ProShares Trust II - Quarter Report: 2022 March (Form 10-Q)

 

 

 

 

 

 

 

 

 

 

 

 

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.    ☒  Yes    ☐  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ☒  Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule of the Exchange Act.

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule of the Exchange Act.).    ☐  Yes    ☒  No

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    ☒  Yes    ☐  No

 222,523,625 shares of common stock, $0 par value per share, outstanding.

 

 

 

 

 

 

STATEMENTS OF FINANCIAL CONDITION

 

 

4

SCHEDULE OF INVESTMENTS

MARCH 31, 2022

(unaudited)

 

 

5

		Three Months Ended March 31,
		2022				2021
Investment Income
Interest		$	(93	)		$	596
Expenses
Management fee			6,672				9,053
Brokerage commissions			144				181
Total expenses			6,816				9,234
Net investment income (loss)			(6,909	)			(8,638	)
Realized and unrealized gain (loss) on investment activity
Net realized gain (loss) on
Futures contracts			59,419				69,393
Short-term U.S. government and agency obligations			4,452				—
Net realized gain (loss)			63,871				69,393
Change in net unrealized appreciation (depreciation) on
Futures contracts			8,056				78,554
Short-term U.S. government and agency obligations			—				88
Change in net unrealized appreciation (depreciation)			8,056				78,642
Net realized and unrealized gain (loss)			71,927				148,035
Net income (loss)		$	65,018			$	139,397

		Three Months Ended March 31,
		2022				2021
Shareholders’ equity, beginning of period		$	2,245,421			$	4,191,955
Addition of 50,000 and – shares, respectively			2,312,961				—
Redemption of – and 50,000 shares, respectively			—				(2,146,812	)
Net addition (redemption) of 50,000 and (50,000) shares, respectively			2,312,961				(2,146,812	)
Net investment income (loss)			(6,909	)			(8,638	)
Net realized gain (loss)			63,871				69,393
Change in net unrealized appreciation (depreciation)			8,056				78,642
Net income (loss)			65,018				139,397
Shareholders’ equity, end of period		$	4,623,400			$	2,184,540

		Three Months Ended March 31,
		2022				2021
Cash flow from operating activities
Net income (loss)		$	65,018			$	139,397
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			—				(1,999,562	)
Proceeds from sales or maturities of short-term U.S. government and agency obligations			4,452				1,000,000
Net amortization and accretion on short-term U.S. government and agency obligations			—				(323	)
Net realized (gain) loss on investments			(4,452	)			—
Change in unrealized (appreciation) depreciation on investments			—				(88	)
Decrease (Increase) in receivable on open futures contracts			(38,569	)			21,094
Decrease (Increase) in interest receivable			93				108
Increase (Decrease) in payable to Sponsor			1,383				(820	)
Increase (Decrease) in payable on open futures contracts			(11,500	)			1,125
Net cash provided by (used in) operating activities			16,425				(839,069	)
Cash flow from financing activities
Proceeds from addition of shares			2,312,961				—
Payment on shares redeemed			—				(2,146,812	)
Net cash provided by (used in) financing activities			2,312,961				(2,146,812	)
Net increase (decrease) in cash			2,329,386				(2,985,881	)
Cash, beginning of period			2,258,652				4,174,091
Cash, end of period		$	4,588,038			$	1,188,210

		March 31, 2022 (unaudited)				December 31, 2021
Assets
Short-term U.S. government and agency obligations (Note 3) (cost $180,804,059 and $147,851,244, respectively)		$	180,357,257			$	147,815,719
Cash			65,794,655				44,359,519
Segregated cash balances with brokers for futures contracts			165,590,124				138,651,465
Receivable on open futures contracts			96,824,449				99,544,338
Interest receivable			—				2,868
Total assets			508,566,485				430,373,909
Liabilities and shareholders’ equity
Liabilities
Payable for capital shares redeemed			—				6,125,130
Payable on open futures contracts			12,542,043				—
Brokerage commissions and futures account fees payable			70,274				104,312
Payable to Sponsor			365,319				331,873
Total liabilities			12,977,636				6,561,315
Commitments and Contingencies (Note 2)
Shareholders’ equity
Shareholders’ equity			495,588,849				423,812,594
Total liabilities and shareholders’ equity		$	508,566,485			$	430,373,909
Shares outstanding			9,084,307				6,884,307
Net asset value per share		$	54.55			$	61.56
Market value per share (Note 2)		$	54.56			$	61.55

		Principal Amount				Value
Short-term U.S. government and agency obligations
(36% of shareholders’ equity)
U.S. Treasury Bills ^^ :
0.021% due 04/21/22		$	25,000,000			$	24,997,917
0.393% due 07/21/22			79,000,000				78,828,270
0.223% due 11/03/22			77,000,000				76,531,070
Total short-term U.S. government and agency obligations (cost $180,804,059)						$	180,357,257

		Number of Contracts				Notional Amount at Value				Unrealized Appreciation (Depreciation)/Value
VIX Futures - Cboe, expires April 2022			4,910			$	115,232,790			$	31,922,101
VIX Futures - Cboe, expires May 2022			5,324				133,034,515				4,062,361
										$	35,984,462

^^	Rates shown represent discount rate at the time of purchase.

		Three Months Ended March 31,
		2022				2021
Investment Income
Interest		$	94,343			$	33,890
Expenses
Management fee			986,537				1,042,569
Brokerage commissions			187,698				175,910
Futures accounts fees			217,030				257,777
Total expenses			1,391,265				1,476,256
Net investment income (loss)			(1,296,922	)			(1,442,366	)
Realized and unrealized gain (loss) on investment activity
Net realized gain (loss) on
Futures contracts			(41,100,614	)			24,209,417
Short-term U.S. government and agency obligations			(10,494	)			—
Net realized gain (loss)			(41,111,108	)			24,209,417
Change in net unrealized appreciation (depreciation) on
Futures contracts			4,709,184				42,121,892
Short-term U.S. government and agency obligations			(411,277	)			3,226
Change in net unrealized appreciation (depreciation)			4,297,907				42,125,118
Net realized and unrealized gain (loss)			(36,813,201	)			66,334,535
Net income (loss)		$	(38,110,123	)		$	64,892,169

		Three Months Ended March 31,
		2022				2021
Shareholders’ equity, beginning of period		$	423,812,594			$	409,371,468
Addition of 3,000,000 and 2,400,000 shares, respectively			156,515,471				98,109,468
Redemption of 800,000 and 1,100,000 shares, respectively			(46,629,093	)			(45,242,254	)
Net addition (redemption) of 2,200,000 and 1,300,000 shares, respectively			109,886,378				52,867,214
Net investment income (loss)			(1,296,922	)			(1,442,366	)
Net realized gain (loss)			(41,111,108	)			24,209,417
Change in net unrealized appreciation (depreciation)			4,297,907				42,125,118
Net income (loss)			(38,110,123	)			64,892,169
Shareholders’ equity, end of period		$	495,588,849			$	527,130,851

		Three Months Ended March 31,
		2022				2021
Cash flow from operating activities
Net income (loss)		$	(38,110,123	)		$	64,892,169
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			(184,846,445	)			(166,972,737	)
Proceeds from sales or maturities of short-term U.S. government and agency obligations			151,980,347				145,000,000
Net amortization and accretion on short-term U.S. government and agency obligations			(97,211	)			(22,858	)
Net realized (gain) loss on investments			10,494				—
Change in unrealized (appreciation) depreciation on investments			411,277				(3,226	)
Decrease (Increase) in receivable on open futures contracts			2,719,889				(10,518,387	)
Decrease (Increase) in interest receivable			2,868				(625	)
Increase (Decrease) in payable to Sponsor			33,446				58,097
Increase (Decrease) in brokerage commissions and futures account fees payable			(34,038	)			7,205
Increase (Decrease) in payable on open futures contracts			12,542,043				(996,159	)
Net cash provided by (used in) operating activities			(55,387,453	)			31,443,479
Cash flow from financing activities
Proceeds from addition of shares			156,515,471				98,109,468
Payment on shares redeemed			(52,754,223	)			(45,242,254	)
Net cash provided by (used in) financing activities			103,761,248				52,867,214
Net increase (decrease) in cash			48,373,795				84,310,693
Cash, beginning of period			183,010,984				266,579,220
Cash, end of period		$	231,384,779			$	350,889,913

		March 31, 2022 (unaudited)				December 31, 2021
Assets
Short-term U.S. government and agency obligations (Note 3) (cost $1,016,679,454 and $848,800,309, respectively)		$	1,016,050,654			$	848,757,567
Cash			122,491,540				86,582,912
Segregated cash balances with brokers for futures contracts			198,872,883				130,704,477
Segregated cash balances with brokers for swap agreements			181,812,000				—
Unrealized appreciation on swap agreements			—				63,928,293
Receivable on open futures contracts			187,616				—
Interest receivable			1				3,523
Total assets			1,519,414,694				1,129,976,772
Liabilities and shareholders’ equity
Liabilities
Payable for capital shares redeemed			15,183,510				—
Payable on open futures contracts			37,639,347				25,317,560
Brokerage commissions and futures account fees payable			99,348				24,677
Payable to Sponsor			1,226,530				850,965
Unrealized depreciation on swap agreements			128,285,274				—
Total liabilities			182,434,009				26,193,202
Commitments and Contingencies (Note 2)
Shareholders’ equity
Shareholders’ equity			1,336,980,685				1,103,783,570
Total liabilities and shareholders’ equity		$	1,519,414,694			$	1,129,976,772
Shares outstanding			8,810,774				12,810,774
Net asset value per share		$	151.74			$	86.16
Market value per share (Note 2)		$	153.30			$	86.78

		Principal Amount				Value
Short-term U.S. government and agency obligations
( 76 % of shareholders’ equity)
U.S. Treasury Bills ^^ :
0.076 % due 04/21/22 †		$	285,000,000			$	284,976,259
0.232 % due 05/19/22 †			175,000,000				174,939,328
0.321 % due 06/16/22 †			180,000,000				179,834,706
0.393 % due 07/21/22 †			47,000,000				46,897,831
0.706 % due 08/18/22 †			150,000,000				149,504,820
0.637 % due 11/03/22 †			181,000,000				179,897,710
Total short-term U.S. government and agency obligations (cost $ 1,016,679,454 )						$	1,016,050,654

		Number of Contracts				Notional Amount at Value				Unrealized Appreciation (Depreciation)/Value
WTI Crude Oil - NYMEX, expires June 2022			4,115			$	405,409,800			$	144,895,562
WTI Crude Oil - NYMEX, expires December 2022			4,724				423,270,400				91,533,153
WTI Crude Oil - NYMEX, expires June 2023			5,012				424,065,320				9,162,448
										$	245,591,163

		Rate Paid (Received) *				Termination Date				Notional Amount at Value **				Unrealized Appreciation (Depreciation)/Value
Swap agreement with Citibank, N.A. based on Bloomberg Commodity Balanced WTI Crude Oil Index			0.35	%			04/06/22			$	202,256,578			$	(18,119,250	)
Swap agreement with Goldman Sachs International based on Bloomberg Commodity Balanced WTI Crude Oil Index			0.35				04/06/22				394,073,711				(36,248,743	)
Swap agreement with Morgan Stanley & Co. International PLC based on Bloomberg Commodity Balanced WTI Crude Oil Index			0.35				04/06/22				350,316,746				(31,383,289	)
Swap agreement with Societe Generale based on Bloomberg Commodity Balanced WTI Crude Oil Index			0.25				04/06/22				190,882,596				(17,086,634	)
Swap agreement with UBS AG based on Bloomberg Commodity Balanced WTI Crude Oil Index			0.30				04/06/22				284,170,376				(25,447,358	)
											Total Unrealized Depreciation			$	(128,285,274	)

†	All or partial amount pledged as collateral for swap agreements.

^	The positions and counterparties herein are as of March 31, 2022. The Fund continually evaluates different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at any time.

^^	Rates shown represent discount rate at the time of purchase.

*	Reflects the floating financing rate, as of March 31, 2022, on the notional amount of the swap agreement paid to the counterparty or received from the counterparty, excluding any commissions. Total Return Swap Agreements payment is due at termination/maturity.

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

		Three Months Ended March 31,
		2022				2021
Investment Income
Interest		$	308,880			$	168,075
Expenses
Management fee			3,084,812				2,535,085
Brokerage commissions			195,541				293,200
Futures accounts fees			252,687				98,937
Total expenses			3,533,040				2,927,222
Net investment income (loss)			(3,224,160	)			(2,759,147	)
Realized and unrealized gain (loss) on investment activity
Net realized gain (loss) on
Futures contracts			266,409,832				191,676,501
Swap agreements			533,013,238				142,674,727
Short-term U.S. government and agency obligations			(3,136	)			—
Net realized gain (loss)			799,419,934				334,351,228
Change in net unrealized appreciation (depreciation) on
Futures contracts			98,135,638				93,984,872
Swap agreements			(192,213,567	)			(58,990,789	)
Short-term U.S. government and agency obligations			(586,058	)			41,573
Change in net unrealized appreciation (depreciation)			(94,663,987	)			35,035,656
Net realized and unrealized gain (loss)			704,755,947				369,386,884
Net income (loss)		$	701,531,787			$	366,627,737

		Three Months Ended March 31,
		2022				2021
Shareholders’ equity, beginning of period		$	1,103,783,570			$	902,739,250
Addition of 2,150,000 and 2,350,000 shares, respectively			330,317,033				117,044,190
Redemption of 6,150,000 and 6,450,000 shares, respectively			(798,651,705	)			(297,832,084	)
Net addition (redemption) of (4,000,000) and (4,100,000) shares, respectively			(468,334,672	)			(180,787,894	)
Net investment income (loss)			(3,224,160	)			(2,759,147	)
Net realized gain (loss)			799,419,934				334,351,228
Change in net unrealized appreciation (depreciation)			(94,663,987	)			35,035,656
Net income (loss)			701,531,787				366,627,737
Shareholders’ equity, end of period		$	1,336,980,685			$	1,088,579,093

		Three Months Ended March 31,
		2022				2021
Cash flow from operating activities
Net income (loss)		$	701,531,787			$	366,627,737
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			(1,394,562,680	)			(934,851,425	)
Proceeds from sales or maturities of short-term U.S. government and agency obligations			1,226,992,801				465,000,000
Net amortization and accretion on short-term U.S. government and agency obligations			(312,402	)			(85,197	)
Net realized (gain) loss on investments			3,136				—
Change in unrealized (appreciation) depreciation on investments			192,799,625				58,949,216
Decrease (Increase) in receivable on open futures contracts			(187,616	)			1,611,608
Decrease (Increase) in interest receivable			3,522				(122,413	)
Increase (Decrease) in payable to Sponsor			375,565				260,388
Increase (Decrease) in brokerage commissions and futures account fees payable			74,671				1,352
Increase (Decrease) in payable on open futures contracts			12,321,787				25,300,245
Net cash provided by (used in) operating activities			739,040,196				(17,308,489	)
Cash flow from financing activities
Proceeds from addition of shares			330,317,033				117,044,190
Payment on shares redeemed			(783,468,195	)			(301,460,018	)
Net cash provided by (used in) financing activities			(453,151,162	)			(184,415,828	)
Net increase (decrease) in cash			285,889,034				(201,724,317	)
Cash, beginning of period			217,287,389				667,259,596
Cash, end of period		$	503,176,423			$	465,535,279

		March 31, 2022 (unaudited)				December 31, 2021
Assets
Short-term U.S. government and agency obligations (Note 3) (cost $95,926,918 and $90,936,719, respectively)		$	95,749,617			$	90,922,438
Cash			20,472,226				6,846,634
Segregated cash balances with brokers for futures contracts			24,424,860				47,289,091
Receivable from capital shares sold			—				20,448,741
Receivable on open futures contracts			13,001,650				33,998,620
Interest receivable			—				1,130
Total assets			153,648,353				199,506,654
Liabilities and shareholders’ equity
Liabilities
Payable for capital shares redeemed			8,420,202				—
Payable on open futures contracts			—				5,403,658
Brokerage commissions and futures account fees payable			23,412				63,628
Payable to Sponsor			135,253				147,190
Total liabilities			8,578,867				5,614,476
Commitments and Contingencies (Note 2)
Shareholders’ equity
Shareholders’ equity			145,069,486				193,892,178
Total liabilities and shareholders’ equity		$	153,648,353			$	199,506,654
Shares outstanding			2,587,527				7,587,527
Net asset value per share		$	56.06			$	25.55
Market value per share (Note 2)		$	56.31			$	26.09

		Principal Amount				Value
Short-term U.S. government and agency obligations
(66% of shareholders’ equity)
U.S. Treasury Bills ^^ :
0.106% due 04/21/22		$	40,000,000			$	39,996,668
0.393% due 07/21/22			24,000,000				23,947,829
0.223% due 11/03/22			32,000,000				31,805,120
Total short-term U.S. government and agency obligations (cost $95,926,918)						$	95,749,617

		Number of Contracts				Notional Amount at Value				Unrealized Appreciation (Depreciation)/Value
Natural Gas - NYMEX, expires May 2022			5,149			$	290,506,580			$	76,824,603

^^	Rates shown represent discount rate at the time of purchase.

		Three Months Ended March 31,
		2022				2021
Investment Income
Interest		$	39,581			$	13,815
Expenses
Management fee			396,610				254,815
Brokerage commissions			88,452				92,297
Futures accounts fees			71,117				81,848
Total expenses			556,179				428,960
Net investment income (loss)			(516,598	)			(415,145	)
Realized and unrealized gain (loss) on investment activity
Net realized gain (loss) on
Futures contracts			76,220,688				41,582,385
Short-term U.S. government and agency obligations			(3,452	)			551
Net realized gain (loss)			76,217,236				41,582,936
Change in net unrealized appreciation (depreciation) on
Futures contracts			85,030,764				(17,800,783	)
Short-term U.S. government and agency obligations			(163,020	)			1,915
Change in net unrealized appreciation (depreciation)			84,867,744				(17,798,868	)
Net realized and unrealized gain (loss)			161,084,980				23,784,068
Net income (loss)		$	160,568,382			$	23,368,923

		Three Months Ended March 31,
		2022				2021
Shareholders’ equity, beginning of period		$	193,892,178			$	169,800,371
Addition of 2,600,000 and 3,400,000 shares, respectively			87,880,355				76,480,823
Redemption of 7,600,000 and 8,000,000 shares, respectively			(297,271,429	)			(195,343,047	)
Net addition (redemption) of (5,000,000) and (4,600,000) shares, respectively			(209,391,074	)			(118,862,224	)
Net investment income (loss)			(516,598	)			(415,145	)
Net realized gain (loss)			76,217,236				41,582,936
Change in net unrealized appreciation (depreciation)			84,867,744				(17,798,868	)
Net income (loss)			160,568,382				23,368,923
Shareholders’ equity, end of period		$	145,069,486			$	74,307,070

		Three Months Ended March 31,
		2022				2021
Cash flow from operating activities
Net income (loss)		$	160,568,382			$	23,368,923
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			(135,944,242	)			(88,986,855	)
Proceeds from sales or maturities of short-term U.S. government and agency obligations			130,991,301				84,999,676
Net amortization and accretion on short-term U.S. government and agency obligations			(40,710	)			(9,576	)
Net realized (gain) loss on investments			3,452				(551	)
Change in unrealized (appreciation) depreciation on investments			163,020				(1,915	)
Decrease (Increase) in receivable on open futures contracts			20,996,970				13,775,851
Decrease (Increase) in interest receivable			1,130				3,558
Increase (Decrease) in payable to Sponsor			(11,937	)			(76,137	)
Increase (Decrease) in brokerage commissions and futures account fees payable			(40,216	)			13,490
Increase (Decrease) in payable on open futures contracts			(5,403,658	)			798,217
Net cash provided by (used in) operating activities			171,283,492				33,884,681
Cash flow from financing activities
Proceeds from addition of shares			108,329,096				76,480,823
Payment on shares redeemed			(288,851,227	)			(203,242,570	)
Net cash provided by (used in) financing activities			(180,522,131	)			(126,761,747	)
Net increase (decrease) in cash			(9,238,639	)			(92,877,066	)
Cash, beginning of period			54,135,725				137,292,722
Cash, end of period		$	44,897,086			$	44,415,656

		March 31, 2022 (unaudited)				December 31, 2021
Assets
Short-term U.S. government and agency obligations (Note 3) (cost $4,690,961 and $998,130, respectively)		$	4,685,054			$	997,678
Cash			1,608,252				6,891,458
Segregated cash balances with brokers for foreign currency forward contracts			—				691,000
Unrealized appreciation on foreign currency forward contracts			—				84,150
Interest receivable			—				153
Total assets			6,293,306				8,664,439
Liabilities and shareholders’ equity
Liabilities
Payable to Sponsor			6,006				3,846
Unrealized depreciation on foreign currency forward contracts			50,318				1,498
Total liabilities			56,324				5,344
Commitments and Contingencies (Note 2)
Shareholders’ equity
Shareholders’ equity			6,236,982				8,659,095
Total liabilities and shareholders’ equity		$	6,293,306			$	8,664,439
Shares outstanding			500,000				650,000
Net asset value per share		$	12.47			$	13.32
Market value per share (Note 2)		$	12.46			$	13.33