Green

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Green Gold FundRecommendation HOLD Xylem, Inc.
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Xylem Position in Fund

• Purchased 300 shares on February 23, 2012 _at_ 27.56
  per share. (8,268)
• Currently _at_ 27.98 per share. (8,394)
• 126 gain

High _at_ 28.73 on March 15
Low _at_ 23.16 on July 16
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Water Industry Overview

• Global Water Sector

• Growth Drivers

• Population Growth
• Supply Shrinking due to Pollution
• Industrial Expansion
• Urbanization
• Infrastructure Replacement/Upgrade

• 425 Billion
• 4 to 6 defensive long-term growth
• Movement towards Global Water Oligopoly

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Technology
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Xylem Company Profile

• Spun off from ITT in 2011
• Xylem (XYL) is a leading global water technology
  provider.
• Transport
• Treat
• Test
• Public Utility
• Industrial
• Agricultural
• Operates in 150 countries
• 12,500 employees worldwide

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Xylem Inc.
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How does Xylem contribute to solving the water
crisis?
Challenges
XYL Solution

• Develop more water treatment systems.

Making water from multiple sources safe to drink.
Growing scarcity and populations.
Reuse and Recycle water.
Using less energy to transport water.
Modernize the water system.
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Financial Highlights
(in millions) 2009 2010 2011 2012E 2013E
Revenue 2,849 3,202 3,803 3,806 3,911
Net Income 202 286 358 303 366
Free Cash Flow 308 301 388 276 345

• XYL has continued to increase revenue over the
  past few years through strategic acquisitions,
  even with slower revenue growth in Europe.
• Strong free cash flow opens the door for future
  acquisitions or an increase in the dividend
  payout.

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Comparables Analysis
XYL PNR FLS WTR AVG
Market Cap 5.80 B 12.26B 8.34B 5.37B 7.94B
Forward PE 14.01 15.72 14.61 22.00 16.585
FCF (2013E) 344.70 335.9 621.39 -5.01 324.25M
FCF (2012E) 276.10 249.59 475.96 -20.81 245.21
Debt to Equity 0.59 0.28 .46 1.26 0.65
Div Yield (2013E) 1.60 1.82 0.99 2.71 1.78

• XYL PNR are strong compared to peer group.

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XYL Investment Information
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Xylem highlights from February 2012 to January
2013

• XYL stock has been fairly stationary since we
  bought the stock and is currently 0.42 above
  where we bought it. Why?
• Revenue did not increase at the expected rate in
  developed markets, especially Europe.
• Losses in foreign exchange conversions.
• However, acquisitions, which did better than
  planned, are expected to continue throughout 2013.

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SWOT Analysis
Strengths Broad Portfolio Water is gt90 of total revenues Partnerships- GE, Zenon, Toro, Mono Established Brand Names (38) BBB Rating Weaknesses Lack of Available Information Ability to hedge foreign currency transaction risks
Opportunities Acquisitions Growth into Emerging Markets Mergers Aging Water Infrastructure Threats Decelerated growth of global economies Increased costs of raw materials Regulatory Compliance
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Investment Thesis

• In order to maintain exposure in the growing
  water sector, we should hold Xylem Inc. due to
  their use of technology and more than 90 of
  their revenues coming from water. The global
  recession has prevented the takeoff we originally
  expected. However, as economies recover and more
  nations require infrastructure upgrades, we
  expect XYLs stock price to increase.

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Portfolio Placement

• Sector Industrials and Materials
• Industry Group Water
• Current Holdings XLI, XME, GE, UPS, SAND, XYL
• Target Sector Allocation 8.23, 44,491
• Current Sector Allocation 10.98, 59,357
• Remaining Allocation (2.75), (14,866)
• HOLD 300 shares of XYL. (8,388, 1.49 of
  portfolio, 13.59 of sector)
• year end target price 32.00

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One Year Stock Chart