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Best, Worst ETFs for the Second Quarter

BRICs and oil monopolized the exchange-traded fund leaders board for the second quarter of 2007, while real estate, home building and silver funds dominated the bottom of the performance array.

The top five funds on the accompanying list of star ETF performers for the quarter represent "BRIC" countries (an acronym for funds that focus on investments in Brazil, Russia, India and China).

First and fourth places went to Brazil-focused funds while Chinese investment vehicles captured second and third spots.

An Indian fund placed fifth from the top.

Seventh position was a diversified BRIC fund, the Claymore/BNY BRIC ETF (EEB).

The final position on the list of the top-10 ETF performers went to iShares S&P Latin American 40 (ILF), which has more than half its assets invested in Brazil.

Nowhere -- including all the time periods on the table -- is there a rate of return among the quarter's top 10 performers of less than 15%.

Eight of the 10 leaders shot ahead by more than 20% during the three-month period, with the remaining two only fractionally behind.

Of eight winners with sufficient histories for computation of grades from Ratings, three qualified for the "A" category while four earned marks in the "B" range -- earning all seven "buy" recommendations.

The remaining fund from the leaders list that qualified for a grade ended with a "C" and a "hold" recommendation.

10 Best Performing ETFs
Ranked by total return for the quarter ended June 30; excludes leveraged and inverse funds
HOLDRs TeleBras (TBH) C Non-US Equity 33.53 30.18 43.81 15.60
PowerShares Gldn Drgn Hltr USX Chn (PGJ) A- Non-US Equity 25.88 23.60 62.61
iShares FTSE/Xinhua China 25 (FXI) A Non-US Equity 25.79 15.61 69.73
iShares MSCI Brazil (EWZ) B+ Non-US Equity 24.79 31.10 60.16 62.63
iPath MSCI India Index ETN (INP) U Emerging Market Equity 22.80 15.02
PowerShares Dynamic Oil & Gas Svc (PXJ) B Energy/Natural Res 22.59 29.38 23.95
Claymore/BNY BRIC ETF (EEB) U Equity Income 22.35 20.28
HOLDRs Oil Services (OIH) B Energy/Natural Res 20.03 25.37 17.46 34.79
iShares DJ US Oil Equip & Serv (IEZ) B+ Energy/Natural Res 19.63 27.29 20.06
iShares S&P Latin American 40 (ILF) A- Non-US Equity 19.53 25.46 58.95 55.94
* "U" is unrated.
Source: Ratings (data as of 6/30/2007).

At the opposite end of the performance array, four real estate ETFs, two home-builder ETFs and a pair of silver ETFs populate the roster of laggards. They are kept company by a small-cap Japan fund and the HealthShares Emerging Cancer Fund (HHJ). Each of the 10 laggards is in negative territory for the year to date as well as for the second quarter.

Of seven funds on the laggards list with sufficient histories for Ratings grades, four ended in the "E" range, which equates to "sell" recommendations. The remaining three received marks in the "C" range that placed them in the "hold" category.

10 Worst Performing ETFs
Ranked by total return for the quarter ended June 30; excludes leveraged and inverse funds
HealthShares Emerging Cancer (HHJ) U Health/Biotechnology -13.20
iShares Cohen & Steers Realty Major (ICF) C Growth & Income -11.68 -8.49 11.39 21.73
Vanguard REIT ETF (VNQ) E Growth & Income -9.46 -6.15 12.16
DJ Wilshire REIT ETF (RWR) C- Growth & Income -9.07 -5.78 11.74 21.27
iShares Dow Jones US Real Estate (IYR) C- Growth & Income -8.30 -5.47 13.06 19.21
iShares DJ US Home Cons Idx (ITB) E- Equity Income -8.13 -25.80 -19.88
PowerShares DB Silver Fund (DBS) U Precious Metals -7.65
iShares Silver Trust (SLV) E- Precious Metals -7.50 -4.00 10.87
SPDR S&P Homebuilders ETF (XHB) E- Equity Income -6.95 -18.77 -10.26
SPDR Russell/Nomura Small Cap Japan (JSC) U Non-US Equity -4.98 -0.84
* "U" is unrated.
Source: Ratings (data as of 6/30/2007).

Richard Widows is a financial analyst for Ratings. Prior to joining, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.

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