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DBO T H E P O W E R S H A R E S D B OIL FUND To download a copy of a prospectus, visit PowerShares.com/DBOpro The fund is not a mutual fund or any other type of Investment Company within the meaning of the Investment Company Act of 1940 and is not subject to its regulation. DB Commodity Services LLC, a wholly owned subsidiary of Deutsche Bank AG, is the managing owner of the fund. Certain marketing services may be provided to the fund by Invesco Distributors, Inc. or its affiliate, Invesco PowerShares Capital Management LLC (together, “Invesco”). Invesco will be compensated by Deutsche Bank or its affiliates. ALPS Distributors, Inc. is the distributor of the fund. Invesco, Deutsche Bank and ALPS Distributors, Inc. are not affiliated. Commodity futures contracts generally are volatile and are not suitable for all investors. An investor may lose all or substantially all of an investment in the fund.
Why I Own: EWM iShares MSCI Malaysia ETF Name: Gary Gordon Title: President Firm: Pacific Park Financial Inc. Founded: 1984 Location: Aliso Viejo, CA AUM: $95 million All ETFs? No (75%) ETFR: Why did you pick EWM? Gordon: Malaysia has been one of my favorites for three years. EWM only has about, over last year, a 0.5 correlation with VWO, which is kind of a weak correlation in the world of stocks, where correlations tend to be 0.8, or 0.9. The fund is also one-fifth as volatile, with a beta of 0.17 with the S&P 500. You often can’t even get bonds with volatility that low in the current market environment. ETFR: Why not Indonesia, through the iShares MSCI Indonesia Investable Market Index Fund (NYSE Arca: EIDO)? Gordon: For one, Indonesia is far more volatile. Secondly, Indonesia’s economy has much higher inflation—double that of Malaysia. And its growth is expected to decline in 2012 because they’re going to have to fight that inflation. In contrast, inflation is stable in Malaysia. It has the lowest inflation in all of Asia, except for Taiwan. And its growth is expected to accelerate in 2012. With the Japanese rebuilding, they’ll need lots of tropical timber and liquefied natural gas that comes from Malaysia. Because of that, Malaysia’s growth is going to increase in the next year, but its inflation— unlike everywhere else in the region—is expected to be stable. Indonesia and India, for example, have incredible growth stories, but they both have to slow it down, so that’s the difference. Meanwhile, Malaysian unemployment is only 3.2 percent. It doesn’t get much better than that. top-performing funds. This year, it’s better than most of the emerging markets, and it’s on par with the S&P 500 right now. ETFR: I noticed that financials are the biggest part of the portfolio. Gordon: What’s interesting is what it dosen’t have: a lot of industrials or materials. With emerging markets, particularly Russia, Brazil—any of the BRIC countries— you usually get a lot of energy and materials, or industrials. The opposite is true for Malaysia. So you’re getting a different area of the emerging market field that you can’t get from big funds like Vanguard Emerging Markets (NYSE Arca: VWO). The first reaction people have when they see the financials is to panic. But here’s the twist on that: The safest banks in the world are Asian in origin. If we were left dealing with an Asia currency crisis like in ’98, it might be a different story. But China’s been tightening its reserves and raising bank reserves so that they could avoid the problems that happen here. And Malaysia is in a good situation as far as that’s concerned. Sure, there are drawbacks. But the risk, the beta itself, tells you that it hasn’t been something subject to rapid swings. That’s attractive to people who are trying to lower the volatility of their portfolio. So if the macroeconomic picture is iShares MSCI Malaysia ETF Equity: Malaysia - Total Market Issuer: BlackRock Legal Structure: Open-Ended Fund Expense Ratio: 0.53% AUM: $994.53 million ADV (60-Day): 3,161,736 Avg. Spread: 0.07% good and their microeconomic is equally good, the corporations are just as solid. Those are positive things. ETFR: Do you think that this is an investment theme a lot of people aren’t aware of? Gordon: Investors don’t have to do much more than look at the trends and look at the risk profiles and see it’s doing well. But I think anyone who’s had an Asia focus understands: China is the big dog. China is the next big economy. China is the one that runs the world. But that doesn’t mean that investing directly in China is your best choice anymore than when Japan was king of the block, that investing directly in Japan was your best choice. ETFR: What do you think is missing from EWM? Gordon: I might reduce the weighting at the top, just because there are only 43 companies in that fund. And even then, nobody wants to see financials moved up from 29 to 32 percent of the portfolio. That’s a lot. You want to see more diversity. But there’s a butterfly effect: Once you adjust it, if it now is only 20 percent financials, but has 15 percent materials and 10 percent energy, for example, half the good things I mentioned in the portfolio won’t exist. September 9, 2010 – September 9, 2011 6.11% ETFR: Have you owned EWM for a long time? Gordon: It’s been one of my holdings since 2008. And last year, it was one of the Competing Funds: N/A Data as of: 09/09/11 Source: Bloomberg S O 2010 N D J F M A M J J A 2011 S ETFR • October 2011 7
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