Green & Gold FundRecommendation: HOLD Xylem, Inc.

• Purchased 300 shares on February 23, 2012 @ 27.56 per share. ($8,268)

• Currently @ 27.98 per share. ($8,394)• $126 gain

Xylem Position in Fund

High @ 28.73 on March 15

Low @ 23.16 on July 16

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

Technology

• 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

Xylem Company Profile

37%

36%

11%

16%

Geographic Mix

Europe

US

AsiaPacific

Other

45%

11%6%

19%

16%

3%

Segments (% of Revenue)

Transport

Treatment

Test

BuildingServices

IndustrialWater

Irrigation

Xylem Inc.

How does Xylem contribute to solving the water crisis?

Challenges: XYL Solution:

Growing scarcity and populations.

Reuse and Recycle water.

Using less energy to transport water.

Modernize the water system.

Develop more water treatment systems.

Making water from multiple sources safe to drink.

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.

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%

Comparables Analysis

• XYL & PNR are strong compared to peer group.

XYL Investment Information

• 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.

Xylem highlights from February 2012 to January 2013

Strengths Broad PortfolioWater is >90% of total revenuesPartnerships- GE, Zenon, Toro, MonoEstablished Brand Names (38)BBB Rating

WeaknessesLack of Available InformationAbility to hedge foreign currency transaction risks

OpportunitiesAcquisitionsGrowth into Emerging Markets MergersAging Water Infrastructure

ThreatsDecelerated growth of global economiesIncreased costs of raw materialsRegulatory Compliance

SWOT Analysis

• 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 XYL’s stock price to increase.

Investment Thesis

• 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

Portfolio Placement

One Year Stock Chart