"Emerging Markets Outperformed the Major Markets by 50%" After the Collapse of Lehman, According to Industry Expert

• On 5:57 pm EDT, Thursday August 27, 2009

67 WALL STREET, New York - August 27, 2009 - The Wall Street Transcript has just published its TWST Investing Strategies Report offering a timely review of the sector to serious investors and industry executives. This 53 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Banking Industry -- Capital Markets -- Weakness in Construction and Real Estate Lending -- Investing in REITs and ETFs -- Federal Regulation -- Health Care System -- Market Recovery -- Portfolio Diversification - Government Stimulus -- Marketplace Valuation -- Deleveraging -- Relative Earnings Growth -- Fast Growing Companies -- Cutting Costs -- Buying Trends -- Shape of the Recovery -- Stabilization -- Opportunities in Oil -- International Markets -- What to Look for in Companies -- Investing in Emerging Markets

Companies include: JPMorgan Chase (JPM); People's United (PBCT); Annaly (NLY); Capstead Mortgage (CMO); Redwood Trust (RWT); Chimera (CIM); JPMorgan Chase (JPM); Apple (AAPL); Google (GOOG); MasterCard (MA); IDEXX Laboratories (IDXX); PetSmart (PETM); Best Buy (BBY); Bristol-Myers (BMY); Agnico-Eagle (AEM); Goldcorp (GG); The Mosaic Company (MOS); Shaw Group (SGR); AGCO (AGCO); Kimberly-Clark (KMB); Adobe Systems (ADBE); Oracle (ORCL); ITT Educational Services (ESI); Wal-Mart Stores (WMT); Walgreen (WAG); Century Casinos (CNTY); Broadpoint Gleacher (BPSG); Veeco (VECO)

In the following brief excerpt from the 53 page report, Antoine W. van Agtmael, Founder, Chairman and Chief Investment Officer of Emerging Markets Management, LLC (EMM), discusses the outlook for the sector and for investors.

TWST: Please start with an overview of Emerging Markets Management and your investment philosophy there.

Mr. van Agtmael: Emerging Markets Management, LLC (EMM) is one of the pioneer investors in emerging markets. I founded the firm together with several colleagues from the World Bank 22 years ago. Previously I had been involved in emerging markets for many years, first running an investment bank in Thailand and then later at the International Finance Corporation, the private sector arm of the World Bank whose objective was the promotion of private sector investment, including portfolio investment, in the developing world. Experiencing a boom and bust in the Thai market had taught me the merits of having a diversified fund for investing in emerging markets rather than putting all eggs in the basket of a single country fund. At first we called it the Third World Equity Fund - Third World, as developing countries were known in 1981. Prospective investors did not find that a very uplifting name so I then proposed that we call these markets "emerging markets" and that term somehow stuck. In 1987, we started EMM very small, with $25 million in assets, and the firm grew eventually to over $20 billion at its peak before emerging markets dropped by nearly two-thirds in 2007-2008 before and during the financial crisis. Currently we have just over $10 billion under management.

TWST: Would you tell us about your country allocation process as I assume that takes place before you select individual stocks?

Mr. van Agtmael: Our philosophy as a firm is that we don't look so much at investment flows or day-to-day developments but focus instead on fundamentals within the context of a whole market cycle. We like to invest in those countries that, relative to those fundamentals, including growth prospects and quality, are attractively valued. Clearly, the recent dramatic fall opened up some very interesting opportunities again to invest in emerging markets, as you've seen by the rise of emerging markets in the last nine months.

TWST: What about the actual selection of equities? What are the criteria that you use and are they different for different countries?

Mr. van Agtmael: Not really. With our country allocation, you could say that we set different hurdle rates for different countries but otherwise our focus in stock selection is on whether stocks are attractively valued and have a competitive edge. If you translate this into ratios and numbers, we are looking for a price/cash earnings ratio that looks attractive next to the longer-term, sustainable growth of those cash earnings. We also examine whether operating margins and return on equity are improving or deteriorating. We believe that you learn as much from the balance sheet as you do from the income statement and we analyze whether firms can finance themselves by looking at free cash flow and the net debt to equity ratio. Finally, we're looking at whether firms have the management with "the right stuff." You may have seen my book The Emerging Market Century (Free Press, 2007) where I traced the road to success against the odds of 25 companies that went from being second-rate producers of cheap goods to world-class companies. Examples range from Samsung Electronics and Hyundai Motor in Korea, Taiwan Semiconductor Manufacturing Co. (TSM) and HTC in Taiwan, to Vale (VALE) and Embraer (ERJ) in Brazil.

TWST: What is the average turnover?

Mr. van Agtmael: 2007 and 2008 were years in which we made fairly dramatic changes to the portfolio, particularly on a country level. To give you an idea, we became very skeptical about China in 2007 because we didn't believe in the China "Superman" story even though we are strong believers in the enormous potential long term of China. Within a year, we moved from 7% underweight to 3% overweight in China after the market became attractive again. That was a 10% change in the portfolio just in China. There were other places where we made not quite as dramatic but major changes. Still, in those tumultuous and unusual 12 months we had a total portfolio turnover that was less than 50%, which is low by the standards of many managers but higher than we normally have. Typically it's between 30% and 45%.

TWST: Thank you. (PS)

Note: Opinions and recommendations are as of 8/7/09.

ANTOINE W. van AGTMAEL Emerging Markets Management, LLC 1001 19th Street North 17th Floor Arlington, VA 22209 (703) 243-8800

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