FAQs

Partnerships are "pass-through" entities. The income and expenses of each Fund "flow through" to its shareholders. (This differs from mutual funds and most ETFs registered under the Investment Company Act of 1940, which pass through taxable income and capital gains in the form of distributions reported on a Form 1099.) Each shareholder of Volatility, Commodity or Currency ProShares ETF is directly responsible for reporting his or her pro rata portion of income, gains, losses, deductions or other taxable events in the ETF for the calendar year.

While investors may incur trading profits or losses through buying and selling the Funds, they are also subject to tax on their portion of any income or gains passed through by the Trust. In addition to income and gains, each Fund can also pass through losses, which shareholders may use to reduce their personal taxes. The tax treatment of income, gains or losses depends on the Fund’s underlying positions. For example:

• The Funds will earn income from debt securities and overnight investments. An investor’s pro rata portion of that income will be taxed at the investor’s ordinary income tax rate.
• The Funds will invest in a range of derivative instruments, including futures and forward contracts. In general, open futures positions will be marked to market, with their gains and losses reportable as 60% long-term and 40% short- term. The reporting of gains and losses may vary depending on the specifics of a contract.
• Commodity and Currency ProShares also enter into swap agreements and non-currency forwards that generally produce capital gains/losses that are likely short-term in character.

Monthly financial statements in accordance with Generally Accepted Accounting Principles (GAAP) for each Fund will be posted on our website on each Fund’s Overview page. Be sure to consult your financial professional or a tax professional for advice as to your particular tax situation.

Unlike mutual funds and most ETFs, the Funds are not expected to make distributions with respect to capital gains or income. The Funds are treated as partnerships for tax purposes, so an investor’s allocated share of a Fund’s income, gains, losses and deductions is reported on a Schedule K-1. Investors will not receive a Form 1099-DIV, issued by most mutual funds and other ETFs, which itemizes the taxable distributions received by the investor.

From a tax perspective, any distributions from the Fund that might occur will be characterized as nontaxable return of capital (lowering the investor’s cost basis). Additionally, each investor’s allotment of the Fund’s taxable income, as reported on the Schedule K-1, should increase or decrease the investor’s cost basis.

Monthly GAAP financial statements for each Fund are posted on our website on each Fund’s Overview page.

Schedule K-1s will reflect your pro rata portion of income, gain, losses, or deductions from fund-driven activities, which are actions the Fund has taken as part of its operation, whereas your 1099-B/R will reflect proceeds from sales of ETFs.

As a result, your Schedule K-1 tax package may include a Sales Schedule which provides instructions on how to compute your gain or loss to fully reflect your experience as a shareholder and a partner of the Fund.

If you sold shares and did not see a copy of your Sales Schedule with your Schedule K-1 tax package, please contact Tax Package Support at 866-949-5539.

Your pro rata portion is determined by the number of shares of the Fund you hold or have held and the duration for which you’ve held them. If you own shares in a Fund at the beginning of a month and sell them during the month, you may still be responsible for and allocated a pro rata portion of income, gains, losses and deductions that were realized during the full month in which you sold your shares.

Income, gains, losses and expenses are generally reported on the Schedule K-1 we send you and should be included on your tax return. How many shares you’ve held and the duration for which you’ve held them determines the portion of any income, gains or losses allocated to you through the K-1. Be sure to consult with a tax professional and/or your financial professional.

For tax years beginning after 2012, new Internal Revenue Code (“IRC”) Section 1411 imposes a 3.8% surtax on certain investment income of individuals and of trusts and estates. Your share of income reported on this Schedule K-1 and any gain on the sale of Partnership units may be subject to this surtax. The Partnership encourages you to consult your tax advisor concerning the impact of IRC Section 1411 to you.

Any gains or losses on your sales of shares should usually be reported on your tax return. In addition to any sales of shares reported on your Form 1099-B from your broker, the Sales Schedule portion of the Schedule K-1 we send you will reflect any sales of your investment(s) in the Fund(s). It will also reflect related adjustments to your tax basis. The Sales Schedule includes a worksheet to help you calculate your total gains or losses. Be sure to consult with a tax professional and/or your financial professional.

Note: A Fund’s income, gains, losses and deductions are allocated to shareholders on a monthly basis. If you own shares in a Fund at the beginning of a month and sell them during the month, you are generally still considered a shareholder through the end of that month.

Each investor in the Fund(s) accounts for his or her pro rata portion of income or losses in the Fund(s) on an annual basis—regardless of whether or not that income, gain or loss is distributed. How many shares you’ve held and the duration for which you’ve held them determines the portion of any income, gains or losses allocated to you through the K- 1.

We generally expect to mail Schedules K-1 in mid-March. We have to gather information regarding ownership interests bought and sold during the year from your financial professional and various reporting sources. Once received, the information must be reviewed for accuracy and processed, and only then can we print the Schedules K-1. We understand the impact any delays have on our investors who need to file their taxes, and we take many steps to facilitate prompt delivery of the Schedules K-1. Notice will be posted on our website at ProShares.com should there be any delay in our expected delivery.

You can sign up now to receive your future tax information up to one week faster by eliminating the need for a paper K-1. Simply locate your investment(s) on www.taxpackagesupport.com/proshares, register your email address and choose the paperless option.

By choosing to eliminate paper K-1s, investor tax information will bypass the U.S. Postal Service and be delivered securely through the website. You will even be notified via e-mail the instant the K-1s are available. You will have the option of saving the electronic version of your tax information to your personal computer or printing a hard copy.

The reporting responsibility of a Schedule K-1 received for Fund shares held in a non- taxable account may differ than if held in a taxable account. Therefore, please consult with your tax advisor for more information.

Covering a short position shouldn't generate a Schedule K-1. Some brokers may not distinguish between long and short positions when reporting transactions to our tax accountants. If you received a Schedule K-1 due to covering a short position, please contact Tax Package Support at 866-949-5539 for correction. Please note that our Tax Package Support staff is not qualified to give tax advice or answer questions regarding your particular tax situation.

The tax calculations found within the tax package you received are based on purchase and sale information obtained from brokers and various reporting sources. If the information provided by these sources is incorrect, the information reported to you, as well as the information reported to the Internal Revenue Service, may also be incorrect. If your ownership records do not agree with the transactions reported on the Ownership Schedule contained in the tax package, please contact Tax Package Support at 866-949-5539 to obtain a corrected K-1.

We do not expect any UBTI. If there is UBTI, it will be detailed on the Schedule K-1 in box 20 with the letter “V” indicated.

Shareholders with questions about the Schedule K-1 can visit each Fund’s tax package support website where you can:

• Sign up for an email alert to notify you when your tax package is available and eliminate paper K-1s.
• View your prior year tax schedules.
• Print your tax package, including instructions.
• Download a file of your Schedule K-1 information that can be imported into select tax software.
• Request changes to incorrect information.

In addition, shareholders will find contact information for our Tax Package Support staff. Please note that our Tax Package Support staff is not qualified to give tax advice or answer questions regarding your particular tax situation. Please refer these questions to your tax advisor.

The prospectuses for Volatility, Commodity and Currency ProShares (ProShares Trust II) may be obtained on-line at www.proshares.com/funds/trust_ii_prospectuses.html, or by contacting ProShares at 866-PRO-5125 (866-776-5125), or by writing to us at 7501 Wisconsin Avenue, Suite 1000, East Tower, Bethesda, MD 20814.