Mutual Fund Summary Prospectus (497k)
February 15 2013 - 12:40PM
Edgar (US Regulatory)
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Summary Prospectus
October 1, 2012
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(as
supplemented February 15, 2013)
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ProShares Ultra Russell3000
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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 Fund’s full prospectus, which contains more information about the Fund and its risks. The Fund’s full prospectus, dated October 1, 2012, and statement of additional information, dated October 1, 2012, each as
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.
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,
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Go to www.icsdelivery.com
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Select the first letter of your brokerage firm’s 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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ProShares.com
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Ultra MarketCap ProShares
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Ultra Russell3000
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3
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Important Information About the Fund
ProShares Ultra Russell3000 (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 Fund’s next NAV calculation. The return of the Fund for periods longer than a single day
will be the result of each day’s returns compounded over the period, which will very likely differ from two times (2x) the return of the Russell 3000
®
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 rises.
Longer holding periods, higher index volatility
and greater leverage each exacerbate the impact of compounding on a fund’s returns. During periods of higher index volatility, the volatility of the Index may affect the Fund’s return as much as or more than the return of the Index.
The Fund is different from most exchange-traded funds in that it seeks 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 leveraged investment results. Shareholders should actively monitor their investments.
Investment Objective
The Fund seeks
daily investment results, before fees and expenses, that correspond to two times (2x) 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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0.75%
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Other Expenses*
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6.10%
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Total Annual Fund Operating Expenses Before Fee Waivers and Expense Reimbursements
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6.85%
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Fee Waiver/Reimbursement**
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-5.90%
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Total Annual Fund Operating Expenses After Fee Waivers and Expense Reimbursements
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0.95%
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*
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“Acquired Fund Fees and Expenses” for the fiscal year end May 31, 2012 were less than 0.01% and are included in “Other Expenses”.
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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 0.95% through September 30, 2013. After such date, the expense limitation may be terminated or
revised. Amounts waived or reimbursed in a particular
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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 Fund’s 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 Fund’s 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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$97
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$1,496
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$2,844
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$6,002
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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 Fund’s 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 Fund’s 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 Fund’s performance. During the most recent fiscal year, the Fund’s annual portfolio turnover rate was 75% 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 Fund’s portfolio turnover rate would be significantly higher.
Principal Investment Strategies
The Fund invests in securities and derivatives that ProShare Advisors believes, in combination, should have similar daily return characteristics as two times (2x) the daily return of the Index. The Index
offers investors access to the broad U.S. equity universe representing approximately 98% of the U.S. market. The Index is designed to be a comprehensive representation of the investable U.S. equity market and its segments. It is a free float
adjusted, market capitalization-weighted index, and includes only common stocks belonging to corporations incorporated in the U.S. and its territories. As of June 30, 2012, the Index included companies with capitalizations between approximately
$53.3 million and $546.0 billion. The average capitalization of the companies comprising the Index was approximately $5.4 billion. The Index is published under the Bloomberg ticker symbol “RAY.”
The types of securities and derivatives 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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4
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Ultra Russell3000
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Ultra MarketCap ProShares
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ProShares.com
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•
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Equity Securities
— The Fund invests in common
stock issued by public companies.
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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, interest rate or index. The Fund invests in derivatives as a substitute for investing directly in stocks in order to gain leveraged exposure to the Index.
These derivatives principally include:
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¡
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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 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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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 two times (2x) the Index. The Fund may gain exposure to only a representative sample of the securities in the Index, which
exposure is intended to have aggregate characteristics similar to those of the Index, and may invest in securities or financial instruments not contained in the Index. ProShare Advisors does not invest the assets of the Fund in securities or
derivatives based on ProShare Advisors’ view of the investment merit of a particular security, instrument, or company, 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 derivatives that, in combination, provide 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 markets each trading day, the Fund will seek to position its portfolio so that its exposure to the Index is consistent with the Fund’s investment objective. The Index’s movements
during the day will affect whether the Fund’s portfolio
needs to be repositioned. For example, if the Index has risen on a given day, net assets of the Fund should rise, As a result, the Fund’s exposure will need to be increased. Conversely, if
the Index has fallen on a given day, net assets of the Fund should fall. As a result, the Fund’s exposure will need to be decreased.
Because of daily rebalancing and the compounding of each day’s return over time, the return of the Fund for periods longer than a single day will be the result of each day’s returns
compounded over the period, which will very likely differ from two times (2x) the return of the Index over the same period. 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 rises, as a result of daily rebalancing, the Index’s volatility and the effects of compounding. See “Principal Risks”, below.
The Fund will concentrate its investments in a particular industry or group of industries to approximately the same extent as the Index is so concentrated.
Please see “Investment Objectives, Principal Investment Strategies and Related Risks” in the Fund’s full 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 uses investment techniques, such as investing in derivatives, that 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. Moreover, with respect to the use of swap agreements, if the Index has a dramatic intraday move that causes a material decline in the Fund’s 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 Fund’s 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 Fund’s return.
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Leverage Risk
— The Fund obtains investment
exposure in excess of its assets in seeking to achieve its investment objective—a form of leverage—and 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 investor’s investment. For example, because the Fund includes a multiplier of two times (2x) the Index, a single day movement in the Index
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ProShares.com
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Ultra MarketCap ProShares
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Ultra Russell3000
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5
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approaching 50% at any point in the day could result in the total loss of a shareholder’s investment if that movement is 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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Compounding Risk
— As a result of compounding and
because the Fund has a single day investment objective, the Fund’s performance for periods greater than a single day is likely to be either greater than or less than the Index performance times the stated multiple in the Fund objective, before
accounting for fees and fund expenses. Compounding affects all investments, but has a more significant impact on a leveraged fund. Particularly during periods of higher Index volatility, compounding will cause results for periods longer than a
single day to vary from two times (2x) 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 performance; b) Index volatility; c) period of time; d) financing rates associated with leveraged exposure; e) other Fund expenses; and f) dividends or interest paid with respect to securities in the Index. The chart below
illustrates the impact of two principal factors— Index volatility and Index performance—on 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 dividends paid with respect to securities included in the Index; (b) no Fund expenses; and (c) borrowing/lending rates (to obtain leveraged exposure) of zero percent. If Fund
expenses and/or actual borrowing/lending rates were reflected, the Fund’s performance would be lower than shown.
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Areas shaded darker represent those scenarios where the Fund can be expected to return less than two times (2x) the performance of the Index.
For periods longer than a single day, the Fund will lose money when the level of the Index is flat and can even lose money when the level of the Index rises.
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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Two
times
(2x) 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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-120%
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-84.2%
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-85.0%
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-87.5%
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-90.9%
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-94.1%
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-50%
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-100%
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-75.2%
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-76.5%
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-80.5%
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-85.8%
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-90.8%
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-40%
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-80%
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-64.4%
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-66.2%
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-72.0%
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-79.5%
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-86.8%
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-30%
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-60%
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-51.5%
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-54.0%
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-61.8%
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-72.1%
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-82.0%
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-20%
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-40%
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-36.6%
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-39.9%
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-50.2%
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-63.5%
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-76.5%
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-10%
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-20%
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-19.8%
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-23.9%
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-36.9%
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-53.8%
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-70.2%
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0%
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0%
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-1.0%
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-6.1%
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-22.1%
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-43.0%
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-63.2%
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10%
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20%
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19.8%
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13.7%
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-5.8%
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-31.1%
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-55.5%
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20%
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40%
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42.6%
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35.3%
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12.1%
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-18.0%
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-47.0%
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30%
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60%
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67.3%
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58.8%
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31.6%
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-3.7%
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-37.8%
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40%
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80%
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94.0%
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84.1%
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52.6%
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11.7%
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-27.9%
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50%
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100%
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122.8%
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111.4%
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75.2%
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28.2%
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-17.2%
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60%
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120%
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153.5%
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140.5%
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99.4%
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45.9%
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-5.8%
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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 -40% 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 -50.2% under such a scenario. The Fund’s actual returns may be significantly greater or less than the returns shown above as a result of any of the factors discussed above or in “Principal Risks—Correlation
Risk” below.
The Index’s annualized historical volatility rate for the five-year period ended June 30, 2012 was 27.34%.
The Index’s highest June to June volatility rate during the five-year period was 46.06% (June 30, 2009). The Index’s annualized performance for the five-year period ended June 30, 2012 was 0.39%.
Historical Index volatility and performance are not indications of what the Index volatility and performance will be in the future.
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 Funds and the Impact of Compounding” in the Fund’s full Prospectus and “Special Note Regarding the Correlation Risks of Geared Funds”
in the Fund’s Statement of Additional Information.
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Correlation Risk
— A number of factors may affect
the Fund’s ability to achieve a high degree of correlation with the Index, and there can be no guarantee that the Fund will achieve a high degree of correlation. Failure to achieve a high degree of correlation may prevent the Fund from
achieving its investment objective.
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6
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:
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Ultra Russell3000
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Ultra MarketCap ProShares
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ProShares.com
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In order to achieve a high degree of 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 correlation with the Index. Market disruptions or closure,
regulatory restrictions or extreme market volatility will adversely affect the Fund’s ability to adjust exposure to requisite levels. The target amount of portfolio exposure is impacted dynamically by the Index’s movements. Because of
this, it is unlikely that the Fund will have perfect exposure (i.e., 2x) 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 Fund’s 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. 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 Fund’s 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 derivatives and repurchase agreements entered
into by the Fund. If a counterparty becomes bankrupt or fails to perform its obligations, the value of your investment in the Fund may decline.
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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 derivatives may be restricted, which may result in the Fund being unable to buy or sell certain
securities or derivatives. 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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Equity and Market Risk
— The equity markets are
volatile, and the value of securities, swaps, futures, options contracts and other instruments correlated with the equity markets may fluctuate dramatically from day-to-day. Equity markets are subject to political, regulatory, market and economic
developments, as well as developments that impact specific economic sectors, industries or segments of the market. Volatility in the markets and/or market developments may cause the value of an investment in the Fund to decrease.
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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 Fund’s stated investment objective of corresponding to two times (2x) the Index. When shares are bought
intraday, the performance of the Fund’s shares relative to the Index until the Fund’s next NAV calculation time will generally be greater than or less than the Fund’s stated multiple.
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Liquidity Risk
— In certain circumstances, such as
the disruption of the orderly markets for the securities or derivatives 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
Advisors. Markets for the securities or derivatives 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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Market Price Variance Risk
— The Fund’s
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 NAV and supply and demand for shares. ProShare Advisors cannot
predict whether shares will trade above, below or at their NAV. 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 NAV of shares should not
be sustained. The Fund’s 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 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 derivative instruments with a single counterparty if ProShare Advisors determines that doing so is the most efficient means of meeting the Fund’s 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 when 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 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
Fund’s shares may cause more frequent creation or redemption activities that
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ProShares.com
:
:
Ultra MarketCap ProShares
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Ultra Russell3000
:
:
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7
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could, in certain circumstances, increase the number of portfolio transactions. High levels of transactions increase brokerage costs and may result in increased taxable capital gains.
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Small- and Mid-Cap Company Investment Risk
— The
Index and, by extension, the Fund are exposed to 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.
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Please see “Investment Objectives, Principal Investment Strategies and Related Risks” in the Fund’s full Prospectus for additional details.
Investment Results
The bar chart below shows how the
Fund’s investment results have varied from year to year, and the table shows how the Fund’s average annual total returns for various periods compare with a broad measure of market performance. This information provides some indication of
the risks of investing in the Fund. Past results (before and after taxes) are not predictive of future results. Updated information on the Fund’s results can be obtained by visiting ProShares.com.
Annual Returns as of December 31 each year
Best Quarter (ended 12/31/2010): 23.48%
Worst Quarter (ended 9/30/2011): -30.71%
The year-to-date return as of the most recent quarter,
which ended June 30, 2012, was 17.38%.
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Average Annual Total Returns
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As of December 31, 2011
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One
Year
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Since
Inception
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Inception
Date
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Before Taxes
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-5.31%
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27.25%
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6/30/2009
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After Taxes on Distributions
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-5.31%
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27.20%
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—
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After Taxes on Distributions and Sale of Shares
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-3.45%
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23.71%
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—
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Russell 3000
®
Index
#
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1.03%
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16.18%
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—
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#
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Reflects no deduction for fees, expenses or taxes. Adjusted to reflect the reinvestment of dividends paid by companies in the Index. Since inception returns are
calculated from the date the Fund commenced operations, not the date of inception of the Index.
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Average annual total returns are shown
on a before- and after-tax basis for the Fund. After-tax returns are calculated using the historical highest individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual after-tax returns depend on an
investor’s tax situation and may differ from those shown. After-tax returns shown are not relevant to investors who hold shares through tax-deferred arrangements, such as a retirement account. After-tax returns may exceed the return before
taxes due to a tax benefit from realizing a capital loss on a sale of shares.
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 leveraged
results (i.e., 2x). Shareholders should actively monitor their investments.
Management
The Fund
is advised by ProShare Advisors. Hratch Najarian, Senior Portfolio Manager, has managed the Fund since December 2009.
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 Fund’s 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. Distributions for this Fund may be significantly higher than those of most exchange-traded funds.
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Investment Company Act file number 811-21114
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ProShares Trust
7501 Wisconsin Avenue, Suite 1000E, Bethesda, MD 20814
866.PRO.5125
866.776.5125
ProShares.com
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© 2012 ProShare Advisors LLC. All rights reserved.
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UWC-OCT12RV1
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