEA requires a clearing organization approved by the CFTC as a derivatives clearing organization to segregate all funds and other property received from a clearing member’s clients in connection with domestic futures and options contracts from any funds held at the clearing organization to support the clearing member’s proprietary trading. Nevertheless, customer funds held at a clearing organization in connection with any futures or options contracts may be held in a commingled omnibus account, which may not identify the name of the clearing member’s individual customers. With respect to futures and options contracts, a clearing organization may use assets of a non-defaulting customer held in an omnibus account at the clearing organization to satisfy payment obligations of a defaulting customer of the clearing member to the clearing organization. As a result, in the event of a default of the clearing FCM’s other clients or the clearing FCM’s failure to extend its own funds in connection with any such default, a Fund may not be able to recover the full amount of assets deposited by the clearing FCM on behalf of the Fund with the clearing organization.

In the event of a bankruptcy or insolvency of any exchange or a clearing house, a Fund could experience a loss of the funds deposited through its FCM as margin with the exchange or clearing house, a loss of any profits on its open positions on the exchange, and the loss of unrealized profits on its closed positions on the exchange.

A court could potentially conclude that the assets and liabilities of one Fund are not segregated from those of another Fund and may thereby potentially expose assets in a Fund to the liabilities of another Fund.

Each Fund is a separate series of a Delaware statutory trust and not itself a separate legal entity. Section 3804(a) of the Delaware Statutory Trust Act, as amended (the “DSTA”) provides that if certain provisions are in the formation and governing documents of a statutory trust organized in series, and if separate and distinct records are maintained for any series and the assets associated with that series are held in separate and distinct records (directly or indirectly, including through a nominee or otherwise) and accounted for in such separate and distinct records separately from the other assets of the statutory trust, or any series thereof, then the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular series are enforceable against the assets of such series only, and not against the assets of the statutory trust generally or any other series thereof, and none of the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the statutory trust generally or any other series thereof shall be enforceable against the assets of such series. The Sponsor is not aware of any court case that has interpreted Section 3804(a) of the DSTA or provided any guidance as to what is required for compliance. The Sponsor maintains separate and distinct records for each Fund and accounts for them separately, but it is possible a court could conclude that the methods used did not satisfy Section 3804(a) of the DSTA and thus potentially expose assets in a Fund to the liabilities of another Fund.

 

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There may be circumstances that could prevent a Fund from being operated in a manner consistent with its investment objective and principal investment strategies.

There may be circumstances outside the control of the Sponsor and/or a Fund that make it, for all practical purposes, impossible to re-position such Fund and/or to process a purchase or redemption order. Examples of such circumstances include: natural disasters; public service disruptions or utility problems such as those caused by fires, floods, extreme weather conditions, and power outages resulting in telephone, telecopy, and computer failures; market conditions or activities causing trading halts; systems failures involving computer or other information systems affecting the aforementioned parties, as well as the Depository Trust Company (“DTC”), the National Securities Clearing Corporation (“NSCC”), or any other participant in the purchase process; and similar extraordinary events. Accordingly, while the Sponsor has implemented and tested a business continuity plan that transfers functions of any disrupted facility to another location and has effected a disaster recovery plan, circumstances, such as those above, may prevent a Fund from being operated in a manner consistent with its investment objective and/or principal investment strategies.

Due to the increased use of technologies, intentional and unintentional cyber attacks pose operational and information security risks.

With the increased use of technologies such as the Internet and the dependence on computer systems to perform necessary business functions, the Funds are susceptible to operational and information security risks. In general, cyber incidents can result from deliberate attacks or unintentional events. Cyber attacks include, but are not limited to gaining unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. Cyber attacks may also be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on websites. Cyber security failures or breaches of a Fund’s third party service provider (including, but not limited to, index providers, the administrator and transfer agent) or the issuers of securities in which the Funds invest, have the ability to cause disruptions and impact business operations, potentially resulting in financial losses, the inability of Fund shareholders to transact business, violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs. In addition, substantial costs may be incurred in order to prevent any cyber incidents in the future. The Funds and their shareholders could be negatively impacted as a result. While the Funds have established business continuity plans and systems to prevent such cyber attacks, there are inherent limitations in such plans and systems including the possibility that certain risks have not been identified. Furthermore, the Funds cannot control the cyber security plans and systems put in place by issuers in which the Funds invest.

Shareholders’ tax liability will exceed cash distributions on the Shares.

Shareholders of each Fund are subject to U.S. federal income taxation and, in some cases, state, local, or foreign income taxation on their share of the Fund’s taxable income, whether or not they receive cash distributions from the Fund. Each Fund does not currently expect to make distributions with respect to capital gains or ordinary income.

Accordingly, shareholders of a Fund will not receive cash distributions equal to their share of the Fund’s taxable income or the tax liability that results from such income. A Fund’s income, gains, losses and deductions are allocated to shareholders on a monthly basis. If you own Shares in a Fund at the beginning of a month and sell them during the month, you are generally still considered a shareholder through the end of that month.

The U.S. Internal Revenue Service (“IRS”) could adjust or reallocate items of income, gain, deduction, loss and credit with respect to the Shares if the IRS does not accept the assumptions or conventions utilized by the Fund.

U.S. federal income tax rules applicable to partnerships, which each Fund is anticipated to be treated as under the Internal Revenue Code of 1986, as amended (the “Code”), are complex and their application is not always clear. Moreover, the rules generally were not written for, and in some respects are difficult to apply to, publicly traded interests in partnerships. The Funds apply certain assumptions and conventions intended to comply with the intent of the rules and to report income, gain, deduction, loss and credit to shareholders in a manner that reflects the shareholders’ economic gains and losses, but these assumptions and conventions may not comply with all aspects of the applicable regulations. It is possible therefore that the IRS will successfully assert that these assumptions or conventions do not satisfy the technical requirements of the Code or the Treasury regulations promulgated thereunder and will require that items of income, gain, deduction, loss and credit be adjusted or reallocated in a manner that could be adverse to investors.

Shareholders will receive partner information tax returns on Schedule K-1, which could increase the complexity of tax returns.

The partner information tax returns on Schedule K-1 which the Funds will distribute to shareholders will contain information regarding the income items and expense items of the Funds. If you have not received Schedule K-1s from other investments, you may find that preparing your tax return may require additional time, or it may be necessary for you to retain an accountant or other tax preparer, at an additional expense to you, to assist you in the preparation of your return.

Investors could be adversely affected if the current treatment of long-term capital gains under current U.S. federal income tax law is changed or repealed in the future.

Under current law, long-term capital gains are taxed to non-corporate investors at a maximum U.S. federal income tax rate of 20%. This tax treatment may be adversely affected, changed or repealed by future changes in tax laws at any time.

 

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Shareholders of each Fund may recognize significant amounts of ordinary income and short-term capital gain.

Due to the investment strategy of the Funds, the Funds may realize and pass-through to Shareholders significant amounts of ordinary income and short-term capital gains as opposed to long-term capital gains, which generally are taxed at a preferential rate. A Fund’s income, gains, losses and deductions are allocated to shareholders on a monthly basis. If you own shares in a Fund at the beginning of a month and sell them during the month, you are generally still considered a shareholder through the end of that month.

INVESTORS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISERS AND COUNSEL WITH RESPECT TO THE POSSIBLE TAX CONSEQUENCES TO THEM OF AN INVESTMENT IN THE SHARES OF A FUND; SUCH TAX CONSEQUENCES MAY DIFFER IN RESPECT OF DIFFERENT INVESTORS.

Regulatory changes or actions, including the implementation of new legislation, may alter the operations and profitability of the Funds.

The U.S. derivatives markets and market participants have been subject to comprehensive regulation, not only by the CFTC but also by self-regulatory organizations, including the NFA and the exchanges on which the derivatives contracts are traded and/or cleared. As with any regulated activity, changes in regulations may have unexpected results. For example, changes in the amount or quality of the collateral that traders in derivatives contracts are required to provide to secure their open positions, or in the limits on number or size of positions that a trader may have open at a given time, may adversely affect the ability of the Funds to enter into certain transactions that could otherwise present lucrative opportunities. Considerable regulatory attention has been focused on non-traditional investment pools which are publicly distributed in the United States. There is a possibility of future regulatory changes altering, perhaps to a material extent, the nature of an investment in the Funds or the ability of the Funds to continue to implement their investment strategies.

In addition, the SEC, CFTC and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including, for example, the retroactive implementation of speculative position limits or higher margin requirements, the establishment of daily price limits and the suspension of trading. The regulation of swaps, forwards and futures transactions in the United States is a rapidly changing area of law and is subject to modification by government and judicial action. The effect of any future regulatory change on the Funds is impossible to predict, but could be substantial and adverse.

In particular, the Dodd-Frank Act was signed into law on July 21, 2010. The Dodd-Frank Act has made and will continue to make sweeping changes to the way in which the U.S. financial system is supervised and regulated. Title VII of the Dodd-Frank Act sets forth a new legislative framework for OTC derivatives, including certain Financial Instruments, such as swaps, in which certain of the Funds may invest. Title VII of the Dodd-Frank Act makes broad changes to the OTC derivatives market, grants significant new authority to the SEC and the CFTC to regulate OTC derivatives and market participants, and will require clearing and exchange trading of many OTC derivatives transactions.

Provisions in the Dodd-Frank Act include the requirement that position limits on commodity futures contracts be established; new registration, recordkeeping, capital and margin requirements for “swap dealers” and “major swap participants” as determined by the Dodd-Frank Act and applicable regulations; and the mandatory use of clearinghouse mechanisms for many OTC derivatives transactions.

The CFTC, the SEC and other federal regulators have been tasked with developing the rules and regulations enacting the provisions of the Dodd-Frank Act. While certain regulations have been promulgated and are already in effect, the full impact of the Dodd-Frank Act on any of the Funds remains uncertain. The legislation and the related regulations that have been and may be promulgated in the future may negatively impact a Fund’s ability to meet its investment objective either through limits on its investments or requirements imposed on it or any of its counterparties. In particular, new requirements, including capital requirements and mandatory clearing of OTC derivatives transactions, which may increase derivative counterparties’ costs and are expected to generally be passed through to other market participants in the form of higher upfront and mark-to-market margin, less favorable trade pricing, and the imposition of new or increased fees, including clearinghouse account maintenance fees, may increase the cost of a Fund’s investments and the cost of doing business, which could adversely affect investors.

 

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Regulatory and exchange accountability levels may restrict the creation of Creation Units and the operation of the Trust.

Many U.S. commodities exchanges and boards of trade limit the amount of fluctuation permitted in futures contract prices during a single trading day by regulations referred to as “daily price fluctuation limits” or “daily limits.” Once the daily limit has been reached in a particular contract, no trades may be made that day at a price beyond that limit or trading may be suspended for specified periods during the trading day. In addition, the CFTC, U.S. futures exchanges and certain non-U.S. exchanges have established limits referred to as “speculative position limits” or “accountability levels” on the maximum net long or short futures positions that any person may hold or control in derivatives traded on such exchanges.

In connection with these limits, the Dodd-Frank Act has required the CFTC to adopt regulations establishing speculative position limits applicable to regulated futures and OTC derivatives and impose aggregate speculative position limits across regulated U.S. futures, OTC positions and certain futures contracts traded on non-U.S. exchanges.

On November 5, 2013, the CFTC re-proposed regulations on position limits with respect to the 28 physical delivery commodity futures and options contracts, as well as to swaps that are economically equivalent to such contracts. The proposed position limits would apply with respect to contracts traded on all U.S. and certain foreign exchanges on an aggregate basis. In addition, the CFTC proposed amendments to the requirement of U.S. commodities exchanges to establish corresponding speculative position limits. Under the proposed CFTC regulations, all accounts owned or managed by an entity that is responsible for such accounts’ trading decisions, their principals and their affiliates would be combined for position limit purposes. Although it is unclear what future position limit rules will be, the Sponsor is subject to current position and accountability limits established by the CFTC and exchanges. Accordingly, it may be required to reduce the size of outstanding positions or not enter into new positions that would otherwise be taken for the Funds or not trade certain markets on behalf of the Funds in order to comply with those limits or any future limits established by the CFTC and the relevant exchanges. Derivatives contract prices could move to a limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of derivatives positions and potentially subjecting the Funds to substantial losses or periods in which such Funds do not create additional Creation Units. Modification of trades made by the Trust, if required, could adversely affect the Trust’s operations and profitability and significantly limit the Trust’s ability to reinvest income in additional contracts, create additional Creation Units, or add to existing positions in the desired amount.

In addition, the Sponsor may be required to liquidate certain open positions in order to ensure compliance with the speculative position limits at unfavorable prices, which may result in substantial losses for the relevant Funds. There also can be no assurance that the Sponsor will liquidate positions held on behalf of all the Sponsor’s accounts, including any proprietary accounts, in a proportionate manner. In the event the Sponsor chooses to liquidate a disproportionate number of positions held on behalf of any of the Funds at unfavorable prices, such Funds may incur substantial losses and the value of the Shares may be adversely affected.

Further, in October 2012, a new CFTC rule became effective, which requires each registered FCM to establish risk-based limits on position and order size. As a result, the Trust’s FCMs may be required to reduce their internal limits on the size of the positions they will execute or clear for the Funds, and the Trust may seek to use additional FCMs, which may increase the costs for the Funds and adversely affect the value of the Shares.

 

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The Trust may apply to the CFTC or to the relevant exchanges for relief from certain position limits. If the Trust is unable to obtain such relief, a Fund’s ability to issue new Creation Units, or the Fund’s ability to reinvest income in additional futures contracts, may be limited to the extent these activities cause the Trust to exceed applicable position limits. Limiting the size of a Fund may affect the correlation between the price of the Shares, as traded on an exchange, and the net asset value of the Fund. Accordingly, the inability to create additional Creation Units or add to existing positions in the desired amount could result in Shares trading at a premium or discount to NAV.

Margin for Non-cleared Swap and Forward Transactions

In 2015, the regulators adopted, and in 2016 the CFTC adopted new mandatory margin requirements for non-cleared swap and foreign currency forward transactions and new requirements for the holding of collateral by derivative dealers. These requirements, which are still pending final adoption, may increase the amount of collateral a Fund is required to provide to derivative dealers for non-cleared swaps and foreign currency forwards.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Not applicable.

Item 3. Legal Proceedings.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Part II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

a) Eight of the Funds, ProShares UltraShort Bloomberg Commodity, ProShares UltraShort Bloomberg Crude Oil, ProShares UltraShort Euro, ProShares UltraShort Yen, ProShares Ultra Bloomberg Commodity, ProShares Ultra Bloomberg Crude Oil, ProShares Ultra Euro and ProShares Ultra Yen, commenced trading on the NYSE Arca on November 25, 2008. Four of the Funds, ProShares UltraShort Gold, ProShares UltraShort Silver, ProShares Ultra Gold, and ProShares Ultra 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 UltraShort Bloomberg Natural Gas and ProShares Ultra Bloomberg 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. One of the Funds, ProShares UltraShort Australian Dollar, commenced trading on the NYSE Arca on July 17, 2012. One of the Funds, ProShares Managed Futures Strategy, commenced trading on the NYSE Arca on October 1, 2014. The following tables set forth the ranges of reported high and low sales prices of each Fund’s Shares as reported on the NYSE Arca for the periods indicated below.

 

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Fiscal Year 2015

 

Fund

   High      Low  

ProShares Managed Futures Strategy

     

First Quarter

     22.22         20.62   

Second Quarter

     22.00         16.20   

Third Quarter

     22.00         19.00   

Fourth Quarter

     22.00         19.00   

ProShares VIX Short-Term Futures ETF

     

First Quarter

     24.83         16.38   

Second Quarter

     17.56         11.22   

Third Quarter

     20.97         10.32   

Fourth Quarter

     17.68         11.79   

ProShares VIX Mid-Term Futures ETF

     

First Quarter

     69.26         59.40   

Second Quarter

     62.14         51.80   

Third Quarter

     70.77         49.07   

Fourth Quarter

     64.15         51.90   

ProShares Short VIX Short-Term Futures ETF

     

First Quarter

     70.77         48.51   

Second Quarter

     98.13         65.84   

Third Quarter

     97.13         41.63   

Fourth Quarter

     64.74         43.08   

ProShares Ultra VIX Short-Term Futures ETF*

     

First Quarter

     170.05         70.00   

Second Quarter

     80.05         31.33   

Third Quarter

     91.25         24.34   

Fourth Quarter

     59.86         23.83   

ProShares UltraShort Bloomberg Commodity

     

First Quarter

     98.25         72.42   

Second Quarter

     96.33         85.85   

Third Quarter

     183.29         88.96   

Fourth Quarter

     150.26         106.66   

ProShares UltraShort Bloomberg Crude Oil

     

First Quarter

     110.94         66.52   

Second Quarter

     86.07         50.90   

Third Quarter

     137.18         58.79   

Fourth Quarter

     147.69         69.91   

ProShares UltraShort Bloomberg Natural Gas

     

First Quarter

     93.75         61.00   

Second Quarter

     98.87         62.50   

Third Quarter

     97.89         68.51   

Fourth Quarter

     222.91         94.00   

ProShares UltraShort Gold

     

First Quarter

     105.58         81.59   

Second Quarter

     100.58         90.40   

Third Quarter

     115.85         98.09   

Fourth Quarter

     118.85         93.48   

ProShares UltraShort Silver*

     

First Quarter

     60.89         42.25   

Second Quarter

     56.51         43.25   

Third Quarter

     66.70         53.43   

Fourth Quarter

     66.29         47.04   

ProShares Short Euro

     

First Quarter

     46.16         40.29   

 

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Fund

   High      Low  

Second Quarter

     45.59         41.93   

Third Quarter

     44.21         40.26   

Fourth Quarter

     45.14         41.52   

ProShares UltraShort Australian Dollar

     

First Quarter

     58.62         50.07   

Second Quarter

     58.17         49.70   

Third Quarter

     66.91         55.24   

Fourth Quarter

     64.60         57.40   

ProShares UltraShort Euro

     

First Quarter

     28.58         21.84   

Second Quarter

     27.88         23.55   

Third Quarter

     26.20         22.26   

Fourth Quarter

     27.18         23.04   

ProShares UltraShort Yen

     

First Quarter

     91.49         84.06   

Second Quarter

     97.60         86.80   

Third Quarter

     96.20         83.73   

Fourth Quarter

     93.23         85.29   

ProShares Ultra Bloomberg Commodity*

     

First Quarter

     52.08         36.80   

Second Quarter

     52.84         13.04   

Third Quarter

     48.18         34.15   

Fourth Quarter

     40.31         27.80   

ProShares Ultra Bloomberg Crude Oil*

     

First Quarter

     51.80         29.45   

Second Quarter

     53.60         34.35   

Third Quarter

     43.92         17.05   

Fourth Quarter

     27.45         11.56   

ProShares Ultra Bloomberg Natural Gas*

     

First Quarter

     78.48         45.00   

Second Quarter

     58.64         38.40   

Third Quarter

     48.70         31.70   

Fourth Quarter

     32.75         12.42   

ProShares Ultra Gold

     

First Quarter

     46.85         35.69   

Second Quarter

     40.93         36.54   

Third Quarter

     37.18         31.30   

Fourth Quarter

     37.75         29.06   

ProShares Ultra Silver

     

First Quarter

     52.29         35.37   

Second Quarter

     46.83         35.47   

Third Quarter

     37.17         28.40   

Fourth Quarter

     38.32         26.55   

ProShares Ultra Euro

     

First Quarter

     19.65         14.80   

Second Quarter

     17.62         14.96   

Third Quarter

     18.19         15.63   

Fourth Quarter

     17.48         14.67   

ProShares Ultra Yen*

     

First Quarter

     59.88         54.16   

Second Quarter

     57.16         50.86   

Third Quarter

     58.07         51.08   

Fourth Quarter

     56.88         52.07   

 

* See Note 1 of the Notes to Financial Statements in Item 15 of Part IV in this Annual Report on Form 10-K.

 

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Fiscal Year 2014

 

Fund

   High      Low  

ProShares Managed Futures Strategy**

     

First Quarter

   $ —        $ —    

Second Quarter

     —          —    

Third Quarter

     —          —    

Fourth Quarter

     22.15         19.50   

ProShares VIX Short-Term Futures ETF

     

First Quarter

   $ 36.91       $ 26.66   

Second Quarter

     30.88         18.84   

Third Quarter

     23.51         17.86   

Fourth Quarter

     29.68         17.06   

ProShares VIX Mid-Term Futures ETF*

     

First Quarter

   $ 84.92       $ 73.56   

Second Quarter

     76.08         61.60   

Third Quarter

     67.20         58.20   

Fourth Quarter

     77.84         59.05   

ProShares Short VIX Short-Term Futures ETF*

     

First Quarter

   $ 71.80       $ 49.80   

Second Quarter

     89.20         55.86   

Third Quarter

     93.33         68.65   

Fourth Quarter

     80.94         48.29   

ProShares Ultra VIX Short-Term Futures ETF*

     

First Quarter

   $ 108.41       $ 58.40   

Second Quarter

     71.72         26.06   

Third Quarter

     39.11         22.22   

Fourth Quarter

     56.28         17.62   

ProShares UltraShort Bloomberg Commodity

     

First Quarter

   $ 63.49       $ 52.13   

Second Quarter

     55.31         49.66   

Third Quarter

     72.95         52.47   

Fourth Quarter

     87.44         67.37   

ProShares UltraShort Bloomberg Crude Oil

     

First Quarter

   $ 36.64       $ 27.10   

Second Quarter

     30.02         24.06   

Third Quarter

     31.78         24.31   

Fourth Quarter

     80.24         29.57   

ProShares UltraShort Bloomberg Natural Gas

     

First Quarter

   $ 76.94       $ 34.00   

Second Quarter

     45.82         35.39   

Third Quarter

     56.10         40.03   

Fourth Quarter

     84.00         37.00   

ProShares UltraShort Gold

     

First Quarter

   $ 100.84       $ 76.83   

Second Quarter

     94.80         82.11   

Third Quarter

     98.69         80.41   

Fourth Quarter

     109.22         91.01   

ProShares UltraShort Silver

     

First Quarter

   $ 92.60       $ 68.26   

Second Quarter

     93.00         71.66   

Third Quarter

     110.00         69.36   

Fourth Quarter

     131.34         97.46   

ProShares Short Euro

     

First Quarter

   $ 36.30       $ 35.15   

Second Quarter

     36.17         35.06   

Third Quarter

     38.56         35.60   

 

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Fund

   High      Low  

Fourth Quarter

     40.04         37.15   

ProShares UltraShort Australian Dollar

     

First Quarter

   $ 48.89       $ 42.22   

Second Quarter

     42.80         40.26   

Third Quarter

     46.23         39.55   

Fourth Quarter

     52.36         43.86   

ProShares UltraShort Euro

     

First Quarter

   $ 17.74       $ 16.50   

Second Quarter

     17.51         16.50   

Third Quarter

     20.09         17.03   

Fourth Quarter

     21.61         19.11   

ProShares UltraShort Yen

     

First Quarter

   $ 70.50       $ 64.61   

Second Quarter

     68.77         64.74   

Third Quarter

     75.85         64.63   

Fourth Quarter

     92.61         69.51   

ProShares Ultra Bloomberg Commodity

     

First Quarter

   $ 23.50       $ 18.51   

Second Quarter

     23.65         20.76   

Third Quarter

     21.93         17.00   

Fourth Quarter

     19.13         12.86   

ProShares Ultra Bloomberg Crude Oil

     

First Quarter

   $ 36.71       $ 27.62   

Second Quarter

     40.17         32.79   

Third Quarter

     39.69         29.52   

Fourth Quarter

     32.35         9.84   

ProShares Ultra Bloomberg Natural Gas

     

First Quarter

   $ 64.36       $ 34.86   

Second Quarter

     54.35         42.94   

Third Quarter

     45.60         31.59   

Fourth Quarter

     41.19         15.45   

ProShares Ultra Gold

     

First Quarter

   $ 54.53       $ 41.80   

Second Quarter

     49.85         43.15   

Third Quarter

     50.43         40.30   

Fourth Quarter

     43.54         35.98   

ProShares Ultra Silver*

     

First Quarter

   $ 80.77       $ 60.50   

Second Quarter

     72.07         56.25   

Third Quarter

     74.31         45.20   

Fourth Quarter

     50.18         36.62   

ProShares Ultra Euro

     

First Quarter

   $ 26.75       $ 24.93   

Second Quarter

     26.61         25.07   

Third Quarter

     25.80         21.72   

Fourth Quarter

     26.10         19.80   

ProShares Ultra Yen

     

First Quarter

   $ 20.25       $ 18.71   

Second Quarter

     20.15         18.95   

Third Quarter

     20.05         16.96   

Fourth Quarter

     18.75         13.73   

 

* See Note 1 of the Notes to Financial Statements in Item 15 of Part IV in this Annual Report on Form 10-K.
** Fund commenced investment operations on October 1, 2014.

 

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The approximate number of holders of the Shares of each Fund as of December 31, 2015 was as follows:

 

Fund

   Number of Holders  

ProShares Managed Futures Strategy

     171   

ProShares VIX Short-Term Futures ETF

     7,262   

ProShares VIX Mid-Term Futures ETF

     2,184   

ProShares Short VIX Short-Term Futures ETF

     14,523   

ProShares Ultra VIX Short-Term Futures ETF

     30,834   

ProShares UltraShort Bloomberg Commodity

     218   

ProShares UltraShort Bloomberg Crude Oil

     4,320   

ProShares UltraShort Bloomberg Natural Gas

     432   

ProShares UltraShort Gold

     3,063   

ProShares UltraShort Silver

     3,767   

ProShares Short Euro

     598   

ProShares UltraShort Australian Dollar

     462   

ProShares UltraShort Euro

     17,045   

ProShares UltraShort Yen

     7,578   

ProShares Ultra Bloomberg Commodity

     390   

ProShares Ultra Bloomberg Crude Oil

     56,982   

ProShares Ultra Bloomberg Natural Gas

     4,408   

ProShares Ultra Gold

     7,452   

ProShares Ultra Silver

     25,889   

ProShares Ultra Euro

     1,867   

ProShares Ultra Yen

     365   

Total:

     189,810   

The Funds made no distributions to Shareholders during the fiscal year ended December 31, 2015 The Funds have no obligation to make periodic distributions to Shareholders.

b) The Trust initially registered Shares on its Registration Statement on Form S-1 (File No. 333-146801), which was declared effective on November 21, 2008, and registered additional Shares on its Registration Statement on Form S-1 (File No. 333-156888), which was declared effective on February 13, 2009. The Trust terminated these two offerings before the sale of all registered Shares and re-allocated the remaining amount of the registered Shares among the Funds listed on its Registration Statement on Form S-3 (File No. 333-163511), which became effective on December 4, 2009. It then registered additional Shares and/or added Funds pursuant to post-effective amendments to that Registration Statement on Form S-3, 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 (File 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 (File No. 333-163511) was declared effective, which registered additional Shares for ProShares Ultra Bloomberg Crude Oil and terminated the offerings for certain publicly offered Funds and certain Funds that had never been publicly offered. New offerings for those Funds that had been publicly offered were registered on an accompanying Registration Statement on Form S-1 (File No. 333-176878), which was also declared effective on June 26, 2012. On September 24, 2012, a Registration Statement on Form S-1 (File 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 (File No. 333-183672) was a combined prospectus and acted as a post-effective amendment to the Form S-1 (File No. 333-176878). On September 27, 2012, a Registration Statement on Form S-3 (File No. 333-183674) was declared effective, which registered additional Shares for ProShares Ultra Bloomberg Crude Oil, ProShares UltraShort Bloomberg Crude Oil and ProShares UltraShort Euro. This registration statement was a combined prospectus and acted as a post-effective amendment to the Form S-3 (File No. 333-163511). On September 28, 2012, a post-effective amendment to a Registration Statement on Form S-1 (File No. 333-178707) was declared effective, terminating the proposed offerings of several unlaunched currency funds. On January 30, 2013, a Registration Statement on Form S-1 (File No. 333-185288) was declared effective. That registration statement, which registered additional Shares to ProShares Short VIX Short-Term Futures ETF, acted as a combined prospectus and post-effective amendment to the Trust’s Form S-1 Registration Statements (File Nos. 333-183672 and 333-178707).

 

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Also, on January 30, 2013, a Registration Statement on Form S-3 (File No. 333-185289) was declared effective. That registration statement, which registered additional Shares to ProShares Ultra Bloomberg Crude Oil, ProShares UltraShort Euro, ProShares Ultra VIX Short-Term Futures ETF and ProShares VIX Short-Term Futures ETF, acted as a combined prospectus and post-effective amendment to the Trust’s Form S-1 Registration Statement (File No. 333-193672) and Form S-3 Registration Statement (File No. 333-183674). On April 24, 2013, a post-effective amendment to the Form S-1 Registration Statement (File No. 333-185288) was declared effective, terminating the registered but unlaunched offerings related to: ProShares UltraPro Short Euro, ProShares Managed Futures Strategy and ProShares Commodity Managed Futures Strategy. On April 29, 2013, a Registration Statement on Form S-3 (File No. 333-187820) was declared effective, which registered additional Shares for ProShares Ultra Bloomberg Crude Oil, ProShares UltraShort Bloomberg Crude Oil, ProShares Ultra Silver, ProShares UltraShort Silver, ProShares UltraShort Euro, ProShares UltraShort Yen, ProShares Ultra VIX Short-Term Futures ETF and ProShares VIX Short-Term Futures ETF. That registration statement was a combined prospectus and acted as a post-effective amendment to the Form S-3 (File No. 333-185289). On May 21, 2013, a Registration Statement on Form S-1 (File 333-188215) was declared effective, which registered additional Shares for ProShares Ultra Bloomberg Natural Gas, ProShares UltraShort Bloomberg Natural Gas, ProShares Short VIX Short-Term Futures ETF and ProShares VIX Mid-Term Futures ETF. That registration statement was a combined prospectus and acted as a post-effective amendment to the Form S-1 (File No. 333-185288). On July 30, 2013, a Registration Statement on Form S-3 (File No. 333-189967) was declared effective, which registered additional Shares for ProShares Bloomberg Crude Oil and ProShares UltraShort Yen and partially terminated registered and unissued Shares of ProShares Ultra Bloomberg Crude Oil, ProShares Ultra Silver, ProShares UltraShort Silver, ProShares UltraShort Euro and ProShares VIX Short-Term Futures ETF. That registration statement was a combined prospectus and acted as a post-effective amendment to the Form S-3 (File No. 333-187820). On May 6, 2014, a post-effective amendment to the Form S-1 Registration Statement (File No. 333-188215) was declared effective, updating the Form S-1 Registration Statement by, among other things, incorporating by reference the audited financial statements for the fiscal year ended December 31, 2013. The post-effective amendment did not register any additional shares. On July 30, 2014, a Registration Statement on Form S-1 (File No. 333-196884) was declared effective, which partially terminated registered and unissued Shares of ProShares VIX Mid-Term Futures ETF, ProShares Ultra Bloomberg Commodity, ProShares Ultra Euro, ProShares Ultra Yen and ProShares UltraShort Bloomberg Commodity. That registration statement was a combined prospectus and acted as a post-effective amendment to two Form S-1 registration statements (File Nos. 333-188215 and 333-185288). On July 30, 2014, a Registration Statement on Form S-3 (File No. 333-196885) was also declared effective, which registered additional Shares for ProShares Ultra Bloomberg Crude Oil, ProShares UltraShort Bloomberg Crude Oil and ProShares UltraShort Euro and partially terminated registered and unissued Shares of ProShares Ultra Gold, ProShares Ultra Silver and ProShares UltraShort Silver. That Registration Statement also was a combined prospectus and acted as a post-effective amendment to the Form S-3 (File No. 333-189967). Through the July 30, 2014 filings, ProShares Short VIX Short-Term Futures ETF was transferred from the Form S-1 to the Form S-3. On September 29, 2014, a Registration Statement on Form S-1 (File No. 333-198189) was declared effective, which registered a new offering of the Managed Futures Fund and acted as a post-effective amendment to the Form S-1 Registration Statement (File No. 333-196884). On November 25, 2014, a Registration Statement on Form S-1 (File No. 333-199642) was declared effective, which registered additional Shares for ProShares Ultra Bloomberg Natural Gas, ProShares UltraShort Bloomberg Natural Gas and ProShares UltraShort Silver. That registration statement was a combined prospectus and acted as a post-effective amendment to the Form S-1 registration statement (File No. 333-198189) and the Form S-3 registration statement (333-196885). On November 25, 2014, a Registration Statement on Form S-3 (File No. 333-199641) was also declared effective, which registered additional Shares for ProShares Ultra Bloomberg Crude Oil, ProShares Ultra Gold, ProShares UltraShort Gold, ProShares Ultra Silver, ProShares UltraShort Euro, ProShares UltraShort Yen, ProShares Ultra VIX Short-Term Futures ETF, ProShares Short VIX Short-Term Futures ETF and ProShares VIX Short-Term Futures ETF. That Registration Statement also was a combined prospectus and acted as a post-effective amendment to the Form S-3 (File No. 333-196885). Through the November 25, 2014 filings, ProShares UltraShort Silver was transferred from the Form S-3 to the Form S-1. On March 31, 2015, a Registration Statement on Form S-1 (File No. 333-202724) was declared effective, which registered additional Shares for ProShares VIX Mid-Term Futures ETF,

 

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ProShares Managed Futures Strategy, ProShares Ultra Bloomberg Commodity, ProShares Ultra Bloomberg Natural Gas, ProShares UltraShort Bloomberg Natural Gas, ProShares UltraShort Silver, ProShares Ultra Australian Dollar, ProShares UltraShort Australian Dollar, ProShares Ultra Euro, ProShares Short Euro and ProShares Ultra Yen. That registration statement was a combined prospectus and acted as a post-effective amendment to the Form S-1 registration statement (File No. 333-199642). On March 31, 2015, a Registration Statement on Form S-3 (File No. 333-202725) was also declared effective, which registered additional Shares for ProShares Ultra Bloomberg Crude Oil, ProShares UltraShort Bloomberg Crude Oil, ProShares Ultra Gold, ProShares UltraShort Gold, ProShares Ultra Silver, ProShares UltraShort Euro, ProShares UltraShort Yen, ProShares Ultra VIX Short-Term Futures ETF, ProShares Short VIX Short-Term Futures ETF and ProShares VIX Short-Term Futures ETF. That Registration Statement also was a combined prospectus and acted as a post-effective amendment to the Form S-3 (File No. 333-199641). On August 11, 2015, a Registration Statement on Form S-1 (File No. 333-202724) was declared effective which removed ProShares Ultra Australian Dollar from the Form S-1. No additional shares were registered. That registration statement was a combined prospectus and acted as a pre-effective amendment to post-effective amendment No. 1 of the Form S-1. Thus, as of December 31, 2015, the Trust continued to have two effective registration statements outstanding: 1) a Form S-1 Registration Statement (No. 333-202724); and 2) a Form S-3 Registration Statement (No. 333-199641).

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 in part be used for direct investment or deposited with the FCMs as margin in connection with futures contracts or in segregated accounts at the Funds’ custodian bank as collateral for swap agreements or forward contracts, as applicable. The Managed Futures Fund and each Geared Fund continuously offers and redeems its Shares in blocks of 50,000 Shares, and each Matching VIX Fund continuously offers and redeems Shares in blocks of 25,000 Shares.

 

Title of

Securities Registered

   Amount
Registered
As of
December 31,
2015
     Shares Sold
For the
Three
Months
Ended

December 31,
2015
     Sale Price of
Shares

Sold For the
Three Months
Ended

December 31,
2015
     Shares Sold
For the Year
Ended

December 31,
2015
     Sale Price of
Shares
Sold For the Year
Ended
December 31,
2015
 

ProShares Managed Futures Strategy Common Units of Beneficial Interest

   $ 509,027,538         150,000       $ 3,096,161         550,000       $ 11,524,992   

ProShares VIX Short-Term Futures ETF Common Units of Beneficial Interest

   $ 2,068,623,063         1,925,000       $ 25,251,144         12,475,000       $ 187,659,682   

ProShares VIX Mid-Term Futures ETF Common Units of Beneficial Interest

   $ 619,302,925         25,000       $ 1,447,922         325,000       $ 19,318,111   

ProShares Short VIX Short-Term Futures ETF Common Units of Beneficial Interest

   $ 3,589,767,641         5,400,000       $ 257,452,762         24,100,000       $ 1,403,231,166   

ProShares Ultra VIX Short-Term Futures ETF Common Units of Beneficial Interest*

   $ 4,255,550,774         27,400,000       $ 802,932,366         72,180,000       $ 3,192,766,319   

 

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Table of Contents

Title of

Securities Registered

   Amount
Registered
As of
December 31,
2015
     Shares Sold
For the
Three
Months
Ended

December 31,
2015
     Sale Price of
Shares

Sold For the
Three Months
Ended

December 31,
2015
     Shares Sold
For the Year
Ended

December 31,
2015
     Sale Price of
Shares
Sold For the Year
Ended
December 31,
2015
 

ProShares UltraShort Bloomberg Commodity Common Units of Beneficial Interest

   $ 172,839,931         —         $ —           —         $ —     

ProShares UltraShort Bloomberg Crude Oil Common Units of Beneficial Interest

   $ 2,114,776,247         600,000       $ 49,768,085         10,800,000       $ 796,070,368   

ProShares UltraShort Bloomberg Natural Gas Common Units of Beneficial Interest

   $ 412,030,981         50,000       $ 7,753,058         450,000       $ 37,204,187   

ProShares UltraShort Gold Common Units of Beneficial Interest

   $ 503,545,611         50,000       $ 4,859,925         150,000       $ 13,383,255   

ProShares UltraShort Silver Common Units of Beneficial Interest*

   $ 2,083,528,399         550,000       $ 28,700,095         1,650,000       $ 84,272,164   

ProShares Short Euro Common Units of Beneficial Interest

   $ 174,672,977         —         $ —           550,000       $ 23,563,492   

ProShares UltraShort Australian Dollar Common Units of Beneficial Interest

   $ 172,771,084         —         $ —           50,000       $ 2,764,167   

ProShares UltraShort Euro Common Units of Beneficial Interest

   $ 1,888,450,946         700,000       $ 17,798,452         12,600,000       $ 328,253,174   

ProShares UltraShort Yen Common Units of Beneficial Interest

   $ 951,962,134         —         $ —           1,350,000       $ 124,524,909   

ProShares Ultra Bloomberg Commodity Common Units of Beneficial Interest*

   $ 129,604,130         150,000       $ 5,583,484         225,000       $ 8,571,369   

ProShares Ultra Bloomberg Crude Oil Common Units of Beneficial Interest*

   $ 3,838,773,188         32,300,000       $ 564,704,767         86,830,000       $ 2,505,616,928   

ProShares Ultra Bloomberg Natural Gas Common Units of Beneficial Interest*

   $ 540,275,387         450,000       $ 8,582,442         2,137,500       $ 83,526,876   

ProShares Ultra Gold Common Units of Beneficial Interest

   $ 683,270,223         50,000       $ 1,549,917         150,000       $ 5,401,300   

ProShares Ultra Silver Common Units of Beneficial Interest

   $ 2,251,471,600         700,000       $ 20,094,769         2,700,000       $ 96,078,803   

ProShares Ultra Euro Common Units of Beneficial Interest

   $ 126,652,323         150,000       $ 2,376,043         950,000       $ 15,916,613   

ProShares Ultra Yen Common Units of Beneficial Interest*

   $ 138,726,333         —         $ —           75,000       $ 4,285,016   

Total:

   $ 27,225,623,435         70,650,000       $ 1,801,951,392         230,297,500       $ 8,943,932,891   

 

c) From October 1, 2015 through December 31, 2015, the number of Shares redeemed and average price per Share for each Fund were as follows:

 

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Table of Contents

Fund

   Total Number of
Shares Redeemed
     Average Price
Per Share
 

ProShares Managed Futures Strategy

     

10/01/15 to 10/31/15

     100,000       $ 20.29   

11/01/15 to 11/30/15

     100,000       $ 20.38   

12/01/15 to 12/31/15

     50,000       $ 20.52   

ProShares VIX Short-Term Futures ETF

     

10/01/15 to 10/31/15

     —         $ —     

11/01/15 to 11/30/15

     —         $ —     

12/01/15 to 12/31/15

     400,000       $ 14.09   

ProShares VIX Mid-Term Futures ETF

     

10/01/15 to 10/31/15

     —         $ —     

11/01/15 to 11/30/15

     —         $ —     

12/01/15 to 12/31/15

     —         $ —     

ProShares Short VIX Short-Term Futures ETF

     

10/01/15 to 10/31/15

     2,850,000       $ 59.54   

11/01/15 to 11/30/15

     1,000,000       $ 59.27   

12/01/15 to 12/31/15

     2,250,000       $ 53.32   

ProShares Ultra VIX Short-Term Futures ETF

     

10/01/15 to 10/31/15

     100,000       $ 29.53   

11/01/15 to 11/30/15

     2,150,000       $ 33.87   

12/01/15 to 12/31/15

     11,500,000       $ 34.65   

ProShares UltraShort Bloomberg Commodity

     

10/01/15 to 10/31/15

     —         $ —     

11/01/15 to 11/30/15

     —         $ —     

12/01/15 to 12/31/15

     —         $ —     

ProShares UltraShort Bloomberg Crude Oil

     

10/01/15 to 10/31/15

     600,000       $ 83.17   

11/01/15 to 11/30/15

     400,000       $ 93.81   

12/01/15 to 12/31/15

     500,000       $ 127.33   

ProShares UltraShort Bloomberg Natural Gas

     

10/01/15 to 10/31/15

     50,000       $ 126.67   

11/01/15 to 11/30/15

     50,000       $ 139.16   

12/01/15 to 12/31/15

     —         $ —     

ProShares UltraShort Gold

     

10/01/15 to 10/31/15

     —         $ —     

11/01/15 to 11/30/15

     50,000       $ 112.46   

12/01/15 to 12/31/15

     50,000       $ 115.59   

ProShares UltraShort Silver*

     

10/01/15 to 10/31/15

     100,000       $ 51.49   

11/01/15 to 11/30/15

     250,000       $ 62.55   

12/01/15 to 12/31/15

     250,000       $ 62.02   

ProShares Short Euro

     

10/01/15 to 10/31/15

     400,000       $ 42.75   

11/01/15 to 11/30/15

     —         $ —     

12/01/15 to 12/31/15

     —         $ —     

ProShares UltraShort Australian Dollar

     

10/01/15 to 10/31/15

     —         $ —     

11/01/15 to 11/30/15

     —         $ —     

12/01/15 to 12/31/15

     —         $ —     

ProShares UltraShort Euro

     

10/01/15 to 10/31/15

     500,000       $ 24.09   

11/01/15 to 11/30/15

     2,000,000       $ 26.14   

12/01/15 to 12/31/15

     200,000       $ 25.54   

ProShares UltraShort Yen

     

10/01/15 to 10/31/15

     50,000       $ 87.76   

11/01/15 to 11/30/15

     350,000       $ 91.79   

12/01/15 to 12/31/15

     350,000       $ 88.69   

ProShares Ultra Bloomberg Commodity

     

10/01/15 to 10/31/15

     —         $ —     

11/01/15 to 11/30/15

     —         $ —     

12/01/15 to 12/31/15

     —         $ —     

ProShares Ultra Bloomberg Crude Oil

     

10/01/15 to 10/31/15

     3,450,000       $ 24.86   

11/01/15 to 11/30/15

     1,550,000       $ 24.48   

12/01/15 to 12/31/15

     200,000       $ 12.57   

ProShares Ultra Bloomberg Natural Gas

     

10/01/15 to 10/31/15

     —         $ —     

11/01/15 to 11/30/15

     —         $ —     

12/01/15 to 12/31/15

     —         $ —     

ProShares Ultra Gold

     

10/01/15 to 10/31/15

     150,000       $ 36.05   

11/01/15 to 11/30/15

     —         $ —     

12/01/15 to 12/31/15

     —         $ —     

ProShares Ultra Silver

     

10/01/15 to 10/31/15

     350,000       $ 35.28   

11/01/15 to 11/30/15

     250,000       $ 30.91   

12/01/15 to 12/31/15

     —         $ —     

ProShares Ultra Euro

     

10/01/15 to 10/31/15

     —         $ —     

11/01/15 to 11/30/15

     —         $ —     

12/01/15 to 12/31/15

     100,000       $ 15.70   

ProShares Ultra Yen

     

10/01/15 to 10/31/15

     —         $ —     

11/01/15 to 11/30/15

     —         $ —     

12/01/15 to 12/31/15

     —         $ —     

Total:

     32,700,000       $ 41.39   

 

* See Note 1 of the Notes to Financial Statements in Item 15 of Part IV in this Annual Report on Form 10-K regarding the reverse Share splits for ProShares Ultra VIX Short-Term Futures ETF, ProShares Ultra Bloomberg Commodity, ProShares Ultra Bloomberg Crude Oil, ProShares Ultra Bloomberg Natural Gas and ProShares Ultra Yen and the Share split for ProShares UltraShort Silver.

 

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Table of Contents

Item 6. Selected Financial Data.

Financial Highlights for the years ended December 31, 2015, 2014, 2013, 2012 and 2011 for each Fund, as applicable, are summarized below and should be read in conjunction with the Funds’ audited financial statements, and the notes and schedules related thereto, which are included in this Annual Report on Form 10-K.

PROSHARES MANAGED FUTURES STRATEGY

 

    

Year ended

December 31, 2015

    

October 1, 2014 (Inception)

through December 31, 2014

 

Total assets

   $ 7,211,467      $ 6,406,630  

Total shareholders’ equity at end of period

     7,187,022        6,340,845  

Net investment income (loss)

     (71,554      (7,531 )

Net realized and unrealized gain (loss)

     (325,345 )      213,333  

Net income (loss)

     (396,899 )      205,802  

Net increase (decrease) in net asset value per share

     (0.60 )      1.14  

PROSHARES VIX SHORT-TERM FUTURES ETF

 

     Year ended
December 31,
2015
    Year ended
December 31,
2014
    Year ended
December 31,
2013
    Year ended
December 31,
2012
    Year ended
December 31,
2011
 

Total assets

   $ 105,350,240     $ 111,540,076     $ 279,169,502     $ 183,678,945     $ 30,574,178  

Total shareholders’ equity at end of period

     105,272,823       111,459,325       270,398,554       137,657,464       30,549,903  

Net investment income (loss)

     (1,150,794     (1,118,548     (1,584,119     (1,053,112     (282,569

Net realized and unrealized gain (loss)

     (26,753,742 )     22,228,972       (161,051,480     (159,588,720     2,157,514  

Net income (loss)

     (27,904,536 )     21,110,424       (162,635,599     (160,641,832     1,874,945  

Net increase (decrease) in net asset value per share

     (7.69     (7.61     (55.40     (297.93     (18.13

 

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Table of Contents

PROSHARES VIX MID-TERM FUTURES ETF

 

     Year ended
December 31,
2015
    Year ended
December 31,
2014
    Year ended
December 31,
2013
    Year ended
December 31,
2012
    Year ended
December 31,
2011
 

Total assets

   $ 27,671,016     $ 29,430,266     $ 56,501,754     $ 89,824,581     $ 90,821,428  

Total shareholders’ equity at end of period

     27,650,638       21,459,575       51,134,323       37,302,992       90,821,428  

Net investment income (loss)

     (240,600     (386,478     (546,566     (786,167     (117,121

Net realized and unrealized gain (loss)

     (3,939,933     (9,219,527     (31,648,251     (70,590,582     (6,632,431

Net income (loss)

     (4,180,533     (9,606,005     (32,194,817     (71,376,749     (6,749,552

Net increase (decrease) in net asset value per share

     (9.64     (13.58     (61.62     (157.76     (23.44

PROSHARES SHORT VIX SHORT-TERM FUTURES ETF

 

     Year ended
December 31,
2015
    Year ended
December 31,
2014
    Year ended
December 31,
2013
    Year ended
December 31,
2012
    April 5, 2011
(Inception)
through

December 31,
2011
 

Total assets

   $ 674,236,256     $ 541,342,389     $ 141,868,875     $ 95,411,974     $ 7,795,104  

Total shareholders’ equity at end of period

     642,811,361       506,556,124       141,751,202       82,663,633       7,760,424  

Net investment income (loss)

     (5,798,200     (4,285,469     (1,328,369     (437,699     (16,333

Net realized and unrealized gain (loss)

     96,936,157        52,474,493       96,687,035       11,731,268       1,446,017  

Net income (loss)

     91,137,957        48,189,024       95,358,666       11,293,569       1,429,684  

Net increase (decrease) in net asset value per share

     (10.59     (6.10     34.43        20.13        2.93   

PROSHARES ULTRA VIX SHORT-TERM FUTURES ETF

 

     Year ended
December 31,
2015
    Year ended
December 31,
2014
    Year ended
December 31,
2013
    Year ended
December 31,
2012
    April 5, 2011
(Inception)
through

December 31,
2011
 

Total assets

   $ 560,771,363     $ 358,364,869     $ 229,779,878     $ 156,387,315     $ 11,767,107  

Total shareholders’ equity at end of period

     547,708,740       351,789,953       226,233,584       84,716,132       9,881,113  

Net investment income (loss)

     (7,410,148     (5,359,486     (4,828,761     (3,001,646     (16,778

Net realized and unrealized gain (loss)

     (419,888,086     (75,812,141     (432,159,208     (506,284,763     (4,287,543

Net income (loss)

     (427,298,234     (81,171,627     (436,987,969     (509,286,409     (4,304,321

Net increase (decrease) in net asset value per share

     (97.38     (209.96     (3691.01     (144,182.85     (331,848.32

 

67


Table of Contents

PROSHARES ULTRASHORT BLOOMBERG COMMODITY

 

     Year ended
December 31,
2015
    Year ended
December 31,
2014
    Year ended
December 31,
2013
    Year ended
December 31,
2012
    Year ended
December 31,
2011
 

Total assets

   $ 8,574,050     $ 5,268,573     $ 3,828,135     $ 3,248,525     $ 9,114,501  

Total shareholders’ equity at end of period

     8,514,039       5,264,706       3,797,427       3,245,965       9,107,146  

Net investment income (loss)

     (56,626     (34,070     (32,130     (47,749     (133,153

Net realized and unrealized gain (loss)

     3,305,959       1,501,349       583,592       340,212       (2,775,425

Net income (loss)

     3,249,333       1,467,279       551,462       292,463       (2,908,578

Net increase (decrease) in net asset value per share

     54.16        24.46        9.19        (2.82     8.92   

PROSHARES ULTRASHORT BLOOMBERG CRUDE OIL

 

     Year ended
December 31,
2015
    Year ended
December 31,
2014
    Year ended
December 31,
2013
    Year ended
December 31,
2012
    Year ended
December 31,
2011
 

Total assets

   $ 96,858,373     $ 173,193,149     $ 258,594,876     $ 96,137,916     $ 144,499,971  

Total shareholders’ equity at end of period

     95,897,894       169,210,110       256,060,149       89,481,266       144,389,893  

Net investment income (loss)

     (2,166,211     (2,415,841     (2,544,628     (1,078,664     (1,211,735

Net realized and unrealized gain (loss)

     57,732,875       145,729,447       (6,221,827     35,047,625       36,113,078  

Net income (loss)

     55,566,664       143,313,606       (8,766,455     33,968,961       34,901,343  

Net increase (decrease) in net asset value per share

     55.22        46.25        (8.58     1.49        (12.03

PROSHARES ULTRASHORT BLOOMBERG NATURAL GAS

 

     Year ended
December 31,
2015
    Year ended
December 31,
2014
    Year ended
December 31,
2013
    Year ended
December 31,
2012
    April 5, 2011
(Inception)
through

December 31,
2011
 

Total assets

   $ 11,260,804     $ 14,698,814     $ 22,744,708     $ 12,780,598     $ 7,174,003  

Total shareholders’ equity at end of period

     10,462,856       14,688,564       22,734,767       12,768,340       7,142,310  

Net investment income (loss)

     (177,124     (460,907     (209,360     (196,407     (15,612

Net realized and unrealized gain (loss)

     8,800,372       11,696,119       (1,952,152     241,864       3,157,122  

Net income (loss)

     8,623,248       11,235,212       (2,161,512     45,457       3,141,510  

Net increase (decrease) in net asset value per share

     55.64        13.99        (32.18     6.92        41.89   

 

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Table of Contents

PROSHARES ULTRASHORT GOLD

 

     Year ended
December 31,
2015
    Year ended
December 31,
2014
    Year ended
December 31,
2013
    Year ended
December 31,
2012
    Year ended
December 31,
2011
 

Total assets

   $ 75,031,735     $ 84,214,601     $ 154,835,279     $ 92,495,298     $ 198,423,144  

Total shareholders’ equity at end of period

     74,971,764       81,861,762       139,436,456       92,416,742       198,298,571  

Net investment income (loss)

     (703,582     (857,817     (1,175,860     (1,106,213     (1,043,199

Net realized and unrealized gain (loss)

     16,807,446        (13,246,612     63,024,399       (39,758,386     (8,458,117

Net income (loss)

     16,103,864        (14,104,429     61,848,539       (40,864,599     (9,501,316

Net increase (decrease) in net asset value per share

     19.23        (6.87     39.65        (18.84     (30.77

PROSHARES ULTRASHORT SILVER

 

     Year ended
December 31,
2015
    Year ended
December 31,
2014
    Year ended
December 31,
2013
    Year ended
December 31,
2012
    Year ended
December 31,
2011
 

Total assets

   $ 56,035,123     $ 53,254,791     $ 115,311,683     $ 105,882,964     $ 267,497,929  

Total shareholders’ equity at end of period

     55,987,938       53,007,867       112,989,686       100,656,703       246,813,921  

Net investment income (loss)

     (516,464     (585,841     (973,304     (1,403,142     (3,388,013

Net realized and unrealized gain (loss)

     14,943,700       17,926,873       91,898,519       (51,826,102     (117,764,498

Net income (loss)

     14,427,236       17,341,032       90,925,215       (53,229,244     (121,152,511

Net increase (decrease) in net asset value per share

     6.77        12.92        19.19        (12.64     (61.39

PROSHARES SHORT EURO

 

     Year ended
December 31,
2015
    Year ended
December 31,
2014
    Year ended
December 31,
2013
    Year ended
December 31,
2012
    December 12, 2011
(Inception)
through

December 31,
2011
 

Total assets

   $ 17,524,993     $ 14,032,932     $ 8,903,836     $ 3,804,040     $ 41,200  

Total shareholders’ equity at end of period

     17,510,898       14,021,804       8,896,842       3,763,040       200  

Net investment income (loss)

     (178,761     (118,247     (51,170     (17,891     —    

Net realized and unrealized gain (loss)

     1,417,580       2,011,540       (359,542     (219,269     —    

Net income (loss)

     1,238,819       1,893,293       (410,712     (237,160     —    

Net increase (decrease) in net asset value per share

     3.72        4.48        (2.04     (2.37     —    

 

69


Table of Contents

PROSHARES ULTRASHORT AUSTRALIAN DOLLAR

 

     Year ended
December 31,
2015
    Year ended
December 31,
2014
    Year ended
December 31,
2013
    Year ended
December 31,
2012
    December 12,
2011

(Inception)
through

December 31,
2011
 

Total assets

   $ 20,477,446     $ 23,139,187     $ 28,091,462     $ 3,832,949     $ 41,200  

Total shareholders’ equity at end of period

     20,460,679       23,120,790       27,983,279       3,780,999       200  

Net investment income (loss)

     (209,987     (213,183     (159,424     (16,229     —    

Net realized and unrealized gain (loss)

     3,166,384       2,121,121       3,553,299       (202,972     —    

Net income (loss)

     2,956,397       1,907,938       3,393,875       (219,201     —    

Net increase (decrease) in net asset value per share

     7.08        4.74        8.83        (2.19     —    

PROSHARES ULTRASHORT EURO

 

     Year ended
December 31,
2015
    Year ended
December 31,
2014
    Year ended
December 31,
2013
    Year ended
December 31,
2012
    Year ended
December 31,
2011
 

Total assets

   $ 556,539,359     $ 519,833,940     $ 438,217,450     $ 553,957,981     $ 1,101,007,056  

Total shareholders’ equity at end of period

     522,306,518       517,191,349       418,001,115       526,778,026       1,100,159,546  

Net investment income (loss)

     (5,000,587     (3,994,145     (4,375,512     (7,447,508     (5,907,849

Net realized and unrealized gain (loss)

     86,176,969       114,182,807       (48,644,550     (33,586,639     85,179,270  

Net income (loss)

     81,176,382       110,188,662       (53,020,062     (41,034,147     79,271,421  

Net increase (decrease) in net asset value per share

     3.95        4.53        (1.96     (1.32     0.05   

PROSHARES ULTRASHORT YEN

 

     Year ended
December 31,
2015
    Year ended
December 31,
2014
    Year ended
December 31,
2013
    Year ended
December 31,
2012
    Year ended
December 31,
2011
 

Total assets

   $ 261,207,696     $ 534,061,601     $ 590,489,940     $ 409,067,507     $ 225,676,364  

Total shareholders’ equity at end of period

     237,372,900       531,471,873       588,121,516       408,563,630       221,131,994  

Net investment income (loss)

     (3,623,678     (3,741,601     (4,398,231     (2,184,694     (2,642,134

Net realized and unrealized gain (loss)

     (3,541,134 )     96,873,706       155,319,469       69,835,696       (38,262,661

Net income (loss)

     (7,164,812 )     93,132,105       150,921,238       67,651,002       (40,904,795

Net increase (decrease) in net asset value per share

     (1.39     18.47        20.11        9.80        (6.06

 

70


Table of Contents

PROSHARES ULTRA BLOOMBERG COMMODITY

 

     Year ended
December 31,
2015
    Year ended
December 31,
2014
    Year ended
December 31,
2013
    Year ended
December 31,
2012
    Year ended
December 31,
2011
 

Total assets

   $ 7,328,066     $ 2,940,584     $ 2,917,408     $ 6,408,497     $ 9,773,138  

Total shareholders’ equity at end of period

     7,105,984       2,606,920       2,915,034       6,097,211       9,058,529  

Net investment income (loss)

     (33,542     (30,991     (38,477     (73,484     (145,601

Net realized and unrealized gain (loss)

     (2,805,455     (1,412,039     (933,021     (134,794     (4,514,955

Net income (loss)

     (2,838,997     (1,443,030     (971,498     (208,278     (4,660,556

Net increase (decrease) in net asset value per share

     (23.71     (25.59     (19.82     (5.97     (41.97

PROSHARES ULTRA BLOOMBERG CRUDE OIL

 

     Year ended
December 31,
2015
    Year ended
December 31,
2014
    Year ended
December 31,
2013
    Year ended
December 31,
2012
    Year ended
December 31,
2011
 

Total assets

   $ 859,276,004     $ 532,881,413     $ 143,904,994     $ 499,982,244     $ 261,618,033  

Total shareholders’ equity at end of period

     783,922,475       450,562,988       142,773,429       483,508,964       251,395,322  

Net investment income (loss)

     (8,473,155     (1,766,364     (2,196,281     (3,248,430     (3,186,369

Net realized and unrealized gain (loss)

     (863,611,244     (368,561,922     68,042,170       (17,357,813     87,943,855  

Net income (loss)

     (872,084,399     (370,328,286     65,845,889       (20,606,243     84,757,486  

Net increase (decrease) in net asset value per share

     (38.16     (109.71     13.48        (57.44     (45.60

PROSHARES ULTRA BLOOMBERG NATURAL GAS

 

     Year ended
December 31,
2015
    Year ended
December 31,
2014
    Year ended
December 31,
2013
    Year ended
December 31,
2012
    April 5, 2011
(Inception)
through

December 31,
2011
 

Total assets

   $ 38,879,917     $ 80,051,311     $ 68,626,038     $ 77,963,078     $ 4,107,427  

Total shareholders’ equity at end of period

     38,851,184       70,433,207       62,915,779       73,019,370       4,079,349  

Net investment income (loss)

     (761,335     (528,581     (821,690     (566,310     (10,459

Net realized and unrealized gain (loss)

     (59,570,610     (37,694,009     41,585,400       (5,825,840     (2,307,329

Net income (loss)

     (60,331,945     (38,222,590     40,763,710       (6,392,150     (2,317,788

Net increase (decrease) in net asset value per share

     (43.08     (93.70     (0.84     (251.71     (392.08

 

71


Table of Contents

PROSHARES ULTRA GOLD

 

     Year ended
December 31,
2015
    Year ended
December 31,
2014
    Year ended
December 31,
2013
    Year ended
December 31,
2012
    Year ended
December 31,
2011
 

Total assets

   $ 72,172,441     $ 104,091,956     $ 141,039,466     $ 350,986,079     $ 407,538,760  

Total shareholders’ equity at end of period

     69,864,815       102,003,345       132,017,405       335,054,752       326,399,360  

Net investment income (loss)

     (796,424     (1,157,348     (1,925,215     (3,169,265     (2,975,486

Net realized and unrealized gain (loss)

     (22,915,651     (784,329     (156,804,545     31,641,746       10,169,127  

Net income (loss)

     (23,712,075     (1,941,677     (158,729,760     28,472,481       7,193,641  

Net increase (decrease) in net asset value per share

     (10.27     (1.25     (42.51     7.85        6.69   

PROSHARES ULTRA SILVER

 

     Year ended
December 31,
2015
    Year ended
December 31,
2014
    Year ended
December 31,
2013
    Year ended
December 31,
2012
    Year ended
December 31,
2011
 

Total assets

   $ 239,160,686     $ 305,793,515     $ 468,353,977     $ 894,123,114     $ 786,720,628  

Total shareholders’ equity at end of period

     216,416,642       291,169,743       465,479,519       747,725,400       606,824,420  

Net investment income (loss)

     (2,507,859     (3,968,608     (5,280,707     (6,918,157     (7,956,212

Net realized and unrealized gain (loss)

     (88,492,326     (165,444,157     (558,275,777     (32,752,438     (438,094,409

Net income (loss)

     (91,000,185     (169,412,765     (563,556,484     (39,670,595     (446,050,621

Net increase (decrease) in net asset value per share

     (12.31     (23.96     (108.56     (0.87     (139.81

PROSHARES ULTRA EURO

 

     Year ended
December 31,
2015
    Year ended
December 31,
2014
    Year ended
December 31,
2013
    Year ended
December 31,
2012
    Year ended
December 31,
2011
 

Total assets

   $ 12,437,492     $ 3,089,736     $ 2,626,494     $ 4,876,503     $ 10,079,176  

Total shareholders’ equity at end of period

     10,857,730       2,981,441       2,603,827       4,870,316       9,554,748  

Net investment income (loss)

     (104,071     (22,247     (35,024     (60,126     (75,102

Net realized and unrealized gain (loss)

     (1,274,395     (625,043     224,084       207,279       (512,495

Net income (loss)

     (1,378,466     (647,290     189,060       147,153       (587,597

Net increase (decrease) in net asset value per share

     (4.36     (6.16     1.68        0.46        (1.87

PROSHARES ULTRA YEN

 

     Year ended
December 31,
2015
    Year ended
December 31,
2014
    Year ended
December 31,
2013
    Year ended
December 31,
2012
    Year ended
December 31,
2011
 

Total assets

   $ 5,483,876     $ 2,135,192     $ 2,960,724     $ 4,739,474     $ 5,475,400  

Total shareholders’ equity at end of period

     5,473,848       2,118,028       2,795,026       4,227,995       5,471,075  

Net investment income (loss)

     (44,423     (20,862     (31,774     (44,440     (39,572

Net realized and unrealized gain (loss)

     (196,091     (396,529     (1,544,017     (1,198,640     383,849  

Net income (loss)

     (240,514     (417,391     (1,575,791     (1,243,080     344,277  

Net increase (decrease) in net asset value per share

     (1.72     (18.05     (38.21     (33.15     11.91   

 

72


Table of Contents

Item 7. 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 Annual Report on Form 10-K. 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 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

As further described in Item 1 in this Annual Report on Form 10-K, 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 two times the inverse (-2x) of the daily performance of its corresponding benchmark. Each “Ultra” Fund seeks daily investment results (before fees and expenses) that correspond to two times (2x) the daily performance of its corresponding benchmark. Each Matching VIX Fund and the Managed Futures Fund seeks investment results (before fees and expenses), both over a single day and over time, that match the performance of its corresponding benchmark. Daily performance is measured from the calculation of one NAV to the next.

Each of the Funds generally invests in Financial Instruments (i.e., instruments whose value is derived from the value of an underlying asset, rate or index), including futures contracts, swap agreements, forward contracts and other instruments as a substitute for investing directly in commodities, currencies, or spot volatility products in order to gain exposure to its applicable underlying commodity futures index, commodity, currency exchange rate or equity volatility index. Financial Instruments also are used to produce economically “inverse,” “inverse leveraged” or “leveraged” investment results for the Geared Funds.

Each Geared Fund seeks investment results for a single day only, not for longer periods. This is different from most exchange-traded funds and means that the return of such Fund for a period longer than a single trading day will be the result of each day’s returns compounded over the period, and usually will differ from -1x, -2x or 2x, of the return of the Geared Fund’s benchmark for that period. Longer holding periods, higher benchmark volatility, inverse exposure and greater leverage each affect the impact of compounding on a Geared 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. 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, leveraged, inverse or inverse leveraged investment results. Shareholders who invest in the Geared Funds should actively manage and monitor their investments, as frequently as daily.

The Matching VIX Funds seek results that, both over a single day and over time, match (before fees and expenses) the performance of its index. If the Matching VIX Fund is successful in meeting its objective, its value (before fees and expenses) should gain approximately as much on a percentage basis as the level of the applicable VIX Futures Index when the index rises. Conversely, its value (before fees and expenses) should lose approximately as much on a percentage basis as the level of the applicable VIX Futures Index when the index declines. The Matching VIX Funds seeks to obtain investment exposure to its benchmark through the relevant futures contracts.

The Managed Futures Fund seeks results that, both over a single day and over time, match (before fees and expenses) the performance of its index. If the Managed Futures Fund is successful in meeting its objective, its value (before fees and expenses) should gain approximately as much on a percentage basis as the level of the S&P Strategic Futures Index when the index rises. Conversely, its value (before fees and expenses) should lose approximately as much on a percentage basis as the level of the S&P Strategic Futures Index when the index declines. The Managed Futures Fund attempts to profit in both rising and falling markets by obtaining investment exposure to its benchmark through the relevant futures contracts.

 

73


Table of Contents

Liquidity and Capital Resources

In order to collateralize derivatives positions in indices, commodities or currencies, a significant portion of the NAV of each Fund is held in cash and/or U.S. Treasury securities, agency securities, or other high credit quality short-term fixed-income or similar securities (such as shares of money market funds, bank deposits, bank money market accounts, certain variable rate-demand notes and repurchase agreements collateralized by government securities, whether denominated in U.S. dollars or the applicable foreign currency with respect to a Currency Fund). A portion of these investments may be posted as collateral in connection with swap agreements and each Fund’s trading in futures and forward contracts. The percentage that U.S. Treasury bills and other short-term fixed-income securities bear to the shareholders’ equity of each Fund varies from period to period as the market values of the underlying swaps, futures contracts and forward contracts change. During the years ended December 31, 2015, 2014 and 2013, each of the Funds earned interest income as follows:

Interest Income

 

Fund

   Interest Income
Year Ended
December 31,
2015
     Interest Income
Year Ended
December 31,
2014
     Interest Income
Year Ended
December 31,
2013
 

ProShares Managed Futures Strategy*

   $ —        $ —        $ N/A  

ProShares VIX Short-Term Futures ETF

     42,319        47,562        77,010  

ProShares VIX Mid-Term Futures ETF

     8,293         16,573         25,811   

ProShares Short VIX Short-Term Futures ETF

     180,686        81,544        36,503  

ProShares Ultra VIX Short-Term Futures ETF

     156,187        72,700        70,016  

ProShares UltraShort Bloomberg Commodity

     2,698        1,232        1,899  

ProShares UltraShort Bloomberg Crude Oil

     60,884        110,620        113,487  

ProShares UltraShort Bloomberg Natural Gas

     5,830        16,306        8,620  

ProShares UltraShort Gold

     31,999        40,675        61,891  

ProShares UltraShort Silver

     23,831        30,901        60,178  

ProShares Short Euro

     4,504        4,716        1,996  

ProShares UltraShort Australian Dollar

     5,998        8,225        5,653  

ProShares UltraShort Euro

     264,845        199,596        224,967  

ProShares UltraShort Yen

     135,814        197,253        209,601  

ProShares Ultra Bloomberg Commodity

     733        1,330        2,066  

ProShares Ultra Bloomberg Crude Oil

     396,158        68,292        135,291  

ProShares Ultra Bloomberg Natural Gas

     20,167        15,961        33,341  

ProShares Ultra Gold

     42,700        54,755        130,437  

ProShares Ultra Silver

     156,353        179,642        348,317  

ProShares Ultra Euro

     2,797        1,083        1,901  

ProShares Ultra Yen

     3,609        1,101        1,795  

 

* Fund commenced investment operations on October 1, 2014.

Each Fund’s underlying swaps, futures, forward contracts and foreign currency 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).

Market Risk

Trading in derivatives contracts involves each Fund entering into contractual commitments to purchase or sell a commodity, currency or spot volatility product underlying the Fund’s benchmark at a specified date and price, should it hold such derivatives contract into the deliverable period. Should a Fund enter into a contractual commitment to sell a physical commodity, currency or spot volatility product, it would be required to make delivery of that commodity, currency or spot volatility product 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, currency or spot volatility product can rise is unlimited, entering into commitments to sell commodities, currencies or spot volatility products would expose a Fund to theoretically unlimited risk.

For more information, see “Item 7A. Quantitative and Qualitative Disclosures About Market Risk” in this Annual Report on Form 10-K.

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 as well as certain swaps 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.

Certain 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 an uncleared swap agreement defaults, the Fund’s risk of loss typically 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.

 

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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;

 

    requiring that the counterparty posts collateral in amounts approximately equal to that owed to the Funds, as marked to market daily, subject to certain minimum thresholds;

 

    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.

Off-Balance Sheet Arrangements and Contractual Obligations

As of February 22, 2016, 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.

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, forward contracts or foreign currency 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 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 Funds’ final creation/redemption NAV for the year ended December 31, 2015.

Short-term investments are valued at amortized cost which approximates fair value for daily NAV purposes. For financial reporting purposes, short-term investments are valued at their market price using information provided by a third-party pricing service or market quotations.

 

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Derivatives (e.g., 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. 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 the Financial Statements in this Annual Report on Form 10-K for further information.

Discounts on short-term securities purchased are amortized and reflected as Interest Income in the Statements of Operations.

Realized gains (losses) and changes in unrealized gain (loss) on open positions are determined on a specific identification basis and recognized in the Statements of Operations in the period in which the contract is closed or the changes occur, respectively.

Each Fund pays its respective brokerage commissions, including applicable exchange fees, NFA fees, give-up fees, pit brokerage fees and other transaction related fees and expenses charged in connection with trading activities for each Fund’s investment in U.S. Commodity Futures Trading Commission regulated investments. Brokerage commissions on futures contracts are recognized on a half-turn basis. Through July 30, 2014, the Sponsor paid brokerage commissions on VIX futures contracts for the Matching VIX Funds. On July 31, 2014, the Sponsor began paying, and is currently paying, brokerage commissions on VIX futures contracts for the Matching VIX Funds that exceed variable create/redeem fees collected by more than 0.02% of the Matching VIX Fund’s average net assets annually.

Results of Operations for the Year Ended December 31, 2015 Compared to the Years Ended December 31, 2014 and 2013

ProShares Managed Futures Strategy

Since the Fund commenced investment operations on October 1, 2014, the Fund’s results of operations for the period ended December 31, 2014 may not be meaningful.

Fund Performance

The following table provides summary performance information for the Fund for the year ended December 31, 2015 and from commencement of operations to December 31, 2015:

 

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     Year Ended
December 31, 2015
    October 1, 2014
(Commencement of
Operations) through
December 31, 2014
 

NAV beginning of period

   $ 6,340,845     $ 200  

NAV end of period

   $ 7,187,022     $ 6,340,845  

Percentage change in NAV

     13.3     3,170,322.5

Shares outstanding beginning of period

     300,010       10  

Shares outstanding end of period

     350,010       300,010  

Percentage change in shares outstanding

     16.7     3,000,000.0

Shares created

     550,000       400,000  

Shares redeemed

     500,000       100,000  

Per share NAV beginning of period

   $ 21.14      $ 20.00   

Per share NAV end of period

   $ 20.53      $ 21.14   

Percentage change in per share NAV

     (2.9 )%      5.7

Percentage change in benchmark

     (2.0 )%      5.2

Benchmark annualized volatility

     5.3     5.9

During the period ended December 31, 2015, the increase in the Fund’s NAV resulted from an increase from 300,010 outstanding Shares at December 31, 2014 to 350,010 outstanding Shares at December 31, 2015. 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 Strategic Futures Index. By comparison, during the period ended December 31, 2014, the increase in the Fund’s NAV resulted primarily from 10 outstanding Shares at October 1, 2014 to 300,010 outstanding Shares at December 31, 2014. 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 Strategic Futures Index.

For the period ended December 31, 2015, 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 2.9% for the year ended December 31, 2015, as compared to the Fund’s per Share NAV increase of 5.7% for the period ended December 31, 2014, was primarily due to depreciation in the value of the futures contracts that make up the S&P Strategic Futures Index during the period ended December 31, 2015.

During the period ended December 31, 2015, the Fund’s per Share NAV reached its high for the period on January 29, 2015 at $21.88 per Share and reached its low for the period on October 9, 2015 at $20.20 per Share. By comparison, during the period ended December 31, 2014, the Fund’s per Share NAV reached its high for the period on December 29, 2014 at $21.16 per Share and reached its low for the period on October 7, 2014 at $19.89 per Share.

The benchmark’s decline of 2.0% for the year ended December 31, 2015, as compared to the benchmark’s rise of 5.2% for the period ended December 31, 2014, can be attributed to depreciation in value of the futures contracts that make up the S&P Strategic Futures Index during the period ended December 31, 2015.

Net Income/Loss

The following table provides summary income information for the Fund for the year ended December 31, 2015 and the period from commencement of operations to December 31, 2014:

 

     Year Ended
December 31, 2015
     October 1, 2014
(Commencement of
Operations) through

December 31, 2014
 

Net investment income (loss)

   $ (71,554    $ (7,531

Management fee

     16,121         —    

Brokerage commission

     7,768        604  

Offering costs

     59,479        16,401  

Limitation by Sponsor

     (11,814      (9,474

Net realized gain (loss)

     (278,197      109,006  

Change in net unrealized appreciation/depreciation

     (47,148      104,327  

Net income (loss)

   $ (396,899    $ 205,802  

 

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The Fund’s net income decreased for the year ended December 31, 2015, as compared to the year ended December 31, 2014, primarily due to a decline in the futures prices during the year ended December 31, 2015.

ProShares VIX Short-Term Futures ETF

Fund Performance

The following table provides summary performance information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
    Year Ended
December 31, 2014
    Year Ended
December 31, 2013
 

NAV beginning of period

   $ 111,459,325     $ 270,398,554     $ 137,657,464  

NAV end of period

   $ 105,272,823     $ 111,459,325     $ 270,398,554  

Percentage change in NAV

     (5.6 )%      (58.8 )%      96.4

Shares outstanding beginning of period

     5,324,812       9,474,812       1,640,001  

Shares outstanding end of period

     7,949,812       5,324,812       9,474,812  

Percentage change in shares outstanding

     49.3     (43.8 )%      477.7

Shares created

     12,475,000       10,575,000       16,095,000  

Shares redeemed

     9,850,000       14,725,000       8,260,189  

Per share NAV beginning of period

   $ 20.93      $ 28.54      $ 83.94   

Per share NAV end of period

   $ 13.24      $ 20.93      $ 28.54   

Percentage change in per share NAV

     (36.7 )%      (26.7 )%      (66.0 )% 

Percentage change in benchmark

     (36.1 )%      (25.5 )%      (65.7 )% 

Benchmark annualized volatility

     78.6     61.4     57.9

During the year ended December 31, 2015, 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 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 5,324,812 outstanding Shares at December 31, 2014 to 7,949,812 outstanding Shares at December 31, 2015. By comparison, during the year ended December 31, 2014, the decrease in the Fund’s NAV resulted primarily from a decrease from 9,474,812 outstanding Shares at December 31, 2013 to 5,324,812 outstanding Shares at December 31, 2014. 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 the daily performance of the S&P 500 VIX Short-Term Futures Index. By comparison, during the year ended December 31, 2013, the increase in the Fund’s NAV resulted from an increase from 1,640,001 outstanding Shares at December 31, 2012 to 9,474,812 outstanding Shares at December 31, 2013. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to the daily performance of the S&P 500 VIX Short-Term Futures Index.

For the years ended December 31, 2015, 2014 and 2013, 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 36.7% for the year ended December 31, 2015, as compared to the Fund’s per Share NAV decrease of 26.7% for the year ended December 31, 2014, was primarily due to a greater decline in prices of the first and second month VIX futures during the year ended December 31, 2015. The Fund’s per Share NAV decrease of 26.7% for the year ended December 31, 2014, as compared to the Fund’s per Share NAV decrease of 66.0% for the year ended December 31, 2013, was primarily due to a lesser decline in prices of the first and second month VIX futures during the year ended December 31, 2014.

 

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During the year ended December 31, 2015, the Fund’s per Share NAV reached its high for the year on January 15, 2015 at $24.15 per Share and reached its low for the year on August 10, 2015 at $10.35 per Share. By comparison, during the year ended December 31, 2014, the Fund’s per Share NAV reached its high for the year on February 5, 2014 at $36.25 per Share and reached its low for the year on December 5, 2014 at $17.25 per Share. By comparison, during the year ended December 31, 2013, the Fund’s per Share NAV reached its high for the year on January 3, 2013 at $76.11 per Share and reached its low for the year on December 26, 2013 at $27.63 per Share.

The benchmark’s decline of 36.1% for the year ended December 31, 2015, as compared to the benchmark’s decline of 25.5% for the year ended December 31, 2014, can be attributed to a greater decline in prices of the near-term futures contracts on the VIX futures curve during the year ended December 31, 2015. The benchmark’s decline of 25.5% for the year ended December 31, 2014, as compared to the benchmark’s decline of 65.7% for the year ended December 31, 2013, can be attributed to a lesser decline in prices of the near-term futures contracts on the VIX futures curve during the year ended December 31, 2014.

Net Income/Loss

The following table provides summary income information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
     Year Ended
December 31, 2014
     Year Ended
December 31, 2013
 

Net investment income (loss)

   $ (1,150,794    $ (1,118,548    $ (1,584,119

Management fee

     1,062,171        1,083,189        1,661,129  

Brokerage commission

     130,942        82,921        —    

Net realized gain (loss)

     (19,406,840      (682,105      (144,624,652

Change in net unrealized appreciation/depreciation

     (7,346,902      22,911,077        (16,426,828

Net income (loss)

   $ (27,904,536    $ 21,110,424      $ (162,635,599

The Fund’s net income decreased for the year ended December 31, 2015, as compared to the year ended December 31, 2014, primarily due to a greater decline in the futures prices and benchmark volatility during the year ended December 31, 2015. By comparison, the Fund’s net income increased for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to a lesser decline in the futures prices in conjunction with an increase in Share turnover and benchmark volatility during the year ended December 31, 2014.

ProShares VIX Mid-Term Futures ETF

Fund Performance

The following table provides summary performance information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
    Year Ended
December 31, 2014
    Year Ended
December 31, 2013
 

NAV beginning of period

   $ 21,459,575     $ 51,134,323     $ 37,302,992  

NAV end of period

   $ 27,650,638     $ 21,459,575     $ 51,134,323  

Percentage change in NAV

     28.8     (58.0 )%      37.1

Shares outstanding beginning of period

     337,404       662,501       268,751  

Shares outstanding end of period

     512,404       337,404       662,501  

Percentage change in shares outstanding

     51.9     (49.1 )%      146.5

Shares created

     325,000       593,750       1,512,500  

Shares redeemed

     150,000       918,847       1,118,750  

Per share NAV beginning of period

   $ 63.60      $ 77.18      $ 138.80   

Per share NAV end of period

   $ 53.96      $ 63.60      $ 77.18   

Percentage change in per share NAV

     (15.2 )%      (17.6 )%      (44.4 )% 

Percentage change in benchmark

     (14.3 )%      (16.5 )%      (43.8 )% 

Benchmark annualized volatility

     38.8     29.1     25.1

 

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During the year ended December 31, 2015, the increase in the Fund’s NAV resulted from an increase from 337,404 outstanding Shares at December 31, 2014 to 512,404 outstanding Shares at December 31, 2015. 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 year ended December 31, 2014, the decrease in the Fund’s NAV resulted primarily from a decrease from 662,501 outstanding Shares at December 31, 2013 to 337,404 outstanding Shares at December 31, 2014. 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 the daily performance of the S&P 500 VIX Mid-Term Futures Index. By comparison, during the year ended December 31, 2013, the increase in the Fund’s NAV resulted from an increase from 268,751 outstanding Shares at December 31, 2012 to 662,501 outstanding Shares at December 31, 2013. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to the daily performance of the S&P 500 VIX Mid-Term Futures Index.

For the years ended December 31, 2015, 2014 and 2013, 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 15.2% for the year ended December 31, 2015, as compared to the Fund’s per Share NAV decrease of 17.6% for the year ended December 31, 2014, was primarily due to a lesser depreciation in the value of the assets of the Fund during the year ended December 31, 2015. The Fund’s per Share NAV decrease of 17.6% for the year ended December 31, 2014, as compared to the Fund’s per Share NAV decrease of 44.4% for the year ended December 31, 2013, was primarily due to a lesser depreciation in the value of the assets of the Fund during the year ended December 31, 2014.

During the year ended December 31, 2015, the Fund’s per Share NAV reached its high for the year on September 1, 2015 at $69.30 per Share and reached its low for the year on August 10, 2015 at $49.68 per Share. By comparison, during the year ended December 31, 2014, the Fund’s per Share NAV reached its high for the year on February 5, 2014 at $85.56 per Share and reached its low for the year on August 19, 2014 at $58.76 per Share. By comparison, during the year ended December 31, 2013, the Fund’s per Share NAV reached its high for the year on January 3, 2013 at $129.47 per Share and reached its low for the year on December 26, 2013 at $77.03 per Share.

The benchmark’s decline of 14.3 % for the year ended December 31, 2015, as compared to the benchmark’s decline of 16.5% for the year ended December 31, 2014, can be attributed to a lesser decline in prices of the futures contracts that made up the S&P 500 VIX Mid-Term Futures Index during the year ended December 31, 2015. By comparison, the benchmark’s decline of 16.5% for the year ended December 31, 2014, as compared to the benchmark’s decline of 43.8% for the year ended December 31, 2013, can be attributed to a lesser decline in prices of the futures contracts that made up the S&P 500 VIX Mid-Term Futures Index during the year ended December 31, 2014.

Net Income/Loss

The following table provides summary income information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
     Year Ended
December 31, 2014
     Year Ended
December 31, 2013
 

Net investment income (loss)

   $ (240,600    $ (386,478    $ (546,566

Management fee

     233,390        392,120        572,377  

Brokerage commission

     15,503        10,931        —    

Net realized gain (loss)

     (3,334,581      (14,377,068      (28,219,941

Change in net unrealized appreciation/depreciation

     (605,352      5,157,541        (3,428,310

Net income (loss)

   $ (4,180,533    $ (9,606,005    $ (32,194,817

The Fund’s net income increased for the year ended December 31, 2015, as compared to the year ended December 31, 2014, primarily due to a lesser decline in futures prices during the year ended December 31, 2015. By comparison, the Fund’s net income increased for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to a lesser decline in futures prices during the year ended December 31, 2014.

 

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ProShares Short VIX Short-Term Futures ETF

Fund Performance

The following table provides summary performance information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
    Year Ended
December 31, 2014
    Year Ended
December 31, 2013
 

NAV beginning of period

   $ 506,556,124     $ 141,751,202     $ 82,663,633  

NAV end of period

   $ 642,811,361     $ 506,556,124     $ 141,751,202  

Percentage change in NAV

     26.9     257.4     71.5

Shares outstanding beginning of period

     8,250,040       2,100,040       2,500,040  

Shares outstanding end of period

     12,650,040       8,250,040       2,100,040  

Percentage change in shares outstanding

     53.3     292.9     (16.0 )% 

Shares created

     24,100,000       16,100,000       11,500,000  

Shares redeemed

     19,700,000       9,950,000       11,900,000  

Per share NAV beginning of period

   $ 61.40      $ 67.50      $ 33.06   

Per share NAV end of period

   $ 50.81      $ 61.40      $ 67.50   

Percentage change in per share NAV

     (17.2 )%      (9.0 )%      104.2

Percentage change in benchmark

     (36.1 )%      (25.5 )%      (65.7 )% 

Benchmark annualized volatility

     78.6     61.4     57.9

During the year ended December 31, 2015, the increase in the Fund’s NAV resulted from an increase from 8,250,040 outstanding Shares at December 31, 2014 to 12,650,040 outstanding Shares at December 31, 2015. 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 inverse of the daily performance of the S&P 500 VIX Short-Term Futures Index. By comparison, during the year ended December 31, 2014, the increase in the Fund’s NAV resulted from an increase from 2,100,040 outstanding Shares at December 31, 2013 to 8,250,040 outstanding Shares at December 31, 2014. 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 inverse of the daily performance of the S&P 500 VIX Short-Term Futures Index. By comparison, during the year ended December 31, 2013, 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 the inverse of the daily performance of the S&P 500 VIX Short-Term Futures Index. The increase in the Fund’s NAV was offset by a decrease from 2,500,040 outstanding Shares at December 31, 2012 to 2,100,040 outstanding Shares at December 31, 2013.

For the years ended December 31, 2015, 2014 and 2013, the Fund’s daily performance had a statistical correlation over 0.99 of the inverse of the daily performance of its benchmark. The Fund’s per Share NAV decrease of 17.2% for the year ended December 31, 2015, as compared to the Fund’s per Share NAV decrease of 9.0% for the year ended December 31, 2014, was primarily due to a greater decline in prices of the first and second month VIX futures during the year ended December 31, 2015. The Fund’s per Share NAV decrease of 9.0% for the year ended December 31, 2014, as compared to the Fund’s per Share NAV increase of 104.2% for the year ended December 31, 2013, was primarily due to a decline in prices of the first and second month VIX futures during the year ended December 31, 2014.

During the year ended December 31, 2015, the Fund’s per Share NAV reached its high for the year on June 23, 2015 at $97.71 per Share and reached its low for the year on September 1, 2015 at $43.58 per Share. By comparison, during the year ended December 31, 2014, the Fund’s per Share NAV reached its high for the year on July 3, 2014 at $92.60 per Share and reached its low for the year on October 15, 2014 at $50.31 per Share. By comparison, during the year ended December 31, 2013, the Fund’s per Share NAV reached its high for the year on December 26, 2013 at $69.78 per Share and reached its low for the year on June 24, 2013 at $35.51 per Share.

The benchmark’s decline of 36.1% for the year ended December 31, 2015, as compared to the benchmark’s decline of 25.5% for the year ended December 31, 2014, can be attributed to a greater decline of the prices of the near-term futures contracts on the VIX futures curve during the year ended December 31, 2015. The benchmark’s decline of 25.5% for the year ended December 31, 2014, as compared to the benchmark’s decline of 65.7% for the year ended December 31, 2013, can be attributed to a lesser decline of the prices of the near-term futures contracts on the VIX futures curve during the year ended December 31, 2014.

 

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Net Income/Loss

The following table provides summary income information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
     Year Ended
December 31, 2014
     Year Ended
December 31, 2013
 

Net investment income (loss)

   $ (5,798,200    $ (4,285,469    $ (1,328,369

Management fee

     4,043,491        2,785,597        845,479  

Brokerage commission

     1,935,395        1,581,416        519,393  

Net realized gain (loss)

     69,828,657        76,945,361        87,181,110  

Change in net unrealized appreciation/depreciation

     27,107,500        (24,470,868      9,505,925  

Net income (loss)

   $ 91,137,957      $ 48,189,024      $ 95,358,666  

The Fund’s net income increased for the year ended December 31, 2015, as compared to the year ended December 31, 2014, primarily due to a greater decline in futures prices during the year ended December 31, 2015. The Fund’s net income decreased for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to a lesser decline in futures prices during the year ended December 31, 2014.

ProShares Ultra VIX Short-Term Futures ETF*

Fund Performance

The following table provides summary performance information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
    Year Ended
December 31, 2014
    Year Ended
December 31, 2013
 

NAV beginning of period

   $ 351,789,953     $ 226,233,584     $ 84,716,132  

NAV end of period

   $ 547,708,740     $ 351,789,953     $ 226,233,584  

Percentage change in NAV

     55.7     55.5     167.0

Shares outstanding beginning of period

     2,804,020       674,478       21,040  

Shares outstanding end of period

     19,502,448       2,804,020       674,478  

Percentage change in shares outstanding

     595.5     315.7     3,105.7

Shares created

     72,180,000       10,215,000       1,980,000  

Shares redeemed

     55,481,572       8,085,458       1,326,563  

Per share NAV beginning of period

   $ 125.46      $ 335.42      $ 4,026.43   

Per share NAV end of period

   $ 28.08      $ 125.46      $ 335.42   

Percentage change in per share NAV

     (77.6 )%      (62.6 )%      (91.7 )% 

Percentage change in benchmark

     (36.1 )%      (25.5 )%      (65.7 )% 

Benchmark annualized volatility

     78.6     61.4     57.9

During the year ended December 31, 2015, the increase in the Fund’s NAV resulted from an increase from 2,804,020 outstanding Shares at December 31, 2014 to 19,502,448 outstanding Shares at December 31, 2015. 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. By comparison, during the year ended December 31, 2014, the increase in the Fund’s NAV resulted from an increase from 674,478 outstanding Shares at December 31, 2013 to 2,804,020 outstanding Shares at December 31, 2014. 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. By comparison, during the year ended December 31, 2013, the increase in the Fund’s NAV resulted from an increase from 21,040 outstanding Shares at December 31, 2012 to 674,478 outstanding Shares at December 31, 2013. 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.

 

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For the years ended December 31, 2015, 2014 and 2013, 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 77.6% for the year ended December 31, 2015, as compared to the Fund’s per Share NAV decrease of 62.6% for the year ended December 31, 2014, was primarily due to a greater decline in prices of the first and second month VIX futures during the year ended December 31, 2015. The Fund’s per Share NAV decrease of 62.6% for the year ended December 31, 2014, as compared to the Fund’s per Share NAV decrease of 91.7% for the year ended December 31, 2013, was primarily due to a lesser decline in prices of the first and second month VIX futures during the year ended December 31, 2014.

During the year ended December 31, 2015, the Fund’s per Share NAV reached its high for the year on January 15, 2015 at $164.28 per Share and reached its low for the year on December 1, 2015 at $24.28 per Share. By comparison, during the year ended December 31, 2014, the Fund’s per Share NAV reached its high for the year on February 5, 2014 at $522.60 per Share and reached its low for the year on December 5, 2014 at $90.15 per Share. By comparison, during the year ended December 31, 2013, the Fund’s per Share NAV reached its high for the year on January 3, 2013 at $3,261.25 per Share and reached its low for the year on December 26, 2013 at $314.45 per Share.

The benchmark’s decline of 36.1% for the year ended December 31, 2015, as compared to the benchmark’s decline of 25.5% for the year ended December 31, 2014, can be attributed to a greater decline in prices of the near-term futures contracts on the VIX futures curve during the year ended December 31, 2015. The benchmark’s decline of 25.5% for the year ended December 31, 2014, as compared to the benchmark’s decline of 65.7% for the year ended December 31, 2013, can be attributed to a lesser decline in prices of the near-term futures contracts on the VIX futures curve during the year ended December 31, 2014.

Net Income/Loss

The following table provides summary income information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
     Year Ended
December 31, 2014
     Year Ended
December 31, 2013
 

Net investment income (loss)

   $ (7,410,148    $ (5,359,486    $ (4,828,761

Management fee

     4,362,460        2,868,337        2,555,345  

Brokerage commission

     3,203,875        2,563,849        2,343,432  

Net realized gain (loss)

     (392,223,946      (139,402,604      (405,797,946

Change in net unrealized appreciation/depreciation

     (27,664,140      63,590,463        (26,361,262

Net income (loss)

   $ (427,298,234    $ (81,171,627    $ (436,987,969

The Fund’s net income decreased for the year ended December 31, 2015, as compared to the year ended December 31, 2014, primarily due to a greater decline in futures prices during the year ended December 31, 2015. By comparison, the Fund’s net income increased for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to a lesser decline in futures prices during the year ended December 31, 2014.

 

* See Note 1 of the Notes to Financial Statements in Item 15 of Part IV in this Annual Report on Form 10-K regarding the reverse Share split for the ProShares Ultra VIX Short-Term Futures ETF.

 

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ProShares UltraShort Bloomberg Commodity

Fund Performance

The following table provides summary performance information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
    Year Ended
December 31, 2014
    Year Ended
December 31, 2013
 

NAV beginning of period

   $ 5,264,706     $ 3,797,427     $ 3,245,965  

NAV end of period

   $ 8,514,039     $ 5,264,706     $ 3,797,427  

Percentage change in NAV

     61.7     38.6     17.0

Shares outstanding beginning of period

     59,997       59,997       59,997  

Shares outstanding end of period

     59,997       59,997       59,997  

Percentage change in shares outstanding

     0.0     0.0     0.0

Shares created

     —         —         —    

Shares redeemed

     —         —         —    

Per share NAV beginning of period

   $ 87.75      $ 63.29      $ 54.10   

Per share NAV end of period

   $ 141.91      $ 87.75      $ 63.29   

Percentage change in per share NAV

     61.7     38.6     17.0

Percentage change in benchmark

     (24.7 )%      (17.0 )%      (9.6 )% 

Benchmark annualized volatility

     15.4     10.3     10.0

During the year ended December 31, 2015, the increase in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of the Bloomberg Commodity Index. There was no net change in the Fund’s outstanding Shares from December 31, 2014 to December 31, 2015. By comparison, during the year ended December 31, 2014, the increase in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of the Bloomberg Commodity Index. There was no net change in the Fund’s outstanding Shares from December 31, 2013 to December 31, 2014. By comparison, during the year ended December 31, 2013, the increase in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of the Bloomberg Commodity Index. There was no net change in the Fund’s outstanding Shares from December 31, 2012 to December 31, 2013.

For the years ended December 31, 2015, 2014 and 2013, 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 61.7% for the year ended December 31, 2015, as compared to the Fund’s per Share NAV increase of 38.6% for the year ended December 31, 2014, was primarily due to a greater appreciation in the value of the assets of the Fund during the year ended December 31, 2015. The Fund’s per Share NAV increase of 38.6% for the year ended December 31, 2014, as compared to the Fund’s per Share NAV increase of 17.0% for the year ended December 31, 2013, was primarily due to a greater appreciation in the value of the assets of the Fund during the year ended December 31, 2014.

During the year ended December 31, 2015, the Fund’s per Share NAV reached its high for the year on December 17, 2015 at $149.68 per Share and reached its low for the year on May 14, 2015 at $83.15 per Share. By comparison, during the year ended December 31, 2014, the Fund’s per Share NAV reached its high for the year on December 31, 2014 at $87.75 per Share and reached its low for the year on April 29, 2014 at $51.38 per Share. By comparison, during the year ended December 31, 2013, the Fund’s per Share NAV reached its high for the year on November 19, 2013 at $67.46 per Share and reached its low for the year on January 30, 2013 at $51.04 per Share.

The benchmark’s decline of 24.7% for the year ended December 31, 2015, as compared to the benchmark’s decline of 17.0% for the year ended December 31, 2014, can be attributed to a greater depreciation of the underlying components of the index during the year ended December 31, 2015. The benchmark’s decline of 17.0% for the year ended December 31, 2014, as compared to the benchmark’s decline of 9.6% for the year ended December 31, 2013, can be attributed to a greater depreciation of the underlying components of the index during the year ended December 31, 2014.

 

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Net Income/Loss

The following table provides summary income information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
     Year Ended
December 31, 2014
     Year Ended
December 31, 2013
 

Net investment income (loss)

   $ (56,626    $ (34,070    $ (32,130

Management fee

     59,324        35,302        34,029  

Net realized gain (loss)

     3,701,255        906,312        760,026  

Change in net unrealized appreciation/depreciation

     (395,296      595,037        (176,434

Net income (loss)

   $ 3,249,333      $ 1,467,279      $ 551,462  

The Fund’s net income increased for the year ended December 31, 2015, as compared to the year ended December 31, 2014, primarily due to a greater depreciation of the underlying components of the index during the year ended December 31, 2015. By comparison, the Fund’s net income increased for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to a greater depreciation of the underlying components of the index during the year ended December 31, 2014.

ProShares UltraShort Bloomberg Crude Oil

Fund Performance

The following table provides summary performance information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
    Year Ended
December 31, 2014
    Year Ended
December 31, 2013
 

NAV beginning of period

   $ 169,210,110     $ 256,060,149     $ 89,481,266  

NAV end of period

   $ 95,897,894     $ 169,210,110     $ 256,060,149  

Percentage change in NAV

     (43.3 )%      (33.9 )%      186.2

Shares outstanding beginning of period

     2,169,944       8,069,944       2,219,944  

Shares outstanding end of period

     719,944       2,169,944       8,069,944  

Percentage change in shares outstanding

     (66.8 )%      (73.1 )%      263.5

Shares created

     10,800,000       15,700,000       23,300,000  

Shares redeemed

     12,250,000       21,600,000       17,450,000  

Per share NAV beginning of period

   $ 77.98      $ 31.73      $ 40.31   

Per share NAV end of period

   $ 133.20      $ 77.98      $ 31.73   

Percentage change in per share NAV

     70.8     145.8     (21.3 )% 

Percentage change in benchmark

     (44.4 )%      (41.7 )%      6.8

Benchmark annualized volatility

     45.5     23.7     18.0

During the year ended December 31, 2015, the decrease in the Fund’s NAV resulted from a decrease from 2,169,944 outstanding Shares at December 31, 2014 to 719,944 outstanding Shares at December 31, 2015. 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 Bloomberg WTI Crude Oil SubindexSM. By comparison, during the year ended December 31, 2014, the decrease in the Fund’s NAV resulted from a decrease from 8,069,944 outstanding Shares at December 31, 2013 to 2,169,944 outstanding Shares at December 31, 2014. 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 Bloomberg WTI Crude Oil SubindexSM. By comparison, during the year ended December 31, 2013, the increase in the Fund’s NAV resulted from an increase from 2,219,944 outstanding Shares at December 31, 2012 to 8,069,944 outstanding Shares at December 31, 2013. 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 Bloomberg WTI Crude Oil SubindexSM.

For the years ended December 31, 2015, 2014 and 2013, 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 70.8% for the year ended December 31, 2015, as compared to the Fund’s per Share NAV increase of 145.8% for the year ended December 31, 2014, was primarily due to a lesser appreciation in the value of the assets of the Fund during the year ended December 31, 2015. The Fund’s per Share NAV increase of 145.8% for the year ended December 31, 2014, as compared to the Fund’s per Share NAV decrease of 21.3% for the year ended December 31, 2013, was primarily due to an appreciation in the value of the assets of the Fund during the year ended December 31, 2014.

 

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During the year ended December 31, 2015, the Fund’s per Share NAV reached its high for the year on December 21, 2015 at $144.87 per Share and reached its low for the year on June 10, 2015 at $52.91 per Share. By comparison, during the year ended December 31, 2014, the Fund’s per Share NAV reached its high for the year on December 31, 2014 at $77.98 per Share and reached its low for the year on June 20, 2014 at $24.07 per Share. By comparison, during the year ended December 31, 2013, the Fund’s per Share NAV reached its high for the year on April 17, 2013 at $45.45 per Share and reached its low for the year on September 9, 2013 at $26.59 per Share.

The benchmark’s decline of 44.4% for the year ended December 31, 2015, as compared to the benchmark’s decline of 41.7% for the year ended December 31, 2014, can be attributed to a greater decrease in the price of WTI Crude Oil during the year ended December 31, 2015. By comparison, the benchmark’s decline of 41.7% for the year ended December 31, 2014, as compared to the benchmark’s rise of 6.8% for the year ended December 31, 2013, can be attributed to a decrease in the price of WTI Crude Oil during the year ended December 31, 2014.

Net Income/Loss

The following table provides summary income information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
     Year Ended
December 31, 2014
     Year Ended
December 31, 2013
 

Net investment income (loss)

   $ (2,166,211    $ (2,415,841    $ (2,544,628

Management fee

     1,978,613        2,448,428        2,581,084  

Brokerage commission

     248,482        78,033        77,031  

Net realized gain (loss)

     91,684,782        99,347,798        (12,299,811

Change in net unrealized appreciation/depreciation

     (33,951,907      46,381,649        6,077,984  

Net income (loss)

   $ 55,566,664      $ 143,313,606      $ (8,766,455

The Fund’s net income decreased for the year ended December 31, 2015, as compared to the year ended December 31, 2014, primarily due to a greater decrease in the price of WTI Crude Oil during the year ended December 31, 2015. By comparison, the Fund’s net income increased for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to a decrease in the price of WTI Crude Oil during the year ended December 31, 2014.

ProShares UltraShort Bloomberg Natural Gas

Fund Performance

The following table provides summary performance information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
    Year Ended
December 31, 2014
    Year Ended
December 31, 2013
 

NAV beginning of period

   $ 14,688,564     $ 22,734,767     $ 12,768,340  

NAV end of period

   $ 10,462,856     $ 14,688,564     $ 22,734,767  

Percentage change in NAV

     (28.8 )%      (35.4 )%      78.1

Shares outstanding beginning of period

     174,952       324,952       125,008  

Shares outstanding end of period

     74,952       174,952       324,952  

Percentage change in shares outstanding

     (57.2 )%      (46.2 )%      159.9

Shares created

     450,000       2,850,000       587,500  

Shares redeemed

     550,000       3,000,000       387,556  

Per share NAV beginning of period

   $ 83.96      $ 69.96      $ 102.14   

Per share NAV end of period

   $ 139.59      $ 83.96      $ 69.96   

Percentage change in per share NAV

     66.3     20.0     (31.5 )% 

Percentage change in benchmark

     (40.0 )%      (30.7 )%      4.9

Benchmark annualized volatility

     40.4     42.1     29.9

 

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During the year ended December 31, 2015, the decrease in the Fund’s NAV resulted from a decrease from 174,952 outstanding Shares at December 31, 2014 to 74,952 outstanding Shares at December 31, 2015. 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 Bloomberg Natural Gas SubindexSM. By comparison, during the year ended December 31, 2014, the decrease in the Fund’s NAV resulted from a decrease from 324,952 outstanding Shares at December 31, 2013 to 174,952 outstanding Shares at December 31, 2014. 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 Bloomberg Natural Gas SubindexSM. By comparison, during the period ended December 31, 2013, the increase in the Fund’s NAV resulted from an increase from 125,008 outstanding Shares at December 31, 2012 to 324,952 outstanding Shares at December 31, 2013. 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 Bloomberg Natural Gas SubindexSM.

For the years ended December 31, 2015, 2014 and 2013, 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 66.3% for the year ended December 31, 2015, as compared to the Fund’s per Share NAV increase of 20.0% for the year ended December 31, 2014, was primarily due to a greater appreciation in the value of the assets of the Fund during the year ended December 31, 2015. The Fund’s per Share NAV increase of 20.0% for the year ended December 31, 2014, as compared to the Fund’s per Share NAV decrease of 31.5% for the year ended December 31, 2013, was primarily due to an appreciation in the value of the assets of the Fund during the year ended December 31, 2014.

During the year ended December 31, 2015, the Fund’s per Share NAV reached its high for the year on December 16, 2015 at $216.64 per Share and reached its low for the year on January 14, 2015 at $64.60 per Share. By comparison, during the year ended December 31, 2014, the Fund’s per Share NAV reached its high for the year on December 31, 2014 at $83.96 per Share and reached its low for the year on June 12, 2014 at $35.78 per Share. By comparison, during the year ended December 31, 2013, the Fund’s per Share NAV reached its high for the year on April 19, 2013 at $116.81 per Share and reached its low for the year on January 9, 2013 at $59.27 per Share.

The benchmark’s decline of 40.0% for the year ended December 31, 2015, as compared to the benchmark’s decline of 30.7% for the year ended December 31, 2014, can be attributed to a greater decrease in the price of Henry Hub Natural Gas during the year ended December 31, 2015. The benchmark’s decline of 30.7% for the year ended December 31, 2014, as compared to the benchmark’s rise of 4.9% for the year ended December 31, 2013, can be attributed to a decrease in the price of Henry Hub Natural Gas during the year ended December 31, 2014.

Net Income/Loss

The following table provides summary income information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
     Year Ended
December 31, 2014
     Year Ended
December 31, 2013
 

Net investment income (loss)

   $ (177,124    $ (460,907    $ (209,360

Management fee

     112,277        385,014        172,542  

Brokerage commission

     70,677        92,199        45,438  

Net realized gain (loss)

     15,212,833        8,796,882        (2,584,895

Change in net unrealized appreciation/depreciation

     (6,412,461      2,899,237        632,743  

Net income (loss)

   $ 8,623,248      $ 11,235,212      $ (2,161,512

The Fund’s net income decreased for the year ended December 31, 2015, as compared to the year ended December 31, 2014, primarily due to a greater decrease in the price of Henry Hub Natural Gas, during the year ended December 31, 2015. By comparison, the Fund’s net income increased for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to a decrease in the price of Henry Hub Natural Gas, during the year ended December 31, 2014.

 

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ProShares UltraShort Gold

Fund Performance

The following table provides summary performance information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
    Year Ended
December 31, 2014
    Year Ended
December 31, 2013
 

NAV beginning of period

   $ 81,861,762     $ 139,436,456     $ 92,416,742  

NAV end of period

   $ 74,971,764     $ 81,861,762     $ 139,436,456  

Percentage change in NAV

     (8.4 )%      (41.3 )%      50.9

Shares outstanding beginning of period

     846,978       1,346,978       1,446,978  

Shares outstanding end of period

     646,978       846,978       1,346,978  

Percentage change in shares outstanding

     (23.6 )%      (37.1 )%      (6.9 )% 

Shares created

     150,000       550,000       2,650,000  

Shares redeemed

     350,000       1,050,000       2,750,000  

Per share NAV beginning of period

   $ 96.65      $ 103.52      $ 63.87   

Per share NAV end of period

   $ 115.88      $ 96.65      $ 103.52   

Percentage change in per share NAV

     19.9     (6.6 )%      62.1

Percentage change in benchmark

     (12.1 )%      0.1     (27.3 )% 

Benchmark annualized volatility

     14.4     12.9     21.8

During the year ended December 31, 2015, the decrease in the Fund’s NAV resulted from a decrease from 846,978 outstanding Shares at December 31, 2014 to 646,978 outstanding Shares at December 31, 2015. 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 gold bullion as measured by the U.S. dollar p.m. LBMA Gold Price. By comparison, during the year ended December 31, 2014, the decrease in the Fund’s NAV resulted primarily from a decrease from 1,346,978 outstanding Shares at December 31, 2013 to 846,978 outstanding Shares at December 31, 2014. 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 year ended December 31, 2013, the increase in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of 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 1,446,978 outstanding Shares at December 31, 2012 to 1,346,978 outstanding Shares at December 31, 2013.

For the years ended December 31, 2015, 2014 and 2013, 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 19.9% for the year ended December 31, 2014, as compared to the Fund’s per Share NAV decrease of 6.6% for the year ended December 31, 2014, was primarily due to an appreciation in the value of the assets of the Fund during the year ended December 31, 2015. The Fund’s per Share NAV decrease of 6.6% for the year ended December 31, 2014, as compared to the Fund’s per Share NAV increase of 62.1% for the year ended December 31, 2013, was primarily due to a depreciation in the value of the assets of the Fund during the year ended December 31, 2014.

During the year ended December 31, 2015, the Fund’s per Share NAV reached its high for the year on December 17, 2015 at $118.51 per Share and reached its low for the year on January 22, 2015 at $83.07 per Share. By comparison, during the year ended December 31, 2014, the Fund’s per Share NAV reached its high for the year on November 5, 2014 at $109.00 per Share and reached its low for the year on March 14, 2014 at $77.10 per Share. By comparison, during the year ended December 31, 2013, the Fund’s per Share NAV reached its high for the year on June 28, 2013 at $114.11 per Share and reached its low for the year on January 1, 2013 at $61.07 per Share.

The benchmark’s decrease of 12.1% for the year ended December 31, 2015, as compared to the benchmark’s increase of 0.1% for the year ended December 31, 2014, can be attributed to a decrease in the price of spot gold in U.S. dollar terms during the year ended December 31, 2015. By comparison, the benchmark’s increase of 0.1% for the year ended December 31, 2014, as compared to the benchmark’s decline of 27.3% for the year ended December 31, 2013, can be attributed to an increase in the price of spot gold in U.S. dollar terms during the year ended December 31, 2014.

 

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Net Income /Loss

The following table provides summary income information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
     Year Ended
December 31, 2014
     Year Ended
December 31, 2013
 

Net investment income (loss)

   $ (703,582    $ (857,817    $ (1,175,860

Management fee

     735,540        898,453        1,237,712  

Brokerage commission

     41        39        39  

Net realized gain (loss)

     12,708,936        (5,312,609      61,123,058  

Change in net unrealized appreciation/depreciation

     4,098,510        (7,934,003      1,901,341  

Net income (loss)

   $ 16,103,864      $ (14,104,429    $ 61,848,539  

The Fund’s net income increased for the year ended December 31, 2015, as compared to the year ended December 31, 2014, primarily due to a decrease in the price of spot gold in U.S. dollar terms during the year ended December 31, 2015. By comparison, the Fund’s net income decreased for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to an increase in the price of spot gold in U.S. dollar terms during the year ended December 31, 2014.

 

  On March 19, 2015, the company that ran the London U.S. dollar gold fixing ceased calculating the price of gold for the LBMA. The LBMA selected ICE Benchmark Administration to calculate the price, which was renamed the LBMA Gold Price, and is based on an electronic, physically settled auction-based methodology, beginning on March 20, 2015.

ProShares UltraShort Silver*

Fund Performance

The following table provides summary performance information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
    Year Ended
December 31, 2014
    Year Ended
December 31, 2013
 

NAV beginning of period

   $ 53,007,867     $ 112,989,686     $ 100,656,703  

NAV end of period

   $ 55,987,938     $ 53,007,867     $ 112,989,686  

Percentage change in NAV

     5.6     (53.1 )%      12.3

Shares outstanding beginning of period

     916,978       2,516,978       3,916,978  

Shares outstanding end of period

     866,978       916,978       2,516,978  

Percentage change in shares outstanding

     (5.5 )%      (63.6 )%      (35.7 )% 

Shares created

     1,650,000       1,800,000       6,900,000  

Shares redeemed

     1,700,000       3,400,000       8,300,000  

Per share NAV beginning of period

   $ 57.81      $ 44.89      $ 25.70   

Per share NAV end of period

   $ 64.58      $ 57.81      $ 44.89   

Percentage change in per share NAV

     11.7     28.8     74.7

Percentage change in benchmark

     (13.5 )%      (18.1 )%      (34.9 )% 

Benchmark annualized volatility

     24.1     21.8     31.5

During the year ended December 31, 2015, the increase in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of silver bullion as measured by the London Silver Price. The increase in the Fund’s NAV was offset by a decrease from 916,978 outstanding shares at December 31, 2014 to 866,978 outstanding shares at December 31, 2015. By comparison, during the year ended December 31, 2014, the decrease in the Fund’s NAV resulted from a decrease from 2,516,978 outstanding Shares at December 31, 2013 to 916,978 outstanding shares at December 31,

 

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2014. 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 London Silver Price†. By comparison, during the year ended December 31, 2013, the increase in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of 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 3,916,978 outstanding Shares at December 31, 2012 to 2,516,978 outstanding Shares at December 31, 2013.

For the years ended December 31, 2015, 2014 and 2013, 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 11.7% for the year ended December 31, 2015, as compared to the Fund’s per Share NAV increase of 28.8% for the year ended December 31, 2014, was primarily due to a lesser appreciation in the value of the assets of the Fund during the year ended December 31, 2015. The Fund’s per Share NAV increase of 28.8% for the year ended December 31, 2014, as compared to the Fund’s per Share NAV increase of 74.7% for the year ended December 31, 2013, was primarily due to a lesser appreciation in the value of the assets of the Fund during the year ended December 31, 2014.

During the year ended December 31, 2015, the Fund’s per Share NAV reached its high for the year on December 14, 2015 at $66.08 per Share and reached its low for the year on January 23, 2015 at $43.39 per Share. By comparison, during the year ended December 31, 2014, the Fund’s per Share NAV reached its high for the year on November 6, 2014 at $65.64 per Share and reached its low for the year on February 24, 2014 at $34.40 per Share. By comparison, during the year ended December 31, 2013, the Fund’s per Share NAV reached its high for the year on June 27, 2013 at $56.84 per Share and reached its low for the year on January 23, 2013 at $21.86 per Share.

The benchmark’s decline of 13.5% for the year ended December 31, 2015, as compared to the benchmark’s decline of 18.1% for the year ended December 31, 2014, can be attributed to a lesser decline in the price of spot silver in U.S. dollar terms during the year ended December 31, 2015. The benchmark’s decline of 18.1% for the year ended December 31, 2014, as compared to the benchmark’s decline of 34.9% for the year ended December 31, 2013, can be attributed to a lesser decline in the price of spot silver in U.S. dollar terms during the year ended December 31, 2014.

Net Income/Loss

The following table provides summary income information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
     Year Ended
December 31, 2014
     Year Ended
December 31, 2013
 

Net investment income (loss)

   $ (516,464    $ (585,841    $ (973,304

Management fee

     540,253        616,703        1,033,442  

Brokerage commission

     42        39        40  

Net realized gain (loss)

     10,756,758        15,119,117        113,463,320  

Change in net unrealized appreciation/depreciation

     4,186,942        2,807,756        (21,564,801

Net income (loss)

   $ 14,427,236      $ 17,341,032      $ 90,925,215  

The Fund’s net income decreased for the year ended December 31, 2015, as compared to the year ended December 31, 2014, primarily due to a lesser decline in the price of spot silver in U.S. dollar terms during the year ended December 31, 2015. By comparison, the Fund’s net income decreased for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to a lesser decline in the price of spot silver in U.S. dollar terms during the year ended December 31, 2014.

 

* See Note 1 of the Notes to Financial Statements in Item 15 of Part IV in this Annual Report on Form 10-K regarding the Share split for ProShares UltraShort Silver.
  On August 14, 2014, the company that ran the London U.S. dollar silver fixing ceased calculating the price of silver for the LBMA. The LBMA selected the CME Group and Thomson Reuters to calculate the price, which was renamed the London Silver Price, beginning August 15, 2014.

 

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ProShares Short Euro

Fund Performance

The following table provides summary performance information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
    Year Ended
December 31, 2014
    Year Ended
December 31, 2013
 

NAV beginning of period

   $ 14,021,804     $ 8,896,842     $ 3,763,040  

NAV end of period

   $ 17,510,898     $ 14,021,804     $ 8,896,842  

Percentage change in NAV

     24.9     57.6     136.4

Shares outstanding beginning of period

     350,005       250,005       100,005  

Shares outstanding end of period

     400,005       350,005       250,005  

Percentage change in shares outstanding

     14.3     40.0     150.0

Shares created

     550,000       250,000       150,000  

Shares redeemed

     500,000       150,000       —    

Per share NAV beginning of period

   $ 40.06      $ 35.59      $ 37.63   

Per share NAV end of period

   $ 43.78      $ 40.06      $ 35.59   

Percentage change in per share NAV

     9.3     12.6     (5.4 )% 

Percentage change in benchmark

     (10.2 )%      (12.0 )%      4.3

Benchmark annualized volatility

     12.1     6.1     7.5

During the year ended December 31, 2015, the increase in the Fund’s NAV resulted primarily from an increase from 350,005 outstanding shares at December 31, 2014 to 400,005 outstanding shares at December 31, 2015. 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 spot price of the euro versus the U.S. dollar. By comparison, during the year ended December 31, 2014, the increase in the Fund’s NAV resulted primarily from an increase from 250,005 outstanding Shares at December 31, 2013 to 350,005 outstanding shares at December 31, 2014. 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 spot price of the euro versus the U.S. dollar. By comparison, during the year ended December 31, 2013, the increase in the Fund’s NAV resulted from an increase from 100,005 outstanding Shares at December 31, 2012 to 250,005 outstanding Shares at December 31, 2013. 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 years ended December 31, 2015, 2014 and 2013, the Fund’s daily performance had a statistical correlation over 0.99 of the inverse of the daily performance of its benchmark. The Fund’s per Share NAV increase of 9.3% for the year ended December 31, 2015, as compared to the Fund’s per Share NAV increase of 12.6% for the year ended December 31, 2014, was primarily due to a lesser appreciation in the value of the assets held by the Fund during the year ended December 31, 2015. The Fund’s per Share NAV increase of 12.6% for the year ended December 31, 2014, as compared to the Fund’s per Share NAV decrease of 5.4% for the year ended December 31, 2013, was primarily due to an appreciation in the value of the assets held by the Fund during the year ended December 31, 2014.

During the year ended December 31, 2015, the Fund’s per Share NAV reached its high for the year on March 13, 2015 at $46.07 per Share and reached its low for the year on January 2, 2015 at $40.37 per Share. By comparison, during the year ended December 31, 2014, the Fund’s per Share NAV reached its high for the year on December 31, 2014 at $40.06 per Share and reached its low for the year on May 6, 2014 at $35.07 per Share. By comparison, during the year ended December 31, 2013, the Fund’s per Share NAV reached its high for the year on March 27, 2013 at $38.76 per Share and reached its low for the year on December 30, 2013 at $35.56 per Share.

The benchmark’s decline of 10.2% for the year ended December 31, 2015, as compared to the benchmark’s decline of 12.0% for the year ended December 31, 2014, can be attributed to a lesser decrease in the value of the euro versus the U.S. dollar during the period ended December 31, 2015. By comparison, the benchmark’s decline of 12.0% for the year ended December 31, 2014, as compared to the benchmark’s rise of 4.3% for the year ended December 31, 2013, can be attributed to a decrease in the value of the euro versus the U.S. dollar during the period ended December 31, 2014.

 

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Net Income/Loss

The following table provides summary income information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
     Year Ended
December 31, 2014
     Year Ended
December 31, 2013
 

Net investment income (loss)

   $ (178,761    $ (118,247    $ (51,170

Management fee

     179,286        121,126        35,075  

Brokerage commission

     3,979        1,837        812  

Offering costs

     —          —          45,511  

Limitation by Sponsor

     —          —          (28,232

Net realized gain (loss)

     1,559,643        1,593,450        (381,830

Change in net unrealized appreciation/depreciation

     (142,063      418,090        22,288  

Net income (loss)

   $ 1,238,819      $ 1,893,293      $ (410,712

The Fund’s net income decreased for the year ended December 31, 2015, as compared to the year ended December 31, 2014, primarily due to a lesser decrease in the value of the euro versus the U.S. dollar and a higher asset base during the year ended December 31, 2015. The Fund’s net income increased for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to a decrease in the value of the euro versus the U.S. dollar and a higher asset base during the year ended December 31, 2014.

ProShares UltraShort Australian Dollar

Fund Performance

The following table provides summary performance information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
    Year Ended
December 31, 2014
    Year Ended
December 31, 2013
 

NAV beginning of period

   $ 23,120,790     $ 27,983,279     $ 3,780,999  

NAV end of period

   $ 20,460,679     $ 23,120,790     $ 27,983,279  

Percentage change in NAV

     (11.5 )%      (17.4 )%      640.1

Shares outstanding beginning of period

     450,005       600,005       100,005  

Shares outstanding end of period

     350,005       450,005       600,005  

Percentage change in shares outstanding

     (22.2 )%      (25.0 )%      500.0

Shares created

     50,000       —         500,000  

Shares redeemed

     150,000       150,000       —    

Per share NAV beginning of period

   $ 51.38      $ 46.64      $ 37.81   

Per share NAV end of period

   $ 58.46      $ 51.38      $ 46.64   

Percentage change in per share NAV

     13.8     10.2     23.4

Percentage change in benchmark

     (10.7 )%      (8.6 )%      (14.1 )% 

Benchmark annualized volatility

     11.9     8.4     10.1

During the year ended December 31, 2015, the decrease in the Fund’s NAV resulted from a decrease from 450,005 outstanding Shares at December 31, 2014 to 350,005 outstanding Shares at December 31, 2015. 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 spot price of the Australian dollar versus the U.S. dollar. By comparison, during the year ended December 31, 2014, the decrease in the Fund’s NAV resulted from a decrease from 600,005 outstanding Shares at December 31, 2013 to 450,005 outstanding Shares at December 31, 2014. 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

 

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spot price of the Australian dollar versus the U.S. dollar. By comparison, during the year ended December 31, 2013, the increase in the Fund’s NAV resulted primarily from an increase from 100,005 outstanding Shares at December 31, 2012 to 600,005 outstanding Shares at December 31, 2013. 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 Australian dollar versus the U.S. dollar.

For the years ended December 31, 2015, 2014 and 2013, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the inverse of the daily performance of its benchmark. The Fund’s per Share NAV increase of 13.8% for the year ended December 31, 2015, as compared to the Fund’s per Share NAV increase of 10.2% for the year ended December 31, 2014, was primarily due to a greater appreciation in the value of the assets held by the Fund during the year ended December 31, 2015. The Fund’s per Share NAV increase of 10.2% for the year ended December 31, 2014, as compared to the Fund’s per Share NAV increase of 23.4% for the year ended December 31, 2013, was primarily due to a lesser appreciation in the value of the assets held by the Fund during the year ended December 31, 2013.

During the year ended December 31, 2015, the Fund’s per Share NAV reached its high for the year on September 4, 2015 at $66.75 per Share and reached its low for the year on May 13, 2015 at $50.07 per Share. By comparison, during the year ended December 31, 2014, the Fund’s per Share NAV reached its high for the year on December 23, 2014 at $52.32 per Share and reached its low for the year on July 1, 2014 at $39.67 per Share. By comparison, during the year ended December 31, 2013, the Fund’s per Share NAV reached its high for the year on August 2, 2013 at $48.58 per Share and reached its low for the year on April 11, 2013 at $35.89 per Share.

The benchmark’s decline of 10.7% for the year ended December 31, 2015, as compared to the benchmark’s decline of 8.6% for the year ended December 31, 2014, can be attributed to a greater decline in the value of the Australian dollar versus the U.S. dollar during the period ended December 31, 2015. By comparison, the benchmark’s decline of 8.6% for the year ended December 31, 2014, as compared to the benchmark’s decline of 14.1% for the year ended December 31, 2013, can be attributed to a lesser decline in the value of the Australian dollar versus the U.S. dollar during the period ended December 31, 2014.

Net Income/Loss

The following table provides summary income information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
     Year Ended
December 31, 2014
     Year Ended
December 31, 2013
 

Net investment income (loss)

   $ (209,987    $ (213,183    $ (159,424

Management fee

     199,845        208,597        106,713  

Brokerage commission

     16,140        12,811        11,753  

Offering costs

     —          —          47,870  

Limitation by Sponsor

     —          —          (1,259

Net realized gain (loss)

     4,330,688        2,296,708        2,720,005  

Change in net unrealized appreciation/depreciation

     (1,164,304      (175,587      833,294  

Net income (loss)

   $ 2,956,397      $ 1,907,938      $ 3,393,875  

The Fund’s net income increased for the year ended December 31, 2015, as compared to the year ended December 31, 2014, primarily due to a greater decline in the value of the Australian dollar versus the U.S. dollar during the year ended December 31, 2015. The Fund’s net income decreased for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to a lesser decline in the value of the Australian dollar versus the U.S. dollar during the year ended December 31, 2014.

 

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ProShares UltraShort Euro

Fund Performance

The following table provides summary performance information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
    Year Ended
December 31, 2014
    Year Ended
December 31, 2013
 

NAV beginning of period

   $ 517,191,349     $ 418,001,115     $ 526,778,026  

NAV end of period

   $ 522,306,518     $ 517,191,349     $ 418,001,115  

Percentage change in NAV

     1.0     23.7     (20.6 )% 

Shares outstanding beginning of period

     23,950,014       24,500,014       27,700,014  

Shares outstanding end of period

     20,450,014       23,950,014       24,500,014  

Percentage change in shares outstanding

     (14.6 )%      (2.2 )%      (11.6 )% 

Shares created

     12,600,000       4,500,000       6,250,000  

Shares redeemed

     16,100,000       5,050,000       9,450,000  

Per share NAV beginning of period

   $ 21.59      $ 17.06      $ 19.02   

Per share NAV end of period

   $ 25.54      $ 21.59      $ 17.06   

Percentage change in per share NAV

     18.3     26.6     (10.3 )% 

Percentage change in benchmark

     (10.2 )%      (12.0 )%      4.3

Benchmark annualized volatility

     12.1     6.1     7.5

During the year ended December 31, 2015, the increase in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the inverse of the daily performance of the spot price of the euro versus the U.S. dollar. The increase in the Fund’s NAV was offset by a decrease from 23,950,014 outstanding Shares at December 31, 2014 to 20,450,014 outstanding Shares at December 31, 2015. By comparison, during the year ended December 31, 2014, 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 inverse of the daily performance of the spot price of the euro versus the U.S. dollar. The increase in the Fund’s NAV was offset by a decrease from 24,500,014 outstanding Shares at December 31, 2013 to 23,950,014 outstanding Shares at December 31, 2014. By comparison, during the year ended December 31, 2013, the decrease in the Fund’s NAV resulted primarily from a decrease from 27,700,014 outstanding Shares at December 31, 2012 to 24,500,014 outstanding Shares at December 31, 2013. 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.

For the years ended December 31, 2015, 2014 and 2013, 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 18.3% for the year ended December 31, 2015, as compared to the Fund’s per Share NAV increase of 26.6% for the year ended December 31, 2014, was primarily due to a lesser appreciation in the value of the assets held by the Fund during the year ended December 31, 2015. The Fund’s per Share NAV increase of 26.6% for the year ended December 31, 2014, as compared to the Fund’s per Share NAV decrease of 10.3% for the year ended December 31, 2013, was primarily due to an appreciation in the value of the assets held by the Fund during the year ended December 31, 2014.

During the year ended December 31, 2015, the Fund’s per Share NAV reached its high for the year on March 13, 2015 at $28.50 per Share and reached its low for the year on January 2, 2015 at $21.94 per Share. By comparison, during the year ended December 31, 2014, the Fund’s per Share NAV reached its high for the year on December 31, 2014 at $21.59 per Share and reached its low for the year on May 6, 2014 at $16.52 per Share. By comparison, during the year ended December 31, 2013, the Fund’s per Share NAV reached its high for the year on March 27, 2013 at $20.16 per Share and reached its low for the year on December 30, 2013 at $16.96 per Share.

The benchmark’s decline of 10.2% for the year ended December 31, 2015, as compared to the benchmark’s decline of 12.0% for the year ended December 31, 2014, can be attributed to a lesser decline in the value of the euro versus the U.S. dollar during the year ended December 31, 2015. By comparison, the benchmark’s decline of 12.0% for the year ended December 31, 2014, as compared to the benchmark’s rise of 4.3% for the year ended December 31, 2013, can be attributed to a decline in the value of the euro versus the U.S. dollar during the year ended December 31, 2014.

 

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Net Income/Loss

The following table provides summary income information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
     Year Ended
December 31, 2014
     Year Ended
December 31, 2013
 

Net investment income (loss)

   $ (5,000,587    $ (3,994,145    $ (4,375,512

Management fee

     5,265,432        4,193,741        4,600,479  

Net realized gain (loss)

     131,674,081        83,683,592        (48,055,883

Change in net unrealized appreciation/depreciation

     (45,497,112      30,499,215        (588,667

Net income (loss)

   $ 81,176,382      $ 110,188,662      $ (53,020,062

The Fund’s net income decreased for the year ended December 31, 2015, as compared to the year ended December 31, 2014, primarily due to a lesser decline in the value of the euro versus the U.S. dollar during the year ended December 31, 2015. By comparison, the Fund’s net income increased for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to a decline in the value of the euro versus the U.S. dollar during the year ended December 31, 2014.

ProShares UltraShort Yen

Fund Performance

The following table provides summary performance information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
    Year Ended
December 31, 2014
    Year Ended
December 31, 2013
 

NAV beginning of period

   $ 531,471,873     $ 588,121,516     $ 408,563,630  

NAV end of period

   $ 237,372,900     $ 531,471,873     $ 588,121,516  

Percentage change in NAV

     (55.3 )%      (9.6 )%      43.9

Shares outstanding beginning of period

     5,949,294       8,299,294       8,049,294  

Shares outstanding end of period

     2,699,294       5,949,294       8,299,294  

Percentage change in shares outstanding

     (54.6 )%      (28.3 )%      3.1

Shares created

     1,350,000       2,850,000       5,650,000  

Shares redeemed

     4,600,000       5,200,000       5,400,000  

Per share NAV beginning of period

   $ 89.33      $ 70.86      $ 50.76   

Per share NAV end of period

   $ 87.94      $ 89.33      $ 70.86   

Percentage change in per share NAV

     (1.6 )%      26.1     39.6

Percentage change in benchmark

     (0.4 )%      (12.1 )%      (17.6 )% 

Benchmark annualized volatility

     8.2     7.9     12.3

During the year ended December 31, 2015, the decrease in the Fund’s NAV resulted primarily from a decrease from 5,949,294 outstanding Shares at December 31, 2014 to 2,699,294 outstanding Shares at December 31, 2015. 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. By comparison, during the year ended December 31, 2014, the decrease in the Fund’s NAV resulted from a decrease from 8,299,294 outstanding Shares at December 31, 2013 to 5,949,294 outstanding Shares at December 31, 2014. 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 spot price of the Japanese yen versus the U.S. dollar. By comparison, during the year ended December 31, 2013, the increase in the Fund’s NAV resulted primarily from an increase from 8,049,294 outstanding Shares at December 31, 2012 to 8,299,294 outstanding Shares at December 31, 2013. 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.

 

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For the years ended December 31, 2015, 2014 and 2013, 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 1.6% for the year ended December 31, 2015, as compared to the Fund’s per Share NAV increase of 26.1% for the year ended December 31, 2014, was primarily due to a depreciation in the value of the assets held by the Fund during the year ended December 31, 2015. The Fund’s per Share NAV increase of 26.1% for the year ended December 31, 2014, as compared to the Fund’s per Share NAV increase of 39.6% for the year ended December 31, 2013, was primarily due to a lesser appreciation in the value of the assets held by the Fund during the year ended December 31, 2014.

During the year ended December 31, 2015, the Fund’s per Share NAV reached its high for the year on June 5, 2015 at $97.30 per Share and reached its low for the year on January 15, 2015 at $84.11 per Share. By comparison, during the year ended December 31, 2014, the Fund’s per Share NAV reached its high for the year on December 5, 2014 at $92.07 per Share and reached its low for the year on July 17, 2014 at $64.75 per Share. By comparison, during the year ended December 31, 2013, the Fund’s per Share NAV reached its high for the year on December 31, 2013 at $70.86 per Share and reached its low for the year on January 8, 2013 at $51.09 per Share.

The benchmark’s decline of 0.4% for the year ended December 31, 2015, as compared to the benchmark’s decline of 12.1% for the year ended December 31, 2014, can be attributed to a lesser decline in the value of the Japanese yen versus the U.S. dollar during the year ended December 31, 2015. By comparison, the benchmark’s decline of 12.1% for the year ended December 31, 2014, as compared to the benchmark’s decline of 17.6% for the year ended December 31, 2013, can be attributed to a lesser decline in the value of the Japanese yen versus the U.S. dollar during the year ended December 31, 2014.

Net Income/Loss

The following table provides summary income information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
     Year Ended
December 31, 2014
     Year Ended
December 31, 2013
 

Net investment income (loss)

   $ (3,623,678    $ (3,741,601    $ (4,398,231

Management fee

     3,759,492        3,938,854        4,607,832  

Net realized gain (loss)

     8,806,429        127,860,058        164,024,125  

Change in net unrealized appreciation/depreciation

     (12,347,563      (30,986,352      (8,704,656

Net income (loss)

   $ (7,164,812    $ 93,132,105      $ 150,921,238  

The Fund’s net income decreased for the year ended December 31, 2015, as compared to the year ended December 31, 2014, primarily due to a lesser decline in the value of the Japanese yen versus the U.S. dollar during the year ended December 31, 2015. By comparison, the Fund’s net income decreased for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to a lesser decline in the value of the Japanese yen versus the U.S. dollar during the year ended December 31, 2014.

ProShares Ultra Bloomberg Commodity*

Fund Performance

The following table provides summary performance information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
    Year Ended
December 31, 2014
    Year Ended
December 31, 2013
 

NAV beginning of period

   $ 2,606,920     $ 2,915,034     $ 6,097,211  

NAV end of period

   $ 7,105,984     $ 2,606,920     $ 2,915,034  

Percentage change in NAV

     172.6     (10.6 )%      (52.2 )% 

Shares outstanding beginning of period

     50,004       37,504       62,504  

Shares outstanding end of period

     249,965       50,004       37,504  

Percentage change in shares outstanding

     399.9     33.3     (40.0 )% 

 

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     Year Ended
December 31, 2015
    Year Ended
December 31, 2014
    Year Ended
December 31, 2013
 

Shares created

     225,000       12,500       —     

Shares redeemed

     25,039       —         25,000  

Per share NAV beginning of period

   $ 52.13      $ 77.73      $ 97.55   

Per share NAV end of period

   $ 28.43      $ 52.13      $ 77.73   

Percentage change in per share NAV

     (45.5 )%      (32.9 )%      (20.3 )% 

Percentage change in benchmark

     (24.7 )%      (17.0 )%      (9.6 )% 

Benchmark annualized volatility

     15.4     10.3     10.0

During the year ended December 31, 2015, the increase in the Fund’s NAV resulted from an increase from 50,004 outstanding Shares at December 31, 2014 to 249,965 outstanding Shares at December 31, 2015. 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 Bloomberg Commodity Index. By comparison, during the year ended December 31, 2014, 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 Bloomberg Commodity Index. The decrease in the Fund’s NAV was offset by an increase from 37,504 outstanding Shares at December 31, 2013 to 50,004 outstanding Shares at December 31, 2014. By comparison, during the year ended December 31, 2013, the decrease in the Fund’s NAV resulted primarily from a decrease from 62,504 outstanding shares at December 31, 2012 to 37,504 outstanding Shares at December 31, 2013. 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 Bloomberg Commodity Index.

For the years ended December 31, 2015, 2014 and 2013, 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 45.5% for the year ended December 31, 2015, as compared to the Fund’s per Share NAV decrease of 32.9% for the year ended December 31, 2014, was primarily due to a greater depreciation in the value of the assets of the Fund during the year ended December 31, 2015. The Fund’s per Share NAV decrease of 32.9% for the year ended December 31, 2014, as compared to the Fund’s per Share NAV decrease of 20.3% for the year ended December 31, 2013, was primarily due to a greater depreciation in the value of the assets of the Fund during the year ended December 31, 2014.

During the year ended December 31, 2015, the Fund’s per Share NAV reached its high for the year on May 14, 2015 at $52.57 per Share and reached its low for the year on December 17, 2015 at $27.07 per Share. By comparison, during the year ended December 31, 2014, the Fund’s per Share NAV reached its high for the year on April 29, 2014 at $93.80 per Share and reached its low for the year on December 31, 2014 at $52.13 per Share. By comparison, during the year ended December 31, 2013, the Fund’s per Share NAV reached its high for the year on January 30, 2013 at $102.88 per Share and reached its low for the year on November 19, 2013 at $73.32 per Share.

The benchmark’s decline of 24.7% for the year ended December 31, 2015, as compared to the benchmark’s decline of 17.0% for the year ended December 31, 2014, can be attributed to a greater depreciation of the underlying components of the index during the year ended December 31, 2015. By comparison, the benchmark’s decline of 17.0% for the year ended December 31, 2014, as compared to the benchmark’s decline of 9.6% for the year ended December 31, 2013, can be attributed to a greater depreciation of the underlying components of the index during the year ended December 31, 2014.

Net Income/Loss

The following table provides summary income information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
     Year Ended
December 31, 2014
     Year Ended
December 31, 2013
 

Net investment income (loss)

   $ (33,542    $ (30,991    $ (38,477

Management fee

     34,275        32,321        40,543  

Net realized gain (loss)

     (2,952,171      (1,065,579      (1,254,295

Change in net unrealized appreciation/depreciation

     146,716        (346,460      321,274  

Net income (loss)

   $ (2,838,997    $ (1,443,030    $ (971,498

 

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The Fund’s net income decreased for the year ended December 31, 2015, as compared to the year ended December 31, 2014, primarily due to a greater depreciation of the underlying components of the index, during the year ended December 31, 2015. By comparison, the Fund’s net income decreased for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to a greater depreciation of the underlying components of the index, during the year ended December 31, 2014.

 

* See Note 1 of the Notes to Financial Statements in Item 15 of Part IV in this Annual Report on Form 10-K regarding the reverse Share split for ProShares Ultra Bloomberg Commodity.

ProShares Ultra Bloomberg Crude Oil*

Fund Performance

The following table provides summary performance information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
    Year Ended
December 31, 2014
    Year Ended
December 31, 2013
 

NAV beginning of period

   $ 450,562,988     $ 142,773,429     $ 483,508,964  

NAV end of period

   $ 783,922,475     $ 450,562,988     $ 142,773,429  

Percentage change in NAV

     74.0     215.6     (70.5 )% 

Shares outstanding beginning of period

     8,879,834       889,834       3,289,834  

Shares outstanding end of period

     62,327,867       8,879,834       889,834  

Percentage change in shares outstanding

     601.9     897.9     (73.0 )% 

Shares created

     86,830,000       10,080,000       2,290,000  

Shares redeemed

     33,381,967       2,090,000       4,690,000  

Per share NAV beginning of period

   $ 50.74      $ 160.45      $ 146.97   

Per share NAV end of period

   $ 12.58      $ 50.74      $ 160.45   

Percentage change in per share NAV

     (75.2 )%      (68.4 )%      9.2

Percentage change in benchmark

     (44.4 )%      (41.7 )%      6.8

Benchmark annualized volatility

     45.5     23.7     18.0

During the year ended December 31, 2015, the increase in the Fund’s NAV resulted from an increase from 8,879,834 outstanding Shares at December 31, 2014 to 62,327,867 outstanding Shares at December 31, 2015. 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 Bloomberg WTI Crude Oil SubindexSM. By comparison, during the year ended December 31, 2014, the increase in the Fund’s NAV resulted from an increase from 889,834 outstanding Shares at December 31, 2013 to 8,879,834 outstanding Shares at December 31, 2014. 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 Bloomberg WTI Crude Oil SubindexSM. By comparison, during the year ended December 31, 2013, the decrease in the Fund’s NAV resulted from a decrease from 3,289,834 outstanding Shares at December 31, 2012 to 889,834 outstanding Shares at December 31, 2013. 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 Bloomberg WTI Crude Oil SubindexSM.

For the years ended December 31, 2015, 2014 and 2013, 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 75.2% for the year ended December 31, 2015, as compared to the Fund’s per Share NAV decrease of 68.4% for the year ended December 31, 2014, was primarily due to a greater depreciation in the value of the assets of the Fund during the year ended December 31, 2015. The Fund’s per Share NAV decrease of 68.4% for the year ended December 31, 2014, as compared to the Fund’s per Share NAV increase of 9.2% for the year ended December 31, 2013, was primarily due to a depreciation in the value of the assets of the Fund during the year ended December 31, 2014.

 

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During the year ended December 31, 2015, the Fund’s per Share NAV reached its high for the year on May 6, 2015 at $50.96 per Share and reached its low for the year on December 21, 2015 at $11.79 per Share. By comparison, during the year ended December 31, 2014, the Fund’s per Share NAV reached its high for the year on June 20, 2014 at $200.70 per Share and reached its low for the year on December 31, 2014 at $50.74 per Share. By comparison, during the year ended December 31, 2013, the Fund’s per Share NAV reached its high for the year on September 6, 2013 at $199.35 per Share and reached its low for the year on April 17, 2013 at $125.30 per Share.

The benchmark’s decline of 44.4% for the year ended December 31, 2015, as compared to the benchmark’s decline of 41.7% for the year ended December 31, 2014, can be attributed to a greater decrease in the price of WTI Crude Oil during the year ended December 31, 2015. By comparison, the benchmark’s decline of 41.7% for the year ended December 31, 2014, as compared to the benchmark’s rise of 6.8% for the year ended December 31, 2013, can be attributed to a decrease in the price of WTI Crude Oil during the year ended December 31, 2014.

Net Income/Loss

The following table provides summary income information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
     Year Ended
December 31, 2014
     Year Ended
December 31, 2013
 

Net investment income (loss)

   $ (8,473,155    $ (1,766,364    $ (2,196,281

Management fee

     8,230,180        1,769,248        2,275,701  

Brokerage commission

     639,133        65,408        55,871  

Net realized gain (loss)

     (896,154,368      (243,314,151      120,757,237  

Change in net unrealized appreciation/depreciation

     32,543,124        (125,247,771      (52,715,067

Net income (loss)

   $ (872,084,399    $ (370,328,286    $ 65,845,889  

The Fund’s net income decreased for the year ended December 31, 2015, as compared to the year ended December 31, 2014, primarily due to a greater decrease in the price of WTI Crude Oil during the year ended December 31, 2015. By comparison, the Fund’s net income decreased for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to a decrease in the price of WTI Crude Oil during the year ended December 31, 2014.

 

* See Note 1 of the Notes to Financial Statements in Item 15 of Part IV in this Annual Report on Form 10-K regarding the reverse Share split for ProShares Ultra Bloomberg Crude Oil.

ProShares Ultra Bloomberg Natural Gas*

Fund Performance

The following table provides summary performance information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
    Year Ended
December 31, 2014
    Year Ended
December 31, 2013
 

NAV beginning of period

   $ 70,433,207     $ 62,915,779     $ 73,019,370  

NAV end of period

   $ 38,851,184     $ 70,433,207     $ 62,915,779  

Percentage change in NAV

     (44.8 )%      11.9     (13.8 )% 

Shares outstanding beginning of period

     1,142,485       404,985       467,485  

Shares outstanding end of period

     2,092,170       1,142,485       404,985  

Percentage change in shares outstanding

     83.1     182.1     (13.4 )% 

Shares created

     2,137,500       1,437,500       1,350,000  

Shares redeemed

     1,187,815       700,000       1,412,500  

Per share NAV beginning of period

   $ 61.65      $ 155.35      $ 156.20   

Per share NAV end of period

   $ 18.57      $ 61.65      $ 155.35   

Percentage change in per share NAV

     (69.9 )%      (60.3 )%      (0.5 )% 

Percentage change in benchmark

     (40.0 )%      (30.7 )%      4.9

Benchmark annualized volatility

     40.4     42.1     29.9

 

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During the year ended December 31, 2015, 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 Bloomberg Natural Gas SubindexSM. The decrease in the Fund’s NAV was offset by an increase from 1,142,485 outstanding Shares at December 31, 2014 to 2,092,170 outstanding Shares at December 31, 2015. By comparison, during the year ended December 31, 2014, the increase in the Fund’s NAV resulted from an increase from 404,985 outstanding Shares at December 31, 2013 to 1,142,485 outstanding Shares at December 31, 2014. 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 Bloomberg Natural Gas SubindexSM. By comparison, during the year ended December 31, 2013, the decrease in the Fund’s NAV resulted primarily from a decrease from 467,485 outstanding Shares at December 31, 2012 to 404,985 outstanding Shares at December 31, 2013. 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 Bloomberg Natural Gas SubindexSM.

For the years ended December 31, 2015, 2014 and 2013, 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 69.9% for the year ended December 31, 2015, as compared to the Fund’s per Share NAV decrease of 60.3% for the year ended December 31, 2014, was primarily due to a greater depreciation in the value of the assets of the Fund during the year ended December 31, 2015. The Fund’s per Share NAV decrease of 60.3% for the year ended December 31, 2014, as compared to the Fund’s per Share NAV decrease of 0.5% for the year ended December 31, 2013, was primarily due to a greater depreciation in the value of the assets of the Fund during the year ended December 31, 2014.

During the year ended December 31, 2015, the Fund’s per Share NAV reached its high for the year on January 14, 2015 at $74.33 per Share and reached its low for the year on December 16, 2015 at $12.83 per Share. By comparison, during the year ended December 31, 2014, the Fund’s per Share NAV reached its high for the year on January 29, 2014 at $255.12 per Share and reached its low for the year on December 31, 2014 at $61.65 per Share. By comparison, during the year ended December 31, 2013, the Fund’s per Share NAV reached its high for the year on April 19, 2013 at $237.28 per Share and reached its low for the year on November 4, 2013 at $109.64 per Share.

The benchmark’s decline of 40.0% for the year ended December 31, 2015, as compared to the benchmark’s decline of 30.7% for the year ended December 31, 2014, can be attributed to a greater decrease in the price of Henry Hub Natural Gas during the year ended December 31, 2015. By comparison, the benchmark’s decline of 30.7% for the year ended December 31, 2014, as compared to the benchmark’s rise of 4.9% for the year ended December 31, 2013, can be attributed to a decrease in the price of Henry Hub Natural Gas during the year ended December 31, 2014.

Net Income/Loss

The following table provides summary income information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
     Year Ended
December 31, 2014
     Year Ended
December 31, 2013
 

Net investment income (loss)

   $ (761,335    $ (528,581    $ (821,690

Management fee

     574,158        455,794        707,598  

Brokerage commission

     207,344        88,748        147,433  

Net realized gain (loss)

     (100,772,476      (6,459,728      41,422,856  

Change in net unrealized appreciation/depreciation

     41,201,866        (31,234,281      162,544  

Net income (loss)

   $ (60,331,945    $ (38,222,590    $ 40,763,710  

 

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The Fund’s net income decreased for the year ended December 31, 2015, as compared to the year ended December 31, 2014, primarily due to a greater decrease in the price of Henry Hub Natural Gas during the year ended December 31, 2015. By comparison, the Fund’s net income decreased for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to a decrease in the price of Henry Hub Natural Gas during the year ended December 31, 2014.

 

* See Note 1 of the Notes to Financial Statements in Item 15 of Part IV in this Annual Report on Form 10-K regarding the reverse Share split for ProShares Ultra Bloomberg Natural Gas.

ProShares Ultra Gold

Fund Performance

The following table provides summary performance information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
    Year Ended
December 31, 2014
    Year Ended
December 31, 2013
 

NAV beginning of period

   $ 102,003,345     $ 132,017,405     $ 335,054,752  

NAV end of period

   $ 69,864,815     $ 102,003,345     $ 132,017,405  

Percentage change in NAV

     (31.5 )%      (22.7 )%      (60.6 )% 

Shares outstanding beginning of period

     2,550,014       3,200,014       4,000,014  

Shares outstanding end of period

     2,350,014       2,550,014       3,200,014  

Percentage change in shares outstanding

     (7.8 )%      (20.3 )%      (20.0 )% 

Shares created

     150,000       300,000       550,000  

Shares redeemed

     350,000       950,000       1,350,000  

Per share NAV beginning of period

   $ 40.00      $ 41.26      $ 83.76   

Per share NAV end of period

   $ 29.73      $ 40.00      $ 41.26   

Percentage change in per share NAV

     (25.7 )%      (3.1 )%      (50.7 )% 

Percentage change in benchmark

     (12.1 )%      0.1 %     (27.3 )% 

Benchmark annualized volatility

     14.4     12.9     21.8

During the year ended December 31, 2015, the decrease in the Fund’s NAV resulted primarily from a decrease from 2,550,014 outstanding Shares at December 31, 2014 to 2,350,014 outstanding Shares at December 31, 2015. 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 gold bullion as measured by the U.S. dollar p.m. LBMA Gold Price. By comparison, during the year ended December 31, 2014, 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 gold bullion as measured by the U.S. dollar p.m. fixing price for delivery in London. The decrease in the Fund’s NAV also resulted in part from a decrease from 3,200,014 outstanding Shares at December 31, 2013 to 2,550,014 outstanding Shares at December 31, 2014. By comparison, during the year ended December 31, 2013, 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 gold bullion as measured by the U.S. dollar p.m. fixing price for delivery in London. The decrease in the Fund’s NAV also resulted in part from a decrease from 4,000,014 outstanding Shares at December 31, 2012 to 3,200,014 outstanding Shares at December 31, 2013.

For the years ended December 31, 2015, 2014 and 2013, the Fund’s daily performance had a statistical correlation over 0.99 to 2x of the daily performance of its benchmark. The Fund’s per Share NAV decrease of 25.7% for the year ended December 31, 2015, as compared to the Fund’s per Share NAV decrease of 3.1% for the year ended December 31, 2014, was primarily due to a greater depreciation in the value of the assets of the Fund during the year ended December 31, 2015. The Fund’s per Share NAV decrease of 3.1% for the year ended December 31, 2014, as compared to the Fund’s per Share NAV decrease of 50.7% for the year ended December 31, 2013, was primarily due to a lesser depreciation in the value of the assets of the Fund during the year ended December 31, 2014.

During the year ended December 31, 2015, the Fund’s per Share NAV reached its high for the year on January 22, 2015 at $46.03 per Share and reached its low for the year on December 17, 2015 at $29.17 per Share. By comparison, during the year ended December 31, 2014, the Fund’s per Share NAV reached its high for the year on March 14, 2014 at $54.16 per Share and reached its low for the year on November 5, 2014 at $36.05 per Share. By comparison, during the year ended December 31, 2013, the Fund’s per Share NAV reached its high for the year on January 2, 2013 at $87.40 per Share and reached its low for the year on December 20, 2013 at $40.65 per Share.

 

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The benchmark’s decrease of 12.1% for the year ended December 31, 2015, as compared to the benchmark’s increase of 0.1% for the year ended December 31, 2014, can be attributed to a decrease in the price of spot gold in U.S. dollar terms during the year ended December 31, 2015. By comparison, the benchmark’s increase of 0.1% for the year ended December 31, 2014, as compared to the benchmark’s decline of 27.3% for the year ended December 31, 2013, can be attributed to an increase in the price of spot gold in U.S. dollar terms during the year ended December 31, 2014.

Net Income/Loss

The following table provides summary income information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
     Year Ended
December 31, 2014
     Year Ended
December 31, 2013
 

Net investment income (loss)

   $ (796,424    $ (1,157,348    $ (1,925,215

Management fee

     839,083        1,212,064        2,055,613  

Brokerage commission

     41        39        39  

Net realized gain (loss)

     (18,606,208      (9,672,972      (165,625,006

Change in net unrealized appreciation/depreciation

     (4,309,443      8,888,643        8,820,461  

Net income (loss)

   $ (23,712,075    $ (1,941,677    $ (158,729,760

The Fund’s net income decreased for the year ended December 31, 2015, as compared to the year ended December 31, 2014, primarily due to a decrease in the price of spot gold in U.S. dollar terms in conjunction with share transactions during the year ended December 31, 2015. By comparison, the Fund’s net income increased for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to an increase in the price of spot gold in U.S. dollar terms in conjunction with share transactions during the year ended December 31, 2014.

On March 19, 2015, the company that ran the London U.S. dollar gold fixing ceased calculating the price of gold for the LBMA. The LBMA selected ICE Benchmark Administration to calculate the price, which was renamed the LBMA Gold Price, and is based on an electronic, physically settled auction-based methodology, beginning on March 20, 2015.

ProShares Ultra Silver

Fund Performance

The following table provides summary performance information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
    Year Ended
December 31, 2014
    Year Ended
December 31, 2013
 

NAV beginning of period

   $ 291,169,743     $ 465,479,519     $ 747,725,400  

NAV end of period

   $ 216,416,642     $ 291,169,743     $ 465,479,519  

Percentage change in NAV

     (25.7 )%      (37.4 )%      (37.7 )% 

Shares outstanding beginning of period

     7,396,533       7,350,007       4,350,007  

Shares outstanding end of period

     7,996,533       7,396,533       7,350,007  

Percentage change in shares outstanding

     8.1     0.6     69.0

Shares created

     2,700,000       2,487,500       4,112,500  

Shares redeemed

     2,100,000       2,440,974       1,112,500  

Per share NAV beginning of period

   $ 39.37      $ 63.33      $ 171.89   

Per share NAV end of period

   $ 27.06      $ 39.37      $ 63.33   

Percentage change in per share NAV

     (31.3 )%      (37.8 )%      (63.2 )% 

Percentage change in benchmark

     (13.5 )%      (18.1 )%      (34.9 )% 

Benchmark annualized volatility

     24.1     21.8     31.5

 

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During the year ended December 31, 2015, 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 London Silver Price. The decrease in the Fund’s NAV was offset by an increase from 7,396,533 outstanding Shares at December 31, 2014 to 7,996,533 outstanding Shares at December 31, 2015. By comparison, during the year ended December 31, 2014, 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 London Silver Price. The decrease in the Fund’s NAV was offset by an increase from 7,350,007 outstanding Shares at December 31, 2013 to 7,396,533 outstanding Shares at December 31, 2014. By comparison, during the year ended December 31, 2013, the decrease in the Fund’s NAV resulted from the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of silver bullion as measured by the U.S. dollar fixing price for delivery in London. The decrease in the Fund’s NAV was offset by an increase from 4,350,007 outstanding Shares at December 31, 2012 to 7,350,007 outstanding Shares at December 31, 2013.

For the years ended December 31, 2015, 2014 and 2013, 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 31.3% for the year ended December 31, 2015, as compared to the Fund’s per Share NAV decrease of 37.8% for the year ended December 31, 2014, was primarily due to a lesser depreciation in the value of the assets of the Fund during the year ended December 31, 2015. The Fund’s per Share NAV decrease of 37.8% for the year ended December 31, 2014, as compared to the Fund’s per Share NAV decrease of 63.2% for the year ended December 31, 2013, was primarily due to a lesser depreciation in the value of the assets of the Fund during the year ended December 31, 2014.

During the year ended December 31, 2015, the Fund’s per Share NAV reached its high for the year on January 23, 2015 at $50.86 per Share and reached its low for the year on December 14, 2015 at $26.73 per Share. By comparison, during the year ended December 31, 2014, the Fund’s per Share NAV reached its high for the year on February 24, 2014 at $80.11 per Share and reached its low for the year on November 6, 2014 at $36.63 per Share. By comparison, during the year ended December 31, 2013, the Fund’s per Share NAV reached its high for the year on January 23, 2013 at $197.58 per Share and reached its low for the year on December 4, 2013 at $60.89 per Share.

The benchmark’s decline of 13.5% for the year ended December 31, 2015, as compared to the benchmark’s decline of 18.1% for the year ended December 31, 2014, can be attributed to a lesser decline in the price of spot silver in U.S. dollar terms during the year ended December 31, 2015. The benchmark’s decline of 18.1% for the year ended December 31, 2014, as compared to the benchmark’s decline of 34.9% for the year ended December 31, 2013, can be attributed to a lesser decline in the price of spot silver in U.S. dollar terms during the year ended December 31, 2014.

Net Income/Loss

The following table provides summary income information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
     Year Ended
December 31, 2014
     Year Ended
December 31, 2013
 

Net investment income (loss)

   $ (2,507,859    $ (3,968,608    $ (5,280,707

Management fee

     2,664,160        4,148,207        5,628,988  

Brokerage commission

     52        43        36  

Net realized gain (loss)

     (78,309,750      (155,543,194      (701,518,468

Change in net unrealized appreciation/depreciation

     (10,182,576      (9,900,963      143,242,691  

Net income (loss)

   $ (91,000,185    $ (169,412,765    $ (563,556,484

 

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The Fund’s net income increased for the year ended December 31, 2015, as compared to the year ended December 31, 2014, primarily due to a lesser decline in the price of spot silver in U.S. dollar terms during the year ended December 31, 2015. By comparison, the Fund’s net income increased for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to a lesser decline in the price of spot silver in U.S. dollar terms during the year ended December 31, 2014.

 

  On August 14, 2014, the company that ran the London U.S. dollar silver fixing ceased calculating the price of silver for the LBMA. The LBMA selected the CME Group and Thomson Reuters to calculate the price, which was renamed the London Silver Price, beginning August 15, 2014.

ProShares Ultra Euro

Fund Performance

The following table provides summary performance information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
    Year Ended
December 31, 2014
    Year Ended
December 31, 2013
 

NAV beginning of period

   $ 2,981,441     $ 2,603,827     $ 4,870,316  

NAV end of period

   $ 10,857,730     $ 2,981,441     $ 2,603,827  

Percentage change in NAV

     264.2     14.5     (46.5 )% 

Shares outstanding beginning of period

     150,014       100,014       200,014  

Shares outstanding end of period

     700,014       150,014       100,014  

Percentage change in shares outstanding

     366.6     50.0     (50.0 )% 

Shares created

     950,000       50,000       50,000  

Shares redeemed

     400,000       —          150,000  

Per share NAV beginning of period

   $ 19.87      $ 26.03      $ 24.35   

Per share NAV end of period

   $ 15.51      $ 19.87      $ 26.03   

Percentage change in per share NAV

     (21.9 )%      (23.7 )%      6.9

Percentage change in benchmark

     (10.2 )%      (12.0 )%      4.3

Benchmark annualized volatility

     12.1     6.1     7.5

During the year ended December 31, 2015, the increase in the Fund’s NAV resulted from an increase from 150,014 outstanding Shares at December 31, 2014 to 700,014 outstanding Shares at December 31, 2015. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of the spot price of the euro versus the U.S. dollar. By comparison, during the year ended December 31, 2014, the increase in the Fund’s NAV resulted from an increase from 100,014 outstanding Shares at December 31, 2013 to 150,014 outstanding Shares at December 31, 2014. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of the spot price of the euro versus the U.S. dollar. By comparison, during the year ended December 31, 2013, the decrease in the Fund’s NAV resulted from a decrease from 200,014 outstanding Shares at December 31, 2012 to 100,014 outstanding Shares at December 31, 2013. The decrease in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of the spot price of the euro versus the U.S. dollar.

For the years ended December 31, 2015, 2014 and 2013, 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 21.9% for the year ended December 31, 2015, as compared to the Fund’s per Share NAV decrease of 23.7% for the year ended December 31, 2014, was primarily due to a lesser depreciation in the value of the assets held by the Fund during the year ended December 31, 2015. The Fund’s per Share NAV decrease of 23.7% for the year ended December 31, 2014, as compared to the Fund’s per Share NAV increase of 6.9% for the year ended December 31, 2013, was primarily due to a depreciation in the value of the assets held by the Fund during the year ended December 31, 2014.

During the year ended December 31, 2015, the Fund’s per Share NAV reached its high for the year on January 2, 2015 at $19.55 per Share and reached its low for the year on November 30, 2015 at $14.73 per Share. By comparison, during the year ended December 31, 2014, the Fund’s per Share NAV reached its high for the year on March 18, 2014 at $26.63 per Share and reached its low for the year on December 31, 2014 at $19.87 per Share. By comparison, during the year ended December 31, 2013, the Fund’s per Share NAV reached its high for the year on October 25, 2013 at $26.28 per Share and reached its low for the year on July 9, 2013 at $22.64 per Share.

 

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The benchmark’s decline of 10.2% for the year ended December 31, 2015, as compared to the benchmark’s decline of 12.0% for the year ended December 31, 2014, can be attributed to a lesser decrease in the value of the euro versus the U.S. dollar during the year ended December 31, 2015. By comparison, the benchmark’s decline of 12.0% for the year ended December 31, 2014, as compared to the benchmark’s rise of 4.3% for the year ended December 31, 2013, can be attributed to a decrease in the value of the euro versus the U.S. dollar during the year ended December 31, 2014.

Net Income/Loss

The following table provides summary income information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
     Year Ended
December 31, 2014
     Year Ended
December 31, 2013
 

Net investment income (loss)

   $ (104,071    $ (22,247    $ (35,024

Management fee

     106,868        23,330        36,925  

Net realized gain (loss)

     (1,982,317      (420,528      210,205  

Change in net unrealized appreciation/depreciation

     707,922        (204,515      13,879  

Net income (loss)

   $ (1,378,466    $ (647,290    $ 189,060  

The Fund’s net income decreased for the year ended December 31, 2015, as compared to the year ended December 31, 2014, primarily due to a lesser decrease in the value of the euro versus the U.S. dollar during the year ended December 31, 2015. By comparison, the Fund’s net income decreased for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to a decrease in the value of the euro versus the U.S. dollar during the year ended December 31, 2014.

ProShares Ultra Yen*

Fund Performance

The following table provides summary performance information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
    Year Ended
December 31, 2014
    Year Ended
December 31, 2013
 

NAV beginning of period

   $ 2,118,028     $ 2,795,026     $ 4,227,995  

NAV end of period

   $ 5,473,848     $ 2,118,028     $ 2,795,026  

Percentage change in NAV

     158.4     (24.2 )%      (33.9 )% 

Shares outstanding beginning of period

     37,504       37,504       37,504  

Shares outstanding end of period

     99,974       37,504       37,504  

Percentage change in shares outstanding

     166.6     0.0     0.0

Shares created

     75,000       12,500       12,500  

Shares redeemed

     12,530       12,500       12,500  

Per share NAV beginning of period

   $ 56.47      $ 74.53      $ 112.73   

Per share NAV end of period

   $ 54.75      $ 56.47      $ 74.53   

Percentage change in per share NAV

     (3.0 )%      (24.2 )%      (33.9 )% 

Percentage change in benchmark

     (0.4 )%      (12.1 )%      (17.6 )% 

Benchmark annualized volatility

     8.2     7.9     12.3

During the year ended December 31, 2015, the increase in the Fund’s NAV resulted from an increase from 37,504 outstanding Shares at December 31, 2014 to 99,974 outstanding Shares at December 31, 2015. The increase in the Fund’s NAV was offset by the cumulative effect of the Fund seeking daily investment results (before fees and expenses) that correspond to 2x of the daily performance of the spot price of the Japanese yen versus the U.S. dollar during the year ended December 31, 2015. By comparison, during the year ended December 31, 2014, 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

 

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during the year ended December 31, 2014. There was no net change in the Fund’s outstanding Shares from December 31, 2013 to December 31, 2014. By comparison, during the year ended December 31, 2013, 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 during the year ended December 31, 2012. There was no net change in the Fund’s outstanding Shares from December 31, 2012 to December 31, 2013.

For the years ended December 31, 2015, 2014 and 2013, 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 3.0% for the year ended December 31, 2015, as compared to the Fund’s per Share NAV decrease of 24.2% for the year ended December 31, 2014, was primarily due to a lesser depreciation in the value of the assets held by the Fund during the year ended December 31, 2015. The Fund’s per Share NAV decrease of 24.2% for the year ended December 31, 2014, as compared to the Fund’s per Share NAV decrease of 33.9% for the year ended December 31, 2013, was primarily due to a lesser depreciation in the value of the assets held by the Fund during the year ended December 31, 2014.

During the year ended December 31, 2015, the Fund’s per Share NAV reached its high for the year on January 15, 2015 at $59.83 per Share and reached its low for the year on June 5, 2015 at $50.86 per Share. By comparison, during the year ended December 31, 2014, the Fund’s per Share NAV reached its high for the year on February 3, 2014 at $80.84 per Share and reached its low for the year on December 5, 2014 at $55.12 per Share. By comparison, during the year ended December 31, 2013, the Fund’s per Share NAV reached its high for the year on January 8, 2013 at $111.88 per Share and reached its low for the year on December 31, 2013 at $74.52 per Share.

The benchmark’s decline of 0.4% for the year ended December 31, 2015, as compared to the benchmark’s decline of 12.1% for the year ended December 31, 2014, can be attributed to a lesser decline in the value of the Japanese yen versus the U.S. dollar during the year ended December 31, 2015. By comparison, the benchmark’s decline of 12.1% for the year ended December 31, 2014, as compared to the benchmark’s decline of 17.6% for the year ended December 31, 2013, can be attributed to a lesser decline in the value of the Japanese yen versus the U.S. dollar during the year ended December 31, 2014.

Net Income/Loss

The following table provides summary income information for the Fund for the years ended December 31, 2015, 2014 and 2013:

 

     Year Ended
December 31, 2015
     Year Ended
December 31, 2014
     Year Ended
December 31, 2013
 

Net investment income (loss)

   $ (44,423    $ (20,862    $ (31,774

Management fee

     48,032        21,963        33,569  

Net realized gain (loss)

     (472,907      (540,304      (1,879,101

Change in net unrealized appreciation/depreciation

     276,816        143,775        335,084  

Net income (loss)

   $ (240,514    $ (417,391    $ (1,575,791

The Fund’s net income increased for the year ended December 31, 2015, as compared to the year ended December 31, 2014, primarily due to a lesser decline in the value of the Japanese yen versus the U.S. dollar during the year ended December 31, 2015. By comparison, the Fund’s net income increased for the year ended December 31, 2014, as compared to the year ended December 31, 2013, primarily due to a lesser decline in the value of the Japanese yen versus the U.S. dollar during the year ended December 31, 2014.

 

* See Note 1 of the Notes to Financial Statements in Item 15 of Part IV in this Annual Report on Form 10-K regarding the reverse Share split for ProShares Ultra Yen.

 

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Quantitative Disclosure

Commodity Price Sensitivity and Exchange Rate Sensitivity

The Managed Futures Fund is exposed to commodity price risk through its holdings of commodity futures contracts and exchange rate risk through its holdings of currency and U.S. Treasury futures contracts. The following table provides information about the Managed Futures Fund’s Financial Instruments, which were sensitive to both commodity price and exchange rate risk. As of December 31, 2015 and 2014, the Managed Futures Fund’s positions were as follows:

ProShares Managed Futures Strategy:

As of December 31, 2015 and 2014, the Managed Futures Fund was exposed to commodity price and exchange rate risk through its holdings of Financial Instruments linked to the S&P Strategic Futures Index. The following table provides information about the Fund’s commodity and currency futures contracts as of December 31, 2015 and 2014, which were sensitive to commodity price risk and exchange rate price risk.

Futures Positions as of December 31, 2015

 

Contract

   Long or
Short
   Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Australian Dollar Fx Currency Futures (CME)

   Long    March 2016      4       $ 72.66         1,000       $ 290,640   

Cocoa Futures (ICE)

   Long    March 2016      9         3,211.00         10         288,990   

Cotton No. 2 Futures (ICE)

   Long    March 2016      9         0.63         50,000         284,760   

Sugar #11 Futures (ICE)

   Long    March 2016      11         0.15         112,000         187,757   

Gold 100 OZ Futures (COMEX)

   Short    February 2016      1         1,060.20         100         (106,020

Gold Mini Futures (ICE)

   Short    February 2016      4         1,060.20         32.15         (136,342

Lean Hogs Futures (CME)

   Short    February 2016      11         0.60         40,000         (263,120

Live Cattle Futures (CME)

   Short    February 2016      7         1.37         40,000         (383,040

Natural Gas Futures (NYMEX)

   Short    February 2016      7         2.34         10,000         (163,590

NY Harbor ULSD Futures (NYMEX)

   Short    February 2016      2         1.12         42,000         (94,408

RBOB Gasoline Futures (NYMEX)

   Short    February 2016      2         1.27         42,000         (106,764

WTI Crude Oil Futures (NYMEX)

   Short    February 2016      2         37.04         1,000         (74,080

British Pound Fx Currency Futures (CME)

   Short    March 2016      4         147.34         625         (368,350

Euro Fx Currency Futures (CME)

   Short    March 2016      2         1.09         125,000         (272,150

Canadian Dollar Fx Currency Futures (CME)

   Short    March 2016      5         72.33         1,000         (361,650

Coffee ‘C’ Futures (ICE)

   Short    March 2016      3         1.27         37,500         (142,537

Copper Futures (COMEX)

   Short    March 2016      4         2.14         25,000         (213,500

Corn Futures (CBT)

   Short    March 2016      11         3.59         5,000         (197,312

Japanese Yen Fx Currency Futures (CME)

   Short    March 2016      5         83.33         1,250         (520,813

Silver Futures (COMEX)

   Short    March 2016      1         13.80         5,000         (69,015

Silver Mini Futures (ICE)

   Short    March 2016      4         13.80         1,000         (55,212

Soybean Futures (CBT)

   Short    March 2016      5         8.64         5,000         (216,063

Swiss Franc Fx Currency Futures (CME)

   Short    March 2016      2         100.32         1,250         (250,800

U.S. 10 YR Note Futures (CBT)

   Short    March 2016      9         125.91         1,000         (1,133,156

U.S. Treasury Long Bond Futures—CBT

   Short    March 2016      5         153.75         1,000         (768,750

Wheat Futures (CBT)

   Short    March 2016      9         4.70         5,000         (211,500

 

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Futures Positions as of December 31, 2014

 

Contract

   Long or
Short
   Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Coffee ‘C’ Futures (ICE)

   Long    March 2015      1       $ 1.67         37,500       $ 62,475   

Soybean Futures (CBT)

   Long    March 2015      3         10.24         5,000         153,525   

US Treasury Long Bond Futures (CBT)

   Long    March 2015      3         144.56         1,000         433,688   

US 10 YR Note Futures (CBT)

   Long    March 2015      6         126.80         1,000         760,781   

Live Cattle Futures (CME)

   Long    April 2015      5         1.62         40,000         324,800   

Corn Futures (CBT)

   Long    July 2015      6         4.13         5,000         123,750   

Wheat Futures (CBT)

   Long    December 2015      4         6.15         5,000         122,950   

Natural Gas Futures (NYMEX)

   Long    January 2016      3         3.53         10,000         105,930   

Gold Mini Futures (ICE)

   Short    February 2015      4         1,184.10         32.15         (152,275 )

Lean Hogs Futures (CME)

   Short    February 2015      6         0.81         40,000         (194,880 )

NY Harbor ULSD Futures (NYMEX)

   Short    February 2015      2         1.83         42,000         (154,022 )

RBOB Gasoline Futures (NYMEX)

   Short    February 2015      2         1.47         42,000         (123,656 )

WTI Crude Oil Mini Futures (NYMEX)

   Short    February 2015      4         53.27         500         (106,472 )

Australian Dollar Fx Currency Futures (CME)

   Short    March 2015      3         81.22         1,000         (243,660 )

British Pound Fx Currency Futures (CME)

   Short    March 2015      6         155.70         625         (583,875 )

Canadian Dollar Fx Currency Futures (CME)

   Short    March 2015      4         85.97         1,000         (343,880 )

Cocoa Futures (ICE)

   Short    March 2015      13         2,910.00         10         (378,300 )

Copper Futures (COMEX)

   Short    March 2015      3         2.83         25,000         (211,913 )

Copper Mini Futures (COMEX)

   Short    March 2015      3         2.83         12,500         (105,975 )

Cotton No. 2 Futures (ICE)

   Short    March 2015      5         0.60         50,000         (150,675 )

Euro Fx Currency Mini Futures (CME)

   Short    March 2015      5         1.21         62,500         (378,344 )

Japanese Yen Fx Currency Futures (CME)

   Short    March 2015      3         83.49         1,250         (313,088 )

Silver Mini Futures (ICE)

   Short    March 2015      6         15.60         1,000         (93,594 )

Swiss Franc Fx Currency Futures (CME)

   Short    March 2015      3         100.74         1,250         (377,775 )

Sugar #11 Futures (ICE)

   Short    March 2015      8         0.15         112,000         (130,099

The December 31, 2015 and 2014 futures notional values are calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. These notional values will increase (decrease) proportionally with decreases (increases) 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 decreases (increases) in short notional values, 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 applicable commodity or 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 return of the Index. See “Item 1A. Risk Factors” in this Annual Report on Form 10-K for additional information regarding performance for periods longer than a single day.

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 December 31, 2015 and 2014, each of the VIX Funds’ positions were as follows:

ProShares VIX Short-Term Futures ETF

As of December 31, 2015 and 2014, 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 December 31, 2015 and 2014, which were sensitive to equity market volatility risk.

Futures Positions as of December 31, 2015

 

Contract

   Long or
Short
     Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

VIX Futures (CBOE)

     Long       January 2016      2,821       $ 18.53         1,000       $ 52,259,025   

VIX Futures (CBOE)

     Long       February 2016      2,821         18.88         1,000         53,246,375   

 

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Futures Positions as of December 31, 2014

 

Contract

   Long or
Short
     Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

VIX Futures (CBOE)

     Long       January 2015      3,326       $ 18.03         1,000       $ 59,951,150   

VIX Futures (CBOE)

     Long       February 2015      2,775         18.23         1,000         50,574,375   

The December 31, 2015 and 2014 futures notional values are calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The notional values will increase (decrease) proportionally with increases (decreases) in the price of the futures contract. Additional gains (losses) associated with these contracts will be equal to any such subsequent increases (decreases) in notional values, 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 equity 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 this Annual Report on Form 10-K for additional information regarding performance for periods longer than a single day.

ProShares VIX Mid-Term Futures ETF

As of December 31, 2015 and 2014, 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 December 31, 2015 and 2014, which were sensitive to equity market volatility risk.

Futures Positions as of December 31, 2015

 

Contract

   Long or
Short
   Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

VIX Futures (CBOE)

   Long    April 2016      235       $ 19.35         1,000       $ 4,547,250   

VIX Futures (CBOE)

   Long    May 2016      469         19.50         1,000         9,145,500   

VIX Futures (CBOE)

   Long    June 2016      469         19.75         1,000         9,262,750   

VIX Futures (CBOE)

   Long    July 2016      234         20.05         1,000         4,691,700   

Futures Positions as of December 31, 2014

 

Contract

   Long or
Short
   Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

VIX Futures (CBOE)

   Long    April 2015      205       $ 18.63         1,000       $ 3,818,125   

VIX Futures (CBOE)

   Long    May 2015      376         18.88         1,000         7,097,000   

VIX Futures (CBOE)

   Long    June 2015      376         19.13         1,000         7,191,000   

VIX Futures (CBOE)

   Long    July 2015      172         19.48         1,000         3,349,700   

The December 31, 2015 and 2014 futures notional values are calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The notional values will increase (decrease) proportionally with increases (decreases) in the price of the futures contract. Additional gains (losses) associated with these contracts will be equal to any such subsequent increases (decreases) in notional values, 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 equity 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 this Annual Report on Form 10-K for additional information regarding performance for periods longer than a single day.

ProShares Short VIX Short-Term Futures ETF

As of December 31, 2015 and 2014, 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 December 31, 2015 and 2014, which were sensitive to equity market volatility risk.

 

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Futures Positions as of December 31, 2015

 

Contract

   Long or
Short
     Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

VIX Futures (CBOE)

     Short       January 2016      17,150       $ 18.53         1,000       $ (317,703,750 )

VIX Futures (CBOE)

     Short       February 2016      17,151         18.88         1,000         (323,725,125 )

Futures Positions as of December 31, 2014

 

Contract

   Long or
Short
     Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

VIX Futures (CBOE)

     Short       January 2015      15,388       $ 18.03         1,000       $ (277,368,700 )

VIX Futures (CBOE)

     Short       February 2015      12,811         18.23         1,000         (233,480,475 )

The December 31, 2015 and 2014 short futures notional values are calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The short notional values will increase (decrease) proportionally with decreases (increases) in the price of the futures contract. Additional gains (losses) associated with these contracts will be equal to any such subsequent decreases (increases) in short notional values, 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 $1.00 of short exposure to the Index for every $1.00 of net assets. While the above information properly represents the then current equity 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 this Annual Report on Form 10-K for additional information regarding performance for periods longer than a single day.

ProShares Ultra VIX Short-Term Futures ETF

As of December 31, 2015 and 2014, the ProShares Ultra VIX Short-Term Futures ETF Fund was exposed to equity market volatility risk through its holding of VIX futures contracts. The following tables provide information about the Fund’s positions in these VIX futures contracts as of December 31, 2015 and 2014, which were sensitive to equity market volatility risk.

Futures Positions as of December 31, 2015

 

Contract

   Long or
Short
     Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

VIX Futures (CBOE)

     Long       January 2016      29,321       $ 18.53         1,000       $ 543,171,525   

VIX Futures (CBOE)

     Long       February 2016      29,320         18.88         1,000         553,415,000   

Futures Positions as of December 31, 2014

 

Contract

   Long or
Short
     Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

VIX Futures (CBOE)

     Long       January 2015      21,092       $ 18.03         1,000       $ 380,183,300   

VIX Futures (CBOE)

     Long       February 2015      17,586         18.23         1,000         320,497,650   

The December 31, 2015 and 2014 futures notional values are calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. These notional values 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 values, 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 equity 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 this Annual Report on Form 10-K for additional information regarding performance for periods longer than a single day.

 

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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 December 31, 2015 and 2014, each of the Commodity Funds and the Commodity Index Funds’ positions were as follows:

ProShares UltraShort Bloomberg Commodity:

As of December 31, 2015 and 2014, the ProShares UltraShort Bloomberg Commodity Fund was exposed to inverse commodity price risk through its holding of swap agreements linked to the Bloomberg Commodity Index. The following tables provide information about the Fund’s short swap positions as of December 31, 2015 and 2014, which were sensitive to commodity price risk.

Swap Agreements as of December 31, 2015

 

Reference Index

   Counterparty    Long or
Short
   Index
Close
     Notional Amount
at Value
 

Bloomberg Commodity Index

   Citibank N.A.    Short    $ 78.5588       $ (1,923,025

Bloomberg Commodity Index

   Deutsche Bank AG    Short      78.5588         (7,650,954 )

Bloomberg Commodity Index

   Goldman Sachs International    Short      78.5588         (4,813,083 )

Bloomberg Commodity Index

   UBS AG    Short      78.5588         (2,647,863 )

Swap Agreements as of December 31, 2014

 

Reference Index

   Counterparty    Long or
Short
   Index Close      Notional Amount
at Value
 

Bloomberg Commodity Index

   Deutsche Bank AG    Short    $ 104.3285       $ (4,847,743 )

Bloomberg Commodity Index

   Goldman Sachs International    Short      104.3285         (4,242,243 )

Bloomberg Commodity Index

   UBS AG    Short      104.3285         (1,460,197 )

The December 31, 2015 and 2014 short swap notional values are calculated by multiplying units times the closing level of the Index. These short notional values will increase (decrease) proportionally with decreases (increases) in the level of the Index. Additional gains (losses) associated with these contracts will be equal to any such subsequent decreases (increases) in short notional values, 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 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 this Annual Report on Form 10-K for additional information regarding performance for periods longer than a single 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 Bloomberg Crude Oil:

As of December 31, 2015 and 2014, the ProShares UltraShort Bloomberg 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 Bloomberg WTI Crude Oil SubindexSM. The following tables provide information about the Fund’s positions in these Financial Instruments as of December 31, 2015 and 2014, which were sensitive to commodity price risk.

 

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Futures Positions as of December 31, 2015

 

Contract

   Long or
Short
     Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

WTI Crude Oil (NYMEX)

     Short       March 2016      2,367       $ 38.17         1,000       $ (90,348,390 )

Swap Agreements as of December 31, 2015

 

Reference Index

   Counterparty    Long or
Short
     Index
Close
     Notional Amount
at Value
 

Bloomberg WTI Crude Oil Subindex

   Citibank N.A.      Short         79.2476         (19,234,533

Bloomberg WTI Crude Oil Subindex

   Deutsche Bank AG      Short       $ 79.2476       $ (29,881,854 )

Bloomberg WTI Crude Oil Subindex

   Goldman Sachs International      Short         79.2476         (17,799,590 )

Bloomberg WTI Crude Oil Subindex

   Societe Generale S.A.      Short         79.2476         (8,303,436 )

Bloomberg WTI Crude Oil Subindex

   UBS AG      Short         79.2476         (26,258,293 )

Futures Positions as of December 31, 2014

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

WTI Crude Oil (NYMEX)

     Short         March 2015         2,569       $ 53.70         1,000       $ (137,955,300 )

Swap Agreements as of December 31, 2014

 

Reference Index

   Counterparty    Long or
Short
   Index Close      Notional Amount
at Value
 

Bloomberg WTI Crude Oil Subindex

   Deutsche Bank AG    Short    $ 142.4858       $ (66,394,305 )

Bloomberg WTI Crude Oil Subindex

   Goldman Sachs International    Short      142.4858         (57,892,826 )

Bloomberg WTI Crude Oil Subindex

   Societe Generale S.A.    Short      142.4858         (21,413,784 )

Bloomberg WTI Crude Oil Subindex

   UBS AG    Short      142.4858         (54,735,210 )

The December 31, 2015 and 2014 short futures notional values are calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The December 31, 2015 and 2014 short swap notional values are calculated by multiplying the number of units times the closing level of the Index. These short notional values will increase (decrease) proportionally with decreases (increases) 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 decreases (increases) in short notional values, 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 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 this Annual Report on Form 10-K for additional information regarding performance for periods longer than a single 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 Bloomberg Natural Gas:

As of December 31, 2015 and 2014, the ProShares UltraShort Bloomberg 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 December 31, 2015 and 2014, which were sensitive to commodity price risk.

 

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Futures Positions as of December 31, 2015

 

Contract

   Long or
Short
     Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Natural Gas (NYMEX)

     Short       March 2016      886       $ 2.36         10,000       $ (20,936,180 )

Futures Positions as of December 31, 2014

 

Contract

   Long or
Short
     Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Natural Gas (NYMEX)

     Short       March 2015      1,014       $ 2.90         10,000       $ (29,365,440 )

The December 31, 2015 and 2014 short futures notional values are calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The short notional values will increase (decrease) proportionally with decreases (increases) in the price of the futures contract. Additional gains (losses) associated with these contracts will be equal to any such subsequent decreases (increases) in short notional values, 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 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 this Annual Report on Form 10-K for additional information regarding performance for periods longer than a single day.

ProShares UltraShort Gold:

As of December 31, 2015 and 2014, 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 December 31, 2015 and 2014, which were sensitive to commodity price risk.

Futures Positions as of December 31, 2015

 

Contract

   Long or
Short
     Expiration      Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Gold Futures (COMEX)

     Short         February 2016         2       $ 1,060.20         100       $ (212,040 )

Forward Agreements as of December 31, 2015

 

Reference Index

   Counterparty    Long or
Short
   Valuation Price      Notional Amount at
Value
 

0.995 Fine Troy Ounce Gold

   Citibank N.A.    Short      1,059.96         (6,889,740

0.995 Fine Troy Ounce Gold

   Deutsche Bank AG    Short    $ 1,060.01       $ (72,186,681 )

0.995 Fine Troy Ounce Gold

   Goldman Sachs International    Short      1,059.96         (27,874,828 )

0.995 Fine Troy Ounce Gold

   Societe Generale S.A.    Short      1,059.96         (14,839,440 )

0.995 Fine Troy Ounce Gold

   UBS AG    Short      1,059.96         (27,929,946 )

Futures Positions as of December 31, 2014

 

Contract

   Long or
Short
     Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Gold Futures (COMEX)

     Short       February 2015      2       $ 1,184.10         100       $ (236,820 )

Forward Agreements as of December 31, 2014

 

Reference Index

   Counterparty    Long or
Short
   Valuation Price      Notional Amount at
Value
 

0.995 Fine Troy Ounce Gold

   Deutsche Bank AG    Short    $ 1,205.99       $ (85,504,691 )

0.995 Fine Troy Ounce Gold

   Goldman Sachs International    Short      1,205.99         (32,438,719 )

0.995 Fine Troy Ounce Gold

   Societe Generale S.A.    Short      1,205.99         (16,522,063 )

0.995 Fine Troy Ounce Gold

   UBS AG    Short      1,205.99         (29,004,060 )

 

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The December 31, 2015 and 2014 short futures notional values are calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The December 31, 2015 and 2014 short forward notional values equal units multiplied by the forward price. These short notional values will increase (decrease) proportionally with decreases (increases) 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 decreases (increases) in notional values, 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 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 this Annual Report on Form 10-K for additional information regarding performance for periods longer than a single 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 December 31, 2015 and 2014, 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 December 31, 2015 and 2014, which were sensitive to commodity price risk.

Futures Positions as of December 31, 2015

 

Contract

   Long or
Short
     Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Silver Futures (COMEX)

     Short       March 2016      2       $ 13.80         5,000       $ (138,030 )

Forward Agreements as of December 31, 2015

 

Reference Index

   Counterparty    Long or
Short
   Valuation Price      Notional Amount
at Value
 

0.999 Fine Troy Ounce Silver

   Deutsche Bank AG    Short    $ 13.8218       $ (44,962,315 )

0.999 Fine Troy Ounce Silver

   Goldman Sachs International    Short      13.8212         (28,298,907 )

0.999 Fine Troy Ounce Silver

   Societe Generale S.A.    Short      13.8212         (9,066,707 )

0.999 Fine Troy Ounce Silver

   UBS AG    Short      13.8212         (29,508,262 )

Futures Positions as of December 31, 2014

 

Contract

   Long or
Short
     Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Silver Futures (COMEX)

     Short       March 2015      2       $ 15.60         5,000       $ (155,990 )

Forward Agreements as of December 31, 2014

 

Reference Index

   Counterparty    Long or
Short
   Valuation Price      Notional Amount
at Value
 

0.999 Fine Troy Ounce Silver

   Deutsche Bank AG    Short    $ 15.9718       $ (54,447,866 )

0.999 Fine Troy Ounce Silver

   Goldman Sachs International    Short      15.9716         (19,094,048 )

0.999 Fine Troy Ounce Silver

   Societe Generale S.A.    Short      15.9716         (10,972,489 )

0.999 Fine Troy Ounce Silver

   UBS AG    Short      15.9716         (21,338,058 )

 

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The December 31, 2015 and 2014 short futures notional values are calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The December 31, 2015 and 2014 short forward notional values equal units multiplied by the forward price. These short notional values will increase (decrease) proportionally with decreases (increases) 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 decreases (increases) in short notional values, 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 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 this Annual Report on Form 10-K for additional information regarding performance for periods longer than a single 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 December 31, 2015 and 2014, each of the Currency Funds’ positions was as follows:

ProShares Short Euro:

As of December 31, 2015 and 2014, 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 December 31, 2015 and 2014, which were sensitive to exchange rate price risk.

Futures Positions as of December 31, 2015

 

Contract

   Long or
Short
     Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Euro Fx Currency Futures (CME)

     Short       March 2016      129       $ 1.09         125,000       $ (17,553,675 )

Futures Positions as of December 31, 2014

 

Contract

   Long or
Short
     Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Euro Fx Currency Futures (CME)

     Short       March 2015      92       $ 1.21         125,000       $ (13,923,050 )

The December 31, 2015 and 2014 short futures notional values are calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The short notional values will increase (decrease) proportionally with decreases (increases) in the price of the futures contract. Additional gains (losses) associated with these contracts will be equal to any such subsequent decreases (increases) in short notional values, 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 $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 this Annual Report on Form 10-K for additional information regarding performance for periods longer than a single day.

 

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ProShares UltraShort Australian Dollar:

As of December 31, 2015 and 2014, 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 December 31, 2015 and 2014, which were sensitive to exchange rate price risk.

Futures Positions as of December 31, 2015

 

Contract

   Long or
Short
     Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Australian Dollar Fx Currency Futures (CME)

     Short       March 2016      562       $ 72.66         1,000       $ (40,834,920 )

Futures Positions as of December 31, 2014

 

Contract

   Long or
Short
     Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Australian Dollar Fx Currency Futures (CME)

     Short       March 2015      569       $ 81.22         1,000       $ (46,214,180 )

The December 31, 2015 and 2014 short futures notional values are calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The short notional values will increase (decrease) proportionally with decreases (increases) in the price of the futures contract. Additional gains (losses) associated with these contracts will be equal to any such subsequent decreases (increases) in short notional values, 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 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 two. See “Item 1A. Risk Factors” in this Annual Report on Form 10-K for additional information regarding performance for periods longer than a single day.

ProShares UltraShort Euro:

As of December 31, 2015 and 2014, 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 December 31, 2015 and 2014, which were sensitive to exchange rate price risk.

Foreign Currency Forward Contracts as of December 31, 2015

 

Reference Currency

   Counterparty    Long or
Short
   Settlement
Date
   Euro     Forward
Rate
     Market Value
USD
 

Euro

   Goldman Sachs International    Long    01/08/16      129,386,700        1.0868       $ 140,627,935   

Euro

   UBS AG    Long    01/08/16      75,393,200        1.0868         81,943,430   

Euro

   Goldman Sachs International    Short    01/08/16      (602,732,925 )     1.0868         (655,098,912 )

Euro

   UBS AG    Short    01/08/16      (562,621,100 )     1.0868         (611,502,135 )

Foreign Currency Forward Contracts as of December 31, 2014

 

Reference Currency

   Counterparty    Long or
Short
   Settlement
Date
   Euro     Forward
Rate
     Market Value
USD
 

Euro

   Goldman Sachs International    Long    01/09/15      31,647,600        1.2101       $ 38,298,521   

Euro

   UBS AG    Long    01/09/15      40,314,300        1.2101         48,786,577   

Euro

   Goldman Sachs International    Short    01/09/15      (443,778,725 )     1.2101         (537,041,321 )

Euro

   UBS AG    Short    01/09/15      (483,290,100 )     1.2101         (584,856,233 )

 

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The December 31, 2015 and 2014 USD market values equal the number of euros multiplied by the forward rate. These short notional values will increase (decrease) proportionally with decreases (increases) in the forward price. Additional gains (losses) associated with these contracts will be equal to any such subsequent decreases (increases) in short notional values, 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 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 this Annual Report on Form 10-K for additional information regarding performance for periods longer than a single 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 December 31, 2015 and 2014, 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 December 31, 2015 and 2014, which were sensitive to exchange rate price risk.

Foreign Currency Forward Contracts as of December 31, 2015

 

Reference Currency

   Counterparty    Long or
Short
   Settlement
Date
   Yen     Forward
Rate
     Market Value
USD
 

Yen

   Goldman Sachs International    Long    01/08/16      5,938,040,200        0.00832       $ 49,402,434   

Yen

   UBS AG    Long    01/08/16      11,521,875,200        0.00832         95,858,003   

Yen

   Goldman Sachs International    Short    01/08/16      (33,696,676,000 )     0.00832         (280,344,651 )

Yen

   UBS AG    Short    01/08/16      (40,852,769,100 )     0.00832         (339,880,862 )

Foreign Currency Forward Contracts as of December 31, 2014

 

Reference Currency

   Counterparty    Long or
Short
   Settlement
Date
   Yen     Forward
Rate
     Market Value
USD
 

Yen

   Goldman Sachs International    Long    01/09/15      8,266,326,300        0.00835       $ 69,025,668   

Yen

   UBS AG    Long    01/09/15      13,530,509,400        0.00835         112,982,770   

Yen

   Goldman Sachs International    Short    01/09/15      (72,481,612,100  )     0.00835         (605,237,623 )

Yen

   UBS AG    Short    01/09/15      (76,736,367,800  )     0.00835         (640,765,782 )

The December 31, 2015 and 2014 USD market values equal the number of yen multiplied by the forward rate. These short notional values will increase (decrease) proportionally with decreases (increases) in the forward price. Additional gains (losses) associated with these contracts will be equal to any such subsequent decreases (increases) in short notional values, 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 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 this Annual Report on Form 10-K for additional information regarding performance for periods longer than a single 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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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 December 31, 2015 and 2014, each of the Commodity Funds and the Commodity Index Funds’ positions were as follows:

ProShares Ultra Bloomberg Commodity:

As of December 31, 2015 and 2014, the ProShares Ultra Bloomberg Commodity Fund was exposed to commodity price risk through its holding of swap agreements linked to the Bloomberg Commodity Index. The following tables provide information about the Fund’s swap positions as of December 31, 2015 and 2014, which were sensitive to commodity price risk.

Swap Agreements as of December 31, 2015

 

Reference Index

   Counterparty    Long or
Short
   Index
Close
     Notional Amount
at Value
 

Bloomberg Commodity Index

   Citibank N.A    Long    $ 78.5588       $ 1,622,466   

Bloomberg Commodity Index

   Deutsche Bank AG    Long      78.5588         6,571,903   

Bloomberg Commodity Index

   Goldman Sachs International    Long      78.5588         4,426,279   

Bloomberg Commodity Index

   UBS AG    Long      78.5588         1,576,626   

Swap Agreements as of December 31, 2014

 

Reference Index

   Counterparty    Long or
Short
   Index Close      Notional Amount
at Value
 

Bloomberg Commodity Index

   Deutsche Bank AG    Long    $ 104.3285       $ 2,207,567   

Bloomberg Commodity Index

   Goldman Sachs International    Long      104.3285         2,221,450   

Bloomberg Commodity Index

   UBS AG    Long      104.3285         780,251   

The December 31, 2015 and 2014 swap notional values are calculated by multiplying units times the closing level of the Index. These notional values 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 values, 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 this Annual Report on Form 10-K for additional information regarding performance for periods longer than a single 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 Bloomberg Crude Oil:

As of December 31, 2015 and 2014, the ProShares Ultra Bloomberg 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 Bloomberg WTI Crude Oil SubindexSM. The following tables provide information about the Fund’s positions in these Financial Instruments as of December 31, 2015 and 2014, which were sensitive to commodity price risk.

 

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Futures Positions as of December 31, 2015

 

Contract

   Long or
Short
   Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

WTI Crude Oil (NYMEX)

   Long    March 2016      11,089       $ 38.17         1,000       $ 423,267,130   

Swap Agreements as of December 31, 2015

 

Reference Index

   Counterparty    Long or
Short
   Index
Close
     Notional Amount
at Value
 

Bloomberg WTI Crude Oil Subindex

   Citibank N.A.    Long    $ 79.2476       $ 158,594,078   

Bloomberg WTI Crude Oil Subindex

   Deutsche Bank AG    Long      79.2476         292,553,469   

Bloomberg WTI Crude Oil Subindex

   Goldman Sachs International    Long      79.2476         298,419,036   

Bloomberg WTI Crude Oil Subindex

   Societe Generale S.A.    Long      79.2476         100,733,521   

Bloomberg WTI Crude Oil Subindex

   UBS AG    Long      79.2476         294,338,185   

Futures Positions as of December 31, 2014

 

Contract

   Long or
Short
   Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

WTI Crude Oil (NYMEX)

   Long    March 2015      7,232       $ 53.70         1,000       $ 388,358,400   

Swap Agreements as of December 31, 2014

 

Reference Index

   Counterparty    Long or
Short
   Index Close      Notional Amount
at Value
 

Bloomberg WTI Crude Oil Subindex

   Deutsche Bank AG    Long    $ 142.4858       $ 165,659,833   

Bloomberg WTI Crude Oil Subindex

   Goldman Sachs International    Long      142.4858         151,188,034   

Bloomberg WTI Crude Oil Subindex

   Societe Generale S.A.    Long      142.4858         39,239,652   

Bloomberg WTI Crude Oil Subindex

   UBS AG    Long      142.4858         156,716,204   

The December 31, 2015 and 2014 futures notional values are calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The December 31, 2015 and 2014 swap notional values are calculated by multiplying the number of units times the closing level of the Index. These notional values 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 values, 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 this Annual Report on Form 10-K for additional information regarding performance for periods longer than a single 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 Bloomberg Natural Gas:

As of December 31, 2015 and 2014, the ProShares Ultra Bloomberg 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 December 31, 2015 and 2014, which were sensitive to commodity price risk.

 

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Futures Positions as of December 31, 2015

 

Contract

   Long or
Short
   Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Natural Gas (NYMEX)

   Long    March 2016      3,288       $ 2.36         10,000       $ 77,695,440   

Futures Positions as of December 31, 2014

 

Contract

   Long or
Short
   Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Natural Gas (NYMEX)

   Long    March 2015      4,864       $ 2.90         10,000       $ 140,861,440   

The December 31, 2015 and 2014 futures notional values are calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The notional values will increase (decrease) proportionally with increases (decreases) in the price of the futures contract, as applicable. Additional gains (losses) associated with these contracts will be equal to any such subsequent increases (decreases) in notional values, 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 this Annual Report on Form 10-K for additional information regarding performance for periods longer than a single day.

ProShares Ultra Gold:

As of December 31, 2015 and 2014, 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 December 31, 2015 and 2014, which were sensitive to commodity price risk.

Futures Positions as of December 31, 2015

 

Contract

   Long or
Short
   Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Gold Futures (COMEX)

   Long    February 2016      2       $ 1,060.20         100       $ 212,040   

Forward Agreements as of December 31, 2015

 

Reference Index

   Counterparty    Long or
Short
   Valuation
Price
     Notional Amount
at Value
 

0.995 Fine Troy Ounce Gold

   Citibank N.A.    Long    $ 1,059.96       $ 3,179,880   

0.995 Fine Troy Ounce Gold

   Deutsche Bank AG    Long      1,060.01         67,734,639   

0.995 Fine Troy Ounce Gold

   Goldman Sachs International    Long      1,059.96         25,036,255   

0.995 Fine Troy Ounce Gold

   Societe Generale S.A.    Long      1,059.96         16,323,384   

0.995 Fine Troy Ounce Gold

   UBS AG    Long      1,059.96         27,240,972   

Futures Positions as of December 31, 2014

 

Contract

   Long or
Short
   Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Gold Futures (COMEX)

   Long    February 2015      2       $ 1,184.10         100       $ 236,820   

Forward Agreements as of December 31, 2014

 

Reference Index

   Counterparty    Long or
Short
   Valuation
Price
     Notional Amount
at Value
 

0.995 Fine Troy Ounce Gold

   Deutsche Bank AG    Long    $ 1,205.99       $ 109,503,892   

0.995 Fine Troy Ounce Gold

   Goldman Sachs International    Long      1,205.99         37,892,206   

0.995 Fine Troy Ounce Gold

   Societe Generale S.A.    Long      1,205.99         18,331,048   

0.995 Fine Troy Ounce Gold

   UBS AG    Long      1,205.99         38,109,284   

 

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The December 31, 2015 and 2014 futures notional values are calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The December 31, 2015 and 2014 forward notional values equal units multiplied by the forward price. These notional values 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 values, 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 this Annual Report on Form 10-K for additional information regarding performance for periods longer than a single 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 December 31, 2015 and 2014, 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 December 31, 2015 and 2014, which were sensitive to commodity price risk.

Futures Positions as of December 31, 2015

 

Contract

   Long or
Short
   Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Silver Futures (COMEX)

   Long    March 2016      3       $ 13.80         5,000       $ 207,045   

Forward Agreements as of December 31, 2015

 

Reference Index

   Counterparty    Long or
Short
   Valuation Price      Notional Amount
at Value
 

0.999 Fine Troy Ounce Silver

   Deutsche Bank AG    Long    $ 13.8218       $ 180,899,718   

0.999 Fine Troy Ounce Silver

   Goldman Sachs International    Long      13.8212         94,755,383   

0.999 Fine Troy Ounce Silver

   Societe Generale S.A.    Long      13.8212         55,063,661   

0.999 Fine Troy Ounce Silver

   UBS AG    Long      13.8212         101,903,708   

Futures Positions as of December 31, 2014

 

Contract

   Long or
Short
   Expiration    Contracts      Valuation
Price
     Contract
Multiplier
     Notional Amount
at Value
 

Silver Futures (COMEX)

   Long    March 2015      2       $ 15.60         5,000       $ 155,990   

Forward Agreements as of December 31, 2014

 

Reference Index

   Counterparty    Long or
Short
   Valuation Price      Notional Amount
at Value
 

0.999 Fine Troy Ounce Silver

   Deutsche Bank AG    Long    $ 15.9718       $ 304,550,282   

0.999 Fine Troy Ounce Silver

   Goldman Sachs International    Long      15.9716         113,411,137   

0.999 Fine Troy Ounce Silver

   Societe Generale S.A.    Long      15.9716         73,916,565   

0.999 Fine Troy Ounce Silver

   UBS AG    Long      15.9716         90,287,455   

The December 31, 2015 and 2014 futures notional values are calculated by multiplying the number of contracts held times the valuation price times the contract multiplier. The December 31, 2015 and 2014 forward notional values equal units multiplied by the forward price. These notional values 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 values, 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

 

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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 this Annual Report on Form 10-K for additional information regarding performance for periods longer than a single 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 December 31, 2015 and 2014, each of the Currency Funds’ positions was as follows:

ProShares Ultra Euro:

As of December 31, 2015 and 2014, 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 December 31, 2015 and 2014, which were sensitive to exchange rate price risk.

Foreign Currency Forward Contracts as of December 31, 2015

 

Reference Currency

   Counterparty    Long or
Short
   Settlement
Date
     Euro     Forward
Rate
     Market
Value
USD
 

Euro

   Goldman Sachs International    Long      01/08/16         12,451,525        1.0868       $ 13,533,325   

Euro

   UBS AG    Long      01/08/16         11,518,600        1.0868         12,519,346   

Euro

   Goldman Sachs International    Short      01/08/16         (3,430,700     1.0868         (3,728,762

Euro

   UBS AG    Short      01/08/16         (555,100     1.0868         (603,328

Foreign Currency Forward Contracts as of December 31, 2014

 

Reference Currency

   Counterparty    Long or
Short
   Settlement
Date
     Euro     Forward
Rate
     Market Value
USD
 

Euro

   Goldman Sachs International    Long      01/09/15         2,080,425        1.2101       $ 2,517,638   

Euro

   UBS AG    Long      01/09/15         3,032,200        1.2101         3,669,434   

Euro

   Goldman Sachs International    Short      01/09/15         (63,400 )     1.2101         (76,724 )

Euro

   UBS AG    Short      01/09/15         (122,500 )     1.2101         (148,244 )

The December 31, 2015 and 2014 USD market value equals the number of euros multiplied by the forward rate. These notional values will increase (decrease) proportionally with increases (decreases) in the forward price. Additional gains (losses) associated with these contracts will be equal to any such subsequent increases (decreases) in notional values, 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 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 this Annual Report on Form 10-K for additional information regarding performance for periods longer than a single 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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ProShares Ultra Yen:

As of December 31, 2015 and 2014, 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 December 31, 2015 and 2014, which were sensitive to exchange rate price risk.

Foreign Currency Forward Contracts as of December 31, 2015

 

Reference Currency

   Counterparty    Long or
Short
   Settlement
Date
     Yen     Forward
Rate
     Market Value
USD
 

Yen

   Goldman Sachs International    Long      01/08/16         866,666,900        0.00832       $ 7,210,368   

Yen

   UBS AG    Long      01/08/16         488,922,300        0.00832         4,067,664   

Yen

   Goldman Sachs International    Short      01/08/16         (18,830,800 )     0.00832         (156,666 )

Yen

   UBS AG    Short      01/08/16         (21,100,300 )     0.00832         (175,547 )

Foreign Currency Forward Contracts as of December 31, 2014

 

Reference Currency

   Counterparty    Long or
Short
   Settlement
Date
     Yen     Forward
Rate
     Market Value
USD
 

Yen

   Goldman Sachs International    Long      01/09/15         229,660,300        0.00835       $ 1,917,715   

Yen

   UBS AG    Long      01/09/15         304,204,900        0.00835         2,540,179   

Yen

   Goldman Sachs International    Short      01/09/15         (9,518,600 )     0.00835         (79,482 )

Yen

   UBS AG    Short      01/09/15         (16,144,000 )     0.00835         (134,806 )

The December 31, 2015 and 2014 USD market values equal the number of yen multiplied by the forward rate. These notional values will increase (decrease) proportionally with increases (decreases) in the forward price. Additional gains (losses) associated with these contracts will be equal to any such subsequent increases (decreases) in notional values, 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 yen for every $1.00 of net assets. While the above information properly represents the then current exchange rate price risk and is adequate for estimating the following day’s gains or losses, estimates of future values over longer periods should take the Fund’s daily rebalancing efforts into account. Future period returns, before fees and expenses, cannot be estimated simply by estimating the appreciation or depreciation of the yen and multiplying by two. See “Item 1A. Risk Factors” in this Annual Report on Form 10-K for additional information regarding performance for periods longer than a single 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.

Qualitative Disclosure

As described above in Item 7 in this Annual Report on Form 10-K, 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 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 two times the inverse (-2x) of the daily performance of its corresponding benchmark. Each Ultra Fund seeks daily investment results (before fees and expenses) that correspond to two times (2x) the daily performance of its corresponding benchmark. Each Matching VIX Fund and the Managed Futures Fund seeks investment results (before fees and expenses), both over a single day and over time, 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. Each Matching VIX Fund and the

 

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Managed Futures Fund seek investment results (before fees and expenses), both over a single day and over time, that match the performance of a benchmark. Shareholders who invest in the Funds should actively manage and monitor their investments, as frequently as daily. See “Item 1A. Risk Factors” in this Annual Report on Form 10-K for additional information regarding performance for periods longer than a single day. The Matching VIX Funds seek to achieve their stated investment objective both over a single day and over time.

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 UltraShort Bloomberg Crude Oil and the ProShares Ultra Bloomberg Crude Oil Funds are exposed to are inverse and direct exposure, respectively, to the price of crude oil as measured by the return of holding and periodically rolling crude oil futures contracts (the Bloomberg 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 7 in this Annual Report on Form 10-K, 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 above in “Item 1A. Risk Factors” in this Annual Report on 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 Managed Futures Fund, the Commodity Index Funds or the Commodity Funds, several factors may affect the price of a commodity underlying the Managed Futures Fund, a Commodity Index Fund or a Commodity Fund, and in turn, the Financial Instruments and other assets, if any, owned by such a Fund. The impact of changes in the price of a physical commodity or of a commodity index (comprised of commodity futures contracts) will affect investors differently depending upon the Fund in which investors invest. Daily increases in the price of an underlying commodity or commodity index will negatively impact the daily performance of Shares of an UltraShort Fund and daily decreases in the price of an underlying commodity or commodity index will negatively impact the daily performance of Shares of an Ultra Fund.

Additionally, performance over time is a cumulative effect of geometrically linking each day’s leveraged or inverse leveraged returns. For instance, if a corresponding benchmark was up 10% and then down 10%, which would result in a (1.1*0.9)-1 = -1% period benchmark return, the two-day period return for a theoretical two-times fund would be equal to a (1.2 *0.8)-1 = -4% period Fund return (rather than simply two times the period return of the benchmark).

Exchange Rate Sensitivity

As further described above in “Item 1A. Risk Factors” in this Annual Report on 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 Managed Futures Fund and 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 above in “Item 1A. Risk Factors” in this Annual Report on 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 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 7 in this Annual Report on Form 10-K, 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, the Fund’s 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.

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 8. Financial Statements and Supplementary Data.

Statement of Operations for the three month periods ended March 31, 2015 and 2014, June 30, 2015 and 2014, September 30, 2015 and 2014, and December 31, 2015 and 2014, and the years ended December 31, 2015 and 2014 for each Fund, as applicable.

PROSHARES MANAGED FUTURES STRATEGY

 

     Three months ended (unaudited)  
     March 31,
2015
    June 30,
2015
    September 30,
2015
    December 31,
2015
    Year ended
December 31,
2015
 

Net investment income (loss)

   $ (16,021   $ (18,095   $ (19,272   $ (18,166   $ (71,554
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ 98,158      $ (389,310   $ 27,957      $ (62,150   $ (325,345

Net income (loss)

   $ 82,137      $ (407,405   $ 8,685      $ (80,316   $ (396,899

Net increase (decrease) in net asset value per share

   $ 0.33      $ (0.97   $ 0.08      $ (0.05   $ (0.61

 

     October 1, 2014
(Commencement of
Investment Operations)
through
December 31, 2014
 

Net investment income (loss)

   $ (7,531
  

 

 

 

Net realized and unrealized gain (loss)

   $ 213,333   

Net income (loss)

   $ 205,802   

Net increase (decrease) in net asset value per share

   $ 1.14   

PROSHARES VIX SHORT-TERM FUTURES ETF

 

     Three months ended (unaudited)  
     March 31,
2015
    June 30,
2015
    September 30,
2015
    December 31,
2015
    Year ended
December 31,
2015
 

Net investment income (loss)

   $ (274,472   $ (331,587   $ (318,561   $ (226,174   $ (1,150,794
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ (20,348,051   $ (32,570,365   $ 51,225,945      $ (25,061,271   $ (26,753,742

Net income (loss)

   $ (20,622,523   $ (32,901,952   $ 50,907,384      $ (25,287,445   $ (27,904,536

Net increase (decrease) in net asset value per share

   $ (3.85   $ (3.56   $ 3.75      $ (4.03   $ (7.69

 

 

 

     Three months ended (unaudited)  
     March 31,
2014
    June 30,
2014
    September 30,
2014
    December 31,
2014
    Year ended
December 31,
2014
 

Net investment income (loss)

   $ (353,797   $ (226,038   $ (253,370   $ (285,343   $ (1,118,548
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ 27,407,450      $ (42,811,471   $ 16,054,928      $ 21,578,065      $ 22,228,972   

Net income (loss)

   $ 27,053,653      $ (43,037,509   $ 15,801,558      $ 21,292,722      $ 21,110,424   

Net increase (decrease) in net asset value per share

   $ (0.34   $ (9.19   $ 1.81      $ 0.11      $ (7.61

PROSHARES VIX MID-TERM FUTURES ETF

 

     Three months ended (unaudited)  
     March 31,
2015
    June 30,
2015
    September 30,
2015
    December 31,
2015
    Year ended
December 31,
2015
 

Net investment income (loss)

   $ (63,559   $ (57,794   $ (59,501   $ (59,746   $ (240,600
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ (633,713   $ (2,850,316   $ 4,392,949      $ (4,848,853   $ (3,939,933

Net income (loss)

   $ (697,272   $ (2,908,110   $ 4,333,448      $ (4,908,599   $ (4,180,533

Net increase (decrease) in net asset value per share

   $ (2.23   $ (6.43   $ 8.89      $ (9.87   $ (9.64

 

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Table of Contents
     Three months ended (unaudited)  
     March 31,
2014
    June 30,
2014
    September 30,
2014
    December 31,
2014
    Year ended
December 31,
2014
 

Net investment income (loss)

   $ (110,008   $ (97,187   $ (92,236   $ (87,047   $ (386,478
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ (2,507,472   $ (8,154,254   $ 1,961,421      $ (519,222   $ (9,219,527

Net income (loss)

   $ (2,617,480   $ (8,251,441   $ 1,869,185      $ (606,269   $ (9,606,005

Net increase (decrease) in net asset value per share

   $ (3.21   $ (12.21   $ 2.25      $ (0.41   $ (13.58

PROSHARES SHORT VIX SHORT-TERM FUTURES ETF

 

     Three months ended (unaudited)  
     March 31,
2015
    June 30,
2015
    September 30,
2015
    December 31,
2015
    Year ended
December 31,
2015
 

Net investment income (loss)

   $ (1,492,492   $ (840,088   $ (1,375,292   $ (2,090,328   $ (5,798,200
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ 47,179,205      $ 62,471,026      $ (119,325,102   $ 106,611,026      $ 96,936,157   

Net income (loss)

   $ 45,686,713      $ 61,630,938      $ (120,700,394   $ 104,520,698      $ 91,137,957   

Net increase (decrease) in net asset value per share

   $ 6.27      $ 11.18      $ (31.68   $ 3.64      $ (10.59

 

     Three months ended (unaudited)  
     March 31,
2014
    June 30,
2014
    September 30,
2014
    December 31,
2014
    Year ended
December 31,
2014
 

Net investment income (loss)

   $ (771,039   $ (740,111   $ (989,160   $ (1,785,159   $ (4,285,469
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ 2,702,003      $ 74,375,658      $ (15,817,047   $ (8,786,121   $ 52,474,493   

Net income (loss)

   $ 1,930,964      $ 73,635,547      $ (16,806,207   $ (10,571,280   $ 48,189,024   

Net increase (decrease) in net asset value per share

   $ (5.64   $ 26.55      $ (13.59   $ (13.42   $ (6.10

PROSHARES ULTRA VIX SHORT-TERM FUTURES ETF

 

     Three months ended (unaudited)  
     March 31,
2015
    June 30,
2015
    September 30,
2015
    December 31,
2015
    Year ended
December 31,
2015
 

Net investment income (loss)

   $ (2,049,613   $ (2,003,111   $ (1,444,542   $ (1,912,882   $ (7,410,148
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ (223,600,088   $ (264,338,289   $ 182,002,869      $ (113,952,578   $ (419,888,086

Net income (loss)

   $ (225,649,701   $ (266,341,400   $ 180,558,327      $ (115,865,460   $ (427,298,234

Net increase (decrease) in net asset value per share*

   $ (49.51   $ (31.43   $ 12.70      $ (29.14   $ (97.38

 

     Three months ended (unaudited)  
     March 31,
2014
    June 30,
2014
    September 30,
2014
    December 31,
2014
    Year ended
December 31,
2014
 

Net investment income (loss)

   $ (1,084,303   $ (1,418,872   $ (1,308,139   $ (1,548,172   $ (5,359,486
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ (9,236,592   $ (258,000,022   $ 84,470,033      $ 106,954,440      $ (75,812,141

Net income (loss)

   $ (10,320,895   $ (259,418,894   $ 83,161,894      $ 105,406,268      $ (81,171,627

Net increase (decrease) in net asset value per share*

   $ (33.94   $ (168.72   $ 16.07      $ (23.37   $ (209.96

PROSHARES ULTRASHORT BLOOMBERG COMMODITY

 

     Three months ended (unaudited)  
     March 31,
2015
    June 30,
2015
    September 30,
2015
    December 31,
2015
    Year ended
December 31,
2015
 

Net investment income (loss)

   $ (12,318   $ (12,273   $ (15,054   $ (16,981   $ (56,626
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ 565,975      $ (589,890   $ 1,735,002      $ 1,594,872      $ 3,305,959   

Net income (loss)

   $ 553,657      $ (602,163   $ 1,719,948      $ 1,577,891      $ 3,249,333   

Net increase (decrease) in net asset value per share

   $ 9.23      $ (10.04   $ 28.67      $ 26.30      $ 54.16   

 

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Table of Contents
     Three months ended (unaudited)  
     March 31,
2014
    June 30,
2014
    September 30,
2014
    December 31,
2014
    Year ended
December 31,
2014
 

Net investment income (loss)

   $ (7,991   $ (7,267   $ (8,532   $ (10,280   $ (34,070
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ (505,706   $ (22,047   $ 903,300      $ 1,125,802      $ 1,501,349   

Net income (loss)

   $ (513,697   $ (29,314   $ 894,768      $ 1,115,522      $ 1,467,279   

Net increase (decrease) in net asset value per share

   $ (8.56   $ (0.49   $ 14.91      $ 18.60      $ 24.46   

PROSHARES ULTRASHORT BLOOMBERG CRUDE OIL

 

     Three months ended (unaudited)  
     March 31,
2015
    June 30,
2015
    September 30,
2015
    December 31,
2015
    Year ended
December 31,
2015
 

Net investment income (loss)

   $ (627,608   $ (732,642   $ (463,183   $ (342,778   $ (2,166,211
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ 46,090,543      $ (130,174,273   $ 86,025,955      $ 55,790,650      $ 57,732,875   

Net income (loss)

   $ 45,462,935      $ (130,906,915   $ 85,562,772      $ 55,447,872      $ 55,566,664   

Net increase (decrease) in net asset value per share

   $ 8.75      $ (29.92   $ 30.71      $ 45.68      $ 55.22   

 

     Three months ended (unaudited)  
     March 31,
2014
    June 30,
2014
    September 30,
2014
    December 31,
2014
    Year ended
December 31,
2014
 

Net investment income (loss)

   $ (599,273   $ (829,357   $ (639,303   $ (347,908   $ (2,415,841
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ (15,666,162   $ (45,885,286   $ 71,664,478      $ 135,616,417      $ 145,729,447   

Net income (loss)

   $ (16,265,435   $ (46,714,643   $ 71,025,175      $ 135,268,509      $ 143,313,606   

Net increase (decrease) in net asset value per share

   $ (3.25   $ (3.85   $ 6.16      $ 47.19      $ 46.25   

PROSHARES ULTRASHORT BLOOMBERG NATURAL GAS

 

     Three months ended (unaudited)  
     March 31,
2015
    June 30,
2015
    September 30,
2015
    December 31,
2015
    Year ended
December 31,
2015
 

Net investment income (loss)

   $ (41,587   $ (48,062   $ (37,310   $ (50,165   $ (177,124
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ 2,097,816      $ (910,106   $ 3,698,383      $ 3,914,279      $ 8,800,372   

Net income (loss)

   $ 2,056,229      $ (958,168   $ 3,661,073      $ 3,864,114      $ 8,623,248   

Net increase (decrease) in net asset value per share

   $ 3.53      $ (12.69   $ 22.33      $ 42.46      $ 55.63   

 

     Three months ended (unaudited)  
     March 31,
2014
    June 30,
2014
    September 30,
2014
    December 31,
2014
    Year ended
December 31,
2014
 

Net investment income (loss)

   $ (155,585   $ (172,282   $ (86,019   $ (47,021   $ (460,907
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ (5,773,719   $ (3,982,380   $ 9,581,777      $ 11,870,441      $ 11,696,119   

Net income (loss)

   $ (5,929,304   $ (4,154,662   $ 9,495,758      $ 11,823,420      $ 11,235,212   

Net increase (decrease) in net asset value per share

   $ (26.06   $ (3.35   $ 5.76      $ 37.64      $ 13.99   

PROSHARES ULTRASHORT GOLD

 

     Three months ended (unaudited)  
     March 31,
2015
    June 30,
2015
    September 30,
2015
    December 31,
2015
    Year ended
December 31,
2015
 

Net investment income (loss)

   $ (185,696   $ (167,434   $ (181,720   $ (168,732   $ (703,582
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ 2,615,871      $ 1,077,517      $ 5,999,565      $ 7,114,493      $ 16,807,446   

Net income (loss)

   $ 2,430,175      $ 910,083      $ 5,817,845      $ 6,945,761      $ 16,103,864   

Net increase (decrease) in net asset value per share

   $ 1.17      $ 1.18      $ 7.99      $ 8.89      $ 19.23   

 

129


Table of Contents
     Three months ended (unaudited)  
     March 31,
2014
    June 30,
2014
    September 30,
2014
    December 31,
2014
    Year ended
December 31,
2014
 

Net investment income (loss)

   $ (250,373   $ (218,689   $ (185,871   $ (202,884   $ (857,817
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ (19,243,614   $ (5,262,045   $ 11,832,873      $ (573,826   $ (13,246,612

Net income (loss)

   $ (19,493,987   $ (5,480,734   $ 11,647,002      $ (776,710   $ (14,104,429

Net increase (decrease) in net asset value per share

   $ (15.22   $ (4.30   $ 12.93      $ (0.28   $ (6.87

PROSHARES ULTRASHORT SILVER

 

     Three months ended (unaudited)  
     March 31,
2015
    June 30,
2015
    September 30,
2015
    December 31,
2015
    Year ended
December 31,
2015
 

Net investment income (loss)

   $ (118,220   $ (130,679   $ (129,265   $ (138,300   $ (516,464
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ (5,691,197   $ 5,720,789      $ 6,242,356      $ 8,671,752      $ 14,943,700   

Net income (loss)

   $ (5,809,417   $ 5,590,110      $ 6,113,091      $ 8,533,452      $ 14,427,236   

Net increase (decrease) in net asset value per share*

   $ (7.22   $ 4.13      $ 5.31      $ 4.55      $ 6.77   

 

     Three months ended (unaudited)  
     March 31,
2014
    June 30,
2014
    September 30,
2014
    December 31,
2014
    Year ended
December 31,
2014
 

Net investment income (loss)

   $ (191,211   $ (133,126   $ (129,289   $ (132,215   $ (585,841
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ (2,651,815   $ (5,873,834   $ 21,824,710      $ 4,627,812      $ 17,926,873   

Net income (loss)

   $ (2,843,026   $ (6,006,960   $ 21,695,421      $ 4,495,597      $ 17,341,032   

Net increase (decrease) in net asset value per share*

   $ (3.52   $ (4.54   $ 16.73      $ 4.25      $ 12.92   

PROSHARES SHORT EURO

 

     Three months ended (unaudited)  
     March 31,
2015
    June 30,
2015
    September 30,
2015
    December 31,
2015
    Year ended
December 31,
2015
 

Net investment income (loss)

   $ (38,347   $ (45,895   $ (47,612   $ (46,907   $ (178,761

Net realized and unrealized gain (loss)

   $ 1,781,715      $ (777,986   $ (32,048   $ 445,899      $ 1,417,580   

Net income (loss)

   $ 1,743,368      $ (823,881   $ (79,660   $ 398,992      $ 1,238,819   

Net increase (decrease) in net asset value per share

   $ 4.79      $ (1.83   $ (0.26   $ 1.02      $ 3.72   

 

     Three months ended (unaudited)  
     March 31,
2014
    June 30,
2014
    September 30,
2014
    December 31,
2014
    Year ended
December 31,
2014
 

Net investment income (loss)

   $ (16,599   $ (27,255   $ (37,429   $ (36,964   $ (118,247
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ 14,611      $ 65,929      $ 1,308,992      $ 622,008      $ 2,011,540   

Net income (loss)

   $ (1,988   $ 38,674      $ 1,271,563      $ 585,044      $ 1,893,293   

Net increase (decrease) in net asset value per share

   $ (0.08   $ 0.10      $ 2.91      $ 1.55      $ 4.48   

 

130


Table of Contents

PROSHARES ULTRASHORT AUSTRALIAN DOLLAR

 

     Three months ended (unaudited)  
     March 31,
2015
    June 30,
2015
    September 30,
2015
    December 31,
2015
    Year ended
December 31,
2015
 

Net investment income (loss)

   $ (55,714   $ (48,012   $ (54,415   $ (51,846   $ (209,987
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ 2,656,367      $ (963,218   $ 3,544,373      $ (2,071,138   $ 3,166,384   

Net income (loss)

   $ 2,600,653      $ (1,011,230   $ 3,489,958      $ (2,122,984   $ 2,956,397   

Net increase (decrease) in net asset value per share

   $ 6.06      $ (2.89   $ 9.97      $ (6.06   $ 7.08   

 

     Three months ended (unaudited)  
     March 31,
2014
    June 30,
2014
    September 30,
2014
    December 31,
2014
    Year ended
December 31,
2014
 

Net investment income (loss)

   $ (59,178   $ (49,562   $ (50,580   $ (53,863   $ (213,183
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ (2,218,104   $ (988,871   $ 2,798,717      $ 2,529,379      $ 2,121,121   

Net income (loss)

   $ (2,277,282   $ (1,038,433   $ 2,748,137      $ 2,475,516      $ 1,907,938   

Net increase (decrease) in net asset value per share

   $ (4.31   $ (2.08   $ 5.62      $ 5.51      $ 4.74   

PROSHARES ULTRASHORT EURO

 

     Three months ended (unaudited)  
     March 31,
2015
    June 30,
2015
    September 30,
2015
    December 31,
2015
    Year ended
December 31,
2015
 

Net investment income (loss)

   $ (1,189,555   $ (1,296,221   $ (1,351,762   $ (1,163,049   $ (5,000,587
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ 114,159,808      $ (48,496,893   $ (7,308,030   $ 27,822,084      $ 86,176,969   

Net income (loss)

   $ 112,970,253      $ (49,793,114   $ (8,659,792   $ 26,659,035      $ 81,176,382   

Net increase (decrease) in net asset value per share

   $ 5.36      $ (2.21   $ (0.36   $ 1.16      $ 3.95   

 

     Three months ended (unaudited)  
     March 31,
2014
    June 30,
2014
    September 30,
2014
    December 31,
2014
    Year ended
December 31,
2014
 

Net investment income (loss)

   $ (901,399   $ (948,368   $ (1,070,109   $ (1,074,269   $ (3,994,145
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ (2,166,393   $ 4,020,165      $ 74,943,078      $ 37,385,957      $ 114,182,807   

Net income (loss)

   $ (3,067,792   $ 3,071,797      $ 73,872,969      $ 36,311,688      $ 110,188,662   

Net increase (decrease) in net asset value per share

   $ (0.13   $ 0.13      $ 2.91      $ 1.62      $ 4.53   

PROSHARES ULTRASHORT YEN

 

     Three months ended (unaudited)  
     March 31,
2015
    June 30,
2015
    September 30,
2015
    December 31,
2015
    Year ended
December 31,
2015
 

Net investment income (loss)

   $ (1,116,544   $ (973,386   $ (865,306   $ (668,442   $ (3,623,678
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ (2,867,365   $ 15,764,799      $ (19,107,015   $ 2,668,447      $ (3,541,134

Net income (loss)

   $ (3,983,909   $ 14,791,413      $ (19,972,321   $ 2,000,005      $ (7,164,812

Net increase (decrease) in net asset value per share

   $ (0.36   $ 3.21      $ (4.36   $ 0.12      $ (1.39

 

     Three months ended (unaudited)  
     March 31,
2014
    June 30,
2014
    September 30,
2014
    December 31,
2014
    Year ended
December 31,
2014
 

Net investment income (loss)

   $ (950,309   $ (820,394   $ (866,070   $ (1,104,828   $ (3,741,601
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ (24,636,797   $ (14,260,091   $ 60,575,000      $ 75,195,594      $ 96,873,706   

Net income (loss)

   $ (25,587,106   $ (15,080,485   $ 59,708,930      $ 74,090,766      $ 93,132,105   

Net increase (decrease) in net asset value per share

   $ (3.25   $ (2.72   $ 10.86      $ 13.58      $ 18.47   

 

131


Table of Contents

PROSHARES ULTRA BLOOMBERG COMMODITY

 

     Three months ended (unaudited)  
     March 31,
2015
    June 30,
2015
    September 30,
2015
    December 31,
2015
    Year ended
December 31,
2015
 

Net investment income (loss)

   $ (5,519   $ (5,763   $ (5,077   $ (17,183   $ (33,542
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ (318,493   $ 232,998      $ (676,874   $ (2,043,086   $ (2,805,455

Net income (loss)

   $ (324,012   $ 227,235      $ (681,951   $ (2,060,269   $ (2,838,997

Net increase (decrease) in net asset value per share*

   $ (6.48   $ 3.93      $ (13.74   $ (7.41   $ (23.70

 

     Three months ended (unaudited)  
     March 31,
2014
    June 30,
2014
    September 30,
2014
    December 31,
2014
    Year ended
December 31,
2014
 

Net investment income (loss)

   $ (6,957   $ (7,738   $ (8,944   $ (7,352   $ (30,991
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ 408,227      $ (37,364   $ (991,280   $ (791,622   $ (1,412,039

Net income (loss)

   $ 401,270      $ (45,102   $ (1,000,224   $ (798,974   $ (1,443,030

Net increase (decrease) in net asset value per share*

   $ 10.70      $ (0.31   $ (20.01   $ (15.98   $ (25.60

PROSHARES ULTRA BLOOMBERG CRUDE OIL

 

     Three months ended (unaudited)  
     March 31,
2015
    June 30,
2015
    September 30,
2015
    December 31,
2015
    Year ended
December 31,
2015
 

Net investment income (loss)

   $ (1,844,712   $ (2,559,682   $ (2,085,145   $ (1,983,616   $ (8,473,155
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ (193,319,571   $ 358,080,448      $ (588,538,331   $ (439,833,790   $ (863,611,244

Net income (loss)

   $ (195,164,283   $ 355,520,766      $ (590,623,476   $ (441,817,406   $ (872,084,399

Net increase (decrease) in net asset value per share*

   $ (16.62   $ 11.38      $ (23.15   $ (9.77   $ (38.16

 

     Three months ended (unaudited)  
     March 31,
2014
    June 30,
2014
    September 30,
2014
    December 31,
2014
    Year ended
December 31,
2014
 

Net investment income (loss)

   $ (333,392   $ (224,621   $ (329,563   $ (878,788   $ (1,766,364
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ 21,676,202      $ 11,978,443      $ (28,886,080   $ (373,330,487   $ (368,561,922

Net income (loss)

   $ 21,342,810      $ 11,753,822      $ (29,215,643   $ (374,209,275   $ (370,328,286

Net increase (decrease) in net asset value per share*

   $ 12.68      $ 22.82      $ (45.36   $ (99.85   $ (109.71

PROSHARES ULTRA BLOOMBERG NATURAL GAS

 

     Three months ended (unaudited)  
     March 31,
2015
    June 30,
2015
    September 30,
2015
    December 31,
2015
    Year ended
December 31,
2015
 

Net investment income (loss)

   $ (206,884   $ (222,837   $ (190,466   $ (141,148   $ (761,335
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ (18,381,540   $ 2,617,359      $ (21,633,331   $ (22,173,098   $ (59,570,610

Net income (loss)

   $ (18,588,424   $ 2,394,522      $ (21,823,797   $ (22,314,246   $ (60,331,945

Net increase (decrease) in net asset value per share*

   $ (15.98   $ (0.25   $ (13.40   $ (13.45   $ (43.08

 

     Three months ended (unaudited)  
     March 31,
2014
    June 30,
2014
    September 30,
2014
    December 31,
2014
    Year ended
December 31,
2014
 

Net investment income (loss)

   $ (117,562   $ (51,717   $ (128,208   $ (231,094   $ (528,581
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ 18,608,808      $ 603,144      $ (1,319,583   $ (55,586,378   $ (37,694,009

Net income (loss)

   $ 18,491,246      $ 551,427      $ (1,447,791   $ (55,817,472   $ (38,222,590

Net increase (decrease) in net asset value per share*

   $ 25.20      $ (0.41   $ (35.29   $ (83.20   $ (93.70

 

132


Table of Contents

PROSHARES ULTRA GOLD

 

     Three months ended (unaudited)  
     March 31,
2015
    June 30,
2015
    September 30,
2015
    December 31,
2015
    Year ended
December 31,
2015
 

Net investment income (loss)

   $ (227,743   $ (212,388   $ (190,084   $ (166,209   $ (796,424
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ (3,374,221   $ (3,014,902   $ (9,190,257   $ (7,336,271   $ (22,915,651

Net income (loss)

   $ (3,601,964   $ (3,227,290   $ (9,380,341   $ (7,502,480   $ (23,712,075

Net increase (decrease) in net asset value per share

   $ (1.62   $ (1.36   $ (3.87   $ (3.42   $ (10.27

 

     Three months ended (unaudited)  
     March 31,
2014
    June 30,
2014
    September 30,
2014
    December 31,
2014
    Year ended
December 31,
2014
 

Net investment income (loss)

   $ (317,539   $ (297,090   $ (293,686   $ (249,033   $ (1,157,348
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ 18,243,517      $ 3,768,105      $ (20,002,547   $ (2,793,404   $ (784,329

Net income (loss)

   $ 17,925,978      $ 3,471,015      $ (20,296,233   $ (3,042,437   $ (1,941,677

Net increase (decrease) in net asset value per share

   $ 5.77      $ 1.35      $ (7.28   $ (1.09   $ (1.25

PROSHARES ULTRA SILVER

 

     Three months ended (unaudited)  
     March 31,
2015
    June 30,
2015
    September 30,
2015
    December 31,
2015
    Year ended
December 31,
2015
 

Net investment income (loss)

   $ (699,839   $ (679,148   $ (596,454   $ (532,418   $ (2,507,859
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ 17,250,785      $ (34,725,040   $ (42,765,969   $ (28,252,102   $ (88,492,326

Net income (loss)

   $ 16,550,946      $ (35,404,188   $ (43,362,423   $ (28,784,520   $ (91,000,185

Net increase (decrease) in net asset value per share

   $ 2.11      $ (5.03   $ (5.40   $ (3.99   $ (12.31

 

     Three months ended (unaudited)  
     March 31,
2014
    June 30,
2014
    September 30,
2014
    December 31,
2014
    Year ended
December 31,
2014
 

Net investment income (loss)

   $ (1,125,310   $ (1,047,200   $ (1,023,432   $ (772,666   $ (3,968,608
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ 18,318,102      $ 38,803,113      $ (169,039,274   $ (53,526,098   $ (165,444,157

Net income (loss)

   $ 17,192,792      $ 37,755,913      $ (170,062,706   $ (54,298,764   $ (169,412,765

Net increase (decrease) in net asset value per share

   $ 1.90      $ 4.87      $ (23.70   $ (7.03   $ (23.96

PROSHARES ULTRA EURO

 

     Three months ended (unaudited)  
     March 31,
2015
    June 30,
2015
    September 30,
2015
    December 31,
2015
    Year ended
December 31,
2015
 

Net investment income (loss)

   $ (15,698   $ (34,217   $ (26,696   $ (27,460   $ (104,071
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ (1,740,537   $ 1,082,327      $ 59,448      $ (675,633   $ (1,274,395

Net income (loss)

   $ (1,756,235   $ 1,048,110      $ 32,752      $ (703,093   $ (1,378,466

Net increase (decrease) in net asset value per share

   $ (4.33   $ 1.05      $ (0.04   $ (1.04   $ (4.36

 

133


Table of Contents
     Three months ended (unaudited)  
     March 31,
2014
    June 30,
2014
    September 30,
2014
    December 31,
2014
    Year ended
December 31,
2014
 

Net investment income (loss)

   $ (5,664   $ (5,779   $ (5,529   $ (5,275   $ (22,247
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ 5,119      $ (30,602   $ (385,103   $ (214,457   $ (625,043

Net income (loss)

   $ (545   $ (36,381   $ (390,632   $ (219,732   $ (647,290

Net increase (decrease) in net asset value per share

   $ 0.01      $ (0.36   $ (3.91   $ (1.90   $ (6.16

PROSHARES ULTRA YEN

 

     Three months ended (unaudited)  
     March 31,
2015
    June 30,
2015
    September 30,
2015
    December 31,
2015
    Year ended
December 31,
2015
 

Net investment income (loss)

   $ (9,090   $ (12,481   $ (11,745   $ (11,107   $ (44,423
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ (106,753   $ (237,139   $ 197,237      $ (49,436   $ (196,091

Net income (loss)

   $ (115,843   $ (249,620   $ 185,492      $ (60,543   $ (240,514

Net increase (decrease) in net asset value per share*

   $ (0.47   $ (2.50   $ 1.86      $ (0.61   $ (1.72

 

     Three months ended (unaudited)  
     March 31,
2014
    June 30,
2014
    September 30,
2014
    December 31,
2014
    Year ended
December 31,
2014
 

Net investment income (loss)

   $ (6,420   $ (6,068   $ (4,379   $ (3,995   $ (20,862
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

   $ 107,537      $ 82,626      $ (295,508   $ (291,184   $ (396,529

Net income (loss)

   $ 101,117      $ 76,558      $ (299,887   $ (295,179   $ (417,391

Net increase (decrease) in net asset value per share*

   $ 2.69      $ 2.65      $ (11.99   $ (11.41   $ (18.06

See the Index to Financial Statements for a list of the financial statements being filed as part of this Annual Report on Form 10-K. Those Financial Statements, and the notes and schedules related thereto, are incorporated by reference into this Item 8.

 

* See Note 1 of the Notes to Financial Statements in Item 15 of Part IV in this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A. 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 (as defined in Rule 13a-15(e) and 15d-15(e) under the 1934 Act) of the Trust and the Funds were effective, as of December 31, 2015, 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.

Management’s Annual Report on Internal Control Over Financial Reporting

The Trust’s management takes responsibility for establishing and maintaining adequate internal control over financial reporting of the Trust and the Funds, as defined in Rules 13a-15(f) and 15d-15(f) under the 1934 Act. The Trust’s and the Funds’ internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Trust and the

 

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Funds; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Trust’s and the Funds’ receipts and expenditures are being made only in accordance with appropriate authorizations of management of the Trust on behalf of the Trust and the Funds; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Trust’s or the Funds’ assets that could have a material effect on the Trust’s or the Funds’ financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The principal executive officer and principal financial officer of the Trust assessed the effectiveness of the Trust’s and the Funds’ internal control over financial reporting as of December 31, 2015. Their assessment included an evaluation of the design of the Trust’s and the Funds’ internal control over financial reporting and testing of the operational effectiveness of their internal control over financial reporting. In making its assessment, the Trust’s management has utilized the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in its report entitled Internal Control – Integrated Framework (2013). Based on their assessment and those criteria, the principal executive officer and principal financial officer of the Trust concluded that the Trust’s and the Funds’ internal control over financial reporting was effective as of December 31, 2015.

The effectiveness of the Trust’s and the Funds’ internal control over financial reporting as of December 31, 2015 has been audited by PricewaterhouseCoopers LLP, the independent registered public accounting firm, as stated in their report which is included herein.

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 December 31, 2015 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 Annual Report on Form 10-K, 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.

Item 9B. Other Information.

Not applicable.

 

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Part III

Item 10. Directors, Executive Officers and Corporate Governance.

The Sponsor

ProShare Capital Management LLC is the Sponsor of the Trust and the Funds. The Sponsor has exclusive management and control of all aspects of the business of the Funds. The Trustee has no duty or liability to supervise the performance of the Sponsor, nor will the Trustee have any liability for the acts or omissions of the Sponsor.

As of December 31, 2015, the Sponsor serves as the Trust’s commodity pool operator.

Specifically, with respect to the Trust, the Sponsor:

 

    selects the Funds’ service providers;

 

    negotiates various agreements and fees;

 

    performs such other services as the Sponsor believes that the Trust may require from time to time;

 

    selects the FCM and Financial Instrument counterparties;

 

    manages each Fund’s portfolio of other assets, including cash equivalents; and

 

    manages the Funds with a view toward achieving the Funds’ investment objectives.

Background and Principals

As of December 31, 2015, the Sponsor served as the commodity pool operator of the Trust and the Funds, and previously also served as the commodity trading advisor to the Trust and the Funds. The Sponsor is registered as a commodity pool operator with the CFTC and is a member in good standing of the NFA. The Sponsor’s membership with the NFA was originally approved on June 11, 1999. It withdrew its membership with the NFA on August 31, 2000 but later re-applied and had its membership subsequently approved on January 8, 2001. Its membership with the NFA is currently effective. The Sponsor’s registration as a commodity trading advisor was approved on June 11, 1999. On February 17, 2013, the Sponsor’s commodity trading advisor registration was withdrawn. The Sponsor’s registration as a commodity pool operator was originally approved on June 11, 1999. It withdrew its registration as a commodity pool operator on August 30, 2000 but later re-applied and had its registration subsequently approved on November 28, 2007. Its registration as a commodity pool operator is currently effective. As a registered commodity pool operator, with respect to the Trust, the Sponsor must comply with various regulatory requirements under the CEA, and the rules and regulations of the CFTC and the NFA, including investor protection requirements, antifraud prohibitions, disclosure requirements, and reporting and recordkeeping requirements. The NFA approved the Sponsor as a Swaps Firm on January 4, 2013. The Sponsor is also subject to periodic inspections and audits by the CFTC and NFA. Its principal place of business is 7501 Wisconsin Avenue, Suite 1000, Bethesda, Maryland 20814 and its telephone number is (240) 497-6400. The registration of the Sponsor with the CFTC and its membership in the NFA must not be taken as an indication that either the CFTC or the NFA has recommended or approved the Sponsor, the Trust and the Funds.

In its capacity as a commodity pool operator, the Sponsor is an organization which operates or solicits funds for commodity pools; that is, an enterprise in which funds contributed by a number of persons are combined for the purpose of trading futures contracts.

 

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Executive Officers of the Trust and Principals and Significant Employees of the Sponsor

 

Name

  

Position

Michael L. Sapir    Chief Executive Officer and Principal of the Sponsor
Louis M. Mayberg    Principal of the Sponsor
William E. Seale    Principal of the Sponsor
Sapir Family Trust    Principal of the Sponsor
Northstar Trust    Principal of the Sponsor
Timothy N. Coakley    Chief Financial Officer and Principal of the Sponsor
Edward J. Karpowicz    Principal Financial Officer of the Trust and Principal of the Sponsor
Todd B. Johnson*    Principal Executive Officer of the Trust and Chief Investment Officer and Principal of the Sponsor
Hratch Najarian    Director, Portfolio Management and Principal of the Sponsor
Jeffrey A. Ploshnick    Senior Portfolio Manager and Associated Person of the Sponsor
Ryan T. Dofflemeyer    Portfolio Manager and Associated Person of the Sponsor
Victor M. Frye    Principal of the Sponsor

 

* Denotes principal of the Sponsor who supervises persons who participate in making trading decisions for the Funds.

The following is a biographical summary of the business experience of the executive officers of the Trust and the principals and significant employees of the Sponsor.

ProFund Advisors LLC (“PFA”) and ProShare Advisors LLC (“PSA”) are investment advisers registered under the Investment Advisers Act of 1940 and commodity pool operators registered under the CEA. PFA is also a commodity trading advisor registered under the CEA.

Michael L. Sapir, Chairman and Chief Executive Officer and a listed principal of the Sponsor since August 14, 2008; Chairman and Chief Executive Officer and a member of PFA since April 1997, and a listed principal of PFA since November 26, 2012; and Chairman and Chief Executive Officer and a member of PSA since January 2005 and a listed principal of PSA since January 14, 2014. As Chairman and Chief Executive Officer of the Sponsor, PFA and PSA, Mr. Sapir’s responsibilities include oversight of all aspects of the Sponsor, PFA and PSA, respectively.

Louis M. Mayberg, a member and a listed principal of the Sponsor since June 9, 2008; a member of PFA since April 1997 and a listed principal of PFA since November 26, 2012; and a member of PSA since January 2005 and a listed principal of PSA since January 14, 2014. Mr. Mayberg served as Principal Executive Officer of the Trust from June 2008 to December 2013.

William E. Seale, Ph.D., a member of the Sponsor and a listed principal of the Sponsor since June 11, 1999; a member of PFA since April 1997 and a listed principal of PFA since November 8, 2013; and a member of PSA since April 2005 and a listed principal of PSA since January 14, 2014. Dr. Seale served as Chief Investment Officer of PFA from January 2003 to July 2005 and from October 2006 to June 2008 and as Director of Portfolio from January 1997 to January 2003. Dr. Seale served as Chief Investment Officer of PSA from October 2006 to June 2008. In these roles, Dr. Seale’s responsibilities included oversight of the investment management activities of the respective entities. Dr. Seale is a former commissioner of the CFTC.

Sapir Family Trust, a listed principal of the Sponsor. The Sapir Family Trust has an ownership interest in the Sponsor and PSA. The Sapir Family Trust has a passive ownership interest in the Sponsor and exercises no management authority over the Funds.

Northstar Trust, a listed principal of the Sponsor. Northstar Trust has an ownership interest in the Sponsor and PFA. Northstar Trust has a passive ownership interest in the Sponsor and exercises no management authority over the Funds.

Timothy N. Coakley, Chief Financial Officer and a listed principal of the Sponsor since March 7, 2014; Chief Financial Officer and a listed principal of PFA since March 11, 2014; and Chief Financial Officer and a listed principal of PSA since March 11, 2014. As Chief Financial Officer of the Sponsor, Mr. Coakley’s responsibilities include oversight of the financial matters of the Sponsor.

 

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Edward J. Karpowicz, Principal Financial Officer of the Trust since July 2008 and a listed principal of the Sponsor since September 18, 2013. Mr. Karpowicz has been employed by PFA since July 2002 and PSA since its inception as Vice President of Financial Administration. Mr. Karpowicz is 52 years old.

Todd B. Johnson, Principal Executive Officer of the Trust since January 2014; Chief Investment Officer of the Sponsor since February 27, 2009, a registered swap associated person of the Sponsor since January 4, 2013, a registered associated person of the Sponsor since January 29, 2010, and a listed principal of the Sponsor since January 16, 2009. As Principal Executive Officer of the Trust, Mr. Johnson’s responsibilities include oversight of the operations of the Trust. As Chief Investment Officer of the Sponsor, Mr. Johnson’s responsibilities include oversight of the investment management activities of the Sponsor. Mr. Johnson has served as Chief Investment Officer of PFA and PSA since December 2008 and has been registered as an associated person of PFA since December 5, 2012 and listed as a principal of PFA since November 26, 2012. In addition, Mr. Johnson has been listed as a principal and associated person of PSA since January 14, 2014. Mr. Johnson served from 2002 to December 2008 at World Asset Management (a financial services firm), working as President and Chief Investment Officer from January 2006 to December 2008, and as Managing Director and Chief Investment Officer of Quantitative Investments of Munder Capital Management, an asset management firm, from January 2002 to December 2005. Mr. Johnson is 52 years old.

Hratch Najarian, Director, Portfolio Management of the Sponsor since August 2013 and a listed principal of the Sponsor since October 15, 2013. In these roles, Mr. Najarian’s responsibilities include oversight of the investment management activities of the Sponsor. Mr. Najarian also serves as Director, Portfolio Management of PFA and PSA since August 2013, and is listed as a principal of PFA since January 8, 2014 and a principal and associated person of PSA since January 14, 2014. Mr. Najarian served as Senior Portfolio Manager of PSA from December 2009 through September 2013. He also served as Senior Portfolio Manager of PFA from December 2009 through September 2013, as Portfolio Manager of PFA from May 2007 through November 2009, and as Associate Portfolio Manager of PFA from November 2004 through April 2007.

Jeffrey A. Ploshnick, Senior Portfolio Manager of the Sponsor since April 12, 2011, a registered associated person and an NFA associate member of the Sponsor since April 12, 2011. In these roles, Mr. Ploshnick’s responsibilities include day-to-day portfolio management of the Currency Funds. Mr. Ploshnick has been registered as an associated person of PFA since December 5, 2012. Mr. Ploshnick also serves as a Senior Portfolio Manager of PFA since May 2007 and has served as Portfolio Manager from February 2001 to April 2007. In addition, Mr. Ploshnick also serves as a Senior Portfolio Manager of PSA since March 2011.

Ryan T. Dofflemeyer, Portfolio Manager of the Sponsor since January 3, 2011, a registered associated person and an NFA associate member of the Sponsor since October 26, 2010. In these roles, Mr. Dofflemeyer’s responsibilities include day-to-day portfolio management of the VIX Funds, the Managed Futures Fund, the Commodity Index Funds, the Commodity Funds and certain other series of the Trust. Mr. Dofflemeyer has been registered as an associated person of PFA since December 5, 2012. Mr. Dofflemeyer also serves as a Portfolio Manager of PFA since August 2007 and was a Portfolio Analyst between October 2003 and August 2007. In addition, Mr. Dofflemeyer also serves as Portfolio Manager for Horizon BetaPro Funds (investment funds) since May 2008 and served as a Portfolio Manager of PSA from March 2010 through September 2013. Mr. Dofflemeyer worked as a Research Assistant for the Investment Company Institute (investment funds trade organization) from September 2001 to August 2003.

Victor M. Frye, a listed principal of the Sponsor since December 2, 2008, a listed principal of PFA since November 26, 2012, and a listed principal of PSA since January 14, 2014. Mr. Frye’s responsibilities include the review and approval of advertising material of the Sponsor. Mr. Frye has been employed as Chief Compliance Officer of PFA since October 2002 and of PSA since December 2004.

Indemnification

The Trust Agreement provides that the Sponsor and its affiliates shall have no liability to the Trust or to any shareholder for any loss suffered by the Trust arising out of any action or inaction of the Sponsor or its affiliates or their respective directors, officers, shareholders, partners, members, managers or employees (the “Sponsor Related Parties”), if the Sponsor Related Parties, in good faith, determined that such course of conduct was in the best

 

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interests of the Funds and such course of conduct did not constitute gross negligence or willful misconduct by the Sponsor Related Parties. The Trust has agreed to indemnify the Sponsor Related Parties against claims, losses or liabilities based on their conduct relating to the Trust, provided that the conduct resulting in the claims, losses or liabilities for which indemnity is sought did not constitute gross negligence or willful misconduct and was done in good faith and in a manner reasonably believed to be in the best interests of the Funds.

Code of Ethics

The Trust has adopted a code of ethics (“Code of Ethics”) that applies to its Principal Executive Officer and Principal Financial Officer. A copy of the Code of Ethics can be obtained, without charge, upon written request to the Sponsor at the following address: ProShare Capital Management LLC, Attn: General Counsel, 7501 Wisconsin Avenue, Suite 1000, Bethesda, MD 20814.

Item 11. Executive Compensation.

The Funds have no employees or directors and are managed by the Sponsor. None of the officers of the Trust, or the members or officers of the Sponsor receive compensation from the Funds.

The Sponsor receives a monthly Management Fee from each Fund, with the exception of each Matching VIX Fund and the Managed Futures Strategy, equal to 0.95% annually of the average daily net asset value per share at the end of each month. The Sponsor receives a monthly Management Fee from each Matching VIX Fund equal to 0.85% annually of the average daily net asset value per share at the end of each month. The Sponsor will receive a monthly Management Fee from the Managed Futures Fund equal to 0.75% annually of the average daily net asset value per share at the end of each month. During the first year of each Fund’s operations, the Sponsor will waive the Management Fee to the extent that such amounts cumulatively exceed the offering costs incurred by each Fund. For the year ended December 31, 2015, the following represents Management Fees earned by the Sponsor:

 

Fund

      

ProShares Managed Futures Strategy

   $ 16,121   

ProShares VIX Short-Term Futures ETF

     1,062,171   

ProShares VIX Mid-Term Futures ETF

     233,390   

ProShares Short VIX Short-Term Futures ETF

     4,043,491   

ProShares Ultra VIX Short-Term Futures ETF

     4,362,460   

ProShares UltraShort Bloomberg Commodity

     59,324   

ProShares UltraShort Bloomberg Crude Oil

     1,978,613   

ProShares UltraShort Bloomberg Natural Gas

     112,277   

ProShares UltraShort Gold

     735,540   

ProShares UltraShort Silver

     540,253   

ProShares Short Euro

     179,286   

ProShares UltraShort Australian Dollar

     199,845   

ProShares UltraShort Euro

     5,265,432   

ProShares UltraShort Yen

     3,759,492   

ProShares Ultra Bloomberg Commodity

     34,275   

ProShares Ultra Bloomberg Crude Oil

     8,230,180   

ProShares Ultra Bloomberg Natural Gas

     574,158   

ProShares Ultra Gold

     839,083   

ProShares Ultra Silver

     2,664,160   

ProShares Ultra Euro

     106,868   

ProShares Ultra Yen

     48,032   

 

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth certain information regarding ownership of Shares of certain beneficial owners as of December 31, 2015:

 

Title of Class

  

Name and Address of Beneficial Owner

  

Amount and Nature of

Beneficial Ownership

   Percent
of Class
 

Common Shares of

ProShares Managed

Futures Strategy

  

ProShares Morningstar Alternatives Solution ETF

7501 Wisconsin Avenue, East Tower

Suite 1000

Bethesda, Maryland 20814

   179,867 shares      51.4 %

Item 13. Certain Relationships and Related Transactions, and Director Independence.

See “Item 11. Executive Compensation” in this Annual Report on Form 10-K.

Item 14. Principal Accounting Fees and Services.

(1) to (4). Fees for services performed by PricewaterhouseCoopers LLP (“PwC”) for the years ended December 31, 2015 and 2014 were as follows:

 

    

Year Ended

December 31, 2015

    

Year Ended

December 31,
2014

 

Audit Fees

     775,725         754,000   

Audit-Related Fees

     12,500         24,000   

Tax Fees

     3,369,100         3,324,250   

All Other Fees

     —           —     
  

 

 

    

 

 

 

Total

     4,157,325         4,102,250   

Audit fees for the year ended December 31, 2015 consist of fees paid to PwC for the audit of the Funds’ December 31, 2015 annual financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2015, for the review of the financial statements included in each Form 10-Q, and for the audits of financial statements included with registration statements. Audit fees for the year ended December 31, 2014 consist of fees paid to PwC for the audit of the Funds’ December 31, 2014 annual financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2014, for the review of the financial statements included in each Form 10-Q, and for the audits of financial statements included with registration statements. Tax fees include certain tax compliance and reporting services provided by PwC to the Trust, including processing beneficial ownership information as it relates to the preparation of tax reporting packages and the subsequent delivery of related information to the IRS. Services also include assistance with tax reporting and related information using a web-based tax package product developed by PwC and a toll-free tax package support help line.

(5) The Sponsor approved all of the services provided by PwC described above. The Sponsor pre-approves all audit and allowed non-audit services of the Trust’s independent registered public accounting firm, including all engagement fees and terms.

(6) None of the hours expended on PwC’s engagement to audit each Fund’s financial statements for the years ended December 31, 2014 or 2015 were attributable to work performed by persons other than the principal accountant’s full-time, permanent employees.

 

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Item 15. Exhibits and Financial Statement Schedules.

Financial Statement Schedules

See the Index to Financial Statements for a list of the financial statements being filed as part of this Annual Report on Form 10-K. Schedules may have been omitted since they are either not required, not applicable, or the information has otherwise been included.

 

Exhibit No.

  

Description of Document

    4.1    Trust Agreement of ProShares Trust II (1)
    4.2    Form of Amended and Restated Trust Agreement of ProShares Trust II (2)
    4.2.1    Amended and Restated Trust Agreement of ProShares Trust II (3)
    4.3    Form of Authorized Participant Agreement (4)
  10.1    Form of Sponsor Agreement (2)
  10.2    Form of Administration and Transfer Agency Services Agreement (4)
  10.3    Form of Custodian Agreement (5)
  10.4    Form of Distribution Agreement (4)
  10.5    Form of Futures Account Agreement (4)
  23.1    Consent of Independent Registered Public Accounting Firm (6)
  31.1    Certification by Principal Executive Officer of the Trust Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended (6)
  31.2    Certification by Principal Financial Officer of the Trust Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended (6)
  32.1    Certification by Principal Executive Officer of the Trust Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (6)
  32.2    Certification by Principal Financial Officer of the Trust Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (6)
101.INS    XBRL Instance Document (6)
101.SCH    XBRL Taxonomy Extension Schema (6)
101.CAL    XBRL Taxonomy Extension Calculation Linkbase (6)
101.DEF    XBRL Taxonomy Extension Definition Linkbase (6)
101.LAB    XBRL Taxonomy Extension Label Linkbase (6)
101.PRE    XBRL Taxonomy Extension Presentation Linkbase (6)

 

(1) Incorporated by reference to the Trust’s Registration Statement, filed on October 18, 2007.
(2) Incorporated by reference to the Trust’s Registration Statement, filed on August 15, 2008.
(3) Incorporated by reference to the Trust’s Registration Statement, filed on September 18, 2008.
(4) Incorporated by reference to the Trust’s Registration Statement, filed on November 17, 2008.
(5) Incorporated by reference to the Trust’s Registration Statement, filed on October 22, 2008.
(6) Filed herewith.

 

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ProShares Trust II

Financial Statements as of December 31, 2015

Index

 

Documents    Page

Report of Independent Registered Public Accounting Firm

   143

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

  

ProShares Managed Futures Strategy

   144

ProShares VIX Short-Term Futures ETF

   150

ProShares VIX Mid-Term Futures ETF

   156

ProShares Short VIX Short-Term Futures ETF

   162

ProShares Ultra VIX Short-Term Futures ETF

   168

ProShares UltraShort Bloomberg Commodity

   174

ProShares UltraShort Bloomberg Crude Oil

   180

ProShares UltraShort Bloomberg Natural Gas

   186

ProShares UltraShort Gold

   192

ProShares UltraShort Silver

   198

ProShares Short Euro

   204

ProShares UltraShort Australian Dollar

   210

ProShares UltraShort Euro

   216

ProShares UltraShort Yen

   222

ProShares Ultra Bloomberg Commodity

   228

ProShares Ultra Bloomberg Crude Oil

   234

ProShares Ultra Bloomberg Natural Gas

   240

ProShares Ultra Gold

   246

ProShares Ultra Silver

   252

ProShares Ultra Euro

   258

ProShares Ultra Yen

   264

ProShares Trust II

   270

Notes to Financial Statements

   274

 

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Report of Independent Registered Public Accounting Firm

To the Shareholders of ProShares Trust II:

In our opinion, the accompanying combined and individual statements of financial condition, including the individual schedules of investments, and the related combined and individual statements of operations, of changes in shareholders’ equity and of cash flows, present fairly, in all material respects, the combined financial position of the ProShares Trust II at December 31, 2015 and 2014, and the individual financial positions of each of the following twenty-one funds comprising ProShares Trust II

 

ProShares Managed Futures Strategy (a)    ProShares UltraShort Euro (b)
ProShares VIX Short-Term Futures ETF (b)    ProShares UltraShort Yen (b)
ProShares VIX Mid-Term Futures ETF (b)    ProShares Ultra Bloomberg Commodity (b)
ProShares Short VIX Short-Term Futures ETF (b)    ProShares Ultra Bloomberg Crude Oil (b)
ProShares Ultra VIX Short-Term Futures ETF (b)    ProShares Ultra Bloomberg Natural Gas (b)
ProShares UltraShort Bloomberg Commodity (b)    ProShares Ultra Gold (b)
ProShares UltraShort Bloomberg Crude Oil (b)    ProShares Ultra Silver (b)
ProShares UltraShort Bloomberg Natural Gas (b)    ProShares Ultra Euro (b)
ProShares UltraShort Gold (b)    ProShares Ultra Yen (b)
ProShares UltraShort Silver (b)   

 

ProShares Short Euro (b)    ProShares Trust II (“combined”) (c)
ProShares UltraShort Australian Dollar (b)   

 

(a) A statement of financial condition, including the schedule of investments, is presented as of December 31, 2015 and 2014, and the related statements of operations, of changes in shareholders’ equity and of cash flows are presented for the year ended December 31, 2015 and for the period from October 1, 2014 (Inception) through December 31, 2014.
(b) A statement of financial condition, including the schedule of investments, is presented as of December 31, 2015 and 2014, and the related statements of operations, of changes in shareholders’ equity and of cash flows are presented for each of the three years in the period ended December 31, 2015.
(c) A statement of financial condition is presented as of December 31, 2015 and 2014, and the related statements of operations, of changes in shareholders’ equity and of cash flows are presented for each of the three years in the period ended December 31, 2015.

(collectively, the “Trust”) at December 31, 2015 and 2014, and the combined and individual results of their operations and their cash flows, for the respective periods described in (a) (b) and (c) above in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the combined Trust and each of the individual funds maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Trust’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the combined Trust and each of the individual fund’s financial statements and on the combined Trust’s and each of the individual fund’s internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audits of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Note 9 to the financial statements, the ProShares Managed Futures Strategy will liquidate after the close of business on March 18, 2016.

A trust’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A trust’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the trust; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the trust are being made only in accordance with authorizations of management of the trust; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the trust’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

/s/ PricewaterhouseCoopers LLP
Baltimore, Maryland
February 29, 2016

 

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PROSHARES MANAGED FUTURES STRATEGY

STATEMENTS OF FINANCIAL CONDITION

 

     December 31, 2015      December 31, 2014  

Assets

     

Cash

   $ 6,931,145      $ 6,135,185  

Segregated cash balances with brokers for futures contracts

     280,322        195,142  

Receivable on open futures contracts

     —          17,445  

Offering costs (Note 5)

     —          49,384  

Limitation by Sponsor

     —          9,474  
  

 

 

    

 

 

 

Total assets

     7,211,467        6,406,630  
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable on open futures contracts

     19,990        —    

Brokerage commissions and fees payable

     164        —    

Management fee payable

     4,291        —    

Payable for offering costs

     —          65,785  
  

 

 

    

 

 

 

Total liabilities

     24,445        65,785  
  

 

 

    

 

 

 

Commitments and Contingencies (Note 2)

     

Shareholders’ equity

     

Shareholders’ equity

     7,187,022        6,340,845  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 7,211,467      $ 6,406,630  
  

 

 

    

 

 

 

Shares outstanding

     350,010        300,010  
  

 

 

    

 

 

 

Net asset value per share

   $ 20.53      $ 21.14  
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 20.76      $ 21.28  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES MANAGED FUTURES STRATEGY

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2015

Futures Contracts Purchased††

 

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

Australian Dollar Fx Currency Futures—CME, expires March 2016

     4      $ 290,640      $ 540  

Cocoa Futures—ICE, expires March 2016

     9        288,990        (5,850

Cotton No. 2 Futures—ICE, expires March 2016

     9        284,760        (4,780

Sugar #11 Futures—ICE, expires March 2016

     11        187,757        7,721  
        

 

 

 
         $ (2,369
        

 

 

 

Futures Contracts Sold††

        

Gold 100 OZ Futures—COMEX, expires February 2016

     1      $ 106,020      $ 2,390  

Gold Mini Futures—ICE, expires February 2016

     4        136,342        645  

Lean Hogs Futures—CME, expires February 2016

     11        263,120        (1,560

Live Cattle Futures—CME, expires February 2016

     7        383,040        (4,950

Natural Gas Futures—NYMEX, expires February 2016

     7        163,590        (11,237

NY Harbor ULSD Futures—NYMEX, expires February 2016

     2        94,408        14,028  

RBOB Gasoline Futures—NYMEX, expires February 2016

     2        106,764        2,033  

WTI Crude Oil Futures—NYMEX, expires February 2016

     2        74,080        8,680  

British Pound Fx Currency Futures—CME, expires March 2016

     4        368,350        8,806  

Euro Fx Currency Futures—CME, expires March 2016

     2        272,150        363  

Canadian Dollar Fx Currency Futures—CME, expires March 2016

     5        361,650        10,180  

Coffee ‘C’ Futures—ICE, expires March 2016

     3        142,537        (4,181

Copper Futures—COMEX, expires March 2016

     4        213,500        10,975  

Corn Futures—CBT, expires March 2016

     11        197,312        14,512  

Japanese Yen Fx Currency Futures—CME, expires March 2016

     5        520,813        (10,399

Silver Futures—COMEX, expires March 2016

     1        69,015        3,625  

Silver Mini Futures—ICE, expires March 2016

     4        55,212        455  

Soybean Futures—CBT, expires March 2016

     5        216,063        5,937  

Swiss Franc Fx Currency Futures—CME, expires March 2016

     2        250,800        1,275  

U.S. 10 YR Note Futures—CBT, expires March 2016

     9        1,133,156        1,234  

U.S. Treasury Long Bond Futures—CBT, expires March 2016

     5        768,750        2,312  

Wheat Futures—CBT, expires March 2016

     9        211,500        4,425  
        

 

 

 
         $ 59,548  
        

 

 

 

 

†† Cash collateral in the amount of $280,322 was pledged to cover margin requirements for open futures contracts as of December 31, 2015.

See accompanying notes to financial statements.

 

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PROSHARES MANAGED FUTURES STRATEGY

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2014

Futures Contracts Purchased††

 

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

Coffee ‘C’ Futures—ICE, expires March 2015

     1      $ 62,475      $ (5,231

Soybean Futures—CBT, expires March 2015

     3        153,525        (2,350

US Treasury Long Bond Futures—CBT, expires March 2015

     3        433,688        5,750   

US 10 YR Note Futures—CBT, expires March 2015

     6        760,781        4,536   

Live Cattle Futures—CME, expires April 2015

     5        324,800        (930

Corn Futures—CBT, expires July 2015

     6        123,750        838   

Wheat Futures—CBT, expires December 2015

     4        122,950        (1,013

Natural Gas Futures—NYMEX, expires January 2016

     3        105,930        (8,980
        

 

 

 
         $ (7,380
        

 

 

 
Futures Contracts Sold††         

Gold Mini Futures—ICE, expires February 2015

     4      $ 152,275      $ 1,530  

Lean Hogs Futures—CME, expires February 2015

     6        194,880        7,980  

NY Harbor ULSD Futures—NYMEX, expires February 2015

     2        154,022        14,704  

RBOB Gasoline Futures—NYMEX, expires February 2015

     2        123,656        16,057  

WTI Crude Oil Mini Futures—NYMEX, expires February 2015

     4        106,472        19,116  

Australian Dollar Fx Currency Futures—CME, expires March 2015

     3        243,660        3,865  

British Pound Fx Currency Futures—CME, expires March 2015

     6        583,875        2,540  

Canadian Dollar Fx Currency Futures—CME, expires March 2015

     4        343,880        4,190  

Cocoa Futures—ICE, expires March 2015

     13        378,300        1,360  

Copper Futures—COMEX, expires March 2015

     3        211,913        7,700  

Copper Mini Futures—COMEX, expires March 2015

     3        105,975        2,850  

Cotton No. 2 Futures—ICE, expires March 2015

     5        150,675        2,272  

Euro Fx Currency Mini Futures—CME, expires March 2015

     5        378,344        7,069  

Japanese Yen Fx Currency Futures—CME, expires March 2015

     3        313,088        2,413  

Silver Mini Futures—ICE, expires March 2015

     6        93,594        3,966  

Swiss Franc Fx Currency Futures—CME, expires March 2015

     3        377,775        6,000  

Sugar #11 Futures—ICE, expires March 2015

     8        130,099        8,095  
        

 

 

 
         $ 111,707  
        

 

 

 

 

†† Cash collateral in the amount of $195,142 was pledged to cover margin requirements for open futures contracts as of December 31, 2014.

See accompanying notes to financial statements.

 

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PROSHARES MANAGED FUTURES STRATEGY*

STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2015

AND FOR THE PERIOD FROM OCTOBER 1, 2014 (INCEPTION) THROUGH DECEMBER 31, 2014

 

     Year ended
December 31, 2015
    October 1, 2014
(Inception)

through
December 31, 2014
 

Investment Income

    

Interest

   $ —       $  —    

Expense

    

Management fee

     16,121        —    

Brokerage commissions and fees

     7,768       604  

Offering costs

     59,479       16,401  

Limitation by Sponsor

     (11,814     (9,474 )
  

 

 

   

 

 

 

Total expenses

     71,554       7,531  
  

 

 

   

 

 

 

Net investment income (loss)

     (71,554 )     (7,531 )
  

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

    

Net realized gain (loss) on

    

Futures contracts

     (278,197 )     109,006  
  

 

 

   

 

 

 

Net realized gain (loss)

     (278,197 )     109,006  
  

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

    

Futures contracts

     (47,148 )     104,327  
  

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (47,148 )     104,327  
  

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (325,345 )     213,333  
  

 

 

   

 

 

 

Net income (loss)

   $ (396,899 )   $ 205,802  
  

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ (0.97 )   $ 1.14  
  

 

 

   

 

 

 

Weighted-average shares outstanding

     408,914       180,779  
  

 

 

   

 

 

 

 

* Since the Fund commenced investment operations on October 1, 2014, the Statement of Operations for the year ended December 31, 2013 has not been provided.

See accompanying notes to financial statements.

 

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PROSHARES MANAGED FUTURES STRATEGY*

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2015

AND FOR THE PERIOD FROM OCTOBER 1, 2014 (INCEPTION) THROUGH DECEMBER 31, 2014

 

     Year ended
December 31,
2015
    October 1,
2014
(Inception)
through
December 31,
2014
 

Shareholders’ equity, beginning of period

   $ 6,340,845     $ —    

Addition of 550,000 and 400,010 shares, respectively

     11,524,992       8,174,604  

Redemption of 500,000 and 100,000 shares, respectively

     (10,281,916 )     (2,039,561 )
  

 

 

   

 

 

 

Net addition (redemption) of 50,000 and 300,010 shares, respectively

     1,243,076       6,135,043  
  

 

 

   

 

 

 

Net investment income (loss)

     (71,554 )     (7,531 )

Net realized gain (loss)

     (278,197 )     109,006  

Change in net unrealized appreciation/depreciation

     (47,148 )     104,327  
  

 

 

   

 

 

 

Net income (loss)

     (396,899 )     205,802  
  

 

 

   

 

 

 

Shareholders’ equity, end of period

   $ 7,187,022     $ 6,340,845  
  

 

 

   

 

 

 

 

* Since the Fund commenced investment operations on October 1, 2014, the Statement of Changes in Shareholders’ Equity for the year ended December 31, 2013 has not been provided.

See accompanying notes to financial statements.

 

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PROSHARES MANAGED FUTURES STRATEGY*

STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED DECEMBER 31, 2015

AND FOR THE PERIOD FROM OCTOBER 1, 2014 (INCEPTION) THROUGH DECEMBER 31, 2014

 

     Year ended
December 31, 2015
    October 1, 2014
(Inception)

through
December 31, 2014
 

Cash flow from operating activities

    

Net income (loss)

   $ (396,899 )   $ 205,802  

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

     (85,180 )     (195,142 )

Decrease (Increase) in receivable on futures contracts

     17,445       (17,445 )

Decrease (Increase) in Limitation by Sponsor

     9,474       (9,474 )

Change in offering cost

     49,384       (49,384 )

Increase (Decrease) in management fee payable

     4,291       —    

Increase (Decrease) in brokerage commissions and fees payable

     164       —    

Increase (Decrease) in payable on futures contracts

     19,990       —    

Increase (Decrease) in payable for offering costs

     (65,785 )     65,785  
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (447,116 )     142  
  

 

 

   

 

 

 

Cash flow from financing activities

    

Proceeds from addition of shares

     11,524,992       8,174,604  

Payment on shares redeemed

     (10,281,916 )     (2,039,561 )
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     1,243,076       6,135,043  
  

 

 

   

 

 

 

Net increase (decrease) in cash

     795,960       6,135,185  

Cash, beginning of period

     6,135,185       —    
  

 

 

   

 

 

 

Cash, end of period

   $ 6,931,145     $ 6,135,185  
  

 

 

   

 

 

 

 

* Since the Fund commenced investment operations on October 1, 2014, the Statement of Cash Flows for the year ended December 31, 2013 has not been provided.

See accompanying notes to financial statements.

 

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PROSHARES VIX SHORT-TERM FUTURES ETF

STATEMENTS OF FINANCIAL CONDITION

 

     December 31, 2015      December 31, 2014  

Assets

     

Cash

   $ 2,124,103      $ 1,694,791  

Segregated cash balances with brokers for futures contracts

     5,888,545        18,439,750  

Short-term U.S. government and agency obligations (Note 3) (cost $96,075,481 and $82,086,464, respectively)

     96,073,659        82,088,299  

Receivable on open futures contracts

     1,263,933        9,317,236  
  

 

 

    

 

 

 

Total assets

     105,350,240        111,540,076  
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     77,417        80,751  
  

 

 

    

 

 

 

Total liabilities

     77,417        80,751  
  

 

 

    

 

 

 

Commitments and Contingencies (Note 2)

     

Shareholders’ equity

     

Shareholders’ equity

     105,272,823        111,459,325  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 105,350,240      $ 111,540,076  
  

 

 

    

 

 

 

Shares outstanding

     7,949,812        5,324,812  
  

 

 

    

 

 

 

Net asset value per share

   $ 13.24      $ 20.93  
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 13.33      $ 20.99  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES VIX SHORT-TERM FUTURES ETF

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2015

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(91% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.087% due 01/07/16

   $ 5,167,000      $ 5,166,983  

0.165% due 01/28/16

     4,768,000        4,767,587  

0.007% due 02/04/16

     44,408,000        44,404,749  

0.000% due 02/25/16

     6,625,000        6,624,282  

0.190% due 03/03/16

     2,943,000        2,942,542  

0.070% due 03/10/16

     2,214,000        2,213,533  

0.201% due 03/17/16†

     14,428,000        14,425,221  

0.060% due 03/24/16†

     5,088,000        5,085,965  

0.366% due 05/26/16†

     10,459,000        10,442,797  
     

 

 

 

Total short-term U.S. government and agency obligations

(cost $96,075,481)

      $ 96,073,659  
     

 

 

 

 

Futures Contracts Purchased††

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

VIX Futures - CBOE, expires January 2016

     2,821      $ 52,259,025      $ (958,831

VIX Futures - CBOE, expires February 2016

     2,821        53,246,375        (119,794
        

 

 

 
         $ (1,078,625
        

 

 

 

 

All or partial amount pledged as collateral for futures contracts .
†† Cash collateral in the amount of $5,888,545 was pledged to cover margin requirements for open futures contracts as of December 31, 2015.

See accompanying notes to financial statements.

 

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PROSHARES VIX SHORT-TERM FUTURES ETF

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2014

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(74% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.033% due 01/08/15

   $ 3,961,000      $ 3,960,990  

0.000% due 01/22/15

     305,000        304,995  

0.000% due 01/29/15

     12,836,000        12,835,807  

0.011% due 02/12/15

     1,357,000        1,356,969  

0.018% due 02/19/15

     3,939,000        3,938,895  

0.023% due 03/05/15

     12,894,000        12,893,667  

0.036% due 04/16/15

     5,181,000        5,180,626  

0.056% due 04/30/15

     186,000        185,976  

0.061% due 05/14/15

     4,724,000        4,723,221  

0.028% due 05/21/15

     6,927,000        6,925,663  

0.071% due 05/28/15

     11,197,000        11,194,275  

0.087% due 06/11/15

     18,593,000        18,587,215  
     

 

 

 

Total short-term U.S. government and agency obligations

(cost $82,086,464)

      $ 82,088,299  
     

 

 

 

Futures Contracts Purchased††

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

VIX Futures - CBOE, expires January 2015

     3,326      $ 59,951,150      $ 3,425,757  

VIX Futures - CBOE, expires February 2015

     2,775        50,574,375        2,838,863  
        

 

 

 
         $ 6,264,620  
        

 

 

 

 

†† Cash collateral in the amount of $18,439,750 was pledged to cover margin requirements for open futures contracts as of December 31, 2014

See accompanying notes to financial statements.

 

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PROSHARES VIX SHORT-TERM FUTURES ETF

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31,
2015
    Year ended
December 31,
2014
    Year ended
December 31,
2013
 

Investment Income

      

Interest

   $ 42,319     $ 47,562     $ 77,010  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Management fee

     1,062,171       1,083,189       1,661,129  

Brokerage commissions and fees

     130,942       82,921       —    
  

 

 

   

 

 

   

 

 

 

Total expenses

     1,193,113       1,166,110       1,661,129  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (1,150,794 )     (1,118,548 )     (1,584,119 )
  

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

      

Net realized gain (loss) on

      

Futures contracts

     (19,408,543 )     (694,347 )     (144,618,136 )

Short-term U.S. government and agency obligations

     1,703       12,242       (6,516 )
  

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (19,406,840 )     (682,105 )     (144,624,652 )
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

      

Futures contracts

     (7,343,245 )     22,917,306       (16,431,267 )

Short-term U.S. government and agency obligations

     (3,657 )     (6,229 )     4,439  
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (7,346,902 )     22,911,077       (16,426,828 )
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (26,753,742 )     22,228,972       (161,051,480 )
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (27,904,536 )   $ 21,110,424     $ (162,635,599 )
  

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ (3.21 )   $ 3.86     $ (36.12 )
  

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     8,688,990       5,463,511       4,503,256  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

153


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PROSHARES VIX SHORT-TERM FUTURES ETF

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Shareholders’ equity, beginning of period

   $ 111,459,325     $ 270,398,554     $ 137,657,464  

Addition of 12,475,000, 10,575,000 and 16,095,000 shares, respectively

     187,659,682       228,373,046       688,146,488  

Redemption of 9,850,000, 14,725,000 and 8,260,189 shares, respectively

     (165,941,648 )     (408,422,699 )     (392,769,799 )
  

 

 

   

 

 

   

 

 

 

Net addition (redemption) of 2,625,000, (4,150,000) and 7,834,811 shares, respectively

     21,718,034       (180,049,653 )     295,376,689  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (1,150,794 )     (1,118,548 )     (1,584,119 )

Net realized gain (loss)

     (19,406,840 )     (682,105 )     (144,624,652 )

Change in net unrealized appreciation/depreciation

     (7,346,902 )     22,911,077       (16,426,828 )
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     (27,904,536 )     21,110,424       (162,635,599 )
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity, end of period

   $ 105,272,823     $ 111,459,325     $ 270,398,554  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

154


Table of Contents

PROSHARES VIX SHORT-TERM FUTURES ETF

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Cash flow from operating activities

      

Net income (loss)

   $ (27,904,536 )   $ 21,110,424     $ (162,635,599 )

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

     12,551,205       45,580,600       (29,910,352 )

Purchases of short-term U.S. government and agency obligations

     (599,166,468 )     (674,817,750 )     (1,149,809,572 )

Proceeds from sales or maturities of short-term U.S. government and agency obligations

     585,220,876       800,418,587       1,086,309,043  

Net amortization and accretion on short-term U.S. government and agency obligations

     (41,722 )     (46,740 )     (77,010 )

Net realized gain (loss) on investments

     (1,703 )     (12,242 )     6,516  

Change in unrealized appreciation/depreciation on investments

     3,657       6,229       (4,439 )

Decrease (Increase) in receivable on futures contracts

     8,053,303       (6,138,219 )     (3,179,017 )

Increase (Decrease) in management fee payable

     (3,334 )     (128,002 )     102,304  

Increase (Decrease) in payable on futures contracts

     —         —         (31,540,181 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (21,288,722 )     185,972,887       (290,738,307 )
  

 

 

   

 

 

   

 

 

 

Cash flow from financing activities

      

Proceeds from addition of shares

     187,659,682       228,373,046       690,664,556  

Payment on shares redeemed

     (165,941,648 )     (416,984,894 )     (398,582,455 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     21,718,034       (188,611,848 )     292,082,101  
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     429,312       (2,638,961 )     1,343,794  

Cash, beginning of period

     1,694,791       4,333,752       2,989,958  
  

 

 

   

 

 

   

 

 

 

Cash, end of period

   $ 2,124,103     $ 1,694,791     $ 4,333,752  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

155


Table of Contents

PROSHARES VIX MID-TERM FUTURES ETF

STATEMENTS OF FINANCIAL CONDITION

 

     December 31, 2015      December 31, 2014  

Assets

     

Cash

   $ 671,791      $ 1,634,082  

Segregated cash balances with brokers for futures contracts

     980,750        1,906,950  

Short-term U.S. government and agency obligations (Note 3) (cost $25,975,462 and $24,104,754, respectively)

     25,976,287        24,105,906  

Receivable on open futures contracts

     42,188        1,783,328  
  

 

 

    

 

 

 

Total assets

     27,671,016        29,430,266  
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     —          7,947,955  

Management fee payable

     20,378        22,736  
  

 

 

    

 

 

 

Total liabilities

     20,378        7,970,691  
  

 

 

    

 

 

 

Commitments and Contingencies (Note 2)

     

Shareholders’ equity

     

Shareholders’ equity

     27,650,638        21,459,575  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 27,671,016      $ 29,430,266  
  

 

 

    

 

 

 

Shares outstanding

     512,404        337,404  
  

 

 

    

 

 

 

Net asset value per share

   $ 53.96      $ 63.60  
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 53.99      $ 63.89  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

156


Table of Contents

PROSHARES VIX MID-TERM FUTURES ETF

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2015

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(94% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.019% due 02/04/16

   $ 15,119,000      $ 15,117,893  

0.000% due 02/25/16

     1,778,000        1,777,808  

0.209% due 03/03/16†

     9,082,000        9,080,586  
     

 

 

 

Total short-term U.S. government and agency obligations

(cost $25,975,462)

      $ 25,976,287  
     

 

 

 

Futures Contracts Purchased††

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

VIX Futures—CBOE, expires April 2016

     235      $ 4,547,250      $ (168,335

VIX Futures—CBOE, expires May 2016

     469        9,145,500        10,005  

VIX Futures—CBOE, expires June 2016

     469        9,262,750        (135,125

VIX Futures—CBOE, expires July 2016

     234        4,691,700        (50,905
        

 

 

 
         $ (344,360
        

 

 

 

 

All or partial amount pledged as collateral for futures contracts.
†† Cash collateral in the amount of $980,750 was pledged to cover margin requirements for open futures contracts as of December 31, 2015.

See accompanying notes to financial statements.

 

157


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PROSHARES VIX MID-TERM FUTURES ETF

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2014

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

        

(112% of shareholders’ equity)

        

U.S. Treasury Bills:

        

0.012% due 01/22/15

   $           1,894,000      $ 1,893,968  

0.012% due 02/12/15

        345,000        344,992  

0.025% due 03/05/15

        1,563,000        1,562,960  

0.043% due 04/16/15

        12,807,000        12,806,075  

0.047% due 04/30/15

        771,000        770,899  

0.071% due 05/28/15

        1,551,000        1,550,623  

0.087% due 06/11/15

        5,178,000        5,176,389  
        

 

 

 

Total short-term U.S. government and agency obligations

(cost $24,104,754)

         $ 24,105,906  
        

 

 

 

Futures Contracts Purchased††

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

VIX Futures—CBOE, expires April 2015

     205      $ 3,818,125      $ (222,845

VIX Futures—CBOE, expires May 2015

     376        7,097,000        302,905  

VIX Futures—CBOE, expires June 2015

     376        7,191,000        54,730  

VIX Futures—CBOE, expires July 2015

     172        3,349,700        125,875  
        

 

 

 
         $ 260,665  
        

 

 

 

 

†† Cash collateral in the amount of $1,906,950 was pledged to cover margin requirements for open futures contracts as of December 31, 2014.

See accompanying notes to financial statements.

 

158


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PROSHARES VIX MID-TERM FUTURES ETF

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Investment Income

      

Interest

   $ 8,293     $ 16,573     $ 25,811  

Expenses

      

Management fee

     233,390       392,120       572,377  

Brokerage commissions and fees

     15,503       10,931       —    
  

 

 

   

 

 

   

 

 

 

Total expenses

     248,893       403,051       572,377  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (240,600 )     (386,478 )     (546,566 )
  

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

      

Net realized gain (loss) on

      

Futures contracts

     (3,335,936 )     (14,378,810 )     (28,219,863 )

Short-term U.S. government and agency obligations

     1,355       1,742       (78 )
  

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (3,334,581 )     (14,377,068 )     (28,219,941 )
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

      

Futures contracts

     (605,025 )     5,157,354       (3,426,279 )

Short-term U.S. government and agency obligations

     (327 )     187       (2,031 )
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (605,352 )     5,157,541       (3,428,310 )
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (3,939,933 )     (9,219,527 )     (31,648,251 )
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (4,180,533 )   $ (9,606,005 )   $ (32,194,817 )
  

 

 

   

 

 

   

 

 

 

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

   $ (8.78 )   $ (14.08 )   $ (46.49 )
  

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding (Note 1)

     476,171       682,131       692,570  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

159


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PROSHARES VIX MID-TERM FUTURES ETF

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Shareholders’ equity, beginning of period

   $ 21,459,575     $ 51,134,323     $ 37,302,992  

Addition of 325,000, 593,750 and 1,512,500 shares, respectively (Note 1)

     19,318,111       41,886,902       151,394,850  

Redemption of 150,000, 918,847 and 1,118,750 shares, respectively (Note 1)

     (8,946,515 )     (61,955,645 )     (105,368,702 )
  

 

 

   

 

 

   

 

 

 

Net addition (redemption) of 175,000, (325,097) and 393,750 shares, respectively (Note 1)

     10,371,596       (20,068,743 )     46,026,148  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (240,600 )     (386,478 )     (546,566 )

Net realized gain (loss)

     (3,334,581 )     (14,377,068 )     (28,219,941 )

Change in net unrealized appreciation/depreciation

     (605,352 )     5,157,541       (3,428,310 )
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     (4,180,533 )     (9,606,005 )     (32,194,817 )
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity, end of period

   $ 27,650,638     $ 21,459,575     $ 51,134,323  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES VIX MID-TERM FUTURES ETF

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Cash flow from operating activities

      

Net income (loss)

   $ (4,180,533 )   $ (9,606,005 )   $ (32,194,817 )

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

     926,200       6,547,440       (624,390 )

Purchases of short-term U.S. government and agency obligations

     (95,567,067 )     (161,570,392 )     (290,242,216 )

Proceeds from sales or maturities of short-term U.S. government and agency obligations

     93,706,007       183,523,221       324,156,552  

Net amortization and accretion on short-term U.S. government and agency obligations

     (8,293 )     (16,573 )     (25,812 )

Net realized gain (loss) on investments

     (1,355 )     (1,742 )     78  

Change in unrealized appreciation/depreciation on investments

     327       (187 )     2,031  

Decrease (Increase) in receivable on futures contracts

     1,741,140       (1,682,594 )     (100,734 )

Increase (Decrease) in management fee payable

     (2,358 )     (22,712 )     (13,917 )

Increase (Decrease) in payable on futures contracts

     —         —         (1,890,675 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (3,385,932 )     17,170,456       (933,900 )
  

 

 

   

 

 

   

 

 

 

Cash flow from financing activities

      

Proceeds from addition of shares

     19,318,111       41,886,902       151,394,850  

Payment on shares redeemed

     (16,894,470 )     (59,329,673 )     (150,618,268 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     2,423,641       (17,442,771 )     776,582  
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     (962,291 )     (272,315 )     (157,318 )

Cash, beginning of period

     1,634,082       1,906,397       2,063,715  
  

 

 

   

 

 

   

 

 

 

Cash, end of period

   $ 671,791     $ 1,634,082     $ 1,906,397  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES SHORT VIX SHORT-TERM FUTURES ETF

STATEMENTS OF FINANCIAL CONDITION

 

     December 31, 2015      December 31, 2014  

Assets

     

Cash

   $ 5,150,976      $ 9,122,219  

Segregated cash balances with brokers for futures contracts

     123,528,405        85,244,950  

Short-term U.S. government and agency obligations (Note 3) (cost $535,381,199 and $446,972,637, respectively)

     535,392,718        446,975,220  

Receivable from capital shares sold

     10,164,157        —    
  

 

 

    

 

 

 

Total assets

     674,236,256        541,342,389  
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     29,497,107        3,358,781  

Payable on open futures contracts

     1,420,271        31,020,019  

Management fee payable

     507,517        407,465  
  

 

 

    

 

 

 

Total liabilities

     31,424,895        34,786,265  
  

 

 

    

 

 

 

Commitments and Contingencies (Note 2)

     

Shareholders’ equity

     

Shareholders’ equity

     642,811,361        506,556,124  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 674,236,256      $ 541,342,389  
  

 

 

    

 

 

 

Shares outstanding

     12,650,040        8,250,040  
  

 

 

    

 

 

 

Net asset value per share

   $ 50.81      $ 61.40  
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 50.45      $ 61.16  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

162


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PROSHARES SHORT VIX SHORT-TERM FUTURES ETF

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2015

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(83% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.065% due 01/07/16

   $ 44,561,000      $ 44,560,853  

0.053% due 01/14/16

     13,600,000        13,599,660  

0.000% due 01/21/16

     10,817,000        10,816,540  

0.165% due 01/28/16

     22,342,000        22,340,063  

0.035% due 02/04/16

     36,091,000        36,088,358  

0.036% due 02/11/16

     85,348,000        85,336,743  

0.000% due 02/25/16

     10,901,000        10,899,819  

0.208% due 03/03/16

     63,916,000        63,906,048  

0.194% due 03/17/16

     74,289,000        74,274,692  

0.206% due 03/24/16

     35,842,000        35,827,663  

0.364% due 05/26/16†

     137,956,000        137,742,279  
     

 

 

 

Total short-term U.S. government and agency obligations

(cost $535,381,199)

      $ 535,392,718  
     

 

 

 

Futures Contracts Sold††

 

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

VIX Futures—CBOE, expires January 2016

     17,150      $ 317,703,750      $ 10,805,245  

VIX Futures—CBOE, expires February 2016

     17,151        323,725,125        (58,830
        

 

 

 
         $ 10,746,415  
        

 

 

 

 

All or partial amount pledged as collateral for futures contracts.
†† Cash collateral in the amount of $123,528,405 was pledged to cover margin requirements for open futures contracts as of December 31, 2015.

See accompanying notes to financial statements.

 

163


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PROSHARES SHORT VIX SHORT-TERM FUTURES ETF

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2014

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

  

(88% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.040% due 01/08/15

   $ 1,850,000      $ 1,849,995   

0.006% due 01/22/15

     22,078,000        22,077,632   

0.010% due 01/29/15

     9,864,000        9,863,852   

0.021% due 02/19/15

     1,830,000        1,829,951   

0.019% due 03/05/15

     90,719,000        90,716,657   

0.016% due 03/12/15

     151,190,000        151,184,205   

0.043% due 04/16/15

     6,920,000        6,919,500   

0.063% due 05/14/15

     7,752,000        7,750,721   

0.066% due 05/21/15

     61,759,000        61,747,077   

0.073% due 05/28/15

     16,216,000        16,212,054   

0.072% due 06/04/15

     67,517,000        67,495,479   

0.030% due 06/11/15

     9,331,000        9,328,097   
     

 

 

 

Total short-term U.S. government and agency obligations

(cost $446,972,637)

      $ 446,975,220   
     

 

 

 

Futures Contracts Sold††

 

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

VIX Futures—CBOE, expires January 2015

     15,388      $ 277,368,700       $ (701,599)   

VIX Futures—CBOE, expires February 2015

     12,811        233,480,475         (15,650,550
        

 

 

 
         $ (16,352,149
        

 

 

 

 

†† Cash collateral in the amount of $85,244,950 was pledged to cover margin requirements for open futures contracts as of December 31, 2014.

See accompanying notes to financial statements.

 

164


Table of Contents

PROSHARES SHORT VIX SHORT-TERM FUTURES ETF

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Investment Income

      

Interest

   $ 180,686     $ 81,544     $ 36,503  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Management fee

     4,043,491       2,785,597       845,479  

Brokerage commissions and fees

     1,935,395       1,581,416       519,393  
  

 

 

   

 

 

   

 

 

 

Total expenses

     5,978,886       4,367,013       1,364,872  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (5,798,200 )     (4,285,469 )     (1,328,369 )
  

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

      

Net realized gain (loss) on

      

Futures contracts

     69,793,028       76,925,998       87,175,105  

Short-term U.S. government and agency obligations

     35,629       19,363       6,005  
  

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     69,828,657       76,945,361       87,181,110  
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

      

Futures contracts

     27,098,564       (24,469,104 )     9,504,130  

Short-term U.S. government and agency obligations

     8,936       (1,764 )     1,795  
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     27,107,500       (24,470,868 )     9,505,925  
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     96,936,157       52,474,493       96,687,035  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 91,137,957     $ 48,189,024     $ 95,358,666  
  

 

 

   

 

 

   

 

 

 

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

   $ 12.83     $ 11.52     $ 53.11  
  

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding (Note 1)

     7,103,739       4,182,232       1,795,656  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

165


Table of Contents

PROSHARES SHORT VIX SHORT-TERM FUTURES ETF

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Shareholders’ equity, beginning of period

   $ 506,556,124     $ 141,751,202     $ 82,663,633  

Addition of 24,100,000, 16,100,000 and 11,500,000 shares, respectively (Note 1)

     1,403,231,166       1,056,547,830       529,295,847  

Redemption of 19,700,000, 9,950,000 and 11,900,000 shares, respectively (Note 1)

     (1,358,113,886 )     (739,931,932 )     (565,566,944 )
  

 

 

   

 

 

   

 

 

 

Net addition (redemption) of 4,400,000, 6,150,000 and (400,000) shares, respectively (Note 1)

     45,117,280       316,615,898       (36,271,097 )
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (5,798,200 )     (4,285,469 )     (1,328,369 )

Net realized gain (loss)

     69,828,657       76,945,361       87,181,110  

Change in net unrealized appreciation/depreciation

     27,107,500       (24,470,868 )     9,505,925  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     91,137,957       48,189,024       95,358,666  
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity, end of period

   $ 642,811,361     $ 506,556,124     $ 141,751,202  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

166


Table of Contents

PROSHARES SHORT VIX SHORT-TERM FUTURES ETF

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Cash flow from operating activities

      

Net income (loss)

   $ 91,137,957     $ 48,189,024     $ 95,358,666  

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

     (38,283,455 )     (51,692,300 )     (12,821,153 )

Purchases of short-term U.S. government and agency obligations

     (2,104,319,382 )     (1,647,460,143 )     (675,205,073 )

Proceeds from sales or maturities of short-term U.S. government and agency obligations

     2,016,127,119       1,306,143,088       623,376,707  

Net amortization and accretion on short-term U.S. government and agency obligations

     (180,670 )     (81,544 )     (36,504 )

Net realized gain (loss) on investments

     (35,629 )     (19,363 )     (6,005 )

Change in unrealized appreciation/depreciation on investments

     (8,936 )     1,764       (1,795 )

Decrease (Increase) in receivable on futures contracts

     —         603,833       4,920,888  

Increase (Decrease) in management fee payable

     100,052       289,792       68,716  

Increase (Decrease) in payable on futures contracts

     (29,599,748 )     31,020,019       —    
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (65,062,692 )     (313,005,830 )     35,654,447  
  

 

 

   

 

 

   

 

 

 

Cash flow from financing activities

      

Proceeds from addition of shares

     1,393,067,009       1,056,547,830       542,528,525  

Payment on shares redeemed

     (1,331,975,560 )     (736,573,151 )     (578,266,328 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     61,091,449       319,974,679       (35,737,803 )
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     (3,971,243 )     6,968,849       (83,356 )

Cash, beginning of period

     9,122,219       2,153,370       2,236,726  
  

 

 

   

 

 

   

 

 

 

Cash, end of period

   $ 5,150,976     $ 9,122,219     $ 2,153,370  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

167


Table of Contents

PROSHARES ULTRA VIX SHORT-TERM FUTURES ETF

STATEMENTS OF FINANCIAL CONDITION

 

     December 31, 2015      December 31, 2014  

Assets

     

Cash

   $ 9,081,964      $ 3,737,292  

Segregated cash balances with brokers for futures contracts

     62,348,600        116,907,700  

Short-term U.S. government and agency obligations (Note 3) (cost $438,333,277 and $182,641,263, respectively)

     438,357,849        182,639,188  

Receivable from capital shares sold

     32,987,472        12,549,248  

Receivable on open futures contracts

     17,995,478        42,531,441  
  

 

 

    

 

 

 

Total assets

     560,771,363        358,364,869  
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     12,635,235        6,272,056  

Management fee payable

     427,388        302,860  
  

 

 

    

 

 

 

Total liabilities

     13,062,623        6,574,916  
  

 

 

    

 

 

 

Commitments and Contingencies (Note 2)

     

Shareholders’ equity

     

Shareholders’ equity

     547,708,740        351,789,953  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 560,771,363      $ 358,364,869  
  

 

 

    

 

 

 

Shares outstanding (Note 1)

     19,502,448        2,804,020  
  

 

 

    

 

 

 

Net asset value per share (Note 1)

   $ 28.08      $ 125.46  
  

 

 

    

 

 

 

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

   $ 28.35      $ 125.75  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

168


Table of Contents

PROSHARES ULTRA VIX SHORT-TERM FUTURES ETF

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2015

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(80% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.000% due 01/07/16

   $ 1,000,000      $ 999,997  

0.000% due 01/14/16

     9,071,000        9,070,773  

0.000% due 01/21/16

     1,327,000        1,326,944  

0.055% due 01/28/16

     3,000,000        2,999,740  

0.130% due 02/04/16

     2,385,000        2,384,825  

0.150% due 02/11/16

     15,718,000        15,715,927  

0.129% due 02/18/16

     8,386,000        8,384,795  

0.125% due 02/25/16

     62,257,000        62,250,257  

0.181% due 03/03/16

     71,491,000        71,479,869  

0.066% due 03/10/16†

     62,525,000        62,511,820  

0.207% due 03/17/16†

     94,427,000        94,408,813  

0.101% due 03/24/16†

     29,399,000        29,387,240  

0.366% due 05/26/16†

     77,557,000        77,436,849  
     

 

 

 

Total short-term U.S. government and agency obligations

     

(cost $438,333,277)

      $ 438,357,849  
     

 

 

 

Futures Contracts Purchased††

 

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

VIX Futures - CBOE, expires January 2016

     29,321      $ 543,171,525      $ 10,546,019  

VIX Futures - CBOE, expires February 2016

     29,320        553,415,000        1,348,447  
        

 

 

 
         $ 11,894,466  
        

 

 

 

 

All or partial amount pledged as collateral for futures contracts.
†† Cash collateral in the amount of $62,348,600 was pledged to cover margin requirements for open futures contracts as of December 31, 2015.

See accompanying notes to financial statements.

 

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PROSHARES ULTRA VIX SHORT-TERM FUTURES ETF

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2014

 

     Principal Amount      Value     

 

Short-term U.S. government and agency obligations

        

(52% of shareholders’ equity)

        

U.S. Treasury Bills:

        

0.033% due 01/08/15

   $ 2,925,000      $ 2,924,993     

0.009% due 01/22/15

     15,872,000        15,871,735     

0.010% due 01/29/15

     12,113,000        12,112,818     

0.012% due 02/12/15

     1,436,000        1,435,967     

0.021% due 02/19/15

     16,715,000        16,714,554     

0.014% due 03/05/15

     12,248,000        12,247,684     

0.015% due 03/12/15

     1,602,000        1,601,939     

0.036% due 04/16/15

     43,147,000        43,143,884     

0.061% due 05/14/15

     14,824,000        14,821,554     

0.026% due 05/21/15

     24,222,000        24,217,324     

0.049% due 05/28/15

     35,702,000        35,693,313     

0.030% due 06/11/15

     1,854,000        1,853,423     
     

 

 

    

Total short-term U.S. government and agency obligations

        

(cost $182,641,263)

      $ 182,639,188     
     

 

 

    

Futures Contracts Purchased††

 

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

VIX Futures - CBOE, expires January 2015

     21,092      $ 380,183,300      $ 22,932,077  

VIX Futures - CBOE, expires February 2015

     17,586        320,497,650        16,653,176  
        

 

 

 
         $ 39,585,253  
        

 

 

 

 

†† Cash collateral in the amount of $116,907,700 was pledged to cover margin requirements for open futures contracts as of December 31, 2014.

See accompanying notes to financial statements.

 

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PROSHARES ULTRA VIX SHORT-TERM FUTURES ETF

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Investment Income

      

Interest

   $ 156,187     $ 72,700     $ 70,016  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Management fee

     4,362,460       2,868,337       2,555,345  

Brokerage commissions and fees

     3,203,875       2,563,849       2,343,432  
  

 

 

   

 

 

   

 

 

 

Total expenses

     7,566,335       5,432,186       4,898,777  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (7,410,148 )     (5,359,486 )     (4,828,761 )
  

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

      

Net realized gain (loss) on

      

Futures contracts

     (392,174,228 )     (139,412,525 )     (401,363,569 )

Swap agreements

     —         —         (4,453,107 )

Short-term U.S. government and agency obligations

     (49,718 )     9,921       18,730  
  

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (392,223,946 )     (139,402,604 )     (405,797,946 )
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

      

Futures contracts

     (27,690,787 )     63,595,164       (26,066,973 )

Swap agreements

     —         —         (301,351 )

Short-term U.S. government and agency obligations

     26,647       (4,701 )     7,062  
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (27,664,140 )     63,590,463       (26,361,262 )
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (419,888,086 )     (75,812,141 )     (432,159,208 )
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (427,298,234 )   $ (81,171,627 )   $ (436,987,969 )
  

 

 

   

 

 

   

 

 

 

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

   $ (41.66 )   $ (44.00 )   $ (1,357.88 )
  

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding (Note 1)

     10,257,573       1,844,625       321,817  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES ULTRA VIX SHORT-TERM FUTURES ETF

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Shareholders’ equity, beginning of period

   $ 351,789,953     $ 226,233,584     $ 84,716,132  

Addition of 72,180,000, 10,215,000 and 1,980,000 shares, respectively (Note 1)

     3,192,766,319       1,646,851,705       1,958,417,114  

Redemption of 55,481,572, 8,085,458 and 1,326,563 shares, respectively (Note 1)

     (2,569,549,298 )     (1,440,123,709 )     (1,379,911,693 )
  

 

 

   

 

 

   

 

 

 

Net addition (redemption) of 16,698,428, 2,129,542 and 653,437 shares, respectively (Note 1)

     623,217,021       206,727,996       578,505,421  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (7,410,148 )     (5,359,486 )     (4,828,761 )

Net realized gain (loss)

     (392,223,946 )     (139,402,604 )     (405,797,946 )

Change in net unrealized appreciation/depreciation

     (27,664,140 )     63,590,463       (26,361,262 )
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     (427,298,234 )     (81,171,627 )     (436,987,969 )
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity, end of period

   $ 547,708,740     $ 351,789,953     $ 226,233,584  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES ULTRA VIX SHORT-TERM FUTURES ETF

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Cash flow from operating activities

      

Net income (loss)

   $ (427,298,234 )   $ (81,171,627 )   $ (436,987,969 )

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

     54,559,100       (9,805,950 )     (68,374,743 )

Purchases of short-term U.S. government and agency obligations

     (3,411,109,730 )     (2,489,268,812 )     (1,990,709,180 )

Proceeds from sales or maturities of short-term U.S. government and agency obligations

     3,155,524,185       2,416,241,031       1,978,712,334  

Net amortization and accretion on short-term U.S. government and agency obligations

     (156,187 )     (72,700 )     (70,006 )

Net realized gain (loss) on investments

     49,718       (9,921 )     (18,730 )

Change in unrealized appreciation/depreciation on investments

     (26,647 )     4,701       294,289  

Decrease (Increase) in receivable on futures contracts

     24,535,963       (42,531,441 )     —    

Increase (Decrease) in management fee payable

     124,528       113,369       92,830  

Increase (Decrease) in payable on futures contracts

     —         (3,356,803 )     (32,309,932 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (603,797,304 )     (209,858,153 )     (549,371,107 )
  

 

 

   

 

 

   

 

 

 

Cash flow from financing activities

      

Proceeds from addition of shares

     3,172,328,095       1,645,206,121       1,965,640,739  

Payment on shares redeemed

     (2,563,186,119 )     (1,433,851,653 )     (1,415,819,480 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     609,141,976       211,354,468       549,821,259  
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     5,344,672       1,496,315       450,152  

Cash, beginning of period

     3,737,292       2,240,977       1,790,825  
  

 

 

   

 

 

   

 

 

 

Cash, end of period

   $ 9,081,964     $ 3,737,292     $ 2,240,977  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES ULTRASHORT BLOOMBERG COMMODITY

STATEMENTS OF FINANCIAL CONDITION

 

     December 31, 2015      December 31, 2014  

Assets

     

Cash

   $ 831,440      $ 467,766  

Short-term U.S. government and agency obligations (Note 3) (cost $7,517,328 and $4,233,396, respectively)

     7,518,119        4,233,548  

Unrealized appreciation on swap agreements

     224,491        567,259  
  

 

 

    

 

 

 

Total assets

     8,574,050        5,268,573  
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     6,844        3,867  

Unrealized depreciation on swap agreements

     53,167        —    
  

 

 

    

 

 

 

Total liabilities

     60,011        3,867  
  

 

 

    

 

 

 

Commitments and Contingencies (Note 2)

     

Shareholders’ equity

     

Shareholders’ equity

     8,514,039        5,264,706  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 8,574,050      $ 5,268,573  
  

 

 

    

 

 

 

Shares outstanding

     59,997        59,997  
  

 

 

    

 

 

 

Net asset value per share

   $ 141.91      $ 87.75  
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 140.41      $ 87.44  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT BLOOMBERG COMMODITY

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2015

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(88% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.000% due 01/21/16

   $ 1,033,000      $ 1,032,956  

0.225% due 03/17/16†

     3,653,000        3,652,297  

0.143% due 03/24/16†

     2,834,000        2,832,866  
     

 

 

 

Total short-term U.S. government and agency obligations

     

(cost $7,517,328)

      $ 7,518,119  
     

 

 

 

Swap Agreements^

 

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

Swap agreement with Citibank N.A. based on Bloomberg Commodity Index

     0.18     01/06/16       $ (1,923,025 )   $ (53,167

Swap agreement with Deutsche Bank AG based on Bloomberg Commodity Index

     0.25        01/06/16         (7,650,954 )     84,161  

Swap agreement with Goldman Sachs International based on Bloomberg Commodity Index

     0.25        01/06/16         (4,813,083 )     36,878  

Swap agreement with UBS AG based on Bloomberg Commodity Index

     0.60        01/06/16         (2,647,863     103,452  
         

 

 

 
          $ 171,324  
         

 

 

 

 

All or partial amount pledged as collateral for swap agreements.
^ The positions and counterparties herein are as of December 31, 2015. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* Reflects the floating financing rate, as of December 31, 2015, on the notional amount of the swap agreement paid to the counterparty or received from the counterparty, excluding any commissions.
** 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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PROSHARES ULTRASHORT BLOOMBERG COMMODITY

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2014

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(80% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.002% due 01/22/15†

   $ 618,000      $ 617,990  

0.022% due 02/12/15

     151,000        150,997  

0.020% due 03/05/15†

     457,000        456,988  

0.039% due 04/16/15†

     2,131,000        2,130,846  

0.087% due 06/11/15

     877,000        876,727  
     

 

 

 

Total short-term U.S. government and agency obligations (cost $4,233,396)

      $ 4,233,548  
     

 

 

 

Swap Agreements^

 

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

Swap agreement with Deutsche Bank AG based on Bloomberg Commodity Index

     0.25     01/06/15       $ (4,847,743   $ 243,474  

Swap agreement with Goldman Sachs International based on Bloomberg Commodity Index

     0.25        01/06/15         (4,242,243     240,271  

Swap agreement with UBS AG based on Bloomberg Commodity Index

     0.60        01/06/15         (1,460,197     83,514  
         

 

 

 
          $ 567,259  
         

 

 

 

 

All or partial amount pledged as collateral for swap agreements.
^ The positions and counterparties herein are as of December 31, 2014. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* Reflects the floating financing rate, as of December 31, 2014, on the notional amount of the swap agreement paid to the counterparty or received from the counterparty, excluding any commissions.
** 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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PROSHARES ULTRASHORT BLOOMBERG COMMODITY

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Investment Income

      

Interest

   $ 2,698     $ 1,232     $ 1,899  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Management fee

     59,324       35,302       34,029  
  

 

 

   

 

 

   

 

 

 

Total expenses

     59,324       35,302       34,029  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (56,626 )     (34,070 )     (32,130 )
  

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

      

Net realized gain (loss) on

      

Swap agreements

     3,701,239       906,309       760,002  

Short-term U.S. government and agency obligations

     16       3       24  
  

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     3,701,255       906,312       760,026  
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

      

Swap agreements

     (395,935 )     594,924       (176,167 )

Short-term U.S. government and agency obligations

     639       113       (267 )
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (395,296 )     595,037       (176,434 )
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     3,305,959       1,501,349       583,592  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 3,249,333     $ 1,467,279     $ 551,462  
  

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ 54.16     $ 24.46     $ 9.19  
  

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     59,997       59,997       59,997  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT BLOOMBERG COMMODITY

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Shareholders’ equity, beginning of period

   $ 5,264,706     $ 3,797,427     $ 3,245,965  

Net investment income (loss)

     (56,626 )     (34,070 )     (32,130 )

Net realized gain (loss)

     3,701,255       906,312       760,026  

Change in net unrealized appreciation/depreciation

     (395,296 )     595,037       (176,434 )
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     3,249,333       1,467,279       551,462  
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity, end of period

   $ 8,514,039     $ 5,264,706     $ 3,797,427  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT BLOOMBERG COMMODITY

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Cash flow from operating activities

      

Net income (loss)

   $ 3,249,333     $ 1,467,279     $ 551,462  

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

      

Purchases of short-term U.S. government and agency obligations

     (16,569,217 )     (10,193,241 )     (11,125,326 )

Proceeds from sales or maturities of short-term U.S. government and agency obligations

     13,287,999       9,414,931       10,476,996  

Net amortization and accretion on short-term U.S. government and agency obligations

     (2,698 )     (1,232 )     (1,899 )

Net realized gain (loss) on investments

     (16 )     (3 )     (24 )

Change in unrealized appreciation/depreciation on investments

     395,296       (595,037 )     176,434  

Increase (Decrease) in management fee payable

     2,977       824       483  
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     363,674       93,521       78,126  
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     363,674       93,521       78,126  

Cash, beginning of period

     467,766       374,245       296,119  
  

 

 

   

 

 

   

 

 

 

Cash, end of period

   $ 831,440     $ 467,766     $ 374,245  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT BLOOMBERG CRUDE OIL

STATEMENTS OF FINANCIAL CONDITION

 

     December 31, 2015      December 31, 2014  

Assets

     

Cash

   $ 598,645      $ 994,268  

Segregated cash balances with brokers for futures contracts

     10,154,430        12,292,665  

Short-term U.S. government and agency obligations (Note 3) (cost $79,694,797 and $131,592,367, respectively)

     79,692,642        131,594,608  

Unrealized appreciation on swap agreements

     6,412,656        27,018,077  

Receivable on open futures contracts

     —          1,293,531  
  

 

 

    

 

 

 

Total assets

     96,858,373        173,193,149  
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     —          3,854,654  

Payable on open futures contracts

     850,883        —    

Brokerage commissions and fees payable

     8,453        —    

Management fee payable

     101,143        128,385  
  

 

 

    

 

 

 

Total liabilities

     960,479        3,983,039  
  

 

 

    

 

 

 

Commitments and Contingencies (Note 2)

     

Shareholders’ equity

     

Shareholders’ equity

     95,897,894        169,210,110  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 96,858,373      $ 173,193,149  
  

 

 

    

 

 

 

Shares outstanding

     719,944        2,169,944  
  

 

 

    

 

 

 

Net asset value per share

   $ 133.20      $ 77.98  
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 133.64      $ 76.52  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT BLOOMBERG CRUDE OIL

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2015

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(83% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.080% due 01/07/16

   $ 3,329,000      $ 3,328,989  

0.020% due 01/21/16

     21,612,000        21,611,082  

0.026% due 02/04/16

     5,980,000        5,979,562  

0.180% due 02/18/16†

     5,106,000        5,105,266  

0.000% due 02/25/16†

     14,974,000        14,972,378  

0.200% due 03/10/16

     2,835,000        2,834,403  

0.172% due 03/17/16†

     2,372,000        2,371,543  

0.176% due 03/24/16†

     14,653,000        14,647,139  

0.353% due 05/26/16†

     8,856,000        8,842,280  
     

 

 

 

Total short-term U.S. government and agency obligations

     

(cost $79,694,797)

      $ 79,692,642  
     

 

 

 

Futures Contracts Sold††

 

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

Crude Oil - NYMEX, expires March 2016

     2,367      $ 90,348,390      $ 2,464,513  

Swap Agreements^

 

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

Swap agreement with Citibank N.A. based on Bloomberg Crude Oil Subindex

     0.18     01/06/16       $ (19,234,533 )   $ 1,098,278  

Swap agreement with Deutsche Bank AG based on Bloomberg Crude Oil Subindex

     0.25        01/06/16         (29,881,854 )     1,722,894  

Swap agreement with Goldman Sachs International based on Bloomberg Crude Oil Subindex

     0.25        01/06/16         (17,799,590 )     1,595,552  

Swap agreement with Societe Generale S.A. based on Bloomberg Crude Oil Subindex

     0.25        01/06/16         (8,303,436     521,142  

Swap agreement with UBS AG based on Bloomberg Crude Oil Subindex

     0.25        01/06/16         (26,258,293 )     1,474,790  
         

 

 

 
          $ 6,412,656  
         

 

 

 

 

All or partial amount pledged as collateral for swap agreements and/or futures contracts.
†† Cash collateral in the amount of $10,154,430 was pledged to cover margin requirements for open futures contracts as of December 31, 2015.
^ The positions and counterparties herein are as of December 31, 2015. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* Reflects the floating financing rate, as of December 31, 2015, on the notional amount of the swap agreement paid to the counterparty or received from the counterparty, excluding any commissions.
** 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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PROSHARES ULTRASHORT BLOOMBERG CRUDE OIL

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2014

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

  

(78% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.051% due 01/08/15

   $ 7,520,000        $7,519,981  

0.010% due 01/22/15

     8,188,000        8,187,864  

0.014% due 02/12/15†

     4,424,000        4,423,899  

0.024% due 02/19/15†

     3,423,000        3,422,909  

0.023% due 03/05/15†

     8,064,000        8,063,792  

0.021% due 03/12/15†

     7,534,000        7,533,711  

0.041% due 04/16/15†

     8,635,000        8,634,376  

0.044% due 04/30/15†

     27,059,000        27,055,452  

0.064% due 05/14/15

     25,974,000        25,969,714  

0.061% due 05/21/15

     3,842,000        3,841,258  

0.073% due 05/28/15†

     2,920,000        2,919,290  

0.072% due 06/04/15†

     21,246,000        21,239,228  

0.030% due 06/11/15

     2,784,000        2,783,134  
        

 

 

 

Total short-term U.S. government and agency obligations

     

(cost $131,592,367)

        $131,594,608  
        

 

 

 

 

Futures Contracts Sold††

 

        
     Number of
Contracts
     Notional Amount
at Value
     Unrealized
Appreciation

(Depreciation)
 

Crude Oil—NYMEX, expires March 2015

     2,569      $ 137,955,300      $  15,806,603  

Swap Agreements^

 

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

Swap agreement with Deutsche Bank AG based on Bloomberg WTI Crude Oil Subindex

     0.25     01/06/15       $ (66,394,305   $ 7,669,493  

Swap agreement with Goldman Sachs International based on Bloomberg WTI Crude Oil Subindex

     0.25        01/06/15         (57,892,826     8,362,336  

Swap agreement with Societe Generale S.A. based on Bloomberg WTI Crude Oil Subindex

     0.25        01/06/15         (21,413,784     2,132,657  

Swap agreement with UBS AG based on Bloomberg WTI Crude Oil Subindex

     0.25        01/06/15         (54,735,210     8,853,591  
         

 

 

 
          $ 27,018,077  
         

 

 

 

 

All or partial amount pledged as collateral for swap agreements.
†† Cash collateral in the amount of $12,292,665 was pledged to cover margin requirements for open futures contracts as of December 31, 2014.
^ The positions and counterparties herein are as of December 31, 2014. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* Reflects the floating financing rate, as of December 31, 2014, on the notional amount of the swap agreement paid to the counterparty or received from the counterparty, excluding any commissions.
** 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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PROSHARES ULTRASHORT BLOOMBERG CRUDE OIL

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Investment Income

      

Interest

   $ 60,884     $ 110,620     $ 113,487  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Management fee

     1,978,613       2,448,428       2,581,084  

Brokerage commissions and fees

     248,482       78,033       77,031  
  

 

 

   

 

 

   

 

 

 

Total expenses

     2,227,095       2,526,461       2,658,115  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (2,166,211 )     (2,415,841 )     (2,544,628 )
  

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

      

Net realized gain (loss) on

      

Futures contracts

     46,904,474       44,472,509       (4,299,671 )

Swap agreements

     44,765,850       54,854,588       (8,005,328 )

Short-term U.S. government and agency obligations

     14,458       20,701       5,188  
  

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     91,684,782       99,347,798       (12,299,811 )
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

      

Futures contracts

     (13,342,090 )     17,039,376       2,796,948  

Swap agreements

     (20,605,421 )     29,350,977       3,274,160  

Short-term U.S. government and agency obligations

     (4,396 )     (8,704 )     6,876  
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (33,951,907 )     46,381,649       6,077,984  
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     57,732,875       145,729,447       (6,221,827 )
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 55,566,664     $ 143,313,606     $ (8,766,455 )
  

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ 20.13     $ 16.45     $ (1.05 )
  

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     2,760,218       8,711,177       8,388,848  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT BLOOMBERG CRUDE OIL

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Shareholders’ equity, beginning of period

   $ 169,210,110     $ 256,060,149     $ 89,481,266  

Addition of 10,800,000, 15,700,000 and 23,300,000 shares, respectively

     796,070,368       474,919,955       764,617,811  

Redemption of 12,250,000, 21,600,000 and 17,450,000 shares, respectively

     (924,949,248 )     (705,083,600 )     (589,272,473 )
  

 

 

   

 

 

   

 

 

 

Net addition (redemption) of (1,450,000), (5,900,000) and 5,850,000 shares, respectively

     (128,878,880 )     (230,163,645 )     175,345,338  

Net investment income (loss)

     (2,166,211 )     (2,415,841 )     (2,544,628 )

Net realized gain (loss)

     91,684,782       99,347,798       (12,299,811 )

Change in net unrealized appreciation/depreciation

     (33,951,907 )     46,381,649       6,077,984  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     55,566,664       143,313,606       (8,766,455 )
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity, end of period

   $ 95,897,894     $ 169,210,110     $ 256,060,149  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT BLOOMBERG CRUDE OIL

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Cash flow from operating activities

      

Net income (loss)

   $ 55,566,664     $ 143,313,606     $ (8,766,455 )

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

     2,138,235       (4,659,270 )     (3,232,021 )

Purchases of short-term U.S. government and agency obligations

     (1,238,357,695 )     (1,127,199,240 )     (1,381,886,204 )

Proceeds from sales or maturities of short-term U.S. government and agency obligations

     1,290,330,607       1,243,311,872       1,221,473,521  

Net amortization and accretion on short-term U.S. government and agency obligations

     (60,884 )     (110,620 )     (113,487 )

Net realized gain (loss) on investments

     (14,458 )     (20,701 )     (5,188 )

Change in unrealized appreciation/depreciation on investments

     20,609,817       (29,342,273 )     (3,281,036 )

Decrease (Increase) in receivable on futures contracts

     1,293,531       210,412       (1,503,943 )

Increase (Decrease) in management fee payable

     (27,242 )     (73,442 )     131,573  

Increase (Decrease) in brokerage commissions and fees payable

     8,453       —         —    

Increase (Decrease) in payable on futures contracts

     850,883       —         (979,336 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     132,337,911       225,430,344       (178,162,576 )
  

 

 

   

 

 

   

 

 

 

Cash flow from financing activities

      

Proceeds from addition of shares

     796,070,368       474,919,955       768,649,288  

Payment on shares redeemed

     (928,803,902 )     (701,228,946 )     (589,272,473 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (132,733,534 )     (226,308,991 )     179,376,815  
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     (395,623 )     (878,647 )     1,214,239  

Cash, beginning of period

     994,268       1,872,915       658,676  
  

 

 

   

 

 

   

 

 

 

Cash, end of period

   $ 598,645     $ 994,268     $ 1,872,915  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT BLOOMBERG NATURAL GAS

STATEMENTS OF FINANCIAL CONDITION

 

     December 31, 2015      December 31, 2014  

Assets

     

Cash

   $ 1,099,140      $ 696,743  

Segregated cash balances with brokers for futures contracts

     2,046,660        4,405,830  

Short-term U.S. government and agency obligations (Note 3) (cost $8,114,653 and $8,672,527, respectively)

     8,115,004        8,672,710  

Receivable on open futures contracts

     —          923,531  
  

 

 

    

 

 

 

Total assets

     11,260,804        14,698,814  
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable on open futures contracts

     785,170        —    

Brokerage commissions and fees payable

     1,908        —    

Management fee payable

     10,870        10,250  
  

 

 

    

 

 

 

Total liabilities

     797,948        10,250  
  

 

 

    

 

 

 

Commitments and Contingencies (Note 2)

     

Shareholders’ equity

     

Shareholders’ equity

     10,462,856        14,688,564  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 11,260,804      $ 14,698,814  
  

 

 

    

 

 

 

Shares outstanding

     74,952        174,952  
  

 

 

    

 

 

 

Net asset value per share

   $ 139.59      $ 83.96  
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 139.66      $ 82.03  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

186


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PROSHARES ULTRASHORT BLOOMBERG NATURAL GAS

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2015

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(78% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.233% due 03/17/16

   $ 814,000      $ 813,843  

0.185% due 03/24/16

     1,294,000        1,293,482  

0.386% due 05/26/16

     6,017,000        6,007,679  
     

 

 

 

Total short-term U.S. government and agency obligations

     

(cost $8,114,653)

      $ 8,115,004  
     

 

 

 

Futures Contracts Sold††

 

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

Natural Gas - NYMEX, expires March 2016

     886      $ 20,936,180      $ (2,471,164

 

†† Cash collateral in the amount of $2,046,660 was pledged to cover margin requirements for open futures contracts as of December 31, 2015.

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT BLOOMBERG NATURAL GAS

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2014

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(59% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.010% due 02/12/15

   $ 129,000      $ 128,997  

0.021% due 02/19/15

     717,000        716,981  

0.041% due 04/16/15

     1,190,000        1,189,914  

0.056% due 04/30/15

     790,000        789,897  

0.061% due 05/14/15

     3,398,000        3,397,439  

0.035% due 05/21/15

     2,093,000        2,092,596  

0.073% due 06/04/15

     357,000        356,886  
     

 

 

 

Total short-term U.S. government and agency obligations

     

(cost $8,672,527)

      $ 8,672,710  
     

 

 

 

Futures Contracts Sold††

 

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

Natural Gas—NYMEX, expires March 2015

     1,014      $ 29,365,440      $ 3,941,465  

 

†† Cash collateral in the amount of $4,405,830 was pledged to cover margin requirements for open futures contracts as of December 31, 2014.

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT BLOOMBERG NATURAL GAS

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Investment Income

      

Interest

   $ 5,830     $ 16,306     $ 8,620  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Management fee

     112,277       385,014       172,542  

Brokerage commissions and fees

     70,677       92,199       45,438  
  

 

 

   

 

 

   

 

 

 

Total expenses

     182,954       477,213       217,980  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (177,124 )     (460,907 )     (209,360 )
  

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

      

Net realized gain (loss) on

      

Futures contracts

     15,212,804       8,791,719       (2,585,514 )

Short-term U.S. government and agency obligations

     29       5,163       619  
  

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     15,212,833       8,796,882       (2,584,895 )
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

      

Futures contracts

     (6,412,629 )     2,899,165       633,165  

Short-term U.S. government and agency obligations

     168       72       (422 )
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (6,412,461 )     2,899,237       632,743  
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     8,800,372       11,696,119       (1,952,152 )
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 8,623,248     $ 11,235,212     $ (2,161,512 )
  

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ 64.82     $ 12.09     $ (9.52 )
  

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     133,033       929,061       227,135  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT BLOOMBERG NATURAL GAS

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Shareholders’ equity, beginning of period

   $ 14,688,564     $ 22,734,767     $ 12,768,340  

Addition of 450,000, 2,850,000 and 587,500 shares, respectively

     37,204,187       119,491,987       43,490,786  

Redemption of 550,000, 3,000,000 and 387,556 shares, respectively

     (50,053,143 )     (138,773,402 )     (31,362,847 )
  

 

 

   

 

 

   

 

 

 

Net addition (redemption) of (100,000), (150,000) and 199,944 shares, respectively

     (12,848,956 )     (19,281,415 )     12,127,939  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (177,124 )     (460,907 )     (209,360 )

Net realized gain (loss)

     15,212,833       8,796,882       (2,584,895 )

Change in net unrealized appreciation/depreciation

     (6,412,461 )     2,899,237       632,743  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     8,623,248       11,235,212       (2,161,512 )
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity, end of period

   $ 10,462,856     $ 14,688,564     $ 22,734,767  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT BLOOMBERG NATURAL GAS

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Cash flow from operating activities

      

Net income (loss)

   $ 8,623,248     $ 11,235,212     $ (2,161,512 )

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

     2,359,170       (2,021,030 )     (589,770 )

Purchases of short-term U.S. government and agency obligations

     (59,678,558 )     (208,007,837 )     (111,087,096 )

Proceeds from sales or maturities of short-term U.S. government and agency obligations

     60,242,291       217,631,381       102,863,931  

Net amortization and accretion on short-term U.S. government and agency obligations

     (5,830 )     (16,306 )     (8,620 )

Net realized gain (loss) on investments

     (29 )     (5,163 )     (619 )

Change in unrealized appreciation/depreciation on investments

     (168 )     (72 )     422  

Decrease (Increase) in receivable on futures contracts

     923,531       597,017       (887,771 )

Increase (Decrease) in management fee payable

     620       309       (2,317 )

Increase (Decrease) in brokerage commissions and fees payable

     1,908       —         —    

Increase (Decrease) in payable on futures contracts

     785,170       —         —    
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     13,251,353       19,413,511       (11,873,352 )
  

 

 

   

 

 

   

 

 

 

Cash flow from financing activities

      

Proceeds from addition of shares

     37,204,187       119,491,987       43,490,786  

Payment on shares redeemed

     (50,053,143 )     (138,773,402 )     (31,362,847 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (12,848,956 )     (19,281,415 )     12,127,939  
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     402,397       132,096       254,587  

Cash, beginning of period

     696,743       564,647       310,060  
  

 

 

   

 

 

   

 

 

 

Cash, end of period

   $ 1,099,140     $ 696,743     $ 564,647  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT GOLD

STATEMENTS OF FINANCIAL CONDITION

 

     December 31, 2015      December 31, 2014  

Assets

     

Cash

   $ 151,638      $ 162,434  

Segregated cash balances with brokers for futures contracts

     91,250         8,800  

Short-term U.S. government and agency obligations (Note 3) (cost $72,981,653 and $84,038,905, respectively)

     72,979,905        84,040,107  

Unrealized appreciation on forward agreements

     1,808,942        —    

Receivable on open futures contracts

     —          3,260  
  

 

 

    

 

 

 

Total assets

     75,031,735        84,214,601  
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable on open futures contracts

     80        —    

Management fee payable

     59,891        70,061  

Unrealized depreciation on forward agreements

     —          2,282,778  
  

 

 

    

 

 

 

Total liabilities

     59,971        2,352,839  
  

 

 

    

 

 

 

Commitments and Contingencies (Note 2)

     

Shareholders’ equity

     

Shareholders’ equity

     74,971,764        81,861,762  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 75,031,735      $ 84,214,601  
  

 

 

    

 

 

 

Shares outstanding

     646,978        846,978  
  

 

 

    

 

 

 

Net asset value per share

   $ 115.88      $ 96.65  
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 115.83      $ 100.22  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT GOLD

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2015

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

  

(97% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.135% due 01/07/16†

   $ 10,805,000        $10,804,964  

0.040% due 01/14/16†

     30,298,000        30,297,243  

0.043% due 01/21/16

     6,940,000        6,939,705  

0.000% due 02/25/16†

     10,734,000        10,732,837  

0.210% due 03/03/16

     1,742,000        1,741,729  

0.070% due 03/10/16†

     4,806,000        4,804,987  

0.181% due 03/17/16†

     500,000        499,904  

0.203% due 03/24/16†

     2,297,000        2,296,081  

0.353% due 05/26/16†

     4,870,000        4,862,455  
        

 

 

 

Total short-term U.S. government and agency obligations

     

(cost $72,981,653)

        $72,979,905  
        

 

 

 

 

Futures Contracts Sold††

 

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

 

 

 

Gold Futures—COMEX, expires February 2016

     2      $ 212,040      $  5,220  

Forward Agreements^

 

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

Forward agreements with Citibank N.A. based on 0.995 Fine Troy Ounce Gold

     0.50     01/06/16       $ (6,500   $ (6,889,740   $ 3,915  

Forward agreements with Deutsche Bank AG based on 0.995 Fine Troy Ounce Gold

     0.25        01/06/16         (68,100     (72,186,681     1,046,664  

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

     0.60        01/06/16         (26,298     (27,874,828     158,827  

Forward agreements with Societe Generale S.A. based on 0.995 Fine Troy Ounce Gold

     0.74        01/06/16         (14,000     (14,839,440     212,680  

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

     0.61        01/06/16         (26,350     (27,929,946     386,856  
           

 

 

 
            $ 1,808,942  
           

 

 

 

 

All or partial amount pledged as collateral for forward agreements and/or futures contracts.
†† Cash collateral in the amount of $8,250 was pledged to cover margin requirements for open futures contracts as of December 31, 2015.
^ The positions and counterparties herein are as of December 31, 2015. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* Reflects the floating financing rate, as of December 31, 2015, on the notional amount of the swap agreement paid to the counterparty or received from the counterparty, excluding any commissions.
** 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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PROSHARES ULTRASHORT GOLD

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2014

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(103% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.051% due 01/08/15†

   $ 995,000      $ 994,998  

0.007% due 01/22/15

     5,194,000        5,193,913  

0.021% due 02/12/15†

     7,310,000        7,309,833  

0.017% due 02/19/15†

     24,106,000        24,105,357  

0.023% due 03/05/15†

     4,814,000        4,813,876  

0.015% due 03/12/15

     4,878,000        4,877,813  

0.041% due 04/16/15†

     2,572,000        2,571,814  

0.042% due 04/30/15†

     6,386,000        6,385,163  

0.056% due 05/14/15

     25,151,000        25,146,850  

0.061% due 05/21/15†

     2,641,000        2,640,490  
     

 

 

 

Total short-term U.S. government and agency obligations

     

(cost $84,038,905)

      $ 84,040,107  
     

 

 

 

Futures Contracts Sold††

 

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

Gold Futures—COMEX, expires February 2015

     2      $ 236,820      $ (4,520

Forward Agreements^

 

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

Forward agreements with Deutsche Bank AG based on 0.995 Fine Troy Ounce Gold

     0.34     01/06/15       $ (70,900   $ (85,504,691   $ (1,422,997

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

     0.44        01/06/15         (26,898     (32,438,719     (354,660

Forward agreements with Societe Generale S.A. based on 0.995 Fine Troy Ounce Gold

     0.54        01/06/15         (13,700     (16,522,063     (182,225

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

     0.44        01/06/15         (24,050     (29,004,060     (322,896
           

 

 

 
            $ (2,282,778
           

 

 

 

 

All or partial amount pledged as collateral for forward agreements.
†† Cash collateral in the amount of $8,800 was pledged to cover margin requirements for open futures contracts as of December 31, 2014.
^ The positions and counterparties herein are as of December 31, 2014. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* Reflects the floating financing rate, as of December 31, 2014, on the notional amount of the forward agreement paid to the counterparty or received from the counterparty, excluding any commissions.
** 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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PROSHARES ULTRASHORT GOLD

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Investment Income

      

Interest

   $ 31,999     $ 40,675     $ 61,891  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Management fee

     735,540       898,453       1,237,712  

Brokerage commissions and fees

     41       39       39  
  

 

 

   

 

 

   

 

 

 

Total expenses

     735,581       898,492       1,237,751  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (703,582 )     (857,817 )     (1,175,860 )
  

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

      

Net realized gain (loss) on

      

Futures contracts

     15,950       23,310       97,060  

Forward agreements

     12,691,685       (5,339,792 )     61,027,349  

Short-term U.S. government and agency obligations

     1,301       3,873       (1,351 )
  

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     12,708,936       (5,312,609 )     61,123,058  
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

      

Futures contracts

     9,740       (19,040 )     (720 )

Forward agreements

     4,091,720       (7,915,831 )     1,903,197  

Short-term U.S. government and agency obligations

     (2,950 )     868       (1,136 )
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     4,098,510       (7,934,003 )     1,901,341  
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     16,807,446       (13,246,612 )     63,024,399  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 16,103,864     $ (14,104,429 )   $ 61,848,539  
  

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ 20.94     $ (13.54 )   $ 39.77  
  

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     769,032       1,041,909       1,555,197  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT GOLD

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Shareholders’ equity, beginning of period

   $ 81,861,762     $ 139,436,456     $ 92,416,742  

Addition of 150,000, 550,000 and 2,650,000 shares, respectively

     13,383,255       51,784,693       233,728,116  

Redemption of 350,000, 1,050,000 and 2,750,000 shares, respectively

     (36,377,117 )     (95,254,958 )     (248,556,941 )
  

 

 

   

 

 

   

 

 

 

Net addition (redemption) of (200,000), (500,000) and (100,000) shares, respectively

     (22,993,862 )     (43,470,265 )     (14,828,825 )
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (703,582 )     (857,817 )     (1,175,860 )

Net realized gain (loss)

     12,708,936       (5,312,609 )     61,123,058  

Change in net unrealized appreciation/depreciation

     4,098,510       (7,934,003 )     1,901,341  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     16,103,864       (14,104,429 )     61,848,539  
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity, end of period

   $ 74,971,764     $ 81,861,762     $ 139,436,456  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT GOLD

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Cash flow from operating activities

      

Net income (loss)

   $ 16,103,864     $ (14,104,429 )   $ 61,848,539  

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

     (82,450     7,150       (1,100 )

Purchases of short-term U.S. government and agency obligations

     (254,497,395 )     (320,898,147 )     (678,813,513 )

Proceeds from sales or maturities of short-term U.S. government and agency obligations

     265,587,947       385,891,756       618,459,986  

Net amortization and accretion on short-term U.S. government and agency obligations

     (31,999 )     (40,646 )     (61,891 )

Net realized gain (loss) on investments

     (1,301 )     (3,873 )     1,351  

Change in unrealized appreciation/depreciation on investments

     (4,088,770 )     7,914,963       (1,902,061 )

Decrease (Increase) in receivable on futures contracts

     3,260       (2,960 )     (300 )

Increase (Decrease) in management fee payable

     (10,170 )     (53,758 )     49,243  

Increase (Decrease) in payable on futures contracts

     80       —         (3,980 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     22,983,066       58,710,056       (423,726 )
  

 

 

   

 

 

   

 

 

 

Cash flow from financing activities

      

Proceeds from addition of shares

     13,383,255       51,784,693       233,728,116  

Payment on shares redeemed

     (36,377,117 )     (110,529,962 )     (233,281,937 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (22,993,862 )     (58,745,269 )     446,179  
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     (10,796 )     (35,213 )     22,453  

Cash, beginning of period

     162,434       197,647       175,194  
  

 

 

   

 

 

   

 

 

 

Cash, end of period

   $ 151,638     $ 162,434     $ 197,647  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT SILVER

STATEMENTS OF FINANCIAL CONDITION

 

     December 31, 2015      December 31, 2014  

Assets

     

Cash

   $ 514,784      $ 207,506  

Segregated cash balances with brokers for futures contracts

     11,440        14,300  

Short-term U.S. government and agency obligations (Note 3) (cost $50,730,044 and $52,225,712, respectively)

     50,730,230        52,226,692  

Unrealized appreciation on forward agreements

     4,778,279        799,523  

Receivable on open futures contracts

     390        6,770  
  

 

 

    

 

 

 

Total assets

     56,035,123        53,254,791  
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     47,185        42,354  

Unrealized depreciation on forward agreements

     —          204,570  
  

 

 

    

 

 

 

Total liabilities

     47,185        246,924  
  

 

 

    

 

 

 

Commitments and Contingencies (Note 2)

     

Shareholders’ equity

     

Shareholders’ equity

     55,987,938        53,007,867  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 56,035,123      $ 53,254,791  
  

 

 

    

 

 

 

Shares outstanding (Note 1)

     866,978        916,978  
  

 

 

    

 

 

 

Net asset value per share (Note 1)

   $ 64.58      $ 57.81  
  

 

 

    

 

 

 

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

   $ 64.55      $ 59.70  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT SILVER

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2015

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(91% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.135% due 01/07/16†

   $ 8,744,000      $ 8,743,971  

0.043% due 01/21/16

     1,641,000        1,640,930  

0.055% due 01/28/16

     1,000,000        999,913  

0.000% due 02/11/16†

     1,982,000        1,981,739  

0.138% due 02/18/16†

     8,323,000        8,321,804  

0.000% due 02/25/16†

     4,001,000        4,000,567  

0.181% due 03/17/16†

     4,573,000        4,572,119  

0.163% due 03/24/16†

     18,199,000        18,191,721  

0.386% due 05/26/16†

     2,281,000        2,277,466  
     

 

 

 

Total short-term U.S. government and agency obligations

     

(cost $50,730,044)

      $ 50,730,230  
     

 

 

 

Futures Contracts Sold††

 

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

Silver Futures—COMEX, expires March 2016

     2      $ 138,030      $ 5,970  

Forward Agreements^

 

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

Forward agreements with Deutsche Bank AG based on 0.999 Fine Troy Ounce Silver

     (0.50 )%      01/06/16       $ (3,253,000   $ (44,962,315   $ 2,500,263  

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

     (0.10     01/06/16         (2,047,500     (28,298,907     1,044,986  

Forward agreements with Societe Generale based on 0.999 Fine Troy Ounce Silver

     0.00        01/06/16         (656,000     (9,066,707     438,975  

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

     (0.09     01/06/16         (2,135,000     (29,508,262     794,055  
           

 

 

 
            $ 4,778,279  
           

 

 

 

 

All or partial amount pledged as collateral for forward agreements and/or futures contracts.
†† Cash collateral in the amount of $11,440 was pledged to cover margin requirements for open futures contracts as of December 31, 2015.
^ The positions and counterparties herein are as of December 31, 2015. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* Reflects the floating financing rate, as of December 31, 2015, on the notional amount of the forward agreement paid to the counterparty or received from the counterparty, excluding any commissions.
** 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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PROSHARES ULTRASHORT SILVER

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2014

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(99% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.051% due 01/08/15†

   $ 992,000      $ 991,997  

0.020% due 02/12/15†

     6,632,000        6,631,849  

0.014% due 02/19/15†

     5,857,000        5,856,844  

0.030% due 03/12/15†

     12,806,000        12,805,509  

0.051% due 04/30/15†

     11,917,000        11,915,438  

0.056% due 05/14/15†

     1,504,000        1,503,752  

0.061% due 05/21/15

     2,355,000        2,354,545  

0.078% due 06/04/15†

     10,170,000        10,166,758  
     

 

 

 

Total short-term U.S. government and agency obligations

     

(cost $52,225,712)

      $ 52,226,692  
     

 

 

 

Futures Contracts Sold††

 

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

Silver Futures—COMEX, expires March 2015

     2      $ 155,990      $ 1,560  

Forward Agreements^

 

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

Forward agreements with Deutsche Bank AG based on 0.999 Fine Troy Ounce Silver

     (0.37 )%      01/06/15       $ (3,409,000   $ (54,447,866   $ 462,619  

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

     (0.20     01/06/15         (1,195,500     (19,094,048     138,563  

Forward agreements with Societe Generale S.A. based on 0.999 Fine Troy Ounce Silver

     (0.09     01/06/15         (687,000     (10,972,489     198,341  

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

     (0.15     01/06/15         (1,336,000     (21,338,058     (204,570
           

 

 

 
       $ 594,953  
           

 

 

 

 

All or partial amount pledged as collateral for forward agreements.
†† Cash collateral in the amount of $14,300 was pledged to cover margin requirements for open futures contracts as of December 31, 2014.
^ The positions and counterparties herein are as of December 31, 2014. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* Reflects the floating financing rate, as of December 31, 2015, on the notional amount of the swap agreement paid to the counterparty or received from the counterparty, excluding any commissions.
** 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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PROSHARES ULTRASHORT SILVER

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014, 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Investment Income

      

Interest

   $ 23,831     $ 30,901     $ 60,178  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Management fee

     540,253       616,703       1,033,442  

Brokerage commissions and fees

     42       39       40  
  

 

 

   

 

 

   

 

 

 

Total expenses

     540,295       616,742       1,033,482  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (516,464 )     (585,841 )     (973,304 )
  

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

      

Net realized gain (loss) on

      

Futures contracts

     15,575       32,275       137,040  

Forward agreements

     10,743,970       15,082,608       113,319,364  

Short-term U.S. government and agency obligations

     (2,787 )     4,234       6,916  
  

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     10,756,758       15,119,117       113,463,320  
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

      

Futures contracts

     4,410       (12,640 )     (25,820 )

Forward agreements

     4,183,326       2,822,810       (21,535,542 )

Short-term U.S. government and agency obligations

     (794 )     (2,414 )     (3,439 )
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     4,186,942       2,807,756       (21,564,801 )
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     14,943,700       17,926,873       91,898,519  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 14,427,236     $ 17,341,032     $ 90,925,215  
  

 

 

   

 

 

   

 

 

 

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

   $ 13.88     $ 11.65     $ 29.07  
  

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding (Note 1)

     1,039,579       1,487,936       3,127,936  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT SILVER

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Shareholders’ equity, beginning of period

   $ 53,007,867     $ 112,989,686     $ 100,656,703  

Addition of 1,650,000, 1,800,000 and 6,900,000 shares, respectively (Note 1)

     84,272,164       72,497,634       251,109,632  

Redemption of 1,700,000, 3,400,000 and 8,300,000 shares, respectively (Note 1)

     (95,719,329 )     (149,820,485 )     (329,701,864 )
  

 

 

   

 

 

   

 

 

 

Net addition (redemption) of (50,000), (1,600,000) and (1,400,000) shares, respectively (Note 1)

     (11,447,165 )     (77,322,851 )     (78,592,232 )
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (516,464 )     (585,841 )     (973,304 )

Net realized gain (loss)

     10,756,758       15,119,117       113,463,320  

Change in net unrealized appreciation/depreciation

     4,186,942       2,807,756       (21,564,801 )
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     14,427,236       17,341,032       90,925,215  
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity, end of period

   $ 55,987,938     $ 53,007,867     $ 112,989,686  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT SILVER

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Cash flow from operating activities

      

Net income (loss)

   $ 14,427,236     $ 17,341,032     $ 90,925,215  

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

     2,860       7,700       2,200  

Purchases of short-term U.S. government and agency obligations

     (220,073,123 )     (243,452,982 )     (593,520,715 )

Proceeds from sales or maturities of short-term U.S. government and agency obligations

     221,589,835       306,085,077       564,965,005  

Net amortization and accretion on short-term U.S. government and agency obligations

     (23,831 )     (30,901 )     (60,178 )

Net realized gain (loss) on investments

     2,787       (4,234 )     (6,916 )

Change in unrealized appreciation/depreciation on investments

     (4,182,532 )     (2,820,396 )     21,538,981  

Decrease (Increase) in receivable on futures contracts

     6,380       (4,320 )     (2,450 )

Increase (Decrease) in management fee payable

     4,831       (51,786 )     8,515  

Increase (Decrease) in payable on futures contracts

     —         —         (2,520 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     11,754,443       77,069,190       83,847,137  
  

 

 

   

 

 

   

 

 

 

Cash flow from financing activities

      

Proceeds from addition of shares

     84,272,164       72,497,634       251,109,632  

Payment on shares redeemed

     (95,719,329 )     (149,820,485 )     (334,839,980 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (11,447,165 )     (77,322,851 )     (83,730,348 )
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     307,278       (253,661 )     116,789  

Cash, beginning of period

     207,506       461,167       344,378  
  

 

 

   

 

 

   

 

 

 

Cash, end of period

   $ 514,784     $ 207,506     $ 461,167  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES SHORT EURO

STATEMENTS OF FINANCIAL CONDITION

 

     December 31, 2015      December 31, 2014  

Assets

     

Cash

   $ 1,783,802      $ 1,640,225  

Segregated cash balances with brokers for futures contracts

     503,745        242,880  

Short-term U.S. government and agency obligations (Note 3) (cost $15,153,202 and $12,086,398, respectively)

     15,153,211        12,086,577  

Receivable on open futures contracts

     84,235        63,250  
  

 

 

    

 

 

 

Total assets

     17,524,993        14,032,932  
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     14,095        11,128  
  

 

 

    

 

 

 

Total liabilities

     14,095        11,128  
  

 

 

    

 

 

 

Commitments and Contingencies (Note 2)

     

Shareholders’ equity

     

Shareholders’ equity

     17,510,898        14,021,804  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 17,524,993      $ 14,032,932  
  

 

 

    

 

 

 

Shares outstanding

     400,005        350,005  
  

 

 

    

 

 

 

Net asset value per share

   $ 43.78      $ 40.06  
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 43.74      $ 40.03  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

204


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PROSHARES SHORT EURO

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2015

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(87% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.000% due 01/07/16

   $ 5,605,000      $ 5,604,982  

0.027% due 02/04/16

     2,555,000        2,554,813  

0.000% due 02/25/16

     2,962,000        2,961,679  

0.200% due 03/10/16

     1,635,000        1,634,655  

0.181% due 03/17/16

     200,000        199,961  

0.203% due 03/24/16

     2,198,000        2,197,121  
     

 

 

 

Total short-term U.S. government and agency obligations

     

(cost $15,153,202)

      $ 15,153,211  
     

 

 

 

Futures Contracts Sold††

 

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

Euro Fx Currency Futures—CME, expires March 2016

     129      $ 17,553,675      $ 243,438  

 

†† Cash collateral in the amount of $503,745 was pledged to cover margin requirements for open futures contracts as of December 31, 2015.

See accompanying notes to financial statements.

 

205


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PROSHARES SHORT EURO

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2014

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(86% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.013% due 02/12/15

   $ 390,000      $ 389,991  

0.024% due 02/19/15

     4,903,000        4,902,869  

0.041% due 04/16/15

     2,278,000        2,277,836  

0.040% due 04/30/15

     1,708,000        1,707,776  

0.078% due 06/04/15

     2,809,000        2,808,105  
     

 

 

 

Total short-term U.S. government and agency obligations

(cost $12,086,398)

      $ 12,086,577   
     

 

 

 

Futures Contracts Sold††

 

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

Euro Fx Currency Futures—CME, expires March 2015

     92      $ 13,923,050      $ 385,331  

 

†† Cash collateral in the amount of $242,880 was pledged to cover margin requirements for open futures contracts as of December 31, 2014.

See accompanying notes to financial statements.

 

206


Table of Contents

PROSHARES SHORT EURO

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 and 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Investment Income

      

Interest

   $ 4,504     $ 4,716     $ 1,996  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Management fee

     179,286       121,126       35,075  

Brokerage commissions and fees

     3,979       1,837       812  

Offering costs

     —         —         45,511  

Limitation by Sponsor

     —         —         (28,232 )
  

 

 

   

 

 

   

 

 

 

Total expenses

     183,265       122,963       53,166  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (178,761 )     (118,247 )     (51,170 )
  

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

      

Net realized gain (loss) on

      

Futures contracts

     1,559,425       1,593,048       (381,987 )

Short-term U.S. government and agency obligations

     218       402       157  
  

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     1,559,643       1,593,450       (381,830 )
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

      

Futures contracts

     (141,893 )     418,562       21,825  

Short-term U.S. government and agency obligations

     (170 )     (472 )     463  
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (142,063 )     418,090       22,288  
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     1,417,580       2,011,540       (359,542 )
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 1,238,819     $ 1,893,293     $ (410,712 )
  

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ 2.84     $ 5.49     $ (2.75 )
  

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     436,443       344,937       149,183  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES SHORT EURO

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 and 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Shareholders’ equity, beginning of period

   $ 14,021,804     $ 8,896,842     $ 3,763,040  

Addition of 550,000, 250,000 and 150,000 shares, respectively

     23,563,492       8,924,282       5,544,514  

Redemption of 500,000, 150,000 and 0 shares, respectively

     (21,313,217 )     (5,692,613 )     —    
  

 

 

   

 

 

   

 

 

 

Net addition (redemption) of 50,000, 100,000 and 150,000 shares, respectively

     2,250,275       3,231,669       5,544,514  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (178,761 )     (118,247 )     (51,170 )

Net realized gain (loss)

     1,559,643       1,593,450       (381,830 )

Change in net unrealized appreciation/depreciation

     (142,063 )     418,090       22,288  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     1,238,819       1,893,293       (410,712 )
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity, end of period

   $ 17,510,898     $ 14,021,804     $ 8,896,842  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES SHORT EURO

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 and 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Cash flow from operating activities

      

Net income (loss)

   $ 1,238,819     $ 1,893,293     $ (410,712 )

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

     (260,865 )     (114,180 )     (65,450 )

Purchases of short-term U.S. government and agency obligations

     (56,503,913 )     (36,652,485 )     (21,563,433 )

Proceeds from sales or maturities of short-term U.S. government and agency obligations

     53,441,831       32,472,610       17,073,898  

Net amortization and accretion on short-term U.S. government and agency obligations

     (4,504 )     (4,716 )     (1,997 )

Net realized gain (loss) on investments

     (218 )     (402 )     (157 )

Change in unrealized appreciation/depreciation on investments

     170       472       (463 )

Decrease (Increase) in receivable on futures contracts

     (20,985 )     (54,150 )     (2,488 )

Decrease (Increase) in Limitation by Sponsor

     —         —         2,145  

Change in offering cost

     —         —         19,770  

Increase (Decrease) in management fee payable

     2,967       4,134       6,994  

Increase (Decrease) in payable for offering costs

     —         —         (41,000 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (2,106,698 )     (2,455,424 )     (4,982,893 )
  

 

 

   

 

 

   

 

 

 

Cash flow from financing activities

      

Proceeds from addition of shares

     23,563,492       8,924,282       5,544,514  

Payment on shares redeemed

     (21,313,217 )     (5,692,613 )     —    
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     2,250,275       3,231,669       5,544,514  
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     143,577       776,245       561,621  

Cash, beginning of period

     1,640,225       863,980       302,359  
  

 

 

   

 

 

   

 

 

 

Cash, end of period

   $ 1,783,802     $ 1,640,225     $ 863,980  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT AUSTRALIAN DOLLAR

STATEMENTS OF FINANCIAL CONDITION

 

     December 31, 2015      December 31, 2014  

Assets

     

Cash

   $ 1,958,996      $ 1,788,757  

Segregated cash balances with brokers for futures contracts

     57,065        1,020,217  

Short-term U.S. government and agency obligations (Note 3) (cost $18,409,449 and $20,267,681, respectively)

     18,408,894        20,267,679  

Receivable on open futures contracts

     52,491        62,534  
  

 

 

    

 

 

 

Total assets

     20,477,446        23,139,187  
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     16,767        18,397  
  

 

 

    

 

 

 

Total liabilities

     16,767        18,397  
  

 

 

    

 

 

 

Commitments and Contingencies (Note 2)

     

Shareholders’ equity

     

Shareholders’ equity

     20,460,679        23,120,790  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 20,477,446      $ 23,139,187  
  

 

 

    

 

 

 

Shares outstanding

     350,005        450,005  
  

 

 

    

 

 

 

Net asset value per share

   $ 58.46      $ 51.38  
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 58.15      $ 51.37  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT AUSTRALIAN DOLLAR

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2015

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(90% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.048% due 02/04/16

   $ 2,538,000      $ 2,537,814  

0.000% due 02/25/16

     415,000        414,955  

0.151% due 03/03/16†

     1,267,000        1,266,803  

0.156% due 03/24/16†

     14,195,000        14,189,322  
     

 

 

 

Total short-term U.S. government and agency obligations

     

(cost $18,409,449)

      $ 18,408,894  
     

 

 

 

 

Futures Contracts Sold††

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

Australian Dollar Fx Currency Futures—CME, expires March 2016

     562      $ 40,834,920      $ (420,270

 

All or partial amount pledged as collateral for futures contracts.
†† Cash collateral in the amount of $57,065 was pledged to cover margin requirements for open futures contracts as of December 31, 2015.

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT AUSTRALIAN DOLLAR

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2014

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(88% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.010% due 02/12/15

   $ 735,000      $ 734,983  

0.012% due 02/19/15

     15,300,000        15,299,592  

0.021% due 03/05/15

     267,000        266,993  

0.043% due 04/16/15

     756,000        755,946  

0.056% due 04/30/15

     351,000        350,954  

0.035% due 05/21/15

     854,000        853,835  

0.087% due 06/11/15

     2,006,000        2,005,376  
     

 

 

 

Total short-term U.S. government and agency obligations (cost $20,267,681)

      $ 20,267,679  
     

 

 

 

Futures Contracts Sold††

 

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

Australian Dollar Fx Currency Futures—CME, expires March 2015

     569      $ 46,214,180      $ 743,481  

 

†† Cash collateral in the amount of $1,020,217 was pledged to cover margin requirements for open futures contracts as of December 31, 2014.

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT AUSTRALIAN DOLLAR

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 and 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Investment Income

      

Interest

   $ 5,998     $ 8,225     $ 5,653  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Management fee

     199,845       208,597       106,713  

Brokerage commissions and fees

     16,140       12,811       11,753  

Offering costs

     —          —          47,870  

Limitation by Sponsor

     —          —          (1,259 )
  

 

 

   

 

 

   

 

 

 

Total expenses

     215,985       221,408       165,077  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (209,987 )     (213,183 )     (159,424 )
  

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

      

Net realized gain (loss) on

      

Futures contracts

     4,330,463       2,296,216       2,720,079  

Short-term U.S. government and agency obligations

     225       492       (74 )
  

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     4,330,688       2,296,708       2,720,005  
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

      

Futures contracts

     (1,163,751 )     (174,124 )     832,015  

Short-term U.S. government and agency obligations

     (553 )     (1,463 )     1,279  
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (1,164,304 )     (175,587 )     833,294  
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     3,166,384       2,121,121       3,553,299  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 2,956,397     $ 1,907,938     $ 3,393,875  
  

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ 8.08     $ 3.82     $ 9.21  
  

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     365,758       499,046       368,635  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT AUSTRALIAN DOLLAR

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 and 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Shareholders’ equity, beginning of period

   $ 23,120,790     $ 27,983,279     $ 3,780,999  

Addition of 50,000, 0 and 500,000 shares, respectively

     2,764,167       —          20,808,405  

Redemption of 150,000, 150,000 and 0 shares, respectively

     (8,380,675 )     (6,770,427 )     —     
  

 

 

   

 

 

   

 

 

 

Net addition (redemption) of (100,000), (150,000) and 500,000 shares, respectively

     (5,616,508 )     (6,770,427 )     20,808,405  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (209,987 )     (213,183 )     (159,424 )

Net realized gain (loss)

     4,330,688       2,296,708       2,720,005  

Change in net unrealized appreciation/depreciation

     (1,164,304 )     (175,587 )     833,294  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     2,956,397       1,907,938       3,393,875  
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity, end of period

   $ 20,460,679     $ 23,120,790     $ 27,983,279  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT AUSTRALIAN DOLLAR

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 and 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Cash flow from operating activities

      

Net income (loss)

   $ 2,956,397     $ 1,907,938     $ 3,393,875  

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

     963,152       121,418       (997,095 )

Purchases of short-term U.S. government and agency obligations

     (61,647,966 )     (41,309,385 )     (69,157,620 )

Proceeds from sales or maturities of short-term U.S. government and agency obligations

     63,512,421       45,247,467       48,268,878  

Net amortization and accretion on short-term U.S. government and agency obligations

     (5,998 )     (8,225 )     (5,653 )

Net realized gain (loss) on investments

     (225 )     (492 )     74  

Change in unrealized appreciation/depreciation on investments

     553       1,463       (1,279 )

Decrease (Increase) in receivable on futures contracts

     10,043       (62,534 )     —     

Decrease (Increase) in Limitation by Sponsor

     —         —          2,216  

Change in offering cost

     —          —          22,129  

Increase (Decrease) in management fee payable

     (1,630 )     (3,620 )     22,017  

Increase (Decrease) in payable on futures contracts

     —          (86,166 )     75,216  

Increase (Decrease) in payable for offering costs

     —          —          (41,000 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     5,786,747       5,807,864       (18,418,242 )
  

 

 

   

 

 

   

 

 

 

Cash flow from financing activities

      

Proceeds from addition of shares

     2,764,167       —          20,808,405  

Payment on shares redeemed

     (8,380,675 )     (6,770,427 )     —     
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (5,616,508 )     (6,770,427 )     20,808,405  
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     170,239       (962,563 )     2,390,163  

Cash, beginning of period

     1,788,757       2,751,320       361,157  
  

 

 

   

 

 

   

 

 

 

Cash, end of period

   $ 1,958,996     $ 1,788,757     $ 2,751,320  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT EURO

STATEMENTS OF FINANCIAL CONDITION

 

     December 31,
2015
     December 31,
2014
 

Assets

     

Cash

   $ 10,372,583      $ 746,454  

Short-term U.S. government and agency obligations (Note 3) (cost $546,177,230 and $487,097,789, respectively)

     546,166,776        487,111,117  

Unrealized appreciation on foreign currency forward contracts

     —             19,019,765  

Receivable from capital shares sold

     —             12,956,604  
  

 

 

    

 

 

 

Total assets

     556,539,359        519,833,940  
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     5,108,230        —     

Management fee payable

     414,275        385,820  

Unrealized depreciation on foreign currency forward contracts

     28,710,336        2,256,771  
  

 

 

    

 

 

 

Total liabilities

     34,232,841        2,642,591  
  

 

 

    

 

 

 

Commitments and Contingencies (Note 2)

     

Shareholders’ equity

     

Shareholders’ equity

     522,306,518        517,191,349  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 556,539,359      $ 519,833,940  
  

 

 

    

 

 

 

Shares outstanding

     20,450,014        23,950,014  
  

 

 

    

 

 

 

Net asset value per share

   $ 25.54      $ 21.59  
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 25.53      $ 21.61  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT EURO

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2015

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(105% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.000% due 01/21/16

   $ 44,995,000      $ 44,993,088  

0.133% due 01/28/16

     67,289,000        67,283,166  

0.027% due 02/04/16†

     98,693,000        98,685,776  

0.150% due 02/11/16

     29,669,000        29,665,087  

0.180% due 02/18/16

     7,296,000        7,294,952  

0.000% due 02/25/16†

     21,719,000        21,716,648  

0.167% due 03/03/16†

     44,405,000        44,398,086  

0.175% due 03/24/16†

     143,484,000        143,426,606  

0.353% due 05/26/16†

     88,841,000        88,703,367  
     

 

 

 

Total short-term U.S. government and agency obligations

     

(cost $546,177,230)

      $ 546,166,776  
     

 

 

 

Foreign Currency Forward Contracts^

 

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

Contracts to Purchase

         

Euro with Goldman Sachs International

     01/08/16         129,386,700     $ 140,627,935     $ (1,100,282

Euro with UBS AG

     01/08/16         75,393,200       81,943,430       (865,112
         

 

 

 
          $ (1,965,394
         

 

 

 

Contracts to Sell

         

Euro with Goldman Sachs International

     01/08/16         (602,732,925   $ (655,098,912   $ (13,891,742

Euro with UBS AG

     01/08/16         (562,621,100     (611,502,135     (12,853,200
         

 

 

 
          $ (26,744,942
         

 

 

 

 

All or partial amount segregated as collateral for foreign currency forward contracts.
^ The positions and counterparties herein are as of December 31, 2015. 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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PROSHARES ULTRASHORT EURO

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2014

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(94% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.011% due 01/22/15†

   $ 37,647,000      $ 37,646,372  

0.022% due 02/12/15

     8,135,000        8,134,815  

0.010% due 02/19/15†

     69,601,000        69,599,144  

0.027% due 03/05/15†

     58,406,000        58,404,491  

0.015% due 03/12/15

     12,133,000        12,132,535  

0.041% due 04/16/15†

     2,717,000        2,716,804  

0.048% due 04/30/15†

     57,015,000        57,007,525  

0.061% due 05/21/15

     67,461,000        67,447,976  

0.070% due 05/28/15

     6,919,000        6,917,316  

0.082% due 06/04/15†

     112,157,000        112,121,250  

0.090% due 06/11/15†

     55,000,000        54,982,889  
     

 

 

 

Total short-term U.S. government and agency obligations

     

(cost $487,097,789)

      $ 487,111,117  
     

 

 

 

.Foreign Currency Forward Contracts^

 

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

Contracts to Purchase

         

Euro with Goldman Sachs International

     01/09/15         31,647,600     $ 38,298,521     $ (1,118,702

Euro with UBS AG

     01/09/15         40,314,300       48,786,577       (1,138,069
         

 

 

 
          $ (2,256,771
         

 

 

 

Contracts to Sell

         

Euro with Goldman Sachs International

     01/09/15         (443,778,725   $ (537,041,321   $ 9,312,005  

Euro with UBS AG

     01/09/15         (483,290,100     (584,856,233     9,707,760  
         

 

 

 
          $ 19,019,765  
         

 

 

 

 

All or partial amount segregated as collateral for foreign currency forward contracts.
^ The positions and counterparties herein are as of December 31, 2014. 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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PROSHARES ULTRASHORT EURO

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 and 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Investment Income

      

Interest

   $ 264,845     $ 199,596     $ 224,967  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Management fee

     5,265,432       4,193,741       4,600,479  
  

 

 

   

 

 

   

 

 

 

Total expenses

     5,265,432       4,193,741       4,600,479  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (5,000,587 )     (3,994,145 )     (4,375,512 )
  

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

      

Net realized gain (loss) on

      

Foreign currency forward contracts

     131,651,572       83,678,955       (48,063,036 )

Short-term U.S. government and agency obligations

     22,509       4,637       7,153  
  

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     131,674,081       83,683,592       (48,055,883 )
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

      

Foreign currency forward contracts

     (45,473,330 )     30,511,501       (600,935 )

Short-term U.S. government and agency obligations

     (23,782 )     (12,286 )     12,268  
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (45,497,112 )     30,499,215       (588,667 )
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     86,176,969       114,182,807       (48,644,550 )
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 81,176,382     $ 110,188,662     $ (53,020,062 )
  

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ 3.66     $ 4.53     $ (2.03 )
  

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     22,169,740       24,321,384       26,095,630  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT EURO

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 and 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Shareholders’ equity, beginning of period

   $ 517,191,349     $ 418,001,115     $ 526,778,026  

Addition of 12,600,000, 4,500,000 and 6,250,000 shares, respectively

     328,253,174       84,751,333       119,076,233  

Redemption of 16,100,000, 5,050,000 and 9,450,000 shares, respectively

     (404,314,387 )     (95,749,761 )     (174,833,082 )
  

 

 

   

 

 

   

 

 

 

Net addition (redemption) of (3,500,000), (550,000) and (3,200,000) shares, respectively

     (76,061,213 )     (10,998,428 )     (55,756,849 )
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (5,000,587 )     (3,994,145 )     (4,375,512 )

Net realized gain (loss)

     131,674,081       83,683,592       (48,055,883 )

Change in net unrealized appreciation/depreciation

     (45,497,112 )     30,499,215       (588,667 )
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     81,176,382       110,188,662       (53,020,062 )
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity, end of period

   $ 522,306,518     $ 517,191,349     $ 418,001,115  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT EURO

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 and 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Cash flow from operating activities

      

Net income (loss)

   $ 81,176,382     $ 110,188,662     $ (53,020,062 )

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

      

Purchases of short-term U.S. government and agency obligations

     (1,901,774,819 )     (1,291,071,881 )     (2,234,974,275 )

Proceeds from sales or maturities of short-term U.S. government and agency obligations

     1,842,981,707       1,241,999,870       2,350,802,065  

Net amortization and accretion on short-term U.S. government and agency obligations

     (263,820 )     (199,596 )     (224,966 )

Net realized gain (loss) on investments

     (22,509 )     (4,637 )     (7,153 )

Change in unrealized appreciation/depreciation on investments

     45,497,112       (30,499,215 )     588,667  

Increase (Decrease) in management fee payable

     28,455       40,427       (153,734 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     67,622,508       30,453,630       63,010,542  
  

 

 

   

 

 

   

 

 

 

Cash flow from financing activities

      

Proceeds from addition of shares

     341,209,778       71,794,729       119,076,233  

Payment on shares redeemed

     (399,206,157 )     (101,720,845 )     (182,144,207 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (57,996,379 )     (29,926,116 )     (63,067,974 )
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     9,626,129       527,514       (57,432 )

Cash, beginning of period

     746,454       218,940       276,372  
  

 

 

   

 

 

   

 

 

 

Cash, end of period

   $ 10,372,583     $ 746,454     $ 218,940  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT YEN

STATEMENTS OF FINANCIAL CONDITION

 

     December 31, 2015      December 31, 2014  

Assets

     

Cash

   $ 276,968      $ 532,706  

Short-term U.S. government and agency obligations (Note 3) (cost $260,014,650 and $532,944,509, respectively)

     259,997,001        532,957,746  

Unrealized appreciation on foreign currency forward contracts

     933,727        571,149  
  

 

 

    

 

 

 

Total assets

     261,207,696        534,061,601  
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     8,794,729        —    

Management fee payable

     210,888        439,804  

Unrealized depreciation on foreign currency forward contracts

     14,829,179        2,149,924  
  

 

 

    

 

 

 

Total liabilities

     23,834,796        2,589,728  
  

 

 

    

 

 

 

Commitments and Contingencies (Note 2)

     

Shareholders’ equity

     

Shareholders’ equity

     237,372,900        531,471,873  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 261,207,696      $ 534,061,601  
  

 

 

    

 

 

 

Shares outstanding

     2,699,294        5,949,294  
  

 

 

    

 

 

 

Net asset value per share

   $ 87.94      $ 89.33  
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 87.89      $ 89.30  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRASHORT YEN

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2015

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(110% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.080% due 01/07/16

   $ 4,417,000      $ 4,416,985  

0.148% due 01/14/16

     6,017,000        6,016,850  

0.043% due 01/21/16

     5,361,000        5,360,772  

0.110% due 01/28/16

     6,089,000        6,088,472  

0.013% due 02/04/16

     38,515,000        38,512,181  

0.150% due 02/11/16

     9,617,000        9,615,732  

0.000% due 02/25/16†

     142,667,000        142,651,549  

0.208% due 03/03/16

     8,000,000        7,998,754  

0.181% due 03/17/16†

     800,000        799,846  

0.152% due 03/24/16†

     28,369,000        28,357,652  

0.366% due 05/26/16†

     10,194,000        10,178,208  
     

 

 

 

Total short-term U.S. government and agency obligations

(cost $260,014,650)

      $ 259,997,001  
     

 

 

 

Foreign Currency Forward Contracts^

 

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

Contracts to Purchase

         

Yen with Goldman Sachs International

     01/08/16         5,938,040,200     $ 49,402,434     $ 319,567  

Yen with UBS AG

     01/08/16         11,521,875,200       95,858,003       614,160  
         

 

 

 
          $ 933,727  
         

 

 

 

Contracts to Sell

         

Yen with Goldman Sachs International

     01/08/16         (33,696,676,000   $ (280,344,651   $ (6,789,972

Yen with UBS AG

     01/08/16         (40,852,769,100     (339,880,862     (8,039,207
         

 

 

 
          $ (14,829,179
         

 

 

 

 

All or partial amount segregated as collateral for foreign currency forward contracts.
^ The positions and counterparties herein are as of December 31, 2015. 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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PROSHARES ULTRASHORT YEN

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2014

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(100% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.017% due 01/29/15

   $ 32,686,000      $ 32,685,510  

0.019% due 02/12/15†

     92,533,000        92,530,892  

0.027% due 02/19/15†

     19,439,000        19,438,482  

0.026% due 03/05/15†

     164,216,000        164,211,758  

0.014% due 03/12/15

     51,533,000        51,531,025  

0.041% due 04/16/15†

     81,110,000        81,104,142  

0.056% due 04/30/15†

     22,696,000        22,693,024  

0.063% due 05/14/15

     1,002,000        1,001,835  

0.070% due 05/21/15

     18,340,000        18,336,459  

0.087% due 06/11/15†

     49,440,000        49,424,619  
     

 

 

 

Total short-term U.S. government and agency obligations

(cost $532,944,509)

      $ 532,957,746  
     

 

 

 

Foreign Currency Forward Contracts^

 

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

Contracts to Purchase

         

Yen with Goldman Sachs International

     01/09/15         8,266,326,300     $ 69,025,668     $ (1,395,668

Yen with UBS AG

     01/09/15         13,530,509,400       112,982,770       (683,685
         

 

 

 
          $ (2,079,353
         

 

 

 

Contracts to Sell

         

Yen with Goldman Sachs International

     01/09/15         (72,481,612,100   $ (605,237,623   $ (70,571

Yen with UBS AG

     01/09/15         (76,736,367,800     (640,765,782     571,149  
         

 

 

 
          $ 500,578  
         

 

 

 

 

All or partial amount segregated as collateral for foreign currency forward contracts.
^ The positions and counterparties herein are as of December 31, 2014. 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.

 

224


Table of Contents

PROSHARES ULTRASHORT YEN

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 and 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Investment Income

      

Interest

   $ 135,814     $ 197,253     $ 209,601  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Management fee

     3,759,492       3,938,854       4,607,832  
  

 

 

   

 

 

   

 

 

 

Total expenses

     3,759,492       3,938,854       4,607,832  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (3,623,678 )     (3,741,601 )     (4,398,231 )
  

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

      

Net realized gain (loss) on

      

Foreign currency forward contracts

     8,809,464       127,846,225       164,019,598  

Short-term U.S. government and agency obligations

     (3,035 )     13,833       4,527  
  

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     8,806,429       127,860,058       164,024,125  
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

      

Foreign currency forward contracts

     (12,316,677 )     (30,965,459 )     (8,727,491 )

Short-term U.S. government and agency obligations

     (30,886 )     (20,893 )     22,835  
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (12,347,563 )     (30,986,352 )     (8,704,656 )
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (3,541,134 )     96,873,706       155,319,469  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (7,164,812 )   $ 93,132,105     $ 150,921,238  
  

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ (1.63 )   $ 15.96     $ 19.43  
  

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     4,396,143       5,835,184       7,767,376  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

225


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PROSHARES ULTRASHORT YEN

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 and 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Shareholders’ equity, beginning of period

   $ 531,471,873     $ 588,121,516     $ 408,563,630  

Addition of 1,350,000, 2,850,000 and 5,650,000 shares, respectively

     124,524,909       216,403,570       362,152,598  

Redemption of 4,600,000, 5,200,000 and 5,400,000 shares, respectively

     (411,459,070 )     (366,185,318 )     (333,515,950 )
  

 

 

   

 

 

   

 

 

 

Net addition (redemption) of (3,250,000), (2,350,000) and 250,000 shares, respectively

     (286,934,161 )     (149,781,748 )     28,636,648  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (3,623,678 )     (3,741,601 )     (4,398,231 )

Net realized gain (loss)

     8,806,429       127,860,058       164,024,125  

Change in net unrealized appreciation/depreciation

     (12,347,563 )     (30,986,352 )     (8,704,656 )
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     (7,164,812 )     93,132,105       150,921,238  
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity, end of period

   $ 237,372,900     $ 531,471,873     $ 588,121,516  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES ULTRASHORT YEN

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 and 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Cash flow from operating activities

      

Net income (loss)

   $ (7,164,812 )   $ 93,132,105     $ 150,921,238  

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

      

Purchases of short-term U.S. government and agency obligations

     (1,322,695,643 )     (1,219,436,703 )     (2,181,412,341 )

Proceeds from sales or maturities of short-term U.S. government and agency obligations

     1,595,758,281       1,245,266,414       1,985,795,270  

Net amortization and accretion on short-term U.S. government and agency obligations

     (135,814 )     (197,253 )     (209,600 )

Net realized gain (loss) on investments

     3,035       (13,833 )     (4,527 )

Change in unrealized appreciation/depreciation on investments

     12,347,563       30,986,352       8,704,656  

Increase (Decrease) in management fee payable

     (228,916 )     2,264       166,305  
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     277,883,694       149,739,346       (36,038,999 )
  

 

 

   

 

 

   

 

 

 

Cash flow from financing activities

      

Proceeds from addition of shares

     124,524,909       216,403,570       369,766,231  

Payment on shares redeemed

     (402,664,341 )     (366,185,318 )     (333,515,950 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (278,139,432 )     (149,781,748 )     36,250,281  
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     (255,738 )     (42,402 )     211,282  

Cash, beginning of period

     532,706       575,108       363,826  
  

 

 

   

 

 

   

 

 

 

Cash, end of period

   $ 276,968     $ 532,706     $ 575,108  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES ULTRA BLOOMBERG COMMODITY

STATEMENTS OF FINANCIAL CONDITION

 

     December 31, 2015      December 31, 2014  

Assets

     

Cash

   $ 211,629      $ 185,684  

Short-term U.S. government and agency obligations (Note 3) (cost $7,084,754 and $2,754,883, respectively)

     7,084,065        2,754,900  

Unrealized appreciation on swap agreements

     32,372        —    
  

 

 

    

 

 

 

Total assets

     7,328,066        2,940,584  
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     5,794        2,326  

Unrealized depreciation on swap agreements

     216,288        331,338  
  

 

 

    

 

 

 

Total liabilities

     222,082        333,664  
  

 

 

    

 

 

 

Commitments and Contingencies (Note 2)

     

Shareholders’ equity

     

Shareholders’ equity

     7,105,984        2,606,920  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 7,328,066      $ 2,940,584  
  

 

 

    

 

 

 

Shares outstanding (Note 1)

     249,965        50,004  
  

 

 

    

 

 

 

Net asset value per share (Note 1)

   $ 28.43      $ 52.13  
  

 

 

    

 

 

 

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

   $ 28.07      $ 51.44  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

228


Table of Contents

PROSHARES ULTRA BLOOMBERG COMMODITY

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2015

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(100% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.032% due 02/04/16†

   $ 3,527,000      $ 3,526,742  

0.000% due 02/25/16†

     2,558,000        2,557,723  

0.060% due 03/24/16†

     1,000,000        999,600  
     

 

 

 

Total short-term U.S. government and agency obligations

(cost $7,084,754)

      $ 7,084,065  
     

 

 

 

Swap Agreements^

 

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

Swap agreement with Citibank N.A. based on Bloomberg Commodity Index

     0.18     01/06/16       $ 1,622,466      $ 32,372  

Swap agreement with Deutsche Bank AG based on Bloomberg Commodity Index

     0.25        01/06/16         6,571,903        (82,976

Swap agreement with Goldman Sachs International based on Bloomberg Commodity Index

     0.25        01/06/16         4,426,279        (60,830

Swap agreement with UBS AG based on Bloomberg Commodity Index

     0.60        01/06/16         1,576,626        (72,482
          

 

 

 
           $ (183,916
          

 

 

 

 

All or partial amount pledged as collateral for swap agreements.
^ The positions and counterparties herein are as of December 31, 2015. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* Reflects the floating financing rate, as of December 31, 2015, on the notional amount of the swap agreement paid to the counterparty or received from the counterparty, excluding any commissions.
** 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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PROSHARES ULTRA BLOOMBERG COMMODITY

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2014

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(106% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.051% due 01/08/15†

   $ 984,000      $ 983,997  

0.019% due 02/19/15†

     1,288,000        1,287,966  

0.047% due 04/30/15

     483,000        482,937  
     

 

 

 

Total short-term U.S. government and agency obligations (cost $2,754,883)

      $ 2,754,900  
     

 

 

 

Swap Agreements^

 

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

Swap agreement with Deutsche Bank AG based on Bloomberg Commodity Index

     0.25     01/06/15       $ 2,207,567      $ (143,751

Swap agreement with Goldman Sachs International based on Bloomberg Commodity Index

     0.25        01/06/15         2,221,450        (138,532

Swap agreement with UBS AG based on Bloomberg Commodity Index

     0.60        01/06/15         780,251        (49,055
          

 

 

 
           $ (331,338
          

 

 

 

 

All or partial amount pledged as collateral for swap agreements.
^ The positions and counterparties herein are as of December 31, 2014. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* Reflects the floating financing rate, as of December 31, 2014, on the notional amount of the swap agreement paid to the counterparty or received from the counterparty, excluding any commissions.
** 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.

 

230


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PROSHARES ULTRA BLOOMBERG COMMODITY

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 and 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Investment Income

      

Interest

   $ 733     $ 1,330     $ 2,066  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Management fee

     34,275       32,321       40,543  
  

 

 

   

 

 

   

 

 

 

Total expenses

     34,275       32,321       40,543  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (33,542 )     (30,991 )     (38,477 )
  

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

      

Net realized gain (loss) on

      

Swap agreements

     (2,951,820 )     (1,065,622 )     (1,254,251 )

Short-term U.S. government and agency obligations

     (351 )     43       (44 )
  

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (2,952,171 )     (1,065,579 )     (1,254,295 )
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

      

Swap agreements

     147,422       (346,416 )     321,346  

Short-term U.S. government and agency obligations

     (706 )     (44 )     (72 )
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     146,716       (346,460 )     321,274  
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (2,805,455 )     (1,412,039 )     (933,021 )
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (2,838,997 )   $ (1,443,030 )   $ (971,498 )
  

 

 

   

 

 

   

 

 

 

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

   $ (29.55 )   $ (32.81 )   $ (19.64 )
  

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding (Note 1)

     96,077       43,976       49,456  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRA BLOOMBERG COMMODITY

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 and 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Shareholders’ equity, beginning of period

   $ 2,606,920     $ 2,915,034     $ 6,097,211  

Addition of 225,000, 12,500 and 0 shares, respectively (Note 1)

     8,571,369       1,134,916       —    

Redemption of 25,039, 0 and 25,000 shares, respectively (Note 1)

     (1,233,308 )     —         (2,210,679 )
  

 

 

   

 

 

   

 

 

 

Net addition (redemption) of 199,961, 12,500 and (25,000) shares, respectively (Note 1)

     7,338,061       1,134,916       (2,210,679 )
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (33,542 )     (30,991 )     (38,477 )

Net realized gain (loss)

     (2,952,171 )     (1,065,579 )     (1,254,295 )

Change in net unrealized appreciation/depreciation

     146,716       (346,460 )     321,274  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     (2,838,997 )     (1,443,030 )     (971,498 )
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity, end of period

   $ 7,105,984     $ 2,606,920     $ 2,915,034  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRA BLOOMBERG COMMODITY

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 and 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Cash flow from operating activities

      

Net income (loss)

   $ (2,838,997 )   $ (1,443,030 )   $ (971,498 )

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

      

Purchases of short-term U.S. government and agency obligations

     (11,943,072 )     (9,482,798 )     (17,205,322 )

Proceeds from sales or maturities of short-term U.S. government and agency obligations

     7,613,583       9,545,915       20,631,535  

Net amortization and accretion on short-term U.S. government and agency obligations

     (733 )     (1,330 )     (2,066 )

Net realized gain (loss) on investments

     351       (43 )     44  

Change in unrealized appreciation/depreciation on investments

     (146,716 )     346,460       (321,274 )

Increase (Decrease) in management fee payable

     3,468       (48 )     (2,644 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (7,312,116 )     (1,034,874 )     2,128,775  
  

 

 

   

 

 

   

 

 

 

Cash flow from financing activities

      

Proceeds from addition of shares

     8,571,369       1,134,916       —    

Payment on shares redeemed

     (1,233,308 )     —         (2,210,679 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     7,338,061       1,134,916       (2,210,679 )
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     25,945       100,042       (81,904 )

Cash, beginning of period

     185,684       85,642       167,546  
  

 

 

   

 

 

   

 

 

 

Cash, end of period

   $ 211,629     $ 185,684     $ 85,642  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRA BLOOMBERG CRUDE OIL

STATEMENTS OF FINANCIAL CONDITION

 

     December 31, 2015      December 31, 2014  

Assets

     

Cash

   $ 4,008,379      $ 2,349,384  

Segregated cash balances with brokers for futures contracts

     47,571,810        34,605,120  

Short-term U.S. government and agency obligations (Note 3) (cost $797,652,302 and $467,195,638, respectively)

     797,650,543        467,200,736  

Receivable from capital shares sold

     4,894,509        28,726,173  

Receivable on open futures contracts

     5,150,763        —    
  

 

 

    

 

 

 

Total assets

     859,276,004        532,881,413  
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     2,514,956        —    

Payable on open futures contracts

     —          5,817,266  

Brokerage commissions and fees payable

     25,000        —    

Management fee payable

     636,984        320,062  

Unrealized depreciation on swap agreements

     72,176,589        76,181,097  
  

 

 

    

 

 

 

Total liabilities

     75,353,529        82,318,425  
  

 

 

    

 

 

 

Commitments and Contingencies (Note 2)

     

Shareholders’ equity

     

Shareholders’ equity

     783,922,475        450,562,988  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 859,276,004      $ 532,881,413  
  

 

 

    

 

 

 

Shares outstanding (Note 1)

     62,327,867        8,879,834  
  

 

 

    

 

 

 

Net asset value per share (Note 1)

   $ 12.58      $ 50.74  
  

 

 

    

 

 

 

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

   $ 12.54      $ 51.85  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRA BLOOMBERG CRUDE OIL

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2015

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(102% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.087% due 01/07/16

   $ 55,485,000      $ 55,484,817  

0.040% due 01/14/16

     18,803,000        18,802,530  

0.001% due 01/21/16

     6,843,000        6,842,709  

0.094% due 01/28/16†

     91,564,000        91,556,061  

0.025% due 02/04/16

     80,508,000        80,502,107  

0.005% due 02/11/16†

     74,430,000        74,420,183  

0.119% due 02/18/16†

     68,546,000        68,536,150  

0.013% due 02/25/16†

     38,009,000        38,004,884  

0.202% due 03/03/16†

     86,544,000        86,530,525  

0.200% due 03/10/16†

     25,596,000        25,590,604  

0.147% due 03/17/16†

     73,235,000        73,220,895  

0.178% due 03/24/16†

     44,753,000        44,735,099  

0.356% due 05/26/16†

     133,631,000        133,423,979  
     

 

 

 

Total short-term U.S. government and agency obligations

(cost $797,652,302)

      $ 797,650,543  
     

 

 

 

Futures Contracts Purchased††

 

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

Crude Oil - NYMEX, expires March 2016

     11,089      $ 423,267,130      $ (17,929,314

Swap Agreements^

 

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

Swap agreement with Citibank N.A. based on Bloomberg Crude Oil Subindex

     0.18     01/06/16       $ 158,594,078      $ (2,509,989

Swap agreement with Deutsche Bank AG based on Bloomberg Crude Oil Subindex

     0.25        01/06/16         292,553,469        (20,221,872

Swap agreement with Goldman Sachs International based on Bloomberg Crude Oil Subindex

     0.25        01/06/16         298,419,036        (20,806,119

Swap agreement with Societe Generale S.A. based on Bloomberg Crude Oil Subindex

     0.25        01/06/16         100,733,521        (6,357,459

Swap agreement with UBS AG based on Bloomberg Crude Oil Subindex

     0.25        01/06/16         294,338,185        (22,281,150
          

 

 

 
           $ (72,176,589
          

 

 

 

 

All or partial amount pledged as collateral for swap agreements and/or futures contracts.
†† Cash collateral in the amount of $47,571,810 was pledged to cover margin requirements for open futures contracts as of December 31, 2015.
^ The positions and counterparties herein are as of December 31, 2015. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* Reflects the floating financing rate, as of December 31, 2015, on the notional amount of the swap agreement paid to the counterparty or received from the counterparty, excluding any commissions.
** 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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PROSHARES ULTRA BLOOMBERG CRUDE OIL

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2014

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(104% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.051% due 01/08/15

   $ 14,590,000      $ 14,589,964  

0.015% due 01/22/15

     20,210,000        20,209,663  

0.009% due 01/29/15

     13,133,000        13,132,803  

0.017% due 02/19/15

     19,325,000        19,324,485  

0.020% due 03/05/15†

     85,597,000        85,594,789  

0.014% due 03/12/15

     50,156,000        50,154,077  

0.039% due 04/16/15†

     23,346,000        23,344,314  

0.049% due 04/30/15†

     50,260,000        50,253,410  

0.061% due 05/14/15†

     15,454,000        15,451,450  

0.051% due 05/21/15†

     60,018,000        60,006,413  

0.071% due 05/28/15†

     40,567,000        40,557,129  

0.074% due 06/04/15†

     72,011,000        71,988,046  

0.030% due 06/11/15

     2,595,000        2,594,193  
     

 

 

 

Total short-term U.S. government and agency obligations

(cost $467,195,638)

      $ 467,200,736  
     

 

 

 

Futures Contracts Purchased††

 

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

Crude Oil - NYMEX, expires March 2015

     7,232      $ 388,358,400      $ (46,474,787

Swap Agreements^

 

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

Swap agreement with Deutsche Bank AG based on Bloomberg WTI Crude Oil Subindex

     0.25     01/06/15       $ 165,659,833      $ (24,223,667

Swap agreement with Goldman Sachs International based on Bloomberg WTI Crude Oil Subindex

     0.25        01/06/15         151,188,034        (24,285,701

Swap agreement with Societe Generale S.A. based on Bloomberg WTI Crude Oil Subindex

     0.25        01/06/15         39,239,652        (5,528,160

Swap agreement with UBS AG based on Bloomberg WTI Crude Oil Subindex

     0.25        01/06/15         156,716,204        (22,143,569
          

 

 

 
           $ (76,181,097
          

 

 

 

 

All or partial amount pledged as collateral for swap agreements.
†† Cash collateral in the amount of $34,605,120 was pledged to cover margin requirements for open futures contracts as of December 31, 2014.
^ The positions and counterparties herein are as of December 31, 2014. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* Reflects the floating financing rate, as of December 31, 2014, on the notional amount of the swap agreement paid to the counterparty or received from the counterparty, excluding any commissions.
** 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 BLOOMBERG CRUDE OIL

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 and 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Investment Income

      

Interest

   $ 396,158     $ 68,292     $ 135,291  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Management fee

     8,230,180       1,769,248       2,275,701  

Brokerage commissions and fees

     639,133       65,408       55,871  
  

 

 

   

 

 

   

 

 

 

Total expenses

     8,869,313       1,834,656       2,331,572  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (8,473,155 )     (1,766,364 )     (2,196,281 )
  

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

      

Net realized gain (loss) on

      

Futures contracts

     (297,227,106 )     (109,160,069 )     52,686,859  

Swap agreements

     (598,949,990 )     (134,165,888 )     68,059,089  

Short-term U.S. government and agency obligations

     22,728       11,806       11,289  
  

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (896,154,368 )     (243,314,151 )     120,757,237  
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

      

Futures contracts

     28,545,473       (47,101,448 )     (21,333,749 )

Swap agreements

     4,004,508       (78,138,990 )     (31,375,727 )

Short-term U.S. government and agency obligations

     (6,857 )     (7,333 )     (5,591 )
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     32,543,124       (125,247,771 )     (52,715,067 )
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (863,611,244 )     (368,561,922 )     68,042,170  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (872,084,399 )   $ (370,328,286 )   $ 65,845,889  
  

 

 

   

 

 

   

 

 

 

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

   $ (28.93 )   $ (229.11 )   $ 42.70  
  

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding (Note 1)

     30,146,006       1,616,382       1,541,998  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

237


Table of Contents

PROSHARES ULTRA BLOOMBERG CRUDE OIL

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 and 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Shareholders’ equity, beginning of period

   $ 450,562,988     $ 142,773,429     $ 483,508,964  

Addition of 86,830,000, 10,080,000 and 2,290,000 shares, respectively (Note 1)

     2,505,616,928       1,007,757,253       334,161,435  

Redemption of 33,381,967, 2,090,000 and 4,690,000 shares, respectively (Note 1)

     (1,300,173,042 )     (329,639,408 )     (740,742,859 )
  

 

 

   

 

 

   

 

 

 

Net addition (redemption) of 53,448,033, 7,990,000 and (2,400,000) shares, respectively (Note 1)

     1,205,443,886       678,117,845       (406,581,424 )
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (8,473,155 )     (1,766,364 )     (2,196,281 )

Net realized gain (loss)

     (896,154,368 )     (243,314,151 )     120,757,237  

Change in net unrealized appreciation/depreciation

     32,543,124       (125,247,771 )     (52,715,067 )
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     (872,084,399 )     (370,328,286 )     65,845,889  
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity, end of period

   $ 783,922,475     $ 450,562,988     $ 142,773,429  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

238


Table of Contents

PROSHARES ULTRA BLOOMBERG CRUDE OIL

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 and 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Cash flow from operating activities

      

Net income (loss)

   $ (872,084,399 )   $ (370,328,286 )   $ 65,845,889  

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

     (12,966,690 )     (30,783,225 )     19,534,732  

Purchases of short-term U.S. government and agency obligations

     (4,300,690,737 )     (1,059,239,810 )     (1,333,100,462 )

Proceeds from sales or maturities of short-term U.S. government and agency obligations

     3,970,639,458       729,547,449       1,633,468,496  

Net amortization and accretion on short-term U.S. government and agency obligations

     (382,657 )     (68,292 )     (135,296 )

Net realized gain (loss) on investments

     (22,728 )     (11,806 )     (11,289 )

Change in unrealized appreciation/depreciation on investments

     (3,997,651 )     78,146,323       31,381,318  

Decrease (Increase) in receivable on futures contracts

     (5,150,763 )     —         3,430,415  

Increase (Decrease) in management fee payable

     316,922       185,707       (267,682 )

Increase (Decrease) in brokerage commissions and fees payable

     25,000       —         —     

Increase (Decrease) in payable on futures contracts

     (5,817,266 )     4,820,056       997,210  
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (1,230,131,511 )     (647,731,884 )     421,143,331  
  

 

 

   

 

 

   

 

 

 

Cash flow from financing activities

      

Proceeds from addition of shares

     2,529,448,592       979,031,080       334,161,435  

Payment on shares redeemed

     (1,297,658,086 )     (329,639,408 )     (756,814,102 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     1,231,790,506       649,391,672       (422,652,667 )
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     1,658,995       1,659,788       (1,509,336 )

Cash, beginning of period

     2,349,384       689,596       2,198,932  
  

 

 

   

 

 

   

 

 

 

Cash, end of period

   $ 4,008,379     $ 2,349,384     $ 689,596  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRA BLOOMBERG NATURAL GAS

STATEMENTS OF FINANCIAL CONDITION

 

     December 31, 2015      December 31, 2014  

Assets

     

Cash

   $ 1,411,137      $ 1,653,582  

Segregated cash balances with brokers for futures contracts

     7,595,280        21,134,080  

Short-term U.S. government and agency obligations (Note 3) (cost $26,806,648 and $53,408,848, respectively)

     26,807,731        53,410,227  

Receivable from capital shares sold

     —          3,853,422  

Receivable on open futures contracts

     3,065,769        —    
  

 

 

    

 

 

 

Total assets

     38,879,917        80,051,311  
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable on open futures contracts

     —          9,552,314  

Brokerage commissions and fees payable

     3,623        —    

Management fee payable

     25,110        65,790  
  

 

 

    

 

 

 

Total liabilities

     28,733        9,618,104  
  

 

 

    

 

 

 

Commitments and Contingencies (Note 2)

     

Shareholders’ equity

     

Shareholders’ equity

     38,851,184        70,433,207  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 38,879,917      $ 80,051,311  
  

 

 

    

 

 

 

Shares outstanding (Note 1)

     2,092,170        1,142,485  
  

 

 

    

 

 

 

Net asset value per share (Note 1)

   $ 18.57      $ 61.65  
  

 

 

    

 

 

 

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

   $ 18.48      $ 63.12  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRA BLOOMBERG NATURAL GAS

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2015

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(69% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.080% due 01/07/16

   $ 1,137,000      $ 1,136,996  

0.165% due 01/28/16

     861,000        860,925  

0.035% due 02/04/16

     1,316,000        1,315,904  

0.000% due 02/25/16

     588,000        587,936  

0.151% due 03/03/16

     3,234,000        3,233,497  

0.200% due 03/10/16

     1,823,000        1,822,616  

0.186% due 03/24/16

     17,857,000        17,849,857  
     

 

 

 

Total short-term U.S. government and agency obligations

(cost $26,806,648)

      $ 26,807,731  
     

 

 

 

Futures Contracts Purchased††

 

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

Natural Gas - NYMEX, expires March 2016

     3,288      $ 77,695,440      $ 6,312,879  

 

†† Cash collateral in the amount of $7,595,280 was pledged to cover margin requirements for open futures contracts as of December 31, 2015.

See accompanying notes to financial statements.

 

241


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PROSHARES ULTRA BLOOMBERG NATURAL GAS

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2014

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(76% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.051% due 01/08/15

   $ 3,173,000      $ 3,172,992  

0.008% due 01/22/15

     2,973,000        2,972,950  

0.010% due 01/29/15

     1,773,000        1,772,973  

0.018% due 02/12/15

     2,356,000        2,355,946  

0.024% due 03/05/15

     3,145,000        3,144,919  

0.015% due 03/12/15

     2,011,000        2,010,923  

0.037% due 04/16/15

     3,175,000        3,174,771  

0.054% due 04/30/15

     9,743,000        9,741,723  

0.061% due 05/14/15

     10,840,000        10,838,211  

0.056% due 05/21/15

     5,588,000        5,586,921  

0.060% due 05/28/15

     8,640,000        8,637,898  
     

 

 

 

Total short-term U.S. government and agency obligations (cost $53,408,848)

      $ 53,410,227  
     

 

 

 

Futures Contracts Purchased††

 

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

Natural Gas - NYMEX, expires March 2015

     4,864      $ 140,861,440      $ (34,889,283

 

†† Cash collateral in the amount of $21,134,080 was pledged to cover margin requirements for open futures contracts as of December 31, 2014.

See accompanying notes to financial statements.

 

242


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PROSHARES ULTRA BLOOMBERG NATURAL GAS

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 and 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Investment Income

      

Interest

   $ 20,167     $ 15,961     $ 33,341  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Management fee

     574,158       455,794       707,598  

Brokerage commissions and fees

     207,344       88,748       147,433  
  

 

 

   

 

 

   

 

 

 

Total expenses

     781,502       544,542       855,031  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (761,335 )     (528,581 )     (821,690 )
  

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

      

Net realized gain (loss) on

      

Futures contracts

     (100,776,817 )     (6,464,796 )     41,418,165  

Short-term U.S. government and agency obligations

     4,341       5,068       4,691  
  

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (100,772,476 )     (6,459,728 )     41,422,856  
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

      

Futures contracts

     41,202,162       (31,232,744 )     160,411  

Short-term U.S. government and agency obligations

     (296 )     (1,537 )     2,133  
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     41,201,866       (31,234,281 )     162,544  
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (59,570,610 )     (37,694,009 )     41,585,400  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (60,331,945 )   $ (38,222,590 )   $ 40,763,710  
  

 

 

   

 

 

   

 

 

 

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

   $ (39.48 )   $ (109.67 )   $ 80.44  
  

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding (Note 1)

     1,528,192       348,513       506,766  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRA BLOOMBERG NATURAL GAS

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 and 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Shareholders’ equity, beginning of period

   $ 70,433,207     $ 62,915,779     $ 73,019,370  

Addition of 2,137,500, 1,437,500 and 1,350,000 shares, respectively (Note 1)

     83,526,876       171,856,215       182,988,911  

Redemption of 1,187,815, 700,000 and 1,412,500 shares, respectively (Note 1)

     (54,776,954 )     (126,116,197 )     (233,856,212 )
  

 

 

   

 

 

   

 

 

 

Net addition (redemption) of 949,685, 737,500 and (62,500) shares, respectively (Note 1)

     28,749,922       45,740,018       (50,867,301 )
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (761,335 )     (528,581 )     (821,690 )

Net realized gain (loss)

     (100,772,476 )     (6,459,728 )     41,422,856  

Change in net unrealized appreciation/depreciation

     41,201,866       (31,234,281 )     162,544  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     (60,331,945 )     (38,222,590 )     40,763,710  
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity, end of period

   $ 38,851,184     $ 70,433,207     $ 62,915,779  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRA BLOOMBERG NATURAL GAS

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Cash flow from operating activities

      

Net income (loss)

   $ (60,331,945 )   $ (38,222,590 )   $ 40,763,710  

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

     13,538,800       (14,531,880 )     3,661,890  

Purchases of short-term U.S. government and agency obligations

     (262,203,648 )     (269,350,242 )     (417,636,625 )

Proceeds from sales or maturities of short-term U.S. government and agency obligations

     288,829,035       274,880,518       423,069,003  

Net amortization and accretion on short-term U.S. government and agency obligations

     (18,846 )     (15,961 )     (33,341 )

Net realized gain (loss) on investments

     (4,341 )     (5,068 )     (4,691 )

Change in unrealized appreciation/depreciation on investments

     296       1,537       (2,133 )

Decrease (Increase) in receivable on futures contracts

     (3,065,769 )     —         —    

Increase (Decrease) in management fee payable

     (40,680 )     (15,937 )     29,802  

Increase (Decrease) in brokerage commissions and fees payable

     3,623       —         —    

Increase (Decrease) in payable on futures contracts

     (9,552,314 )     3,923,782       736,749  
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (32,845,789 )     (43,335,841 )     50,584,364  
  

 

 

   

 

 

   

 

 

 

Cash flow from financing activities

      

Proceeds from addition of shares

     87,380,298       168,002,793       182,988,911  

Payment on shares redeemed

     (54,776,954 )     (126,116,197 )     (233,856,212 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     32,603,344       41,886,596       (50,867,301 )
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     (242,445 )     (1,449,245 )     (282,937 )

Cash, beginning of period

     1,653,582       3,102,827       3,385,764  
  

 

 

   

 

 

   

 

 

 

Cash, end of period

   $ 1,411,137     $ 1,653,582     $ 3,102,827  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRA GOLD

STATEMENTS OF FINANCIAL CONDITION

 

     December 31, 2015      December 31, 2014  

Assets

     

Cash

   $ 251,524      $ 104,145  

Segregated cash balances with brokers for futures contracts

     8,250        8,800  

Short-term U.S. government and agency obligations (Note 3) (cost $71,908,280 and $101,925,636, respectively)

     71,912,587        101,927,857  

Unrealized appreciation on forward agreements

     —          2,051,154  

Receivable on open futures contracts

     80        —    
  

 

 

    

 

 

 

Total assets

     72,172,441        104,091,956  
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     —          1,999,718  

Payable on open futures contracts

     —          3,260  

Management fee payable

     57,031        85,633  

Unrealized depreciation on forward agreements

     2,250,595        —    
  

 

 

    

 

 

 

Total liabilities

     2,307,626        2,088,611  
  

 

 

    

 

 

 

Commitments and Contingencies (Note 2)

     

Shareholders’ equity

     

Shareholders’ equity

     69,864,815        102,003,345  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 72,172,441      $ 104,091,956  
  

 

 

    

 

 

 

Shares outstanding

     2,350,014        2,550,014  
  

 

 

    

 

 

 

Net asset value per share

   $ 29.73      $ 40.00  
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 29.73      $ 38.41  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRA GOLD

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2015

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(103% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.135% due 01/07/16†

   $ 7,778,000      $ 7,777,974   

0.110% due 01/28/16

     9,751,000        9,750,155   

0.000% due 02/04/16†

     1,484,000        1,483,891   

0.000% due 02/25/16†

     2,659,000        2,658,712   

0.208% due 03/03/16

     22,780,000        22,776,453   

0.240% due 03/17/16

     1,450,000        1,449,721   

0.184% due 03/24/16†

     18,286,000        18,278,686   

0.353% due 05/26/16†

     7,749,000        7,736,995   
     

 

 

 

Total short-term U.S. government and agency obligations

     

(cost $71,908,280)

      $ 71,912,587   
     

 

 

 

Futures Contracts Purchased††

 

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

Gold Futures - COMEX, expires February 2016

     2      $ 212,040      $ (5,200

Forward Agreements^

 

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

Forward agreements with Citibank N.A. based on 0.995 Fine Troy Ounce gold

     0.00     01/06/16       $ 3,000      $ 3,179,880      $ (4,614

Forward agreements with Deutsche Bank AG based on 0.995 Fine Troy Ounce Gold

     0.35        01/06/16         63,900        67,734,639        (1,049,383

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

     0.25        01/06/16         23,620        25,036,255        (520,730

Forward agreements with Societe Generale based on 0.995 Fine Troy Ounce Gold

     0.26        01/06/16         15,400        16,323,384        (244,992

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

     0.19        01/06/16         25,700        27,240,972        (430,876
             

 

 

 
              $ (2,250,595
             

 

 

 

 

All or partial amount pledged as collateral for forward agreements and/or futures contracts.
†† Cash collateral in the amount of $8,250 was pledged to cover margin requirements for open futures contracts as of December 31, 2015.
^ The positions and counterparties herein are as of December 31, 2015. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* Reflects the floating financing rate, as of December 31, 2015, on the notional amount of the forward agreement paid to the counterparty or received from the counterparty, excluding any commissions.
** 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.

 

247


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PROSHARES ULTRA GOLD

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2014

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(100% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.051% due 01/08/15†

   $ 13,004,000      $ 13,003,967  

0.010% due 01/29/15†

     2,843,000        2,842,957  

0.010% due 02/19/15†

     17,175,000        17,174,542  

0.045% due 04/30/15†

     11,287,000        11,285,520  

0.057% due 05/14/15†

     37,832,000        37,825,758  

0.061% due 05/21/15

     3,373,000        3,372,349  

0.078% due 06/04/15†

     16,428,000        16,422,764  
     

 

 

 

Total short-term U.S. government and agency obligations

     

(cost $101,925,636)

      $ 101,927,857  
     

 

 

 

Futures Contracts Purchased††

 

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

Gold Futures - COMEX, expires February 2015

     2      $ 236,820      $ 4,580  

Forward Agreements^

 

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

Forward agreements with Deutsche Bank AG based on 0.995 Fine Troy Ounce Gold

     0.26     01/06/15       $ 90,800      $ 109,503,892      $ 1,231,694  

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

     0.41        01/06/15         31,420        37,892,206        222,126  

Forward agreements with Societe Generale S.A. based on 0.995 Fine Troy Ounce Gold

     0.46        01/06/15         15,200        18,331,048        190,591  

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

     0.36        01/06/15         31,600        38,109,284        406,743  
             

 

 

 
              $ 2,051,154  
             

 

 

 

 

All or partial amount pledged as collateral for forward agreements.
†† Cash collateral in the amount of $8,800 was pledged to cover margin requirements for open futures contracts as of December 31, 2014.
^ The positions and counterparties herein are as of December 31, 2014. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* Reflects the floating financing rate, as of December 31, 2014, on the notional amount of the forward agreement paid to the counterparty or received from the counterparty, excluding any commissions.
** 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.

 

248


Table of Contents

PROSHARES ULTRA GOLD

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Investment Income

      

Interest

   $ 42,700     $ 54,755     $ 130,437  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Management fee

     839,083       1,212,064       2,055,613  

Brokerage commissions and fees

     41       39       39  
  

 

 

   

 

 

   

 

 

 

Total expenses

     839,124       1,212,103       2,055,652  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (796,424 )     (1,157,348 )     (1,925,215 )
  

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

      

Net realized gain (loss) on

      

Futures contracts

     (16,180 )     (23,260 )     (97,160 )

Forward agreements

     (18,589,635 )     (9,651,073 )     (165,535,626 )

Short-term U.S. government and agency obligations

     (393 )     1,361       7,780  
  

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (18,606,208 )     (9,672,972 )     (165,625,006 )
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

      

Futures contracts

     (9,780 )     19,140       680  

Forward agreements

     (4,301,749 )     8,864,128       8,839,084  

Short-term U.S. government and agency obligations

     2,086       5,375       (19,303 )
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (4,309,443 )     8,888,643       8,820,461  
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (22,915,651 )     (784,329 )     (156,804,545 )
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (23,712,075 )   $ (1,941,677 )   $ (158,729,760 )
  

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ (9.80 )   $ (0.68 )   $ (44.55 )
  

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     2,418,918       2,838,096       3,562,617  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

249


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PROSHARES ULTRA GOLD

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Shareholders’ equity, beginning of period

   $ 102,003,345     $ 132,017,405     $ 335,054,752  

Addition of 150,000, 300,000 and 550,000 shares, respectively

     5,401,300       13,559,078       30,696,013  

Redemption of 350,000, 950,000 and 1,350,000 shares, respectively

     (13,827,755 )     (41,631,461 )     (75,003,600 )
  

 

 

   

 

 

   

 

 

 

Net addition (redemption) of (200,000), (650,000) and (800,000) shares, respectively

     (8,426,455 )     (28,072,383 )     (44,307,587 )
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (796,424 )     (1,157,348 )     (1,925,215 )

Net realized gain (loss)

     (18,606,208 )     (9,672,972 )     (165,625,006 )

Change in net unrealized appreciation/depreciation

     (4,309,443 )     8,888,643       8,820,461  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     (23,712,075 )     (1,941,677 )     (158,729,760 )
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity, end of period

   $ 69,864,815     $ 102,003,345     $ 132,017,405  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRA GOLD

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Cash flow from operating activities

      

Net income (loss)

   $ (23,712,075 )   $ (1,941,677 )   $ (158,729,760 )

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

     550       7,150       (1,100 )

Purchases of short-term U.S. government and agency obligations

     (260,988,119 )     (407,203,130 )     (923,993,097 )

Proceeds from sales or maturities of short-term U.S. government and agency obligations

     291,047,782       446,217,714       1,133,855,965  

Net amortization and accretion on short-term U.S. government and agency obligations

     (42,700 )     (54,755 )     (130,437 )

Net realized gain (loss) on investments

     393       (1,361 )     (7,780 )

Change in unrealized appreciation/depreciation on investments

     4,299,663       (8,869,503 )     (8,819,781 )

Decrease (Increase) in receivable on futures contracts

     (80 )     —         3,980  

Increase (Decrease) in management fee payable

     (28,602 )     (25,929 )     (167,707 )

Increase (Decrease) in payable on futures contracts

     (3,260 )     2,960       300  
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     10,573,552       28,131,469       42,010,583  
  

 

 

   

 

 

   

 

 

 

Cash flow from financing activities

      

Proceeds from addition of shares

     5,401,300       13,559,078       30,696,013  

Payment on shares redeemed

     (15,827,473 )     (41,728,968 )     (72,906,375 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (10,426,173 )     (28,169,890 )     (42,210,362 )
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     147,379       (38,421 )     (199,779 )

Cash, beginning of period

     104,145       142,566       342,345  
  

 

 

   

 

 

   

 

 

 

Cash, end of period

   $ 251,524     $ 104,145     $ 142,566  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRA SILVER

STATEMENTS OF FINANCIAL CONDITION

 

     December 31, 2015      December 31, 2014  

Assets

     

Cash

   $ 243,900      $ 305,004  

Segregated cash balances with brokers for futures contracts

     17,160        14,300  

Short-term U.S. government and agency obligations (Note 3) (cost $238,900,176 and $305,465,636, respectively)

     238,899,626        305,474,211  
  

 

 

    

 

 

 

Total assets

     239,160,686        305,793,515  
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     —          1,967,832  

Payable on open futures contracts

     1,875        6,770  

Management fee payable

     181,068        254,050  

Unrealized depreciation on forward agreements

     22,561,101        12,395,120  
  

 

 

    

 

 

 

Total liabilities

     22,744,044        14,623,772  
  

 

 

    

 

 

 

Commitments and Contingencies (Note 2)

     

Shareholders’ equity

     

Shareholders’ equity

     216,416,642        291,169,743  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 239,160,686      $ 305,793,515  
  

 

 

    

 

 

 

Shares outstanding

     7,996,533        7,396,533  
  

 

 

    

 

 

 

Net asset value per share

   $ 27.06      $ 39.37  
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 27.08      $ 38.05  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

252


Table of Contents

PROSHARES ULTRA SILVER

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2015

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(110% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.135% due 01/07/16†

   $ 19,913,000      $ 19,912,934  

0.040% due 01/14/16

     17,050,000        17,049,574  

0.001% due 01/21/16†

     34,041,000        34,039,553  

0.039% due 02/04/16†

     29,869,000        29,866,814  

0.115% due 02/18/16

     2,811,000        2,810,596  

0.000% due 02/25/16†

     41,656,000        41,651,489  

0.199% due 03/03/16†

     40,444,000        40,437,703  

0.200% due 03/10/16

     2,873,000        2,872,394  

0.180% due 03/24/16†

     30,018,000        30,005,993  

0.356% due 05/26/16†

     20,284,000        20,252,576  
     

 

 

 

Total short-term U.S. government and agency obligations

     

(cost $238,900,176)

      $ 238,899,626  
     

 

 

 

Futures Contracts Purchased††

 

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

Silver Futures - COMEX, expires March 2016

     3      $ 207,045      $ (9,030

Forward Agreements^

 

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

Forward agreements with Deutsche Bank AG based on 0.999 Fine Troy Ounce Silver

     1.10     01/06/16       $ 13,088,000      $ 180,899,718      $ (9,355,945

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

     0.95        01/06/16         6,855,800        94,755,383        (5,106,853

Forward agreements with Societe Generale S.A. based on 0.999 Fine Troy Ounce Silver

     1.00        01/06/16         3,984,000        55,063,661        (2,704,459

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

     0.99        01/06/16         7,373,000        101,903,708        (5,393,844
             

 

 

 
              $ (22,561,101
             

 

 

 

 

All or partial amount pledged as collateral for forward agreements and/or futures contracts.
†† Cash collateral in the amount of $17,160 was pledged to cover margin requirements for open futures contracts as of December 31, 2015.
^ The positions and counterparties herein are as of December 31, 2015. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* Reflects the floating financing rate, as of December 31, 2015, on the notional amount of the forward agreement paid to the counterparty or received from the counterparty, excluding any commissions.
** 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.

 

253


Table of Contents

PROSHARES ULTRA SILVER

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2014

.

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

     

(105% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.016% due 01/22/15

   $ 2,309,000      $ 2,308,961  

0.012% due 01/29/15

     14,382,000        14,381,784  

0.011% due 02/12/15†

     92,778,000        92,775,887  

0.020% due 02/19/15†

     35,850,000        35,849,044  

0.012% due 03/05/15†

     9,368,000        9,367,758  

0.041% due 04/16/15†

     18,037,000        18,035,697  

0.047% due 04/30/15†

     6,604,000        6,603,134  

0.060% due 05/14/15†

     76,886,000        76,873,314  

0.078% due 06/04/15†

     4,277,000        4,275,637  

0.090% due 06/11/15†

     45,017,000        45,002,995  
     

 

 

 

Total short-term U.S. government and agency obligations

     

(cost $305,465,636)

      $ 305,474,211  
     

 

 

 

Futures Contracts Purchased††

 

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

Silver Futures - COMEX, expires March 2015

     2      $ 155,990      $ (1,560

Forward Agreements^

 

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

Forward agreements with Deutsche Bank AG based on 0.999 Fine Troy Ounce Silver

     0.97     01/06/15       $ 19,068,000      $ 304,550,282      $ (6,220,069

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

     1.05        01/06/15         7,100,800        113,411,137        (2,124,796

Forward agreements with Societe Generale S.A. based on 0.999 Fine Troy Ounce Silver

     1.09        01/06/15         4,628,000        73,916,565        (1,384,207

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

     1.05        01/06/15         5,653,000        90,287,455        (2,666,048
             

 

 

 
              $ (12,395,120
             

 

 

 

 

All or partial amount pledged as collateral for forward agreements.
†† Cash collateral in the amount of $14,300 was pledged to cover margin requirements for open futures contracts as of December 31, 2014.
^ The positions and counterparties herein are as of December 31, 2014. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.
* Reflects the floating financing rate, as of December 31, 2014, on the notional amount of the forward agreement paid to the counterparty or received from the counterparty, excluding any commissions.
** 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.

 

254


Table of Contents

PROSHARES ULTRA SILVER

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Investment Income

      

Interest

   $ 156,353     $ 179,642     $ 348,317  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Management fee

     2,664,160       4,148,207       5,628,988  

Brokerage commissions and fees

     52       43       36  
  

 

 

   

 

 

   

 

 

 

Total expenses

     2,664,212       4,148,250       5,629,024  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (2,507,859 )     (3,968,608 )     (5,280,707 )
  

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

      

Net realized gain (loss) on

      

Futures contracts

     (19,600 )     (52,451 )     (137,594 )

Forward agreements

     (78,289,709 )     (155,498,969 )     (701,395,135 )

Short-term U.S. government and agency obligations

     (441 )     8,226       14,261  
  

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (78,309,750 )     (155,543,194 )     (701,518,468 )
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

      

Futures contracts

     (7,470 )     12,640       25,820  

Forward agreements

     (10,165,981 )     (9,902,240 )     143,247,826  

Short-term U.S. government and agency obligations

     (9,125 )     (11,363 )     (30,955 )
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (10,182,576 )     (9,900,963 )     143,242,691  
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (88,492,326 )     (165,444,157 )     (558,275,777 )
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (91,000,185 )   $ (169,412,765 )   $ (563,556,484 )
  

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ (11.82 )   $ (22.83 )   $ (93.80 )
  

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     7,697,629       7,420,839       6,008,363  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

255


Table of Contents

PROSHARES ULTRA SILVER

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Shareholders’ equity, beginning of period

   $ 291,169,743     $ 465,479,519     $ 747,725,400  

Addition of 2,700,000, 2,487,500 and 4,112,500 shares, respectively

     96,078,803       144,929,400       383,200,214  

Redemption of 2,100,000, 2,440,974 and 1,112,500 shares, respectively

     (79,831,719 )     (149,826,411 )     (101,889,611 )
  

 

 

   

 

 

   

 

 

 

Net addition (redemption) of 600,000, 46,526 and 3,000,000 shares, respectively

     16,247,084       (4,897,011 )     281,310,603  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (2,507,859 )     (3,968,608 )     (5,280,707 )

Net realized gain (loss)

     (78,309,750 )     (155,543,194 )     (701,518,468 )

Change in net unrealized appreciation/depreciation

     (10,182,576 )     (9,900,963 )     143,242,691  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     (91,000,185 )     (169,412,765 )     (563,556,484 )
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity, end of period

   $ 216,416,642     $ 291,169,743     $ 465,479,519  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES ULTRA SILVER

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Cash flow from operating activities

      

Net income (loss)

   $ (91,000,185 )   $ (169,412,765 )   $ (563,556,484 )

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

     (2,860 )     7,700       2,200  

Purchases of short-term U.S. government and agency obligations

     (835,846,036 )     (1,432,093,309 )     (2,495,134,063 )

Proceeds from sales or maturities of short-term U.S. government and agency obligations

     902,567,408       1,594,662,608       2,918,654,096  

Net amortization and accretion on short-term U.S. government and agency obligations

     (156,353 )     (177,671 )     (348,317 )

Net realized gain (loss) on investments

     441       (8,226 )     (14,261 )

Change in unrealized appreciation/depreciation on investments

     10,175,106       9,913,603       (143,216,871 )

Decrease (Increase) in receivable on futures contracts

     —         —         2,520  

Increase (Decrease) in management fee payable

     (72,982 )     (125,078 )     (277,880 )

Increase (Decrease) in payable on futures contracts

     (4,895 )     4,320       2,450  
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (14,340,356 )     2,771,182       (283,886,610 )
  

 

 

   

 

 

   

 

 

 

Cash flow from financing activities

      

Proceeds from addition of shares

     96,078,803       144,929,400       385,349,171  

Payment on shares redeemed

     (81,799,551 )     (147,858,579 )     (101,889,611 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     14,279,252       (2,929,179 )     283,459,560  
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     (61,104 )     (157,997 )     (427,050 )

Cash, beginning of period

     305,004       463,001       890,051  
  

 

 

   

 

 

   

 

 

 

Cash, end of period

   $ 243,900     $ 305,004     $ 463,001  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES ULTRA EURO

STATEMENTS OF FINANCIAL CONDITION

 

     December 31, 2015      December 31, 2014  

Assets

     

Cash

   $ 227,310      $ 671,117  

Short-term U.S. government and agency obligations (Note 3) (cost $11,605,665 and $2,415,732, respectively)

     11,605,262        2,415,698  

Unrealized appreciation on foreign currency forward contracts

     604,920        2,921  
  

 

 

    

 

 

 

Total assets

     12,437,492        3,089,736  
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     1,569,718        —    

Management fee payable

     10,044        2,003  

Unrealized depreciation on foreign currency forward contracts

     —          106,292  
  

 

 

    

 

 

 

Total liabilities

     1,579,762        108,295  
  

 

 

    

 

 

 

Commitments and Contingencies (Note 2)

     

Shareholders’ equity

     

Shareholders’ equity

     10,857,730        2,981,441  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 12,437,492      $ 3,089,736  
  

 

 

    

 

 

 

Shares outstanding

     700,014        150,014  
  

 

 

    

 

 

 

Net asset value per share

   $ 15.51      $ 19.87  
  

 

 

    

 

 

 

Market value per share (Note 2)

   $ 15.51      $ 19.80  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

258


Table of Contents

PROSHARES ULTRA EURO

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2015

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(107% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.000% due 01/21/16†

   $ 7,404,000      $ 7,403,685  

0.035% due 02/04/16

     790,000        789,942  

0.166% due 03/24/16†

     3,413,000        3,411,635  
     

 

 

 

Total short-term U.S. government and agency obligations

     

(cost $11,605,665)

      $ 11,605,262  
     

 

 

 

 

Foreign Currency Forward Contracts^

  

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

Contracts to Purchase

         

Euro with Goldman Sachs International

     01/08/16         12,451,525     $ 13,533,325     $ 298,929  

Euro with UBS AG

     01/08/16         11,518,600       12,519,346       288,302  
         

 

 

 
          $ 587,231  
         

 

 

 

Contracts to Sell

         

Euro with Goldman Sachs International

     01/08/16         (3,430,700   $ (3,728,762   $ 16,425  

Euro with UBS AG

     01/08/16         (555,100     (603,328     1,264  
         

 

 

 
          $ 17,689  
         

 

 

 

 

All or partial amount segregated as collateral for foreign currency forward contracts.
^ The positions and counterparties herein are as of December 31, 2015. 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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PROSHARES ULTRA EURO

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2014

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(81% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.010% due 02/12/15

   $ 245,000      $ 244,994  

0.021% due 03/05/15†

     342,000        341,991  

0.036% due 04/16/15

     242,000        241,983  

0.047% due 04/30/15†

     587,000        586,923  

0.035% due 05/21/15

     1,000,000        999,807  
     

 

 

 

Total short-term U.S. government and agency obligations

     

(cost $2,415,732)

      $ 2,415,698  
     

 

 

 

 

Foreign Currency Forward Contracts^

  

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

Contracts to Purchase

         

Euro with Goldman Sachs International

     01/09/15         2,080,425     $ 2,517,638     $ (40,058

Euro with UBS AG

     01/09/15         3,032,200       3,669,434       (66,234
         

 

 

 
          $ (106,292
         

 

 

 

Contracts to Sell

         

Euro with Goldman Sachs International

     01/09/15         (63,400   $ (76,724   $ 1,202  

Euro with UBS AG

     01/09/15         (122,500     (148,244     1,719  
         

 

 

 
          $ 2,921  
         

 

 

 

 

All or partial amount segregated as collateral for foreign currency forward contracts.
^ The positions and counterparties herein are as of December 31, 2014. 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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PROSHARES ULTRA EURO

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Investment Income

      

Interest

   $ 2,797     $ 1,083     $ 1,901  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Management fee

     106,868       23,330       36,925  
  

 

 

   

 

 

   

 

 

 

Total expenses

     106,868       23,330       36,925  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (104,071 )     (22,247 )     (35,024 )
  

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

      

Net realized gain (loss) on

      

Foreign currency forward contracts

     (1,982,208 )     (420,533 )     210,150  

Short-term U.S. government and agency obligations

     (109 )     5       55  
  

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (1,982,317 )     (420,528 )     210,205  
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

      

Foreign currency forward contracts

     708,291       (204,333 )     13,803  

Short-term U.S. government and agency obligations

     (369 )     (182 )     76  
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     707,922       (204,515 )     13,879  
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (1,274,395 )     (625,043 )     224,084  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (1,378,466 )   $ (647,290 )   $ 189,060  
  

 

 

   

 

 

   

 

 

 

Net income (loss) per weighted-average share

   $ (1.99 )   $ (6.36 )   $ 1.19  
  

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding

     691,384       101,795       159,192  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRA EURO

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Shareholders’ equity, beginning of period

   $ 2,981,441     $ 2,603,827     $ 4,870,316  

Addition of 950,000, 50,000 and 50,000 shares, respectively

     15,916,613       1,024,904       1,261,329  

Redemption of 400,000, 0 and 150,000 shares, respectively

     (6,661,858 )     —         (3,716,878 )
  

 

 

   

 

 

   

 

 

 

Net addition (redemption) of 550,000, 50,000 and (100,000) shares, respectively

     9,254,755       1,024,904       (2,455,549 )
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (104,071 )     (22,247 )     (35,024 )

Net realized gain (loss)

     (1,982,317 )     (420,528 )     210,205  

Change in net unrealized appreciation/depreciation

     707,922       (204,515 )     13,879  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     (1,378,466 )     (647,290 )     189,060  
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity, end of period

   $ 10,857,730     $ 2,981,441     $ 2,603,827  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRA EURO

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Cash flow from operating activities

      

Net income (loss)

   $ (1,378,466 )   $ (647,290 )   $ 189,060  

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

      

Purchases of short-term U.S. government and agency obligations

     (42,137,395 )     (7,297,855 )     (15,171,747 )

Proceeds from sales or maturities of short-term U.S. government and agency obligations

     32,950,150       7,338,926       17,264,860  

Net amortization and accretion on short-term U.S. government and agency obligations

     (2,797 )     (1,083 )     (1,901 )

Net realized gain (loss) on investments

     109       (5 )     (55 )

Change in unrealized appreciation/depreciation on investments

     (707,922 )     204,515       (13,879 )

Increase (Decrease) in management fee payable

     8,041       (718 )     (1,152 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (11,268,280 )     (403,510 )     2,265,186  
  

 

 

   

 

 

   

 

 

 

Cash flow from financing activities

      

Proceeds from addition of shares

     15,916,613       1,024,904       1,261,329  

Payment on shares redeemed

     (5,092,140 )     —         (3,716,878 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     10,824,473       1,024,904       (2,455,549 )
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     (443,807 )     621,394       (190,363 )

Cash, beginning of period

     671,117       49,723       240,086  
  

 

 

   

 

 

   

 

 

 

Cash, end of period

   $ 227,310     $ 671,117     $ 49,723  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRA YEN

STATEMENTS OF FINANCIAL CONDITION

 

     December 31, 2015      December 31, 2014  

Assets

     

Cash

   $ 147,371      $ 846,919  

Short-term U.S. government and agency obligations (Note 3) (cost $5,069,206 and $1,287,844, respectively)

     5,069,491        1,287,869  

Unrealized appreciation on foreign currency forward contracts

     267,014        404  
  

 

 

    

 

 

 

Total assets

     5,483,876        2,135,192  
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     4,325        1,515  

Unrealized depreciation on foreign currency forward contracts

     5,703        15,649  
  

 

 

    

 

 

 

Total liabilities

     10,028        17,164  
  

 

 

    

 

 

 

Commitments and Contingencies (Note 2)

     

Shareholders’ equity

     

Shareholders’ equity

     5,473,848        2,118,028  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 5,483,876      $ 2,135,192  
  

 

 

    

 

 

 

Shares outstanding (Note 1)

     99,974        37,504  
  

 

 

    

 

 

 

Net asset value per share (Note 1)

   $ 54.75      $ 56.47  
  

 

 

    

 

 

 

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

   $ 54.70      $ 56.48  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

264


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PROSHARES ULTRA YEN

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2015

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(93% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.165% due 01/28/16†

   $ 3,811,000      $ 3,810,670  

0.000% due 02/25/16

     360,000        359,961  

0.208% due 03/03/16

     899,000        898,860  
     

 

 

 

Total short-term U.S. government and agency obligations

     

(cost $5,069,206)

      $ 5,069,491  
     

 

 

 

 

Foreign Currency Forward Contracts^

  

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

Contracts to Purchase

         

Yen with Goldman Sachs International

     01/08/16         866,666,900     $ 7,210,368     $ 172,891  

Yen with UBS AG

     01/08/16         488,922,300       4,067,664       94,123  
         

 

 

 
          $ 267,014  
         

 

 

 

Contracts to Sell

         

Yen with Goldman Sachs International

     01/08/16         (18,830,800   $ (156,666   $ (3,104

Yen with UBS AG

     01/08/16         (21,100,300     (175,547     (2,599
         

 

 

 
          $ (5,703
         

 

 

 

 

All or partial amount segregated as collateral for foreign currency forward contracts.
^ The positions and counterparties herein are as of December 31, 2015. 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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PROSHARES ULTRA YEN

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2014

 

     Principal Amount      Value  

Short-term U.S. government and agency obligations

  

(61% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.021% due 03/05/15†

   $ 357,000      $ 356,991  

0.047% due 04/30/15

     931,000        930,878  
     

 

 

 

Total short-term U.S. government and agency obligations

     

(cost $1,287,844)

      $ 1,287,869  
     

 

 

 

Foreign Currency Forward Contracts^

 

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

Contracts to Purchase

         

Yen with Goldman Sachs International

     01/09/15         229,660,300     $ 1,917,715     $ (11,754

Yen with UBS AG

     01/09/15         304,204,900       2,540,179       (3,394
         

 

 

 
          $ (15,148
         

 

 

 

Contracts to Sell

         

Yen with Goldman Sachs International

     01/09/15         (9,518,600   $ (79,482   $ (501

Yen with UBS AG

     01/09/15         (16,144,000     (134,806     404  
         

 

 

 
          $ (97
         

 

 

 

 

All or partial amount pledged as collateral for foreign currency forward contracts.
^ The positions and counterparties herein are as of December 31, 2014. 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.

 

266


Table of Contents

PROSHARES ULTRA YEN

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Investment Income

      

Interest

   $ 3,609     $ 1,101     $ 1,795  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Management fee

     48,032       21,963       33,569  
  

 

 

   

 

 

   

 

 

 

Total expenses

     48,032       21,963       33,569  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (44,423 )     (20,862 )     (31,774 )
  

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

      

Net realized gain (loss) on

      

Foreign currency forward contracts

     (472,913 )     (540,398 )     (1,879,169 )

Short-term U.S. government and agency obligations

     6       94       68  
  

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (472,907 )     (540,304 )     (1,879,101 )
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

      

Foreign currency forward contracts

     276,556       144,064       334,987  

Short-term U.S. government and agency obligations

     260       (289 )     97  
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     276,816       143,775       335,084  
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (196,091 )     (396,529 )     (1,544,017 )
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (240,514 )   $ (417,391 )   $ (1,575,791 )
  

 

 

   

 

 

   

 

 

 

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

   $ (2.59 )   $ (13.39 )   $ (39.59 )
  

 

 

   

 

 

   

 

 

 

Weighted-average shares outstanding (Note 1)

     92,794       31,168       39,798  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES ULTRA YEN

STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Shareholders’ equity, beginning of period

   $ 2,118,028     $ 2,795,026     $ 4,227,995  

Addition of 75,000, 12,500 and 12,500 shares, respectively (Note 1)

     4,285,016       716,043       1,323,474  

Redemption of 12,530, 12,500 and 12,500 shares, respectively (Note 1)

     (688,682 )     (975,650 )     (1,180,652 )
  

 

 

   

 

 

   

 

 

 

Net addition of 62,470, 0, and 0 shares, respectively
(Note 1)

     3,596,334       (259,607 )     142,822  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (44,423 )     (20,862 )     (31,774 )

Net realized gain (loss)

     (472,907 )     (540,304 )     (1,879,101 )

Change in net unrealized appreciation/depreciation

     276,816       143,775       335,084  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     (240,514 )     (417,391 )     (1,575,791 )
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity, end of period

   $ 5,473,848     $ 2,118,028     $ 2,795,026  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES ULTRA YEN

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Cash flow from operating activities

      

Net income (loss)

   $ (240,514 )   $ (417,391 )   $ (1,575,791 )

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

      

Purchases of short-term U.S. government and agency obligations

     (12,557,564 )     (5,540,122 )     (14,074,486 )

Proceeds from sales or maturities of short-term U.S. government and agency obligations

     8,779,817       7,181,715       15,735,808  

Net amortization and accretion on short-term U.S. government and agency obligations

     (3,609 )     (1,101 )     (1,795 )

Net realized gain (loss) on investments

     (6 )     (94 )     (68 )

Change in unrealized appreciation/depreciation on investments

     (276,816 )     (143,775 )     (335,084 )

Increase (Decrease) in management fee payable

     2,810       (822 )     (1,323 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (4,295,882 )     1,078,410       (252,739 )
  

 

 

   

 

 

   

 

 

 

Cash flow from financing activities

      

Proceeds from addition of shares

     4,285,016       716,043       1,323,474  

Payment on shares redeemed

     (688,682 )     (975,650 )     (1,180,652 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     3,596,334       (259,607 )     142,822  
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     (699,548 )     818,803       (109,917 )

Cash, beginning of period

     846,919       28,116       138,033  
  

 

 

   

 

 

   

 

 

 

Cash, end of period

   $ 147,371     $ 846,919     $ 28,116  
  

 

 

   

 

 

   

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

PROSHARES TRUST II

COMBINED STATEMENTS OF FINANCIAL CONDITION

 

     December 31, 2015      December 31, 2014  

Assets

     

Cash

   $ 48,049,225      $ 35,899,231  

Segregated cash balances with brokers for futures contracts

     261,083,712         296,561,615  

Short-term U.S. government and agency obligations (Note 3) (cost $3,313,585,456 and $3,005,824,301, respectively)

     3,313,591,600        3,005,876,580  

Unrealized appreciation on swap agreements

     6,669,519        27,585,336  

Unrealized appreciation on forward agreements

     6,587,221        2,850,677  

Unrealized appreciation on foreign currency forward contracts

     1,805,661        19,594,239  

Receivable from capital shares sold

     48,046,138        58,085,447  

Receivable on open futures contracts

     27,655,327        56,002,326  

Offering costs (Note 5)

     —          49,384  

Limitation by Sponsor

     —          9,474  
  

 

 

    

 

 

 

Total assets

     3,713,488,403        3,502,514,309  
  

 

 

    

 

 

 

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     60,119,975        25,400,996  

Payable on open futures contracts

     3,078,269        46,405,998  

Brokerage commissions and fees payable

     39,148        —    

Management fee payable

     2,839,305        2,657,505  

Payable for offering costs

     —          65,785  

Unrealized depreciation on swap agreements

     72,446,044        76,512,435  

Unrealized depreciation on forward agreements

     24,811,696        14,882,468  

Unrealized depreciation on foreign currency forward contracts

     43,545,218        4,528,636  
  

 

 

    

 

 

 

Total liabilities

     206,879,655        170,453,823  
  

 

 

    

 

 

 

Commitments and Contingencies (Note 2)

     

Shareholders’ equity

     

Shareholders’ equity

     3,506,608,748        3,332,060,486  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 3,713,488,403      $ 3,502,514,309  
  

 

 

    

 

 

 

Shares outstanding

     143,049,418        72,190,846  
  

 

 

    

 

 

 

See accompanying notes to financial statements.

 

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PROSHARES TRUST II

COMBINED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013*

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Investment Income

      

Interest

   $ 1,546,729     $ 1,151,784     $ 1,552,350  
  

 

 

   

 

 

   

 

 

 

Expenses

      

Management fee

     35,055,606        27,669,705       30,836,871  

Brokerage commissions and fees

     6,480,284       4,580,430       3,202,862  

Offering costs

     59,479       16,401       141,251  

Limitation by Sponsor

     (11,814     (9,474 )     (57,127 )
  

 

 

   

 

 

   

 

 

 

Total expenses

     41,583,555       32,257,062       34,123,857  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (40,036,826 )     (31,105,278 )     (32,571,507 )
  

 

 

   

 

 

   

 

 

 

Realized and unrealized gain (loss) on investment activity

      

Net realized gain (loss) on

      

Futures contracts

     (675,706,798 )     (136,360,050 )     (398,397,208 )

Swap agreements

     (553,434,721 )     (79,470,613 )     55,106,405  

Forward agreements

     (73,443,689 )     (155,407,226 )     (692,584,048 )

Foreign currency forward contracts

     138,005,915       210,564,249       114,287,543  

Short-term U.S. government and agency obligations

     47,732       123,212       79,408  
  

 

 

   

 

 

   

 

 

 

Net realized gain (loss)

     (1,164,531,561 )     (160,550,428 )     (921,507,900 )
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation on

      

Futures contracts

     40,193,356       9,175,329       (53,329,004 )

Swap agreements

     (16,849,426 )     (48,539,505 )     (28,257,739 )

Forward agreements

     (6,192,684 )     (6,131,133 )     132,454,565  

Foreign currency forward contracts

     (56,805,160 )     (514,227 )     (8,979,636 )

Short-term U.S. government and agency obligations

     (46,135 )     (73,469 )     (3,687 )
  

 

 

   

 

 

   

 

 

 

Change in net unrealized appreciation/depreciation

     (39,700,049 )     (46,083,005 )     41,884,499  
  

 

 

   

 

 

   

 

 

 

Net realized and unrealized gain (loss)

     (1,204,231,610 )     (206,633,433 )     (879,623,401 )
  

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (1,244,268,436 )   $ (237,738,711 )   $ (912,194,908 )
  

 

 

   

 

 

   

 

 

 

 

* The operations include the activity of ProShares Ultra Australian Dollar through June 29, 2015, the date of liquidation. See Note 1.

See accompanying notes to financial statements.

 

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PROSHARES TRUST II

COMBINED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013*

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Shareholders’ equity, beginning of period

   $ 3,332,060,486     $ 3,082,207,084     $ 3,242,449,608  

Addition of 230,297,500, 80,763,760 and 85,440,000 shares, respectively

     8,943,932,891       5,351,585,350       6,061,413,770  

Redemption of 159,438,928, 79,572,779 and 75,095,573** shares, respectively

     (7,525,116,193 )     (4,863,993,237 )     (5,309,461,386 )
  

 

 

   

 

 

   

 

 

 

Net addition (redemption) of 70,858,572, 1,190,981 and 10,343,842 shares, respectively

     1,418,816,698       487,592,113       751,952,384  
  

 

 

   

 

 

   

 

 

 

Net investment income (loss)

     (40,036,826 )     (31,105,278 )     (32,571,507 )

Net realized gain (loss)

     (1,164,531,561 )     (160,550,428 )     (921,507,900 )

Change in net unrealized appreciation/depreciation

     (39,700,049 )     (46,083,005 )     41,884,499  
  

 

 

   

 

 

   

 

 

 

Net income (loss)

     (1,244,268,436 )     (237,738,711 )     (912,194,908 )
  

 

 

   

 

 

   

 

 

 

Shareholders’ equity, end of period

   $ 3,506,608,748     $ 3,332,060,486     $ 3,082,207,084  
  

 

 

   

 

 

   

 

 

 

 

* The operations include the activity of ProShares Ultra Australian Dollar through June 29, 2015, the date of liquidation. See Note 1.
** Amount includes $600 of redemptions related to the termination of offerings of certain Funds.

See accompanying notes to financial statements.

 

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PROSHARES TRUST II

COMBINED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2015, 2014 AND 2013*

 

     Year ended
December 31, 2015
    Year ended
December 31, 2014
    Year ended
December 31, 2013
 

Cash flow from operating activities

      

Net income (loss)

   $ (1,244,268,436 )   $ (237,738,711 )   $ (912,194,908 )

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

     35,477,903        (61,515,085 )     (93,386,617 )

Purchases of short-term U.S. government and agency obligations

     (17,070,603,480 )     (12,667,505,150 )     (16,624,948,160 )

Proceeds from sales or maturities of short-term U.S. government and agency obligations

     16,764,420,326       12,509,293,100       17,115,395,982  

Net amortization and accretion on short-term U.S. government and agency obligations

     (1,530,269 )     (1,148,962 )     (1,552,346 )

Net realized gain (loss) on investments

     (47,732 )     (123,212 )     (79,408 )

Change in unrealized appreciation/depreciation on investments

     79,893,405       55,258,334       (95,213,503 )

Decrease (Increase) in receivable on futures contracts

     28,346,999       (49,071,751 )     2,682,450  

Decrease (Increase) in Limitation by Sponsor

     9,474       (9,474 )     5,373  

Change in offering cost

     49,384       (49,384 )     64,027  

Increase (Decrease) in management fee payable

     181,800       134,637       (206,989 )

Increase (Decrease) in brokerage commissions and fees payable

     39,148       —         —    

Increase (Decrease) in payable on futures contracts

     (43,327,729 )     36,334,537       (64,914,699 )

Increase (Decrease) in payable for offering costs

     (65,785 )     65,785       (123,000 )
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     (1,451,424,992 )     (416,075,336 )     (674,471,798 )
  

 

 

   

 

 

   

 

 

 

Cash flow from financing activities

      

Proceeds from addition of shares

     8,953,972,200       5,304,403,567       6,098,182,208  

Payment on shares redeemed

     (7,490,397,088 )     (4,875,819,732 )     (5,420,279,034 )**
  

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     1,463,575,112       428,583,835       677,903,174  
  

 

 

   

 

 

   

 

 

 

Net increase (decrease) in cash

     12,150,120       12,508,499       3,431,376  

Cash, beginning of period

     35,899,231       23,390,732       19,959,356  
  

 

 

   

 

 

   

 

 

 

Cash, end of period

   $ 48,049,351     $ 35,899,231     $ 23,390,732  
  

 

 

   

 

 

   

 

 

 

 

* Amounts include the activity of ProShares Ultra Australian Dollar through June 29, 2015, the date of liquidation. See Note 1.
** Amount includes $600 of redemptions related to the termination of offerings of certain Funds.

See accompanying notes to financial statements.

 

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PROSHARES TRUST II

NOTES TO FINANCIAL STATEMENTS

December 31, 2015

NOTE 1 – ORGANIZATION

ProShares Trust II (formerly known as the Commodities and Currencies Trust) (the “Trust”) is a Delaware statutory trust formed on October 9, 2007 and is currently organized into separate series (each, a “Fund” and collectively, the “Funds”). As of December 31, 2015, the following twenty-one series of the Trust have commenced investment operations: (i) ProShares Managed Futures Strategy (the “Managed Futures Fund”); (ii) ProShares VIX Short-Term Futures ETF and ProShares VIX Mid-Term Futures ETF (each, a “Matching VIX Fund” and collectively, the “Matching VIX Funds”); (iii) ProShares Short VIX Short-Term Futures ETF and ProShares Ultra VIX Short-Term Futures ETF (each, a “Geared VIX Fund” and collectively, the “Geared VIX Funds”); and (iv) ProShares UltraShort Bloomberg Commodity, ProShares UltraShort Bloomberg Crude Oil, ProShares UltraShort Bloomberg Natural Gas, ProShares UltraShort Gold, ProShares UltraShort Silver, ProShares UltraShort Australian Dollar, ProShares UltraShort Euro, ProShares UltraShort Yen, ProShares Ultra Bloomberg Commodity, ProShares Ultra Bloomberg Crude Oil, ProShares Ultra Bloomberg Natural Gas, ProShares Ultra Gold, ProShares Ultra Silver, ProShares Ultra Euro and ProShares Ultra Yen (each, a “Leveraged Fund” and collectively, the “Leveraged Funds”); and (v) ProShares Short Euro (the “Short Euro Fund”). 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 Fund. The Shares of each Fund are listed on the New York Stock Exchange Archipelago (“NYSE Arca”). 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. The Geared VIX Funds and the Matching VIX Funds are collectively referred to as the “VIX Funds” in these Notes to Financial Statements.

On May 22, 2015, the Trust announced plans to liquidate ProShares Ultra Australian Dollar (ticker symbol: GDAY). ProShares Ultra Australian Dollar was closed to purchases and redemptions as of the close of regular trading on the NYSE Arca on June 18, 2015. Beginning June 19, 2015, no secondary market for ProShares Ultra Australian Dollar’s Shares remained. Proceeds of the liquidation were distributed to shareholders on June 29, 2015. Any shareholders remaining in the fund on June 29, 2015 automatically had their shares redeemed for cash at ProShares Ultra Australian Dollar’s net asset value per Share as of June 19, 2015. On June 30, 2015, the NYSE Arca filed a Form 25 removing the listing of ProShares Ultra Australian Dollar on the NYSE Arca. On July 10, 2015 a Form 15 was filed with the U.S. Securities and Exchange Commission (“SEC”) terminating the registration of ProShares Ultra Australian Dollar.

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 UltraShort Bloomberg Commodity, ProShares UltraShort Bloomberg Crude Oil, ProShares UltraShort Gold, ProShares UltraShort Silver, ProShares UltraShort Euro, ProShares UltraShort Yen, ProShares Ultra Bloomberg Commodity, ProShares Ultra Bloomberg Crude Oil, ProShares Ultra Gold, ProShares Ultra Silver, ProShares Ultra Euro and ProShares Ultra Yen.

Groups of Funds are collectively referred to in several different ways. References to “Short Funds,” “UltraShort Funds,” or “Ultra Funds” refer to the different Funds based upon their investment objectives, but without distinguishing among the Funds’ benchmarks.

References to “Commodity Index Funds,” “Commodity Funds” and “Currency Funds” refer to the different Funds according to their general benchmark categories without distinguishing among the Funds’ investment objectives or Fund-specific benchmarks. References to “VIX Funds” refer to the different Funds based upon their investment objective and their general benchmark categories.

Each “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 two times the inverse (-2x) of the daily performance of its corresponding benchmark. Each “Ultra” Fund seeks daily investment results (before fees and expenses) that

 

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correspond to two times (2x) the daily performance of its corresponding benchmark. Each Matching VIX Fund and the Managed Futures Fund seeks investment results (before fees and expenses), both over a single day and over time, that match the performance of its corresponding benchmark. Daily performance is measured from the calculation of one NAV to the next.

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 a single day should not be expected to be a simple multiple (e.g., -1x, -2x or 2x) of the period return of the corresponding benchmark and will likely differ significantly.

The Matching VIX Funds and the Managed Futures Fund seek to achieve their stated investment objective both over a single day and over time.

Each of the Funds generally invests in Financial Instruments (i.e., instruments whose value is derived from the value of an underlying asset, rate or index, including futures contracts, swap agreements, forward contracts and other instruments) as a substitute for investing directly in commodities, currencies, or spot volatility products in order to gain exposure to its applicable underlying commodity futures index, commodity, currency exchange rate or equity volatility index. Financial Instruments also are used to produce economically “inverse,” “inverse leveraged” or “leveraged” investment results for the Geared Funds.

Share Splits and Reverse Share Splits

The table below includes Share splits and reverse Share splits for the Funds during the years ended December 31, 2013, 2014 and 2015. The ticker symbols for these Funds did not change, and each Fund continues to trade on the NYSE Arca.

 

Fund   

Execution Date

(Prior to Opening

of Trading)

   Type of Split   

Date Trading

Resumed at Post-

Split Price

ProShares VIX Short-Term Futures ETF

   June 10, 2013    1-for-5 reverse Share split    June 10, 2013

ProShares VIX Mid-Term Futures ETF

   November 6, 2014    1-for-4 reverse Share split    November 6, 2014

ProShares Short VIX Short-Term Futures ETF

   January 21, 2014    2-for-1 Share split    January 24, 2014

ProShares Ultra VIX Short-Term Futures ETF

   June 10, 2013    1-for-10 reverse Share
split
   June 10, 2013

ProShares Ultra VIX Short-Term Futures ETF

   January 21, 2014    1-for-4 reverse Share split    January 24, 2014

ProShares Ultra VIX Short-Term Futures ETF

   May 20, 2015    1-for-5 reverse Share split    May 20, 2015

ProShares UltraShort Bloomberg Natural Gas

   June 10, 2013    1-for-4 reverse Share split    June 10, 2013

ProShares UltraShort Silver

   November 13, 2015    2-for-1 Share split    November 13, 2015

ProShares Ultra Silver

   January 21, 2014    1-for-4 reverse Share split    January 24, 2014

ProShares Ultra Bloomberg Commodity

   May 20, 2015    1-for-4 reverse Share split    May 20, 2015

ProShares Ultra Bloomberg Crude Oil

   May 20, 2015    1-for-5 reverse Share split    May 20, 2015

ProShares Ultra Bloomberg Natural Gas

   May 20, 2015    1-for-4 reverse Share split    May 20, 2015

ProShares Ultra Yen

   May 20, 2015    1-for-4 reverse Share split    May 20, 2015

The reverse splits were applied retroactively for all periods presented, reducing the number of Shares outstanding for each of the Funds, 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 reverse split.

The splits were applied retroactively for all periods presented, increasing the number of Shares outstanding for each of the Funds, 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.

 

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NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Each Fund is an investment company, as defined by Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946 “Financial Services — Investment Companies.” As such, the Funds follow the investment company accounting and reporting guidance. 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”). Certain prior year amounts have been reclassified to conform to the current year presentation.

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 U.S. Securities and Exchange Commission (“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 December 31, 2015 and 2014, and represents non-segregated cash with the custodian and does not include short-term investments.

Final Net Asset Value for Fiscal Period

The cut-off times and the times of the calculation of the Funds’ final net asset value for creation and redemption of fund Shares for the year ended December 31, 2015 were as follows. All times are Eastern Standard Time:

 

     Create/Redeem
Cut-off*
     NAV Calculation
Time
     NAV
Calculation Date
 

UltraShort Silver, Ultra Silver

     6:30 a.m.         7:00 a.m.         December 31   

UltraShort Gold, Ultra Gold

     9:30 a.m.         10:00 a.m.         December 31   

UltraShort Bloomberg Crude Oil,

Ultra Bloomberg Crude Oil

     2:00 p.m.         2:30 p.m.         December 31   

UltraShort Bloomberg Natural Gas,

Ultra Bloomberg Natural Gas

     2:00 p.m.         2:30 p.m.         December 31   

UltraShort Bloomberg Commodity,

Ultra Bloomberg Commodity

     10:45 a.m.         2:30 p.m.         December 31   

Managed Futures Strategy

     10:45 a.m.         3:00 p.m.         December 31   

UltraShort Australian Dollar

     3:00 p.m.         4:00 p.m.         December 31   

Short Euro,

UltraShort Euro,

Ultra Euro

     3:00 p.m.         4:00 p.m.         December 31   

UltraShort Yen,

Ultra Yen

     3:00 p.m.         4:00 p.m.         December 31   

VIX Short-Term Futures ETF,

Ultra VIX Short-Term Futures ETF,

Short VIX Short-Term Futures ETF

     2:00 p.m.         4:15 p.m.         December 31   

VIX Mid-Term Futures ETF

     2:00 p.m.         4:15 p.m.         December 31   

 

* Although the 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 year ended December 31, 2015.

 

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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 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 of the Funds’ final creation/redemption NAV for the year ended December 31, 2015.

Investment Valuation

Short-term investments are valued at amortized cost which approximates fair value for daily NAV purposes. For financial reporting purposes, short-term investments are valued at their market price using information provided by a third-party pricing service or market quotations. In each of these situations, valuations are typically categorized as Level I in the fair value hierarchy.

Derivatives (e.g., 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 the 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 generally be 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 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 Funds’ policies are intended to result in a calculation of its respective Fund’s NAV that fairly reflects investment values as of the time of pricing, such 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 such Fund may differ from the value that would be realized if the investments were sold and the differences could be material to the financial statements.

Fair Value of Financial Instruments

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

 

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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.

 

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The following table summarizes the valuation of investments at December 31, 2015 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  

Managed Futures Strategy

   $ —         $ 57,179      $ —        $ —        $ —        $ 57,179   

VIX Short-Term Futures ETF

     96,073,659         (1,078,625     —          —          —          94,995,034   

VIX Mid-Term Futures ETF

     25,976,287         (344,360     —          —          —          25,631,927   

Short VIX Short-Term Futures ETF

     535,392,718         10,746,415        —          —          —          546,139,133   

Ultra VIX Short-Term Futures ETF

     438,357,849         11,894,466        —          —          —          450,252,315   

UltraShort Bloomberg Commodity

     7,518,119         —          —          —          171,324        7,689,443   

UltraShort Bloomberg Crude Oil

     79,692,642         2,464,513        —          —          6,412,656        88,569,811   

UltraShort Bloomberg Natural Gas

     8,115,004         (2,471,164     —          —          —          5,643,840   

UltraShort Gold

     72,979,905         5,220        1,808,942        —          —          74,794,067   

UltraShort Silver

     50,730,230         5,970        4,778,279        —          —          55,514,479   

Short Euro

     15,153,211         243,438        —          —          —          15,396,649   

UltraShort Australian Dollar

     18,408,894         (420,270     —          —          —          17,988,624   

UltraShort Euro

     546,166,776         —          —          (28,710,336     —          517,456,440   

UltraShort Yen

     259,997,001         —          —          (13,895,452     —          246,101,549   

Ultra Bloomberg Commodity

     7,084,065         —          —          —          (183,916     6,900,149   

Ultra Bloomberg Crude Oil

     797,650,543         (17,929,314     —          —          (72,176,589     707,544,640   

Ultra Bloomberg Natural Gas

     26,807,731         6,312,879        —          —          —          33,120,610   

Ultra Gold

     71,912,587         (5,200     (2,250,595 )     —          —          69,656,792   

Ultra Silver

     238,899,626         (9,030     (22,561,101 )     —          —          216,329,495   

Ultra Euro

     11,605,262         —          —          604,920        —          12,210,182   

Ultra Yen

     5,069,491         —          —          261,311        —          5,330,802   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Trust

   $ 3,313,591,600       $ 9,472,117      $ (18,224,475   $ (41,739,557 )   $ (65,776,525   $ 3,197,323,160   

 

* 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.

At December 31, 2015, there were no Level III portfolio investments for which significant unobservable inputs were used to determine fair value.

The Funds’ policy is to recognize transfers between valuation levels at the end of the reporting period.

At December 31, 2015, there were no significant transfers in or out of Level I and Level II fair value measurements.

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

 

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The following table summarizes the valuation of investments at December 31, 2014 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  

Managed Futures Strategy

   $ —         $ 104,327      $ —        $ —        $ —        $ 104,327   

VIX Short-Term Futures ETF

     82,088,299         6,264,620        —          —          —          88,352,919   

VIX Mid-Term Futures ETF

     24,105,906         260,665        —          —          —          24,366,571   

Short VIX Short-Term Futures ETF

     446,975,220         (16,352,149     —          —          —          430,623,071   

Ultra VIX Short-Term Futures ETF

     182,639,188         39,585,253        —          —          —          222,224,441   

UltraShort Bloomberg Commodity

     4,233,548         —          —          —          567,259        4,800,807   

UltraShort Bloomberg Crude Oil

     131,594,608         15,806,603        —          —          27,018,077        174,419,288   

UltraShort Bloomberg Natural Gas

     8,672,710         3,941,465        —          —          —          12,614,175   

UltraShort Gold

     84,040,107         (4,520     (2,282,778     —          —          81,752,809   

UltraShort Silver

     52,226,692         1,560        594,953        —          —          52,823,205   

Short Euro

     12,086,577         385,331        —          —          —          12,471,908   

UltraShort Australian Dollar

     20,267,679         743,481        —          —          —          21,011,160   

UltraShort Euro

     487,111,117         —          —          16,762,994        —          503,874,111   

UltraShort Yen

     532,957,746         —          —          (1,578,775     —          531,378,971   

Ultra Bloomberg Commodity

     2,754,900         —          —          —          (331,338     2,423,562   

Ultra Bloomberg Crude Oil

     467,200,736         (46,474,787     —          —          (76,181,097     344,544,852   

Ultra Bloomberg Natural Gas

     53,410,227         (34,889,283     —          —          —          18,520,944   

Ultra Gold

     101,927,857         4,580        2,051,154        —          —          103,983,591   

Ultra Silver

     305,474,211         (1,560     (12,395,120 )     —          —          293,077,531   

Ultra Euro

     2,415,698         —          —          (103,371     —          2,312,327   

Ultra Yen

     1,287,869         —          —          (15,245     —          1,272,624   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Trust**

   $ 3,003,470,895       $ (30,624,414   $ (12,031,791   $ 15,065,603      $ (48,927,099   $ 2,926,953,194   

 

* 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.
** Amount excludes the activity of ProShares Ultra Australian Dollar which liquidated in June 2015.

At December 31, 2014, there were no Level III portfolio investments for which significant unobservable inputs were used to determine fair value.

The Funds’ policy is to recognize transfers between valuation levels at the end of the reporting period.

At December 31, 2014, there were no significant transfers in or out of Level I and Level II fair value measurements.

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

 

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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 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 (“CFTC”) 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 (e.g., the first half is recognized when the contract is purchased (opened) and the second half is recognized when the transaction is closed). Through July 30, 2014, the Sponsor paid brokerage commissions on VIX futures contracts for the Matching VIX Funds. On July 31, 2014, the Sponsor began paying, and is currently paying, brokerage commissions on VIX futures contracts for the Matching VIX Funds that exceed variable create/redeem fees collected by more than 0.02% of the Matching VIX Fund’s average net assets annually.

Federal Income Tax

Each Fund is registered as a series of a Delaware statutory trust and is 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 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 (i.e., the last four tax year ends and the interim tax period since then, as applicable) 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, including derivative positions, which the Sponsor believes in combination, should produce returns consistent with a Fund’s objective.

All open derivative positions at period end are reflected on each respective Fund’s Schedule of Investments. Certain Funds utilized a varying level of derivative instruments in conjunction with investment securities in seeking to meet their investment objective during the period. While the volume of open positions may vary on a daily basis as each Fund transacts derivatives contracts in order to achieve the appropriate exposure to meet its investment objective, the volume of these open positions relative to the net assets of each respective Fund at the date of this report is generally representative of open positions throughout the reporting period.

 

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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 affected. The initial margin is segregated as cash and/or securities 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. Many futures exchanges and boards of trade limit the amount of fluctuation permitted in futures contract prices during a single trading day. Once the daily limit has been reached in a particular contract, no trades may be made that day at a price beyond that limit or trading may be suspended for specified times during the trading day. Futures contracts prices could move to the limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of futures positions and potentially subjecting a Fund to substantial losses. If trading is not possible, or if a Fund determines not to close a futures position in anticipation of adverse price movements, the Fund will be required to make daily cash payments of variation margin. The risk the Fund will be unable to close out a futures position will be minimized by entering into such transactions on a national exchange with an active and liquid secondary market.

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) an underlying index, currency or commodity, or to create an economic hedge against a position. Swap agreements are two-party contracts that have traditionally been entered into primarily with institutional investors in over-the-counter (“OTC”) markets for a specified period, ranging from a day to more than one year. However, the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) provides for significant reforms of the OTC derivative markets, including a requirement to execute certain swap transactions on a CFTC-regulated market and/or to clear such transactions through a CFTC-regulated central clearing organization. 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. Transaction or commission costs are reflected in the benchmark level at which the transaction is entered into. 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.

 

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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 a Matching VIX Fund or an Ultra Fund, the Matching VIX Fund or Ultra Fund would be entitled to settlement payments in the event the level of the benchmark increases and would be required to make payments to the swap counterparties in the event the level of 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 a Short Fund or an UltraShort Fund, the Short Fund or UltraShort Fund would be required to make payments to the swap counterparties in the event the level of the benchmark increases and would be entitled to settlement payments in the event the level of the benchmark decreases, adjusted for any transaction costs or trading spreads on the notional amount the Funds may pay.

The net amount of the excess, if any, of each Fund’s obligations over its entitlements with respect to each uncleared swap agreement is accrued on a daily basis and an amount of cash and/or securities having an aggregate value at least equal to such accrued excess is maintained for the benefit of the counterparty in a segregated account by the Funds’ Custodian. The net amount of the excess, if any, of each Fund’s entitlements over its obligations with respect to each uncleared swap agreement is accrued on a daily basis and an amount of cash and/or securities having an aggregate value at least equal to such accrued excess is maintained for the benefit of the Fund in a segregated account by the Fund’s 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 asset.

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 and exposure to loss in excess of the unrealized gain/loss reflected. The notional amounts reflect the extent of the total investment exposure each Fund has under the swap agreement, which may exceed the NAV of each Fund. Additional risks associated with the use of swap agreements are imperfect correlations 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 agreement counterparty. A Fund will typically 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 December 31, 2015 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. As noted above, collateral posted in connection with uncleared derivative transactions 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

 

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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 in connection with uncleared swaps 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 December 31, 2015, the collateral posted by counterparties consisted of cash and/or U.S. Treasury securities.

The counterparty/credit risk for cleared derivative transactions is generally lower than for uncleared OTC derivatives since generally a clearing organization becomes substituted for each counterparty to a cleared derivative contract and, in effect, guarantees the parties’ performance under the contract as each party to a trade looks only to the clearing organization for performance of financial obligations. In addition, cleared derivative transactions benefit from daily marking-to-market and settlement, and segregation and minimum capital requirements applicable to intermediaries.

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 OTC markets and all details of the contract are negotiated between the counterparties to the agreement. Accordingly, the forward contracts are valued by reference to the contracts traded in the OTC markets.

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

Forward contracts have traditionally not been cleared or guaranteed by a third party. As a result of the Dodd-Frank Act, the CFTC now regulates non-deliverable forwards (including deliverable forwards where the parties do not take delivery). Certain non-deliverable forward contracts, such as non-deliverable foreign exchange forwards, may be subject to regulation as swap agreements, including mandatory clearing. Changes in the forward markets may entail increased costs and result in burdensome reporting requirements.

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

 

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The Funds remain subject to credit risk with respect to the amount they expect to receive from counterparties. 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 Fund will be exposed to counterparty risk as described above, including the possible delays in recovering amounts as a result of bankruptcy proceedings. As of December 31, 2015, the collateral posted by counterparties consisted of cash and/or 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 their counterparties to post margin.

A Fund will typically 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.

The counterparty/credit risk for cleared derivative transactions is generally lower than for uncleared OTC derivatives since generally a clearing organization becomes substituted for each counterparty to a cleared derivative contract and, in effect, guarantees the parties’ performance under the contract as each party to a trade looks only to the clearing organization for performance of financial obligations. In addition, cleared derivative transactions benefit from daily marking-to-market and settlement, and segregation and minimum capital requirements applicable to intermediaries.

The following tables indicate the location of derivative related items on the Statement of Financial Condition as well as the effect of derivative instruments on the Statement of Operations during the reporting period.

 

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Fair Value of Derivative Instruments

as of December 31, 2015

 

    

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
 

Managed Futures Contracts

  

Receivables on open futures contracts

  

ProShares Managed Futures Strategy

   $ 100,136  

Payable on open futures contracts

  

ProShares Managed Futures Strategy

   $ 42,957

VIX Futures Contracts

  

Receivables on open futures contracts

  

ProShares VIX Mid-Term Futures ETF

     10,005  

Payable on open futures contracts

  

ProShares VIX Short-Term Futures ETF

     1,078,625
     

ProShares Short VIX Short-Term ETF

     10,805,245     

ProShares VIX Mid-Term Futures ETF

     354,365
     

ProShares Ultra VIX Short-Term Futures ETF

     11,894,466     

ProShares Short VIX Short-Term ETF

     58,830

Commodities Contracts

  

Receivables on open futures contracts, unrealized appreciation on swap and/or forward agreements

  

ProShares UltraShort Bloomberg Commodity

     224,491     

Payable on open futures contracts, unrealized depreciation on swap and/or forward agreements

  

ProShares UltraShort Bloomberg Commodity

     53,167   
     

ProShares UltraShort Bloomberg Crude Oil

     8,877,169     

ProShares UltraShort Bloomberg Natural Gas

     2,471,164 *
     

ProShares Ultra Bloomberg Commodity

     32,372        

ProShares Ultra Bloomberg Commodity

     216,288   
     

ProShares Ultra Bloomberg Natural Gas

     6,312,879     

ProShares Ultra Bloomberg Crude Oil

     90,105,903
     

ProShares UltraShort Gold

     1,814,162     

ProShares Ultra Gold

     2,255,795
     

ProShares UltraShort Silver

     4,784,249     

ProShares Ultra Silver

     22,570,131

Foreign Exchange Contracts

  

Unrealized appreciation on foreign currency forward contracts and receivables on open futures contracts

  

ProShares Short Euro

     243,438  

Unrealized depreciation on foreign currency forward contracts and payable on open futures contracts

  

ProShares UltraShort Australian Dollar

     420,270
     

ProShares UltraShort Yen

     933,727        

ProShares UltraShort Euro

     28,710,336   
     

ProShares Ultra Euro

     604,920        

ProShares UltraShort Yen

     14,829,179   
     

ProShares Ultra Yen

     267,014        

ProShares Ultra Yen

     5,703   
        

 

 

         

 

 

 
     

Total Trust

   $ 46,904,273     

Total Trust

   $ 163,172,713

 

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

 

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Fair Value of Derivative Instruments

as of December 31, 2014

 

    

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
 

Managed Futures Contracts

  

Receivables on open futures contracts

  

ProShares Managed Futures Strategy

   $ 122,831  

Payable on open futures contracts

  

ProShares Managed Futures Strategy

   $ 18,504

VIX Futures Contracts

  

Receivables on open futures contracts

  

ProShares VIX Short-Term Futures ETF

     6,264,620  

Payable on open futures contracts

  

ProShares VIX Mid-Term Futures ETF

     222,845
     

ProShares VIX Mid-Term Futures ETF

     483,510     

ProShares Short VIX Short-Term ETF

     16,352,149
     

ProShares Ultra VIX Short-Term Futures ETF

     39,585,253        

Commodities Contracts

  

Receivables on open futures contracts, unrealized appreciation on swap and/or forward agreements

  

ProShares UltraShort Bloomberg Commodity

     567,259     

Payable on open futures contracts, unrealized depreciation on swap and/or forward agreements

  

ProShares UltraShort Gold

     2,287,298
     

ProShares UltraShort Bloomberg Crude Oil

     42,824,680     

ProShares UltraShort Silver

     204,570   
     

ProShares UltraShort Bloomberg Natural Gas

     3,941,465     

ProShares Ultra Bloomberg Commodity

     331,338   
     

ProShares UltraShort Silver

     801,083     

ProShares Ultra Bloomberg Crude Oil

     122,655,884
     

ProShares Ultra Gold

     2,055,734     

ProShares Ultra Bloomberg Natural Gas

     34,889,283
             

ProShares Ultra Silver

     12,396,680

Foreign Exchange Contracts

  

Unrealized appreciation on foreign currency forward contracts and receivables on open futures contracts

  

ProShares Short Euro

     385,331  

Unrealized depreciation on foreign currency forward contracts and payable on open futures contracts

  

ProShares UltraShort Euro

     2,256,771   
     

ProShares UltraShort Australian Dollar

     743,481     

ProShares UltraShort Yen

     2,149,924   
     

ProShares UltraShort Euro

     19,019,765        

ProShares Ultra Euro

     106,292   
     

ProShares UltraShort Yen

     571,149        

ProShares Ultra Yen

     15,649   
     

ProShares Ultra Euro

     2,921           
     

ProShares Ultra Yen

     404           
        

 

 

         

 

 

 
     

Total Trust**

   $ 117,369,486     

Total Trust

   $ 193,887,187

 

* 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.
** Amount excludes the activity of ProShares Ultra Australian Dollar which liquidated in June 2015.

 

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The Effect of Derivative Instruments on the Statements of Operations

For the year ended December 31, 2015

 

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
 

Managed Futures Contracts

  

Net realized gain (loss) on futures contracts / changes in unrealized appreciation/ depreciation on futures contracts

  

ProShares Managed Futures Strategy

   $ (278,197   $ (47,148

VIX Futures Contracts

  

Net realized gain (loss) on futures contracts / changes in unrealized appreciation/ depreciation on futures contracts

  

ProShares VIX Short-Term Futures ETF

     (19,408,543     (7,343,245
     

ProShares VIX Mid-Term Futures ETF

     (3,335,936     (605,025
     

ProShares Short VIX Short-Term Futures ETF

     69,793,028        27,098,564   
     

ProShares Ultra VIX Short-Term Futures ETF

     (392,174,228     (27,690,787

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 UltraShort Bloomberg Commodity

     3,701,239        (395,935
     

ProShares UltraShort Bloomberg Crude Oil

     91,670,324        (33,947,511
     

ProShares UltraShort Bloomberg Natural Gas

     15,212,804        (6,412,629
     

ProShares UltraShort Gold

     12,707,635        4,101,460   
     

ProShares UltraShort Silver

     10,759,545        4,187,736   
     

ProShares Ultra Bloomberg Commodity

     (2,951,820     147,422   
     

ProShares Ultra Bloomberg Crude Oil

     (896,177,096     32,549,981   
     

ProShares Ultra Bloomberg Natural Gas

     (100,776,817     41,202,162   
     

ProShares Ultra Gold

     (18,605,815     (4,311,529
     

ProShares Ultra Silver

     (78,309,309     (10,173,451

Foreign Exchange Contracts

  

Net realized gain (loss) on futures contracts or forward agreements/changes in unrealized appreciation/ depreciation on futures contracts or forward agreements

  

ProShares Short Euro

     1,559,425        (141,893
     

ProShares UltraShort Australian Dollar

     4,330,463        (1,163,751
     

ProShares UltraShort Euro

     131,651,572        (45,473,330
     

ProShares UltraShort Yen

     8,809,464        (12,316,677
     

ProShares Ultra Euro

     (1,982,208     708,291   
     

ProShares Ultra Yen

     (472,913     276,556   
        

 

 

   

 

 

 
      Total Trust    $ (1,164,277,383   $ (39,750,739

 

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The Effect of Derivative Instruments on the Statements of Operations

For the year ended December 31, 2014

 

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
 

Managed Futures Contracts

  

Net realized gain (loss) on futures contracts / changes in unrealized appreciation/ depreciation on futures contracts

  

ProShares Managed Futures Strategy

   $ 109,006      $ 104,327   

VIX Futures Contracts

  

Net realized gain (loss) on futures contracts / changes in unrealized appreciation/ depreciation on futures contracts

  

ProShares VIX Short-Term Futures ETF

     (694,347     22,917,306   
     

ProShares VIX Mid-Term Futures ETF

     (14,378,810     5,157,354   
     

ProShares Short VIX Short-Term Futures ETF

     76,925,998        (24,469,104
     

ProShares Ultra VIX Short-Term Futures ETF

     (139,412,525     63,595,164   

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 UltraShort Bloomberg Commodity

     906,309        594,924   
     

ProShares UltraShort Bloomberg Crude Oil

     99,327,097        46,390,353   
     

ProShares UltraShort Bloomberg Natural Gas

     8,791,719        2,899,165   
     

ProShares UltraShort Gold

     (5,316,482     (7,934,871
     

ProShares UltraShort Silver

     15,114,883        2,810,170   
     

ProShares Ultra Bloomberg Commodity

     (1,065,622     (346,416
     

ProShares Ultra Bloomberg Crude Oil

     (243,325,957     (125,240,438
     

ProShares Ultra Bloomberg Natural Gas

     (6,464,796     (31,232,744
     

ProShares Ultra Gold

     (9,674,333     8,883,268   
     

ProShares Ultra Silver

     (155,551,420     (9,889,600

Foreign Exchange Contracts

  

Net realized gain (loss) on futures contracts or forward agreements/changes in unrealized appreciation/ depreciation on futures contracts or forward agreements

  

ProShares Short Euro

     1,593,048        418,562   
     

ProShares UltraShort Australian Dollar

     2,296,216        (174,124
     

ProShares UltraShort Euro

     83,678,955        30,511,501   
     

ProShares UltraShort Yen

     127,846,225        (30,965,459
     

ProShares Ultra Euro

     (420,533     (204,333
     

ProShares Ultra Yen

     (540,398     144,064   
        

 

 

   

 

 

 
     

Total Trust*

   $ (160,255,767   $ (46,030,931

 

* Amount excludes the activity of ProShares Ultra Australian Dollar which liquidated in June 2015.

 

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Table of Contents

The Effect of Derivative Instruments on the Statements of Operations

For the year ended December 31, 2013

 

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
 

VIX Futures Contracts

  

Net realized gain (loss) on futures contracts and/or swap agreements /changes in unrealized appreciation/ depreciation on futures contracts and/or swap agreements

  

ProShares VIX Short-Term Futures ETF

   $ (144,618,136   $ (16,431,267
     

ProShares VIX Mid-Term Futures ETF

     (28,219,863     (3,426,279
     

ProShares Short VIX Short-Term Futures ETF

     87,175,105        9,504,130   
     

ProShares Ultra VIX Short-Term Futures ETF

     (405,816,676     (26,368,324

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 UltraShort Bloomberg Commodity

     760,002        (176,167
     

ProShares UltraShort Bloomberg Crude Oil

     (12,304,999     6,071,108   
     

ProShares UltraShort Bloomberg Natural Gas

     (2,585,514     633,165   
     

ProShares UltraShort Gold

     61,124,409        1,902,477   
     

ProShares UltraShort Silver

     113,456,404        (21,561,362
     

ProShares Ultra Bloomberg Commodity

     (1,254,251     321,346   
     

ProShares Ultra Bloomberg Crude Oil

     120,745,948        (52,709,476
     

ProShares Ultra Bloomberg Natural Gas

     41,418,165        160,411   
     

ProShares Ultra Gold

     (165,632,786     8,839,764   
     

ProShares Ultra Silver

     (701,532,729     143,273,646   

Foreign Exchange 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 Short Euro

     (381,987     21,825   
     

ProShares UltraShort Australian Dollar

     2,720,079        832,015   
     

ProShares UltraShort Euro

     (48,063,036     (600,935
     

ProShares UltraShort Yen

     164,019,598        (8,727,491
     

ProShares Ultra Euro

     210,150        13,803   
     

ProShares Ultra Yen

     (1,879,169     334,987   
        

 

 

   

 

 

 
     

Total Trust*

   $ (920,659,286   $ 41,907,376   

 

* Amount excludes the activity of ProShares Ultra Australian Dollar which liquidated in June 2015.

 

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Table of Contents

Offsetting Assets and Liabilities

Each Fund is subject to master netting agreements or similar arrangements that allow for amounts owed between each Fund and the counterparty to be netted upon an early termination. The party that has the larger payable pays the excess of the larger amount over the smaller amount to the other party. The master netting agreements or similar arrangements do not apply to amounts owed to/from different counterparties. As described above, the Funds utilize derivative instruments to achieve their investment objective during the year. The amounts shown in the Statements of Financial Condition do not take into consideration the effects of legally enforceable master netting agreements or similar arrangements.

For financial reporting purposes, the Funds do not offset derivative assets and derivative liabilities that are subject to netting arrangements in the Statements of Financial Condition. The following table presents each Fund’s derivatives by investment type and by counterparty net of amounts available for offset under a master netting agreement and the related collateral received or pledged by the Funds as of December 31, 2015 and 2014:

 

Fair Values of Derivative Instruments as of December 31, 2015

 
     Assets      Liabilities  
     Gross
Amounts of
Recognized
Assets
presented in
the Statements
of Financial
Condition
     Gross
Amounts
Offset in the
Statements 
of Financial
Condition
     Net Amounts of
Assets
presented in
the Statements
of Financial
Condition
     Gross
Amounts of
Recognized
Liabilities
presented in
the Statements
of Financial
Condition
     Gross
Amounts
Offset in the
Statements
of Financial
Condition
     Net Amounts of 
Liabilities
presented in
the Statements
of Financial
Condition
 

ProShares UltraShort Bloomberg Commodity Swap agreements

   $ 224,491      $ —        $ 224,491      $ 53,167      $ —        $ 53,167  

ProShares UltraShort Bloomberg Crude Oil Swap agreements

     6,412,656        —          6,412,656        —          —          —    

ProShares UltraShort Gold Forward agreements

     1,808,942        —          1,808,942        —          —          —    

ProShares UltraShort Silver Forward agreements

     4,778,279        —          4,778,279        —          —          —    

ProShares UltraShort Euro Foreign currency forward contracts

     —          —          —          28,710,336        —          28,710,336  

ProShares UltraShort Yen Foreign currency forward contracts

     933,727        —          933,727        14,829,179        —          14,829,179  

ProShares Ultra Bloomberg Commodity Swap agreements

     32,372        —          32,372        216,288        —          216,288  

ProShares Ultra Bloomberg Crude Oil Swap agreements

     —          —          —          72,176,589        —          72,176,589  

ProShares Ultra Gold Forward agreements

     —          —          —          2,250,595        —          2,250,595  

ProShares Ultra Silver Forward agreements

     —          —          —          22,561,101        —          22,561,101  

ProShares Ultra Euro Foreign currency forward contracts

     604,920        —          604,920        —          —          —    

ProShares Ultra Yen Foreign currency forward contracts

     267,014        —          267,014        5,703        —          5,703  

Asset (Liability) amounts shown in the table below represent amounts owed to (by) the Funds for the derivative-related investments at December 31, 2015. These amounts may be collateralized by cash or financial instruments, segregated for the benefit of the Funds or the counterparties, depending on whether the related contracts are in an

 

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appreciated or depreciated position at period end. Amounts shown in the column labeled “Net Amount” represent the uncollateralized portions of these amounts at period end. These amounts may be un-collateralized due to timing differences related to market movements or due to minimum thresholds for collateral movement, as further described above under the caption “Accounting for Derivative Instruments”.

 

Gross Amounts Not Offset in the Statement of Financial Condition as of December 31, 2015

 
     Amounts of
Recognized
Assets /
(Liabilities)
presented in the
Statements of
Financial
Condition
    Financial
Instruments for
the Benefit of
(the Funds) /
the
Counterparties
    Cash Collateral
for the Benefit of
(the Funds) / the
Counterparties
    Net Amount  

ProShares UltraShort Bloomberg Commodity

        

Citibank N.A.

   $ (53,167   $ 53,167      $ —       $ —    

Deutsche Bank AG

     84,161        —         (50,000     34,161   

Goldman Sachs International

     36,878        (28,466     —         8,412  

UBS AG

     103,452        (103,452     —         —    

ProShares UltraShort Bloomberg Crude Oil

        

Citibank N.A.

     1,098,278        —         —         1,098,278   

Deutsche Bank AG

     1,722,894        —         (1,722,894     —    

Goldman Sachs International

     1,595,552        (1,595,552     —         —    

Societe Generale S.A.

     521,142        (521,142     —         —    

UBS AG

     1,474,790        (1,474,790     —         —    

ProShares UltraShort Gold

        

Citibank N.A.

     3,915        —         —         3,915   

Deutsche Bank AG

     1,046,664        —         (1,046,664 )     —    

Goldman Sachs International

     158,827        —         —         158,827   

Societe Generale S.A.

     212,680        (212,680     —         —    

UBS AG

     386,856        (386,856     —         —    

ProShares UltraShort Silver

        

Deutsche Bank AG

     2,500,263        —         (2,500,000     263   

Goldman Sachs International

     1,044,986        (858,460     —         186,526   

Societe Generale S.A.

     438,975        (438,975     —         —    

UBS AG

     794,055        (582,692     —         211,363   

ProShares UltraShort Euro

        

Goldman Sachs International

     (14,992,024     14,992,024       —         —    

UBS AG

     (13,718,312     13,718,312       —         —    

ProShares UltraShort Yen

        

Goldman Sachs International

     (6,470,405     6,470,405        —         —    

UBS AG

     (7,425,047     7,425,047        —         —    

ProShares Ultra Bloomberg Commodity

        

Citibank N.A.

     32,372        —         —         32,372   

Deutsche Bank AG

     (82,976     82,976       —         —    

Goldman Sachs International

     (60,830     60,830       —         —    

UBS AG

     (72,482     72,482       —         —    

ProShares Ultra Bloomberg Crude Oil

        

Citibank N.A.

     (2,509,989     2,509,989        —         —    

Deutsche Bank AG

     (20,221,872     20,221,872        —         —    

Goldman Sachs International

     (20,806,119     20,806,119        —         —    

Societe Generale S.A.

     (6,357,459     6,357,459        —         —    

UBS AG

     (22,281,150     22,281,150        —         —    

ProShares Ultra Gold

        

Citibank N.A.

     (4,614     —         —         (4,614

Deutsche Bank AG

     (1,049,383     1,049,383        —         —    

Goldman Sachs International

     (520,730     520,730        —         —    

Societe Generale S.A.

     (244,992     244,992        —         —    

UBS AG

     (430,876     430,876        —         —    

ProShares Ultra Silver

        

Deutsche Bank AG

     (9,355,945     9,355,945        —         —    

Goldman Sachs International

     (5,106,853     5,106,853        —         —    

Societe Generale S.A.

     (2,704,459     2,704,459        —         —    

UBS AG

     (5,393,844     5,393,844        —         —    

ProShares Ultra Euro

        

Goldman Sachs International

     315,354        (315,354     —         —    

UBS AG

     289,566        (289,566     —         —    

ProShares Ultra Yen

        

Goldman Sachs International

     169,787        —         —         169,787   

UBS AG

     91,524        —         —         91,524   

 

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Table of Contents

 

Fair Values of Derivative Instruments as of December 31, 2014

 
     Assets      Liabilities  
     Gross
Amounts of
Recognized
Assets
presented in
the Statements
of Financial
Condition
     Gross
Amounts
Offset in the
Statements
of Financial
Condition
     Net Amounts of
Assets
presented in
the Statements
of Financial
Condition
     Gross
Amounts of
Recognized
Liabilities
presented in
the Statements
of Financial
Condition
     Gross
Amounts
Offset in the
Statements
of Financial
Condition
     Net Amounts of
Liabilities
presented in
the Statements
of Financial
Condition
 

ProShares UltraShort Bloomberg Commodity

                 

Swap agreements

   $ 567,259       $ —         $ 567,259       $ —         $ —        $ —    

ProShares UltraShort Bloomberg Crude Oil

                 

Swap agreements

     27,018,077         —          27,018,077         —           —           —     

ProShares UltraShort Gold

                 

Forward agreements

     —           —           —           2,282,778         —           2,282,778   

ProShares UltraShort Silver

                 

Forward agreements

     799,523         —           799,523         204,570         —           204,570   

ProShares UltraShort Euro

                 

Foreign currency forward contracts

     19,019,765         —           19,019,765         2,256,771         —           2,256,771   

ProShares UltraShort Yen

                 

Foreign currency forward contracts

     571,149         —           571,149         2,149,924         —           2,149,924   

ProShares Ultra Bloomberg Commodity

                 

Swap agreements

     —           —           —           331,338         —           331,338   

ProShares Ultra Bloomberg Crude Oil

                 

Swap agreements

     —           —           —           76,181,097         —           76,181,097   

ProShares Ultra Gold

                 

Forward agreements

     2,051,154         —           2,051,154         —           —           —     

ProShares Ultra Silver

                 

Forward agreements

     —           —           —           12,395,120         —           12,395,120   

ProShares Ultra Euro

                 

Foreign currency forward contracts

     2,921         —           2,921         106,292         —           106,292   

ProShares Ultra Yen

                 

Foreign currency forward contracts

     404         —           404         15,649         —           15,649   

Asset (Liability) amounts shown in the table below represent amounts owed to (by) the Funds for the derivative-related investments at December 31, 2014. These amounts may be collateralized by cash or financial instruments, segregated for the benefit of the Funds or the counterparties, depending on whether the related contracts are in an appreciated or depreciated position at period end. Amounts shown in the column labeled “Net Amount” represent the uncollateralized portions of these amounts at period end. These amounts may be un-collateralized due to timing differences related to market movements or due to minimum thresholds for collateral movement, as further described above under the caption “Accounting for Derivative Instruments”.

 

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Gross Amounts Not Offset in the Statements of Financial Condition as of December 31, 2014

 
     Amounts of
Recognized
Assets /
(Liabilities)
presented in the
Statements of
Financial
Condition
    Financial
Instruments for
the Benefit of
(the Funds) /
the
Counterparties
    Cash Collateral
for the Benefit of
(the Funds) / the
Counterparties
    Net Amount  

ProShares UltraShort Bloomberg Commodity

        

Deutsche Bank AG

   $ 243,474      $ —        $ —        $ 243,474   

Goldman Sachs International

     240,271        —          —          240,271   

UBS AG

     83,514        —          —          83,514   

ProShares UltraShort Bloomberg Crude Oil

        

Deutsche Bank AG

     7,669,493        —          (6,800,000     869,493   

Goldman Sachs International

     8,362,336        (7,598,657     —          763,679   

Societe Generale S.A.

     2,132,657        (2,132,657     —          —     

UBS AG

     8,853,591        (8,281,350     —          572,241   

ProShares UltraShort Gold

        

Deutsche Bank AG

     (1,422,997     1,422,997        —          —     

Goldman Sachs International

     (354,660 )     354,660        —          —     

Societe Generale S.A.

     (182,225     182,225        —          —     

UBS AG

     (322,896     322,896        —          —     

ProShares UltraShort Silver

        

Deutsche Bank AG

     462,619        —          (462,619     —     

Goldman Sachs International

     138,563        (138,563 )     —          —     

Societe Generale S.A.

     198,341        (198,341     —          —     

UBS AG

     (204,570     204,570        —          —     

ProShares UltraShort Euro

        

Goldman Sachs International

     8,193,303        (6,008,925     —          2,184,378   

UBS AG

     8,569,691        (6,592,366 )     (11,518 )     1,965,807   

ProShares UltraShort Yen

        

Goldman Sachs International

     (1,466,239 )     1,466,239        —          —     

UBS AG

     (112,536 )     112,536        —          —     

ProShares Ultra Bloomberg Commodity

        

Deutsche Bank AG

     (143,751 )     143,751        —          —     

Goldman Sachs International

     (138,532 )     138,532        —          —     

UBS AG

     (49,055 )     49,055        —          —     

ProShares Ultra Bloomberg Crude Oil

        

Deutsche Bank AG

     (24,223,667 )     24,223,667        —          —     

Goldman Sachs International

     (24,285,701 )     24,285,701        —          —     

Societe Generale S.A.

     (5,528,160 )     5,528,160        —          —     

UBS AG

     (22,143,569 )     22,143,569        —          —     

ProShares Ultra Gold

        

Deutsche Bank AG

     1,231,694        —          (1,231,694 )     —     

Goldman Sachs International

     222,126        —          —          222,126   

Societe Generale S.A.

     190,591        (190,591     —          —     

UBS AG

     406,743        (406,743     —          —     

ProShares Ultra Silver

        

Deutsche Bank AG

     (6,220,069 )     6,220,069        —          —     

Goldman Sachs International

     (2,124,796 )     2,124,796        —          —     

Societe Generale S.A.

     (1,384,207 )     1,384,207        —          —     

UBS AG

     (2,666,048 )     2,666,048        —          —     

ProShares Ultra Euro

        

Goldman Sachs International

     (38,856 )     38,856        —          —     

UBS AG

     (64,515 )     64,515        —          —     

ProShares Ultra Yen

        

Goldman Sachs International

     (12,255 )     12,255        —          —     

UBS AG

     (2,990 )     2,990        —          —     

 

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Table of Contents

NOTE 4 – AGREEMENTS

Management Fee

Each Leveraged Fund, the Short Euro Fund and each Geared VIX Fund pays 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. 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 of such Fund. The Managed Futures Fund will pay the Sponsor a Management Fee, monthly in arrears, in an amount equal to 0.75% per annum of its average daily net assets. The Sponsor did not and will not charge the Management Fee in the first year of operation of each Fund in an amount equal to the offering costs. The Sponsor reimbursed each Fund, to the extent that its offering costs exceed the Management Fee, for the first year of operations.

The Management Fee is paid in consideration of the Sponsor’s services as commodity pool operator, and for managing the business and affairs of the Funds. From the Management Fee, the Sponsor pays all of the routine operational, administrative and other ordinary expenses of each Fund, generally as determined by the Sponsor, including but not limited to the Administrator, Custodian, Distributor, ProFunds Distributors, Inc. (“PDI”), an affiliated broker-dealer of the Sponsor, Transfer Agent, accounting and auditing fees and expenses, any index licensors for the Funds, 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 and Financial Industry Regulatory Authority (“FINRA”) filing fees, individual Schedule 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.

Non-Recurring Fees and Expenses

Each Fund pays all its 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 which are unexpected or unusual in nature, 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.

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, and 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 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 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. The Sponsor pays SEI for performing its duties on behalf of the Funds.

 

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NOTE 5 – OFFERING COSTS

Offering costs will be amortized by the Funds over a twelve month period on a straight-line basis beginning once the fund commences operations. The Sponsor did not and will not charge its Management Fee in the first year of operations of the Managed Futures Fund in an amount equal to the offering costs. The Sponsor will reimburse the Managed Futures Fund to the extent its offering costs exceed 0.75% of its average daily NAV for the first year of operations. Normal and expected expenses incurred in connection with the continuous offering of Shares of the Managed Futures Fund after the commencement of its trading operations will be paid by the Sponsor.

NOTE 6 – CREATION AND REDEMPTION OF CREATION UNITS

Each Fund issues and redeems shares from time to time, but only in one or more Creation Units. A Creation Unit is a block of 50,000 Shares of a Geared Fund and the 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.

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 and to offset the costs of increasing or decreasing derivative positions. Authorized Participants also may pay a variable transaction fee to the Fund of up to 0.10% (and a variable transaction fee to the Matching VIX Funds of 0.05%) 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.

 

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Transaction fees for the years ended December 31, 2015, 2014 and 2013, which are included in the Addition and/or Redemption of Shares on the Statements of Changes in Shareholders’ Equity, were as follows:

 

Fund

   Year Ended
December 31,
2015
     Year Ended
December 31,
2014
     Year Ended
December 31,
2013
 

Managed Futures Strategy*

   $ —         $ —         $ N/A   

VIX Short-Term Futures ETF

     105,024         72,020         —     

VIX Mid-Term Futures ETF

     8,521         8,927         —     

Short VIX Short-Term Futures ETF

     342,734         218,121         130,779   

Ultra VIX Short-Term Futures ETF

     1,391,292         734,298         814,195   

UltraShort Bloomberg Commodity

     —           —           —     

UltraShort Bloomberg Crude Oil

     382,054         257,458         298,261   

UltraShort Bloomberg Natural Gas

     8,853         26,053         7,434   

UltraShort Gold

     11,024         32,473         105,508   

UltraShort Silver

     39,354         48,832         128,850   

Short Euro

     —           —           —     

UltraShort Australian Dollar

     —           —           —     

UltraShort Euro

     —           —           —     

UltraShort Yen

     —           —           —     

Ultra Bloomberg Commodity

     2,194         249         487   

Ultra Bloomberg Crude Oil

     847,422         299,493         236,956   

Ultra Bloomberg Natural Gas

     13,939         30,073         42,172   

Ultra Gold

     4,218         12,088         23,035   

Ultra Silver

     38,848         65,208         107,285   

Ultra Euro

     —           —           —     

Ultra Yen

     —           —           —     
        
  

 

 

    

 

 

    

 

 

 

Total Trust

   $ 3,195,477       $ 1,805,293       $ 1,894,962   

 

* Fund commenced investment operations on October 1, 2014.

 

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NOTE 7 – FINANCIAL HIGHLIGHTS

Selected data for a Share outstanding throughout the year ended December 31, 2015:

For the Year Ended December 31, 2015

 

Per Share Operating Performance

   Managed
Futures
Strategy
    VIX Short-
Term
Futures
ETF
    VIX Mid-
Term
Futures
ETF
    Short VIX
Short-Term
Futures
ETF
    Ultra VIX
Short-Term
Futures
ETF*
    UltraShort
Bloomberg
Commodity
    UltraShort
Bloomberg
Crude Oil
 

Net asset value, at December 31, 2014

   $ 21.1354      $ 20.9321      $ 63.6020      $ 61.4004      $ 125.4591      $ 87.7495      $ 77.9790   

Net investment income (loss)

     (0.1750     (0.1324     (0.5053     (0.8162     (0.7224     (0.9438     (0.7848

Net realized and unrealized gain (loss)#

     (0.4266     (7.5575     (9.1341     (9.7692     (96.6526     55.1020        56.0077   

Change in net asset value from operations

     (0.6016     (7.6899     (9.6394     (10.5854     (97.3750     54.1582        55.2229   

Net asset value, at December 31, 2015

   $ 20.5338      $ 13.2422      $ 53.9626      $ 50.8150      $ 28.0841      $ 141.9077      $ 133.2019   

Market value per share, at December 31, 2014†

   $ 21.28      $ 20.99      $ 63.89      $ 61.16      $ 125.75      $ 87.44      $ 76.52   

Market value per share, at December 31, 2015†

   $ 20.76      $ 13.33      $ 53.99      $ 50.45      $ 28.35      $ 140.41      $ 133.64   

Total Return, at net asset value

     (2.8 )%      (36.7 )%      (15.2 )%      (17.2 )%      (77.6 )%      61.7     70.8

Total Return, at market value

     (2.4 )%      (36.5 )%      (15.5 )%      (17.5 )%      (77.5 )%      60.6     74.6

Ratios to Average Net Assets

              

Expense ratio

     (0.84 )%      (0.95 )%      (0.91 )%      (1.40 )%      (1.65 )%      (0.95 )%      (1.07 )% 

Expense ratio, excluding brokerage commissions

     (0.75 )%      (0.85 )%      (0.85 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )% 

Net investment income (loss)

     (0.84 )%      (0.92 )%      (0.88 )%      (1.36 )%      (1.61 )%      (0.91 )%      (1.04 )% 

 

* 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.

 

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For the Year Ended December 31, 2015

 

Per Share Operating Performance

   UltraShort
Bloomberg
Natural Gas
    UltraShort
Gold
    UltraShort
Silver*
    Short
Euro
    UltraShort
Australian
Dollar
    UltraShort
Euro
    UltraShort
Yen
 

Net asset value, at December 31, 2014

   $ 83.9577      $ 96.6516      $ 57.8071      $ 40.0617      $ 51.3790      $ 21.5946      $ 89.3336   

Net investment income (loss)

     (1.3314     (0.9149     (0.4968     (0.4096     (0.5741     (0.2256     (0.8243

Net realized and unrealized gain (loss)#

     56.9678        20.1432        7.2680        4.1246        7.6533        4.1716        (0.5704

Change in net asset value from operations

     55.6364        19.2283        6.7712        3.7150        7.0792        3.9460        (1.3947

Net asset value, at December 31, 2015

   $ 139.5941      $ 115.8799      $ 64.5783      $ 43.7767      $ 58.4582      $ 25.5406      $ 87.9389   

Market value per share, at December 31, 2014†

   $ 82.03      $ 100.22      $ 59.70      $ 40.03      $ 51.37      $ 21.61      $ 89.30   

Market value per share, at December 31, 2015†

   $ 139.66      $ 115.83      $ 64.55      $ 43.74      $ 58.15      $ 25.53      $ 87.89   

Total Return, at net asset value

     66.3     19.9     11.7     9.3     13.8     18.3     (1.6 )% 

Total Return, at market value

     70.3     15.6     8.1     9.3     13.2     18.1     (1.6 )% 

Ratios to Average Net Assets

              

Expense ratio

     (1.55 )%      (0.95 )%      (0.95 )%      (0.97 )%      (1.03 )%      (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)

     (1.50 )%      (0.91 )%      (0.91 )%      (0.95 )%      (1.00 )%      (0.90 )%      (0.92 )% 

 

* 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.

 

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For the Year Ended December 31, 2015

 

Per Share Operating Performance

   Ultra
Bloomberg
Commodity*
    Ultra
Bloomberg
Crude Oil*
    Ultra
Bloomberg
Natural
Gas*
    Ultra Gold     Ultra Silver     Ultra
Euro
    Ultra
Yen*
 

Net asset value, at December 31, 2014

   $ 52.1342      $ 50.7400      $ 61.6491      $ 40.0011      $ 39.3657      $ 19.8744      $ 56.4747   

Net investment income (loss)

     (0.3491     (0.2811     (0.4982     (0.3292     (0.3258     (0.1505     (0.4787

Net realized and unrealized gain (loss)#

     (23.3572     (37.8815     (42.5811     (9.9424     (11.9761     (4.2132     (1.2433

Change in net asset value from operations

     (23.7063     (38.1626     (43.0793     (10.2716     (12.3019     (4.3637     (1.7220

Net asset value, at December 31, 2015

   $ 28.4279      $ 12.5774      $ 18.5698      $ 29.7295      $ 27.0638      $ 15.5107      $ 54.7527   

Market value per share, at December 31, 2014†

   $ 51.44      $ 51.85      $ 63.12      $ 38.41      $ 38.05      $ 19.80      $ 56.48   

Market value per share, at December 31, 2015†

   $ 28.07      $ 12.54      $ 18.48      $ 29.73      $ 27.08      $ 15.51      $ 54.70   

Total Return, at net asset value

     (45.5 )%      (75.2 )%      (69.9 )%      (25.7 )%      (31.3 )%      (22.0 )%      (3.0 )% 

Total Return, at market value

     (45.4 )%      (75.8 )%      (70.7 )%      (22.6 )%      (28.8 )%      (21.7 )%      (3.2 )% 

Ratios to Average Net Assets

              

Expense ratio

     (0.95 )%      (1.02 )%      (1.29 )%      (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)

     (0.93 )%      (0.98 )%      (1.26 )%      (0.90 )%      (0.89 )%      (0.93 )%      (0.88 )% 

 

* 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.

 

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Selected data for a Share outstanding throughout the year ended December 31, 2014:

For the Year Ended December 31, 2014

 

Per Share Operating Performance

   Managed
Futures
Strategy+
    VIX Short-
Term
Futures
ETF
    VIX Mid-
Term
Futures
ETF*
    Short VIX
Short-
Term
Futures
ETF
    Ultra VIX
Short-Term
Futures
ETF*
    UltraShort
Bloomberg
Commodity
    UltraShort
Bloomberg
Crude Oil
 

Net asset value, beginning of period

   $ 20.0000      $ 28.5387      $ 77.1837      $ 67.4993      $ 335.4203      $ 63.2936      $ 31.7301   

Net investment income (loss)

     (0.0417     (0.2047     (0.5666     (1.0247     (2.9055     (0.5679     (0.2773

Net realized and unrealized gain (loss)#

     1.1771        (7.4019     (13.0151     (5.0742     (207.0557     25.0238        46.5262   

Change in net asset value from operations

     1.1354        (7.6066     (13.5817     (6.0989     (209.9612     24.4559        46.2489   

Net asset value, at December 31, 2014

   $ 21.1354      $ 20.9321      $ 63.6020      $ 61.4004      $ 125.4591      $ 87.7495      $ 77.9790   

Market value per share, at December 31, 2013†

   $  —       $ 28.53      $ 77.16      $ 67.47      $ 335.60      $ 58.41      $ 31.58   

Market value per share, at December 31, 2014†

   $ 21.28      $ 20.99      $ 63.89      $ 61.16      $ 125.75      $ 87.44      $ 76.52   

Total Return, at net asset value

     5.7 %^      (26.7 )%      (17.6 )%      (9.0 )%      (62.6 )%      38.6     145.8

Total Return, at market value

     6.4 %^      (26.4 )%      (17.2 )%      (9.4 )%      (62.5 )%      49.7     142.3

Ratios to Average Net Assets

              

Expense ratio

     (0.82 )%**      (0.92 )%      (0.87 )%      (1.49 )%      (1.80 )%      (0.95 )%      (0.98 )% 

Expense ratio, excluding brokerage commissions

     (0.75 )%**      (0.85 )%      (0.85 )%      (0.95 )%      (0.95 )%      (0.95 )%      (0.95 )% 

Net investment income (loss)

     (0.82 )%**      (0.88 )%      (0.84 )%      (1.46 )%      (1.78 )%      (0.92 )%      (0.94 )% 

 

* See Note 1 of these Notes to Financial Statements.
+ From commencement of operations, October 1, 2014, through December 31, 2014.
# 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 December 31, 2014. The return for a share outstanding for 2014 is calculated based on the initial offering price upon commencement of investment operations of $20.0000 for ProShares Managed Futures Strategy.
** Percentage are annualized.

 

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For the Year Ended December 31, 2014

 

Per Share Operating Performance

   UltraShort
Bloomberg
Natural
Gas
    UltraShort
Gold
    UltraShort
Silver*
    Short
Euro
    UltraShort
Australian
Dollar
    UltraShort
Euro
    UltraShort
Yen
 

Net asset value, at December 31, 2013

   $ 69.9635      $ 103.5180      $ 44.8910      $ 35.5867      $ 46.6384      $ 17.0613      $ 70.8640   

Net investment income (loss)

     (0.4961     (0.8233     (0.3937     (0.3428     (0.4272     (0.1642     (0.6412

Net realized and unrealized gain (loss)#

     14.4903        (6.0431     13.3098        4.8178        5.1678        4.6975        19.1108   

Change in net asset value from operations

     13.9942        (6.8664     12.9161        4.4750        4.7406        4.5333        18.4696   

Net asset value, at December 31, 2014

   $ 83.9577      $ 96.6516      $ 57.8071      $ 40.0617      $ 51.3790      $ 21.5946      $ 89.3336   

Market value per share, at December 31, 2013†

   $ 69.36      $ 103.53      $ 45.10      $ 35.66      $ 46.66      $ 17.06      $ 70.91   

Market value per share, at December 31, 2014†

   $ 82.03      $ 100.22      $ 59.70      $ 40.03      $ 51.37      $ 21.61      $ 89.30   

Total Return, at net asset value

     20.0     (6.6 )%      28.8     12.6     10.2     26.6     26.1

Total Return, at market value

     18.3     (3.2 )%      32.4     12.3     10.1     26.7     25.9

Ratios to Average Net Assets

              

Expense ratio

     (1.18 )%      (0.95 )%      (0.95 )%      (0.96 )%      (1.01 )%      (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)

     (1.14 )%      (0.91 )%      (0.90 )%      (0.93 )%      (0.97 )%      (0.90 )%      (0.90 )% 

 

* 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.

 

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For the Year Ended December 31, 2014

 

Per Share Operating Performance

   Ultra
Bloomberg
Commodity*
    Ultra
Bloomberg
Crude Oil*
    Ultra
Bloomberg
Natural
Gas*
    Ultra Gold     Ultra Silver     Ultra
Euro
    Ultra Yen*  

Net asset value, at December 31, 2013

   $ 77.7259      $ 160.4495      $ 155.3534      $ 41.2553      $ 63.3305      $ 26.0346      $ 74.5261   

Net investment income (loss)

     (0.7047     (1.0928     (1.5167     (0.4078     (0.5348     (0.2185     (0.6693

Net realized and unrealized gain (loss)#

     (24.8870     (108.6167     (92.1876     (0.8464     (23.4300     (5.9417     (17.3821

Change in net asset value from operations

     (25.5917     (109.7095     (93.7043     (1.2542     (23.9648     (6.1602     (18.0514

Net asset value, at December 31, 2014

   $ 52.1342      $ 50.7400      $ 61.6491      $ 40.0011      $ 39.3657      $ 19.8744      $ 56.4747   

Market value per share, at December 31, 2013†

   $ 76.52      $ 161.10      $ 157.12      $ 41.26      $ 63.04      $ 25.98      $ 74.44   

Market value per share, at December 31, 2014†

   $ 51.44      $ 51.85      $ 63.12      $ 38.41      $ 38.05      $ 19.80      $ 56.48   

Total Return, at net asset value

     (32.9 )%      (68.4 )%      (60.3 )%      (3.0 )%      (37.8 )%      (23.7 )%      (24.2 )% 

Total Return, at market value

     (32.8 )%      (67.8 )%      (59.8 )%      (6.9 )%      (39.6 )%      (23.8 )%      (24.1 )% 

Ratios to Average Net Assets

              

Expense ratio

     (0.95 )%      (0.99 )%      (1.13 )%      (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)

     (0.91 )%      (0.95 )%      (1.10 )%      (0.91 )%      (0.91 )%      (0.91 )%      (0.90 )% 

 

* 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.

 

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Selected data for a Share outstanding throughout the year ended December 31, 2013

For the Year Ended December 31, 2013

 

Per Share Operating Performance

   VIX Short-
Term
Futures
ETF*
    VIX Mid-
Term
Futures
ETF*
    Short VIX
Short-
Term
Futures
ETF*
    Ultra VIX
Short-Term
Futures ETF*
    UltraShort
Bloomberg
Commodity
    UltraShort
Bloomberg
Crude Oil
    UltraShort
Bloomberg
Natural
Gas*
 

Net asset value, at December 31, 2012

   $ 83.9374      $ 138.8013      $ 33.0649      $ 4,026.4321      $ 54.1021      $ 40.3079      $ 102.1402   

Net investment income (loss)

     (0.3518     (0.7892     (0.7398     (15.0047     (0.5355     (0.3033     (0.9217

Net realized and unrealized gain (loss)#

     (55.0469     (60.8284     35.1742        (3,676.0071     9.7270        (8.2745     (31.2550

Change in net asset value from operations

     (55.3987     (61.6176     34.4344        (3,691.0118     9.1915        (8.5778     (32.1767

Net asset value, at December 31, 2013

   $ 28.5387      $ 77.1837      $ 67.4993      $ 335.4203      $ 63.2936      $ 31.7301      $ 69.9635   

Market value per share, at December 31, 2012†

   $ 85.05      $ 136.88      $ 32.73      $ 4,180.00      $ 51.64      $ 40.44      $ 101.64   

Market value per share, at December 31, 2013†

   $ 28.53      $ 77.16      $ 67.47      $ 335.60      $ 58.41      $ 31.58      $ 69.36   

Total Return, at net asset value

     (66.0 )%      (44.4 )%      104.1     (91.7 )%      17.0     (21.3 )%      (31.5 )% 

Total Return, at market value

     (66.5 )%      (43.6 )%      106.2     (92.0 )%      13.1     (21.9 )%      (31.8 )% 

Ratios to Average Net Assets

              

Expense ratio

     (0.85 )%      (0.85 )%      (1.53 )%      (1.82 )%      (0.95 )%      (0.98 )%      (1.20 )% 

Expense ratio, excluding brokerage commissions

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

Net investment income (loss)

     (0.81 )%      (0.81 )%      (1.49 )%      (1.80 )%      (0.90 )%      (0.94 )%      (1.15 )% 

 

* 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.

 

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For the Year Ended December 31, 2013

 

Per Share Operating Performance

   UltraShort
Gold
    UltraShort
Silver*
    Short Euro     UltraShort
Australian
Dollar
    UltraShort
Euro
    UltraShort
Yen
    Ultra
Bloomberg
Commodity*
 

Net asset value, at December 31, 2012

   $ 63.8688      $ 25.6975      $ 37.6285      $ 37.8081      $ 19.0172      $ 50.7577      $ 97.5491   

Net investment income (loss)

     (0.7561     (0.3112     (0.3430     (0.4325     (0.1677     (0.5662     (0.7780

Net realized and unrealized gain (loss)#

     40.4053        19.5047        (1.6988     9.2628        (1.7882     20.6725        (19.0452

Change in net asset value from operations

     39.6492        19.1935        (2.0418     8.8303        (1.9559     20.1063        (19.8232

Net asset value, at December 31, 2013

   $ 103.5180      $ 44.8910      $ 35.5867      $ 46.6384      $ 17.0613      $ 70.8640      $ 77.7259   

Market value per share, at December 31, 2012†

   $ 62.60      $ 25.04      $ 37.64      $ 37.74      $ 19.01      $ 50.77      $ 95.72   

Market value per share, at December 31, 2013†

   $ 103.53      $ 45.10      $ 35.66      $ 46.66      $ 17.06      $ 70.91      $ 76.52   

Total Return, at net asset value

     62.1     74.7     (5.4 )%      23.4     (10.3 )%      39.6     (20.3 )% 

Total Return, at market value

     65.4     80.1     (5.3 )%      23.6     (10.3 )%      39.7     (20.1 )% 

Ratios to Average Net Assets

              

Expense ratio

     (0.95 )%      (0.95 )%      (0.96 )%      (1.02 )%      (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 )%      (0.89 )%      (0.93 )%      (0.99 )%      (0.90 )%      (0.91 )%      (0.90 )% 

 

* 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.

 

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For the Year Ended December 31, 2013

 

Per Share Operating Performance

   Ultra
Bloomberg
Crude Oil*
    Ultra
Bloomberg
Natural Gas*
    Ultra Gold     Ultra Silver*     Ultra Euro     Ultra Yen*  

Net asset value, at December 31, 2012

   $ 146.9706      $ 156.1962      $ 83.7634      $ 171.8906      $ 24.3499      $ 112.7345   

Net investment income (loss)

     (1.4243     (1.6214     (0.5404     (0.8789     (0.2200     (0.7984

Net realized and unrealized gain (loss)#

     14.9032        0.7786        (41.9677     (107.6812     1.9047        (37.4100

Change in net asset value from operations

     13.4789        (0.8428     (42.5081     (108.5601     1.6847        (38.2084

Net asset value, at December 31, 2013

   $ 160.4495      $ 155.3534      $ 41.2553      $ 63.3305      $ 26.0346      $ 74.5261   

Market value per share, at December 31, 2012†

   $ 146.60      $ 156.96      $ 85.34      $ 176.40      $ 24.32      $ 113.12   

Market value per share, at December 31, 2013†

   $ 161.10      $ 157.12      $ 41.26      $ 63.04      $ 25.98      $ 74.44   

Total Return, at net asset value

     9.2     (0.5 )%      (50.7 )%      (63.2 )%      6.9     (33.9 )% 

Total Return, at market value

     9.9     0.1     (51.7 )%      (64.3 )%      6.8     (34.2 )% 

Ratios to Average Net Assets

            

Expense ratio

     (0.97 )%      (1.15 )%      (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 )%      (1.10 )%      (0.89 )%      (0.89 )%      (0.90 )%      (0.90 )% 

 

* 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.

 

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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 a single day (as measured from NAV calculation time to NAV calculation time). The return of a Geared Fund for a period longer than a single day is the result of its return for each day compounded over the period and usually will differ from the inverse (-1x), two times the inverse (-2x), or two times (2x) of the return of the Geared Fund’s benchmark for the period. A Fund will lose money if its benchmark performance is flat over time, and it is possible for a Geared Fund to lose money over time even if the performance of its benchmark increases (or decreases in the case of Short and UltraShort Funds), as a result of daily rebalancing, the benchmark’s volatility and compounding. Longer holding periods, higher benchmark volatility, inverse exposure 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 benchmark. The Matching VIX Funds and the Managed Futures Fund seek to achieve their stated investment objective both over a single day and over time.

Each Ultra and 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 two times 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 a Short or UltraShort Fund is designed to return the inverse (-1x) or two times 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 Financial Instruments held by a Fund and the performance of the applicable benchmark; (3) bid-ask spreads on such Financial Instruments; (4) fees, expenses, transaction costs, financing costs associated with the use of Financial Instruments 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; (10) accounting standards; and (11) differences caused by a Fund obtaining exposure to only a representative sample of the components of a benchmark, overweighting or underweighting certain components of a benchmark or obtaining exposure to assets that are not included in a benchmark.

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 under- or over-exposed to the benchmark may prevent such Geared 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 (i.e., -1x, -2x or 2x, as applicable) to its benchmark at the

 

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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. In addition, unlike other funds that do not rebalance their portfolios as frequently, each Geared Fund may be subject to increased trading costs associated with daily portfolio rebalancing in order to maintain appropriate exposure to the underlying benchmarks.

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 or forward contracts 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 or forward contracts.

Swap agreements and forward contracts are generally traded in OTC markets and have only recently become subject to regulation by the CFTC. CFTC rules, however, do not cover all types of swap agreements and forward contracts. Investors, therefore, may not receive the protection of CFTC regulation or the statutory scheme of the Commodity Exchange Act (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.

The Funds will be subject to credit risk with respect to the counterparties to the derivatives contracts (whether a clearing corporation in the case of cleared instruments or another third party in the case of OTC uncleared instruments). Unlike in futures contracts, the counterparty to uncleared 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 uncleared 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, subject to certain minimum thresholds; however there are no limitations on the percentage of its assets each Fund may invest in swap agreements or forward contracts with a particular counterparty. 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.

OTC 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. In addition, cleared derivative transactions benefit from daily marking-to-market and settlement, and segregation and minimum capital requirements applicable to intermediaries. Transactions entered into directly between two counterparties generally do not benefit from such protections. This exposes the Funds to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions because of a dispute over the terms of the contract (whether or not bona fide) or because of a credit or liquidity problem, thus causing the Funds to suffer a loss.

 

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Each counterparty and/or any of its affiliates may be an Authorized Participant or shareholder of a Fund.

The counterparty risk for cleared derivative transactions is generally lower than for uncleared OTC derivatives since generally a clearing organization becomes substituted for each counterparty to a cleared derivative contract and, in effect, guarantees the parties’ performance under the contract as each party to a trade looks only to the clearing house for performance of financial obligations. However, there can be no assurance that the clearing house, or its members, will satisfy its obligations to the Fund.

Leverage Risk

The Leveraged 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.

For example, because the UltraShort Funds and Ultra Funds include a two times the inverse (-2x), or a two times (2x) multiplier, a single-day movement in the relevant benchmark approaching 50% at any point in the day (for an UltraShort Fund or an UltraShort Fund) 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 single-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 November 2014 may specify a January 2015 expiration. As that contract nears expiration, it may be replaced by selling the January 2015 contract and purchasing the contract expiring in March 2015. 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 January 2015 contract would take place at a price that is higher than the price at which the March 2015 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, the Managed Futures 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, the Managed Futures Fund and Matching VIX Funds.

 

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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 applicable 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.

Shareholder Concentration

As of December 31, 2015, ProShares Morningstar Alternatives Solution ETF, an ETF affiliated with the Funds, owned 51.4% of the outstanding shares of the Managed Futures Fund. Subscription and redemption activity by concentrated shareholders may have a significant effect on the operations of the Fund.

NOTE 9 – 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 February 18, 2016, the Trust announced that it plans to close and liquidate ProShares Managed Futures Strategy (ticker symbol: FUTS). The fund trades on NYSE Arca.

After the close of business on March 18, 2016, the fund will no longer accept creation orders. Trading in the fund on NYSE Arca will be halted prior to market open on March 21, 2016. Fund holdings will be liquidated by March 21, 2016 or shortly thereafter. Beginning on March 21, 2016, the fund will not be traded on NYSE Arca and there will be no secondary market for the fund’s shares. Once the fund is in the process of liquidating its portfolio holdings, it will not be managed in accordance with its investment objective. Proceeds of the liquidation are scheduled to be distributed to shareholders on or about March 30, 2016.

Any shareholders remaining in the fund on the distribution date will automatically have their shares redeemed for cash at the fund’s net asset value per share as of the liquidation date. The cash distribution will be deposited into their brokerage accounts. These cash distributions are taxable events and shareholders should consult their tax advisors about potential tax consequences.

 

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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/ Todd Johnson

By: Todd Johnson
Principal Executive Officer
Date: February 29, 2016

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

/s/ Todd Johnson

By: Todd Johnson
Principal Executive Officer
Date: February 29, 2016

 

/s/ Edward Karpowicz

By: Edward Karpowicz
Principal Financial Officer
Date: February 29, 2016

 

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