Fund Description: The ProShares Short MSCI EAFE Fund is an exchange-traded index fund that is a separate investment portfolio of the ProShares Trust, an exchange-traded fund that consists of separate investment portfolios (each, an index Fund). <p> INVESTMENT OBJECTIVE: The Fund seeks daily investment results, before fees and expenses, that correspond to the inverse (opposite) of the daily performance of the MSCI EAFE Index. If the Fund is successful in meeting its objective, its net asset value should gain approximately the same amount, on a percentage basis, as any decrease in the Index when the Index declines on a given day. Conversely, its net asset value should lose approximately the same amount, on a percentage basis, as the Index when the Index rises on a given day. The Fund seeks investment results for a single day only, not for longer periods. This means that the return of the Fund for a period longer than a single trading day will be the result of each day’s returns compounded over the period, which will very likely differ from the inverse of the return of the Index for that period. <p> INDEX DESCRIPTION: The MSCI EAFE Index (Europe, Australasia, Far East) adjusts the market capitalization of index constituents for free float and targets for index inclusion 85% of free float-adjusted market capitalization in each industry group, in developed market countries, excluding the US & Canada. As of June 2007 the MSCI EAFE Index consisted of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. As of June 30, 2007, the MSCI EAFE Index included companies with capitalizations between $437 million and $234 billion. The average capitalization of the companies comprising the Index was approximately $12 billion. <p> FUND STRATEGY: The ProShares Short MSCI EAFE Funds’s principal investment strategies include: investing in equity securities and/or financial instruments (including derivatives) that ProShare Advisors believes, in combination, should have similar daily price return characteristics as the inverse of the daily return of the MSCI EAFE Index; employing leveraged investment techniques and/or sampling techniques in seeking its investment objective; and investing assets not invested in equity securities or financial instruments, in debt securities and/or money market instruments. The Fund employs leveraged investment techniques to achieve its investment objective. Over time, the use of leverage, combined with the effect of compounding, will have a more significant impact on the Index’s performance compared to the index underlying its benchmark than a fund that does not employ leverage. Therefore, the return of the index over a period of time greater than one day multiplied by a fund’s specified inverse multiple will not generally equal the fund’s performance over that same period. <p> FUND MANAGEMENT: Principal Investment Strategy ProShare Advisors LLC serves as the investment advisor to the Fund.