BASIC MATERIALS

Ryan Shelley Bill McCarran Thao Truong

AGENDA

Current Holding Sub-Industries Sector Leaders Materials Outlook Deere & Co (DE) Alcoa (AA) SPDR Gold Trust (GLD) Recommendations Q&A

Current Holdings

Alcoa (AA) Purchased 9/14/11 283 shares @ $11.73

Deere & co (DE) Purchased Feb 25th 2011 25 Shares @ $90.49

S&P Basic Materials Weighting: 3.7%

Atkins Basic Materials Weighting: 5.3%

Purchase:XXX8/31/11:XXXYTD: XXX

Purchase:8/31/11:XXXYTD: XXX

Sub Industries

Chemicals The Chemicals Industry in the Materials Sector includes producers of commodity,

diversified, fertilizers, agricultural, and specialty chemicals. It also includes manufacturers of industrial gases

Construction Materials () The Construction Materials Industry in the Materials Sector includes manufacturers of

construction materials including sand, clay, gypsum, lime, aggregates, cement, concrete, and bricks. Other finished or semi-finished building materials are classified in the Building Products industry

Containers & Packaging The Containers and Packaging Industry in the Materials Sector includes manufacturers of

metal, glass, or plastic containers (including corks and caps), and manufacturers of paper and cardboard containers and packaging

Metals & Mining The Metals and Mining Industry in the Materials Sector includes producers of aluminum and

related products; companies engaged in diversified metals and mining production or extraction of gold, precious metals, minerals and related products; and producers of iron, steel and related products

Paper & Forest Products The Paper and Forest Products Industry in the Materials Sector includes manufacturers of

timber, related wood products, and all grades of paper. It includes manufacturers of lumber for the building industry, and excludes companies specializing in paper packaging.

Sector Leaders

Du Pont 10.71% Monsanto 10.18% FreePort-McMoran 8.82% Praxiar 7.96% Newmont Mining 7.88% Dow Chemicals 4.82% Air Prods & Chem 4.49% Mosaic Co 4.24% PPG Ind Inc 3.50% EcoLab 3.32%

Macro Overview

GDP Retail +7.9% New home sales + 5.7% Auto Sales

ISM manufacturing : 51.6 %

Baltic Dry Index

Durable Goods: +1.7%

Free Trade Agreement South Korea, Columbia, & Panama

China Q3 GDP 9.1% Europe’s Debt Agreement Yen Intervention

Obama Job Proposal QE3 Trade Deficit Shrinking Baltic Dry Index: +30% ISM manufacturing :

50.6 % Non Manufacturing:

53.3% Steep YC Corporate Balance

Sheets Brazil and China

JOHN DEERE

DE Overview

Headquarters (Founded) Moline, IL. (1837)

Market Cap $34.8 billion Industry Farm and construction

machinery

71%

22%

8%

Revenue by Ge-ography

US & CanadaOutsideOther

76%

9%

16%

Operation Profit by Segment

Agriculture & TurfConstruction & ForestryFinancial Services

Agriculture 2012 Outlook

OCT

NOV

DECJANFEBMARAPRMAY

JUNJULAUGSEP

4000000000

6000000000

8000000000

10000000000

12000000000

Monthly U.S. agricultural imports

2008

2009

2010

2011

2012

Fiscal years

$ billion

OCT

NOV

DEC

JANFEBMAR

APR

MAY

JUNJULAUG

SEP

400000000060000000008000000000100000000001200000000014000000000

Monthly U.S. agricultural exports

2008

2009

2010

2011

2012

Fiscal years

$ billion

• Excess Supply, crop price 2012 are projected to decrease

• Farm Profits and exports are forecast at all times high and continue to grow

• Global food cost 2011 down 11% while US farm income up 28%

• Forecast: Farm corn field up 2.6%, wheat 5.2%, and soybean 0.4%

Holding Rationale

Need for Agricultural output Increase Globally Long-term macroeconomic tailwind in BRIC-

countries Low used-inventory, machinery has high

resell value Geographically diversified Operations and manufacturing efficiency Corn-based ethanol as an alternative form of

fuel in the U.S. Repurchase activity

Recent News

2/7/2012 USDA To Release New Long-Term Agricultural Projections

2/7/2012 Farmers Plan Biggest U.S. Crop Boost Since 1984, Led by Corn: Commodities

2/2/2012 Blackrock Favors Seed, Machinery Makers Over Food as Investment

2/2/2012 John Deere Sponsors National Ag Day to Celebrate American Agriculture

1/26/2012 John Deer Marks the Company’s 175th Anniversary 11/15/2011 U.S. Farm Exports Reach Record $137.4 Billion

on China Buys 11/10/2011 Deere & Company Announces Additional

Investments in Russia

Performance

Q4 results and initial 2012 over-expectations

Financial Performance

Trailing-12-Month Revenue $32.0 billion Return on Equity 42.81% Cash/Debt $3.7 billion / $26.7 billion Dividend Yield 1.9% Next Earnings Date: Feb 15, 2012 Estimated growth FY 2012: +17.30 Est. Q4 2011: 1.44 2011 EPS: 6.44

Actual: 1.62 2012e EPS: 7.84 Surprise: 12.4% 2013e EPS: 8.38

Favorable currency-translation impact of about 3 percent

Cont’

GROWTH RATES % COMPANY INDUSTRY S&P 500

Sales (Qtr vs yr ago qtr) 19.6 24.3 11.7Net Income (Qtr vs yr ago qtr) 46.5 42.1 14.4Sales (5-Year Annual Avg.) 7.65 6.34 7.75Net Income (5-Year Annual Avg.) 14.01 8.99 7.64Dividends (5-Year Annual Avg.) 14.27 7.3 5.09

Yahoo Target Price $93Morningstar Target $113.40

CompetitorsStock

Market Cap

Q Rv Growth

Gross Margin EPS P/E

5 yr PEG P/S

Beta ROE

DE 35.72B 0.196 0.2916 6.6313.3

3 0.84 1.1 1.630.42

8

AGCO 5.14B 0.267 0.1972 3.92 13.5 0.84 0.59 20.44

8

CAT 73.73B 0.346 0.2616 7.4 15.4 0.44 1.19 20.40

3

CNH 10.44B 0.243 0.2376 3.9111.1

3 0.8 0.52 2.890.12

1Industry 1.79B 0.195 0.2916 4.32 10.6 0.84 0.72

0.204

Potential Risks

Highly leveraged Weaken economic sentiments EU credits issues China residential construction risks USDA pointed to higher-than-expected

inventory levels for most crops

Alcoa

SPDR Gold Trust

GLD: $167.33NAV: $167.07Mkt Cap: 71.46 B

Beta: .11Inst own: 42%1 GLD= 1/10 an ounce

Who Holds gold

1. U.S. - $418 billion 2. Germany $174.7

billion 3. IMF $144.76 billion

4. Italy $ 126.12 billion

5. France $125.28 billion

6. SPDR Gold ETF $64.53 billion

20%

50%

18%

12%

World Gold Holdings

CBs

Jewlery

Investments

Industrial

Gold as an investment

1. Inflation 2. Economic uncertainty 3. Political uncertainty 4. Portfolio diversification

Supply vs Demand of Gold Global growth of MS vs Gold

Break down to diff countries and why MS growing Politics in US, EU, and Iran As a Portfolio diversification

Graphs of relationships

Supply and Demand

Gold Supply

Supply

Gold Demand

Global Demand up 6%

Central Banks purchase 430 tones

China and India Demand up 7.5%

Global MS vs Gold

Who’s creating money?

US

Inflation

Economic

Political

Portfolio

Europe

Inflation

Economic

Political

Portfolio

China

Inflation

Economic

Political

Portfolio

Brazil

Inflation

Economic

Political

Portfolio

Economy, Stocks, general fear

Inflation

Economic

Political

Portfolio

US gov, Eu gov, Iran

Inflation

Economic

Political

Portfolio

Portfolio Diversification

Inflation

Economic

Political

Portfolio

Gold Performance charts

Risks

Highlights

Physical Demand > supply Global MS outpacing gold prices More Global QEs likely General uncertainty on agreements Political issues still present Provides portfolio hedge

Pitch home base, side column

Supply and demand Inflation: do it by countries (US, europe

china, jap, brazil) low int rate slides, with debt &= printing money

QE and weak currencies, safe haven in ? Times Political worries: US gov, Europe agr, and Iran Europe: germany interbank is overlooked Bank trickle effect from default, CDS

defaults, hedge funds win

Scenarios

Recommendations

Option 1: sdg

Option 2: asa

Option 3:

Q & A