Fund Description: ProShares Hedge Replication ETF is an exchange-traded index fund or Index ETF which is a separate investment portfolio of the ProShares Trust, an open-end investment management company. INVESTMENT OBJECTIVE: ProShares Hedge Replication ETF seeks investment results, before fees and expenses, that track the performance of the Merrill Lynch Factor Model - Exchange Series (the Benchmark). INDEX/BENCHMARK DESCRIPTION: The Merrill Lynch Factor Model - Exchange Series seeks to provide the risk and return characteristics of the hedge fund asset class by targeting a high correlation to HFRI Fund Weighted Composite Index. The HFRI is designed to reflect hedge fund industry performance through an equally weighted composite of over 2,000 constituent funds. In seeking to maintain a high correlation with the HFRI, the benchmark utilizes a systematic model to establish, each month, weighted long or short (or, in certain cases, long or flat) positions in six underlying factors. The factors that comprise the benchmark are the (1) S&P 500 Total Return Index, (2) MSCI EAFE US Dollar Net Total Return Index, (3) MSCI Emerging Markets US Dollar Net Total Return Index, (4) Russell 2000 Total Return Index, (5) three-month U.S. Treasury bills, and (6) ProShares UltraShort Euro ETF. The benchmark is not comprised of, and the fund does not invest in, any hedge fund or group of hedge funds. FUND STRATEGY: The Fund invests in a combination of securities and derivatives that ProShare Advisors believes should track the performance of the Benchmark. It is expected that, at any given point in time, the Fund will be substantially invested in three-month U.S. Treasury Bills, which is one of the Factors, or other short-term debt instruments that have terms-to-maturity of less than 397 days and exhibit high quality credit profiles in order to gain exposure to the three-month U.S. Treasury Bill rate. The Fund may invest in common stock issued by public companies, derivatives, swap agreements, forward contracts, money market instruments, depository receipts and other ETF Funds. A mathematical approach to investing is used by the Advisors who determines the type, quantity and mix of investment positions that the Fund should hold to approximate the performance of the Benchmark. The Fund may gain exposure to only a representative sample of the securities in the Benchmark or underlying or comprising each Factor; the sample is intended to have aggregate characteristics similar to those of the Benchmark. The Fund seeks to remain fully invested at all times in securities (including three-month U.S. Treasury Bills and other money market instruments) and/or derivatives that provide exposure to its Benchmark without regard to market conditions, trends or direction. FUND MANAGEMENT: ProShare Advisors serves as the investment advisor and provides investment advice and management services to the Fund.