Fin 419 Real Client Managed Portfolio

1. Fin 419Real Client Managed Portfolio Deere & Company 4/19/2011 Antti Zhang Kevin Jinfu Chen Shih-Wei Huang Ying-Min Weng

2. Agenda • Company Overview • Industry Analysis • Competitors Analysis • DCF Valuation • Recommendation Independent evaluation of the state of the global commodity market. Assess the influence of USD movements on commodity prices and recommend how to incorporate this phenomenon into asset allocation process Have market dynamics changed such that commodities are no longer “diversifiers” or are the higher correlations recently experienced just the result of the market crisis during 2007-2008. Assess influence of emerging markets growth on commodity demand/prices Do certain commodities provide better diversification or inflation protection features than others? Are risk parity or equity based commodity strategies viable approaches to gain commodity exposure? Is the current energy overweight prudent given the higher energy/equity correlation, especially during periods of stress? Should the benchmark be changed to de-emphasize energy exposure?

3. Company Overview • Sector: Industrial Goods • Industry: Farm & Construction Machinery • Location: Moline, Illinois • Market Cap: 41.78B • P/E (ttm): 19.94 • Founded in 1837 • NYSE: DE Since 1982 • SVA Oriented Source: Deer & Company’s 2010 Annual Report

4. Historical Performance Independent evaluation of the state of the global commodity market. Assess the influence of USD movements on commodity prices and recommend how to incorporate this phenomenon into asset allocation process Have market dynamics changed such that commodities are no longer “diversifiers” or are the higher correlations recently experienced just the result of the market crisis during 2007-2008. Assess influence of emerging markets growth on commodity demand/prices Do certain commodities provide better diversification or inflation protection features than others? Are risk parity or equity based commodity strategies viable approaches to gain commodity exposure? Is the current energy overweight prudent given the higher energy/equity correlation, especially during periods of stress? Should the benchmark be changed to de-emphasize energy exposure? Source: Yahoo Finance

5. Business Overview • Agriculture & Turf • Tractors, Combines and other agriculture equipment • Construction & Forestry • Construction Machinery, timber harvesting • Credit Service • Buying Receivables from operation

6. c Business Overview

7. Revenue BreakdownBy Geographic In MM USD Source: Deer & Company’s 2010 Annual Report

8. Operation Profit BreakdownBy Segment In MM USD Source: Deer & Company’s 2010 Annual Report

10. Management Discussion & Analysis • Globalize • New plant and Joint Venture in Russia, India and China • Innovation • Maintain competitive advantage in technology • More efficient and low emission to meet both government and customer needs • Target: • 12 Operational Margin in 2014 • 50 Billion Sales in 2018 • 2.5 Asset Turnover 2018 • >50% Outside American

11. SWOT Strengths Market Leader Stable Demand Good Management Weakness Distribution Network Depends on Farmer’s Purchasing Power Opportunities Changing in Nutrition Needs Changing in Farming Technology Leveraged Financing for farmers Threats Compliance with regulation Government’s Interference Global Competition

12. Global Agriculture Machinery- Industry Outlook • Definition: industry firms manufacture agricultural machinery and equipment • High degree of saturation • A trend toward consolidation • Increasing technology will help efficiency, driving demand for agricultural equipment • Rising farm income and strong global demand for food

13. Key External Drivers • Aggregate farm income • Downstream demand from agriculture • Trade-weighted index • Damage caused by natural disasters

14. Historical Performance & Forecasts • Following decline in 2009, the global agricultural equipment market recovered in 2010. Relatively strong growth is expected for the forecast period through to 2015.

15. Porters Five Force Analysis • Threat of New Entrants (Low) • High fixed cost and initial investment • Threat of Substitutes (Low) • Used equipment are cheaper • Low efficiency • Supplier Power (Moderate) • Low differentiation in raw materials • Long-term contract with suppliers for hedging purpose • Buyer Power (Moderate) • Large number of buyers • Brand loyalty is decreasing • Degree of Rivalry (High) • Dominated by small number of large players

16. Competitors • Caterpillar Inc. (Ticker: CAT) • Three principal lines of business: Machinery, Engines and Financial products • FY 2010 Revenue : $42.6B • CNH Global N.V.(Ticker: CNH) • Three business segments: agricultural equipment, construction equipment and financial services • FY 2010 Revenue: $15.61B • Kubota Corporation (Ticker: KUB) • Manufactured farm equipment, engines and construction machinery • FY 2010 Revenue: $9.96B Source: OneSource http://globalbb.onesource.com/homepage.aspx

17. Historical Price Movements – 1 year Source: Google Finance http://www.google.com/finance

18. Historical Price Movements – 5 years Source: Google Finance http://www.google.com/finance

19. Multiple Comparable Source: OneSource http://globalbb.onesource.com/homepage.aspx

20. Comparable Valuation Source: OneSource http://globalbb.onesource.com/homepage.aspx

21. Dupont Analysis Source: OneSource http://globalbb.onesource.com/homepage.aspx

22. DCF Model

23. DCF Model (cont.) DCF Model (cont.)

24. Sensitivity Analysis

25. Recommendation • DCF Valuation Range: $67.3-$119.2 with base case share price at $88.5 • Comparable estimated value : $89.83 • Closing market price at 4/18: $91.53 • Place on watch list