The audited Financial Statements, for each Fund that commenced operations prior to May 31, 2017, and the report of PricewaterhouseCoopers LLP, as independent registered public accounting firm, for the fiscal year ended May 31,2017, that appear in the Annual Report to shareholders dated May 31, 2017, are hereby incorporated by reference in this SAI. The Annual Report to shareholders is delivered with this SAI to shareholders requesting this SAI.
Below is a description of various types of money market instruments and other debt instruments that a Fund may utilize for investment purposes, as “cover” for other investment techniques such Fund employs, or for liquidity purposes. Other types of money market instruments and debt instruments may become available that are similar to those described below and in which the Funds also may invest consistent with their investment goals and policies. Each Fund may also invest in pooled investment vehicles that invest in, and themselves qualify as, money market instruments.
The CME Group contract (symbol "BTC") began trading on December 18, 2017, building off of the success of the BRR and demand for a regulated trading venue for the digital asset market. The contract is cash-settled, based on the CME CF Bitcoin Reference Rate (BRR) which serves as a once-a-day reference rate of the U.S. dollar price of bitcoin. Bitcoin futures are listed on and subject to the rules of CME.2
CCC – An obligation rated ‘CCC’ is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

The Board has approved a Distribution and Service Plan under which each Fund may pay financial intermediaries such as broker-dealers and investment advisers (“Authorized Firms”) up to 0.25%, on an annualized basis, of average daily net assets of the Fund as reimbursement or compensation for distribution-related activities with respect to the Shares of the Fund and shareholder services. Under the Distribution and Service Plan, the Trust or the Distributor may enter into agreements (“Distribution and Service Agreements”) with Authorized Firms that purchase Shares on behalf of their clients.
On September 15, 2015, the Conference of State Bank Supervisors finalized their proposed model regulatory framework for state regulation of participants in “virtual currency activities.” The Conference of State Bank Supervisors proposed framework is a non-binding model and would have to be independently adopted, in sum or in part, by state legislatures or regulators on a case-by-case basis. In July 2017, the Uniform Law Commission (the “ULC”), a private body of lawyers and legal academics from the several U.S. states, voted to finalize and approve a uniform model state law for the regulation of virtual currency businesses, including bitcoin (the “Uniform Virtual Currency Act”). Having been approved by the ULC, the Uniform Virtual Currency Act now goes to each of the U.S. states and territories for their consideration and would have to be independently adopted, in sum or in part, by state legislatures or regulators on a case-by-case basis.
Bitcoin futures contracts are a new type of futures contract that began trading in December 2017. Unlike the established futures markets for traditional physical commodities, the market for bitcoin futures contracts is in the developmental stage and has very limited volume, trading and operational history. Bitcoins and other cryptocurrencies are a new and developing asset class subject to both developmental and regulatory uncertainty. As such, bitcoin futures contracts and the market for bitcoin futures contracts may be riskier, less liquid, more volatile and more vulnerable to economic, market, industry, regulatory and other changes than more established futures contracts and futures markets. There is no assurance that a liquid market will emerge or be sustained for bitcoin futures contracts. The liquidity of the market for bitcoin futures contracts will depend on, among other things, the supply and demand for bitcoin futures contracts, the adoption of bitcoin and the commercial and speculative interest in the market for bitcoin futures contracts and the potential ability to hedge against the price of bitcoin with exchange-traded bitcoin futures contracts. Additionally, if market participants executing trades in bitcoin futures contracts face constraints, including capital constraints, security risks, or high execution costs, the price of bitcoin futures contracts may fail to capture price movements in the underlying price of bitcoin.
The fund performance for a Geared ProShares Fund can be estimated given any set of assumptions for the factors described above. The tables on the next five pages illustrate the impact of two factors, benchmark volatility and benchmark performance, on a Geared Fund. Benchmark volatility is a statistical measure of the magnitude of fluctuations in the returns of a benchmark and is calculated as the standard deviation of the natural logarithm of one plus the benchmark return (calculated daily), multiplied by the square root of the number of trading days per year (assumed to be 252). The tables show estimated Fund returns for a number of combinations of benchmark performance and benchmark volatility over a one-year period. Assumptions used in the tables include: (a) no dividends paid with respect to securities included in the underlying benchmark; (b) no Fund expenses; and (c) borrowing/lending rates (to obtain leverage or inverse exposure) of zero percent. If Fund expenses and/or actual borrowing lending rates were reflected, the Fund’s performance would be different than shown.
For each intervening holiday in the applicable foreign market that is not a holiday observed by the U.S. equity markets, the redemption settlement cycle will be extended by the number of days of such intervening holiday. In addition to holidays, other unforeseeable closings in a foreign market, including due to regulatory action, may also prevent a Fund from delivering securities within the normal settlement period.
•   Small-and Mid-Cap Company Investment Risk — The Fund may invest in stocks of small-and mid-cap companies. The risk of equity investing may be particularly acute for securities of issuers with smaller market capitalizations. Small-and mid-cap company stocks may trade at greater spreads or lower trading volumes, and may be less liquid than the stocks of larger companies. Small-and mid-cap companies may have limited product lines or resources, may be dependent upon a particular market niche and may have greater fluctuations in price than the stocks of larger companies. Further, stocks of small-and mid-sized companies could be more difficult to liquidate during market downturns compared to larger, more widely traded companies. In addition, small-and mid-cap companies may lack the financial and personnel resources to handle economic or industry-wide setbacks and, as a result, such setbacks could have a greater effect on small-and mid-cap security prices.
Those who believe in Cryptocurrency claim it to be the next big thing in the history of mankind. The mere fact that Cryptocurrency is beyond the control of any government body gets it a lot of eyeballs. Imagine a universal currency beyond the control of liquidity, inflation and government subsidy. This would mean that the commercial activity of economies working on Cryptocurrency shall be privatized absolutely.

CCC – An obligation rated ‘CCC’ is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.
Recent bitcoin futures contract announcements from CBOE, CME, and Nasdaq have generated tremendous interest in digital assets. Bitcoin futures have been highly anticipated as they will provide traditional financial institutions with one of the first opportunities to meaningfully participate in the digital asset space via a regulated investment framework. It is an opportunity for Wall Street to catch up with Main Street on bitcoin. With the impending launch of U.S.-listed bitcoin futures, investors may wonder what the bitcoin futures curve might look like. Using information from existing digital asset derivative trading platforms such as Bitmex, OKCoin, CryptoFacilities, and BTCC (all exchanges outside of the Commodity Futures Trading Commission purview), MVIS Research has constructed an approximate curve based on non-U.S. bitcoin futures trading on these exchanges. These are real trading platforms revealing real volume.
reduce the amount of the Fund’s borrowings to the extent necessary to meet this 300% coverage requirement. Maintenance of this percentage limitation may result in the sale of portfolio securities at a time when investment considerations would not favor such sale. In addition to the foregoing, the Funds are authorized to borrow money as a temporary measure for extraordinary or emergency purposes in amounts not in excess of 5% of the value of each Fund’s total assets. This borrowing is not subject to the foregoing 300% asset coverage requirement. The Funds are authorized to pledge portfolio securities as ProShare Advisors deems appropriate in connection with any borrowings.
As of September 16, 2017, the Trustees and officers of the Trust, as a group, owned outstanding shares that entitled them to give voting instructions with respect to less than one percent of the shares of any series of the Trust; except that Mr. Michael L. Sapir owned more than 25% of the outstanding shares of ProShares S&P 500 Ex-Financials ETF and ProShares S&P 500 Ex-Health Care ETF.
Crypto derivatives were naturally discovered as an interesting addition to cryptocurrency exchanges first – probably as individual contracts between interested investors on these exchanges. Nowadays, there are already a couple of exchanges that offer crypto derivatives trading as a standard feature: BitMEX is the current market leader, according to The Merkle News; others are OKCoin, Crypto Facilities, Coinpit, and Deribit, as well as LedgerX (the first regulated cryptocurrency exchange in the US).
×