NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies followed by each Fund, as applicable, in preparation of its financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Certain prior year amounts have been reclassified to conform to the current year presentation.

The accompanying unaudited financial statements were prepared in accordance with GAAP for interim financial information and with the instructions for Form 10-Q and the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). In the opinion of management, all material adjustments, consisting only of normal recurring adjustments, considered necessary for a fair statement of the interim period financial statements have been made. Interim period results are not necessarily indicative of results for a full-year period. These financial statements and the notes thereto should be read in conjunction with the Trust’s and the Funds’ financial statements included in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2012, as filed with the SEC on March 1, 2013.

Use of Estimates & Indemnifications

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

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

Basis of Presentation

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

Statement of Cash Flows

The cash amount shown in the Statements of Cash Flows is the amount reported as cash in the Statement of Financial Condition dated March 31, 2013, and represents non-segregated cash with the custodian and does not include short-term investments.

Final Net Asset Value for Fiscal Period

The times of the calculation of the Leveraged Funds’, the Short Euro Fund’s, the Geared VIX Funds’ and the Matching VIX Funds’ final net asset value for creation and redemption of fund Shares for the three months ended March 31, 2013 were as follows. All times are Eastern Standard Time:


	NAV Calculation Time		NAV Calculation Date
UltraShort Silver, Ultra Silver		7:00 A.M.		March 28
UltraShort Gold, Ultra Gold		10:00 A.M.		March 28
UltraShort DJ-UBS Crude Oil, Ultra DJ-UBS Crude Oil		2:30 P.M.		March 28
UltraShort DJ-UBS Natural Gas, Ultra DJ-UBS Natural Gas		2:30 P.M.		March 28
UltraShort DJ-UBS Commodity, Ultra DJ-UBS Commodity		3:00 P.M.		March 28
UltraShort Australian Dollar, Ultra Australian Dollar		4:00 P.M.		March 28
Short Euro, UltraShort Euro, Ultra Euro		4:00 P.M.		March 28
UltraShort Yen, Ultra Yen		4:00 P.M.		March 28
VIX Short-Term Futures ETF, Ultra VIX Short-Term Futures ETF, Short VIX Short-Term Futures ETF		4:15 P.M.		March 28
VIX Mid-Term Futures ETF		4:15 P.M.		March 28

The Funds’ per Share NAV was calculated on March 28, 2013 due to a market holiday on Friday, March 29, 2013.

Although the Leveraged Funds’, the Short Euro Fund’s, the Geared VIX Funds’ and the Matching VIX Funds’ Shares may continue to trade on secondary markets subsequent to the calculation of the final NAV, these times represent the final opportunity to transact in creation or redemption units for the three months ended March 31, 2013.

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

For financial reporting purposes, the Leveraged Funds, the Short Euro Fund, the VIX Funds value transactions based upon the final closing price in their primary markets. Accordingly, the investment valuations in these financial statements may differ from those used in the calculation of certain Leveraged Funds’, the Short Euro Fund’s and VIX Funds’ final creation/redemption NAV for the three months ended March 31, 2013.

Investment Valuation

Short-term investments are valued at amortized cost which approximates fair value for daily NAV purposes. For financial reporting purposes, short-term investments are valued at their market price using information provided by a third-party pricing service or market quotations. In each of these situations, valuations are typically categorized as Level I in the fair value hierarchy.

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

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

Fair Value of Financial Instruments

The Funds disclose the fair value of their investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The disclosure requirements establish a fair value hierarchy that distinguishes between: (1) market participant assumptions developed based on market data obtained from sources independent of the Funds (observable inputs); and (2) the Funds’ own assumptions about market participant assumptions developed based on the best information available under the circumstances (unobservable inputs). The three levels defined by the disclosure requirements hierarchy are as follows:

Level I – Quoted prices (unadjusted) in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level II – Inputs other than quoted prices included within Level I that are observable for the asset or liability, either directly or indirectly. Level II assets include the following: quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).

Level III – Unobservable pricing input at the measurement date for the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available.

In some instances, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. The level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest input level that is significant to the fair value measurement in its entirety.

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

The following table summarizes the valuation of investments at March 31, 2013 using the fair value hierarchy:


	Level I - Quoted Prices					Level II - Other Significant Observable Inputs
	Short-Term U.S. Government and Agencies		Futures Contracts			Forward Agreements			Foreign Currency Forward Contracts			Swap Agreements			Total
UltraShort DJ-UBS Commodity	$	3,062,812	$	—		$	—		$	—		$	(92,919	)	$	2,969,893
UltraShort DJ-UBS Crude Oil		145,473,612		231,524			—			—			(11,368,414	)		134,336,722
UltraShort DJ-UBS Natural Gas		21,193,216		(3,496,753	)		—			—			—			17,696,463
UltraShort Gold		108,157,077		(1,410	)		(3,246,282	)		—			—			104,909,385
UltraShort Silver		105,347,243		27,520			255,288			—			—			105,630,051
Short Euro		3,371,965		61,713			—			—			—			3,433,678
UltraShort Australian Dollar		3,329,970		(109,570	)		—			—			—			3,220,400
UltraShort Euro		507,190,542		—			—			13,665,449			—			520,855,991
UltraShort Yen		463,617,695		—			—			2,732,626			—			466,350,321
Ultra DJ-UBS Commodity		3,350,652		—			—			—			115,047			3,465,699
Ultra DJ-UBS Crude Oil		304,000,111		1,362,516			—			—			25,193,571			330,556,198
Ultra DJ-UBS Natural Gas		53,702,179		14,044,618			—			—			—			67,746,797
Ultra Gold		307,384,042		1,380			9,222,440			—			—			316,607,862
Ultra Silver		754,961,358		(27,770	)		(8,106,718	)		—			—			746,826,870
Ultra Australian Dollar		3,676,902		124,930			—			—			—			3,801,832
Ultra Euro		4,478,920		—			—			(133,996	)		—			4,344,924
Ultra Yen		3,534,934		—			—			(70,562	)		—			3,464,372
VIX Short-Term Futures ETF		152,936,809		(8,346,060	)		—			—			—			144,590,749
VIX Mid-Term Futures ETF		49,702,438		(1,876,429	)		—			—			—			47,826,009
Ultra VIX Short-Term Futures ETF		118,784,756		(18,737,121	)		—			—			—			100,047,635
Short VIX Short-Term Futures ETF		45,830,843		2,388,716			—			—			—			48,219,559

Total Trust	$	3,163,088,076	$	(14,352,196	)	$	(1,875,272	)	$	16,193,517		$	13,847,285		$	3,176,901,410

At March 31, 2013, there were no Level III portfolio investments for which significant unobservable inputs were used to determine fair value.

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

The following table summarizes the valuation of investments at December 31, 2012 using the fair value hierarchy:


	Level I - Quoted Prices					Level II - Other Significant Observable Inputs
	Short-Term U.S. Government and Agencies		Futures Contracts			Forward Agreements			Foreign Currency Forward Contracts			Swap Agreements			Total
UltraShort DJ-UBS Commodity	$	2,803,904	$	—		$	—		$	—		$	148,502		$	2,952,406
UltraShort DJ-UBS Crude Oil		87,046,389		(4,029,721	)		—			—			(5,607,060	)		77,409,608
UltraShort DJ-UBS Natural Gas		10,042,731		409,135			—			—			—			10,451,866
UltraShort Gold		88,575,398		15,240			3,729,856			—			—			92,320,494
UltraShort Silver		86,206,701		40,020			19,307,685			—			—			105,554,406
Short Euro		3,409,904		(55,056	)		—			—			—			3,354,848
UltraShort Australian Dollar		3,302,907		85,590			—			—			—			3,388,497
UltraShort Euro		553,430,562		—			—			(13,147,572	)		—			540,282,990
UltraShort Yen		362,743,231		—			—			38,114,175			—			400,857,406
Ultra DJ-UBS Commodity		6,240,951		—			—			—			(306,268	)		5,934,683
Ultra DJ-UBS Crude Oil		437,662,650		21,960,410			—			—			33,333,620			492,956,680
Ultra DJ-UBS Natural Gas		64,313,224		(3,816,950	)		—			—			—			60,496,274
Ultra Gold		350,624,904		(15,240	)		(15,652,058	)		—			—			334,957,606
Ultra Silver		891,057,386		(40,020	)		(145,740,706	)		—			—			745,276,660
Ultra Australian Dollar		3,570,894		(99,030	)		—			—			—			3,471,864
Ultra Euro		4,546,944		—			—			87,159			—			4,634,103
Ultra Yen		4,587,918		—			—			(494,296	)		—			4,093,622
VIX Short-Term Futures ETF		144,060,921		(221,419	)		—			—			—			143,839,502
VIX Mid-Term Futures ETF		79,930,866		(1,470,410	)		—			—			—			78,460,456
Ultra VIX Short-Term Futures ETF		97,440,843		2,057,062			—			—			301,351			99,799,256
Short VIX Short-Term Futures ETF		53,686,352		(1,387,175	)		—			—			—			52,299,177

Total Trust	$	3,335,285,580	$	13,432,436		$	(138,355,223	)	$	24,559,466		$	27,870,145		$	3,262,792,404

At December 31, 2012, there were no Level III portfolio investments for which significant unobservable inputs were used to determine fair value.

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

Investment Transactions and Related Income

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

Brokerage Commissions and Fees

Each Fund pays or will pay its respective brokerage commissions, including applicable exchange fees, National Futures Association (“NFA”) fees, give-up fees, pit brokerage fees and other transaction related fees and expenses charged in connection with trading activities for each Fund’s investment in U.S. Commodity Futures Trading Commission (“CFTC”) regulated investments. The effects of trading spreads, financing costs/fees associated with Financial Instruments, and costs relating to the purchase of U.S. Treasury securities or similar high credit quality short-term fixed-income or similar securities would also be borne by the Funds. Brokerage commissions on futures contracts are recognized on a half-turn basis. For the three months ended March 31, 2013, the Sponsor paid, and is currently paying, brokerage commissions on VIX futures contracts for the Matching VIX Funds.

Federal Income Tax

Each Fund is registered as a series of a Delaware statutory trust and is or will be treated as a partnership for U.S. federal income tax purposes. Accordingly, no Fund expects to incur U.S. federal income tax liability; rather, each beneficial owner of a Fund’s Shares is or will be required to take into account its allocable share of its Fund’s income, gain, loss, deductions and other items for its Fund’s taxable year ending with or within the beneficial owner’s taxable year.

Management of the Funds has reviewed all open tax years and major jurisdictions (i.e. the last four tax year ends and the interim tax period since then, as applicable) and concluded that there is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns. The Funds are also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. On an ongoing basis, management will monitor its tax positions taken under the interpretation to determine if adjustments to conclusions are necessary based on factors including, but not limited to, on-going analysis of tax law, regulation, and interpretations thereof.