Mutual Fund Summary Prospectus (497k)
April 01 2014 - 11:59AM
Edgar (US Regulatory)
SUMMARY PROSPECTUS
OCTOBER 1, 2013
(as supplemented April 1,
2014)
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PROSHARES ULTRAPRO SHORT 10 YEAR TIPS/TSY SPREAD
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This summary prospectus is designed to provide investors with key fund information in a
clear and concise format. Before you invest, you may want to review the Funds full prospectus, which contains more information about the Fund and its risks. The Funds full prospectus, dated October 1, 2013, and statement of additional
information, dated October 1, 2013, and as each hereafter may be supplemented, are incorporated by reference into this summary prospectus. All of this information may be obtained at no cost either: online at ProShares.com/resources/litcenter; by
calling 866-PRO-5125 (866-776-5125); or by sending an email request to info@ProShares.com.
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ULTRAPRO SHORT 10 YEAR TIPS/TSY SPREAD
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PROSHARES.COM
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Important Information About the Fund
ProShares UltraPro Short 10 Year TIPS/TSY Spread (the Fund) seeks investment results
for a single day
only
, not for longer periods. A single day is measured from the time the Fund calculates its net asset value (NAV) to the time of the Funds next NAV calculation. The
return of the Fund for periods longer than a single day will be the result of each days returns compounded over the period, which will very likely differ from three times the inverse (-3x) of the return of the Credit Suisse 10-Year Inflation
Breakeven Index (the Index) for that period.
For periods longer than a single day, the Fund will lose money when the level of the Index is flat over time, and it is possible
that the Fund will lose money over time even if the level of the Index falls.
Longer holding periods, higher index volatility, inverse exposure and greater leverage each exacerbate the impact of
compounding on a funds returns. During periods of higher Index volatility, the volatility of the Index may affect the Funds return as much as or more than the return of the Index. Unlike many traditional bond funds, the Fund is not
designed to provide a steady stream of income.
The Fund is different from most exchange-traded funds in that it seeks inverse leveraged
returns relative to the Index and only on a daily basis. The Fund also is riskier than similarly benchmarked exchange-traded funds that do not use leverage. Accordingly, the Fund may not be suitable for all investors and should be used only by
knowledgeable investors who understand the potential consequences of seeking daily inverse leveraged investment results. Shareholders should actively manage and monitor their investments, as frequently as daily.
Investment Objective
The Fund seeks daily investment
results, before fees and expenses, that correspond to three times the inverse (-3x) of the daily performance of the Index.
The Fund does not seek to achieve its stated investment objective
over a period of time greater than a single day.
Fees and Expenses of the Fund
The table below describes the fees and expenses that you may pay if you buy or hold shares of the Fund.
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Annual Fund Operating Expenses
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(expenses that you pay each year as a percentage of the value of your investment)
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Investment Advisory Fees
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0.55%
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Other Expenses
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2.21%
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Total Annual Fund Operating Expenses Before Fee Waivers and Expense Reimbursements
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2.76%
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Fee Waiver/Reimbursement*
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-2.01%
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Total Annual Fund Operating Expenses After Fee Waivers and Expense Reimbursements
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0.75%
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*
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ProShare Advisors LLC (ProShare Advisors) has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse Other Expenses to
the extent Total Annual Fund Operating Expenses Before Fee Waivers and Expense Reimbursements, as a percentage of average daily net assets, exceed 0.75% through September 30, 2014. After such date, the expense limitation may be
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terminated or revised. Amounts waived or reimbursed in a particular contractual period may be recouped by ProShare Advisors within five years of the end of that contractual period to the extent
that recoupment will not cause the Funds expenses to exceed any expense limitation in place at that time.
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Example:
This example is intended to help you compare the cost of investing in the Fund with the cost of investing in other funds.
The example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of each period. The example
also assumes that your investment has a 5% return each year and that the Funds operating expenses remain the same, except that the fee waiver/expense reimbursement is assumed only to pertain to the first year. Although your actual cost may be
higher or lower, based on these assumptions your approximate costs would be:
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1 Year
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3 Years
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5 Years
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10 Years
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$77
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$665
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$1,280
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$2,942
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The Fund pays transaction and financing costs associated with transacting in securities and derivatives. In addition, investors may
pay brokerage commissions on their purchases and sales of the Funds shares. These costs are not reflected in the example or the table above.
Portfolio Turnover
The Fund pays transaction costs,
such as commissions, when it buys and sells securities (or turns over its portfolio). A higher portfolio turnover may indicate higher transaction costs and may result in higher taxes when the Funds shares are held in a taxable
account. These costs, which are not reflected in Annual Fund Operating Expenses or in the example above, affect the Funds performance. During the most recent fiscal year, the Funds annual portfolio turnover rate was 259% of the average
value of its entire portfolio. This portfolio turnover rate is calculated without regard to cash instrument or derivatives transactions. If such transactions were included, the Funds portfolio turnover rate would be significantly higher.
Principal Investment Strategies
The Fund
invests in fixed income securities and derivatives that ProShare Advisors believes, in combination, should have similar daily return characteristics as three times the inverse (-3x) of the daily return of the Index. The Index tracks the performance
of long positions in the most recently issued 10-year Treasury Inflation-Protected Securities (TIPS) bond and duration-adjusted short positions in U.S. Treasury notes of the closest maturity. The difference in yield (or spread) between
these instruments (Treasury yield minus TIPS yield) is commonly referred to as a breakeven rate of inflation (BEI).
The 10-Year BEI is considered to be a measure of the markets expectations for inflation over the next ten years.
The Index is designed to appreciate as the BEI increases. An increase in the BEI occurs if: (1) the yield on Treasurys rises (i.e., the price of the Treasurys
decreases) relative to the yield on TIPS; or (2) the yield on TIPS falls (i.e., the price of the TIPS increases) relative to the yield on Treasurys. Conversely, the Index is
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PROSHARES.COM
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ULTRAPRO SHORT 10 YEAR TIPS/TSY SPREAD
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3
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designed to depreciate if the BEI decreases. A decrease in the BEI occurs if: (1) the yield on Treasurys falls (i.e., the price of the Treasurys increases) relative to the yield on TIPS; or
(2) the yield on TIPS rises (i.e., the price of the TIPS decreases) relative to the yield on Treasurys. The level of the Index (and the Fund) will fluctuate based on changes in the value of the underlying instruments, which likely will not be
the same on a percentage basis as changes in the BEI.
The Index is not designed to measure the realized rate of inflation, nor does it seek to replicate the returns of any index or measure
of actual consumer price
levels.
The Index is published under the Bloomberg ticker
symbol CSTYIN10.
The types of securities and financial instruments that the Fund will principally invest in are set forth below. Cash
balances arising from the use of derivatives will typically be held in money market instruments.
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U.S. Treasury Securities
The Fund
has exposure to securities issued by the U.S. Treasury, in particular the following:
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U.S. Treasury Inflation-Protected
Securities
The Fund generally takes short positions (or obtains short exposure via derivatives, as further described below) in U.S. Treasury Inflation-Protected Securities, or
TIPS, which are inflation-protected public obligations of the U.S. Treasury. TIPS are income-generating instruments whose interest and principal payments are adjusted for inflationa sustained increase in prices that erodes the purchasing power
of money. The inflation adjustment, which is typically applied monthly to the principal of the bond, follows a designated inflation index, such as the consumer price index. A fixed coupon rate is applied to the inflation-adjusted principal so that
as inflation rises, the values of both the principal and the interest payments increase. This can provide investors with a hedge against inflation, as it helps preserve the purchasing power of an investment. Because of this inflation adjustment
feature, inflation-protected bonds typically have lower yields than conventional fixed-rate bonds.
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U.S. Treasury Notes
The Fund
generally takes long positions (or obtains long exposure via derivatives, as further described below) in U.S. Treasury notes, which are public obligations of the U.S. Treasury that pay a fixed coupon and have a maturity at issuance of two to ten
years.
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Derivatives
The Fund invests in
derivatives, which are financial instruments whose value is derived from the value of an underlying asset or assets, such as stocks, bonds or funds (including exchange-traded funds (ETFs)), interest rates or indexes. The Fund invests in
derivatives as a substitute for investing directly in or making short sales of the fixed income securities underlying the Index. These derivatives principally include:
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Swap Agreements
Contracts entered
into primarily with major global financial institutions for a specified period ranging from a day to more than one year. In a standard swap transaction, two parties agree to exchange the return (or differentials in rates of return) earned or
realized on particular predetermined investments or instruments. The
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gross return to be exchanged or swapped between the parties is calculated with respect to a notional amount, e.g., the return on or change in value of a particular dollar
amount invested in a basket of securities representing a particular index.
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Futures Contracts
Standardized
contracts traded on, or subject to the rules of, an exchange that call for the future delivery of a specified quantity and type of asset at a specified time and place or, alternatively, may call for cash settlement.
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Money Market Instruments
The Fund
invests in short-term cash instruments that have a remaining maturity of 397 days or less and exhibit high quality credit profiles, including:
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U.S. Treasury Bills
U.S.
government securities that have initial maturities of one year or less, and are supported by the full faith and credit of the United States.
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Repurchase Agreements
Contracts in
which a seller of securities, usually U.S. government securities or other money market instruments, agrees to buy them back at a specified time and price. Repurchase agreements are primarily used by the Fund as a short-term investment vehicle for
cash positions.
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ProShare Advisors uses a mathematical approach to investing. Using this approach, ProShare Advisors determines
the type, quantity and mix of investment positions that the Fund should hold to approximate, on a daily basis, the performance of three times the inverse (-3x) of the Index. The Fund may gain inverse exposure to only a representative sample of the
securities in the Index or to securities or financial instruments not contained in the Index, with the intent of obtaining exposure with aggregate characteristics similar to those of a multiple of the inverse of the Index. ProShare Advisors does not
invest the assets of the Fund in securities or financial instruments based on ProShare Advisors view of the investment merit of a particular security or instrument, other than for cash management purposes, nor does it conduct conventional
research or analysis (other than in determining counterparty creditworthiness), or forecast market movement or trends, in managing the assets of the Fund. The Fund seeks to remain fully invested at all times in securities and/or financial
instruments that, in combination, provide inverse leveraged exposure to the Index without regard to market conditions, trends or direction. The Fund seeks investment results for a single day only as calculated from NAV to NAV, not for longer
periods.
At the close of the U.S. securities markets on each trading day, the Fund will seek to position its portfolio so that its exposure to the Index
is consistent with the Funds investment objective. The Indexs movements during the day will affect whether the Funds portfolio needs to be repositioned. For example, if the Index has risen on a given day, net assets of the Fund
should fall. As a result, the Funds inverse exposure will need to be decreased. Conversely, if
the Index has fallen on a given day, net assets of the Fund should rise. As a result, the Funds inverse exposure will need to be increased.
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4
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ULTRAPRO SHORT 10 YEAR TIPS/TSY SPREAD
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PROSHARES.COM
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Because of daily rebalancing and the compounding of each days return over time, the return of the Fund for
periods longer than a single day will be the result of each days returns compounded over the period, which will very likely differ from three times the inverse (-3x) of the return of the Index over the same period. The Fund will lose money if
the level of the Index is flat over time, and it is possible that the Fund will lose money over time even if the level of the Index falls, as a result of daily rebalancing, the Indexs volatility and the effects of compounding. See
Principal Risks, below.
Please see Investment Objectives, Principal Investment Strategies and Related Risks in the back of the
Funds Statutory Prospectus for additional details.
Principal Risks
You could lose money by investing in the Fund.
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Risks Associated with the Use of
Derivatives
The Fund obtains investment exposure through derivatives, which may be considered aggressive. Investing in derivatives may expose the Fund to greater risks than
investing directly in the reference asset(s) underlying those derivatives, such as counterparty risk, liquidity risk and increased correlation risk (each as discussed below). When the Fund uses derivatives, there may be imperfect correlation between
the value of the reference asset(s) and the derivative, which may prevent the Fund from achieving its investment objective. The Fund may use a combination of swaps on the Index and swaps on an ETF that is designed to track the performance of the
Index. The performance of an ETF may not track the performance of the Index due to embedded costs and other factors. Thus, to the extent the Fund invests in swaps that use an ETF as the reference asset, the Fund may be subject to greater correlation
risk and may not achieve as high a degree of correlation with the Index as it would if the Fund only used swaps on the Index. Moreover, with respect to the use of swap agreements, if the Index has a dramatic intraday move that causes a material
decline in the Funds net assets, the terms of a swap agreement between the Fund and its counterparty may permit the counterparty to immediately close out the transaction with the Fund. In that event, the Fund may be unable to enter into
another swap agreement or invest in other derivatives to achieve the desired exposure consistent with the Funds investment objective. This, in turn, may prevent the Fund from achieving its investment objective, even if the Index reverses all
or a portion of its intraday move by the end of the day. Any financing, borrowing and other costs associated with using derivatives may also have the effect of lowering the Funds return.
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Leverage Risk
The Fund obtains
investment exposure in excess of its assets in seeking to achieve its investment objectivea form of leverageand will lose more money in market environments adverse to its daily objective than a similar fund that does not employ such
leverage. The use of such leverage could result in the total loss of an investors investment. For example, because the Fund includes a multiplier of three times the inverse (-3x) of the Index, a single day movement in the Index approaching 33%
at any point in the day could result in the total loss of a shareholders investment if that movement is
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contrary to the investment objective of the Fund, even if the Index subsequently moves in an opposite direction, eliminating all or a portion of the earlier movement. This would be the case with
any such single day movements in the Index, even if the Index maintains a level greater than zero at all times.
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Breakeven Inflation Investing
Risk
The Index tracks the performance of long positions in the most recently issued Treasury Inflation-Protected Securities (TIPS) bond of a particular maturity and
duration-adjusted short positions in U.S. Treasury notes of the closest maturity. The difference in yield (or spread) between these instruments (Treasury yield minus TIPS yield) is commonly referred to as a breakeven rate of inflation
(BEI) and is considered to be a measure of the markets expectations for inflation over the relevant period. The level of the Index (and the Fund) will fluctuate based on changes in the value of the underlying instruments, which will likely not
be the same on a percentage basis as changes in the BEI. The Index is not designed to measure or predict the realized rate of inflation, nor does it seek to replicate the returns of any price index or measure of actual consumer price levels. Changes
in the BEI are based on the TIPS and U.S. Treasury markets, interest rate and inflation expectations, and fiscal and monetary policy. There is no guarantee that these factors will combine to produce any particular directional changes in the Index
over time, or that the Fund will retain any appreciation in value over extended periods of time, or that the returns of the Index or the Fund will track or outpace the realized rate of inflation, or any price index or measure of actual consumer
price levels. It is possible that the returns of the Index or the Fund will not correlate to (or may be the opposite of) the change in the realized rate of inflation, or any price index, or measure of actual consumer price levels. Furthermore, while
the BEI provides exposure to inflation expectations, it may also be influenced by other factors, including premiums related to liquidity for certain bonds as well as premiums surrounding the uncertainty of future inflation. These other factors may
impact the level of the Index or the value of the Fund in unexpected ways and may cancel out or even reverse the impact of changes in inflation expectations. As a result, an investment in the Fund may not serve as an effective hedge against
disinflationary or deflationary environments.
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Fixed Income and Market Risk
The
TIPS and U.S. Treasury markets can be volatile, and the value of securities, swaps, futures, options contracts and other instruments correlated with these markets may fluctuate dramatically from day-to-day. Fixed income markets are subject to
adverse issuer, political, regulatory, market and economic developments, as well as developments that impact specific economic sectors, industries or segments of the market. Further, fixed income securities in the Index may underperform other fixed
income or inflation-linked investments. Volatility in the markets and/or market developments may cause the value of an investment in the Fund to decrease. As a fund seeking investment results that correspond to three times the inverse (-3x) of the
Index, the Funds performance will generally decrease when market conditions cause the level of the Index to rise.
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PROSHARES.COM
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ULTRAPRO SHORT 10 YEAR TIPS/TSY SPREAD
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5
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Index Performance Risk
There is no
guarantee or assurance that the methodology used to create the Index will result in the Fund achieving high, or even positive, returns, or that the Fund will retain any appreciation in value over extended periods of time. The Index may underperform
more traditional indices. In turn, the Fund could lose value while other indices or measures of market performance increase in value. Although such occurrences may benefit the Fund, as a fund that seeks daily returns that are three times the inverse
(-3x) of the daily returns of the Index, the Fund may lose money if the Index out performs expectations. In addition, the Index was formed in November 2011. Accordingly, the Index has limited historical performance. In addition, the Index adjusts
its positions on a daily basis to maintain duration neutrality between its TIPS and Treasury positions. As such, its performance will not reflect the performance of an unadjusted equivalent investment in long TIPS and short Treasury securities over
a period of time greater than a single day. Because the Index adjusts its positions to maintain duration neutrality at or about the time of the Funds NAV calculation, when the Funds shares are bought intraday, such shares are unlikely to
be duration neutral.
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Risk of Limited Gains
TIPS include
a deflation floor which limits potential losses on the securities during deflationary periods (i.e. even if inflation is sufficiently negative to otherwise reduce the value of the bond below the floor price, the value of the security at
maturity will remain at the floor price). As such, the market price of TIPS securities are unlikely to drop beneath this floor level, which may limit declines in the level of the Index and, by extension, gains in the value of the Fund.
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Compounding Risk
As a result of
compounding and because the Fund has a single day investment objective, the Funds performance for periods greater than a single day is likely to be either better or worse than the Index performance times the stated multiple in the Funds
investment objective, before accounting for fees and fund expenses. Compounding affects all investments, but has a more significant impact on an inverse leveraged fund. Particularly during periods of higher Index volatility, compounding will cause
results for periods longer than a single day to vary from three times the inverse
(-3x)
of the return of the Index. This effect becomes more pronounced as volatility increases. Fund performance for periods
greater than a single day can be estimated given any set of assumptions for the following factors: a) Index volatility; b) Index performance; c) period of time; d) financing rates associated with inverse leveraged exposure; e) other Fund
expenses; and f) interest paid with respect to securities in the Index. The chart below illustrates the impact of two principal factorsIndex volatility and Index performanceon Fund performance. The chart shows estimated Fund returns for
a number of combinations of Index volatility and Index performance over a one-year period. Performance shown in the chart assumes: (a) no Fund expenses; and (b) borrowing/lending rates (to obtain inverse leveraged exposure) of zero
percent. If Fund expenses and/or actual borrowing/lending rates were reflected, the Funds performance would be different than shown.
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Areas shaded darker represent those scenarios where the Fund can be expected to return less than
three times the inverse (-3x) of the performance of the Index.
Estimated Fund Returns
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Index
Performance
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One Year Volatility Rate
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One
Year
Index
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Three
times
the
Inverse
(-3x) of
the One
Year
Index
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10%
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25%
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50%
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75%
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100%
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-60%
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180%
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1371.5%
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973.9%
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248.6%
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-46.5%
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-96.1%
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-50%
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150%
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653.4%
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449.8%
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78.5%
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-72.6%
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-98.0%
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-40%
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120%
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336.0%
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218.2%
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3.3%
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-84.2%
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-98.9%
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-30%
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90%
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174.6%
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100.4%
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-34.9%
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-90.0%
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-99.3%
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-20%
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60%
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83.9%
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34.2%
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-56.4%
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-93.3%
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-99.5%
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-10%
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30%
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29.2%
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-5.7%
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-69.4%
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-95.3%
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-99.7%
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0%
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0%
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-5.8%
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-31.3%
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-77.7%
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-96.6%
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-99.8%
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10%
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-30%
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-29.2%
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-48.4%
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-83.2%
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-97.4%
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-99.8%
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20%
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-60%
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-45.5%
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-60.2%
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-87.1%
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-98.0%
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-99.9%
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30%
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-90%
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-57.1%
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-68.7%
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-89.8%
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-98.4%
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-99.9%
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40%
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-120%
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-65.7%
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-75.0%
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-91.9%
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-98.8%
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-99.9%
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50%
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-150%
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-72.1%
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-79.6%
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-93.4%
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-99.0%
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-99.9%
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60%
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-180%
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-77.0%
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-83.2%
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-94.6%
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-99.2%
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-99.9%
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The foregoing table is intended to isolate the effect of Index volatility and Index performance on the return of
the Fund. For example, the Fund may incorrectly be expected to achieve a
-60%
return on a yearly basis if the Index return were 20%, absent the effects of compounding. However, as the table shows, with Index
volatility of 50%, the Fund could be expected to return -87.1% under such a scenario. The Funds actual returns may be significantly better or worse than the returns shown above as a result of any of the factors discussed above or in
Principal RisksCorrelation Risk below.
The Index was created in November 2011. Had the Index been in existence prior
to such date, the Indexs annualized historical volatility rate for the five-year period ended June 30, 2013 would have been 6.80%. The Indexs highest June to June volatility rate during the five-year period would have been 10.85%
(June 30, 2009).
Historical Index volatility and performance are not indications of what the Index volatility and performance will be in
the future. The volatility of U.S. exchange-traded securities or instruments that reflect the value of the underlying Index may differ from the volatility of the Index.
For additional graphs and charts demonstrating the effects of Index volatility and Index performance on the long-term performance of the Fund, see
Principal Risks of Geared
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PROSHARES.COM
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Funds and the Impact of Compounding in the back of the Funds Statutory Prospectus and Special Note Regarding the Correlation Risks of Geared Funds in the Funds
Statement of Additional Information.
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Correlation Risk
A number of
factors may affect the Funds ability to achieve a high degree of inverse correlation with the Index, and there can be no guarantee that the Fund will achieve a high degree of inverse correlation. Failure to achieve a high degree of inverse
correlation may prevent the Fund from achieving its investment objective. The percentage change of the Funds NAV each day may differ, perhaps significantly, from three times the inverse (-3x) of the percentage change of the Index on such day.
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In order to achieve a high degree of inverse correlation with the Index, the Fund seeks to rebalance its portfolio
daily to keep exposure consistent with its investment objective. Being materially over- or under-exposed to the Index may prevent the Fund from achieving a high degree of inverse correlation with the Index. Market disruptions or closure, regulatory
restrictions or extreme market volatility will adversely affect the Funds ability to adjust exposure to requisite levels. The target amount of portfolio exposure is impacted dynamically by the Indexs movements. Because of this, it is
unlikely that the Fund will have perfect inverse exposure (i.e., -3x) to the Index at the end of each day and the likelihood of being materially over- or under-exposed is higher on days when the Index level is volatile near the close of the trading
day.
A number of other factors may also adversely affect the Funds inverse correlation with the Index, including fees, expenses,
transaction costs, financing costs associated with the use of derivatives, income items, valuation methodology, accounting standards and disruptions or illiquidity in the markets for the securities or financial instruments in which the Fund invests.
The Fund may not have investment exposure to all securities in the Index, or its weighting of investment exposure to such securities may be different from that of the Index. In addition, the Fund may invest in securities or financial instruments not
included in the Index. As a result, developments regarding the performance of those securities and financial instruments in which the Fund invests could result in a greater decline in NAV than would be the case if the Funds holdings precisely
replicated the securities and weights of the Index. The Fund may also be subject to large movements of assets into and out of the Fund, potentially resulting in the Fund being over- or under-exposed to the Index. Activities surrounding Index
reconstitutions or other Index rebalancing events may hinder the Funds ability to meet its daily investment objective on or around that day.
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Counterparty Risk
The Fund will be
subject to credit risk (i.e., the risk that a counterparty is unwilling or unable to make timely payments to meet its contractual obligations) with respect to the amount it expects to receive from counterparties to financial instruments or
repurchase agreements entered into by the Fund. If a counterparty becomes bankrupt or fails to perform its obligations, the value of an investment in the Fund may decline.
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Debt Instrument Risk
The Fund will
invest in, or seek exposure to, debt instruments. Debt instruments may have varying levels of sensitivity to changes in interest rates, issuer credit risk and other factors. In addition, changes in the credit quality of the issuer of a debt
instrument can also affect the price of a debt instrument, as can an issuers default on its payment obligations. Many types of debt instruments are subject to prepayment risk, which is the risk that the issuer of the security will repay
principal (in part or in whole) prior to the maturity date. Debt instruments allowing prepayment may offer less potential for gains during a period of declining interest rates, as the Fund may be required to reinvest the proceeds at lower interest
rates. Such factors may cause the value of an investment in the Fund to change. Also, the securities of certain U.S. government agencies, authorities or instrumentalities are neither issued by nor guaranteed as to principal and interest by the U.S.
government, and may be exposed to more credit risk than securities issued by and guaranteed as to principal and interest by the U.S. government. All U.S. government securities are subject to credit risk. It is possible that the U.S. government may
not be able to meet its financial obligations or that securities issued by the U.S. government may experience credit downgrades. Such a credit event may also adversely impact the financial markets.
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Early Close/Late Close/Trading Halt
Risk
An exchange or market may close early, close late or issue trading halts on specific securities, or the ability to buy or sell certain securities or financial instruments may
be restricted, which may result in the Fund being unable to buy or sell certain securities or financial instruments. In such circumstances, the Fund may be unable to rebalance its portfolio, may be unable to accurately price its investments and/or
may incur substantial trading losses.
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Intraday Price Performance
Risk
The Fund is rebalanced at or about the time of its NAV calculation. As such, the intraday position of the Fund will generally be different from the Funds stated
investment objective of corresponding to three times the inverse (-3x) of the Index. When shares are bought intraday, the performance of the Funds shares relative to the Index until the Funds next NAV calculation time will generally be
greater than or less than the Funds stated multiple.
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Inflation-Indexed Security
Risk
The value of an inflation-indexed security (such as TIPS) tends to decrease when real interest rates increase, and tend to increase when real interest rates decrease. Real
interest rates are generally measured as a nominal interest rate less an inflation rate. As such, investors should be aware that a short position in TIPS over a particular timeframe may decrease in value due to falling real rates even in a
deflationary environment.
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Inverse Correlation
Risk
Shareholders will lose money when the Index risesa result that is the opposite from traditional funds.
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Liquidity Risk
In certain
circumstances, such as the disruption of the orderly markets for the securities or financial instruments in which the Fund invests, the Fund might not be able to acquire or dispose of certain holdings quickly or at prices that represent true market
value in the judgment of ProShare
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ULTRAPRO SHORT 10 YEAR TIPS/TSY SPREAD
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Advisors. Markets for the securities or financial instruments in which the Fund invests may be disrupted by a number of events, including but not limited to economic crises, natural disasters,
new legislation, or regulatory changes inside or outside of the U.S. For example, regulation limiting the ability of certain financial institutions to invest in certain securities would likely reduce the liquidity of those securities. Such
situations may prevent the Fund from limiting losses, realizing gains or achieving a high correlation with the Index.
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Long/Short Risk
The Fund seeks
long exposure to certain securities and short exposure to certain other securities. There is no guarantee that the returns on the Funds long or short positions will produce high, or even positive, returns and the Fund could lose money if
either or both the Funds long and short positions produce negative returns. In addition, the Fund may gain enhanced long exposure to certain securities (i.e., obtain investment exposure that exceeds the amount directly invested in those
assets, a form of leverage) and, under such circumstances, will lose more money in market environments that are adverse to its long positions than funds that do not employ such leverage. As a result, such investments may give rise to losses that
exceed the amount invested in those assets.
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Market Price Variance Risk
The
Funds shares are listed for trading on the NYSE Arca and can be bought and sold in the secondary market at market prices. The market prices of shares will fluctuate in response to changes in the value of the Funds holdings and supply and
demand for shares. ProShare Advisors cannot predict whether shares will trade above, below or at a price equal to the value of the Funds holdings. Given the fact that shares can be created and redeemed in Creation Units, as defined below,
ProShare Advisors believes that large discounts or premiums to the value of the Funds holdings should not be sustained. The Funds investment results are measured based upon the daily NAV of the Fund. Investors purchasing and selling
shares in the secondary market may not experience investment results consistent with those experienced by investors creating and redeeming shares directly with the Fund.
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Non-Diversification Risk
The Fund
is classified as non-diversified under the Investment Company Act of 1940, and has the ability to invest a relatively high percentage of its assets in the securities of a small number of issuers susceptible to a single economic,
political or regulatory event, or in financial instruments with a single counterparty, if ProShare Advisors determines that doing so is the most efficient means of meeting the Funds investment objective. This makes the performance of the Fund
more susceptible to adverse impact to an issuer or counterparty than a diversified fund might be. This risk may be particularly acute if the Index is comprised of a small number of securities.
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Portfolio Turnover Risk
Daily
rebalancing of Fund holdings, which is required to keep inverse leverage consistent with a single day investment objective, will cause a higher level of portfolio transactions than compared to most exchange-traded funds. Additionally, active market
trading of the Funds shares may cause more frequent creation or redemption activities that
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could, in certain circumstances, increase the number of portfolio transactions. High levels of transactions increase brokerage and other transaction costs and may result in increased taxable
capital gains.
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Short Sale Exposure Risk
The Fund
may seek inverse or short exposure through financial instruments such as swap agreements and futures contracts, which may cause the Fund to be exposed to certain risks associated with selling securities short. These risks include, under
certain market conditions, an increase in the volatility and decrease in the liquidity of securities underlying the short position, which may lower the Funds return, result in a loss, have the effect of limiting the Funds ability to
obtain inverse exposure through financial instruments such as swap agreements and futures contracts, or require the Fund to seek inverse exposure through alternative investment strategies that may be less desirable or may be more costly to
implement. To the extent that, at any particular point in time, the securities underlying the short position may be thinly traded or have a limited market, including due to regulatory action, the Fund may be unable to meet its investment objective
due to a lack of available securities or counterparties. During such periods, the Funds ability to issue additional Creation Units may be adversely affected. Obtaining inverse exposure through these instruments may be considered an aggressive
investment technique.
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Valuation Risk
In certain
circumstances, portfolio securities may be valued using techniques other than market quotations. The value established for a portfolio security may be different from what would be produced through the use of another methodology or if it had been
priced using market quotations. Portfolio securities that are valued using techniques other than market quotations, including fair valued securities, may be subject to greater fluctuation in their value from one day to the next than
would be the case if market quotations were used. In addition, there is no assurance that a Fund could sell a portfolio security for the value established for it at any time, and it is possible that a Fund would incur a loss because a portfolio
security is sold at a discount to its established value.
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Please see Investment Objectives, Principal Investment Strategies and
Related Risks in the back of the Funds Statutory Prospectus for additional details.
Investment Results
Performance history will be available for the Fund after it has been in operation for a full calendar year. After the Fund has a full calendar year of performance
information, performance information will be shown on an annual basis. Annual returns are required to be shown and should not be interpreted as suggesting that the Fund should or should not be held for longer periods of time. The Fund may not be
suitable for all investors and should only be used by knowledgeable investors who understand the potential consequences of seeking daily inverse leveraged investment results (i.e., -3x). Shareholders should actively manage and monitor their
investments, as frequently as daily.
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PROSHARES.COM
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Management
The Fund is advised by ProShare Advisors. Michelle Liu, Portfolio Manager, has managed the Fund since February 2012.
Purchase and Sale of Fund Shares
The Fund will issue and redeem shares only to Authorized Participants
(typically broker-dealers) in exchange for the deposit or delivery of a basket of assets (securities and/or cash) in large blocks, known as Creation Units, each of which is comprised of 50,000 shares. Retail investors may only purchase and sell
shares on a national securities exchange through a broker-dealer.
Because the Funds shares trade at market prices rather than at NAV, shares may trade at a price greater than NAV (a premium) or less than NAV (a discount).
Tax Information
Income and capital gain
distributions you receive from the Fund generally are subject to federal income taxes and may also be subject to state and local taxes. The Fund intends to distribute income, if any, quarterly, and capital gains, if any, at least annually.
Distributions for this Fund may be significantly higher than those of most ETFs.
Investment Company Act file number
811-21114
ProShares Trust
7501 Wisconsin Avenue, Suite 1000E, Bethesda, MD 20814
866.PRO.5125
866.776.5125
ProShares.com
Receive investor materials electronically:
Shareholders may sign up for electronic delivery of investor materials. By doing so, you will receive the information faster and help us reduce the impact
on the environment of providing these materials. To enroll in electronic delivery,
1.
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Go to www.icsdelivery.com
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2.
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Select the first letter of your brokerage firms name.
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From the list that follows, select your brokerage firm. If your brokerage firm is not listed, electronic delivery may not be available. Please contact your brokerage firm.
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Complete the information requested, including the
e-mail
address where you would like to receive notifications for electronic
documents.
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Your information will be kept confidential and will not be used for any purpose other than electronic delivery. If you
change your mind, you can cancel electronic delivery at any time and revert to physical delivery of your materials. Just go to www.icsdelivery.com, perform the first three steps above, and follow the instructions for cancelling electronic delivery.
If you have any questions, please contact your brokerage firm.
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© 2014 ProShare Advisors LLC. All rights reserved.
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