Investment Case:
Fallen Angel High-Yield Corporate Bonds
1
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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
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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
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2
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
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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
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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
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TRADEMARKS, OR THE PRODUCT(S) (INCLUDING WITHOUT LIMITATION, THEIR QUALITY, ACCURACY, SUITABILITY AND/OR COMPLETENESS).
Performance and characteristics of the BofA Merrill Lynch US Fallen Angel High Yield Index (H0FA) are quoted throughout this material. H0FA is representative of the entire
Fallen Angels high yield corporate bond market. H0FA does not represent the performance or yield of the Fund or underlying index. See index description on page 19
3
Downgraded. Overlooked. Potentially Undervalued.
Fallen Angel bonds have historically outperformed high yield corporate bonds and the average
active high yield mutual fund manager.
3/15/2003 - 12/31/2011 Historic Index Cumulative Return (%)
Proven Index Track Record*
120%
115.8%
101.8%
100%
84.6%
80%
60%
40%
20%
0%
-20%
*Index performance is not illustrative of Fund performance. The Fund has a limited operating history.
2004
2005
2006
2007
2008
2009
BofAML Fallen Angel
Lipper High Current Yield Category Avgerage
2010
2011
2012
Barclays High Yield Very Liquid
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.
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What are Fallen Angels?
 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
.
See slides 2 and 3 for important disclosures
5
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
Index Characteristics
As of 3/31/2012
Current
Yield to
Worst
Modified
Duration
Market
Value ($ Mil)
# 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
Credit Composition of High Yield Indices
As of 3/31/2012
BofAML US Fallen Angel
BofAML Original Issue High
Yield
BofAML US High Yield
BB
72.2%
44.7%
39.9%
B
19.3%
39.3%
42.9%
CCC
7.6%
14.6%
15.9%
CC
0.8%
1.1%
1.2%
C
0.1%
0.2%
0.2%
D
0.0%
0.0%
0.0%
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
6
Structural Similarities to Investment Grade Issuers
 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
Issuer Characterstics
Index
Average
Average
1
1
Index (Underlying Bonds) Characteristics
Debt/Equity
Average
Average
Duration
Maturity2
5.00
5.62
8.16
281.2
6.79
5.49
10.05
317.7
8.35
3.67
6.34
Market Cap
Sales
Ratio (%)
BofAML Investment Grade
$21,087
$18,624
123.3
BofAML US Fallen Angel
$6,193
$11,518
BofAML Original Issue High Yield
$2,382
$3,264
1
Average
Weighted
Coupon2
2
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
7
High Yield Default Rates

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
Fallen Angel versus Original Issue Speculative Grade Default Rates*
Trailing 12-Month Issuer-Weighted All U.S. Speculative-Grade Default Rate
16%
14%
12%
10%
8%
6%
4%
Mar-12
2.76%
2%
0%
Source: Moody’s.
*All S&P issuer based.
Source: Altman, Edward I. and Brenda J. Kuehne. “Defaults and Returns in the High-Yield Bond and
Distressed Debt Market: The Year 2010 in Review and Outlook”. Feb 2011. NYU Salomon Center.
See slides 2 and 3 for important disclosures.
8
Historical Performance vs US High Yield
 Fallen Angels outperformed general U.S. high yield 6 of 9 years ending 2011*
 Fallen Angels declined less than general U.S. high yield in 2008
Annual Returns
01/2003 to 12/2011
60%
BofA Merrill Lynch U.S. High Yield - Fallen Angel
Barclays Capital High Yield Very Liquid
40%
20%
0%
-20%
-40%
2003
2004
2005
2006
2007
2008
2009
2010
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.
9
2011
Contributing Factors to Fallen Angel Performance
 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
Potential for Price Appreciation + Comparable Yield to Original Issue High Yield Bonds
* Number of Bonds in the Fallen Angel Index
60%
40%
30%
500
BofAML US Fallen Angel Price Return
BofAML Original Issue HY Price Return
BofAML US Fallen Angel Yield
BofAML Original Issue HY Yield
50%
568*
20%
10%
441
426
477
0%
469
-10%
385
409
-20%
-30%
411
-40%
2003
2004
2005
2006
2007
2008
2009
2010
Source: Bank of America Merrill Lynch Global Index System.
See index descriptions on slide 20. See slide 2 and 3 for important disclosures
10
2011
A Tale of Two Angels
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
Case Study #1: Lehman Brothers
Date
Rating Change
From
To
Ratings Outlook
9/15/2008
A2
B3
Negative
12/8/2008
B3
C
Rating to be
withdrawn
Rationale
Unable to refinance debt due to severe credit
deterioration; bankruptcy impending
Company went bankrupt and defaulted on debt
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 #2: Xerox
Date
Rating Change
From
To
Ratings Outlook
12/1/2000
Baa2
Ba1
Negative
5/1/2002
Ba1
B1
Negative
8/10/2004
B1
Ba2
Stable
9/5/2005
Ba2
Ba1
Positive
11/29/2006
Ba1
Baa3
Positive
Rationale
Declining business environment, management
and operations problems, liquidity strain
Continued concern regarding free cash flow
Good operational execution and improving
profits and free cash flow; reduced leverage
Continued improvement in business and balance
sheet management
Solid business execution, stable profitability,
solid free cash flow generation
Source: www.moodys.com
See slide 2 and 3 for important disclosures.
11
Return Statistics
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
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
S&P 500
0.69
0.74
0.74
0.08
-0.28
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.
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S&P 500
1.00
Return Statistics
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
S&P 500
12.59
8.54
23.42
2.01
5.61
15.36
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.
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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, warrantbearing, 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. dollardenominated, 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
transportation sectors.
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