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CSTA Conference

CSTA Conference. Presented by Howard J. Atkinson, CFA, CIMA President, BetaPro Management August 16, 2008. About Horizons BetaPro. Fastest growing

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CSTA Conference

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  1. CSTA Conference Presented by Howard J. Atkinson, CFA, CIMA President, BetaPro Management August 16, 2008

  2. About Horizons BetaPro • Fastest growing Horizons BetaPro is the fastest growing ETF manager in the country growing 539% in 2007 and currently managing over $1.8 BN amongst 28 ETFs. • HBP ETFs account for at least 50% of all the ETF volumeon the TSX • Exclusive provider of leveraged and inverse leveraged ETFs in Canada • World's firstleveraged and inverse leveraged commodity ETFs NYMEX® Crude Oil, NYMEX® Natural Gas, COMEX® Gold, DJ-AIGSM Grains • Affiliate ofJovian Capital Corporation (JOV:TSX) JOV is a publicly traded financial services company with $16 BN AUA/AUM in client assets.

  3. About Horizons BetaPro As of July 31, 2008

  4. Key Attributes of all HBP ETFs • +/- 2x the DAILY performance of the underlying benchmark • Non-recourse leverage (limited risk) due to daily rebalance • Non-constant leverage (unless investor rebalances) • Marginable • RSP eligible

  5. HBP ETFs Guide • HBP currently has 28 Bull+ and Bear+ ETFs offering 2x or -2x the daily return • of the following indices:

  6. HBP ETFs Guide * USD Hedged

  7. HBP ETFs vs. U.S. Listed ETFs Advantages on U.S. and commodity benchmarked ETFs • Traded in CAD and USD hedged • No foreign exchange costs • USD/CAD exposure hedged • Tax Advantages • Not subject to U.S. estate tax • No withholding tax on distributions

  8. HBP ETFs Mechanism & Forward Structure Investor A (buyer) +/- 2x Index Exposure Broker Forward Sale of the Canadian shares at a price Exchange Designated Broker Underwriter HBP ETF Counterparty Bank equal to +/-2x underlying index exposure Broker Basket of Canadian Shares Investor B (seller)

  9. Key Features • 3 Levels of Liquidity • HBP Trading Volume • Market Makers • Subscription/ Redemption Process • HBP ETFs Track NAV due to ARBITRAGE POTENTIAL • Tax Efficiency (39 – 4 Structure) • Deferral – Annual Distribution (if any) • Recharacterization - Capital Gains

  10. HBP Volumes Source: TSX

  11. HBP ETFs Source: Bloomberg

  12. HBP ETFs Trading Summary Source: TSX

  13. Economics of HBP ETFsHBP Bull+ & Bear+ ETFs earn interest accruals Note: 1. In flat market (annual basis) 2. Interest accrued at 3.00% CDOR 3. Includes financing spread calculated on notional exposure 4. Dividends based on 2x current yield

  14. Economics of HBP ETFsTotal annualized carry Bear+ ETFs HXD $2.51 HFD ($0.63) HED $1.89 HGD $6.85 HMD $6.75 HOD $6.75 HBD $6.75 HND $6.75 HAD $6.75 HSD $1.93 HQD $5.77 HTD ($1.95) HDD $7.25 HJD $6.85 Bull+ ETFs HXU ($0.21) HFU $2.73 HEU ($0.21) HGU ($4.75) HMU ($5.25) HOU ($5.25) HBU ($5.25) HNU ($5.25) HAU ($5.25) HSU ($0.23) HQU ($4.07) HTU $4.45 HDU ($4.75) HJU ($5.15) Note: 1. Interest accrued at 3.00% CDOR 2. Includes financing spread on notional exposure & hedging costs where applicable 3. Dividends based on a 2x current yield 4. In a flat market (annual basis) 5. No dividend yields for commodity ETFs

  15. Horizons BetaPro ETFs Users • 60% Institutional (Canada, Europe, US) • IC/PMs, Hedge/ Mutual Funds, Small Pension Plans, Endowments • OSC Exemptive Relief (10%/ 20% with Shorting Capability) • 25% Investment Advisors • PMs Dominate • 15% Self-Directed Investors

  16. Horizons BetaPro ETFs Strategies • Cash Equitization • Beta Efficiency • Alpha Generation • Downside Protection • Straddles

  17. ETFs in the future • Potential New HBP ETFs • CDN Small Cap • International • More Commodities • Canadian and US ETF Outlook • Canada: New Players, Product Digestion, Closures • US: Fee Pressure, Consolidation/ Closures • Global Trading • Active ETFs: Myth or Reality

  18. For more information: • Bloomberg: HETF • www.HBPETFs.com • Contact Horizons BetaPro • Howard J. Atkinson CFA, CIMA • hatkinson@betapro.ca • 416 777 5167

  19. Disclaimers All Horizons BetaPro ETFs use leveraged investment techniques that magnify gains and losses and result in greater volatility in value. All Horizons BetaPro ETFs are subject to active investor risk. Commissions, management fees and expenses all may be associated with ETF investments. ETFs are not guaranteed, their values change frequently and past performance may not be repeated. 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 “NYMEX® is a registered service mark of New York Mercantile Exchange, Inc. and COMEX® is a registered service mark of Commodity Exchange Inc., and have been licensed by them for use to BetaPro. The Funds are not sponsored, endorsed, sold or promoted by New York Mercantile Exchange, Inc. or Commodity Exchange, Inc., and New York Mercantile Exchange, Inc. and Commodity Exchange, Inc. make no representation regarding the advisability of investing in the Funds.” "Dow Jones," “AIG®” "Dow Jones-AIG Grains Sub-IndexSM," is a service mark of Dow Jones & Company, Inc. and American International Group, Inc. (“American International Group”), as the case may be, and have been licensed for use for certain purposes by BetaPro Management Inc..  BetaPro Management Inc.'s Horizons BetaPro DJ-AIG Agricultural Grains Bull Plus ETF and Horizons BetaPro DJ-AIG Agricultural Grains Bear Plus ETF based on the Dow Jones-AIG Grains Sub-IndexSM, are not sponsored, endorsed, sold or promoted by Dow Jones, AIG Financial Products Corp. (“AIG-FP”), American International Group, or any of their respective subsidiaries or affiliates, and none of Dow Jones, AIG-FP, American International Group, or any of their respective subsidiaries or affiliates, makes any representation regarding the advisability of investing in such product(s).

  20. The Effects of Compounding and Rebalancing • HBP ETFs offer 200% exposure with limited risk • Daily rebalancing ensures that the notional exposure is equal to 2x the net assets of the fund at the end of each day • This process limits the investors’ risk to their capital invested. • In a trending market, “profits” increase exposure, “losses” reduce exposure resulting in a convex return pattern

  21. HXU Correlation to Benchmark Inception to July 31, 2008

  22. HXD Correlation to Benchmark Inception to July 31, 2008

  23. The Effects of Compounding and Rebalancing

  24. The effects of volatility on performance: • The greater the volatility, the greater the deviation from 2x the period return of the underlying benchmark (no rebalancing). Bull+ ETFs Bear+ ETFs

  25. Index Volatilities –Annualized (7/28/2008) *180 day Volatility Source: Bloomberg

  26. HBP Rebalancing Tool: • If an investor would like to minimize the effects of compounding and have their investment track more closely to 2x/-2x the PERIOD return of the underlying benchmark the investor should rebalance their holdings. • More frequent rebalancing will result in period investment returns more closely matching 2x/-2x the benchmark. • Rebalancing consideration is more important if volatility in the underlying index is higher and anticipated hold period is longer.

  27. Horizons BetaPro Commodity ETFs: • The initial HBP Commodity ETFs track: • NYMEX Crude Oil • NYMEX Natural Gas • COMEX Gold Bullion • DJ-AIG Grains Sub-IndexSM (soybeans, corn and wheat) • All HBP Commodity ETFs reference the nearby future contract of each of the respective commodities. • All existing US dollar exposure is hedged back to Canadian dollars. • None of the HBP Commodity ETFs hold the physical commodity as in most cases storage is not economical or operationally fluid enough to offer small unitized exposure.

  28. Horizons BetaPro Commodity ETFs • HBP NYMEX® Crude Oil Bull+ and Bear+ ETFs: • Track nearby futures contract for NYMEX West Texas Intermediate Crude as priced at Cushing, Oklahoma • Rolled at beginning of each month over three days • HBP NYMEX® Natural Gas Bull+ and Bear+ ETFs: • Track nearby futures contract for NYMEX Natural Gas based on delivery at the Henry Hub in Louisiana • Rolled at beginning of each month over three days • HBP COMEX® Gold Bullion Bull+ and Bear+ ETFs: • Track nearby futures contract for COMEX Division gold • Rolled at the beginning of each month over three days • HBP DJ-AIGSM Agricultural Grains Bull+ and Bear+ ETFs: • Tracks the DJ-AIG Sub Grains IndexSM, a subset of DJ-AIG Agriculture Index, which is a subset of the DJ-AIG Commodity IndexSM • 2008 Weightings: • Soybeans 42.39% • Corn 31.47% • Wheat 26.14%

  29. Underlying Market Hours: OpenClose • NYMEX Crude Oil 9:00EST 2:30EST • NYMEX Natural Gas 9:00EST 2:30EST • COMEX Gold 8:20EST 1:30EST • CBOT Grains 10:30EST 2:15EST • CAD Futures 8:20EST 3:00EST • U.S. 30yr Bond Futures 8:20EST 3:00EST

  30. Underlying Indices, Bloomberg Tickers:

  31. Underlying Indices, Bloomberg Tickers:

  32. HBP S&P/TSX Global Mining Bull+ and Bear+ ETFs: • Top 10 Index Holdings (as of July, 2008) Source: Standard and Poor’s

  33. HBP S&P/TSX Global Gold Bull+ and Bear+ ETFs: • Top 10 Index Holdings (as of July, 2008)

  34. HBP S&P/TSX Capped Energy Bull+ and Bear+ ETFs: • Top 10 Index Holdings (as of July, 2008)

  35. Jovian Capital Corporation

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