Attached files

file filename
EX-32.2 - EXHIBIT 32.2 - ProShares Trust IIdex322.htm
EX-31.2 - EXHIBIT 31.2 - ProShares Trust IIdex312.htm
EX-32.1 - EXHIBIT 32.1 - ProShares Trust IIdex321.htm
EX-31.1 - EXHIBIT 31.1 - ProShares Trust IIdex311.htm
Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

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

for the quarterly period ended June 30, 2010.

OR

 

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

for the transition period from              to             .

 

 

Commission file number: 001-34200

PROSHARES TRUST II

(Exact name of registrant as specified in its charter)

 

Delaware   87-6284802

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

c/o ProShare Capital Management LLC

7501 Wisconsin Avenue, Suite 1000

Bethesda, Maryland 20814

(Address of principal executive offices) (Zip code)

(240) 497-6400

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    ¨  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes     x  No


Table of Contents

PROSHARES TRUST II

Table of Contents

 

         Page

Part I. FINANCIAL INFORMATION

  

Item 1.

  Condensed Financial Statements.    1

Item 2.

  Management’s Discussion and Analysis of Financial Condition and Results of Operations.    88

Item 3.

  Quantitative and Qualitative Disclosures About Market Risk.    104

Item 4.

  Controls and Procedures.    121

Part II. OTHER INFORMATION

  

Item 1.

  Legal Proceedings.    122

Item 1A.

  Risk Factors.    122

Item 2.

  Unregistered Sales of Equity Securities and Use of Proceeds.    123

Item 3.

  Defaults Upon Senior Securities.    125

Item 4.

  Reserved.    125

Item 5.

  Other Information.    125

Item 6.

  Exhibits.    125


Table of Contents

Part I. FINANCIAL INFORMATION

 

Item 1. Condensed Financial Statements.

Index

 

      Page

Documents

  

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

  

ProShares Ultra DJ-UBS Commodity

   2

ProShares UltraShort DJ-UBS Commodity

   7

ProShares Ultra DJ-UBS Crude Oil

   12

ProShares UltraShort DJ-UBS Crude Oil

   17

ProShares Short DJ-UBS Natural Gas

   22

ProShares Ultra Gold

   23

ProShares Short Gold

   28

ProShares UltraShort Gold

   29

ProShares Ultra Silver

   34

ProShares UltraShort Silver

   39

ProShares Ultra Euro

   44

ProShares UltraShort Euro

   49

ProShares Ultra Yen

   54

ProShares UltraShort Yen

   59

Notes to Financial Statements

   64

 

-1-


Table of Contents

PROSHARES ULTRA DJ-UBS COMMODITY

STATEMENTS OF FINANCIAL CONDITION

 

     June 30, 2010
(unaudited)
   December 31, 2009

Assets

     

Cash

   $ 1,536,012    $  78,112

Short-term U.S. government and agency obligations (Note 3)
(cost $10,235,478 and $18,504,220, respectively)

     10,236,860      18,503,052

Unrealized appreciation on swap agreements

     541,400      1,177,968
             

Total assets

     12,314,272      19,759,132
             

Liabilities and shareholders’ equity

     

Liabilities

     

Management fee payable

     9,323      15,200
             

Total liabilities

     9,323      15,200
             

Shareholders’ equity

     

Paid-in capital

     10,839,183      14,857,362

Accumulated earnings (deficit)

     1,465,766      4,886,570
             

Total shareholders’ equity

     12,304,949      19,743,932
             

Total liabilities and shareholders’ equity

   $ 12,314,272    $ 19,759,132
             

Shares outstanding

     550,014      700,014
             

Net asset value per share

   $ 22.37    $ 28.21
             

Market value per share (Note 2)

   $ 22.16    $ 28.43
             

 

 

 

 

 

See accompanying notes to financial statements.

 

-2-


Table of Contents

PROSHARES ULTRA DJ-UBS COMMODITY

SCHEDULE OF INVESTMENTS

JUNE 30, 2010

(unaudited)

 

     Principal Amount    Value

Short-term U.S. government and agency obligations (83% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.260% due 08/26/10†

   $ 5,740,000    $ 5,738,465

0.195% due 09/09/10†

     2,500,000      2,499,257

0.230% due 10/07/10

     2,000,000      1,999,138
         

Total short-term U.S. government and agency obligations
(cost $10,235,478)

      $ 10,236,860
         

 

 

 

Swap Agreements^

 

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

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

   07/06/10    $    6,292,846    $ 138,031

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

   07/06/10    18,324,499      403,369
            
         $ 541,400
            

 

^ The positions and counterparties herein are as of June 30, 2010. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at anytime.

 

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

 

All or partial amount segregated as collateral for swap agreements.

 

 

 

See accompanying notes to financial statements.

 

-3-


Table of Contents

PROSHARES ULTRA DJ-UBS COMMODITY

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009

(unaudited)

 

     Three months
ended

June 30, 2010
    Three months
ended

June 30, 2009
    Six months
ended

June 30, 2010
    Six months
ended

June 30, 2009
 

Investment Income

        

Interest

   $ 6,549      $ 1,791      $ 11,318      $ 2,274   
                                

Expenses

        

Management fee

     28,875        30,449        60,926        26,503   

Offering costs

     —          19,322        —          38,430   
                                

Total expenses

     28,875        49,771        60,926        64,933   
                                

Net investment income (loss)

     (22,326     (47,980     (49,608     (62,659
                                

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Swap agreements

     (2,396,285     3,718,222        (2,738,144     3,755,997   

Short-term U.S. government and agency obligations

     89        —          966        —     
                                

Net realized gain (loss)

     (2,396,196     3,718,222        (2,737,178     3,755,997   
                                

Change in net unrealized appreciation/depreciation on

        

Swap agreements

     1,020,246        (1,093,594     (636,568     (2,077,981

Short-term U.S. government and agency obligations

     194        —          2,550        —     
                                

Change in net unrealized appreciation/depreciation

     1,020,440        (1,093,594     (634,018     (2,077,981
                                

Net realized and unrealized gain (loss)

     (1,375,756     2,624,628        (3,371,196     1,678,016   
                                

Net income (loss)

   $ (1,398,082   $ 2,576,648      $ (3,420,804   $ 1,615,357   
                                

Net income (loss) per weighted-average share

   $ (2.74   $ 2.73      $ (6.63   $ 2.51   
                                

Weighted-average shares outstanding

     509,904        942,322        516,312        643,108   
                                

 

 

 

.

See accompanying notes to financial statements.

 

-4-


Table of Contents

PROSHARES ULTRA DJ-UBS COMMODITY

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED

JUNE 30, 2010

(unaudited)

 

Shareholders’ equity, at December 31, 2009

   $ 19,743,932   

Addition of 250,000 shares

     5,958,070   

Redemption of 400,000 shares

     (9,976,249
        

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

     (4,018,179
        

Net investment income (loss)

     (49,608

Net realized gain (loss)

     (2,737,178

Change in net unrealized appreciation/depreciation

     (634,018
        

Net income (loss)

     (3,420,804
        

Shareholders’ equity, at June 30, 2010

   $ 12,304,949   
        

 

 

 

 

See accompanying notes to financial statements.

 

-5-


Table of Contents

PROSHARES ULTRA DJ-UBS COMMODITY

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2010 AND 2009

(unaudited)

 

     Six months
ended
June 30, 2010
    Six months
ended

June 30, 2009
 

Cash flow from operating activities

    

Net income (loss)

   $ (3,420,804   $ 1,615,357   

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

    

(Increase) in segregated cash balances for swap agreements

     —          (12,960,000

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

     8,268,742        (9,637,846

Change in unrealized appreciation/depreciation on investments

     634,018        2,077,981   

(Increase) Decrease in receivable from Sponsor

     —          26,503   

Amortization of offering cost

     —          38,430   

(Decrease) in management fee payable

     (5,877     —     
                

Net cash provided by (used in) operating activities

     5,476,079        (18,839,575
                

Cash flow from financing activities

    

Proceeds from addition of shares

     5,958,070        25,899,595   

Payment on shares redeemed

     (9,976,249     —     
                

Net cash provided by (used in) financing activities

     (4,018,179     25,899,595   
                

Net increase (decrease) in cash

     1,457,900        7,060,020   

Cash, beginning of period

     78,112        1,745,354   
                

Cash, end of period

   $ 1,536,012      $ 8,805,374   
                

 

 

 

See accompanying notes to financial statements.

 

-6-


Table of Contents

PROSHARES ULTRASHORT DJ-UBS COMMODITY

STATEMENTS OF FINANCIAL CONDITION

 

     June 30, 2010
(unaudited)
    December 31, 2009  

Assets

    

Cash

   $ 904,556      $ 90,383   

Segregated cash balances for swap agreements

     419,200        485,000   

Short-term U.S. government and agency obligations (Note 3)
(cost $2,498,793 and $2,568,287, respectively)

     2,499,060        2,568,141   
                

Total assets

     3,822,816        3,143,524   
                

Liabilities and shareholders’ equity

    

Liabilities

    

Management fee payable

     3,629        2,493   

Unrealized depreciation on swap agreements

     437,534        216,605   
                

Total liabilities

     441,163        219,098   
                

Shareholders’ equity

    

Paid-in capital

     5,193,421        5,049,843   

Accumulated earnings (deficit)

     (1,811,768     (2,125,417
                

Total shareholders’ equity

     3,381,653        2,924,426   
                

Total liabilities and shareholders’ equity

   $ 3,822,816      $ 3,143,524   
                

Shares outstanding

     200,014        200,014   

Net asset value per share

   $ 16.91      $ 14.62   
                

Market value per share (Note 2)

   $ 17.01      $ 14.65   

 

 

 

 

See accompanying notes to financial statements.

 

-7-


Table of Contents

PROSHARES ULTRASHORT DJ-UBS COMMODITY

SCHEDULE OF INVESTMENTS

JUNE 30, 2010

(unaudited)

 

     Principal Amount    Value

Short-term U.S. government and agency obligations (74% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.260% due 08/26/10†

   $ 1,000,000    $ 999,733

0.190% due 09/23/10†

     1,000,000      999,631

0.205% due 11/04/10

     500,000      499,696
         

Total short-term U.S. government and agency obligations
(cost $2,498,793)

      $ 2,499,060
         

 

 

 

Swap Agreements^

 

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

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

   07/06/10    $ (1,504,460   $ (107,599

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

   07/06/10      (5,246,244     (329,935
             
          $(437,534)   
             

 

^ The positions and counterparties herein are as of June 30, 2010. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at anytime.

 

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

 

All or partial amount segregated as collateral for swap agreements.

 

 

 

 

See accompanying notes to financial statements.

 

-8-


Table of Contents

PROSHARES ULTRASHORT DJ-UBS COMMODITY

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009

(unaudited)

 

     Three months
ended
June 30, 2010
    Three months
ended
June 30, 2009
    Six months
ended
June 30, 2010
    Six months
ended

June 30, 2009
 

Investment Income

        

Interest

   $ 1,438      $ 154      $ 2,318      $ 390   
                                

Expenses

        

Management fee

     10,734        —          19,491        —     

Offering costs

     —          77,243        —          153,637   

Limitation by Sponsor

     —          (71,154     —          (140,717
                                

Total expenses

     10,734        6,089        19,491        12,920   
                                

Net investment income (loss)

     (9,296     (5,935     (17,173     (12,530
                                

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Swap agreements

     688,684        (1,068,161     551,420        (1,079,538

Short-term U.S. government and agency obligations

     —          —          (82     —     
                                

Net realized gain (loss)

     688,684        (1,068,161     551,338        (1,079,538
                                

Change in net unrealized appreciation/depreciation on

        

Swap agreements

     (548,694     340,661        (220,929     472,159   

Short-term U.S. government and agency obligations

     36        —          413        —     
                                

Change in net unrealized appreciation/depreciation

     (548,658     340,661        (220,516     472,159   
                                

Net realized and unrealized gain (loss)

     140,026        (727,500     330,822        (607,379
                                

Net income (loss)

   $ 130,730      $ (733,435   $ 313,649      $ (619,909
                                

Net income (loss) per weighted-average share

   $ 0.47      $ (6.54   $ 1.21      $ (5.84
                                

Weighted-average shares outstanding

     277,487        112,102        258,854        106,091   
                                

 

 

 

See accompanying notes to financial statements.

 

-9-


Table of Contents

PROSHARES ULTRASHORT DJ-UBS COMMODITY

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED

JUNE 30, 2010

(unaudited)

 

Shareholders’ equity, at December 31, 2009

   $ 2,924,426   

Addition of 200,000 shares

     3,370,174   

Redemption of 200,000 shares

     (3,226,596
        

Net addition (redemption) of 0 shares

     143,578   
        

Net investment income (loss)

     (17,173

Net realized gain (loss)

     551,338   

Change in net unrealized appreciation/depreciation

     (220,516
        

Net income (loss)

     313,649   
        

Shareholders’ equity, at June 30, 2010

   $ 3,381,653   
        

 

 

 

 

See accompanying notes to financial statements.

 

-10-


Table of Contents

PROSHARES ULTRASHORT DJ-UBS COMMODITY

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2010 AND 2009

(unaudited)

 

     Six months
ended
June 30, 2010
    Six months
ended
June 30, 2009
 

Cash flow from operating activities

    

Net income (loss)

   $ 313,649      $ (619,909

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

    

Decrease (Increase) in segregated cash balances for swap agreements

     65,800        (790,000

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

     69,494        (1,064,989

Change in unrealized appreciation/depreciation on investments

     220,516        (472,159

(Increase) in receivable from Sponsor

     —          (140,717

Amortization of offering cost

     —          153,637   

Increase (Decrease) in management fee payable

     1,136        —     
                

Net cash provided by (used in) operating activities

     670,595        (2,934,137
                

Cash flow from financing activities

    

Proceeds from addition of shares

     3,370,174        3,165,714   

Payment on shares redeemed

     (3,226,596     —     
                

Net cash provided by (used in) financing activities

     143,578        3,165,714   
                

Net increase (decrease) in cash

     814,173        231,577  

Cash, beginning of period

     90,383        1,579,140   
                

Cash, end of period

   $ 904,556      $ 1,810,717   
                

 

 

 

 

See accompanying notes to financial statements.

 

-11-


Table of Contents

PROSHARES ULTRA DJ-UBS CRUDE OIL

STATEMENTS OF FINANCIAL CONDITION

 

     June 30, 2010
(unaudited)
   December 31, 2009

Assets

     

Cash

   $ 8,052,003    $ 80,936

Segregated cash balances with brokers for futures contracts

     20,899,564      13,574,925

Short-term U.S. government and agency obligations (Note 3)
(cost $446,082,069 and $323,044,324, respectively)

     446,105,615      323,026,067

Unrealized appreciation on swap agreements

     22,463,244      21,129,076

Receivable from capital shares sold

     6,742,296      —  

Receivable on open futures contracts

     —        1,466,444
             

Total assets

     504,262,722      359,277,448
             

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     2,585,828      35,195,574

Management fee payable

     424,723      262,204
             

Total liabilities

     3,010,551      35,457,778
             

Shareholders’ equity

     

Paid-in capital

     387,487,874      190,554,540

Accumulated earnings (deficit)

     113,764,297      133,265,130
             

Total shareholders’ equity

     501,252,171      323,819,670
             

Total liabilities and shareholders’ equity

   $ 504,262,722    $ 359,277,448
             

Shares outstanding

     52,050,014      25,650,014
             

Net asset value per share

   $ 9.63    $ 12.62
             

Market value per share (Note 2)

   $ 9.53    $ 12.68
             

 

 

 

See accompanying notes to financial statements.

 

-12-


Table of Contents

PROSHARES ULTRA DJ-UBS CRUDE OIL

SCHEDULE OF INVESTMENTS

JUNE 30, 2010

(unaudited)

 

     Principal Amount    Value

Short-term U.S. government and agency obligations (89% of shareholders’ equity)

     

U.S. Cash Management Bills:

     

0.077% due 07/15/10†

   $ 81,100,000    $ 81,097,056

U.S. Treasury Bills:

     

0.150% due 07/22/10

     22,000,000      21,998,348

0.050% due 07/29/10

     49,000,000      48,993,748

0.185% due 08/26/10

     63,650,000      63,632,980

0.160% due 09/09/10

     49,000,000      48,985,442

0.220% due 09/16/10†

     24,000,000      23,992,147

0.230% due 10/07/10†

     10,000,000      9,995,688

0.200% due 10/21/10†

     49,000,000      48,975,828

0.208% due 11/04/10†

     61,000,000      60,962,936

0.220% due 11/18/10†

     30,000,000      29,978,574

0.286% due 12/16/10†

     7,500,000      7,492,868
         

Total short-term U.S. government and agency obligations
(cost $446,082,069)

      $ 446,105,615
         

 

 

 

Futures Contracts Purchased

 

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

Crude Oil – NYMEX, expires September 2010

   4,598    $ 350,183,680    $ 1,499,120

Swap Agreements^

 

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

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

   07/06/10    $ 240,847,937    $ 9,836,917

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

   07/06/10      411,408,299      12,626,327
            
         $ 22,463,244
            

 

^ The positions and counterparties herein are as of June 30, 2010. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at anytime.

 

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

 

All or partial amount segregated as collateral for swap agreements.

 

 

See accompanying notes to financial statements.

 

-13-


Table of Contents

PROSHARES ULTRA DJ-UBS CRUDE OIL

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009

(unaudited)

 

     Three months
ended

June 30, 2010
    Three months
ended

June 30, 2009
    Six months
ended

June 30, 2010
    Six months
ended

June 30, 2009
 

Investment Income

        

Interest

   $ 132,798      $ 36,106      $ 174,054      $ 69,821   
                                

Expenses

        

Management fee

     841,537        689,780        1,445,462        1,399,471   

Brokerage commissions

     51,622        54,556        79,965        186,506   

Offering costs

     —          38,627        —          76,829   
                                

Total expenses

     893,159        782,963        1,525,427        1,662,806   
                                

Net investment income (loss)

     (760,361     (746,857     (1,351,373     (1,592,985
                                

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Futures contracts

     (11,447,341     85,053,189        8,078,781        41,331,968   

Swap agreements

     (45,766,422     76,735,007        (12,270,907     39,216,145   

Short-term U.S. government and agency obligations

     2,683        —          45,375        —     
                                

Net realized gain (loss)

     (57,211,080     161,788,196        (4,146,751     80,548,113   
                                

Change in net unrealized appreciation/depreciation on

        

Futures contracts

     (9,058,300     (22,476,590     (15,378,680     (16,612,830

Swap agreements

     17,726,009        20,557,303        1,334,168        4,755,439   

Short-term U.S. government and agency obligations

     18,945        —          41,803        —     
                                

Change in net unrealized appreciation/depreciation

     8,686,654        (1,919,287     (14,002,709     (11,857,391
                                

Net realized and unrealized gain (loss)

     (48,524,426     159,868,909        (18,149,460     68,690,722   
                                

Net income (loss)

   $ (49,284,787   $ 159,122,052      $ (19,500,833   $ 67,097,737   
                                

Net income (loss) per weighted-average share

   $ (1.44   $ 5.11      $ (0.70   $ 1.97   
                                

Weighted-average shares outstanding

     34,243,421        31,169,794        28,033,992        34,069,075   
                                

 

 

See accompanying notes to financial statements.

 

-14-


Table of Contents

PROSHARES ULTRA DJ-UBS CRUDE OIL

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED

JUNE 30, 2010

(unaudited)

 

Shareholders’ equity, at December 31, 2009

   $ 323,819,670   

Addition of 68,650,000 shares

     702,031,785   

Redemption of 42,250,000 shares

     (505,098,451
        

Net addition (redemption) of 26,400,000 shares

     196,933,334   
        

Net investment income (loss)

     (1,351,373

Net realized gain (loss)

     (4,146,751

Change in net unrealized appreciation/depreciation

     (14,002,709
        

Net income (loss)

     (19,500,833
        

Shareholders’ equity, at June 30, 2010

   $ 501,252,171   
        

 

 

 

 

 

See accompanying notes to financial statements.

 

-15-


Table of Contents

PROSHARES ULTRA DJ-UBS CRUDE OIL

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2010 AND 2009

(unaudited)

 

     Six months
ended
June 30, 2010
    Six months
ended
June 30, 2009
 

Cash flow from operating activities

    

Net income (loss)

   $ (19,500,833   $ 67,097,737   

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

    

(Increase) in segregated cash balances for swap agreements

     —          (56,600,000

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

     (7,324,639     20,120,527   

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

     (123,037,745     (105,996,361

Change in unrealized appreciation/depreciation on investments

     (1,375,971     (4,755,439

Decrease in receivable on futures contracts

     1,466,444        20,527,738   

(Increase) Decrease in receivable from Sponsor

     —          16,192   

Amortization of offering cost

     —          76,829   

Increase (Decrease) in management fee payable

     162,519        —     

(Decrease) Increase in payable to Sponsor

     —          538,361   
                

Net cash provided by (used in) operating activities

     (149,610,225     (58,974,416
                

Cash flow from financing activities

    

Proceeds from addition of shares

     695,289,489        754,505,680   

Payment on shares redeemed

     (537,708,197     (682,567,291
                

Net cash provided by (used in) financing activities

     157,581,292        71,938,389   
                

Net increase (decrease) in cash

     7,971,067        12,963,973   

Cash, beginning of period

     80,936        40,341,120   
                

Cash, end of period

     $    8,052,003        $    53,305,093   
                

 

 

 

See accompanying notes to financial statements.

 

-16-


Table of Contents

PROSHARES ULTRASHORT DJ-UBS CRUDE OIL

STATEMENTS OF FINANCIAL CONDITION

 

     June 30, 2010
(unaudited)
   December 31, 2009  

Assets

     

Cash

   $ 23,305,497    $ 75,409   

Segregated cash balances for swap agreements

     387,100      —     

Segregated cash balances with brokers for futures contracts

     2,252,813      4,162,725   

Short-term U.S. government and agency obligations (Note 3)
(cost $31,120,176 and $66,498,959, respectively)

     31,124,437      66,495,308   

Receivable from capital shares sold

     —        8,244,946  

Receivable on open futures contracts

     417,984      —     
               

Total assets

     57,487,831      78,978,388  
               

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     4,527,290      —     

Payable on open futures contracts

     —        1,271,069   

Management fee payable

     33,697      68,204   

Unrealized depreciation on swap agreements

     1,600,736      982,489   
               

Total liabilities

     6,161,723      2,321,762   
               

Shareholders’ equity

     

Paid-in capital

     42,638,623      94,438,947   

Accumulated earnings (deficit)

     8,687,485      (17,782,321
               

Total shareholders’ equity

     51,326,108      76,656,626   
               

Total liabilities and shareholders’ equity

   $ 57,487,831    $ 78,978,388   
               

Shares outstanding

     3,400,014      5,600,014   
               

Net asset value per share

   $ 15.10    $ 13.69   
               

Market value per share (Note 2)

   $ 15.24    $ 13.65   
               

 

 

 

See accompanying notes to financial statements.

 

-17-


Table of Contents

PROSHARES ULTRASHORT DJ-UBS CRUDE OIL

SCHEDULE OF INVESTMENTS

JUNE 30, 2010

(unaudited)

 

     Principal Amount    Value

Short-term U.S. government and agency obligations (61% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.260% due 08/26/10†

   $ 2,140,000    $ 2,139,428

0.195% due 09/09/10†

     14,000,000      13,995,840

0.200% due 11/04/10†

     10,000,000      9,993,924

0.286% due 12/16/10†

     5,000,000      4,995,245
         

Total short-term U.S. government and agency obligations
(cost $31,120,176)

      $ 31,124,437
         

 

 

 

Futures Contracts Sold

 

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

Crude Oil – NYMEX, expires September 2010

   445    $ 33,891,200      $ 802,030   

Swap Agreements^

 

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

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

   07/06/10    $ (26,682,771   $ (398,913

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

   07/06/10      (42,068,224     (1,201,823
             
        $ (1,600,736
             

 

^ The positions and counterparties herein are as of June 30, 2010. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at anytime.

 

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

 

All or partial amount segregated as collateral for swap agreements.

 

 

See accompanying notes to financial statements.

 

-18-


Table of Contents

PROSHARES ULTRASHORT DJ-UBS CRUDE OIL

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009

(unaudited)

 

     Three months
ended
June 30, 2010
    Three months
ended

June 30, 2009
    Six months
ended
June 30, 2010
    Six months
ended

June 30, 2009
 

Investment Income

        

Interest

   $ 33,056      $ 7,498      $ 55,494      $ 9,389   
                                

Expenses

        

Management fee

     189,102        79,934        406,784        62,584   

Brokerage commissions

     15,543        19,379        27,722        53,069   

Offering costs

     —          77,243        —          153,637   
                                

Total expenses

     204,645        176,556        434,506        269,290   
                                

Net investment income (loss)

     (171,589     (169,058     (379,012     (259,901
                                

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Futures contracts

     5,375,460        (13,729,760     5,001,258        (10,237,821

Swap agreements

     16,625,026        (16,070,328     18,583,440        (16,070,328

Short-term U.S. government and agency obligations

     7,620        —          8,525        —     
                                

Net realized gain (loss)

     22,008,106        (29,800,088     23,593,223        (26,308,149
                                

Change in net unrealized appreciation/depreciation on

        

Futures contracts

     3,248,810        925,020        3,865,930        4,645,600   

Swap agreements

     1,175,687        (1,780,068     (618,247     (1,858,544

Short-term U.S. government and agency obligations

     1,417        —          7,912        —     
                                

Change in net unrealized appreciation/depreciation

     4,425,914        (855,048     3,255,595        2,787,056   
                                

Net realized and unrealized gain (loss)

     26,434,020        (30,655,136     26,848,818        (23,521,093
                                

Net income (loss)

   $ 26,262,431      $ (30,824,194   $ 26,469,806      $ (23,780,994
                                

Net income (loss) per weighted-average share

   $ 4.19      $ (9.38   $ 4.05      $ (11.77
                                

Weighted-average shares outstanding

     6,263,201        3,286,278        6,542,279        2,019,904   
                                

 

 

See accompanying notes to financial statements.

 

-19-


Table of Contents

PROSHARES ULTRASHORT DJ-UBS CRUDE OIL

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED

JUNE 30, 2010

(unaudited)

 

Shareholders’ equity, at December 31, 2009

   $ 76,656,626   

Addition of 18,350,000 shares

     237,147,759   

Redemption of 20,550,000 shares

     (288,948,083
        

Net addition (redemption) of (2,200,000) shares

     (51,800,324
        

Net investment income (loss)

     (379,012

Net realized gain (loss)

     23,593,223   

Change in net unrealized appreciation/depreciation

     3,255,595   
        

Net income (loss)

     26,469,806   
        

Shareholders’ equity, at June 30, 2010

   $ 51,326,108   
        

 

 

 

 

See accompanying notes to financial statements.

 

-20-


Table of Contents

PROSHARES ULTRASHORT DJ-UBS CRUDE OIL

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2010 AND 2009

(unaudited)

 

     Six months
ended

June 30, 2010
    Six months
ended

June 30, 2009
 

Cash flow from operating activities

    

Net income (loss)

   $ 26,469,806      $ (23,780,994

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

    

(Increase) in segregated cash balances for swap agreements

     (387,100     (37,840,000

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

     1,909,912        (3,778,675

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

     35,378,783        (57,482,866

Change in unrealized appreciation/depreciation on investments

     610,335        1,858,544   

(Increase) in receivable on futures contracts

     (417,984     —     

(Increase) Decrease in receivable from Sponsor

     —          53,143   

Amortization of offering cost

     —          153,637   

(Decrease) in management fee payable

     (34,507     —     

(Decrease) Increase in payable to Sponsor

     —          9,441   

(Decrease) in payable on futures contracts

     (1,271,069     (4,265,898
                

Net cash provided by (used in) operating activities

     62,258,176        (125,073,668
                

Cash flow from financing activities

    

Proceeds from addition of shares

     245,392,705        337,112,487   

Payment on shares redeemed

     (284,420,793     (195,430,244
                

Net cash provided by (used in) financing activities

     (39,028,088     141,682,243   
                

Net increase (decrease) in cash

     23,230,088        16,608,575   

Cash, beginning of period

     75,409        7,925,214   
                

Cash, end of period

   $ 23,305,497      $ 24,533,789   
                

 

 

 

See accompanying notes to financial statements.

 

-21-


Table of Contents

PROSHARES SHORT DJ-UBS NATURAL GAS*

STATEMENT OF FINANCIAL CONDITION

JUNE 30, 2010

(unaudited)

 

Assets

  

Cash

   $ 200
      

Total assets

   $ 200
      

Shareholders’ equity

  

Paid-in capital

   $ 200
      

Total shareholders’ equity

   $ 200
      

 

* See Note 1.

 

 

 

 

See accompanying notes to financial statements.

 

-22-


Table of Contents

PROSHARES ULTRA GOLD

STATEMENTS OF FINANCIAL CONDITION

 

     June 30, 2010
(unaudited)
   December 31, 2009

Assets

     

Cash

   $ 19,159,842    $ 96,468

Segregated cash balances with brokers for futures contracts

     652,358      480,837

Short-term U.S. government and agency obligations (Note 3)
(cost $195,418,791 and $168,088,591, respectively)

     195,430,393      168,085,670

Receivable on open futures contracts

     —        32,930
             

Total assets

     215,242,593      168,695,905
             

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     —        6,835,057

Management fee payable

     160,765      149,879

Unrealized depreciation on forward agreements

     5,757,565      5,234,260
             

Total liabilities

     5,918,330      12,219,196
             

Shareholders’ equity

     

Paid-in capital

     131,021,098      120,971,898

Accumulated earnings (deficit)

     78,303,165      35,504,811
             

Total shareholders’ equity

     209,324,263      156,476,709
             

Total liabilities and shareholders’ equity

   $ 215,242,593    $ 168,695,905
             

Shares outstanding

     3,750,014      3,550,014
             

Net asset value per share

   $ 55.82    $ 44.08
             

Market value per share (Note 2)

   $ 55.83    $ 44.68
             

 

 

 

See accompanying notes to financial statements.

 

-23-


Table of Contents

PROSHARES ULTRA GOLD

SCHEDULE OF INVESTMENTS

JUNE 30, 2010

(unaudited)

 

     Principal Amount    Value

Short-term U.S. government and agency obligations (93% of shareholders’ equity)

     

U.S. Cash Management Bills:

     

0.107% due 07/15/10

   $ 12,000,000    $ 11,999,564

U.S. Treasury Bills:

     

0.150% due 07/22/10

     11,000,000      10,999,174

0.120% due 07/29/10

     21,000,000      20,997,320

0.260% due 08/26/10†

     5,500,000      5,498,529

0.181% due 09/09/10†

     44,000,000      43,986,928

0.220% due 09/16/10

     4,000,000      3,998,691

0.190% due 09/23/10

     14,500,000      14,494,651

0.185% due 09/30/10

     24,500,000      24,489,281

0.230% due 10/07/10†

     13,000,000      12,994,395

0.150% due 10/14/10†

     12,000,000      11,994,627

0.204% due 11/04/10†

     20,000,000      19,987,848

0.258% due 11/18/10†

     4,000,000      3,997,143

0.210% due 11/26/10†

     10,000,000      9,992,242
         

Total short-term U.S. government and agency obligations
(cost $195,418,791)

      $ 195,430,393
         

 

 

 

Futures Contracts Purchased

 

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

Gold Futures – COMEX, expires August 2010

       116    $ 14,452,440    $ 124,570   

Forward Agreements^

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

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

  07/06/10    $ 37,420    $ 46,554,222    $ (640,540

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

  07/06/10      285,800      355,563,780      (5,117,025
                
           $ (5,757,565
                

 

^ The positions and counterparties herein are as of June 30, 2010. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at anytime.

 

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

 

All or partial amount segregated as collateral for forward agreements.

 

 

See accompanying notes to financial statements.

 

-24-


Table of Contents

PROSHARES ULTRA GOLD

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009

(unaudited)

 

     Three months
ended
June 30, 2010
    Three months
ended
June 30, 2009
    Six months
ended
June 30, 2010
    Six months
ended

June 30, 2009
 

Investment Income

        

Interest

   $ 77,349      $ 16,032      $ 102,169      $ 25,506   
                                

Expenses

        

Management fee

     447,194        258,045        830,426        386,087   

Brokerage commissions

     1,067        1,239        2,071        2,521   

Offering costs

     —          77,244        —          153,638   
                                

Total expenses

     448,261        336,528        832,497        542,246   
                                

Net investment income (loss)

     (370,912     (320,496     (730,328     (516,740
                                

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Futures contracts

     984,644        223,390        905,501        353,866   

Forward agreements

     45,292,173        (953,897     42,807,434        (1,333,346

Short-term U.S. government and agency obligations

     —          —          5,759        —     
                                

Net realized gain (loss)

     46,276,817        (730,507     43,718,694        (979,480
                                

Change in net unrealized appreciation/depreciation on

        

Futures contracts

     62,390        65,909        318,770        37,630   

Forward agreements

     (8,015,828     2,738,924        (523,305     243,532   

Short-term U.S. government and agency obligations

     13,222        —          14,523        —     
                                

Change in net unrealized appreciation/depreciation

     (7,940,216     2,804,833        (190,012     281,162   
                                

Net realized and unrealized gain (loss)

     38,336,601        2,074,326        43,528,682        (698,318
                                

Net income (loss)

   $ 37,965,689      $ 1,753,830      $ 42,798,354      $ (1,215,058
                                

Net income (loss) per weighted-average share

   $ 10.43      $ 0.41      $ 11.79      $ (0.36
                                

Weighted-average shares outstanding

     3,640,124        4,273,640        3,630,125        3,417,417   
                                

 

 

See accompanying notes to financial statements.

 

-25-


Table of Contents

PROSHARES ULTRA GOLD

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2010

(unaudited)

 

Shareholders’ equity, at December 31, 2009

   $  156,476,709   

Addition of 1,150,000 shares

     55,273,217   

Redemption of 950,000 shares

     (45,224,017
        

Net addition (redemption) of 200,000 shares

     10,049,200   
        

Net investment income (loss)

     (730,328

Net realized gain (loss)

     43,718,694   

Change in net unrealized appreciation/depreciation

     (190,012
        

Net income (loss)

     42,798,354   
        

Shareholders’ equity, at June 30, 2010

   $ 209,324,263   
        

 

 

 

 

See accompanying notes to financial statements.

 

-26-


Table of Contents

PROSHARES ULTRA GOLD

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2010 AND 2009

(unaudited)

 

     Six months
ended
June 30, 2010
    Six months
ended
June 30, 2009
 

Cash flow from operating activities

    

Net income (loss)

   $ 42,798,354      $ (1,215,058

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

    

(Increase) in segregated cash balances for forward agreements

     —          (62,320,000

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

     (171,521     (345,113

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

     (27,330,200     (67,998,364

Change in unrealized appreciation/depreciation on investments

     508,782        (243,532

(Increase) in receivable due from counterparty

     —          (5,083,218

Decrease in receivable on futures contracts

     32,930        2,885   

(Increase) Decrease in receivable from Sponsor

     —          43,098   

Amortization of offering cost

     —          153,638   

Increase (Decrease) in management fee payable

     10,886        —     

(Decrease) Increase in payable to Sponsor

     —          342,989   
                

Net cash provided by (used in) operating activities

     15,849,231        (136,662,675
                

Cash flow from financing activities

    

Proceeds from addition of shares

     55,273,217        151,401,468   

Payment on shares redeemed

     (52,059,074     (16,570,607
                

Net cash provided by (used in) financing activities

     3,214,143        134,830,861   
                

Net increase (decrease) in cash

     19,063,374        (1,831,814

Cash, beginning of period

     96,468        23,435,796   
                

Cash, end of period

   $ 19,159,842      $ 21,603,982   
                

 

 

 

 

See accompanying notes to financial statements.

 

-27-


Table of Contents

PROSHARES SHORT GOLD*

STATEMENT OF FINANCIAL CONDITION

JUNE 30, 2010

(unaudited)

 

Assets

  

Cash

   $ 200
      

Total assets

   $ 200
      

Shareholders’ equity

  

Paid-in capital

   $ 200
      

Total shareholders’ equity

   $ 200
      

 

* See Note 1.

 

 

 

 

 

 

See accompanying notes to financial statements.

 

-28-


Table of Contents

PROSHARES ULTRASHORT GOLD

STATEMENTS OF FINANCIAL CONDITION

 

     June 30, 2010
(unaudited)
    December 31,
2009
 

Assets

    

Cash

   $ 900,576      $ 75,790   

Segregated cash balances for forward agreements

     409,500        —     

Segregated cash balances with brokers for futures contracts

     118,555        140,916   

Short-term U.S. government and agency obligations (Note 3)
(cost $68,576,880 and $66,312,955, respectively)

     68,580,846        66,310,764   

Unrealized appreciation on forward agreements

     1,762,644        2,144,062   
                

Total assets

     71,772,121        68,671,532   
                

Liabilities and shareholders’ equity

    

Liabilities

    

Payable for capital shares redeemed

     —          1,014,755   

Management fee payable

     56,489       53,966   
                

Total liabilities

     56,489       1,068,721   
                

Shareholders’ equity

    

Paid-in capital

     111,407,721        86,180,401   

Accumulated earnings (deficit)

     (39,692,089     (18,577,590
                

Total shareholders’ equity

     71,715,632        67,602,811   
                

Total liabilities and shareholders’ equity

   $ 71,772,121      $ 68,671,532   
                

Shares outstanding (Note 1)

     1,889,901        1,290,003   
                

Net asset value per share (Note 1)

   $ 37.95      $ 52.41   
                

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

   $ 37.95      $ 51.75   
                

 

 

 

See accompanying notes to financial statements.

 

-29-


Table of Contents

PROSHARES ULTRASHORT GOLD

SCHEDULE OF INVESTMENTS

JUNE 30, 2010

(unaudited)

 

     Principal Amount    Value

Short-term U.S. government and agency obligations (96% of shareholders’ equity)

     

U.S. Cash Management Bills:

     

0.044% due 07/15/10

   $ 14,000,000    $ 13,999,492

U.S. Treasury Bills:

     

0.150% due 07/22/10

     7,000,000      6,999,474

0.163% due 07/29/10

     6,000,000      5,999,234

0.260% due 08/26/10†

     9,700,000      9,697,406

0.180% due 09/09/10†

     7,500,000      7,497,772

0.190% due 09/23/10

     6,900,000      6,897,455

0.185% due 09/30/10†

     4,500,000      4,498,031

0.230% due 10/07/10†

     6,000,000      5,997,413

0.210% due 11/26/10

     7,000,000      6,994,569
         

Total short-term U.S. government and agency obligations
(cost $68,576,880)

      $ 68,580,846
         

 

 

 

Futures Contracts Sold

 

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

Gold Futures – COMEX, expires August 2010

   22    $ 2,740,980    $ (21,930

Forward Agreements^

 

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

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

   07/06/10    $ (14,798   $ (18,410,192   $ 250,973

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

   07/06/10      (98,800     (122,917,080     1,511,671
             
          $ 1,762,644
             

 

^ The positions and counterparties herein are as of June 30, 2010. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at anytime.

 

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

 

All or partial amount segregated as collateral for forward agreements.

 

See accompanying notes to financial statements.

 

-30-


Table of Contents

PROSHARES ULTRASHORT GOLD

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009

(unaudited)

 

     Three months
ended
June 30, 2010
    Three months
ended
June 30, 2009
    Six months
ended
June 30, 2010
    Six months
ended

June 30, 2009
 

Investment Income

        

Interest

   $ 26,319      $ 5,627      $ 39,753      $ 9,039   
                                

Expenses

        

Management fee

     152,203        40,340        314,538        37,026   

Brokerage commissions

     775        1,045        1,825        2,265   

Offering costs

     —          77,243        —          153,637   
                                

Total expenses

     152,978        118,628        316,363        192,928   
                                

Net investment income (loss)

     (126,659     (113,001     (276,610     (183,889
                                

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Futures contracts

     (422,725     (24,477     (314,318     (222,084

Forward agreements

     (18,270,102     (2,336,048     (20,089,396     (7,791,142

Short-term U.S. government and agency obligations

     53        —          2,156        —     
                                

Net realized gain (loss)

     (18,692,774     (2,360,525     (20,401,558     (8,013,226
                                

Change in net unrealized appreciation/depreciation on

        

Futures contracts

     (1,690     (19,724     (61,070     8,750   

Forward agreements

     2,688,728        (1,060,650     (381,418     14,716   

Short-term U.S. government and agency obligations

     2,175        —          6,157        —     
                                

Change in net unrealized appreciation/depreciation

     2,689,213        (1,080,374     (436,331     23,466   
                                

Net realized and unrealized gain (loss)

     (16,003,561     (3,440,899     (20,837,889     (7,989,760
                                

Net income (loss)

   $ (16,130,220   $ (3,553,900   $ (21,114,499   $ (8,173,649
                                

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

   $ (10.46   $ (5.70   $ (14.40   $ (16.29
                                

Weighted-average shares outstanding (Note 1)

     1,541,572        623,959        1,466,482        501,660   
                                

 

 

See accompanying notes to financial statements.

 

-31-


Table of Contents

PROSHARES ULTRASHORT GOLD

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED

JUNE 30, 2010

(unaudited)

 

Shareholders’ equity, at December 31, 2009

   $ 67,602,811   

Addition of 1,150,000 shares (Note 1)

     49,991,342   

Redemption of 550,102 shares (Note 1)

     (24,764,022
        

Net addition (redemption) of 599,898 shares (Note 1)

     25,227,320   
        

Net investment income (loss)

     (276,610

Net realized gain (loss)

     (20,401,558

Change in net unrealized appreciation/depreciation

     (436,331
        

Net income (loss)

     (21,114,499
        

Shareholders’ equity, at June 30, 2010

   $ 71,715,632   
        

 

 

 

 

 

See accompanying notes to financial statements.

 

-32-


Table of Contents

PROSHARES ULTRASHORT GOLD

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2010 AND 2009

(unaudited)

 

     Six months
ended
June 30, 2010
    Six months
ended
June 30, 2009
 

Cash flow from operating activities

    

Net income (loss)

   $ (21,114,499   $ (8,173,649

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

    

(Increase) in segregated cash balances for forward agreements

     (409,500     (20,460,000

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

     22,361        (192,195

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

     (2,263,925     (19,499,386

Change in unrealized appreciation/depreciation on investments

     375,261        (14,716

(Increase) Decrease in receivable due from counterparty

     —          1,845,084   

(Increase) in receivable on futures contracts

     —          (36,809

(Increase) Decrease in receivable from Sponsor

     —          37,026   

Amortization of offering cost

     —          153,637   

Increase (Decrease) in management fee payable

     2,523        —     

(Decrease) in payable on futures contracts

     —          (10,931
                

Net cash provided by (used in) operating activities

     (23,387,779     (46,351,939
                

Cash flow from financing activities

    

Proceeds from addition of shares

     49,991,342        88,548,995   

Payment on shares redeemed

     (25,778,777     (33,013,605
                

Net cash provided by (used in) financing activities

     24,212,565        55,535,390   
                

Net increase (decrease) in cash

     824,786        9,183,451   

Cash, beginning of period

     75,790        3,104,221   
                

Cash, end of period

   $ 900,576      $ 12,287,672   
                

 

 

 

 

See accompanying notes to financial statements.

 

-33-


Table of Contents

PROSHARES ULTRA SILVER

STATEMENTS OF FINANCIAL CONDITION

 

     June 30, 2010
(unaudited)
   December 31, 2009

Assets

     

Cash

   $ 17,214,196    $ 75,670

Segregated cash balances for forward agreements

     337,800      —  

Segregated cash balances with brokers for futures contracts

     823,500      928,138

Short-term U.S. government and agency obligations (Note 3)
(cost $170,008,132 and $157,779,376, respectively)

     170,026,348      157,772,073

Receivable on open futures contracts

     30,878      —  
             

Total assets

     188,432,722      158,775,881
             

Liabilities and shareholders’ equity

     

Liabilities

     

Payable for capital shares redeemed

     —        6,007,423

Management fee payable

     138,901      123,889

Unrealized depreciation on forward agreements

     7,217,691      7,228,187
             

Total liabilities

     7,356,592      13,359,499
             

Shareholders’ equity

     

Paid-in capital

     120,432,240      109,869,748

Accumulated earnings (deficit)

     60,643,890      35,546,634
             

Total shareholders’ equity

     181,076,130      145,416,382
             

Total liabilities and shareholders’ equity

   $ 188,432,722    $ 158,775,881
             

Shares outstanding

     2,850,014      2,550,014
             

Net asset value per share

   $ 63.54    $ 57.03
             

Market value per share (Note 2)

   $ 62.67    $ 56.15
             

 

 

 

See accompanying notes to financial statements.

 

-34-


Table of Contents

PROSHARES ULTRA SILVER

SCHEDULE OF INVESTMENTS

JUNE 30, 2010

(unaudited)

 

     Principal Amount    Value

Short-term U.S. government and agency obligations (94% of shareholders’ equity)

     

U.S. Cash Management Bills:

     

0.053% due 07/15/10

   $ 13,600,000    $ 13,599,506

U.S. Treasury Bills:

     

0.163% due 07/29/10

     9,700,000      9,698,762

0.260% due 08/26/10†

     31,600,000      31,591,550

0.191% due 09/09/10†

     20,000,000      19,994,058

0.190% due 09/23/10

     4,000,000      3,998,525

0.185% due 09/30/10

     3,500,000      3,498,469

0.230% due 10/07/10†

     14,700,000      14,693,661

0.207% due 11/04/10†

     45,000,000      44,972,658

0.220% due 11/18/10†

     20,000,000      19,985,716

0.210% due 11/26/10

     6,000,000      5,995,345

0.286% due 12/16/10

     2,000,000      1,998,098
         

Total short-term U.S. government and agency obligations
(cost $170,008,132)

      $ 170,026,348
         

 

 

 

 

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

Silver Futures – COMEX, expires September 2010

   122    $ 11,411,880    $ 111,235

 

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

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

   07/06/10    $ 4,720,800    $ 88,477,234    $ (1,815,115

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

   07/06/10      13,994,000      262,275,548      (5,402,576
                 
            $ (7,217,691
                 

 

^ The positions and counterparties herein are as of June 30, 2010. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at anytime.

 

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

 

All or partial amount segregated as collateral for forward agreements.

 

See accompanying notes to financial statements.

 

-35-


Table of Contents

PROSHARES ULTRA SILVER

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009

(unaudited)

 

     Three months
ended

June 30, 2010
    Three months
ended
June 30, 2009
    Six months
ended
June 30, 2010
    Six months
ended

June 30, 2009
 

Investment Income

        

Interest

   $ 80,805      $ 7,765      $ 117,250      $ 10,714   
                                

Expenses

        

Management fee

     419,415        148,006        791,851        199,948   

Brokerage commissions

     1,580        1,341        3,355        2,234   

Offering costs

     —          19,321        —          38,430   
                                

Total expenses

     420,995        168,668        795,206        240,612   
                                

Net investment income (loss)

     (340,190     (160,903     (677,956     (229,898
                                

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Futures contracts

     1,254,115        444,330        311,419        575,394   

Forward agreements

     31,635,413        4,954,519        24,739,760        7,677,696   

Short-term U.S. government and agency obligations

     492        —          7,983        —     
                                

Net realized gain (loss)

     32,890,020        5,398,849        25,059,162        8,253,090   
                                

Change in net unrealized appreciation/depreciation on

        

Futures contracts

     (974,170     (358,816     680,035        (388,285

Forward agreements

     (13,766,948     (2,659,464     10,496        (1,233,708

Short-term U.S. government and agency obligations

     12,122        —          25,519        —     
                                

Change in net unrealized appreciation/depreciation

     (14,728,996     (3,018,280     716,050        (1,621,993
                                

Net realized and unrealized gain (loss)

     18,161,024        2,380,569        25,775,212        6,631,097   
                                

Net income (loss)

   $ 17,820,834      $ 2,219,666      $ 25,097,256      $ 6,401,199   
                                

Net income (loss) per weighted-average share

   $ 6.25      $ 1.35      $ 8.74      $ 5.27   
                                

Weighted-average shares outstanding

     2,850,563        1,647,816        2,871,561        1,213,826   
                                

 

 

See accompanying notes to financial statements.

 

-36-


Table of Contents

PROSHARES ULTRA SILVER

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED

JUNE 30, 2010

(unaudited)

 

Shareholders’ equity, at December 31, 2009

   $ 145,416,382   

Addition of 1,350,000 shares

     73,802,200   

Redemption of 1,050,000 shares

     (63,239,708
        

Net addition (redemption) of 300,000 shares

     10,562,492   
        

Net investment income (loss)

     (677,956

Net realized gain (loss)

     25,059,162   

Change in net unrealized appreciation/depreciation

     716,050   
        

Net income (loss)

     25,097,256   
        

Shareholders’ equity, at June 30, 2010

   $ 181,076,130   
        

 

 

 

 

 

See accompanying notes to financial statements.

 

-37-


Table of Contents

PROSHARES ULTRA SILVER

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2010 AND 2009

(unaudited)

 

     Six months
ended

June 30, 2010
    Six months
ended

June 30, 2009
 

Cash flow from operating activities

    

Net income (loss)

   $ 25,097,256      $ 6,401,199   

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

    

(Increase) in segregated cash balances for forward agreements

     (337,800     (31,690,000

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

     104,638        (455,730

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

     (12,228,756     (30,999,293

Change in unrealized appreciation/depreciation on investments

     (36,015     1,233,708   

(Increase) in receivable due from counterparty

     —          (2,243,695

(Increase) Decrease in receivable on futures contracts

     (30,878     24,488   

(Increase) Decrease in receivable from Sponsor

     —          30,776   

Amortization of offering cost

     —          38,430   

Increase (Decrease) in management fee payable

     15,012        —     

(Decrease) Increase in payable to Sponsor

     —          155,604   
                

Net cash provided by (used in) operating activities

     12,583,457        (57,504,513
                

Cash flow from financing activities

    

Proceeds from addition of shares

     73,802,200        81,428,295   

Payment on shares redeemed

     (69,247,131     (19,880,349
                

Net cash provided by (used in) financing activities

     4,555,069        61,547,946   
                

Net increase (decrease) in cash

     17,138,526        4,043,433   

Cash, beginning of period

     75,670        8,641,327   
                

Cash, end of period

   $ 17,214,196      $ 12,684,760   
                

 

 

 

See accompanying notes to financial statements.

 

-38-


Table of Contents

PROSHARES ULTRASHORT SILVER

STATEMENTS OF FINANCIAL CONDITION

 

     June 30, 2010
(unaudited)
    December 31, 2009  

Assets

    

Cash

   $ 10,829,844      $ 78,312   

Segregated cash balances for forward agreements

     100        —     

Segregated cash balances with brokers for futures contracts

     222,750        447,653   

Short-term U.S. government and agency obligations (Note 3)
(cost $45,578,774 and $64,775,162, respectively)

     45,583,644        64,772,241   

Unrealized appreciation on forward agreements

     2,023,748        2,859,064   

Receivable from capital shares sold

     1,630,724        —     
                

Total assets

     60,290,810        68,157,270   
                

Liabilities and shareholders’ equity

    

Liabilities

    

Payable for capital shares redeemed

     —          3,588,515   

Payable on open futures contracts

     64,385        —     

Management fee payable

     40,767        52,610   
                

Total liabilities

     105,152        3,641,125   
                

Shareholders’ equity

    

Paid-in capital

     122,365,076        103,237,063   

Accumulated earnings (deficit)

     (62,179,418     (38,720,918
                

Total shareholders’ equity

     60,185,658        64,516,145   
                

Total liabilities and shareholders’ equity

   $ 60,290,810      $ 68,157,270   
                

Shares outstanding (Note 1)

     1,879,914        1,370,001   
                

Net asset value per share (Note 1)

   $ 32.02      $ 47.09   
                

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

   $ 32.46      $ 47.90   
                

 

 

 

See accompanying notes to financial statements.

 

-39-


Table of Contents

PROSHARES ULTRASHORT SILVER

SCHEDULE OF INVESTMENTS

JUNE 30, 2010

(unaudited)

 

     Principal Amount    Value

Short-term U.S. government and agency obligations (76% of shareholders’ equity)

     

U.S. Cash Management Bills:

     

0.040% due 07/15/10

   $ 4,500,000    $ 4,499,837

U.S. Treasury Bills:

     

0.260% due 08/26/10†

     11,700,000      11,696,872

0.183% due 09/09/10†

     9,500,000      9,497,178

0.220% due 09/16/10

     3,000,000      2,999,018

0.185% due 09/30/10†

     4,500,000      4,498,031

0.230% due 10/07/10†

     5,000,000      4,997,844

0.200% due 11/04/10†

     2,500,000      2,498,481

0.258% due 11/18/10†

     3,000,000      2,997,857

0.210% due 11/26/10†

     1,900,000      1,898,526
         

Total short-term U.S. government and agency obligations
(cost $45,578,774)

      $ 45,583,644
         

 

 

 

 

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

Silver Futures – COMEX, expires September 2010

   33    $ 3,086,820    $ (8,550

 

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

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

   07/06/10    $ (1,627,500   $ (30,502,605   $ 506,214

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

   07/06/10      (4,628,000     (86,737,976     1,517,534
             
          $ 2,023,748
             

 

^ The positions and counterparties herein are as of June 30, 2010. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at anytime.

 

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

 

All or partial amount segregated as collateral for forward agreements.

 

See accompanying notes to financial statements.

 

-40-


Table of Contents

PROSHARES ULTRASHORT SILVER

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009

(unaudited)

 

     Three months
ended

June 30, 2010
    Three months
ended
June 30, 2009
    Six months
ended

June 30, 2010
    Six months
ended

June 30, 2009
 

Investment Income

        

Interest

   $ 24,355      $ 3,994      $ 39,267      $ 5,161   
                                

Expenses

        

Management fee

     129,704        50,482        297,094        38,081   

Brokerage commissions

     1,235        1,379        1,892        2,019   

Offering costs

     —          38,627        —          76,829   
                                

Total expenses

     130,939        90,488        298,986        116,929   
                                

Net investment income (loss)

     (106,584     (86,494     (259,719     (111,768
                                

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Futures contracts

     (447,210     (117,274     (63,750     (186,571

Forward agreements

     (19,007,793     (4,317,999     (22,117,438     (5,122,612

Short-term U.S. government and agency obligations

     130        —          3,217        —     
                                

Net realized gain (loss)

     (19,454,873     (4,435,273     (22,177,971     (5,309,183
                                

Change in net unrealized appreciation/depreciation on

        

Futures contracts

     173,585        211,582        (193,285     214,095   

Forward agreements

     4,889,197        1,861,879        (835,316     1,193,780   

Short-term U.S. government and agency obligations

     2,701        —          7,791        —     
                                

Change in net unrealized appreciation/depreciation

     5,065,483        2,073,461        (1,020,810     1,407,875   
                                

Net realized and unrealized gain (loss)

     (14,389,390     (2,361,812     (23,198,781     (3,901,308
                                

Net income (loss)

   $ (14,495,974   $ (2,448,306   $ (23,458,500   $ (4,013,076
                                

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

   $ (9.44   $ (6.31   $ (15.20   $ (16.61
                                

Weighted-average shares outstanding (Note 1)

     1,535,428        388,298        1,543,669        241,548   
                                

 

 

See accompanying notes to financial statements.

 

-41-


Table of Contents

PROSHARES ULTRASHORT SILVER

STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE SIX MONTHS ENDED

JUNE 30, 2010

(unaudited)

 

Shareholders’ equity, at December 31, 2009

   $ 64,516,145   

Addition of 1,420,000 shares (Note 1)

     55,001,132   

Redemption of 910,087 shares (Note 1)

     (35,873,119
        

Net addition (redemption) of 509,913 shares (Note 1)

     19,128,013   
        

Net investment income (loss)

     (259,719

Net realized gain (loss)

     (22,177,971

Change in net unrealized appreciation/depreciation

     (1,020,810
        

Net income (loss)

     (23,458,500
        

Shareholders’ equity, at June 30, 2010

   $ 60,185,658   
        

 

 

 

 

See accompanying notes to financial statements.

 

-42-


Table of Contents

PROSHARES ULTRASHORT SILVER

STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED

JUNE 30, 2010 AND 2009

(unaudited)

 

     Six months
ended

June 30, 2010
    Six months
ended

June 30, 2009
 

Cash flow from operating activities

    

Net income (loss)

   $ (23,458,500   $ (4,013,076

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

    

(Increase) in segregated cash balances for forward agreements

     (100     (27,980,000

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

     224,903        (409,810

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

     19,196,388        (30,351,323

Change in unrealized appreciation/depreciation on investments

     827,525        (1,193,780

(Increase) Decrease in receivable due from counterparty

     —          2,293,957   

(Increase) Decrease in receivable from Sponsor

     —          38,081   

Amortization of offering cost

     —          76,829   

(Decrease) in management fee payable

     (11,843     —     

Increase (Decrease) in payable on futures contracts

     64,385        (5,171
                

Net cash provided by (used in) operating activities

     (3,157,242     (61,544,293
                

Cash flow from financing activities

    

Proceeds from addition of shares

     53,370,408        80,494,533   

Payment on shares redeemed

     (39,461,634     (13,231,208
                

Net cash provided by (used in) financing activities

     13,908,774        67,263,325   
                

Net increase (decrease) in cash

     10,751,532        5,719,032   

Cash, beginning of period

     78,312        992,121   
                

Cash, end of period

   $ 10,829,844      $ 6,711,153   
                

 

 

 

 

See accompanying notes to financial statements.

 

-43-


Table of Contents

PROSHARES ULTRA EURO

STATEMENTS OF FINANCIAL CONDITION

 

     June 30, 2010
(unaudited)
    December 31, 2009

Assets

    

Cash

   $ 9,773,269      $ 79,160

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

(cost $6,797,097 and $7,736,562, respectively)

     6,797,605        7,736,270
              

Total assets

     16,570,874        7,815,430
              

Liabilities and shareholders’ equity

    

Liabilities

    

Management fee payable

     11,834        6,315

Unrealized depreciation on foreign currency forward contracts

     229,998        277,258
              

Total liabilities

     241,832        283,573
              

Shareholders’ equity

    

Paid-in capital

     18,340,903        6,602,808

Accumulated earnings (deficit)

     (2,011,861     929,049
              

Total shareholders’ equity

     16,329,042        7,531,857
              

Total liabilities and shareholders’ equity

   $ 16,570,874      $ 7,815,430
              

Shares outstanding

     750,014        250,014
              

Net asset value per share

   $ 21.77      $ 30.13
              

Market value per share (Note 2)

   $ 21.76      $ 30.17
              

 

 

 

See accompanying notes to financial statements.

 

-44-


Table of Contents

PROSHARES ULTRA EURO

SCHEDULE OF INVESTMENTS

JUNE 30, 2010

(unaudited)

 

     Principal Amount    Value

Short-term U.S. government and agency obligations (42% of shareholders’ equity)

     

U.S. Treasury Bills:

     

0.260% due 08/26/10†

   $ 900,000    $ 899,759

0.178% due 09/09/10†

     3,000,000      2,999,109

0.185% due 09/30/10

     2,000,000      1,999,125

0.230% due 10/07/10

     900,000      899,612
         

Total short-term U.S. government and agency obligations
(cost $6,797,097)

      $ 6,797,605
         

 

 

 

Foreign Currency Forward Contracts^

 

    

Settlement

Date

  

Local

Currency

    Notional Amount
at Value (USD)
    Unrealized
Appreciation
(Depreciation)
 

Contracts to Purchase

         

Euro with Goldman Sachs International

   07/02/10    12,336,325      $ 15,086,098      $ (102,348

Euro with UBS AG

   07/02/10    14,965,800        18,301,685        (128,691

Euro with Goldman Sachs International

   07/16/10    11,770,325        14,393,937        (25 ,065

Euro with UBS AG

   07/16/10    14,939,500        18,269,522        (33,342
               
          $ (289,446
               

Contracts to Sell

         

Euro with Goldman Sachs International

   07/02/10    (12,336,325   $ (15,086,098   $ 26,297   

Euro with UBS AG

   07/02/10    (14,965,800     (18,301,685     33,151   
               
          $ 59,448   
               

 

^ The positions and counterparties herein are as of June 30, 2010. The Funds continually evaluate different counterparties for their transactions and counterparties are subject to change. New counterparties can be added at anytime.

 

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

 

 

 

See accompanying notes to financial statements.

 

-45-


Table of Contents

PROSHARES ULTRA EURO

STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009

(unaudited)

 

     Three months
ended

June 30, 2010
    Three months
ended

June 30, 2009
    Six months
ended

June 30, 2010
    Six months
ended

June  30, 2009
 

Investment Income

        

Interest

   $ 4,342      $ 819      $ 5,822      $ 1,509   
                                

Expenses

        

Management fee

     30,631        —          49,931        —     

Offering costs

     —          19,321        —          38,430   

Limitation by Sponsor

     —          (4,710     —          (12,053
                                

Total expenses

     30,631        14,611        49,931        26,377   
                                

Net investment income (loss)

     (26,289     (13,792     (44,109     (24,868
                                

Realized and unrealized gain (loss) on investment activity

        

Net realized gain (loss) on

        

Foreign currency forward contracts

     (2,103,157     346,506        (2,945,250     161,220   

Short-term U.S. government and agency obligations

     (46     —          389        —     
                                

Net realized gain (loss)

     (2,103,203     346,506        (2,944,861     161,220   
                                

Change in net unrealized appreciation/depreciation on

        

Foreign currency forward contracts

     88,388        274,806        47,260        124,559   

Short-term U.S. government and agency obligations

     451