Do ProShares make income or capital gain distributions?
ProShares may distribute net investment income earned by the funds, if any, on a monthly or quarterly basis, depending on the fund. Some ProShares may make capital gain distributions generally on an annual basis. Distribution information is posted on our web site.
For funds that provide tax information on Schedule K-1, such as our Commodity, Currency, Volatility and Managed Futures funds, additional information is available in Taxation FAQs for Volatility, Commodity, Currency and Managed Futures ProShares.
Why do ProShares make distributions?
All 40 Act ETFs are required by IRS regulations to distribute substantially all of their net investment income and capital gains to shareholders at least annually. Many ETFs make regular income distributions as well as capital gains distributions.
ETFs are often touted as tax-efficient investment vehicles because the methods used to operate them result in few, if any, capital gains. However, many ProShares ETFs offer investors access to short and magnified exposure to indexes or benchmarks, and the investment instruments we use to get this exposure may generate capital gains (which could be significant). If this is the case, we are required to distribute the gains to shareholders.
What's the difference between ex-dates, record dates and pay dates?
Ex-Date. On this date, the ETF will trade without its dividend with the first reported trade. That means the ETF’s NAV will drop by the amount of the distribution on the morning of the ex-date. Even though the NAV is affected, shareholders who bought the shares before the ex-date have not "lost" the dividend amount, because they will receive the distribution. The ex-date is usually the second business day before the record date.
Record Date. This is the date on which ProShares determines the shareholders of record. An investor must be listed as a holder of record to ensure the right of a distribution payout.
Pay Date. This is the date on which ProShares pays a distribution to the holder of record. This date is usually a couple of days after the record date.
Can I automatically reinvest ProShares distributions?
Because you hold ProShares through a brokerage account, you must request this service, if offered, from your brokerage firm. Your brokerage firm is also responsible for other services, such as account statements, confirmations of your purchases and sales of ProShares, and year-end tax information. It also will be responsible for ensuring that you receive shareholder reports and other communications from ProShares.
What specifically generates distributions from ProShares?
Net investment income results from the funds holding debt securities, money market instruments and/or dividend-producing equity securities. These instruments pay income to the ETFs, which is then required to be distributed (net of expenses) to shareholders.
How can Short ProShares have income distributions?
Short ProShares may use derivative products, including futures contracts and/or swap agreements, to obtain short exposure to indexes or benchmarks. These derivatives generally provide the fund with the desired short exposure to an index or benchmark. As a result, the fund has cash available to invest in debt securities and/or money market instruments which generally earn prevailing interest rates. This investment strategy allows ProShares to pass on income (net of expenses) to shareholders.
How are ProShares distributions displayed on Form 1099-DIVs?
Net investment income and short-term capital gains will be reported as ordinary income on the Form 1099-DIV your financial advisor sends out. Long-term capital gains are reported as ETF capital gains.
Volatility, Commodity, Currency and Managed Futures ProShares issue K-1s instead of 1099s. For more information, please see Taxation FAQs for Volatility, Commodity, Currency and Managed Futures ProShares.