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Investment Case: International and Emerging Markets High-Yield Corporate Bonds

Market Vectors International High Yield Bond ETF (IHY) Market Vectors Emerging Markets High Yield Bond ETF (HYEM)

ETF Disclosure
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Contents
International High-Yield Credit Market
Market Growth Corporate Financing Trends

Global High-Yield Market


Correlation Risk/Reward Profile Potential Yield Advantage Portfolio Optimization Default Rates

Emerging Markets Corporate Bond Market


Fundamentals Market Access

13

Market Vectors International High Yield Bond ETF (IHY)


Fund Overview Index Characteristics Fund Overview Index Characteristics

15 18

Market Vectors Emerging Markets High Yield Bond ETF (HYEM)

International High-Yield Credit Market Growth


The international segment of the global high-yield corporate bond market has grown from approximately 10% in 1997 to 35% in 2011. Investors who are allocated to only U.S. high-yield corporate bonds may be missing exposure to over one third of the corporate high-yield market.
Growth of International Corporate High-Yield Market
100% % of Global High-Yield Corporate Market Value 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 10.9% 1997 16.3% 2000 20.7% 2003 Non-U.S Issuers 22.0% 2006 U.S. Issuers 29.0% 35.0% 89.1% 83.7% 79.3% 78.0% 71.0% 65.0% $219 billon $288 billion Global Market Value $669 billion $807 billion $976 billion $1,343 billion

2009

2011

Source: Bank of America Merrill Lynch Figures based on market value of high-yield corporate bonds in the BofA Merrill Lynch Global High Yield Index which encompasses below investment-grade corporate debt publicly issued in major domestic or Eurobond markets. Indexes are unmanaged and are not securities in which an investment can be made. See index descriptions on page 21. See disclaimers on pages 2 and 3.

Growth of the Emerging Markets Corporate Bond Market


Emerging markets corporate bonds represent a growing segment of the overall emerging markets debt universe, both investment grade and high-yield.
Breakdown of High-Yield and Investment-Grade Bonds in EM Corporate Bonds Market
Global Market Value (US $ Billions) 600 Market Value (US$ Billions) 500 400 300 200 100 0 $84 $116 $137 High Yield $159 $195 $161 $293 $443 $541

Investment Grade

2003

2004

2005

2006

2007

2008

2009

2010

2011

Source: Bank of America Merrill Lynch. Figures based on market value of high-yield and investment grade corporate bonds in The BofA Merrill Lynch US Emerging Markets Liquid Corporate Plus Index. Indexes are unmanaged and are not securities in which an investment can be made. See index descriptions on page 21. See disclaimers on pages 2 and 3.

Shift from Leveraged Loans to High-Yield Debt


One factor contributing to the growth of the international high-yield market has been a shift in financing sources. Since 2008, European companies have increased their use of debt issuance and reduced their use of leveraged loans to finance operations.
Leveraged Issuance by Percentage
100% Percent of Total European Debt Issuance 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 15.9% 2003 21.4% 2004 12.8% 2005 16.2% 2006 9.7% 2007 5.8% 2008 Leveraged Loans 2009 2010 2011 33.2% 47.6% 42.0% 84.1% 78.6% 87.2% 83.8% 90.3% 94.2% 66.8% 52.4% 58.0%

High-Yield Corporate Bonds

Source: Dealogic, SIFMA/AFME; European High Yield & Leveraged Loan Report, 2011 4Q See index descriptions on page 21. See disclaimers on pages 2 and 3.

Stronger Correlations to Stocks than Bonds


Global high-yield corporate bonds have had low or negative correlation to other bond asset classes. In fact, they have historically been more correlated to equities which may provide an opportunity to diversify bond portfolios.
Correlation to Global High-Yield Corporate Bonds
1/1998 2/2012 Emerging Market Stocks International Developed Market Stocks U.S. Small-Cap Stocks U.S. Large-Cap Stocks Global Investment-Grade Bonds U.S. Investment-Grade Bonds U.S. Treasuries -0.40 -0.20 -0.20 0.00 0.20 0.40 0.60 0.80 1.00 0.17 0.29 0.71 0.69 0.65 0.64

Index performance is not illustrative of Fund performance. Prior to April 2, 2012, IHY had no operating history and prior to May 9, 2012 EMHY had no operating history. Source: FactSet. Fixed income investments have interest rate risk, which refers to the risk that bond prices generally fall as interest rates rise. U.S. government bonds, such as Treasuries, are guaranteed by the full faith and credit of the United States government. High-yield and investment-grade bonds are not guaranteed by the full faith and credit of the United States and carry the credit risk of the issuer. U.S. Treasuries are exempt from state and local taxes, but subject to federal taxes. Other securities listed are subject to federal, state and local taxes. Prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. Prices of bonds change in response to factors such as interest rates and issuers credit worthiness, among others. Foreign securities have additional risks, including exchange rate changes, political and economic upheaval, relative lack of information, relatively low market liquidity and the potential lack of strict financial and accounting controls. Investing in smaller companies involves risks not associated with investing in more established companies such as business risk, stock price fluctuations and illiquidity. Correlation is a statistical measure of how two investments move in relation to one another. A correlation of +1.00 indicates the securities will move in lockstep. A correlation of -1.00 indicates the securities will move in opposite directions. A correlation of 0.00 indicates the securities movements are random. For illustrative purposes only. Historical information is not indicative of future results; current data may differ from data quoted. Indexes are unmanaged and are not securities in which an investment can be made. Diversification does not assure a profit nor protect against loss. See index descriptions on slide 21. See disclaimers on pages 2 and 3.

Potential Long-Term Return with Less Risk than Equities


Historically, global and U.S. high-yield corporate bonds have outperformed many equity asset classes with significantly less risk.
Risk vs. Reward
02/2000 to 02/2012
10 8 Global High-Yield Corporate Bonds U.S. High-Yield Corporate Bonds Emerging M arket Stocks

Annualized Return (%)

6 4 2 0 -2 -4 -6

International Developed M arket Stocks U.S. Small-Cap Stocks U.S. Large-Cap Stocks

10

Risk (Annualized Standard Deviation)

15

20

25

Index performance is not illustrative of Fund performance. Prior to April 2, 2012, IHY had no operating history and prior to May 9, 2012 EMHY had no operating history. Source: FactSet. Fixed income investments have interest rate risk, which refers to the risk that bond prices generally fall as interest rates rise. Prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. Prices of bonds change in response to factors such as interest rates and issuers credit worthiness, among others. Foreign securities have additional risks, including exchange rate changes, political and economic upheaval, relative lack of information, relatively low market liquidity and the potential lack of strict financial and accounting controls. Investing in smaller companies involves risks not associated with investing in more established companies such as business risk, stock price fluctuations and illiquidity. Standard deviation is the statistical measure of the historical volatility of a portfolio. For illustrative purposes only. Historical information is not indicative of future results; current data may differ from data quoted. Indexes are unmanaged and are not securities in which an investment can be made. See index descriptions on slide 21. See disclaimers on pages 2 and 3.

Potential Yield Advantage


International high-yield corporate bonds and emerging market high-yield corporate bonds currently offer higher yields and lower duration than U.S. high-yield corporate bonds with similar credit ratings.
Index Yield & Duration as of 4/30/2012 Yield-to-Worst
9 8 7

Modified Duration 7.08

8.59

8.39

Percent

6 5 4 3 2 U.S. High-Yield Corporate Bonds International High-Yield Corporate Bonds (ex U.S.) Emerging Market High-Yield Corporate Bonds

4.85 4.08

4.34

Source: Bank of America Merrill Lynch 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 bonds price to interest rate changes. It is defined as the percentage change in price for a 100 basis point change in interest rates. Yield and duration figures based on BofA Merrill Lynch U.S. High Yield Master II Index, BofA Merrill Lynch Global ex-US Issuers High Yield Constrained Index and BofA Merrill Lynch High Yield US Emerging Markets Liquid Corporate Plus Index. Indexes are unmanaged and are not securities in which an investment can be made. Index performance is not illustrative of Fund performance. Prior to April 2, 2012, IHY had no operating history and prior to May 9, 2012 EMHY had no operating history. See index descriptions on page 21. See disclaimers on pages 2 and 3. 10

Potential to Increase Efficiency in Portfolio of U.S. Treasuries


Historically, allocating global high-yield corporate bonds to a cash portfolio holding U.S. Treasuries has improved the potential performance while reducing portfolio volatility.
Efficient Frontier
7.1 7 6.9 1/1998 to 2/2012 100% Global High-Yield Corporate Bonds

Annualized Return (%)

6.8 6.7 6.6 6.5 6.4 6.3 6.2 6.1 4 5 6 100% U.S. Treasuries 7 8 Risk (Annualized Standard Deviation) 9 10 11 39% allocation to global high-yield corporate bonds proved to be portfolio with lowest risk

Index performance is not illustrative of Fund performance. Prior to April 2, 2012, IHY had no operating history and prior to May 9, 2012 EMHY had no operating history. Source: FactSet. The chart displays the return and standard deviation of various portfolios allocations of global high yield bonds and 10-Year U.S. Treasuries as measured by The BofA Merrill Lynch Global High Yield Index and The BofA Merrill Lynch U.S. Treasuries Current 10Y Index. Portfolios range from 100% global high yield bonds to 100% U.S. Treasuries. U.S. Treasuries, are guaranteed by the full faith and credit of the United States government. Corporate high-yield bonds are not guaranteed by the full faith and credit of the United States and carry the credit risk of the issuer. Standard deviation is the statistical measure of the historical volatility of a portfolio. Efficient frontier: a set of portfolios that each maximize expected return for a given level of risk. For illustrative purposes only. Historical information is not indicative of future results; current data may differ from data quoted. Indexes are unmanaged and are not securities in which an investment can be made. See index descriptions on slide 21. See disclaimers on pages 2 and 3.

11

Lower Default Rates than U.S. High-Yield Bonds


European and emerging market corporate high-yield bonds have historically had lower default rates than comparable U.S. high-yield bonds.

Median Annual High-Yield Corporate Default Rate 1981-2011 Region U.S. and Tax Havens Europe Emerging Markets Other Developed Default Rate 3.64% 1.75% 1.55% 4.17%

Sources: Standard & Poor's Global Fixed Income Research and Standard & Poor's CreditPro; 2011 Annual Global Corporate Default Study and Rating Transitions. Study includes over 12,000 bond issuers. U.S. and Tax Havens: U.S., Bermuda, and the Cayman Islands. Europe: Austria, Belgium, Bulgaria, Channel Islands, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, Switzerland, and the U.K. Emerging Markets: Argentina, Bahamas, Bahrain, Barbados, Belize, Bolivia, Brazil, British Virgin Islands, Bulgaria, Chile, China, Colombia, Costa Rica, Croatia, Cyprus, Czech Republic, Dominican Republic, Egypt, El Salvador, Estonia, Fiji, Georgia, Gibraltar, Guatemala, Hong Kong, Hungary, India, Indonesia, Israel, Jamaica, Jordan, Kazakhstan, Korea, Republic of, Kuwait, Latvia, Lebanon, Liberia, Lithuania, Malaysia, Marshall Islands, Mauritius, Mexico, Mongolia, Morocco, Netherlands Antilles, Nigeria, Oman, Pakistan, Panama, Papua New Guinea, Paraguay, Peru, Philippines, Poland, Qatar, Romania, Russian Federation, Saint Helena, Saudi Arabia, Singapore, Slovakia, Slovenia, South Africa, Sri Lanka, Taiwan, Thailand, Trinidad and Tobago, Tunisia, Turkey, Ukraine, United Arab Emirates, Uruguay, Vanuatu, and Venezuela. Other Developed: Australia, Canada, Japan, and New Zealand.

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Emerging Market Fundamentals Continue to Improve


The case for emerging markets high-yield corporate bond investing appears compelling based on improved credit fundamentals, solid macro backdrop, and potentially attractive yields vs. U.S. high-yield corporate bonds. Additionally, the risk profile for EM corporates has improved due in part to stronger sovereign balance sheets and economic growth prospects compared with developed markets.
Government Gross Debt (% of GDP)
120 100 80 Percent (%) 60 40 20 0 Advanced economies Emerging and developing economies

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016
13

*IMF Projections Source: Source: IMF, World Economic Outlook (April 2012). Regional categories as determined by the IMF. Gross Domestic Product (GDP) is a broad measure of the economy that measures the retail value of goods and services produced in a country. Debt-to-GDP Ratio is a measure of a countrys government debt divided by its GDP. See disclaimers on pages 2 and 3.

2017

Different Ways to Access Bonds from Emerging Markets


Emerging markets corporate bonds generally have not garnered as much attention as emerging markets sovereign bonds. However, over time the EM corporate bond market has continued to grow in terms of market value and issuance.
Growth of EM Bond Markets
2000 1800 1600 Market Value (US $ Billions) 1400 1200 1000 800 600 400 200 0 84 250 188 2003 2004 2005 2006 2007 2008 2009 2010 2011 USD Denominated EM Sovereign Bonds USD Denominated EM Corporate Bonds 840 457 541

Local Currency Denominated EM Sovereign Bonds

Source: J.P. Morgan and Bank of America Merrill Lynch. Market value based on J.P. Morgan Emerging Markets Bond Index, J.P. Morgan Government Bond Index-Emerging Markets Index and The BofA Merrill Lynch US Emerging Markets Liquid Corporate Plus Index. Indexes are unmanaged and are not securities in which an investment can be made. Local currency bonds are debt instruments that are denominated in the issuers own domestic market and currency. See index descriptions on page 21 See disclaimers on pages 2 and 3.

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Market Vectors International High Yield Bond ETF (IHY)

The Market Vectors International High Yield Bond ETF (IHY) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of The BofA Merrill Lynch Global ex-US Issuers High Yield Constrained Index (HXUS). The Index is comprised of below investment-grade debt issued by corporations located throughout the world (which may include emerging market countries) excluding the United States, denominated in euros, U.S. dollars, Canadian dollars or British pound sterling issued in the major domestic or Eurobond markets. Fund Characteristics Fund Ticker Intraday NAV Ticker Index Ticker Commencement Date Gross Expense Ratio Net Expense Ratio1 Exchange Anticipated Dividend Frequency IHY IHY.IV HXUS 4/2/2012 0.53% 0.40% NYSE Arca Monthly Diversify your high-yield exposure Many high-yield investors may be missing out on the internationally issued high-yield corporate bond market, which represents one-third of the total corporate high-yield bond market2 Potential for higher yield and total return International high-yield corporate bonds currently have higher yields than U.S. high-yield corporate bonds2 Historically lower default rates International high-yield corporate bonds historically have experienced lower default rates than U.S. high-yield corporate bonds3

for the Fund are capped contractually until 09/01/2013. Cap excludes certain expenses, such as interest. represented by The BofA Merrill Lynch Global ex-US Issuers High Yield Constrained Index for international high-yield corporate bonds, and The BofA Merrill Lynch U.S. High Yield Master Index II for U.S. high-yield corporate bonds. 3Source: Standard & Poors Global Fixed Income Research and Standard & Poors CreditPro; 2011 Annual Global Corporate Default Study and Rating Transitions. All information as of 5/7/2012 and subject to change. Indexes are unmanaged and are not securities in which an investment can be made. See disclaimers on pages 2 and 3.
2As

1Expenses

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BofA Merrill Lynch Global ex-US Issuers High Yield Constrained Index
Index Characteristics Average Yield to Worst Average Modified Duration Average Years to Maturity Average Coupon Number of Issues Index Credit Quality BB B CCC CC C D 60.30% 34.34% 5.06% 0.17% 0.06% 0.07% Index Country Breakdown Developed Emerging Markets 65.74% 34.26% 8.59% 4.08 8.74 7.68% 1039 Index Maturity Breakdown
Years 10+ 7-10 5-7 3-5 0-3 0% 5% 10% 15% 18.25% 20% 25% 30% 35% 3.45% 20.10% 29.18% 29.01%

All information as of 4/30/2012 and subject to change. All figures are based on the Funds index and do not represent characteristics of the Fund. Indexes are unmanaged and are not securities in which an investment can be made. Averages are market weighted. 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 bonds price to interest rate changes. It is defined as the percentage change in price for a 100 basis point change in interest rates. Years to Maturity is a measure of the time period, in years, until a bond matures. Standard and Poors Credit Ratings: credit ratings of A or better are considered to be high credit quality; credit ratings of BBB are good credit quality and the lowest category of investment grade; credit ratings BB and below are lower-rated securities (high yield); and credit ratings of CCC or below have high default risk. Equivalent Fitch and Moodys ratings are BB/Ba, B/B, CCC/Caa, CC/Ca, C/Ca and D/C. See disclaimers on pages 2 and 3.

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BofA Merrill Lynch Global ex-US Issuers High Yield Constrained Index
Index EM/Developed Breakdown Developed Emerging Markets 65.74% 34.26%
Currency Industry Breakdown (%) Financial Banking Financial Services Insurance Industrials Automotive Basic Industry Capital Goods Consumer Cyclical Consumer Non-Cyclical Energy Healthcare Media Real Estate Services Technology & Electronics Telecommunications Utility Utility CAD 0.10 0.10 --1.45 -0.29 0.03 0.04 -0.46 -0.43 -0.21 --0.03 0.03 1.58 EUR 7.84 6.12 1.30 0.42 28.70 5.62 6.72 2.42 0.78 1.15 0.58 1.20 3.32 0.17 3.34 0.30 3.13 1.17 1.17 37.71 GBP 1.48 1.19 0.13 0.16 3.67 0.51 0.36 0.12 0.56 0.21 0.09 0.30 0.46 0.12 0.77 -0.16 0.36 0.36 5.51 USD 12.22 11.42 0.62 0.18 39.42 0.51 11.35 1.35 0.61 2.12 6.73 1.93 2.41 3.07 3.76 0.85 4.73 3.55 3.55 55.19 Total 21.64 18.83 2.04 0.77 73.25 6.63 18.72 3.91 2.00 3.47 7.85 3.43 6.62 3.36 8.08 1.14 8.01 5.11 5.11 100.00

Index Top 10 Country Breakdown United Kingdom France Germany Canada Italy Russian Federation Brazil Luxembourg China Netherlands Total Remaining 59 Countries 10.86% 8.93% 8.21% 7.05% 6.45% 5.11% 5.01% 3.44% 3.42% 3.37% 61.85% 38.15%

Total

All information as of 4/30/2012 and subject to change. All figures are based on the Funds index and do not represent characteristics of the Fund. Indexes are unmanaged and are not securities in which an investment can be made. See disclaimers on pages 2 and 3.

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Market Vectors Emerging Markets High Yield Bond ETF (HYEM)


The Market Vectors Emerging Markets High Yield Bond ETF (HYEM) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of The BofA Merrill Lynch High Yield US Emerging Markets Liquid Corporate Plus Index (EMHY). The Index is comprised of U.S. dollar-denominated bonds issued by non-sovereign emerging market issuers that are rated below investment grade and issued in the major domestic or eurobond markets. In order to qualify for inclusion in the Index, an issuer must have risk exposure to countries other than members of FX G10, all Western European countries and territories of the U.S. and Western European countries.1 Fund Characteristics Fund Ticker Intraday NAV Ticker Index Ticker Inception Date Gross Expense Ratio Net Expense Ratio2 Exchange Anticipated Dividend Frequency
1The

First EM corporate high-yield bond ETF HYEM HYEM.IV EMHY 5/9/2012 0.53% 0.40% NYSE Arca Monthly First ETF to focus solely on the U.S. dollar (USD)-denominated nonsovereign segment of the EM high-yield bond marketa market segment that has grown by 265% since 2003 and now accounts for over 10% of the global high yield corporate bond market.3 Currently higher yields than EM sovereign and U.S. corporate bonds USD-denominated EM high-yield corporate bonds currently generate higher yields than both USD-denominated EM sovereign bonds and U.S. high-yield corporate bonds.3 Historically lower default rates than U.S. corporate bonds EM high-yield corporate bonds historically have experienced lower default rates than U.S. high-yield corporate bonds.4

FX G10 is defined as Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom and the United States for the Fund are capped contractually until 09/01/2013. Cap excludes certain expenses, such as interest. 3As represented by The BofA Merrill Lynch Global High Yield Index for global high-yield corporate bonds, The BofA Merrill Lynch High Yield US Emerging Markets Liquid Corporate Plus Index for USDdenominated EM high-yield corporate bonds, The BofA Merrill Lynch USD Emerging Markets Sovereigns Index for USD-denominated EM high-yield sovereign bonds and The BofA Merrill Lynch U.S. High Yield Master Index II for U.S. high yield corporate bonds. 4Source: Standard & Poors Global Fixed Income Research and Standard & Poors CreditPro; 2011 Annual Global Corporate Default Study and Rating Transition All information as of 5/7/12 and subject to change. Indexes are unmanaged and are not securities in which an investment can be made. See disclaimers on pages 2 and 3.
2Expenses

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BofA Merrill Lynch High Yield US EM Liquid Corporate Plus Index


Index Characteristics Average Yield to Worst Average Modified Duration Average Years to Maturity Average Coupon Number of Issues Index Credit Quality BB B CCC CC C D 58.10% 39.37% 2.63% 8.39% 4.34 6.03 8.3% 272
Years 10+ 7-10 5-7 3-5 1-3 0% 5% 10% 15% 16.52% 20% 25% 30% 35% 4.89% 25.50% 24.80% 29.63%

All information as of 4/30/2012 and subject to change. All figures are based on the Funds index and do not represent characteristics of the Fund. Indexes are unmanaged and are not securities in which an investment can be made. Averages are market weighted. 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 bonds price to interest rate changes. It is defined as the percentage change in price for a 100 basis point change in interest rates. Years to Maturity is a measure of the time period, in years, until a bond matures. Standard and Poors Credit Ratings: credit ratings of A or better are considered to be high credit quality; credit ratings of BBB are good credit quality and the lowest category of investment grade; credit ratings BB and below are lower-rated securities (high yield); and credit ratings of CCC or below have high default risk. Equivalent Fitch and Moodys ratings are BB/Ba, B/B, CCC/Caa, CC/Ca, C/Ca and D/C. See disclaimers on pages 2 and 3.

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BofA Merrill Lynch High Yield US EM Liquid Corporate Plus Index


Index Top 10 Country Breakdown China Russian federation Indonesia Venezuela Brazil Mexico United Arab Emirates India Ukraine Turkey Total Remaining 21 Countries 12.10 11.68 7.99 7.30 7.17 6.73 6.00 5.19 4.53 4.07 72.75% 27.25%
Industry Breakdown (%) Financial Banking Financial Services Industrials Automotive Basic Industry Capital Goods Consumer Cyclical Consumer Non-Cyclical Energy Media Real Estate Services Technology & Electronics Telecommunications Quasi & Foreign Government Government Guaranteed Local-Authority Utility Utility Total Total 18.35 17.87 0.48 63.79 0.29 21.16 0.96 1.41 3.36 11.20 0.12 10.03 5.90 1.03 8.31 7.50 4.62 2.88 10.35 10.35 100.00

All information as of 4/30/2012 and subject to change. All figures are based on the Funds index and do not represent characteristics of the Fund. Indexes are unmanaged and are not securities in which an investment can be made. See disclaimers on pages 2 and 3.

20

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 indexs performance is not illustrative of the Funds performance. Indices are not securities in which investments can be made. Global High-Yield Corporate Bonds: BofA Merill Lynch Global High Yield Index tracks the performance of USD, CAD, GBP and EUR denominated below investment grade corporate debt publicly issued in the major domestic or eurobond markets. International High-Yield Corporate Bonds: BofA Merrill Lynch Global ex-US Issuers High Yield Constrained Index (HXUS). The Index is comprised of below investment-grade debt issued by corporations located throughout the world (which may include emerging market countries) excluding the United States, denominated in euros, U.S. dollars, Canadian dollars or British pound sterling issued in the major domestic or Eurobond markets. USD Emerging Markets High-Yield Corporate Bonds: The BofA Merrill Lynch High Yield US Emerging Markets Liquid Corporate Plus Index (EMHY). The Index is comprised of U.S. dollardenominated bonds issued by non-sovereign emerging market issuers that are rated below investment grade and issued in the major domestic or eurobond markets. U.S. High-Yield Corporate Bonds: BofA Merrill Lynch U.S. High Yield Master II Index tracks the performance of US dollar denominated below investment grade corporate debt publicly issued in the US domestic market. Global Investment Grade Bonds: BofA Merrill Lynch Global Broad Market Index tracks the performance of investment grade debt publicly issued in the major domestic and eurobond markets, including sovereign, quasi-government, corporate, securitized and collateralized securities. U.S. Investment Grade Bonds: BofA Merrill Lynch U.S. Broad Market Index tracks the performance of US dollar denominated investment grade debt publicly issued in the US domestic market, including US Treasury, quasi-government, corporate, securitized and collateralized securities. U.S. Treasuries: BofA Merrill Lynch Current 10-Year US Treasury Index is a one-security index comprised of the most recently issued 10-year US Treasury note. The index is rebalanced monthly. In order to qualify for inclusion, a 10-year note must be auctioned on or before the third business day before the last business day of the month. U.S. Large-Cap Stocks: S&P 500 Index consists of 500 widely held common stocks covering industrial, utility, financial and transportation sectors. U.S. Small-Cap Stocks: Russell 2000 Index measures the performance of U.S. small cap stocks: the 2000 smallest companies in the Russell 3000 index, a broad based index that represents approximately 98% of the value of the investable U.S. equity market. International Developed Market Stocks: MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. The MSCI EAFE Index consists of the following 22 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. Emerging Market Stocks: MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. The MSCI Emerging Markets Index consists of the following 21 emerging market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey. Leveraged Loans: Leveraged loan data are from Dealogic and are defined primarily as coming from a leveraged or highly leveraged European deal; loan tranches must have sub-investment grade ratings, or, if unrated, a margin spread minimum of 125 basis points over a benchmark (e.g., Euribor, LIBOR). Under these guidelines, sub-investment grade-rated loans with a margin spread of less than 125 basis points are included. Deals must be European and are inclusive of both developed and emerging market Europe as defined in high yield criteria in Section 3. Deals must also be marketed either in Europe or in the United States. Loans not EUR-denominated are converted to EUR as of credit date for purposes of aggregation. Aggregates include new money as well as non-new money deals. USD Emerging Market Sovereign Bonds: J.P. Morgan Emerging Markets Bond Index (EMBI) tracks total returns for USD-denominated debt issued by emerging market sovereign entities. Local Currency Emerging Market Sovereign Bonds: J.P. Morgan Government Bond Index-Emerging Markets (GBI-EM) tracks regularly traded, liquid, fixed-rate, domestic currency debt issues by emerging market governments. USD Emerging Market Corporate Bonds: The BofA Merrill Lynch US Emerging Markets Liquid Corporate Plus Index tracks U.S. dollar denominated emerging markets non-sovereign debt.

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