Fund Description: The ProShares Short S&P500 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 S&P 500 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 S&P 500 Index is a measure of large-cap U.S. stock market performance. It is a float-adjusted market capitalization weighted index of 500 U.S. operating companies and REITs selected by the S&P U.S. Index Committee through a non-mechanical process that factors criteria such as liquidity, price, market capitalization and financial viability. Reconstitution occurs both on a quarterly and ongoing basis. As of March 31, 2006, the S&P 500 Index included companies with capitalizations between $815.2 million and $371.6 billion. The average capitalization of the companies comprising the Index was approximately $24.2 billion. <p> FUND STRATEGY: The ProShares Short S&P500 Fund’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 S&P 500 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.