• Active Management Risk — The performance of actively managed funds reflects, in part, the ability of ProShare Advisors to select investments and make investment decisions that are suited to achieving the Fund’s investment objective. ProShare Advisors’ judgments about the Fund’s investments may prove to be incorrect. If the investments selected and strategies employed by ProShare Advisors fail to produce the intended results, the Fund may not achieve its investment objective and could underperform other funds with a similar investment objective and/or strategies.
The Funds may invest in forward currency contracts for investment or risk management purposes. A forward currency contract is an obligation to buy or sell a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. These contracts are entered into on the interbank market conducted directly between currency traders (usually large commercial banks) and their customers. Forward currency contracts may be structured for cash settlement, rather than physical delivery.
Many expect bitcoin futures to stabilise the markets because big institutional investors will be able to trade bitcoin using all the flexibility present in sophisticated trading markets, with effective risk management and hedging strategies. Since the CME plans to set price limits on the trading range of bitcoin futures, the price of the coin is expected to become more stable. That is the optimistic outlook. It is reasonable to assume that if futures markets will indeed take off the way they are expected to, the market will eventually gravitate towards a less volatile state.
(c) distribute with respect to each taxable year at least 90% of the sum of its investment company taxable income (as that term is defined in the Code without regard to the deduction for dividends paid—generally, taxable ordinary income and the excess, if any, of net short-term capital gains over net long-term capital losses) and net tax-exempt interest income, for such year.
In pure financial theory, the value of a futures contract is based on a "no arbitrage condition" from the interest rates in each asset. We have Bitcoin and US Dollar. Bitcoin interest rates tend to be less than US Dollar interest rates, so when you want to replicate the future value of bitcoin in US dollars, you have to borrow USD at, say, 5%, and invest in Bitcoin at 1% return. This requires a premium on the futures exchange to be able to hedge that trade.
Exchanges Operating in: US, Panama, Australia, Canada, Japan, Singapore, Hong Kong, New Zealand, China, Poland, EU, Indonesia, South Korea, UK, Russia, Seychelles, Mexico, Netherlands, Brazil, Japan, Philippines, Ukraine, Turkey, Iceland, British Virgin Islands, Thailand, Germany, Cyprus, Chile, Bulgaria, Czech Republic, India, Spain, Sweden, South Africa, Tanzania, France, Taiwan, Vietnam, Argentina, Venezuela, Malta, Pakistan, Switzerland, Austria
* The “Fund Complex” consists of all operational registered investment companies under the 1940 Act that are advised by ProShare Advisors LLC and any registered investment companies that have an investment adviser that is an affiliated person of ProShare Advisors LLC. Investment companies that are non-operational (and therefore, not publicly offered) as of the date of this SAI are excluded from these figures.
Short Term USD Emerging Markets Bond ETF; Crude Oil Strategy ETF; Inflation Expectations ETF; CDS Short North American HY Credit ETF and Short or Ultra Fixed Income ProShares Funds 2:30 p.m. (3:00 p.m., if transmitted by mail; except 4:00 p.m., if transmitted by mail on behalf of Short High Yield or Ultra High Yield) in order to receive that day’s closing NAV per Share
The Bitcoin Network is currently maintained by Bitcoin Core and no single entity owns the Bitcoin Network (see “Description of Bitcoin and the Bitcoin Network—The Bitcoin Network”). However, third parties may still assert intellectual property rights claims relating to the operation of the Bitcoin Network. Regardless of the merit of any intellectual property or other legal action, any threatened action that reduces confidence in the Bitcoin Network’s long-term viability or the ability of end-users to hold and transfer bitcoin may adversely affect the price of bitcoin and adversely affect the Bitcoin Instruments. Additionally, a meritorious intellectual property rights claim could prevent end-users from accessing the Bitcoin Network or holding or transferring their bitcoin, which could adversely affect the value of the Bitcoin Instruments. As a result, an intellectual property rights claim against Bitcoin Network participants could have a material adverse impact on the Funds.
As of February 2018, the Chinese Government halted trading of virtual currency, banned initial coin offerings and shut down mining. Some Chinese miners have since relocated to Canada. One company is operating data centers for mining operations at Canadian oil and gas field sites, due to low gas prices. In June 2018, Hydro Quebec proposed to the provincial government to allocate 500 MW to crypto companies for mining. According to a February 2018 report from Fortune, Iceland has become a haven for cryptocurrency miners in part because of its cheap electricity. Prices are contained because nearly all of the country’s energy comes from renewable sources, prompting more mining companies to consider opening operations in Iceland. The region’s energy company says bitcoin mining is becoming so popular that the country will likely use more electricity to mine coins than power homes in 2018. In October 2018 Russia will become home to one of the largest legal mining operations in the world, located in Siberia. More than 1.5 million Russians are engaged in home mining. Russia’s energy resources and climate provide some of the best conditions for crypto mining.
Each Fund may purchase illiquid securities, including securities that are not readily marketable and securities that are not registered (“restricted securities”) under the Securities Act of 1933 (the “1933 Act”), but which can be sold to qualified institutional buyers under Rule 144A under the 1933 Act. A Fund will not invest more than 15% of the Fund’s net assets in illiquid securities. The term “illiquid securities” for this purpose means securities that cannot be disposed of within seven days in the ordinary course of business at approximately the amount at which the Fund has valued the securities. Under the current guidelines of the staff of the SEC, illiquid securities also are considered to include, among other securities, purchased OTC options, certain cover for OTC options, repurchase agreements with maturities in excess of seven days, and certain securities whose disposition is restricted under the federal securities laws. The Fund may not be able to sell illiquid securities when the Advisor considers it desirable to do so or may have to sell such securities at a price that is lower than the price that could be obtained if the securities were more liquid. In addition, the sale of illiquid securities also may require more time and may result in higher dealer discounts and other selling expenses than the sale of securities that are not illiquid. Illiquid securities may be more difficult to value due to the unavailability of reliable market quotations for such securities, and investments in illiquid securities may have an adverse impact on NAV.
The Fund is an actively managed exchange traded fund. The Fund seeks to achieve its investment objective by investing substantially all of its assets in a combination of bitcoin futures contracts and money market instruments. The Fund is designed to benefit when the price of bitcoin futures contracts increases. The Fund generally seeks to have 30% of the value of its portfolio invested in bitcoin futures contracts and 70% of the value of its portfolio invested in money market instruments. The Fund does not invest directly in bitcoin.
Each Fund’s investment objective is non-fundamental, meaning it may be changed by the Board of Trustees (the “Board”) of the Trust, without the approval of Fund shareholders. Each Fund (excluding, Managed Futures Strategy ETF, Crude Oil Strategy ETF, CDS Short North American HY Credit ETF, Bitcoin Futures Strategy ETF, Blockchain/Bitcoin Strategy ETF, Bitcoin Futures/Equity Strategy ETF, and Short Bitcoin Futures Strategy ETF) reserves the right to substitute a different index or security for its index, without the approval of that Fund’s shareholders. Other Funds may be added in the future. Each Fund, except for S&P 500 Dividend Aristocrats ETF, S&P MidCap 400 Dividend Aristocrats ETF, Russell 2000 Dividend Growers ETF, MSCI EAFE Dividend Growers ETF, MSCI Europe Dividend Growers ETF, MSCI Emerging Markets Dividend Growers ETF, DJ Brookfield Global Infrastructure ETF, Equities for Rising Rates ETF, S&P 500 Ex-Energy ETF, the S&P 500 Ex-Financials ETF, S&P 500 Ex-Health Care ETF, S&P 500 Ex-Technology ETF, High Yield—Interest Rate Hedged, Investment Grade—Interest Rate Hedged and Short Term USD Emerging Markets Bond ETF, is a non-diversified management investment company.
and other factors. Thus, to the extent a Fund invests in swaps that use an ETF as the reference asset, that Fund may be subject to greater correlation risk and may not achieve as high a degree of correlation with its index as it would if the Fund used only swaps on the underlying index. The Advisor, under the supervision of the Board of Trustees, is responsible for determining and monitoring the liquidity of the Funds’ transactions in swap agreements.
Credit Default Swaps (“CDS”): In the case of a CDS, the agreement will reference one or more debt securities or reference entities. The protection “buyer” in a credit default contract is generally obligated to pay the protection “seller” an upfront or a periodic stream of payments over the term of the contract until a credit event, such as a default, on a reference entity has occurred. If a credit event occurs, the seller generally must pay the buyer: a) the full notional value of the swap; or b) the difference between the notional value of the defaulted reference entity and the recovery price/rate for the defaulted reference entity. CDS are designed to reflect changes in credit quality, including events of default. The CDS Short North American HY Credit ETF will normally be a “buyer” of CDS (also referred to as a buyer of protection or a seller of risk). The CDS Short North American HY Credit ETF will primarily invest in centrally cleared, index-based CDS that provide credit exposure through a single trade to a basket of reference entities. The CDS Short North American HY Credit ETF may also invest in single-name CDS. Single-name CDS provide exposure to a single reference entity and are not centrally cleared.
shareholders, and were ineligible to or were not to cure such failure, the Fund would be taxed in the same manner as an ordinary corporation subject to U.S. federal income tax on all its income at the fund level. The resulting taxes could substantially reduce the Fund’s net assets and the amount of income available for distribution. In addition, in order to requalify for taxation as a RIC, the Fund could be required to recognize unrealized gains, pay substantial taxes and interest, and make certain distributions.
The most common way to trade in Bitcoin and other cryptocurrency derivatives today is through contract-for-difference (CFD) contracts. These CFD contracts are usually traded over the counter (OTC), meaning that they are not traded on exchanges but directly between participants. Due to the high volatility (exceeding 1.5-2x std from the mean) most of the OTC platforms do not provide leverage on bitcoin and other cryptos CFDs.