ProShares Trust II 10-K

Item 1A. Risk Factors. RISK FACTOR SUMMARY Risks Specific to the Geared Funds • Each Fund’s returns over periods longer than a day will likely differ in amount and possibly even direction from the Fund’s daily target for such period. • Correlation risks specific to the Geared Funds may arise because the Geared Funds seek to rebalance their portfolios daily to keep daily exposure consistent with their investment objectives to achieve a high degree of daily correlation with their applicable underlying benchmarks. • The use of leveraged, inverse and/or inverse leveraged positions could result in the total loss of an investor’s investment within a given day. • Intraday price/performance of Geared Funds will likely differ from the Fund’s stated daily multiple times the performance of its Benchmark for such day. Risks Specific to the Currency Funds, Precious Metals Funds, Natural Gas Funds, and Oil Funds • The Currency Funds are subject to a number of risks impacting the value of non-U.S. currencies and the value of Financial Instruments based on such currencies. For example, European financial markets and the value of the euro have experienced significant volatility, in part related to unemployment, budget deficits and economic downturns. In addition, the euro could be abandoned in the future by countries that have already adopted its use. • The Precious Metals Funds do not hold gold or silver bullion. Rather, the Precious Metals Funds use Financial Instruments to gain exposure to gold and silver bullion. Using Financial Instruments to obtain exposure to gold or silver bullion may cause tracking error and subject the Precious Metals Funds to the effects of contango and backwardation. 20 Table of Contents • The Natural Gas Funds are linked to an index comprised of natural gas futures contracts, and are not directly linked to the “spot” price of natural gas. Natural Gas futures contracts may perform very differently from the spot price of natural gas. • The Oil Funds are linked to an index comprised of crude oil futures contracts, and are not directly linked to the “spot” price of crude oil. Oil futures contracts may perform very differently from the spot price of crude oil. • In April 2020, the market for crude oil futures contracts experienced a period of “extraordinary contango” (the spot price for a commodity is significantly lower than the price of the futures contract in that commodity) that resulted in a negative price in the May 2020 WTI crude oil futures contract. If all or a significant portion of the futures contracts held by the Oil Funds at a future date were to reach a negative price, investors in any such Fund could lose their entire investment. • A number of factors may have a negative impact on the price of commodities, such as oil, gold, silver and gas, and the price of Financial Instruments based on such commodities. Risks Specific to the VIX Funds • The VIX Funds are benchmarked to a VIX Futures Index. They are not benchmarked to the VIX or actual realized volatility of the S&P 500. The Index and each Fund should be expected to perform very differently from the VIX over all periods of time. • VIX futures contracts can be highly volatile and the Funds may experience sudden and large losses when buying, selling or holding such instruments. • The level of the VIX has historically reverted to a long-term mean level and is subject to sudden and unexpected reversions to its mean. Accordingly, investors should not expect the VIX Funds to retain any appreciation in value over extended periods of time. • The CBOE can make changes to the methodology and calculation of the VIX that could affect the value of VIX futures contracts, and consequently, the value of the Index and the Funds. Risks Related to All Funds • There is no guarantee that a Fund will achieve its investment objective or that the returns of a Fund will correlate to the returns of its index times its stated multiple. There may be circumstances that could prevent a Fund from being operated in a manner consistent with its investment objective and principal investment strategies. • The assets that the Funds invest in can be highly volatile and the Funds may experience large losses when buying, selling or holding such instruments; you can lose all of your investment within a given day. • Each Fund seeks to achieve its investment objective even during periods when the performance of the Fund’s benchmark is flat or when the benchmark is moving in a manner that may cause the value of the Fund to decline. • The value of the Shares of the Funds relates directly to the value of, and realized profit or loss from, the Financial Instruments and other assets held by that Fund. Fluctuations in the price of these Financial Instruments or assets could materially adversely affect an investment in such Fund’s Shares. • Margin requirements and position limits applicable to futures contracts and swaps may limit a Fund’s ability to achieve sufficient exposure and prevent a Fund from achieving its investment objective. • Possible illiquid markets may cause or exacerbate losses; the large size of the positions the Funds may acquire increases these risks. • The Funds may be subject to significant and sustained losses from rolling futures positions. • It may not be possible to gain exposure to the benchmarks using exchange-traded Financial Instruments in the future. • Fees are charged regardless of a Fund’s returns and may result in depletion of assets. • For the Funds linked to a benchmark, changes implemented by the benchmark provider that affect the composition and valuation of the benchmark could adversely affect the value of Fund Shares and an investment in a Funds Shares. • The particular benchmark used by a Fund may underperform other asset classes and may underperform other indices or benchmarks based upon the same underlying Reference Asset. • The Funds may be subject to counterparty risks. • Historical correlation trends between Fund benchmarks and other asset classes may not continue or may reverse, limiting or eliminating any potential diversification or other benefit from owning a Fund. • The lack of active trading markets for any of the Shares of the Funds may result in losses on investors’ investments at the time of disposition of such Shares. • A Fund may change its investment objective, benchmark or strategies and may liquidate at a time that is disadvantageous to shareholders. • Investors may be adversely affected by redemption or creation orders that are subject to postponement, suspension or rejection under certain circumstances. • The NAV per Share may not correspond to the market price per Share. 21 Table of Contents • Investors may be adversely affected by an overstatement or understatement of a Fund’s NAV due to the valuation method employed or errors in the NAV calculation. • Regulatory and exchange position limits or accountability levels may restrict the creation of Creation Units and have a negative impact on operation of the Trust. • Purchases of Creation Units by Authorized Participants may be limited or suspended by the Sponsor in its sole discretion. For example, the Sponsor may limit or suspend the purchase of Creation Units if it believes doing so would help a Fund manage its portfolio, such as by allowing a Fund to comply with counterparty or position limits, or in response to significant and/or rapid increase in the size of a Fund as a result of an increase in creation activity. This may, among other things, cause Fund Shares to trade at a premium to NAV or otherwise have a negative impact on the liquidity and trading of Fund shares. • The number of underlying components included in a Fund’s benchmark may impact volatility, which could adversely affect an investment in the Shares. • The liquidity of the Shares may also be affected by the withdrawal from participation of Authorized Participants, which could adversely affect the market price of the Shares. • Shareholders that are not Authorized Participants may only purchase or sell their Shares in secondary trading markets, and the conditions associated with trading in secondary markets may adversely affect investors’ investment in the Shares. • The applicable Exchange may halt trading in the Shares of a Fund which would adversely impact investors’ ability to sell Shares. • Shareholders do not have the protections associated with ownership of shares in an investment company registered under the 1940 Act. • Shareholders do not have the rights enjoyed by investors in certain other vehicles and may be adversely affected by a lack of statutory rights and by limited voting and distribution rights. • The value of the Shares will be adversely affected if the Funds are required to indemnify Wilmington Trust Company (the “Trustee”) and/or the Sponsor. • Although the Shares of the Funds are limited liability investments, certain circumstances such as bankruptcy of a Fund will increase a shareholder’s liability. • Failure of the FCMs to segregate assets may increase losses in the Funds. • A court could potentially conclude that the assets and liabilities of one Fund are not segregated from those of another Fund and may thereby potentially expose assets in a Fund to the liabilities of another Fund. • Due to the increased use of technologies, intentional and unintentional cyber-attacks pose operational and information security risks. • Trading on exchanges outside the United States is generally not subject to U.S. regulation and may result in different or diminished investor protections. • Competing claims of intellectual property rights may affect the Funds and an investment in the Shares. • Shareholders’ tax liability may exceed cash distributions on the Shares. • The U.S. Internal Revenue Service (“IRS”) could adjust or reallocate items of income, gain, deduction, loss and credit with respect to the Shares if the IRS does not accept the assumptions or conventions utilized by the Fund. • Shareholders will receive partner information tax returns on Schedule K-1, which could increase the complexity of tax returns. • Shareholders of each Fund may recognize significant amounts of ordinary income and short-term capital gain. • A Fund could be treated as a corporation for federal income tax purposes, which may substantially reduce the value of Shares. • Changes in U.S. federal income tax law could affect an investment in the Shares. • The Funds and the Sponsor are subject to extensive legal and regulatory requirements. Regulatory changes or actions, including the implementation of new legislation, may alter the operations and profitability of the Funds. • Investors cannot be assured of the Sponsor’s continued services, the discontinuance of which may be detrimental to the Funds. • Natural disasters and public health disruptions, such as the COVID-19 virus (including any variants), may have a significant negative impact on the performance of each Fund; the risks and other information described herein could become outdated as a result of such events. • In response to Russia’s invasion of Ukraine in February 2022 and the ongoing conflict between those two countries, the U.S. and other countries, as well as the European Union, have issued broad-ranging economic sanctions designed to impose severe pressure on Russia’s economy. Such sanctions, and the conflict generally, may have adverse effects on regional and global economic markets, and may result in increased volatility and could have a negative impact on the performance of a Fund and its or the liquidity and price of Fund Shares. • Public health issues, war and military conflicts (such as Russia’s continued military actions against Ukraine that started in February 2022 and the Israel-Hamas conflict and the ensuring conflict) sanctions, acts of terrorism, sustained elevated inflation, supply chain issues or other events could have a significant negative impact on global financial markets and economies. 22 Table of Contents These risk factors should be read in connection with the other information included in this Annual Report on Form 10-K, including Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Funds’ Financial Statements and the related Notes to the Funds’ Financial Statements. For purposes of this section: • The term “Matching VIX Fund” refers to ProShares VIX Short-Term Futures ETF and ProShares VIX Mid-Term Futures ETF; • The term “Geared VIX Fund” refers to ProShares Ultra VIX Short-Term Futures ETF and ProShares Short VIX Short-Term Futures ETF; • The term “VIX Fund” refers to each Geared VIX Fund and each Matching VIX Fund; • The term “Geared Fund” refers to ProShares UltraShort Bloomberg Crude Oil, ProShares UltraShort Bloomberg Natural Gas, ProShares UltraShort Gold, ProShares UltraShort Silver, ProShares UltraShort Euro, ProShares UltraShort Yen, ProShares Ultra Bloomberg Crude Oil, ProShares Ultra Bloomberg Natural Gas, ProShares Ultra Gold, ProShares Ultra Silver, ProShares Ultra Euro and ProShares Ultra Yen, and each Geared VIX Fund; • The term “Natural Gas Fund” refers to ProShares UltraShort Bloomberg Natural Gas and ProShares Ultra Bloomberg Natural Gas; • The term “Oil Fund” refers to ProShares UltraShort Bloomberg Crude Oil and ProShares Ultra Bloomberg Crude Oil; • The term “Precious Metal Fund” refers to ProShares UltraShort Gold, ProShares UltraShort Silver, ProShares Ultra Gold and ProShares Ultra Silver; and • The term “Currency Fund” refers to ProShares UltraShort Euro, ProShares UltraShort Yen, ProShares Ultra Euro and ProShares Ultra Yen. Risks Specific to the Geared Funds In addition to the risks described elsewhere in this “Risk Factors” section, the following risks apply to the Geared Funds. The performance of a Geared Fund for periods longer than a single day will likely differ from the Daily Target and investors holding shares for longer than a day should understand the impact of benchmark returns and volatility (how much the value of the benchmark moves up and down from day-to-day) on their holding period return. Each of the Geared Funds is “geared” in the sense that each has an investment objective to correspond, before fees and expenses, to the one-half inverse ( e.g. , -0.5x), an inverse multiple ( e.g. , -2x), or a multiple ( e.g. , 1.5x, 2x), of the performance of a benchmark on a given day (referred to as the “Daily Target”). Each Geared Fund seeks investment results for a single day only, as measured from its NAV calculation time to its next NAV calculation time, and not for any other period. The return of a Geared Fund for a period longer than a single day is the result of its return for each day compounded over the period and usually will differ from one-half inverse ( e.g. , -0.5x), one and one-half times (1.5x), two times the inverse (-2x) or two times (2x) the return of the Geared Fund’s benchmark for the period. A Geared Fund will lose money if its benchmark’s performance is flat over time, and it is possible for a Geared Fund to lose money over time regardless of the performance of an underlying benchmark, as a result of daily rebalancing, the benchmark’s volatility and compounding. Longer holding periods, higher benchmark volatility, inverse exposure and greater leverage each affect the impact of compounding on a Geared Fund’s returns. Daily compounding of a Geared Fund’s investment returns can dramatically and adversely affect its longer-term performance during periods of high volatility. Volatility may be at least as important to a Geared Fund’s return for a period as the return of the Geared Fund’s underlying benchmark. A Geared Fund will lose money if the Index’s performance is flat over time, and it is possible for a Geared Fund to lose money over time regardless of the performance of the Index, as a result of daily rebalancing, the Index’s volatility, compounding and other factors. Longer holding periods, higher index volatility, inverse exposure and greater leverage each affect the impact of compounding on a Geared Fund’s returns. Daily compounding of a Geared Fund’s investment returns can dramatically and adversely affect performance, especially during periods of high volatility. Volatility has a negative impact on Geared Fund performance and the volatility of the Index may be at least as important to a Geared Fund’s return for a period as the return of the Index. Each Ultra or UltraShort Fund uses leverage and should produce daily returns that are more volatile than that of its benchmark. For example, the daily return of an Ultra Fund with a 2x multiple should be approximately two times as volatile on a daily basis as the return of a fund with an objective of matching the same benchmark. The daily return of an Ultra Fund with a 1.5x multiple should be approximately one and one-half times as volatile on a daily basis as the return of a fund with an objective of matching the same benchmark. The daily return of a Short Fund is designed to return one-half the inverse (-0.5x) of the return, that would be expected of 23 Table of Contents a fund with an objective of matching the same benchmark. The Geared Funds are not appropriate for all investors and present different risks than other funds. The daily return of an UltraShort Fund is designed to return two times the inverse (-2x) of the return, respectively, that would be expected of a fund with an objective of matching the same benchmark. The Geared Funds that use leverage are riskier than similarly benchmarked exchange-traded funds that do not use leverage. An investor should only consider an investment in a Geared Fund if he or she understands the consequences of seeking daily leveraged, daily inverse or daily inverse leveraged investment results. Daily objective geared funds, if used properly and in conjunction with the investor’s view on the future direction and volatility of the markets, can be useful tools for investors who want to manage their exposure to various markets and market segments and who are willing to monitor and/or periodically rebalance their portfolios. Shareholders who invest in the Geared Funds should actively manage and monitor their investments, as frequently as daily. The hypothetical examples below illustrate how daily Geared Fund returns can behave for periods longer than a single day. On each day, fund XYZ performs in line with its objective (two times (2x) the benchmark’s daily performance before fees and expenses). Notice that, in the first example (showing an overall benchmark loss for the period), over the entire seven-day period, the fund’s total return is more than two times the loss of the period return of the benchmark. For the seven-day period, benchmark XYZ lost 3.26% while fund XYZ lost 7.01% (versus -6.52% or 2 x -3.26%). In other scenarios, the return of a daily rebalanced fund could be greater than three times the benchmark’s returns. Benchmark XYZ Fund XYZ Level Daily Performance Daily Performance Net Asset Value Start 100.00 $ 100.00 Day 1 97.00 -3.00 % -6.00 % 94.00 Day 2 99.91 3.00 % 6.00 % 99.64 Day 3 96.91 -3.00 % -6.00 % 93.66 Day 4 99.82 3.00 % 6.00 % 99.28 Day 5 96.83 -3.00 % -6.00 % 93.32 Day 6 99.73 3.00 % 6.00 % 98.92 Day 7 96.74 -3.00 % -6.00 % 92.99 Total Return -3.26 % -7.01 % Similarly, in another example (showing an overall benchmark gain for the period), over the entire seven-day period, the fund’s total return is considerably less than double that of the period return of the benchmark. For the seven-day period, benchmark XYZ gained 2.72% while fund XYZ gained 4.86% (versus 5.44% (or 2 x 2.72%)). Benchmark XYZ Fund XYZ Level Daily Performance Daily Performance Net Asset Value Start 100.00 $ 100.00 Day 1 103.00 3.00 % 6.00 % 106.00 Day 2 99.91 -3.00 % -6.00 % 99.64 Day 3 102.91 3.00 % 6.00 % 105.62 Day 4 99.82 -3.00 % -6.00 % 99.28 Day 5 102.81 3.00 % 6.00 % 105.24 Day 6 99.73 -3.00 % -6.00 % 98.92 Day 7 102.72 3.00 % 6.00 % 104.86 Total Return 2.72 % 4.86 % This effect is caused by compounding, which exists in all investments. The return of a Geared Fund for a period longer than a single day is the result of its return for each day compounded over the period and usually will differ in amount, and possibly even direction, from the Geared Fund’s stated multiple times the return of the Geared Fund’s benchmark for the same period. In general, during periods of higher benchmark volatility, compounding will cause the longer term results to be less than the multiple (or inverse multiple) of the return of the benchmark. This effect becomes more pronounced as volatility increases. Conversely, in periods of lower benchmark volatility, returns over longer periods can be higher than the multiple of the return of the benchmark. Actual results for a particular period, before fees and expenses, are also dependent on the following factors: (a) the benchmark’s volatility; (b) the 24 Table of Contents benchmark’s performance; (c) period of time; (d) financing rates associated with derivatives; (e) other Fund expenses; and (f) dividends or interest paid with respect to the securities in the benchmark. The examples herein illustrate the impact of two principal factors- benchmark volatility and benchmark performance – on Fund performance. Similar effects exist for the Short Fund and UltraShort Funds, and the significance of this effect is even greater for such inverse leveraged funds. The graphs that follow illustrate this point. Each of the graphs shows a simulated hypothetical one-year performance of a benchmark compared with the performance of a Geared Fund that perfectly achieves its daily investment objective. The graphs demonstrate that, for periods greater than a single day, a Geared Fund is likely to underperform or overperform (but not match) the benchmark performance (or the inverse of the benchmark performance) times the stated multiple in the fund’s investment objective. Investors should understand the consequences of holding daily rebalanced funds for periods longer than a single day, including the impact of compounding on fund performance. Investors should consider actively monitoring and/or periodically rebalancing their portfolios (which will possibly trigger transaction costs and tax consequences) in light of their investment goals and risk tolerance. A one-year period is used solely for illustrative purposes only. Deviations from the benchmark return times the fund multiple can occur over periods as short as a single day (as measured from one day’s NAV to the next day’s NAV) and may also occur in periods shorter than a single day (when measured intraday as opposed to NAV to NAV). An investor in a Geared Fund could potentially lose the full value of their investment within a single day. See “Intraday Price Performance Risk” below for additional details. To isolate the impact of daily leveraged, inverse or inverse leveraged exposure, these graphs assume: a) no fund expenses or transaction costs; b) borrowing/lending rates (to obtain required inverse, inverse leveraged or leveraged exposure) and cash reinvestment rates of zero percent; and c) the fund consistently maintaining perfect exposure (-0.5x, -2x, 1.5x, or 2x) as of the fund’s NAV time each day. If these assumptions were different, the fund’s performance would be different than that shown. If fund expenses, transaction costs and financing expenses greater than zero percent were included, the fund’s performance would also be different than that shown. The -0.5x and 1.5x graphs below assume a volatility rate of 73%, which is an approximate average of the five-year historical volatility rate of the most volatile benchmark referenced herein (the S&P 500 VIX Short-Term Futures Index) for funds with these multiples. The -2x and 2x graphs below assume a volatility rate of 57%, which is an approximate average of the five-year historical volatility rate of the most volatile benchmark referenced herein (the Bloomberg Natural Gas Subindex) for funds with these multiples. A benchmark’s volatility rate is a statistical measure of the magnitude of fluctuations in its returns. The graph above shows a scenario where the index, which exhibits day-to-day volatility, is flat or trendless over the year (i.e., begins and ends the year at 0%), but the Short Fund (-0.5x) is down. 25 Table of Contents The graph above shows a scenario where the benchmark, which exhibits day-to-day volatility, is up over the year, but the Short Fund (-0.5x) is down more than one-half the inverse of the benchmark. The graph above shows a scenario where the benchmark, which exhibits day-to-day volatility, is down over the year, but the Short Fund (-0.5x) is up less than one-half the inverse of the benchmark. 26 Table of Contents The graph above shows a scenario where the index, which exhibits day-to-day volatility, is flat or trendless over the year (i.e., begins and ends the year at 0%), but the Ultra Fund (1.5x) is down. The graph above shows a scenario where the index, which exhibits day-to-day volatility, is up over the year, but the Ultra Fund (1.5x) is up less than one and one-half times the index. 27 Table of Contents The graph above shows a scenario where the index, which exhibits day-to-day volatility, is down over the year, but the Ultra Fund (1.5x) is down less than one and one-half times the index. The graph above shows a scenario where the benchmark, which exhibits day-to-day volatility, is flat or trendless over the year (i.e., provides a return of 0% over the course of the year), but the Ultra Fund (2x) and the UltraShort Fund (-2x) are both down. 28 Table of Contents The graph above shows a scenario where the benchmark, which exhibits day-to-day volatility, is up over the year, but the Ultra Fund (2x) is up less than two times the benchmark and the UltraShort Fund (-2x) is down less than two times the inverse of the benchmark. The graph above shows a scenario where the benchmark, which exhibits day-to-day volatility, is down over the year, but the Ultra Fund (2x) is down less than two times the benchmark and the UltraShort Fund (-2x) is up less than two times the inverse of the benchmark. 29 Table of Contents The historical five year average volatility of the benchmarks utilized by the Funds ranges from 7.40% to 76.20%, as set forth in the table below. Historical Five-Year Average Volatility Rate As of Index Identifier December 31, 2024 S&P 500 VIX Short-Term Futures Index SPVXSP 76.20 % S&P 500 VIX Mid-Term Futures Index SPVXMP 36.28 % Bloomberg Commodity Balanced WTI Crude Oil Index SM BCBCLIT 37.30 % Bloomberg Natural Gas Subindex SM BCOMNGTR 59.81 % Bloomberg Gold Subindex SM BCOMGCTR 16.27 % Bloomberg Silver Subindex SM BCOMSITR 33.92 % The US dollar price of the euro USDEUR 7.40 % The US dollar price of the Japanese yen USDJPY 9.48 % The tables below illustrate the impact of two factors that affect a Geared Fund’s performance, benchmark volatility and benchmark return. Benchmark volatility is a statistical measure of the magnitude of fluctuations in the returns of a benchmark and is calculated as the standard deviation of the natural logarithms of one plus the benchmark return (calculated daily), multiplied by the square root of the number of trading days per year (assumed to be 252). The tables show estimated fund returns for a number of combinations of benchmark volatility and benchmark return over a one-year period. To isolate the impact of daily leveraged, inverse or inverse leveraged exposure, these graphs assume: a) no fund expenses or transaction costs; b) borrowing/lending rates of zero percent (to obtain required inverse, inverse leveraged or leveraged exposure) and cash reinvestment rates of zero percent; and c) the fund consistently maintaining perfect exposure (-0.5x, -2x, 1.5x, or 2x) as of the fund’s NAV time each day. If these assumptions were different, the fund’s performance would be different than that shown. If fund expenses, transaction costs and financing expenses were included, the fund’s performance would be different than that shown. The tables below show examples in which a Geared Fund has an investment objective to correspond, before fees and expenses, to one-half the inverse (-0.5x), two times the inverse (-2x), two times (2x), one and one-half times (1.5x) the daily performance of a benchmark. The Geared Fund that has an investment objective to correspond to two times (2x) the daily performance of a benchmark could incorrectly be expected to achieve a 20% return on a yearly basis if the benchmark return was 10%, absent the effects of compounding. However, as the tables below show, with a benchmark volatility of 40%, such a fund would return 3.1 %. In the charts below, shaded areas represent those scenarios where a geared fund with the investment objective described will outperform ( i.e. , return more than) the benchmark performance times the stated multiple in the fund’s investment objective; conversely areas not shaded represent those scenarios where the fund will underperform ( i.e. , return less than) the benchmark performance times the multiple stated as the daily fund objective. 30 Table of Contents Estimated Fund Return Over One Year When the Fund Objective is to Seek Daily Investment Results For a single day, Before Fees and Expenses, that Correspond to One-Half the Inverse (-0.5x) of the Daily Performance of an Index. Index Volatility One Year Index Performance One-Half the Invers (-0.5x) One Year Index Performance 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% -60% 30.0 % 58.1 % 58.0 % 57.5 % 56.8 % 55.8 % 54.5 % 52.9 % 51.0 % 48.9 % 46.6 % 44.0 % 41.2 % 38.1 % 34.9 % 31.6 % 28.0 % -55% 27.5 % 49.1 % 48.9 % 48.5 % 47.8 % 46.9 % 45.6 % 44.1 % 42.4 % 40.4 % 38.2 % 35.7 % 33.1 % 30.2 % 27.2 % 24.0 % 20.7 % -50% 25.0 % 41.4 % 41.3 % 40.9 % 40.2 % 39.3 % 38.1 % 36.7 % 35.1 % 33.2 % 31.1 % 28.8 % 26.3 % 23.6 % 20.7 % 17.7 % 14.5 % -45% 22.5 % 34.8 % 34.7 % 34.3 % 33.7 % 32.8 % 31.7 % 30.4 % 28.8 % 27.0 % 25.0 % 22.8 % 20.4 % 17.8 % 15.1 % 12.2 % 9.2 % -40% 20.0 % 29.1 % 29.0 % 28.6 % 28.0 % 27.2 % 26.1 % 24.8 % 23.3 % 21.6 % 19.7 % 17.5 % 15.3 % 12.8 % 10.2 % 7.4 % 4.5 % -35% 17.5 % 24.0 % 23.9 % 23.6 % 23.0 % 22.2 % 21.2 % 19.9 % 18.5 % 16.8 % 15.0 % 12.9 % 10.7 % 8.4 % 5.9 % 3.2 % 0.4 % -30% 15.0 % 19.5 % 19.4 % 19.1 % 18.5 % 17.7 % 16.8 % 15.6 % 14.2 % 12.6 % 10.8 % 8.8 % 6.7 % 4.4 % 2.0 % -0.5 % -3.2 % -25% 12.5 % 15.5 % 15.4 % 15.0 % 14.5 % 13.8 % 12.8 % 11.6 % 10.3 % 8.7 % 7.0 % 5.1 % 3.1 % 0.9 % -1.4 % -3.9 % -6.5 % -20% 10.0 % 11.8 % 11.7 % 11.4 % 10.9 % 10.1 % 9.2 % 8.1 % 6.8 % 5.3 % 3.6 % 1.8 % -0.2 % -2.3 % -4.6 % -7.0 % -9.5 % -15% 7.5 % 8.5 % 8.4 % 8.1 % 7.6 % 6.9 % 6.0 % 4.9 % 3.6 % 2.1 % 0.5 % -1.2 % -3.2 % -5.2 % -7.4 % -9.7 % -12.2 % -10% 5.0 % 5.4 % 5.3 % 5.0 % 4.5 % 3.8 % 3.0 % 1.9 % 0.7 % -0.7 % -2.3 % -4.0 % -5.9 % -7.9 % -10.0 % -12.3 % -14.6 % -5% 2.5 % 2.6 % 2.5 % 2.2 % 1.7 % 1.1 % 0.2 % -0.8 % -2.0 % -3.4 % -4.9 % -6.6 % -8.4 % -10.4 % -12.4 % -14.6 % -16.9 % 0% 0.0 % 0.0 % -0.1 % -0.4 % -0.8 % -1.5 % -2.3 % -3.3 % -4.5 % -5.8 % -7.3 % -8.9 % -10.7 % -12.6 % -14.7 % -16.8 % -19.0 % 5% -2.5 % -2.4 % -2.5 % -2.8 % -3.2 % -3.9 % -4.7 % -5.6 % -6.8 % -8.1 % -9.5 % -11.1 % -12.9 % -14.7 % -16.7 % -18.8 % -21.0 % 10% -5.0 % -4.7 % -4.7 % -5.0 % -5.5 % -6.1 % -6.9 % -7.8 % -8.9 % -10.2 % -11.6 % -13.2 % -14.9 % -16.7 % -18.6 % -20.7 % -22.8 % 15% -7.5 % -6.7 % -6.8 % -7.1 % -7.5 % -8.1 % -8.9 % -9.8 % -10.9 % -12.2 % -13.6 % -15.1 % -16.7 % -18.5 % -20.4 % -22.4 % -24.5 % 20% -10.0 % -8.7 % -8.8 % -9.1 % -9.5 % -10.1 % -10.8 % -11.7 % -12.8 % -14.0 % -15.4 % -16.9 % -18.5 % -20.2 % -22.1 % -24.0 % -26.1 % 25% -12.5 % -10.6 % -10.6 % -10.9 % -11.3 % -11.9 % -12.6 % -13.5 % -14.6 % -15.8 % -17.1 % -18.6 % -20.1 % -21.9 % -23.7 % -25.6 % -27.6 % 30% -15.0 % -12.3 % -12.4 % -12.6 % -13.0 % -13.6 % -14.3 % -15.2 % -16.2 % -17.4 % -18.7 % -20.1 % -21.7 % -23.4 % -25.1 % -27.0 % -29.0 % 35% -17.5 % -13.9 % -14.0 % -14.3 % -14.7 % -15.2 % -15.9 % -16.8 % -17.8 % -18.9 % -20.2 % -21.6 % -23.2 % -24.8 % -26.5 % -28.4 % -30.3 % 40% -20.0 % -15.5 % -15.6 % -15.8 % -16.2 % -16.7 % -17.4 % -18.3 % -19.3 % -20.4 % -21.7 % -23.0 % -24.5 % -26.2 % -27.9 % -29.7 % -31.6 % 45% -22.5 % -17.0 % -17.0 % -17.3 % -17.7 % -18.2 % -18.9 % -19.7 % -20.7 % -21.8 % -23.0 % -24.4 % -25.9 % -27.4 % -29.1 % -30.9 % -32.7 % 50% -25.0 % -18.4 % -18.4 % -18.7 % -19.0 % -19.6 % -20.2 % -21.1 % -22.0 % -23.1 % -24.3 % -25.7 % -27.1 % -28.7 % -30.3 % -32.1 % -33.9 % 55% -27.5 % -19.7 % -19.8 % -20.0 % -20.4 % -20.9 % -21.5 % -22.3 % -23.3 % -24.4 % -25.6 % -26.9 % -28.3 % -29.8 % -31.4 % -33.2 % -35.0 % 60% -30.0 % -20.9 % -21.0 % -21.2 % -21.6 % -22.1 % -22.8 % -23.6 % -24.5 % -25.5 % -26.7 % -28.0 % -29.4 % -30.9 % -32.5 % -34.2 % -36.0 % Estimated Fund Return Over One Year When the Fund Objective is to Seek Daily Investment Results, Before Fees and Expenses, that Correspond to Two Times the Inverse (-2x) of the Daily Performance of a Benchmark. Benchmark Volatility One Year Benchmark Performance Two Times Inverse(-2x) of One Year Benchmark Performance 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% -60% 120 % 525.0 % 520.3 % 506.5 % 484.2 % 454.3 % 418.1 % 377.1 % 332.8 % 286.7 % 240.4 % 195.2 % 152.2 % 112.2 % 76.0 % 43.7 % -55% 110 % 393.8 % 390.1 % 379.2 % 361.6 % 338.0 % 309.4 % 277.0 % 242.0 % 205.6 % 169.0 % 133.3 % 99.3 % 67.7 % 39.0 % 13.5 % -50% 100 % 300.0 % 297.0 % 288.2 % 273.9 % 254.8 % 231.6 % 205.4 % 177.0 % 147.5 % 117.9 % 88.9 % 61.4 % 35.8 % 12.6 % -8.0 % -45% 90 % 230.6 % 228.1 % 220.8 % 209.0 % 193.2 % 174.1 % 152.4 % 128.9 % 104.6 % 80.1 % 56.2 % 33.4 % 12.3 % -6.9 % -24.0 % -40% 80 % 177.8 % 175.7 % 169.6 % 159.6 % 146.4 % 130.3 % 112.0 % 92.4 % 71.9 % 51.3 % 31.2 % 12.1 % -5.7 % -21.8 % -36.1 % -35% 70 % 136.7 % 134.9 % 129.7 % 121.2 % 109.9 % 96.2 % 80.7 % 63.9 % 46.5 % 28.9 % 11.8 % -4.5 % -19.6 % -33.4 % -45.6 % -30% 60 % 104.1 % 102.6 % 98.1 % 90.8 % 81.0 % 69.2 % 55.8 % 41.3 % 26.3 % 11.2 % -3.6 % -17.6 % -30.7 % -42.5 % -53.1 % -25% 50 % 77.8 % 76.4 % 72.5 % 66.2 % 57.7 % 47.4 % 35.7 % 23.1 % 10.0 % -3.2 % -16.0 % -28.3 % -39.6 % -49.9 % -59.1 % -20% 40 % 56.3 % 55.1 % 51.6 % 46.1 % 38.6 % 29.5 % 19.3 % 8.2 % -3.3 % -14.9 % -26.2 % -36.9 % -46.9 % -56.0 % -64.1 % -15% 30 % 38.4 % 37.4 % 34.3 % 29.4 % 22.8 % 14.7 % 5.7 % -4.2 % -14.4 % -24.6 % -34.6 % -44.1 % -53.0 % -61.0 % -68.2 % -10% 20 % 23.5 % 22.5 % 19.8 % 15.4 % 9.5 % 2.3 % -5.8 % -14.5 % -23.6 % -32.8 % -41.7 % -50.2 % -58.1 % -65.2 % -71.6 % -5% 10 % 10.8 % 10.0 % 7.5 % 3.6 % -1.7 % -8.1 % -15.4 % -23.3 % -31.4 % -39.6 % -47.7 % -55.3 % -62.4 % -68.8 % -74.5 % 0% 0 % 0.0 % -0.7 % -3.0 % -6.5 % -11.3 % -17.1 % -23.7 % -30.8 % -38.1 % -45.5 % -52.8 % -59.6 % -66.0 % -71.8 % -77.0 % 5% -10 % -9.3 % -10.0 % -12.0 % -15.2 % -19.6 % -24.8 % -30.8 % -37.2 % -43.9 % -50.6 % -57.2 % -63.4 % -69.2 % -74.5 % -79.1 % 10% -20 % -17.4 % -18.0 % -19.8 % -22.7 % -26.7 % -31.5 % -36.9 % -42.8 % -48.9 % -55.0 % -61.0 % -66.7 % -71.9 % -76.7 % -81.0 % 15% -30 % -24.4 % -25.0 % -26.6 % -29.3 % -32.9 % -37.3 % -42.3 % -47.6 % -53.2 % -58.8 % -64.3 % -69.5 % -74.3 % -78.7 % -82.6 % 20% -40 % -30.6 % -31.1 % -32.6 % -35.1 % -38.4 % -42.4 % -47.0 % -51.9 % -57.0 % -62.2 % -67.2 % -72.0 % -76.4 % -80.4 % -84.0 % 25% -50 % -36.0 % -36.5 % -37.9 % -40.2 % -43.2 % -46.9 % -51.1 % -55.7 % -60.4 % -65.1 % -69.8 % -74.2 % -78.3 % -82.0 % -85.3 % 30% -60 % -40.8 % -41.3 % -42.6 % -44.7 % -47.5 % -50.9 % -54.8 % -59.0 % -63.4 % -67.8 % -72.0 % -76.1 % -79.9 % -83.3 % -86.4 % 35% -70 % -45.1 % -45.5 % -46.8 % -48.7 % -51.3 % -54.5 % -58.1 % -62.0 % -66.0 % -70.1 % -74.1 % -77.9 % -81.4 % -84.6 % -87.4 % 40% -80 % -49.0 % -49.4 % -50.5 % -52.3 % -54.7 % -57.7 % -61.1 % -64.7 % -68.4 % -72.2 % -75.9 % -79.4 % -82.7 % -85.6 % -88.3 % 45% -90 % -52.4 % -52.8 % -53.8 % -55.5 % -57.8 % -60.6 % -63.7 % -67.1 % -70.6 % -74.1 % -77.5 % -80.8 % -83.8 % -86.6 % -89.1 % 50% -100 % -55.6 % -55.9 % -56.9 % -58.5 % -60.6 % -63.2 % -66.1 % -69.2 % -72.5 % -75.8 % -79.0 % -82.1 % -84.9 % -87.5 % -89.8 % 55% -110 % -58.4 % -58.7 % -59.6 % -61.1 % -63.1 % -65.5 % -68.2 % -71.2 % -74.2 % -77.3 % -80.3 % -83.2 % -85.9 % -88.3 % -90.4 % 60% -120 % -60.9 % -61.2 % -62.1 % -63.5 % -65.4 % -67.6 % -70.2 % -73.0 % -75.8 % -78.7 % -81.5 % -84.2 % -86.7 % -89.0 % -91.0 % Estimated Fund Return Over One Year When the Fund Objective is to Seek Daily Investment Results For a single day, Before Fees and Expenses, that Correspond to One and One-Half Times (1.5x) the Daily Performance of an Index. Index Volatility One Year Index Performance One and One-Half Times (1.5x) One Year Index Performance 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% 75% -60% -90.0 % -74.7 % -74.7 % -74.8 % -74.9 % -75.1 % -75.3 % -75.5 % -75.8 % -76.2 % -76.6 % -77.0 % -77.4 % -77.9 % -78.4 % -78.9 % -79.5 % -55% -82.5 % -69.8 % -69.8 % -69.9 % -70.1 % -70.3 % -70.5 % -70.8 % -71.2 % -71.6 % -72.0 % -72.5 % -73.1 % -73.6 % -74.2 % -74.9 % -75.6 % -50% -75.0 % -64.6 % -64.7 % -64.8 % -64.9 % -65.2 % -65.5 % -65.8 % -66.2 % -66.7 % -67.2 % -67.8 % -68.4 % -69.1 % -69.8 % -70.6 % -71.4 % -45% -67.5 % -59.2 % -59.2 % -59.4 % -59.6 % -59.8 % -60.2 % -60.6 % -61.0 % -61.6 % -62.2 % -62.9 % -63.6 % -64.4 % -65.2 % -66.1 % -67.0 % -40% -60.0 % -53.5 % -53.6 % -53.7 % -53.9 % -54.2 % -54.6 % -55.1 % -55.6 % -56.2 % -56.9 % -57.7 % -58.5 % -59.4 % -60.3 % -61.3 % -62.4 % -35% -52.5 % -47.6 % -47.6 % -47.8 % -48.0 % -48.4 % -48.8 % -49.3 % -49.9 % -50.6 % -51.4 % -52.3 % -53.2 % -54.2 % -55.3 % -56.4 % -57.6 % -30% -45.0 % -41.4 % -41.5 % -41.7 % -41.9 % -42.3 % -42.8 % -43.4 % -44.1 % -44.8 % -45.7 % -46.7 % -47.7 % -48.8 % -50.0 % -51.3 % -52.6 % -25% -37.5 % -35.0 % -35.1 % -35.3 % -35.6 % -36.0 % -36.6 % -37.2 % -38.0 % -38.8 % -39.8 % -40.9 % -42.0 % -43.3 % -44.6 % -46.0 % -47.4 % -20% -30.0 % -28.4 % -28.5 % -28.7 % -29.0 % -29.5 % -30.1 % -30.8 % -31.7 % -32.6 % -33.7 % -34.8 % -36.1 % -37.5 % -38.9 % -40.5 % -42.1 % -15% -22.5 % -21.6 % -21.7 % -21.9 % -22.3 % -22.8 % -23.4 % -24.2 % -25.2 % -26.2 % -27.4 % -28.6 % -30.0 % -31.5 % -33.1 % -34.8 % -36.5 % -10% -15.0 % -14.6 % -14.7 % -14.9 % -15.3 % -15.9 % -16.6 % -17.5 % -18.5 % -19.6 % -20.9 % -22.3 % -23.8 % -25.4 % -27.1 % -29.0 % -30.9 % -5% -7.5 % -7.4 % -7.5 % -7.8 % -8.2 % -8.8 % -9.6 % -10.5 % -11.6 % -12.8 % -14.2 % -15.7 % -17.3 % -19.1 % -21.0 % -22.9 % -25.0 % 0% 0.0 % 0.0 % -0.1 % -0.4 % -0.8 % -1.5 % -2.3 % -3.3 % -4.5 % -5.8 % -7.3 % -8.9 % -10.7 % -12.6 % -14.7 % -16.8 % -19.0 % 5% 7.5 % 7.6 % 7.5 % 7.2 % 6.7 % 6.0 % 5.1 % 4.0 % 2.8 % 1.3 % -0.3 % -2.0 % -3.9 % -6.0 % -8.2 % -10.5 % -12.9 % 10% 15.0 % 15.4 % 15.3 % 14.9 % 14.4 % 13.7 % 12.7 % 11.5 % 10.2 % 8.7 % 6.9 % 5.0 % 3.0 % 0.8 % -1.5 % -4.0 % -6.6 % 15% 22.5 % 23.3 % 23.2 % 22.9 % 22.3 % 21.5 % 20.5 % 19.2 % 17.8 % 16.1 % 14.3 % 12.3 % 10.1 % 7.7 % 5.3 % 2.6 % -0.1 % 20% 30.0 % 31.5 % 31.3 % 31.0 % 30.3 % 29.5 % 28.4 % 27.1 % 25.6 % 23.8 % 21.8 % 19.7 % 17.4 % 14.9 % 12.2 % 9.4 % 6.5 % 25% 37.5 % 39.8 % 39.6 % 39.2 % 38.6 % 37.7 % 36.5 % 35.1 % 33.5 % 31.6 % 29.5 % 27.2 % 24.8 % 22.1 % 19.3 % 16.3 % 13.2 % 30% 45.0 % 48.2 % 48.1 % 47.7 % 47.0 % 46.0 % 44.8 % 43.3 % 41.6 % 39.6 % 37.4 % 35.0 % 32.3 % 29.5 % 26.5 % 23.3 % 20.0 % 35% 52.5 % 56.9 % 56.7 % 56.3 % 55.5 % 54.5 % 53.2 % 51.7 % 49.8 % 47.7 % 45.4 % 42.8 % 40.0 % 37.0 % 33.9 % 30.5 % 27.0 % 40% 60.0 % 65.7 % 65.5 % 65.0 % 64.3 % 63.2 % 61.8 % 60.2 % 58.2 % 56.0 % 53.5 % 50.8 % 47.9 % 44.7 % 41.4 % 37.8 % 34.1 % 45% 67.5 % 74.6 % 74.4 % 73.9 % 73.1 % 72.0 % 70.6 % 68.8 % 66.8 % 64.4 % 61.8 % 59.0 % 55.9 % 52.6 % 49.0 % 45.3 % 41.4 % 50% 75.0 % 83.7 % 83.5 % 83.0 % 82.2 % 81.0 % 79.5 % 77.6 % 75.5 % 73.0 % 70.3 % 67.3 % 64.0 % 60.5 % 56.8 % 52.9 % 48.8 % 55% 82.5 % 93.0 % 92.8 % 92.3 % 91.4 % 90.1 % 88.5 % 86.6 % 84.3 % 81.7 % 78.9 % 75.7 % 72.3 % 68.6 % 64.7 % 60.6 % 56.3 % 60% 90.0 % 102.4 % 102.2 % 101.6 % 100.7 % 99.4 % 97.7 % 95.7 % 93.3 % 90.6 % 87.6 % 84.3 % 80.7 % 76.8 % 72.7 % 68.4 % 63.9 % Estimated Fund Return Over One Year When the Fund Objective is to Seek Daily Investment Results, Before Fees and Expenses, that Correspond to Two Times (2x) the Daily Performance of a Benchmark. Benchmark Volatility One Year Benchmark Performance Two Times (2x) One Year Benchmark Performance 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 55% 60% 65% 70% -60% -120 % -84.0 % -84.0 % -84.2 % -84.4 % -84.6 % -85.0 % -85.4 % -85.8 % -86.4 % -86.9 % -87.5 % -88.2 % -88.8 % -89.5 % -90.2 % -55% -110 % -79.8 % -79.8 % -80.0 % -80.2 % -80.5 % -81.0 % -81.5 % -82.1 % -82.7 % -83.5 % -84.2 % -85.0 % -85.9 % -86.7 % -87.6 % -50% -100 % -75.0 % -75.1 % -75.2 % -75.6 % -76.0 % -76.5 % -77.2 % -77.9 % -78.7 % -79.6 % -80.5 % -81.5 % -82.6 % -83.6 % -84.7 % -45% -90 % -69.8 % -69.8 % -70.1 % -70.4 % -70.9 % -71.6 % -72.4 % -73.2 % -74.2 % -75.3 % -76.4 % -77.6 % -78.9 % -80.2 % -81.5 % -40% -80 % -64.0 % -64.1 % -64.4 % -64.8 % -65.4 % -66.2 % -67.1 % -68.2 % -69.3 % -70.6 % -72.0 % -73.4 % -74.9 % -76.4 % -77.9 % -35% -70 % -57.8 % -57.9 % -58.2 % -58.7 % -59.4 % -60.3 % -61.4 % -62.6 % -64.0 % -65.5 % -67.1 % -68.8 % -70.5 % -72.3 % -74.1 % -30% -60 % -51.0 % -51.1 % -51.5 % -52.1 % -52.9 % -54.0 % -55.2 % -56.6 % -58.2 % -60.0 % -61.8 % -63.8 % -65.8 % -67.9 % -70.0 % -25% -50 % -43.8 % -43.9 % -44.3 % -45.0 % -46.0 % -47.2 % -48.6 % -50.2 % -52.1 % -54.1 % -56.2 % -58.4 % -60.8 % -63.1 % -65.5 % -20% -40 % -36.0 % -36.2 % -36.6 % -37.4 % -38.5 % -39.9 % -41.5 % -43.4 % -45.5 % -47.7 % -50.2 % -52.7 % -55.3 % -58.1 % -60.8 % -15% -30 % -27.8 % -27.9 % -28.5 % -29.4 % -30.6 % -32.1 % -34.0 % -36.1 % -38.4 % -41.0 % -43.7 % -46.6 % -49.6 % -52.6 % -55.7 % -10% -20 % -19.0 % -19.2 % -19.8 % -20.8 % -22.2 % -23.9 % -26.0 % -28.3 % -31.0 % -33.8 % -36.9 % -40.1 % -43.5 % -46.9 % -50.4 % -5% -10 % -9.8 % -10.0 % -10.6 % -11.8 % -13.3 % -15.2 % -17.5 % -20.2 % -23.1 % -26.3 % -29.7 % -33.3 % -37.0 % -40.8 % -44.7 % 0% 0 % 0.0 % -0.2 % -1.0 % -2.2 % -3.9 % -6.1 % -8.6 % -11.5 % -14.8 % -18.3 % -22.1 % -26.1 % -30.2 % -34.5 % -38.7 % 5% 10 % 10.3 % 10.0 % 9.2 % 7.8 % 5.9 % 3.6 % 0.8 % -2.5 % -6.1 % -10.0 % -14.1 % -18.5 % -23.1 % -27.7 % -32.5 % 10% 20 % 21.0 % 20.7 % 19.8 % 18.3 % 16.3 % 13.7 % 10.6 % 7.0 % 3.1 % -1.2 % -5.8 % -10.6 % -15.6 % -20.7 % -25.9 % 15% 30 % 32.3 % 31.9 % 30.9 % 29.3 % 27.1 % 24.2 % 20.9 % 17.0 % 12.7 % 8.0 % 3.0 % -2.3 % -7.7 % -13.3 % -19.0 % 20% 40 % 44.0 % 43.6 % 42.6 % 40.8 % 38.4 % 35.3 % 31.6 % 27.4 % 22.7 % 17.6 % 12.1 % 6.4 % 0.5 % -5.6 % -11.8 % 25% 50 % 56.3 % 55.9 % 54.7 % 52.8 % 50.1 % 46.8 % 42.8 % 38.2 % 33.1 % 27.6 % 21.7 % 15.5 % 9.0 % 2.4 % -4.3 % 30% 60 % 69.0 % 68.6 % 67.3 % 65.2 % 62.4 % 58.8 % 54.5 % 49.5 % 44.0 % 38.0 % 31.6 % 24.9 % 17.9 % 10.8 % 3.5 % 35% 70 % 82.3 % 81.8 % 80.4 % 78.2 % 75.1 % 71.2 % 66.6 % 61.2 % 55.3 % 48.8 % 41.9 % 34.7 % 27.2 % 19.4 % 11.7 % 40% 80 % 96.0 % 95.5 % 94.0 % 91.6 % 88.3 % 84.1 % 79.1 % 73.4 % 67.0 % 60.1 % 52.6 % 44.8 % 36.7 % 28.5 % 20.1 % 45% 90 % 110.3 % 109.7 % 108.2 % 105.6 % 102.0 % 97.5 % 92.2 % 86.0 % 79.2 % 71.7 % 63.7 % 55.4 % 46.7 % 37.8 % 28.8 % 50% 100 % 125.0 % 124.4 % 122.8 % 120.0 % 116.2 % 111.4 % 105.6 % 99.1 % 91.7 % 83.8 % 75.2 % 66.3 % 57.0 % 47.5 % 37.8 % 55% 110 % 140.3 % 139.7 % 137.9 % 134.9 % 130.8 % 125.7 % 119.6 % 112.6 % 104.7 % 96.2 % 87.1 % 77.5 % 67.6 % 57.5 % 47.2 % 60% 120 % 156.0 % 155.4 % 153.5 % 150.3 % 146.0 % 140.5 % 134.0 % 126.5 % 118.1 % 109.1 % 99.4 % 89.2 % 78.6 % 67.8 % 56.8 % The foregoing tables are intended to isolate the effect of benchmark volatility and benchmark performance on the return of inverse, inverse leveraged or leveraged funds. The Geared Funds’ actual returns may be significantly greater or less than the returns shown above as a result of any of the factors discussed above or under the below risk factor describing correlation risks. Correlation and Performance Risks Specific to the Geared Funds. A number of factors may affect a Geared Fund’s ability to achieve a high correlation with its benchmark, and there is no guarantee that a Geared Fund will achieve a high degree of correlation Failure to achieve a high degree of correlation may prevent a Geared Fund from achieving its investment objective, and the percentage change of the Geared Fund’s NAV each day may differ, perhaps significantly in amount, and possibly even direction from its Daily Target. Factors that may affect a Geared Fund’s ability to meet its investment objective include: (1) the Sponsor’s ability to purchase and sell Financial Instruments in a manner that correlates to a Fund’s objective, including the Sponsor’s ability to enter into new positions and contracts to replace exposure that has been reduced or terminated by a counterparty or otherwise; (2) an imperfect correlation between the performance of the Financial Instruments held by a Fund and the performance of the applicable benchmark; (3) bid-ask spreads on such Financial Instruments; (4) fees, expenses, transaction costs, financing costs and margin requirements associated with the use of Financial Instruments and commission costs; (5) holding or trading Financial Instruments in a market that has become illiquid or disrupted; (6) a Fund’s Share prices being rounded to the nearest cent and/or valuation methodologies; (7) changes to a benchmark that are not disseminated in advance; (8) the need to conform a Fund’s portfolio holdings to comply with investment restrictions or policies, position limits and accountability levels, and regulatory or tax law requirements; (9) early or unanticipated closings of the markets on which the holdings of a Fund trade, limiting or preventing the Fund from executing intended portfolio transactions; (10) accounting standards; (11) differences caused by a Fund obtaining exposure to only a representative sample of the components of a benchmark, overweighting or underweighting certain components of a benchmark or obtaining exposure to assets that are not included in a benchmark; (12) large movements of assets into and/or out of a Fund, particularly late in the day; (13) significant and/or rapid increases in the size of the Fund as a result of an increase in creation activity that cause the Fund to approach or reach position or accountability limits or other portfolio limits; and (14) events such as natural disasters (including disease, epidemics and pandemics) that can be highly disruptive to economies, markets and companies including, but not limited to, the Sponsor and third party service providers. In order to achieve a high degree of correlation with their respective benchmarks, the Geared Funds seek to rebalance their portfolios daily to keep exposure consistent with their respective investment objectives. Being materially under- or overexposed to the benchmark may prevent a Geared Fund from achieving a high degree of correlation with its benchmark and may expose the Geared Fund to greater leverage risk. Market disruptions or closures, large movements of assets into or out of the Geared Funds, regulatory restrictions, market volatility, illiquidity, margin requirements, accountability levels, position limits, and daily price fluctuation limits set forth by the exchanges and other factors will adversely affect such Geared Funds’ ability to adjust exposure to requisite levels. The target amount of a Fund’s portfolio exposure may be impacted by changes to the value of its benchmark each day. The target amount of portfolio exposure is impacted dynamically by a benchmark’s movements, including intraday movements. Because of this, it is unlikely that a Geared Fund will have perfect exposure during the day or at the end of each day and the likelihood of being materially under- or overexposed is higher on days when its benchmark is volatile, particularly when the benchmark is volatile at or near the close of the trading day. 31 Table of Contents The time and manner in which a Geared Fund rebalances its portfolio may vary from day to day at the sole discretion of the Sponsor, depending upon market conditions and other circumstances. If for any reason a Geared Fund is unable to rebalance all or a portion of its portfolio, or if all or a portion of the portfolio is rebalanced incorrectly, the Fund’s investment exposure may not be consistent with the Fund’s investment objective. In these instances, the Geared Fund may have investment exposure to its benchmark that is significantly greater or less than its stated multiple. As a result, the Geared Fund may be more or less exposed to leverage risk than if it had been properly rebalanced and may not achieve its investment objective. Unlike other funds that do not rebalance their portfolios as frequently, each Geared Fund may be subject to increased trading costs associated with daily portfolio rebalancings. Intraday Price Performance Risk. Each Geared Fund is typically rebalanced at or about the time of its NAV calculation time (which may be other than at the close of the U.S. equity markets). As such, the intraday position of the Geared Fund will generally be different from the Geared Fund’s stated daily investment objective ( i.e. , -0.5x, -2x, 1.5x, or 2x). Intraday price performance of the Geared Funds will likely differ from the Fund’s stated daily multiple times the performance of the Benchmark for such day. The use of leveraged, inverse and/or inverse leveraged positions could result in the total loss of an investor’s investment. Each of the Geared Funds utilize leverage in seeking to achieve its respective investment objective and will lose more money in market environments adverse to its Daily Target than funds that do not employ leverage. The use of leveraged and/or inverse leveraged positions could result in the total loss of an investor’s investment, even within a single day. Even if held for only a single day, the Fund is highly vulnerable to sudden large changes in the daily movement of the Index. The use of leverage increases the volatility of your returns. The cost of obtaining leverage will lower your returns. For example, because the Ultra Funds and the UltraShort Funds offered hereby include a two times (2x) or a two times inverse (-2x) multiplier, a single-day movement in the benchmark for one of these Funds approaching 50% at any point in the day could result in the total loss or almost total loss of an investment in such Fund if that movement is contrary to the investment objective of the Fund. This would be the case with downward single-day or intraday movements in the underlying benchmark of an Ultra Fund or upward single day or intraday movements in the benchmark of an UltraShort Fund, even if the underlying benchmark maintains a level greater than zero at all times and even if the benchmark subsequently moves in an opposite direction, eliminating all or a portion of the prior adverse movement. It is not possible to predict when sudden large changes in the daily movement in an Index may occur. A number of factors may have a negative impact on the price of commodities, such as oil, gold, silver and natural gas, and the price of Financial Instruments based on such commodities. With regard to the Natural Gas Funds, the Precious Metals Funds and the Oil Funds, a number of factors may affect the price of these commodities and, in turn, the Financial Instruments and other assets, if any, owned by such a Fund, including, but not limited to: • Significant increases or decreases in the available supply of a physical commodity due to natural, technological, or other factors. Natural factors would include depletion of known cost-effective sources for a commodity or the impact of severe weather or other natural events on the ability to produce or distribute the commodity. Technological factors, such as increases in availability created by new or improved extraction, refining and processing equipment and methods or decreases caused by failure or unavailability of major refining and processing equipment (for example, shutting down or constructing natural gas processing plants), also materially influence the supply of the commodity. General economic conditions in the world or in a major region, such as population growth rates, periods of civil unrest, government austerity programs, or currency exchange rate fluctuations may affect prices of underlying commodities. • The exploration and production of commodities are uncertain processes with many risks. The cost of extraction, completing and operating wells / mines is often uncertain, and a number of factors can delay or prevent operations or production of commodities, including: (1) unexpected extraction or drilling conditions; (2) pressure or irregularities in formations; (3) equipment failures or repairs; (4) fires or other accidents; (5) adverse weather conditions; (6) pipeline ruptures, spills or other supply disruptions; and (7) shortages or delays in the availability of extraction delivery equipment. • In regard to the Oil Funds, the exploration and production of crude oil are uncertain processes with many risks. The cost of drilling, completing and operating wells for crude oil is often uncertain, and a number of factors can delay or prevent operations or production of crude oil, including (1) unexpected drilling conditions, (2) pressure or irregularities in formations, (3) equipment failures or repairs, (4) fires or other accidents, (5) adverse weather conditions, (6) pipeline ruptures, spills or other supply disruptions, and (7) shortages or delays in the availability of extraction or delivery equipment. 32 Table of Contents • Significant increases or decreases in the demand for a physical commodity due to natural, technological or other factors. Natural factors would include such events as unusual climatological or health conditions (such as disease or pandemics) impacting the demand for commodities. Technological or other factors may include such developments as substitutes or new uses for particular commodities or changes in the demand for particular commodities. General economic conditions in the world or in a major region, such as population growth rates, periods of civil unrest, government austerity programs, or currency exchange rate fluctuations may affect prices of underlying commodities. For example, gold and silver are used in a wide range of industrial applications and demand for gold and silver is driven by, among other things, demand for jewelry. An economic downturn could have a negative impact on gold and silver demand and, consequently, their prices. • A significant change in the attitude of speculators and investors towards a commodity or in the commodity hedging activities of commodity producers. Should the speculative community take a negative or positive view towards any given commodity, or if there is an increase or decrease in the level of hedge activity of commodity producing companies, countries and/or organizations, such action could cause a change in world prices of any given commodity. • Large purchases or sales of physical commodities by the official sector. Governments and large institutions have large commodities holdings or may establish major commodities positions. For example, a significant portion of the aggregate world precious metals holdings is owned by governments, central banks and related institutions. Similarly, nations with centralized or nationalized energy production organizations may control large physical quantities of certain commodities. The purchase or sale by one of these institutions in large amounts could potentially cause a change in prices for that commodity. • With regard to the Oil Funds, nations with centralized or nationalized oil production and organizations such as the Organization of Petroleum Exporting Countries (OPEC) control large physical qualities of crude oil. The purchase or sale by one of these institutions in large amounts could potentially cause a change in prices for that commodity. Tension between the governments of the United States and oil exporting nations, civil unrest and sabotage, the ability of members of OPEC to agree upon and maintain oil prices and production levels, and fluctuations in the reserve capacity of crude oil could impact future oil prices. • Political activity such as the adoption of changes to legislation, imposition of regulations or entry into trade treaties, as well as political disruptions caused by societal breakdown, insurrection, terrorism, pandemics, sabotage and/or war may greatly influence commodities prices. • With regard to the Natural Gas Funds, the demand for natural gas correlates closely with general economic growth rates. The occurrence of recessions or other periods of low or negative economic growth will typically have a direct adverse impact on natural gas demand and natural gas prices. The supply and demand for natural gas may also be impacted by changes in interest rates, inflation, and other local or regional weather and market conditions, as well as by the development of alternative energy sources. • The demand for natural gas has traditionally been cyclical, with higher demand during winter months and lower demand during summer months. Natural gas prices are subject to volatile, sudden, unpredictable and/or temporary price movements over short periods of time. • The recent proliferation of commodity-linked products and their unknown effect on the commodity markets. • With regard to the Oil and Natural Gas Funds, competition from clean power companies, fluctuations in the supply and demand of alternative energy fuels, energy conservation, changes in consumer preferences regarding the use of renewable energy sources to replace fossil fuels, and tax and other government regulations can significantly affect the prices of oil and natural gas. • The prices, supply and demand for gold and silver may also be impacted by changes in interest rates, inflation, and other local or regional market conditions, as well as by investor confidence. There can be no assurance that either gold or silver will maintain its long-term value in terms of future purchasing power. Gold and silver prices are volatile and subject to sudden, and unpredictable price movements, including reversals. Gold and silver markets also have historically experienced extended periods of flat or declining prices. Each of these factors could have a negative impact on the value of the Funds. These factors interrelate in complex ways, and the effect of one factor on the market value of a Fund may offset or enhance the effect of another factor. 33 Table of Contents Risks Specific to the Currency Funds. A number of factors may have a negative impact on the value of non-U.S. currencies and the value of Financial Instruments based on such currencies. A number of factors may affect the value of non-U.S. currencies or the U.S. dollar and, in turn, Financial Instruments based on such non-U.S. currencies or the U.S. dollar. These factors include: • Natural or environmental disasters and widespread disease, including public health disruptions, pandemics and epidemics (for example COVID-19); • Debt level and trade deficit of the relevant foreign countries; • Inflation rates of the United States and the relevant foreign countries and investors’ expectations concerning inflation rates; • Interest rates of the United States and the relevant foreign countries and investors’ expectations concerning interest rates; • Investment and trading activities of mutual funds, hedge funds and other market participants; • Global or regional political, economic or financial events and situations; • Sovereign action to set or restrict currency conversion; • Monetary policies and other related activities of central banks within the U.S. and other relevant non-U.S. markets; • Overall growth and performance of the economies of the relevant countries; and • Non-U.S. financial markets may be closed on a day when U.S. domestic markets are open for trading. As a result, liquidity and/or pricing may be affected by the absence of trading in a specific currency. In periods of financial turmoil, capital can move quickly out of countries or geographic regions that are perceived to be more vulnerable to the effects of the crisis than other countries or geographic regions, with sudden and severely adverse consequences to the currencies of those countries or geographic regions. Each of these factors could have a negative impact on the value of a Currency Fund. These factors interrelate in complex ways, and the effect of one factor on the market value of a Currency Fund may offset or enhance the effect of another factor. All of these factors are, in turn, sensitive to the monetary, fiscal and trade policies pursued by the relevant countries and those of other countries important to international trade and finance. In addition, information relating to non-U.S. countries or currencies may not be as well-known or as rapidly or thoroughly reported as information regarding the U.S. or the U.S. dollar. The value of the Shares of the VIX Futures Fund relates directly to the value of, and realized gain or loss from the Financial Instruments and other assets held by the Fund. Fluctuations in the price of these Financial Instruments or assets could materially adversely affect an investment in Shares of the VIX Futures Fund. Several factors may affect the price and/or liquidity of VIX futures contracts and other assets, if any, owned by the VIX Futures Fund, including, but not limited to: • Prevailing market prices and forward volatility levels of the U.S. stock markets, the S&P 500, the equity securities included in the S&P 500 and prevailing market prices of options on the S&P 500, the VIX, options on the VIX, the relevant VIX futures contracts, or any other financial instruments related to the S&P 500 and the VIX or VIX futures contracts; • Interest rates, and investors’ expectations concerning interest rates; Inflation rates and investors’ expectations concerning inflation rates; • Economic, financial, political, regulatory, geographical, judicial and other events that affect the level of the Mid-Term VIX Futures Index or the market price or forward volatility of the U.S. stock markets, the equity securities included in the S&P 500, the S&P 500, the VIX or the relevant futures or option contracts on the VIX; • Supply and demand as well as hedging activities in the listed and OTC equity derivatives markets; • The level of margin requirements; • The position limits imposed by futures exchanges and any position or risk limits imposed by FCMs and swap counterparties; • Disruptions in trading of the S&P 500, futures contracts on the S&P 500 or options on the S&P 500; and • The level of contango or backwardation in the VIX futures contract market. These factors interrelate in complex ways, and the effect of one factor on the market value of the VIX Futures Fund may offset or enhance the effect of another factor. 34 Table of Contents The Natural Gas Funds are linked to an index comprised of natural gas futures contracts, and are not directly linked to the “spot” price of natural gas. Natural Gas futures contracts may perform very differently from the spot price of natural gas. The benchmark used by each Natural Gas Fund is intended to reflect the performance of the prices of futures contracts on natural gas. The Natural Gas Funds are not directly linked to the “spot” price of natural gas. The price of a futures contract reflects the expected value of the commodity upon delivery in the future whereas the spot price of a commodity reflects the immediate delivery value of the commodity. While prices of swaps, futures contracts and other derivatives contracts on natural gas are related to the prices of an underlying cash market (i.e., the “spot market”), they have typically performed very differently from, and commonly underperform, the spot price of natural gas. This is primarily due to a variety of factors including the current (and future) expectations of storage costs, geopolitical risks, interest charges incurred to finance the purchase of the commodity, and expectations concerning supply and demand for the commodity. It is possible that during certain time periods the performance of different derivatives contracts may be substantially lower or higher than cash market prices for natural gas due to differences in derivatives contract terms or as supply, demand or other economic or regulatory factors become more pronounced in either the cash or derivatives markets. As a result, the Natural Gas Funds may underperform a similar investment that is linked to the “spot” price of natural gas. The Oil Funds are linked to an index comprised of crude oil futures contracts, and are not directly linked to the “spot” price of crude oil. Oil futures contracts may perform very differently from the spot price of crude oil. The benchmark used by each Oil Fund, the Bloomberg Commodity Balanced WTI Crude Oil Index SM (the “Oil Index”), is intended to reflect the performance of crude oil as measured by the price of West Texas Intermediate (“WTI”), sweet light crude oil futures contracts traded on the New York Mercantile Exchange (the “NYMEX”). The Oil Funds are not directly linked to the “spot” price of crude oil. The price of a futures contract reflects the expected value of the commodity upon delivery in the future, whereas the spot price of a commodity reflects the immediate delivery values of the commodity. While prices of futures contracts and other derivatives contracts on crude oil are related to the prices of an underlying cash market (i.e., the “spot” market), they may not be well correlated and have typically performed very differently from, and commonly underperform, the spot price of crude oil due to a variety of factors including the current (and future) expectations of storage costs, geopolitical risks, interest charges incurred to finance the purchase of the commodity, and expectations concerning supply and demand for the commodity. It is possible that during certain time periods derivatives contract prices may not be correlated to spot market prices and may be substantially lower or higher than spot market prices for oil due to differences in derivatives contract terms or as supply, demand or other economic or regulatory factors become more pronounced in either the spot or derivatives markets. As a result, the Oil Funds may underperform a similar investment that is linked to the “spot” price of crude oil. Risks Specific to ProShares Ultra Euro and ProShares UltraShort Euro The European financial markets and the value of the euro have experienced significant volatility, in part related to unemployment, budget deficits and economic downturns. In addition, several member countries of the Economic and Monetary Union (the “EMU”) of the European Union (the “EU”) have experienced credit rating downgrades, rising government debt levels and, for certain EU member countries (including Greece, Spain, Portugal, Ireland and Italy), weaknesses in sovereign debt. Following a referendum in June 2016, the United Kingdom (the “UK”) formally exited the EU on January 31, 2020 (known as “Brexit”). During a transition period where the UK remained subject to EU rules but had no role in the EU law-making process, the UK and EU representatives negotiated the precise terms of their future relationship, reaching an agreement on December 24, 2020. On December 31, 2020, the transition period concluded and the terms of the new agreement went into effect on January 1, 2021. The complete impact of the new agreement, as well as the full scope and nature of the consequences of the exit, are not at this time known and are unlikely to be known for a significant period of time, but may impact the future direction of the value of non-U.S. currencies or the U.S. dollar and, in turn, affect the value of the Currency Funds. In addition, these uncertainties could increase volatility in the market prices of non-U.S. currencies or the U.S. dollar and, in turn, affect the value of the Currency Funds. The effects of Brexit will depend on agreements the UK negotiates to retain access to EU markets either during a transitional period or more permanently. Brexit could lead to legal and tax uncertainty and potentially divergent national laws and regulations as the UK determines which EU laws to replace and replicate. In addition, it is possible that the euro could be abandoned in the future by countries that have already adopted its use. If this were to occur, the value of the euro could fluctuate drastically. Increased volatility related to the euro could exacerbate the effects of daily compounding on the Ultra Euro Fund’s and the UltraShort Euro Fund’s performance over periods longer than a single day. If the euro is abandoned by all or a significant number of countries that have adopted its use, the Ultra Euro Fund and the UltraShort Euro Fund may be forced to switch benchmarks or terminate. 35 Table of Contents Risks Specific to the VIX Funds In addition to the risks described elsewhere in this “Risk Factors” section, the following risks apply to the VIX Funds. The VIX Funds are benchmarked to a VIX Futures Index. They are not benchmarked to the VIX or actual realized volatility of the S&P 500. The level of each VIX Futures Index is based on the value of the relevant VIX futures contracts based on the Chicago Board Options Exchange, Incorporated Volatility Index (the “VIX”) comprising the applicable VIX Futures Index. Each VIX Fund is benchmarked to its respective VIX Futures Index. The VIX Funds are not linked to the VIX (which is a measure of implied volatility of the S&P 500 over the next 30 days derived from option prices), to realized volatility of the S&P 500 or to the options that underlie the VIX calculation. Each VIX Fund should be expected to perform very differently from the VIX over all periods of time. In many cases, the VIX Futures Indexes will significantly underperform the VIX. VIX futures contracts are not directly based on a tradable underlying asset. The VIX is not directly investable. The settlement price at maturity of VIX futures contracts are based on the calculation that determines the level of the VIX. As a result, the behavior of the VIX futures contracts may be different from traditional futures contracts whose settlement price is based on a specific tradable asset. The level of the VIX has historically reverted to a long-term mean level and is subject to the risk associated with reversion to its mean. Accordingly, investors should not expect the VIX Funds to retain any appreciation in value over extended periods of time. In the past, the level of the VIX has typically reverted over the longer term to a historical mean, and its absolute level has been constrained within a band. As such, the potential upside of long or short exposure to VIX futures contracts may be limited, and any gains may be subject to sharp reversals during such reversions to the mean. When economic uncertainty increases and there is an associated increase in expected volatility, the value of VIX futures contracts will likely also increase and the potential upside of an investment in a VIX Short Fund will correspondingly be limited as a result. Similarly, when economic uncertainty recedes, and there is an associated decrease in expected volatility, the value of VIX futures contracts will likely also decrease and the potential upside of an investment in a VIX Ultra Fund or a Matching VIX Fund will correspondingly be limited as a result. The value of the Shares of a VIX Futures Fund relates directly to the value of, and realized profit or loss from, the Financial Instruments and other assets held by that Fund. Fluctuations in the price of these Financial Instruments or assets could materially adversely affect an investment in such Fund’s Shares. Several factors may affect the price and/or liquidity of VIX futures contracts and other assets, if any, owned by the VIX Futures Fund, including, but not limited to: • Prevailing market prices and forward volatility levels of the U.S. stock markets, the S&P 500, the equity securities included in the S&P 500 and prevailing market prices of options on the S&P 500, the VIX, options on the VIX, the relevant VIX futures contracts, or any other financial instruments related to the S&P 500 and the VIX or VIX futures contracts; • Interest rates, and investors’ expectations concerning interest rates; • Inflation rates and investors’ expectations concerning inflation rates; • Economic, financial, political, regulatory, geographical, biological or judicial events that affect the level of the Mid-Term VIX Index or the market price or forward volatility of the U.S. stock markets, the equity securities included in the S&P 500, the S&P 500, the VIX or the relevant futures or option contracts on the VIX; • Supply and demand as well as hedging activities in the listed and OTC equity derivatives markets; • Disruptions in trading of the S&P 500, futures contracts on the S&P 500 or options on the S&P 500; • The level of contango or backwardation in the VIX futures contract market; • The position limits imposed by FCMs; and • The level of margin requirements. Margin requirements for VIX futures contracts and position limits imposed by exchanges and/or FCMs may limit the VIX Futures Fund’s ability to achieve sufficient exposure and prevent the Fund from achieving its investment objective. The term “margin” refers to the minimum amount a Fund must deposit and maintain with its FCM in order to establish an open position in futures contracts. The minimum amount of margin required in connection with a particular futures contract is set by the exchange on which such contract is traded and is subject to change at any time during the term of the contract. Futures contracts are customarily bought and sold on margins that represent a percentage of the aggregate purchase or sales price of the contract. 36 Table of Contents An FCM may compute margin requirements multiple times per day. When a Fund has an open futures contract position, it is subject to daily variation margin calls by an FCM that could be substantial in the event of adverse price movements. Because futures contracts require only a small initial investment in the form of a deposit or initial margin, they involve a high degree of leverage. A Fund with open positions is subject to maintenance or variation margin on its open positions. When the market value of a particular open futures contract position changes to a point where the margin on deposit does not satisfy maintenance margin requirements, a margin call is made by the FCM. If the margin call is not met within a reasonable time, the FCM may close out a Fund’s position. If a Fund has insufficient cash to meet daily variation margin requirements, it might need to sell Financial Instruments at a time when such sales are disadvantageous. Futures markets are highly volatile and the use of or exposure to futures contracts may increase volatility of a Fund’s NAV. VIX futures contracts have been subject to periods of sudden and extreme volatility. As a result, margin requirements for VIX futures contracts are higher than the margin requirements for most other types of futures contracts. In addition, the FCMs utilized by the Fund may impose margin requirements in addition to those imposed by the clearinghouse. Margin requirements are subject to change, and may be raised in the future by either or both the clearinghouse and the FCMs. High margin requirements could prevent the Fund from obtaining sufficient exposure to VIX futures contracts and may adversely affect the Fund’s ability to achieve its investment objective. An FCM’s failure to return required margin to the Fund on a timely basis may cause the Fund to delay redemption settlement dates and/or restrict, postpone or limit the right of redemption. Futures contracts are subject to liquidity risk. Certain of the FCMs utilized by the Fund have imposed their own “position limits” on the Fund. Position limits restrict the amount of exposure to futures contracts the Fund can obtain through such FCMs. As a result, the Fund may need to transact through a number of FCMs to achieve its investment objective. If enough FCMs are not willing to transact with the Fund, or if the position limits imposed by such FCMs do not provide sufficient exposure, the Fund may not be able to achieve its investment objective. Risks Related to All Funds Correlation Risks for all Funds. While the Funds seek to meet their investment objectives, there is no guarantee they will do so. Factors that may affect a Fund’s ability to meet its investment objective include: (1) the Sponsor’s ability to purchase and sell each Fund’s Financial Instruments in a manner that correlates to a Fund’s objective; (2) an imperfect correlation between the performance of the Financial Instruments held by a Fund and the performance of the corresponding benchmark; (3) bid-ask spreads on each Fund’s Financial Instruments; (4) fees, expenses, transaction costs, commissions, financing costs and margin requirements associated with the use of each Fund’s Financial Instruments; (5) holding or trading Financial Instruments in a market that has become illiquid or disrupted; (6) a Fund’s Share prices being rounded to the nearest cent and/or other valuation methodologies; (7) changes to a benchmark that are not disseminated in advance; (8) the need to conform a Fund’s Financial Instruments to comply with investment restrictions or policies or regulatory or tax law requirements; (9) early and unanticipated closings of the markets on which the holdings of a Fund trade; (10) accounting standards; (11) differences caused by a Fund obtaining exposure to only a representative sample of the components of a benchmark, overweighting or underweighting certain components of a benchmark or obtaining exposure to assets that are not included in a benchmark; and (12) large movements of assets into and/or out of a Fund. Each Geared Fund seeks to provide investment results that correspond, before fees and expenses, to the performance of, or a multiple of, the inverse or an inverse multiple of the daily performance of a benchmark at all times, even during periods when the applicable benchmark is flat as well as when the benchmark is moving in a manner which causes the Fund’s NAV to decline, thereby causing losses to such Fund. Other than for cash management purposes, the Funds are not actively managed by traditional methods ( e.g. , by effecting changes in the composition of a portfolio on the basis of judgments relating to economic, financial and market considerations with a view toward obtaining positive results under all market conditions). Rather, the Sponsor seeks to cause the NAV to track the daily performance of a benchmark in accordance with each Fund’s investment objective, even during periods in which the benchmark is flat or moving in a manner which causes the NAV of a Fund to decline. It is possible to lose money over time regardless of the performance of an underlying benchmark, due to the effects of daily rebalancing, volatility and compounding, as applicable (see “Correlation Risks Specific to the Geared Funds” in this Annual Report on Form 10-K for additional details). 37 Table of Contents The assets that the Funds invest in can be highly volatile and the Funds may experience large losses when buying, selling or holding such instruments. Investments linked to volatility, commodity, currency or fixed income markets can be highly volatile compared to investments in traditional securities and the Funds may experience large losses. The value of these investments may be affected by changes in overall market movements, commodity or currency benchmarks (as the case may be), volatility, changes in interest rates, changes in inflation rates and investors’ expectations concerning inflation rates or factors affecting a particular industry, commodity or currency. For example, commodity futures contracts (as may be held by the Commodity Index Funds) may be affected by numerous factors, including drought, floods, fires, weather, livestock diseases, pipeline ruptures or spills, embargoes, tariffs and international, economic, political or regulatory developments. In particular, trading in VIX futures contracts and trading in natural gas futures contracts (or other Financial Instruments linked to natural gas) have been very volatile and can be expected to be very volatile in the future. High volatility may have an adverse impact on the Funds beyond the impact of any performance-based losses of the underlying benchmark. Potential negative impact from rolling futures positions. Certain of the Funds invest in or have exposure to futures contracts and are subject to risks related to “rolling” such futures contracts, which is the process by which a Fund closes out a futures position prior to its expiration month and purchases an identical futures contract with a later expiration date. The Funds do not intend to hold futures contracts through expiration, but instead intend to “roll” their respective positions as they approach expiration. The contractual obligations of a buyer or seller holding a futures contract to expiration may be satisfied by settling in cash as designated in the contract specifications. As explained further below, the price of futures contracts further from the expiration may be higher (a condition known as “contango”) or lower (a condition known as “backwardation”), which can impact the Funds’ returns. When the market for these futures contracts is such that the prices are higher in the more distant delivery months than in the nearer delivery months, the sale during the course of the rolling process of the more nearby contract would take place at a price that is lower than the price of the more distant futures contract. This pattern of higher prices for longer expiration futures contracts is often referred to as “contango.” Alternatively, when the market for these futures contracts is such that the prices are higher in the nearer months than in the more distant months, the sale during the course of the rolling process of the more nearby contract would take place at a price that is higher than the price of the more distant futures contract. This pattern of higher futures prices for shorter expiration futures contracts is referred to as “backwardation.” The presence of contango in certain futures contracts at the time of rolling would be expected to adversely affect the relevant Funds with long positions, and positively affect the Funds with short positions. Similarly, the presence of backwardation in certain futures contracts at the time of rolling such contracts would be expected to adversely affect the Funds with short positions and positively affect the Funds with long positions. There have been extended periods in which contango or backwardation have existed in the futures contract markets for various types of futures contracts and such periods can be expected to occur in the future. These extended periods have caused in the past, and may cause in the future, significant losses, and these periods can have as much or more impact over time than movements in the level of a Fund’s benchmark. Additionally, because of the frequency with which the Funds may roll futures contracts, the impact of such contango or backwardation on Fund performance may be greater than it would have been if the Funds rolled futures contracts less frequently. The Precious Metals Funds do not hold gold or silver bullion. Rather, the Precious Metals Funds use Financial Instruments to gain exposure to gold and silver bullion. Using Financial Instruments to obtain exposure to gold or silver bullion may cause tracking error and subject the Precious Metals Funds to the effects of contango and backwardation as described herein. Using Financial Instruments such as swaps, forwards and futures in an effort to replicate the inverse performance of gold or silver bullion may cause tracking error which is the divergence between the price behavior of a position and that of a benchmark. While prices of Financial Instruments are related to the prices of an underlying cash market, they may not be perfectly correlated and typically have performed differently. In addition, the use of forward or futures contracts exposes a Fund to risks associated with “rolling” as described herein (forward contracts are subject to the same risks as rolling futures contracts), including the possibility that contango or backwardation can occur. Gold and silver historically exhibit contango markets during most periods. Although the existence of historically prevalent contango markets would be expected to be beneficial to the Precious Metals Funds, there can be no assurance that such contango markets will always exist. Alternatively, the existence of backwardated markets would be expected to adversely impact the Precious Metals Funds. Credit and liquidity risks associated with collateralized repurchase agreements. A portion of each Fund’s assets may be held in cash and/or U.S. Treasury securities, agency securities, or other high credit quality short-term fixed-income or similar securities (such as shares of money market funds and collateralized repurchase agreements). These securities may be used for direct investment or serve as collateral for such Fund’s trading in Financial Instruments, as applicable, and may include collateralized repurchase agreements. Collateralized repurchase agreements involve an agreement to purchase a security and to sell that security back to the original seller at an agreed-upon price. The resale price reflects the purchase price plus an agreed- upon incremental amount which is unrelated to the coupon rate or maturity of the purchased security. As protection against the risk 38 Table of Contents that the original seller will not fulfill its obligation, the buyer receives collateral marked-to-market daily, and maintained at a value at least equal to the sale price plus the accrued incremental amount. Although the collateralized repurchase agreements that the Funds enter into require that counterparties (which act as original sellers) over-collateralize the amount owed to a Fund with U.S. Treasury securities and/or agency securities, there is a risk that such collateral could decline in price at the same time that the counterparty defaults on its obligation to repurchase the security. If this occurs, a Fund may incur losses or delays in receiving proceeds. To minimize these risks, the Funds typically enter into transactions only with major global financial institutions. Possible illiquid markets may exacerbate losses. Financial Instruments cannot always be liquidated at the desired price. It is difficult to execute a trade at a specific price when there is a relatively small volume of buy and sell orders in a market. A market disruption can also make it difficult to liquidate a position or find a swap or forward contract counterparty at a reasonable cost. Market illiquidity may cause losses for the Funds. The large size of the positions which the Funds may acquire increases the risk of illiquidity by both making their positions more difficult to liquidate and increasing the losses incurred while trying to do so. Any type of disruption or illiquidity will potentially be exacerbated due to the fact that the Funds will typically invest in Financial Instruments related to one benchmark, which in many cases is highly concentrated. Limits imposed by counterparties, exchanges or other regulatory organizations, such as accountability levels, position limits and daily price fluctuation limits, may contribute to lack of liquidity with respect to some Financial Instruments. It may not be possible to gain exposure to the benchmarks using exchange-traded Financial Instruments in the future. The Funds may utilize exchange-traded Financial Instruments. It may not be possible to gain exposure to the benchmarks with these Financial Instruments in the future. If these Financial Instruments cease to be traded on regulated exchanges, they may be replaced with Financial Instruments traded on trading facilities that are subject to lesser degrees of regulation or, in some cases, no substantive regulation. As a result, trading in such Financial Instruments, and the manner in which prices and volumes are reported by the relevant trading facilities, may not be subject to the provisions of, and the protections afforded by the CEA, or other applicable statutes and related regulations, that govern trading on regulated U.S. futures exchanges, or similar statutes and regulations that govern trading on regulated U.K. futures exchanges. In addition, many electronic trading facilities have only recently initiated trading and do not have significant trading histories. As a result, the trading of contracts on such facilities, and the inclusion of such contracts in a benchmark, may be subject to certain risks not presented by U.S. or U.K. exchange-traded futures contracts, including risks related to the liquidity and price histories of the relevant contracts. Fees are charged regardless of a Fund’s returns and may result in depletion of assets. The Funds are subject to the fees and expenses described herein which are payable irrespective of a Fund’s returns, as well as the effects of commissions, trading spreads, and embedded financing, borrowing costs and fees associated with applicable swaps, forwards, futures contracts, and costs relating to the purchase of U.S. Treasury securities or similar high credit quality, short-term fixed-income or similar securities. Additional charges may include other fees as applicable. These fees and expenses have a negative impact on the Funds returns. For the Funds linked to a benchmark, changes implemented by the benchmark provider that affect the composition and valuation of the benchmark could adversely affect the value of Fund Shares and an investment in a Fund Shares. The Funds, other than the Currency Funds, are linked to benchmarks maintained by third-party providers that are unaffiliated with the Funds or the Sponsor. There can be no guarantee or assurance that the methodology used by the third-party provider to create the benchmark will result in a Fund achieving high, or even positive, returns. The policies implemented by each benchmark provider concerning the calculation or the composition of the benchmark could affect the value of a benchmark and, therefore, the value of the corresponding Fund’s Shares. A benchmark provider may change the composition of the benchmark, or make other methodological changes that could change the value of a benchmark. Additionally, a benchmark provider may alter, discontinue or suspend calculation or dissemination of a benchmark. Any of these actions could adversely affect the value of Shares of a Fund using that benchmark. There is no guarantee that the methodology underlying the benchmark will be free from error. Benchmark providers have no obligation to consider Fund shareholder interests in calculating or revising a benchmark. Each of these factors could have a negative impact on the performance of the Funds. In addition, for the VIX Futures Fund, the Chicago Board Options Exchange, Incorporated (“Cboe”) can make methodological changes to the calculation of the VIX that could affect the value of VIX futures contracts and, consequently, the value of the VIX Futures Fund’s Shares. There can be no assurance that Cboe will not change the VIX calculation methodology in a way which may affect the value of the VIX Futures Fund’s Shares. The Cboe may also alter, discontinue or suspend calculation or dissemination of the VIX and/or exercise 39 Table of Contents settlement value. It is also possible that a third party may attempt to manipulate the value of the VIX Futures Index or the VIX. S&P Dow Jones Indices may also make changes to the equity securities underlying the S&P 500 or the futures contracts included in the Index, or make other methodological changes that could change the level of the S&P 500. Any of these actions could adversely affect the value of such Fund’s Shares. Calculation of a benchmark may not be possible or feasible under certain events or circumstances that are beyond the reasonable control of the Sponsor, which in turn may adversely impact both the benchmark and/or the Shares, as applicable. Additionally, benchmark calculations are subject to error and may be disrupted by rollover disruptions, rebalancing disruptions and/or market emergencies, which may have an adverse effect on the value of the Shares. The particular benchmark used by a Fund may underperform other asset classes and may underperform other indices or benchmarks based upon the same underlying Reference Asset. The Funds, other than the Currency Funds, are linked to benchmarks maintained by third-party providers unaffiliated with the Funds or the Sponsor. There can be no guarantee or assurance that the methodology used by the third party provider to create the benchmark will result in a Fund achieving high, or even positive, returns. Further, there can be no guarantee that the methodology underlying the benchmark or the daily calculation of the benchmark will be free from error. It is also possible that the value of the benchmark or its underlying Reference Asset may be subject to intentional manipulation by third-party market participants. The particular benchmark used by each Fund may underperform other asset classes and may underperform other indices or benchmarks based upon the same underlying Reference Asset. Each of these factors could have a negative impact on the performance of a Fund. The Funds may be subject to counterparty risks. Each Fund may use derivatives such as swap agreements and forward contracts (collectively referred to herein as “derivatives”) in the manner described herein as a means to achieve their respective investment objectives. The use of derivatives by a Fund exposes the Fund to counterparty risks. Financial markets, including the Financial Instruments used by a Fund, may be subject to unusual trading activity, volatility, and potential fraud and/or manipulation by third parties . Financial markets, including the Financial Instruments in which the Funds invest can be highly volatile and the Funds may experience sudden and large movements in price. Unusual trading activity that is unrelated to economic fundamentals, including activity that is considered market fraud and/or manipulation or excessive speculation, can lead to unusual movements in the prices of a commodity, currency, or security, which, in turn, may increase the price volatility of such commodity, currency, or security and the risk of investing in such instrument during periods of unusual market volatility. Market fraud and/or manipulation and other fraudulent trading practices (such as the intentional dissemination of false or misleading information (e.g., false rumors)) can, among other things, lead to disruption of the orderly functioning of markets, lead to significant market volatility and cause the value of a Fund and/or the Financial Instruments held by a Fund to fluctuate quickly and without warning. Such fluctuations could be significant and could be temporary or last for longer periods of time. High volatility may have an adverse impact on the performance of the Funds. The widespread demand for a commodity, currency, or security may cause price increases in the commodity, currency, or security, which could result in an increased demand for Shares. The Funds may experience difficulty in registering additional Shares in a timely manner in response to a high demand for Shares. An increase in demand for a commodity, currency, or security also may make it difficult for the Funds to create or redeem Creation Units. An investor in any of the Funds could potentially lose the full principal value of his or her investment within a single day. Regulatory Treatment Derivatives are generally traded in over-the-counter (“OTC”) markets and have only recently become subject to comprehensive regulation in the United States. Cash-settled forwards are generally regulated as “swaps”, whereas physically settled forwards are generally not subject to regulation (in the case of commodities other than currencies) or subject to the federal securities laws (in the case of securities). Title VII of the Dodd-Frank Act (“Title VII”) created a regulatory regime for derivatives, with the CFTC responsible for the regulation of swaps and the SEC responsible for the regulation of “security-based swaps.” The SEC requirements have largely yet to be made effective, but the CFTC requirements are largely in place. The CFTC requirements have included rules for some of the types of transactions in which the Funds will engage, including mandatory clearing and exchange trading for certain categories of swaps, reporting, and margin for OTC swaps. Title VII also created new categories of regulated market participants, such as “swap dealers,” “security-based swap dealers,” “major swap participants,” and “major security-based swap participants” who are, or will be, subject to significant new capital, registration, recordkeeping, reporting, disclosure, business conduct and other regulatory requirements. The regulatory requirements under Title VII continue to be developed and there may be further modifications that could materially and adversely impact the Funds, the markets in which a Fund trades and the counterparties with which the Fund engages in derivatives transactions. 40 Table of Contents As noted, the CFTC rules may not apply to all of the physically settled forward contracts entered into by the Funds. Investors, therefore, may not receive the protection of CFTC regulation or the statutory scheme of the CEA in connection with each Fund’s physically settled forward contracts. The lack of regulation in these markets could expose investors to significant losses under certain circumstances, including in the event of trading abuses or financial failure by participants. Counterparty Credit Risk The Funds will be subject to the credit risk of the counterparties to the derivatives. In the case of cleared derivatives, the Funds will have credit risk to the clearinghouse in a similar manner as the Funds would for futures contracts. In the case of OTC derivatives, the Funds will be subject to the credit risk of the counterparty to the transaction – typically a single bank or financial institution. As a result, a Fund is subject to increased credit risk with respect to the amount it expects to receive from counterparties to OTC derivatives entered into as part of that Fund’s principal investment strategy. If a counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties or other reasons, a Fund could suffer significant losses on these contracts and the value of an investor’s investment in a Fund may decline. The Funds have sought to mitigate these risks by generally requiring that the counterparties for each Fund agree to post collateral for the benefit of the Fund, marked to market daily, subject to certain minimum thresholds. However, there are no limitations on the percentage of assets each Fund may invest in swap agreements or forward contracts with a particular counterparty. To the extent any such collateral is insufficient or there are delays in accessing the collateral, the Funds will be exposed to counterparty risk as described above, including possible delays in recovering amounts as a result of bankruptcy proceedings. The Funds typically enter into transactions only with major, global financial institutions. OTC derivatives of the type that may be utilized by the Funds are generally less liquid than futures contracts because they are not traded on an exchange, do not have uniform terms and conditions, and are generally entered into based upon the creditworthiness of the parties and the availability of credit support, such as collateral, and in general, are not transferable without the consent of the counterparty. These agreements contain various conditions, events of default, termination events, covenants and representations. The triggering of certain events or the default on certain terms of the agreement could allow a party to terminate a transaction under the agreement and request immediate payment in an amount equal to the net positions owed to the party under the agreement. For example, if the level of the Fund’s benchmark has a dramatic intraday move that would cause a material decline in the Fund’s NAV, the terms of the swap may permit the counterparty to immediately close out the transaction with the Fund. In that event, it may not be possible for the Fund to enter into another swap or to invest in other Financial Instruments necessary to achieve the desired exposure consistent with the Fund’s objective. This, in turn, may prevent the Fund from achieving its investment objective, particularly if the level of the Fund’s benchmark reverses all or part of its intraday move by the end of the day. In addition, cleared derivatives benefit from daily marking-to-market and settlement, and segregation and minimum capital requirements applicable to intermediaries. To the extent that a Fund enters into cleared swap transactions, the Fund will deposit collateral with a FCM in cleared swaps customer accounts, which are required by CFTC regulations to be separate from its proprietary collateral posted for cleared swaps transactions. Cleared swap customer collateral is subject to regulations that closely parallel the regulations governing customer segregated funds for futures transactions (described above) but provide certain additional protections to cleared swaps collateral in the event of a clearing broker or clearing broker customer default. For example, in the event of a default of both the clearing broker and a customer of the clearing broker, a clearing house is only permitted to access the cleared swaps collateral in the legally separate (but operationally comingled) account of the defaulting cleared swap customer of the clearing broker, as opposed to the treatment of customer segregated funds, under which the clearing house may access all of the commingled customer segregated funds of a defaulting clearing broker. OTC derivatives entered into directly between two counterparties do not necessarily benefit from such protections, particularly if entered into with an entity that is not registered as a “swap dealer” with the CFTC. This exposes the Funds to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions because of a dispute over the terms of the contract (whether or not bona fide) or because of a credit or liquidity problem, thus causing the Funds to suffer a loss. Each counterparty and/or any of its affiliates may be an Authorized Participant or shareholder of a Fund, subject to applicable law. The counterparty risk for cleared derivatives transactions is generally lower than for OTC derivatives. Once a transaction is cleared, the clearinghouse is substituted and is a Fund’s counterparty on the derivative. The clearinghouse guarantees the performance of the other side of the derivative. Nevertheless, some risk remains, as there is no assurance that the clearinghouse, or its members, will satisfy its obligations to a Fund. 41 Table of Contents As of December 31, 2024, the Funds’ approved counterparties for swap agreements and forward contracts are Royal Bank of Canada, Citibank N.A., UBS AG, Goldman Sachs & Co., Goldman Sachs International, Morgan Stanley & Co. International PLC and Societe Generale. The Sponsor regularly reviews the performance of its counterparties for, among other things, creditworthiness and execution quality. In addition, the Sponsor periodically considers the addition of new counterparties. Thus, the list of counterparties noted above may change at any time. Each day, the Funds disclose their portfolio holdings as of the prior Business Day (as such term is defined in “Creation and Redemption of Shares-Creation Procedures” in Part I, Item 1 of this Annual Report on Form 10-K). Each Fund’s portfolio holdings identity its counterparties, as applicable. This portfolio holdings information may be accessed through the web on the Sponsor’s website at www.ProShares.com. More information about Royal Bank of Canada, including its current financial statements, may be found on the SEC’s EDGAR website under CIK No. 0001000275 (for Royal Bank of Canada). More information about Citibank N.A., including its current financial statements, may also be found on the SEC’s EDGAR website under CIK No. 0000036684 (for Citibank N.A.). More information about UBS AG, including its current financial statements, may also be found on the SEC’s EDGAR website under CIK No. 0001114446 (for UBS AG). More information about Goldman Sachs & Co., including its current financial statements, may also be found on the SEC’s EDGAR website under CIK No. 0000042352 (for Goldman Sachs & Co. LLC) More information about Goldman Sachs International, a U.K. broker-dealer and subsidiary of The Goldman Sachs Group, Inc., may also be found on the SEC’s EDGAR website under CIK No. 0000886982 (for The Goldman Sachs Group, Inc.). The Goldman Sachs Group, Inc. consolidates the financial statements of each of its subsidiaries, including Goldman Sachs & Co. and Goldman Sachs International, with its own. More information about Morgan Stanley & Co. International PLC may be found on the SEC’s EDGAR website under CIK No. 0000924186 (for Morgan Stanley & Co. International PLC). More information about Societe Generale, a French public limited company, including its current financial statements as filed with the AMF (the French securities regulator), may be found on Societe Generale’s website. Please note that the references to third-party websites have been provided solely for informational purposes. Neither the Funds nor the Sponsor endorses or is responsible for the content or information contained on any third-party website, including with respect to any financial statements. In addition, neither the Funds nor the Sponsor makes any warranty, express or implied or assumes any legal liability or responsibility for the accuracy, completeness or usefulness of any such information. Each counterparty and/or any of its affiliates may be an Authorized Participant or shareholder of a Fund, subject to applicable law. The counterparty risk for cleared derivatives transactions is generally lower than for OTC derivatives since generally a clearing organization becomes substituted for each counterparty to a cleared derivatives contract and, in effect, guarantees the parties’ performance under the contract as each party to a trade looks only to the clearing house for performance of financial obligations. However, there can be no assurance that the clearing house, or its members, will satisfy its obligations to the Fund. Historical correlation trends between Fund benchmarks and other asset classes may not continue or may reverse, limiting or eliminating any potential diversification or other benefit from owning a Fund. To the extent that an investor purchases a Fund seeking diversification benefits based on the historic correlation (whether positive or negative) between the returns of that Fund or its underlying benchmark and other asset classes, such historic correlation may not continue or may reverse itself. In this circumstance, the diversification or other benefits sought may be limited or nonexistent. The diversification or other benefits sought by an investor in a Fund may also become limited or cease to exist if the Sponsor determines to change the Fund’s benchmark or otherwise modify the Fund’s investment objective or strategy. Investors cannot be assured of the Sponsor’s continued services, the discontinuance of which may be detrimental to the Funds. Investors cannot be assured that the Sponsor will be able to continue to service the Funds for any length of time. If the Sponsor discontinues its activities on behalf of the Funds, the Funds may be adversely affected, as there may be no entity servicing the Funds for a period of time. If the Sponsor’s registrations with the CFTC or memberships in the NFA were revoked or suspended, the Sponsor would no longer be able to provide services and/or to render advice to the Funds. If the Sponsor were unable to provide services and/or advice to the Funds, the Funds would be unable to pursue their investment objectives unless and until the Sponsor’s ability to provide services and advice to the Funds was reinstated or a replacement for the Sponsor as commodity pool operator could be found. Such an event could result in termination of the Funds. The lack of active trading markets for any of the Shares of the Funds may result in losses on investors’ investments at the time of disposition of such Shares. Although the Shares of the Funds are publicly listed and traded on the applicable Exchange, there can be no guarantee that an active trading market for the Shares of any Fund will develop or be maintained. In this regard, if a Fund is not able to meet the continued listing standards of its primary listing exchange and is delisted, there will not be an active trading market for such Fund’s Shares. If investors need to sell their Shares at a time when no active market for them exists, the price investors receive for their Shares, assuming that investors are able to sell them, likely will be lower than the price that investors would receive if an active market did exist. 42 Table of Contents A Fund may change its investment objective, benchmark and investment strategies, and/or may terminate, at any time without shareholder approval. The Sponsor has the authority to change a Fund’s investment objective, benchmark or investment strategy at any time, or to terminate the Trust or a Fund, in each case, without shareholder approval or advance notice, subject to applicable regulatory requirements. Although such changes may be subject to applicable regulatory approvals, the Sponsor may determine to operate a Fund in accordance with its new investment objective, benchmark or investment strategy while the applicable approvals, if any, are pending. Such changes may expose shareholders to losses on their investments in a Fund. When a Fund’s assets are sold as part of the Fund’s termination, the resulting proceeds distributed to shareholders may be less than those that could have been realized in a sale outside of a termination context. Investors may be adversely affected by redemption or creation orders that are subject to postponement, suspension or rejection under certain circumstances. A Fund may, in its discretion, suspend the right of creation or redemption or may postpone the redemption or purchase settlement date, for (1) any period during which the Exchange or any other exchange, marketplace or trading center, deemed to affect the normal operations of any of the Funds, is closed, or when trading is restricted or suspended on such exchanges in any of the Funds’ futures contracts, (2) any period during which an emergency exists as a result of which the fulfillment of a purchase order or the redemption distribution is not reasonably practicable, or (3) such other period as the Sponsor determines to be necessary for the protection of the shareholders of the Funds. In addition, a Fund will reject a redemption order if the order is not in proper form as described in the Authorized Participant Agreement or if the fulfillment of the order might be unlawful. Any such postponement, suspension or rejection could adversely affect a redeeming Authorized Participant. For example, the resulting delay may adversely affect the value of the Authorized Participant’s redemption proceeds if the NAV of a Fund declines during the period of delay. The Funds disclaim any liability for any loss or damage that may result from any such suspension or postponement. Suspension of creation privileges may adversely impact how the Shares are traded and arbitraged on the secondary market, which could cause them to trade at levels materially different (premiums and discounts) from the fair value of their underlying holdings. The NAV per Share may not correspond to the market price per Share. The NAV per Share of a Fund changes as fluctuations occur in the market value of the Fund’s portfolio. Investors should be aware that the public trading price per Share of a Fund may be different from the NAV per Share of the Fund (i.e., the secondary market price may trade at a premium or discount to NAV). The price at which an investor may be able to sell Shares at any time, especially in times of market volatility, may be significantly less than the NAV per Share of the Fund at the time of sale. Consequently, an Authorized Participant may be able to create or redeem a Creation Unit of a Fund at a discount or a premium to the public trading price per Share of that Fund. Authorized Participants or their customers may have an opportunity to realize a profit if they can purchase a Creation Unit at a discount to the public trading price of the Shares of a Fund or can redeem a Creation Unit at a premium over the public trading price of the Shares of a Fund. The Sponsor expects that the exploitation of such arbitrage opportunities by Authorized Participants and their clients and customers will tend to cause the public trading price to track the NAV per Share of the Funds closely over time. Investors who purchase Fund Shares in the secondary market and pay a premium purchase price over a Fund’s indicative optimized portfolio value (“IOPV”) could incur significant losses in the event such investor sells such Fund Shares at a time when such premium is no longer present in the marketplace. The value of a Share may be influenced by non-concurrent trading hours between the Exchange and the market in which Financial Instruments (or related Reference Assets, as applicable) held by a Fund are traded. The Shares of each Fund trade on the Exchange from 9:30 a.m. to 4:00 p.m. (Eastern Time). The Financial Instruments (and/or the related Reference Assets, as applicable) held by a particular Fund, however, may have earlier fixing or settlement times. Consequently, liquidity in the Financial Instruments (and/or the related Reference Assets, as applicable) may be reduced after such fixing or settlement time. As a result, during the time when the Exchange is open after the applicable fixing or settlement time of an underlying component, trading spreads and the resulting premium or discount on the Shares of a Fund may widen, and, therefore, may increase the difference between the price of the Shares of a Fund and the NAV of such Shares. Also, during the time when the Exchange is open but the Fund’s NAV has already been determined, there could be market developments or other events that cause or exacerbate the difference between the price of the Shares of such Funds in the secondary market and the NAV of such Shares. 43 Table of Contents The VIX futures contracts in which the VIX Futures Fund invests may be traded throughout the day, up to 4:15 p.m. and including between 4:30 p.m. and 5:00 p.m. (Eastern Time). As a result, during the time when the Exchange is closed for trading, there could be market developments or other events that cause or exacerbate the difference between the price of the Shares of the VIX Futures Fund in the secondary market and the NAV of such Shares. The number of underlying components included in a Fund’s benchmark may impact volatility, which could adversely affect an investment in the Shares. The number of underlying components in a Fund’s benchmark may also impact volatility, which could adversely affect an investment in the Shares. For example, each of the indexes for the Commodity Index Funds is concentrated in terms of the number and type of commodities represented, and some of the subindexes are solely concentrated in a single commodity futures contract. In addition, the benchmarks for the Currency Funds are concentrated solely on a single currency and the benchmarks for the VIX Funds are concentrated solely in VIX futures contracts. Investors should be aware that other benchmarks are more diversified in terms of both the number and variety of investments included. Concentration in fewer underlying components may result in a greater degree of volatility in a benchmark and the NAV of the Fund which corresponds to that benchmark under specific market conditions and over time. Trading on exchanges outside the United States is generally not subject to U.S. regulation and may result in different or diminished investor protections. To the extent that a Fund places trades on exchanges outside the United States trading on such exchanges is generally not regulated by any U.S. governmental agency and may involve certain risks not applicable to trading on U.S. exchanges, including different or diminished investor protections. In trading contracts denominated in currencies other than U.S. dollars, the Shares are subject to the risk of adverse exchange rate movements between the dollar and the functional currencies of such contracts. Investors could incur substantial losses from trading on foreign exchanges which such investors would not have otherwise been subject had the Funds’ trading been limited to U.S. markets. Competing claims of intellectual property rights may affect the Funds and an investment in the shares. The Sponsor believes that it has obtained all required licenses or the appropriate consent of all necessary parties with respect to the intellectual property rights necessary to operate the Funds. However, other third parties could allege ownership as to such rights and may bring legal action asserting their claims. The expenses in litigating, negotiating, cross-licensing or otherwise settling such claims may adversely affect the Funds. Additionally, as a result of such action, a Fund could potentially change its investment objective, strategies or benchmark. Each of these factors could have a negative impact on the performance of the Funds. Investors may be adversely affected by an overstatement or understatement of a Fund’s NAV due to the valuation method employed or errors in the NAV calculation. Under normal circumstances, the NAV of a Fund reflects the value of the Financial Instruments held by the Fund, as of the time the NAV is calculated. The NAV of the Funds includes, in part, any unrealized profits or losses on open Financial Instrument positions. In certain circumstances (e.g., if the Sponsor believes market quotations do not accurately reflect fair value of an investment, or a trading halt closes an exchange or market early), the Sponsor may, in its sole discretion, choose to determine a fair value price as the basis for determining the market value of such position for such day. The fair value of an investment determined by the Sponsor may be different from other value determinations of the same investment. Such fair value prices generally would be determined based on available inputs about the current value of the underlying Reference Assets and would be based on principles that the Sponsor deems fair and equitable. The valuation method or errors in calculation of a Fund’s NAV also may cause the Fund’s NAV to be overstated or understated and may affect the performance of the Fund and the value of an investment in the Shares. The liquidity of the Shares may also be affected by the withdrawal from participation of Authorized Participants, which could adversely affect the market price of the Shares. In the event that one or more Authorized Participants which have substantial interests in the Shares withdraw from participation, the liquidity of the Shares will likely decrease, which could adversely affect the market price of the Shares and result in investors incurring a loss on their investment. Additionally, Authorized Participants with large holdings may choose to terminate the Trust. This power may be exercised by a relatively small number of holders and, if exercised, investors may have to find another vehicle in which to invest and may have difficulty finding one offering the same features as the Trust. 44 Table of Contents Shareholders that are not Authorized Participants may only purchase or sell their Shares in secondary trading markets, and the conditions associated with trading in secondary markets may adversely affect investors’ investment in the Shares. Only Authorized Participants may create or redeem Creation Units. All other investors that desire to purchase or sell Shares must do so through the Exchange or in other markets, if any, in which the Shares may be traded. Shares may trade at a premium or discount to NAV per Share. The applicable Exchange may halt trading in the Shares of a Fund which would adversely impact investors’ ability to sell Shares. Trading in Shares of a Fund may be halted due to market conditions or, in light of the applicable Exchange rules and procedures, for reasons that, in the view of the applicable Exchange, make trading in Shares of a Fund inadvisable. In addition, trading is subject to trading halts caused by extraordinary market volatility pursuant to “circuit breaker” rules that require trading to be halted for a specified period based on a specified decline or rise in a market index ( e.g. , the Dow Jones Industrial Average) or in the price of a Fund’s Shares. Additionally, the ability to short sell a Fund’s Shares may be restricted when there is a 10% or greater change from the previous day’s official closing price. There can be no assurance that the requirements necessary to maintain the listing of the Shares of a Fund will continue to be met or will remain unchanged. Shareholders do not have the protections associated with ownership of shares in an investment company registered under the 1940 Act. The Funds are not subject to registration or regulation under the 1940 Act. Consequently, shareholders do not have the regulatory protections provided to investors in investment companies registered under 1940 Act. These protections include, but are not limited to, provisions in the 1940 Act that limit transactions with affiliates, prohibit the suspension of redemptions (except under limited circumstances), require a board of directors that must include disinterested directors, limit leverage, impose a fiduciary duty on the fund’s manager with respect to the receipt of compensation for services, require shareholder approval for certain fundamental changes, limit sales loads, and require proper valuation of fund assets. Shareholders do not have the rights enjoyed by investors in certain other vehicles and may be adversely affected by a lack of statutory rights and by limited voting and distribution rights. The Shares have limited voting and distribution rights. For example, shareholders do not have the right to elect directors, the Funds may enact splits or reverse splits without shareholder approval and the Funds are not required to pay regular distributions, although the Funds may pay distributions at the discretion of the Sponsor. The value of the Shares will be adversely affected if the Funds are required to indemnify Wilmington Trust Company (the “Trustee”) and/or the Sponsor. Under the Trust Agreement, the Trustee and the Sponsor each has the right to be indemnified for any liability or expense incurred without gross negligence or willful misconduct. That means the Sponsor may require the assets of a Fund to be sold in order to cover losses or liability suffered by it or by the Trustee. Any such sale would decrease the value of an investment in an impacted Fund. Although the Shares of the Funds are limited liability investments, certain circumstances such as bankruptcy of a Fund will increase a shareholder’s liability. The Shares of the Funds are limited liability investments; investors may not lose more than the amount that they invest plus any profits recognized on their investment. However, shareholders could be required, as a matter of bankruptcy law, to return to the estate of a Fund any distribution they received at a time when such Fund was in fact insolvent or in violation of the Trust Agreement. Failure of the FCMs to segregate assets may increase losses in the Funds. The CEA requires a clearing broker to segregate all funds received from customers from such broker’s proprietary assets. There is a risk that assets deposited by the Sponsor on behalf of the Funds as margin with the FCMs may, in certain circumstances, be used to satisfy losses of other clients of the FCMs. If an FCM fails to segregate the funds received from the Sponsor, the assets of the Funds might not be fully protected in the event of the FCM’s bankruptcy. Furthermore, in the event of an FCM’s bankruptcy, Fund Shares could be limited to recovering only a pro rata share of all available funds segregated on behalf of the FCM’s combined customer accounts, even though certain property specifically traceable to a particular Fund was held by the FCM. Each FCM may, from time to time, be the subject of certain regulatory and private causes of action. 45 Table of Contents Similarly, the CEA requires a clearing organization approved by the CFTC as a derivatives clearing organization to segregate all funds and other property received from a clearing member’s clients in connection with domestic futures and options contracts from any funds held at the clearing organization to support the clearing member’s proprietary trading. Nevertheless, customer funds held at a clearing organization in connection with any futures or options contracts may be held in a commingled omnibus account, which may not identify the name of the clearing member’s individual customers. With respect to futures and options contracts, a clearing organization may use assets of a non-defaulting customer held in an omnibus account at the clearing organization to satisfy payment obligations of a defaulting customer of the clearing member to the clearing organization. As a result, in the event of a default of the clearing FCM’s other clients or the clearing FCM’s failure to extend its own funds in connection with any such default, a Fund may not be able to recover the full amount of assets deposited by the clearing FCM on behalf of the Fund with the clearing organization. In the event of a bankruptcy or insolvency of any exchange or a clearing house, a Fund could experience a loss of the funds deposited through its FCM as margin with the exchange or clearing house, a loss of any profits on its open positions on the exchange, and the loss of unrealized profits on its closed positions on the exchange. A court could potentially conclude that the assets and liabilities of one Fund are not segregated from those of another Fund and may thereby potentially expose assets in a Fund to the liabilities of another Fund. Each Fund is a separate series of a Delaware statutory trust and not itself a separate legal entity. Section 3804(a) of the Delaware Statutory Trust Act, as amended (the “DSTA”) provides that if certain provisions are in the formation and governing documents of a statutory trust organized in series, and if separate and distinct records are maintained for any series and the assets associated with that series are held in separate and distinct records (directly or indirectly, including through a nominee or otherwise) and accounted for in such separate and distinct records separately from the other assets of the statutory trust, or any series thereof, then the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular series are enforceable against the assets of such series only, and not against the assets of the statutory trust generally or any other series thereof, and none of the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the statutory trust generally or any other series thereof shall be enforceable against the assets of such series. The Sponsor is not aware of any court case that has interpreted Section 3804(a) of the DSTA or provided any guidance as to what is required for compliance. The Sponsor maintains separate and distinct records for each Fund and accounts for them separately, but it is possible a court could conclude that the methods used did not satisfy Section 3804(a) of the DSTA and thus potentially expose assets in a Fund to the liabilities of another Fund. There may be circumstances that could prevent a Fund from being operated in a manner consistent with its investment objective and principal investment strategies. There may be circumstances outside the control of the Sponsor and/or a Fund that could prevent or make it impractical to reposition such Fund’s portfolio investments, to process purchase or redemption orders, or to otherwise operate in a manner consistent with its investment objective and principal investment strategies. Examples of such circumstances include: market disruptions; significant market volatility, particularly late in the trading day; natural disasters; public service disruptions or utility problems such as those caused by fires, floods, extreme weather conditions, and power outages resulting in telephone, telecopy, and computer failures; market conditions or activities causing trading halts; systems failures involving computer or other information systems affecting the aforementioned parties, as well as the Depository Trust Company (“DTC”), the National Securities Clearing Corporation (“NSCC”), or any other participant in the trading or operations of a Fund; and similar extraordinary events. While the Sponsor has implemented and tested a business continuity plan and a disaster recovery plan designed to address circumstances such as those above, these and other circumstances may prevent a Fund from being operated in a manner consistent with its investment objective and/or principal investment strategies. Due to the increased use of technologies, intentional and unintentional cyber-attacks pose operational and information security risks. With the increased use of technologies such as the Internet and the dependence on computer systems to perform necessary business functions, the Funds and their service providers are susceptible to operational and information security risks. In general, cyber incidents can result from deliberate attacks or unintentional events. Cyber-attacks include, but are not limited to gaining unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data, or causing operational disruption. Cyber-attacks may also be carried out in a manner that does not require gaining unauthorized access, such as causing denial-of-service attacks on websites. Cyber security failures or breaches of a third party service provider (including, but not limited to, index providers, the administrator and transfer agent) or the issuers of securities in which the Funds invest, have the ability to cause disruptions and impact business operations, potentially resulting in financial losses, the inability of Fund shareholders to transact business, violations of applicable privacy and other laws, regulatory fines, penalties, reputational damage, reimbursement or other compensation costs, and/or additional compliance costs. In addition, substantial costs may be incurred in order to prevent any cyber incidents in the future. The 46 Table of Contents Funds and their shareholders could be negatively impacted as a result. While the Sponsor has established business continuity plans and systems to prevent such cyber-attacks, there are inherent limitations in such plans and risk management systems including the possibility that certain risks have not been identified. Security controls and systems, no matter how well designed or implemented, may only partially mitigate and not fully eliminate risks. Events, when detected by security tools or third parties, may not always be immediately understood or acted upon. Furthermore, the Sponsor cannot control the cyber security plans and systems of each Fund’s service providers, market makers, Authorized Participants or issuers of securities in which each Fund invests. Shareholders’ tax liability may exceed cash distributions on the Shares. Shareholders of each Fund may be subject to U.S. federal income taxation and, in some cases, state, local, or foreign income taxation on their share of the Fund’s taxable income, whether or not they receive cash distributions from the Fund. Each Fund does not currently expect to make distributions with respect to capital gains or ordinary income. Accordingly, shareholders of a Fund will not receive cash distributions equal to their share of the Fund’s taxable income or the tax liability that results from such income. 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. The U.S. Internal Revenue Service (“IRS”) could adjust or reallocate items of income, gain, deduction, loss and credit with respect to the Shares if the IRS does not accept the assumptions or conventions utilized by the Fund. U.S. federal income tax rules applicable to partnerships, which each Fund is anticipated to be treated as under the Internal Revenue Code of 1986, as amended (the “Code”), are complex and their application is not always clear. Moreover, the rules generally were not written for, and in some respects are difficult to apply to, publicly traded interests in partnerships. The Funds apply certain assumptions and conventions intended to comply with the intent of the rules and to report income, gain, deduction, loss and credit to shareholders in a manner that reflects the shareholders’ economic gains and losses, but these assumptions and conventions may not comply with all aspects of the applicable regulations. It is possible therefore that the IRS will successfully assert that these assumptions or conventions do not satisfy the technical requirements of the Code or the Treasury regulations promulgated thereunder and will require that items of income, gain, deduction, loss and credit be adjusted or reallocated in a manner that could be adverse to investors. Shareholders will receive partner information tax returns on Schedule K-1, which could increase the complexity of tax returns. The partner information tax returns on Schedule K-1 which the Funds will distribute to shareholders will contain information regarding the income items and expense items of the Funds. If you have not received Schedule K-1s from other investments, you may find that preparing your tax return may require additional time, or it may be necessary for you to retain an accountant or other tax preparer, at an additional expense to you, to assist you in the preparation of your return. Shareholders of each Fund may recognize significant amounts of ordinary income and short-term capital gain. Due to the investment strategy of the Funds, the Funds may realize and pass-through to Shareholders significant amounts of ordinary income and short-term capital gains as opposed to long-term capital gains, which generally are taxed at a preferential rate. 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, the fund will generally still consider you a shareholder through the end of that month. A Fund may be liable for U.S. federal income tax on any “imputed underpayment” of tax resulting from an adjustment as a result of an IRS audit. The amount of the imputed underpayment generally includes increases in allocations of items of income or gains to any shareholder and decreases in allocations of items of deduction, loss, or credit to any shareholder without any offset for any corresponding reductions in allocations of items of income or gain to any shareholder or increases in allocations of items of deduction, loss, or credit to any shareholder. If a Fund is required to pay any U.S. federal income taxes on any imputed underpayment, the resulting tax liability would reduce the net assets of the Fund and would likely have an adverse impact on the value of the Shares. Under certain circumstances, a Fund may be eligible to make an election to cause the shareholders to take into account the amount of any imputed underpayment, including any interest and penalties. However, there can be no assurance that such election will be made or effective. If the election is made, the Fund would be required to provide shareholders who owned beneficial interests in the Shares in the year to which the adjusted allocations relate with a statement setting forth their proportionate shares of the adjustment (“Adjustment Statements”). Those shareholders would be required to take the adjustment into account in the taxable year in which the Adjustment Statements are issued. 47 Table of Contents A Fund could be treated as a corporation for federal income tax purposes, which may substantially reduce the value of Shares. Each Fund has received an opinion of counsel that, under current U.S. federal income tax laws, such will be treated as a partnership that is not taxable as a corporation for U.S. federal income tax purposes, provided that, inter alia, (i) at least 90 percent of such Fund’s annual gross income will be derived from qualifying income which includes dividends, interest, capital gains from the sale or other disposition of stocks and debt instruments and, in the case of a partnership a principal activity of which is the buying and selling of commodities or certain positions with respect to commodities, income and gains derived from certain swap agreements or regulated futures or forward contracts with respect to commodities, (ii) such Fund is organized and operated in accordance with its governing agreements and applicable law and (iii) such Fund does not elect to be taxed as a corporation for federal income tax purposes. Although the Sponsor anticipates that each Fund has satisfied and will continue to satisfy the “qualifying income” requirement for all of its taxable years, such result cannot be assured. The Funds have not requested and will not request any ruling from the IRS with respect to their classification that each Fund is treated as a partnership not taxable as a corporation for federal income tax purposes. If the IRS were to successfully assert that a Fund is taxable as a corporation for federal income tax purposes in any taxable year, rather than passing through its income, gains, losses and deductions proportionately to shareholders, such Fund would be subject to tax on its net income for the year at the 21% corporate tax rate. In addition, although each Fund does not currently intend to make distributions with respect to Shares, any distributions would be taxable to shareholders as dividend income. Taxation of a Fund as a corporation could materially reduce the after-tax return on an investment in Shares and could substantially reduce the value of the Shares. Changes in U.S. federal income tax law could affect an investment in the Shares. Recently enacted legislation commonly known as the “Tax Cuts and Jobs Act” has made significant changes to U.S. federal income tax rules. As of the date of this filing, the long-term impact of the Tax Cuts and Jobs Act, including on the Shares, is unclear. Investors are urged to consult their tax advisors regarding the effect of the Tax Cuts and Jobs Act prior to investing in the Shares. INVESTORS ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISERS AND COUNSEL WITH RESPECT TO THE POSSIBLE TAX CONSEQUENCES TO THEM OF AN INVESTMENT IN THE SHARES OF A FUND; SUCH TAX CONSEQUENCES MAY DIFFER IN RESPECT OF DIFFERENT INVESTORS. Regulatory changes or actions, including the implementation of new legislation, may alter the operations and profitability of the Funds. The U.S. derivatives markets and market participants have been subject to comprehensive regulation, not only by the CFTC but also by self-regulatory organizations, including the NFA and the exchanges on which the derivatives contracts are traded and/or cleared. The regulation of commodity interest transactions and markets, including under the Dodd-Frank Act, is a rapidly changing area of law and is subject to ongoing modification by governmental and judicial action. In particular, the Dodd-Frank Act has expanded the regulation of markets, market participants and financial instruments. The regulatory regime under the Dodd-Frank Act has imposed additional compliance and legal burdens on participants in the markets for futures and other commodity interests. For example, under the Dodd-Frank Act new capital and risk requirements have been imposed on market intermediaries. Those requirements may cause the cost of trading to increase for market participants, like the Funds, that must interact with those intermediaries to carry out their trading activities. These increased costs can detract from the Funds’ performance. As with any regulated activity, changes in regulations may have unexpected results. For example, changes in the amount or quality of the collateral that traders in derivatives contracts are required to provide to secure their open positions, or in the limits on number or size of positions that a trader may have open at a given time, may adversely affect the ability of the Funds to enter into certain transactions that could otherwise present lucrative opportunities. Considerable regulatory attention has been focused on non-traditional investment pools which are publicly distributed in the United States. There is a possibility of future regulatory changes altering, perhaps to a material extent, the nature of an investment in the Funds or the ability of the Funds to continue to implement their investment strategies. In November 2019, the SEC issued proposed regulations limiting the purchase and sale of funds like the Geared Funds. Instead of adopting these regulations, in October 2020, the SEC directed its staff to conduct a review of the existing regulatory framework related to the purchase and sale of funds like the Geared Funds. Although it is impossible to predict the outcome of such review, its impact could be adverse to the effect on the Geared Funds. In addition, the SEC, CFTC and the exchanges are authorized to take extraordinary actions in the event of a market emergency, including, for example, the retroactive implementation of speculative position limits or higher margin requirements, the establishment of daily price limits and the suspension of trading. The regulation of swaps, forwards and futures transactions in the United States is a rapidly changing area of law and is subject to modification by government and judicial action. The effect of any future regulatory change on the Funds is impossible to predict, but could be substantial and adverse. 48 Table of Contents In particular, the Dodd-Frank Act was signed into law on July 21, 2010. The Dodd-Frank Act has made and will continue to make sweeping changes to the way in which the U.S. financial system is supervised and regulated. Title VII of the Dodd-Frank Act sets forth a new legislative framework for OTC derivatives, including certain Financial Instruments, such as swaps, in which certain of the Funds may invest. Title VII of the Dodd-Frank Act makes broad changes to the OTC derivatives market, grants significant new authority to the SEC and the CFTC to regulate OTC derivatives and market participants, and will require clearing and exchange trading of many OTC derivatives transactions. Pursuant to relatively recent regulations adopted by the CFTC, swap dealers are required to be registered and are subject to various regulatory requirements, including, but not limited to, margin, recordkeeping, reporting and various business conduct requirements, as well as proposed minimum financial capital requirements. Pursuant to the Dodd-Frank Act, regulations adopted by the CFTC and the federal banking regulators that are now in effect require swap dealers to post and collect variation margin (comprised of specified liquid instruments and subject to a required haircut) in connection with trading of OTC swaps with a Fund. These requirements may increase the amount of collateral the Funds are required to provide and the costs associated with providing it. OTC swap agreements submitted for clearing are subject to minimum initial and variation margin requirements set by the relevant clearinghouse, as well as margin requirements mandated by the CFTC, SEC and/or federal banking regulators. Swap dealers also typically demand the unilateral ability to increase a Fund’s collateral requirements for cleared swap agreements beyond any regulatory and clearinghouse minimums. Such requirements may make it more difficult and costly for investment funds, such as the Funds, to enter into customized transactions. They may also render certain strategies in which a Fund might otherwise engage impossible or so costly that they will no longer be economical to implement. If a Fund decides to execute swap agreements through such an exchange or execution facility, the Fund would be subject to the rules of the exchange or execution facility, which would bring additional risks and liabilities, and potential requirements under applicable regulations and under rules of the relevant exchange or execution facility. With respect to cleared OTC derivatives, a Fund will not face a clearinghouse directly but rather will do so through a swap dealer that is registered with the CFTC or SEC and that acts as a clearing member. A Fund may face the indirect risk of the failure of another clearing member customer to meet its obligations to its clearing member. This risk could arise due to a default by the clearing member on its obligations to the clearinghouse triggered by a customer’s failure to meet its obligations to the clearing member. Swap dealers also are required to post margin to the clearinghouses through which they clear their customers’ trades instead of using such margin in their operations, as was widely permitted before Dodd-Frank. This has increased and will continue to increase swap dealers’ costs, and these increased costs are generally passed through to other market participants such as the Funds in the form of higher upfront and mark-to-market margin, less favorable trade pricing, and the imposition of new or increased fees, including clearing account maintenance fees. While certain regulations have been promulgated and are already in effect, the full impact of the Dodd-Frank Act on any of the Funds remains uncertain. The legislation and the related regulations that have been and may be promulgated in the future may negatively impact a Fund’s ability to meet its investment objective either through limits on its investments or requirements imposed on it or any of its counterparties. In particular, new requirements, including capital requirements and mandatory clearing of OTC derivatives transactions, which may increase derivative counterparties’ costs and are expected to generally be passed through to other market participants in the form of higher upfront and mark-to-market margin, less favorable trade pricing, and the imposition of new or increased fees, including clearinghouse account maintenance fees, may increase the cost of a Fund’s investments and the cost of doing business, which could adversely affect investors. Regulatory bodies outside the U.S. have also passed or proposed, or may propose in the future, legislation similar to that proposed by Dodd-Frank or other legislation containing other restrictions that could adversely impact the liquidity of and increase costs of participating in the commodities markets. In addition, regulations adopted by U.S. federal banking regulators that began to take effect in 2019 will require certain bank- regulated swap dealer counterparties and certain of their affiliates and subsidiaries, including swap dealers, to include in certain financial contracts, including many derivatives contracts, such as swap agreements, terms that delay or restrict the rights of counterparties, such as a Fund, to terminate such contracts, foreclose upon collateral, exercise other default rights or restrict transfers of credit support in the event that the counterparty and/or its affiliates are subject to certain types of resolution or insolvency proceedings. Similar regulations and laws have been adopted in the United Kingdom and the European Union that applies to the Funds’ counterparties located in those jurisdictions. It is possible that these new requirements could adversely affect the Funds’ ability to terminate existing derivatives agreements or to realize amounts to be received under such agreements. 49 Table of Contents Regulatory and exchange accountability levels may restrict the creation of Creation Units and the operation of the Trust. Many U.S. futures exchanges limit the amount of fluctuation permitted in futures contract prices during a single trading day by regulations referred to as “daily price fluctuation limits” or “daily limits.” Once the daily limit has been reached in a particular contract, no trades may be made that day at a price beyond that limit or trading may be suspended for specified periods during the trading day. Derivatives contract prices could move to a limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of or entry into derivatives positions and potentially subjecting the Fund to substantial losses or periods in which the Fund does not create additional Creation Units. In addition, the CFTC, U.S. futures exchanges and certain non-U.S. exchanges have established limits referred to as “speculative position limits” or “accountability levels” on the maximum net long or short futures positions that any person may hold or control in futures contracts traded on U.S. and certain non-U.S. exchanges. The CFTC’s rules require that all accounts owned or managed by an entity that is responsible for such accounts’ trading decisions, their principals and their affiliates be aggregated for position limit purposes. The CFTC amended these aggregation rules in December 2016. In connection with these limits, the Dodd-Frank Act amended the Commodity Exchange Act and, as a result, the CFTC has adopted regulations establishing speculative position limits applicable to regulated futures and OTC derivatives and impose aggregate speculative position limits across regulated U.S. futures, OTC positions and certain futures contracts traded on non-U.S. exchanges. The CFTC has sought to amend its position limits rules for several years and on October 15, 2020 the CFTC re-proposed rules on position limits with respect to the 25 physical delivery commodity futures contracts and options on futures, as well as to swaps that are economically equivalent to such contracts and futures and options thereon that are directly or indirectly linked to the price of such contracts or to the same commodity underlying such contracts (e.g., cash-settled look-a-like futures). Exchanges may establish accountability levels applicable to futures contracts instead of position limits. An accountability level is not a strict limit, but when a person holds or controls a position in excess of a position accountability level, the relevant exchange may convert the accountability level to a limit based on information that it collects from the person as to the person’s investment intentions and strategy as part of the position accountability process and market conditions. In addition, the relevant exchange may order a person who holds or controls a position in excess of a position accountability level not to further increase its position, to comply with any prospective limit that exceeds the size of the position owned or controlled, or to reduce any open position that exceeds the position accountability level if the exchange determines that such action is necessary to maintain an orderly market. Position accountability levels could adversely affect each of the Fund’s ability to establish and maintain positions in commodity futures contracts to which such levels apply, if the Funds were to trade in such contracts. Such an outcome could adversely affect each of the Fund’s ability to pursue its investment objective. Currently, the Sponsor and the Funds are subject to position limits and accountability levels established by the CFTC and exchanges. Accordingly, the Sponsor and the Funds may be required to reduce the size of outstanding positions or be restricted from entering into new positions that would otherwise be taken for the Fund or not trade in certain markets on behalf of the Fund in order to comply with those limits or any future limits established by the CFTC and the relevant exchanges. These restrictions, if implemented, could limit the ability of each Fund to invest in additional futures contracts, add to existing positions in the desired amount, or create additional Creation Units and could otherwise have a significant negative impact on Fund operations. In May and June 2020, the Sponsor engaged in discussions with the CME regarding position limits in September 2020 WTI oil futures contracts with respect to the Oil Funds. Any limitation on positions for particular oil futures contracts could limit the Oil Funds’ ability to increase their oil futures contracts to the extent needed to achieve their respective investment objectives and may force the Funds to seek to obtain exposure to economically similar contracts through alternative instruments, if available. This could have a negative impact on the Oil Funds due to potentially increased costs of trading in alternative instruments or the inability to obtain the desired exposure. In May 2020, in response to a notice directing the Oil Funds to not exceed a designated position accountability level in the September 2020 WTI crude oil futures contracts, and to help manage the impact of unprecedented price volatility in the markets for crude oil and crude oil futures contracts and related Financial Instruments, and other market conditions, each Oil Fund repositioned its portfolio in early May to have approximately 2/3 of its portfolio exposed to the September 2020 WTI crude oil futures contract and approximately 1/3 of its portfolio exposed to the December 2020 crude oil futures contract. In July 2020, in anticipation of the Prior Oil Benchmark’s upcoming roll, and in order to help manage the impact of recent extraordinary conditions and volatility in the markets for crude oil and related Financial Instruments, each Oil Fund repositioned its portfolio in early July to have approximately 1/3 of its portfolio exposed to the October 2020 WTI crude oil futures contract, approximately 1/3 of its portfolio exposed to the November 2020 WTI crude oil futures contract, and approximately 1/3 of its portfolio exposed to the December 2020 crude oil futures contract. In August 2020, in anticipation of the Prior Oil Benchmark’s upcoming roll, and in order to help manage the impact of recent extraordinary conditions and volatility in the markets for crude oil and related Financial Instruments, each Oil Fund repositioned its portfolio in early August to have approximately 2/3 of its portfolio exposed to the December 2020 WTI crude oil futures contract, and approximately 1/3 of its portfolio exposed to the June 2021 crude oil futures contract. To the extent an Oil Fund has exposure to a 50 Table of Contents WTI crude oil futures contract not included in its benchmark, the performance of such Oil Fund should not be expected to correspond to two times (2x), or two times the inverse (-2x), as applicable, of the daily performance of its benchmark, and such Fund’s performance could differ significantly from its stated investment objective. Further, when an Oil Fund is exposed to longer-dated futures contracts, the performance of the Fund should be expected to deviate to a greater extent from the “spot” price of WTI crude oil than if the Fund had exposure to a shorter-dated futures contract. In addition, the Sponsor may be required to liquidate certain open positions in order to ensure compliance with the speculative position limits at unfavorable prices, which may result in substantial losses for the relevant Funds. There also can be no assurance that the Sponsor will liquidate positions held on behalf of all the Sponsor’s accounts, including any proprietary accounts, in a proportionate manner. In the event the Sponsor chooses to liquidate a disproportionate number of positions held on behalf of any of the Funds at unfavorable prices, such Funds may incur substantial losses and the value of the Shares may be adversely affected. A person is generally required by CFTC or exchange rules, as applicable, to aggregate all positions in accounts as to which the person has 10% or greater ownership or control. However, CFTC and exchange rules provide certain exemptions from this requirement. For example, a person is not required to aggregate positions in multiple accounts that it owns or controls if that person is able to satisfy the requirements of an exemption from aggregation of those accounts, including, where available, the independent account controller exemption. Any failure to comply with the independent account controller exemption or another exemption from the aggregation requirement could obligate the Sponsor to aggregate positions in multiple accounts under its control, which could include the Funds and other commodity pools or accounts under the Sponsor’s control. In such a scenario, the Funds may not be able to obtain exposure to one or more Financial Instruments necessary to pursue their investment objectives, or they may be required to liquidate existing futures contract positions in order to comply with a limit. Such an outcome could adversely affect each of the Fund’s ability to pursue its investment objective or achieve favorable performance. The Funds are currently subject to position limits and accountability levels and may be subject to new or more restrictive position limits or accountability levels in the future. If the Funds reached a position limit or accountability level or became subject to a daily limit, their ability to issue new Creation Units or reinvest income in additional commodity futures contracts may be limited to the extent these restrictions limit its ability to establish new futures positions, add to existing positions, or otherwise transact in futures. Limiting the size of the Funds, or restricting the Funds’ futures trading, under these requirements could adversely affect the Funds’ ability to pursue its investment objective. The Trust or Sponsor may apply to the CFTC or to the relevant exchanges for relief from certain position limits. If the Trust or Sponsor is unable to obtain such relief, a Fund’s ability to issue new Creation Units, or the Fund’s ability to reinvest income in additional futures contracts, may be limited to the extent these activities cause the Trust to exceed applicable position limits. Limiting the size of a Fund may affect the correlation between the price of the Shares, as traded on an exchange, and the net asset value of the Fund. Accordingly, the inability to create additional Creation Units or add to existing positions in the desired amount could result in Shares trading at a premium or discount to NAV. Margin for Non-cleared Swap and Forward Transactions In 2015, the regulators adopted, and in 2016 the CFTC adopted new mandatory margin requirements for non-cleared swap and foreign currency forward transactions and new requirements for the holding of collateral by derivative dealers. These requirements, which are still pending final adoption, may increase the amount of collateral a Fund is required to provide to derivative dealers for non-cleared swaps and foreign currency forwards. Regulatory changes or actions may alter the operations and profitability of the Funds. The regulation of commodity interest transactions and markets, including under the Dodd-Frank Act, is a rapidly changing area of law and is subject to ongoing modification by governmental and judicial action. In particular, the Dodd-Frank Act has expanded the regulation of markets, market participants and financial instruments. The regulatory regime under the Dodd-Frank Act has imposed additional compliance and legal burdens on participants in the markets for futures and other commodity interests. For example, under the Dodd-Frank Act new capital and risk requirements have been imposed on market intermediaries. Those requirements may cause the cost of trading to increase for market participants, like the Funds, that must interact with those intermediaries to carry out their trading activities. These increased costs can detract from the Funds’ performance. A Fund’s performance could be adversely affected if the FCM reduces its internal risk limits for the Fund. Further, CFTC rules require clearing member FCMs to establish risk-based limits on position and order size. As a result, the Trust’s FCMs may be required to reduce their internal limits on the size of the positions they will execute or clear for the Funds, and the Funds’ ability to transact in futures contracts could be reduced. Under these circumstances, the Trust may seek to use additional FCMs, which may increase the costs for the Funds, make the Funds’ trading less efficient or more prone to error, or adversely affect the value of the Shares. 51 Table of Contents The Funds and the Sponsor are subject to extensive legal and regulatory requirements. The Funds are subject to a comprehensive scheme of regulation under the federal commodity futures trading and securities laws, as well as futures exchange rules and the rules and listing standards for their Shares. Each of the Funds and the Sponsor could each be subject to sanctions for a failure to comply with those requirements, which could adversely affect the Funds’ financial performance and their ability to pursue their investment objectives. In addition, the SEC, CFTC, and exchanges are empowered to intervene in their respective markets in response to extreme market conditions. Those interventions could adversely affect the Funds’ ability to pursue their investment objectives and could lead to losses for the Funds and their shareholders. In addition, each of the Funds is subject to significant disclosure, internal control, governance, and financial reporting requirements because the Shares are publicly traded. For example, the Funds are responsible for establishing and maintaining internal controls over financial reporting. Under this requirement, the Funds must adopt, implement and maintain an internal control system designed to provide reasonable assurance to its management regarding the preparation and fair presentation of published financial statements. The Funds are also required to adopt, implement, and maintain disclosure controls and procedures that are designed to ensure information required to be disclosed by the Funds in reports that they file or submit to the SEC is recorded, processed, summarized and reported within the time periods specified by the SEC. There is a risk that the Funds’ internal controls over financial reporting and disclosure controls and procedures could fail to operate as designed or otherwise fail to satisfy SEC requirements. Such a failure could result in the reporting or disclosure of incorrect information or a failure to report information on a timely basis. Such a failure could be to the disadvantage of shareholders and could expose the Funds to penalties or otherwise adversely affect each of the Fund’s status under the federal securities laws and SEC regulations. Any internal control system, no matter how well designed, has inherent limitations. Therefore, even those systems determined to be effective may provide only reasonable assurance with respect to financial statement preparation and presentation and other disclosure matters. 52 Table of Contents