Hedging Rising Interest Rates with the Horizons BetaPro U.S. 30-year Bond Bear Plus ETF. Adam Felesky CEO, Horizons BetaPro ETFs 1

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1 Hedging Rising Interest Rates with the Hrizns BetaPr U.S. 30-year Bnd Bear Plus ETF Adam Felesky CEO, Hrizns BetaPr ETFs 1

2 U.S. 30-year Bnd Bull + & Bear + ETFs Investment Objectives: The HBP U.S. 30-year Bnd Bull+ ETF seeks daily investment results, befre fees, expenses, distributins, brkerage cmmissins and ther transactin csts, that endeavur t crrespnd t tw times (200%) the daily perfrmance f the U.S. 30-year Bnd futures cntract fr the next delivery mnth. The HBP U.S. 30-year Bnd Bear+ ETF seeks daily investment results, befre fees, expenses, distributins, brkerage cmmissins and ther transactin csts, that endeavur t crrespnd t tw times (200%) the inverse (ppsite) f the daily perfrmance f the U.S. 30-year Bnd futures cntract fr the next delivery mnth. Nearby futures cntract fr the U.S. 30-year bnd trades n CBOT frm 8:20a.m. 3:00p.m. EST Deliverable bnds t settle the cntract include U.S. Treasury bnds with a maturity f years Because a 15-year bnd will typically be the cheapest (assuming a typical yield curve ), the U.S. 30-year bnd future will have a duratin shrter than the cash U.S. 30-year treasury bnd equivalent 2

3 Trading Bnds 101 Perfrmance f a bnd has tw cmpnents: Price Yield Price The fluctuatin f the price f a bnd is derived by the mvement f interest rates crrespnding t its term. Duratin is the mst cmmn way bnd risk is measured. Duratin is measured in years and will be lwer than the term f the crrespnding bnd (technically, duratin f a bnd is the zer-term equivalent). The lnger the duratin, the greater the expected price vlatility as a result f interest rate change. 3

4 Trading Bnds 101 Fr example: U.S. Treasury Bnd Term: 15yrs Yield-t-maturity (YTD): 4.60% Duratin: 11yrs Value a basis pint (PVP): 0.11% 100bps drp in interest rates = 11% return 100bps rise in interest rates = -11% return Yield Yield is the secnd cnsideratin in evaluating ttal perfrmance YTM is the expected incme t be paid ver the purchase price per annum Per the abve example, a YTM f 4.60% wuld ffset a 42 bps rise in interest rates 4

5 Bnd Bull + Calculatr U.S. Bnd Bull Analysis: Present Value f a Basis Pint (PVBP) Determinatin: Capital Invested $100,000 Ntinal Expsure $200,000 Current YTM f Current Benchmark U.S. 15-year Bnd 4.60% Tday 2/15/2008 Expected return per Maturity 2/15/2023 basis pint fall Time t maturity in the 15-year yield PV (1 bps) $ => 0.220% Duratin Psitive Carry Determinatin: Current YTM f Current Benchmark U.S. 30-year Bnd 4.60% Current Fed Funds rate: 2.00% Cst f financing % Leverage: 2.00 x Synthetic incme received : 5.200% $5,200 Return received n cash frm cmmitted capital: 2.000% $2,000 Ttal Net Carry per Annum incurred n capital invested: 7.200% $7,200 This calculatr is an interactive tl fr illustratin purpses nly. In additin a cnstant 10-year maturity has been assumed. Figures quted belw may r may nt be an accurate indicatin f hw the U.S. 30-year Bnd Plus ETFs will perfrm. Please read the Prspectus befre investing. Cmmissins, trailing cmmissins, management fees and expenses all may be assciated with mutual fund investments. Mutual funds are nt guaranteed, their values change frequently and past perfrmance may nt be repeated. 5

6 Bnd Bear + Calculatr Present Value f a Basis Pint (PVBP) Determinatin: Capital Invested $100,000 Ntinal Expsure $200,000 Current YTM f Current Benchmark U.S. 15-year Bnd 4.60% Tday 1/30/2008 Maturity 1/30/2023 Expected return per Time t maturity bp rise in the 15-year yield PV (1 bps) $ => 0.220% Duratin Negative Carry Determinatin: Current YTM f Current Benchmark U.S. 15-year Bnd 4.60% Current Fed Funds rate: 2.00% Return received n cash prceeds f a synthetic sale 2.000% Leverage: 2.00 x Negative carry assciated with synthetic sale: % ($5,200) Return received n cash frm cmmitted capital: 2.000% $2,000 Ttal Net Negative Carry per Annum incurred n capital invested: % ($3,200) (Negative number implies a negative cst f carry) This calculatr is an interactive tl fr illustratin purpses nly. In additin a cnstant 10-year maturity has been assumed. Figures quted belw may r may nt be an accurate indicatin f hw the U.S. 30-year Bnd Plus ETFs will perfrm. Please read the Prspectus befre investing. Cmmissins, trailing cmmissins, management fees and expenses all may be assciated with mutual fund investments. Mutual funds are nt guaranteed, their values change frequently and past perfrmance may nt be repeated. 6

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10 Next Steps Put HBP Tickers f interest n yur screen Visit Cntact JvFunds fr a cnsultatin

11 Disclaimers All Hrizns BetaPr Bull+and Bear+ Exchange Traded Funds ("HBP Plus ETFs") use leveraged investment techniques that magnify gains and lsses and result in greater vlatility in value. All Hrizns BetaPr Exchange Traded Funds ("HBP ETFs") are subject t aggressive investment risk, leverage risk, and price vlatility risk, which are described in the HBP Plus ETF s prspectus. Each HBP Plus ETF seeks a return that is either 200% r -200% f the return f an index, cmmdity r benchmark (the "target") fr a single day. Due t the cmpunding f daily returns, a HBP ETF s returns ver perids ther than ne day will likely differ in amunt and pssibly directin frm the perfrmance f the specified underlying index fr the same perid. Investrs shuld mnitr, as frequently as daily, their hldings t ensure that it remains cnsistent with their investment strategies. Cmmissins, management fees and expenses all may be assciated with HBP ETFs. HBP ETFs are nt guaranteed, their values change frequently and past perfrmance may nt be repeated. Please read the prspectus befre investing. All trademarks/service marks are registered by their respective wners and licensed fr use by BetaPr Management Inc. All the respective wners r any f their affiliates d nt spnsr, endrse, sell, prmte r make any representatin regarding the advisability f investing in HBP ETFs. Cmplete trademark and servicemark infrmatin is available at 12

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