Hedging with Horizons BetaPro Inverse and Bear+ ETFs Presented By: Howard Atkinson, CFA, CIMA ®, ICD.D President Horizons ETFs Date: March 11, 2010.

Hedging withHorizons BetaPro Inverse and Bear+ ETFs

Presented By: Howard Atkinson, CFA, CIMA®, ICD.D President Horizons ETFs

Date: March 11, 2010

- For Dealer Use Only -

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About Horizons BetaPro ETFs

• Offers investors three types of ETF structures to profit or protect in all market conditions

o HBP Bull+ & Bear+ ETFs: provide double exposure to the daily performance (or inverse daily) performance of 15 underlying indices before fees and expenses

o Risk limited to capital invested through daily rebalancingo HBP Inverse ETFs: provide exposure to the inverse daily performance of 7

underlying indices before fees and expenseso HBP Single ETFs: provide exposure to the performance of 4 underlying commodity

indices before fees and expenses

• Leading ETF provider in CanadaBetaPro Management Inc. is a leading ETF provider in the country, growing 539% in 2007, 223% in 2008, and 26% in 2009 currently managing approximately $2.6 BN in the Horizons BetaPro ETFs.

• Exclusive provider of leveraged, inverse, and single commodity ETFs in Canada

• World's first leveraged and inverse leveraged commodity ETFs NYMEX® Crude Oil, NYMEX® Natural Gas, COMEX® Gold & Silver, S&P Agribusiness


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Current Product Line-Up


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Markets: Past & PresentHistorical Market Cycles: DJIA 1900 - Present

“Historical market cycles indicate that U.S. equity markets tend to follow cycles approximately every 14-16 years.” (Don Vialoux, Investing Through the Ages, National Post, 3.15.2008)

1930-1950

1950-1966

1966-1982

1983-1999

2000- present

Post-Depression

Baby Boom

Skeptical

Technology

??

1900-1915Turn of theCentury

1915-1930Roaring ‘20s

Source: StockCharts.com


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Dow Jones Industrial Average 2000 to 2010

Source: Bloomberg


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Leveraged and inverse funds affected by record volatility

• Highest short-term volatility levels for U.S. equities in 80 years affected all investments, including leveraged funds

S&P

500

3-M

onth

Vol

atili

ty (a

nnua

lized

%)

66% (12/31/29)

69% (10/21/32)60% (1/11/88)

72% (12/16/08)

Source: Journal of Indexes , August 2009. For illustrative purposes only. Source: Bloomberg


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Universal effects of compounding on investment returns

• All HBP leveraged and inverse ETFs rebalance daily to ensure an investor’s risk is limited to the current value of their investment

• The trend is your friendo Favourable trending periods enhance returnso Unfavourable trending periods reduce losses

• Volatile periods reduce returns and may increase losses

• Positive and negative effects of compounding are magnified in leveraged and inverse funds

o The impact of daily compounding on a 2x leveraged fund is greater than 2x a period return

Source: ProShare Advisors LLC


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Compounding Affects All Investments Over Time

Source: ProShare Advisors LLC

I N D E X -1x F U N D* -2x F U N D*

Daily Return Daily Return Daily Return

U P W A R D T R E N D

Day 1 Return 10% -10% -20%

Day 2 Return 10% -10% -20%

Compounded 2-day Return 21% -19% -36%

D O W N W A R D T R E N D

Day 1 Return -10% 10% 20%

Day 2 Return -10% 10% 20%

Compounded 2-day Return -19% 21% 44%

V O L A T I L E M A R K E T

Day 1 Return 10% -10% -20%

Day 2 Return -10% 10% 20%

Compounded 2-day Return -1% -1% -4%

*Before fees and expenses as described in the Prospectus


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HBP ETFs Guide

Underlying Index Ticker Inception Date

S&P/TSX 60™ Index HIX March 4, 2009

S&P/TSX Capped Financials Index™ HIF March 4, 2009

S&P/TSX Capped Energy Index™ HIE March 11, 2009

S&P/TSX Global Gold Index™ HIG March 11, 2009

S&P 500® Index HIU February 10, 2010

NYMEX® Natural Gas HIN February 10, 2010

NYMEX® Crude Oil HIO February 10, 2010

BetaPro currently has 7 Inverse ETFs offering the daily inverse results of the following indices:


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Index Volatility - 2007

Source of Data: Bloomberg

2007

S&P/TSX 60TM Index 14.90%

S&P/TSX Capped Financials IndexTM 13.22%

S&P/TSX Capped Energy IndexTM 19.81%

S&P/TSX Global Gold IndexTM 28.92%

S&P 500® Index 15.95%

NYMEX® Crude Oil 29.25%

NYMEX® Natural Gas 44.83%


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2008





S&P 500® Index 41.05%




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2009





S&P 500® Index 27.28%




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Key Attributes of HBP Inverse ETFs

• INVERSE DAILY performance of the underlying index*

• Risk limited to capital invested

• TSX Listed

• No leverage

• Tax Efficient

• Marginable

• CAD Denominated

*Before fees and expenses as described in the Prospectus


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Why Do We Rebalance?

• Limits risk to current invested amount

• Same experience for each investor

• No margin calls

• Rebalancing calculator available for longer period holds


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HBP Inverse ETF Correlations - Financials

Bank Equity Relative to Correlation* HIF Hedge HFD Hedge

RBCCapped

Financials

0.93 $0.93 $0.46

CIBCCapped

Financials

0.87 $0.87 $0.44

TDCapped

Financials

0.91 $0.91 $0.45

BNSCapped

Financials

0.91 $0.91 $0.45

BMOCapped

Financials

0.86 $0.86 $0.43

MFCCapped

Financials

0.86 $0.86 $0.43

*Data from 1/1/07 to 2/23/10 | Source of Data: BloombergPerfect Correlation = 1


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HBP Inverse ETF Correlations – S&P 500

US Bank Relative to Correlation* HIU Hedge HSD Hedge

Bank of America S&P 500 0.69 $0.69 $0.35

JP Morgan S&P 500 0.75 $0.75 $0.37

3M S&P 500 0.79 $0.79 $0.39

General Electric S&P 500 0.73 $0.73 $0.36



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HBP ETF Correlations – Natural Gas

Firm / Fund Relative to Correlation* HIN Hedge HND Hedge

EnCana Corporation Natural Gas 0.26 $0.26 $0.13

Talisman Energy Inc Natural Gas 0.23 $0.23 $0.11

NuVista Energy Ltd. Natural Gas 0.28 $0.28 $0.14

*Data from 1/1//07 to 2/23/10 | Source of Data: BloombergPerfect Correlation = 1


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HBP ETF Correlations – Crude Oil

Firm / Fund Relative to Correlation* HIC Hedge HOD Hedge

EnCana Corporation Crude Oil 0.45 $0.45 $0.22

Talisman Energy Inc Crude Oil 0.47 $0.47 $0.23

Canadian Natural Resource LTD. Crude Oil 0.53 $0.53 $0.26

Suncor Energy Inc. Crude Oil 0.52 $0.52 $0.24



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Performance

40

50

60

70

80

90

100

110

120

130

140

150

160

170

8-Ja

n-07

27-F

eb-0

7

18-A

pr-0

7

7-Ju

n-07

27-J

ul-0

7

15-S

ep-0

7

4-N

ov-0

7

24-D

ec-0

7

12-F

eb-0

8

2-A

pr-0

8

22-M

ay-0

8

11-J

ul-0

8

30-A

ug-0

8

19-O

ct-0

8

8-D

ec-0

8

27-J

an-0

9

18-M

ar-0

9

7-M

ay-0

9

26-J

un-0

9

15-A

ug-0

9

4-O

ct-0

9

23-N

ov-0

9

12-J

an-1

0

3-M

ar-1

0

% TSX60 HXD HIX

-4.4%

-25.8%

-50.9%

Source: Bloomberg


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HIX outperforms HXD

70

80

90

100

110

120

130

15-O

ct-0

8

22-O

ct-0

8

29-O

ct-0

8

5-N

ov-0

8

12-N

ov-0

8

19-N

ov-0

8

26-N

ov-0

8

3-D

ec-0

8

10-D

ec-0

8

17-D

ec-0

8

24-D

ec-0

8

31-D

ec-0

8

7-Ja

n-09

14-J

an-0

9

21-J

an-0

9

28-J

an-0

9

4-F

eb-0

9

11-F

eb-0

9

18-F

eb-0

9

25-F

eb-0

9

4-M

ar-0

9

%TSX60 HXD HIX

+8.1%

+4.7%

-18.1%

Source: Bloomberg


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Performance of TSX 60/HIX/HXD5-month period

50

75

100

125

150

175

200

225

250

18-J

un-0

8

24-J

un-0

8

30-J

un-0

8

6-Ju

l-08

12-J

ul-0

8

18-J

ul-0

8

24-J

ul-0

8

30-J

ul-0

8

5-A

ug-0

8

11-A

ug-0

8

17-A

ug-0

8

23-A

ug-0

8

29-A

ug-0

8

4-S

ep-0

8

10-S

ep-0

8

16-S

ep-0

8

22-S

ep-0

8

28-S

ep-0

8

4-O

ct-0

8

10-O

ct-0

8

16-O

ct-0

8

22-O

ct-0

8

28-O

ct-0

8

3-N

ov-0

8

9-N

ov-0

8

15-N

ov-0

8

% TSX60 HXD HIX

+106.9%

+50.9%

-40.7%

Source: Bloomberg


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HBP ETFs Performance Summary*

• HBP ETFs track (-1x, +/-2x) extremely well on a DAILY basis

• Over periods longer than a day, performance is MARKET PATH DEPENDENT

• Directional markets are favourable for performance:o Earn GREATER than (-1x, +/-2x) or lose LESS than (-1x, +/-2x) period returns

• The greater the two-way volatility, the further performance will deviate (be worse) from (-1x, +/-2x) the period return WITHOUT INVESTOR REBALANCING

• HBP Single Commodity ETFs (1x) track the daily AND period performance of the rolling underlying futures contracts

*Assumes an investor is Long HBP ETFs


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Disclaimers

Horizons BetaPro Bull Plus and Bear Plus Exchange Traded Funds ("BetaPro Plus ETFs") use leveraged investment techniques that magnify gains and losses and result in greater volatility in value. BetaPro Plus ETFs are subject to leverage risk, and Horizons BetaPro Single Exchange Traded Funds ("BetaPro Single ETFs"), Horizons BetaPro Inverse Exchange Traded Funds ("BetaPro Inverse ETFs") and BetaPro Plus ETFs (collectively, "BetaPro ETFs") are subject to aggressive investment risk and price volatility risk, which are described in the respective BetaPro ETF's prospectus. Each BetaPro Plus ETF seeks a return that is either 200% or -200% of the performance of a specified underlying index, commodity or benchmark (the "target") for a single day. Each BetaPro Single ETF or BetaPro Inverse ETF seeks a return that is 100% or - 100%, respectively, of the performance of a specified underlying target. Due to the compounding of daily returns, an BetaPro Plus ETF's or BetaPro Inverse ETF's, returns over periods other than one day will likely differ in amount and possibly direction from the performance of the specified underlying target for the same period. Investors should monitor their holdings, as frequently as daily, to ensure that they remain consistent with their investment strategies. Commissions, management fees and expenses all may be associated with the BetaPro ETFs. BetaPro ETFs are not guaranteed, their values change frequently and past performance may not be repeated. All trademarks and servicemarks are registered by their respective owners and licensed for use by BetaPro Management Inc. and none of the owners thereof or any of their affiliates sponsor, endorse, sell, promote or make any representation regarding the advisability of investing in BetaPro ETFs. Complete trademark and servicemark information is available at www.hbpetfs.com/pub/en/Trademark.aspx. Please read the prospectus before investing.

"Standard & Poor's®" and "S&P®" are registered trademarks of The McGraw-Hill Companies, Inc. and "TSX®" is a registered trademark of the TSX Inc. These marks have been licensed for use by BetaPro Management Inc. The HBP ETFs are not sponsored, endorsed, sold, or promoted by Standard & Poor's or TSX Group and its affiliated companies and neither party make any representation, warranty or condition regarding the advisability of investing in the HBP ETFs

http://www.hbpetfs.com/pub/en/Trademark.aspx


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HBP Inverse ETFs

• S&P/TSX 60™ Inverse ETF (HIX)o The HBP S&P/TSX 60™ Inverse ETF seeks daily investment results, before

fees, expenses, distributions, brokerage commissions and other transaction costs, that endeavour to correspond to one times (100%) the inverse (opposite) of the daily performance of the S&P/TSX 60 Index™.

• S&P/TSX Capped Financials™ Inverse ETF (HIF)o The HBP S&P/TSX Financials™ Inverse ETF seeks daily investment results,

before fees, expenses, distributions, brokerage commissions and other transaction costs, that endeavour to correspond to one times (100%) the inverse (opposite) of the daily performance of the S&P/TSX Capped Financials Index™.

• S&P/TSX Capped Energy™ Inverse ETF (HIE)o The HBP S&P/TSX Energy™ Inverse ETF seeks daily investment results,

before fees, expenses, distributions, brokerage commissions and other transaction costs, that endeavour to correspond to one times (100%) the inverse (opposite) of the daily performance of the S&P/TSX Capped Energy Index™.


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HBP Inverse ETFs

• S&P/TSX Global Gold™ Inverse ETF (HIG)o The HBP S&P/TSX Global Gold™ Inverse ETF seeks daily investment results,

before fees, expenses, distributions, brokerage commissions and other transaction costs, that endeavour to correspond to one times (100%) the inverse (opposite) of the daily performance of the S&P/TSX Global Gold Index™.

• S&P 500® Inverse ETF (HIU)o The HBP S&P 500® Inverse ETF seeks daily investment results, before fees,

expenses, distributions, brokerage commissions and other transaction costs, that endeavour to correspond to one times (100%) the inverse (opposite) of the daily performance of the S&P 500® Index.


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HBP Inverse ETFs

• NYMEX® Natural Gas Inverse ETF (HIN)o The HBP NYMEX Natural Gas Inverse ETF seeks daily investment results,

before fees, expenses, distributions, brokerage commissions and other transaction costs, that endeavour to correspond to one times (100%) the inverse (opposite) of the daily performance of NYMEX Natural Gas.

• NYMEX® Crude Oil Inverse ETF (HIO)o The HBP NYMEX Crude Oil Inverse ETF seeks daily investment results,

before fees, expenses, distributions, brokerage commissions and other transaction costs, that endeavour to correspond to one times (100%) the inverse (opposite) of the daily performance of NYMEX Crude Oil.

Hedging with Horizons BetaPro Inverse and Bear+ ETFs Presented By: Howard Atkinson, CFA, CIMA ®, ICD.D President Horizons ETFs Date: March 11, 2010.

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