Investment Case:
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Index and fund performance data quoted represents past performance and is for illustration purposes only. Past performance is not a guarantee of future results. Performance information for the Market Vectors Fallen Angel High Yield Bond ETF (commenced April 16, 2012) reflects temporary waivers of expenses and/or fees. Had the Fund incurred all expenses, investment returns would have been reduced. Investment return and value of the shares of the Fund will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. Performance may be lower or higher than performance data quoted. Fund returns reflect dividends and capital gains distributions.
Net asset value (NAV) per share is calculated by subtracting total liabilities from the total assets, then dividing by the number of shares outstanding. Share price is the last price at which shares were traded on the Fund’s primary listing exchange. Fund shares may trade at, above or below NAV. Performance current to the most recent month end available by calling 888.MKT.VCTR or by visiting marketvectorsetfs.com.
Forecasts, estimates, and certain information contained herein are based upon proprietary research and the information contained in this material is not intended to be, nor should it be construed or used as investment, tax or legal advice, any recommendation, or an offer to sell, or a solicitation of any offer to buy, an interest in any security. References to specific securities and their issuers or sectors are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities or gain exposure to such sectors. The Fund(s) may or may not own the securities or be exposed to the sectors referenced and, if such securities are owned or exposure maintained, no representation is being made that such securities will continue to be held or exposure maintained.
NOT FDIC INSURED – NO BANK GUARANTEE – MAY LOSE VALUE
ETF Disclosure
Principal Risk Factors: The Fund may be subject to credit risk, interest rate risk and a greater risk of loss of income and principal than higher rated securities. Investors
should be willing to accept a high degree of volatility and the potential of significant loss. Securities rated below investment grade are commonly referred to as high yield securities, or “junk bonds.” High yield securities may be subject to greater risk of loss of income and principal and are likely to be more sensitive to adverse economic changes than higher rated securities. The secondary market for securities that are junk bonds may be less liquid than the markets for higher quality securities and as such, may have an adverse effect on the market prices of certain securities. The illiquidity of the market may also, at certain time, adversely affect the Fund’s ability to arrive at a fair value for certain junk bonds. The illiquidity of the market could also make it difficult for the Fund to sell certain securities in connection with a rebalancing of the index. In addition, periods of economic uncertainty and change probably would result in an increased volatility of market prices of high yield securities and a corresponding volatility in the Fund’s net asset value (“NAV”). Investments concentrated in the financial services and industrials sectors may be subject to more volatility than investment in a diver group of sectors and are subject to the risks associated with such sectors. For a more complete description of these and other risks, please refer to the Fund’s
prospectus.
Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called “creation units” and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind. Shares may trade at a premium or discount to their NAV in the secondary market. You will incur brokerage expenses when trading Fund shares in the secondary market. Past performance is no guarantee of future results. Returns for actual Fund investments may differ from what is shown because of differences in timing, the amount invested and fees and expenses.
Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds will
decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and
expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contains this
and other information, call 888.MKT.VCTR or visit marketvectorsetfs.com. Please read the prospectus and summary
prospectus carefully before investing.
Non-Van Eck Global proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission of Van Eck Global. ©2012, Van Eck Global.
Merrill Lynch, Pierce, Fenner & Smith Incorporated and its affiliates (“BofA Merrill Lynch”) indices and related information, the name “Bank of America Merrill Lynch”, and related trademarks, are intellectual property licensed from BofA Merrill Lynch, and may not be copied, used, or distributed without BofA Merrill Lynch’s prior written approval. The licensee’s products have not been passed on as to their legality or suitability, and are not regulated, issued, endorsed, sold, guaranteed, or promoted by BofA Merrill Lynch. BOFA MERRILL LYNCH MAKES NO WARRANTIES AND BEARS NO LIABILITY WITH RESPECT TO THE INDICES, ANY RELATED INFORMATION, ITS TRADEMARKS, OR THE PRODUCT(S) (INCLUDING WITHOUT LIMITATION, THEIR QUALITY, ACCURACY, SUITABILITY AND/OR COMPLETENESS).
Downgraded. Overlooked. Potentially Undervalued.
Source: FactSet. This chart is for illustrative purposes only. Historical information is not indicative of future results. Current data may differ from data quoted. Past performance is no guarantee of future results; Market Vectors Fallen Angel High Yield Bond ETF commenced on April 16, 2012. An investor cannot invest directly in an index. The results assume that no cash was added to or assets withdrawn from the Index. Index returns do not represent Fund returns. The Index does not charge management fees or brokerage expenses, nor does the Index lend securities, and no revenues from securities lending were added to the performance shown.
See index descriptions on slide 20. See slides 2 and 3 for important disclosures.
Fallen Angel bonds have historically outperformed high yield corporate bonds and the average
active high yield mutual fund manager.
2004 2005 2006 2007 2008 2009 2010 2011 2012 -20% 0% 20% 40% 60% 80% 100% 120% 3/ 15/ 2003 12/ 31/ 2011 H is tor ic I ndex C um ul at iv e R et ur n ( % ) 84.6% 101.8% 115.8%
Proven Index Track Record*
BofAML Fallen Angel Barclays High Yield Very Liquid Lipper High Current Yield Category Avgerage
What are Fallen Angels?
See slides 2 and 3 for important disclosures
The term “Fallen Angel” refers to corporate bonds that were once investment grade, but have
since been downgraded to non-investment grade (i.e. “high yield”) bond status.
Despite being a subset of high yield corporate bonds, Fallen Angels could arguably be treated
as a separate asset class from original issue high yield bonds.
Generally more concentrated in BB; other high yield has more in B and CCC-rated bonds
Fallen Angel issuers tend to be larger and more well-established companies
Historically more likely than original issue high yield bonds to migrate to investment grade status
Well-known Fallen Angels: Toys R Us, JCPenney, Sprint
Credit Composition of High Yield Indices
As of 3/31/2012
Fallen Angels as an Alternative High Yield
As of March 31, 2012:
As a subset of high yield, Fallen Angels accounted for approximately 15% of high yield
universe
The BofAML US Fallen Angel Index had a higher percentage of BB rated bonds than the
BofAML US High Yield Index
Source: Bank of America Merrill Lynch Global Index Systems
Yield to Worst is generally defined as being the lowest yield that a buyer can expect to receive. Modified Duration measures the responsiveness of a bond’s
price to interest rate changes. It is defined as the percentage change in price for a 100 basis point change in interest rates. See index descriptions on slide 20. See slides 2 and 3 for important disclosures
Index
Yield to
Current
Worst
Modified
Duration
Value ($ Mil)
Market
# of Bonds
in Index
% of Fallen
Angels
BofAML US Fallen Angel
7.5
5.5
157,913
396
100%
BofAML US High Yield
7.2
3.9
1,051,361
2,091
15%
Index Characteristics
As of 3/31/2012
BofAML US Fallen Angel BofAML US High Yield BofAML Original Issue High Yield
Structural Similarities to Investment Grade Issuers
Source: 1 FactSet 2 Bank of America Merrill Lynch Global Index System
Average figure is arrived at by taking the average of available data in each category. Some issuers in these indices are private companies, and therefore no financial data is available. Private companies are excluded from the above calculation of average statistics. Sales is calculated as gross sales and other operating revenue less discounts, returns and allowances. Debt/Equity Ratio is calculated as total debt as a percentage of total equity in local currency. Average Weighted
Coupon is measured by weighting the coupon of each bond by its relative size in the index. Duration refers to modified duration, which measures the
responsiveness of a bond’s price to interest rate changes. It is defined as the percentage change in price for a 100 basis point change in interest rates. Maturity is the length of time until a fixed income investment returns its original investment
See index descriptions on slide 20. See slide 2 and 3 for important disclosures
Fallen Angel issuers have tended to be larger and more established than original high yield
issuers
Capital structures have tended to be similar to investment grade issuers
Longer-dated bonds with relatively low coupons
Unencumbered assets allow issuer to borrow more debt secured by assets
Results in potential for greater financing flexibility
As of 3/31/2012 Average Market Cap1 Average Sales1 Debt/Equity Ratio (%)1 Average Weighted Coupon2 Average Duration2 Average Maturity2 BofAML Investment Grade $21,087 $18,624 123.3 5.00 5.62 8.16 BofAML US Fallen Angel $6,193 $11,518 281.2 6.79 5.49 10.05 BofAML Original Issue High Yield $2,382 $3,264 317.7 8.35 3.67 6.34
Annual high yield default rates have declined from most recent highs in 2009
As of February 2011, fallen angel average default rate was marginally lower than for bonds
rated speculative grade upon issue
High Yield Default Rates
See slides 2 and 3 for important disclosures.
Mar-12 2.76% 0% 2% 4% 6% 8% 10% 12% 14% 16%
Trailing 12-Month Issuer-Weighted All U.S. Speculative-Grade Default Rate Fallen Angel versus Original Issue Speculative Grade Default Rates*
*All S&P issuer based.
2003 2004 2005 2006 2007 2008 2009 2010 2011 -40% -20% 0% 20% 40% 60%
Annual Returns
01/2003 to 12/2011BofA Merrill Lynch U.S. High Yield - Fallen Angel Barclays Capital High Yield Very Liquid
Historical Performance vs US High Yield
Source: FactSet.
*The BofA Merrill Lynch US Fallen Angel High Yield Index has an inception date of March 13, 2003. See index descriptions on slide 20. See slide 2 and 3 for important disclosures.
-40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 2003 2004 2005 2006 2007 2008 2009 2010 2011
Potential for Price Appreciation + Comparable Yield to Original Issue High Yield Bonds
BofAML US Fallen Angel Price Return BofAML Original Issue HY Price Return BofAML US Fallen Angel Yield BofAML Original Issue HY Yield
568* 477 469 426 409 411 500 441 385 * Number of Bonds in the Fallen Angel Index
Fallen Angels have historically seen greater price returns than original issue high yield
Institutional selling could be a contributing factor as some investment grade managers forced to sell
downgraded issues
Rating actions tend to be anticipated by market and price deterioration may have occurred before
becoming a fallen angel
Contributing Factors to Fallen Angel Performance
Source: Bank of America Merrill Lynch Global Index System.
11
A Tale of Two Angels
Source: www.moodys.com
See slide 2 and 3 for important disclosures.
By the time of the downgrade, the creditworthiness of Fallen Angel companies have become
impaired and their debt obligations carry greater risk of credit losses
However, if they survive, many of the Fallen Angels adjust their business models or enjoy
strengths of a brand name company that enable them to regain investment grade status
Case Study #1: Lehman Brothers
Case Study #2: Xerox
From To
9/15/2008 A2 B3 Negative Unable to refinance debt due to severe credit deterioration; bankruptcy impending
12/8/2008 B3 C Rating to be withdrawn Company went bankrupt and defaulted on debt
Date Rating Change Ratings Outlook Rationale
From To
12/1/2000 Baa2 Ba1 Negative Declining business environment, management and operations problems, liquidity strain 5/1/2002 Ba1 B1 Negative Continued concern regarding free cash flow 8/10/2004 B1 Ba2 Stable Good operational execution and improving profits and free cash flow; reduced leverage
9/5/2005 Ba2 Ba1 Positive Continued improvement in business and balance sheet management
11/29/2006 Ba1 Baa3 Positive Solid business execution, stable profitability, solid free cash flow generation
Return Statistics
Source:FactSet
Correlation is the degree to which two or more variables are related and change together. The value of equity investments are more volatile than the other
securities, high yield bonds are speculative and subject to credit risk, and Government bonds are guaranteed as to the timely payment of principal and interest. See index descriptions on slide 20. See slides 2 and 3 for important disclosures.
Correlation
Period 12/2003 to 03/2012 (Frequency: Monthly)
BofAML US Fallen Angel BofAML Original Issue High Yield Barclays Capital High Yield Very Liquid Barclays Capital US Aggregate US 10YR Treasury S&P 500
BofAML US Fallen Angel 1.00
BofAML Original Issue High Yield 0.88 1.00
Barclays Capital High Yield Very Liquid 0.93 0.98 1.00
Barclays Capital US Aggregate 0.61 0.23 0.25 1.00
US 10YR Treasury -0.16 -0.25 -0.23 0.85 1.00
Return Statistics
Source:FactSet
Standard Deviation is the statistical measure of the historically volatility of a portfolio.
See index descriptions on slide 20. See disclaimers on pages 2 and 3.
Historical Annualized Returns
Period 12/2003 to 03/2012 (Frequency: Monthly)
Entire Period YTD 1 Year 3 Year 5 Year Annualized Return Annualized StdDev
BofAML US Fallen Angel 6.61 5.55 26.82 9.36 9.67 12.70
BofAML Original Issue High Yield 4.90 5.63 22.80 7.38 7.93 10.97
Barclays Capital High Yield Very Liquid 5.20 7.34 25.84 8.27 8.79 13.29
Barclays Capital US Aggregate 0.3 7.71 6.83 6.25 5.38 3.42
US 10YR Treasury -2.24 14.92 4.68 7.70 5.86 7.70
Index Descriptions
The indices listed are unmanaged indices and do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. An index’s performance is not illustrative of the Fund’s performance. Indices are not securities in which investments can be made.
BofAML Fallen Angel: The BofA Merill Lynch US Fallen Angel High Yield Index (H0FA) is a subset of The BofA Merrill Lynch US High Yield Index including securities that
were rated investment grade at point of issuance
BofAML US High Yield: The BofA Merrill Lynch US High Yield Index (H0A0) tracks the performance of U.S. dollar denominated below investment grade corporate debt
publically issued in the U.S. domestic market. Qualifying securities must have a below investment grade rating. Original issue zero coupon bonds, 144a securities, both with and without registration rights, and pay-in-kind securities, including toggle notes, qualify for inclusion. Eurodollar bonds, taxable and tax-exempt US municipal, warrant-bearing, DRD-eligible and defaulted securities are excluded from the Index.
BofAML Original Issue High Yield: The BofA Merrill Lynch US Original Issue High Yield Index (H0HY) is a subset of The BofA Merrill Lynch US High Yield Index including
securities that were not rated investment grade at the point of issuance.
BofAML Investment Grade: The BofA Merrill Lynch Global Corporate Index (G0BC) tracks the performance of investment grade corporate debt publically issued in the
major domestic and eurobond markets. Qualifying securities must have an investment grade rating (based on an average of Moody’s, S&P and Fitch). For Canadian dollar securities only, Fitch is replaced by DBRS in the rating calculation. Original issue zero coupon bonds and pay-in-kind securities, including toggle notes, also qualifying for inclusion. Taxable and tax-exempt US municipal, warrant-bearing, DRD-eligible and defaulted securities are excluded from the Index.
Barclays Capital US Aggregate: The Barclays Capital US Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S.
dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, MBS, ABS, CMBS.
Barclays Capital High Yield Very Liquid: The Barclays Capital US High Yield Very Liquid Index is a more liquid version of The Barclays Capital US Corporate High-Yield
Index that measures the market of USD-denominated, non-investment grade, fixed-rate, taxable corporate bonds. Qualifying issues just have been issued within the past three years, have a USD 600 million minimum amount outstanding and include only the largest issue from each issuer.
Lipper High Current Yield Average: The Lipper High Current Yield is comprised of open-end mutual funds with an investment objective of high (relative) current yield from
fixed income securities, without quality or maturity restrictions, and tending to invest in lower grade debt issues.
US 10YR Treasury: The BofA Merrill Lynch Current 30-Year US Treasury Index is a one-security index comprised of the most recently issued 30-year US Treasury bond. To
qualify for the inclusion, the 30-year bond must be auctioned on or before the third business day before the last business day of the month.
S&P 500: The Standard & Poor 500 Index, calculated with dividends reinvested, consists of 500 widely held common stocks covering industrial, utility, financial and
