1. Mar13 HBJ CAPITAL VENTURES LLP Annual Newsletter: HBJ Capital Ventures LLP To The Partners & Co-founders, HBJ Capital Ventures LLP, #912, 1F Main, Girinagar, BSK 3rd Stage, Bangalore 85, Karnataka, India Dear Partners, The Bloodbath in Stock Markets continues with the Broader Markets taking a Strong beating in the month of March. Tax Planning coupled with Political Uncertainty and bad Macro data, made the Markets jittery over the past few Weeks. The Polarization continues to increase in Indian Stock Markets. Stocks which have already corrected to significantly lower levels like Small Caps, Mid Caps, Interest Rate sensitive's, Metals, Infra, Real Estate, ADAG pack etc continues to lead the fall. Their equity values has been completely butchered with more than 80% Value Erosion from their Highs of 2008. Indian Stock Markets continues to be shallow and any signs of Selling pulls a particular stock heavily. While previously it was limited to Highly leveraged stocks, Pledged Stocks or Low Corporate Governance stocks - this has spread to even stocks like NHPC and other Public sectors stocks like Engineers India. We believe that there is extreme Pessimism in the Markets and there is really no additional buying other than the ETF Flows into select Large-Cap stocks. While the SENSEX number is deceiving, the underlying market is heavily bruised and Individual Investors portfolio are in deep Red. After the pull-off of Retail Investors from Equity Mutual Funds, even Insurance companies have started facing redemptions and this has led to virtually no new money coming into the Markets over the last several years. While Equities have been dull, Investors in other asset classes like Gold and Real Estate have made money which has made Equity inflows even tougher. While Gold seems to be cooling off Globally, Real Estate prices too would not give strong returns for the next 5 Years considering the higher base and the overheating happening there. Classic signs of Land Prices in Small Villages and Towns getting sold for Astronomical sums strengthens the arguments. Anyways, in any Markets People who make money are the ones who swim against the tide and Sell, when everyone tries to Buy and Buy, when everyone tries to sell. With this, it's quite clear that Equities are the place to be over the next 5 Years for Investors.#912, 1F Main, Girinagar 2nd Phase, BSK 3rd Stage, BLR - 85Page 1

2. Mar13 HBJ CAPITAL VENTURES While everyone agrees that these all the beaten-down stocks (Interest Rate LLP sensitive's, Metals, PSU's, Infra, Real Estate, ADAG pack, PSU Banks) are currently available at levels which are extremely mouth-watering, no one has the courage to get into these Stocks. (It includes us too). But at the same time, as Patient Value Investors - we find Value in several Stocks which offer the same upside at lower downside Risk. As we have been continuing to write, we are not interested in Hiding in the stocks which are quoting at very high Valuations even if that give us better short term MTM returns. We continue to believe that these short term MTM returns can't be predicted at all. While we have been continuing to expect the Market sentiments to improve and Retail Investors to come into the Market, that is still not happening. We continue to believe that this is an Investors market and people buying good shares at cheap prices currently will profit going forward. While the Markets have substantially improved from the levels of late 2011 and Sept-2012, the broader Markets will take some time to catch-up. We believe that the Markets are in a Structural Up-turn which it started from January-2012 and these Corrections are always part and parcel of a Market Rally. Our Portfolio has been affected heavily over the past few months with many of our Stocks correcting significantly. We believe that these corrections would be temporary and these Businesses will be valued much higher going forward. The stocks in our Portfolio are Good Quality Businesses and there is very little Risk in holding on to them, except for a stock like XX Movers where the Risk has increased considerably but the Potential returns is also High. Indian Equities are extremely oversold and they offer the best value. We are buying companies which are inevitable to this growth story. Stocks which are leaders in their segments and are being affected by just a few temporary issues. While the returns over the last 2 years has not been great, even though we have been repetitive with better outlook for the past several months - we continue to believe that our Relative Performance with respect to SENSEX will continue to improve going forward. The Important Uncertainty which is hanging on the head of Stock Markets is the Political situation in India. The environment continues to get volatile with Political news breaking Headlines regularly and we can only expect it to intensify going forward. While these are near Term-Uncertainties, we believe India as a democracy is matured enough and any Government which comes in will take it in the Right direction while the Speed varies among different Political parties. Investors looking for clarity post Election Results would definitely be disappointed. Equity Investments is all about Uncertainty and as Market mantra goes, "Investors either get#912, 1F Main, Girinagar 2nd Phase, BSK 3rd Stage, BLR - 85Page 2 3. Mar13 HBJ CAPITAL VENTURES Good Prices or Good News. Never do both Co-Exist". Investors looking for clarity LLP will never get that in Stock Markets. Equity Markets always like to wait for some or the other Event. For example over the past year, it first waited for the Budget, then UP Elections, Presidential Elections, Appointment of new FM etc. So these events and uncertainties will continue to be there and Investors should take advantage of the same. Everyone must also remember the 2009 experience where people who were waiting for clarity on the Government front, got a surprise 20% upper circuit on SENSEX and even higher levels in various Stocks. People who brought through the uncertainties of 2008 & 09, laughed all the way to Bank over the next 2 years. " The future is never clear, and you pay a very high price in the stock market for a cheery consensus. Uncertainty is the friend of the buyer of long-term values" - Warren.E.Buffet. With so much Pessimism about the Asset Class and the Investors, we believe - we should move the Tide to Profit from Markets. The Global Markets continues to be very buoyant and the US stock markets continues to hit new Highs and that's amazing for a economy which was said to be in a bad shape. We believe that Indian economy has bottomed out and with the Interest rates moving down slowly, we believe that the Economy would start gaining steam going forward. We also believe that Delta's on most parameters on Indian Economy looks extremely positive. The Real risk stems from the derailing of the Current Reform process or Fiscal deficit targets. With the Government keeping the Fiscal Deficit under control and better environments for Exports, there would be better Macro variables going forward. Anyways, these only matter to an extent as we are Bottom-Up Investors with strong focus on that particular Business rather than the overall View. Our Portfolio continues to have decent enough cash and we are continuing to add good stocks and exit out of a few stocks. This will continue to happen and I am supremely confident that, once the Market sentiment turns - Our Portfolio would deliver Great returns to make for this Year's Underperformance, Considering the Higher Beta of most of our Stocks, they would deliver much higher returns than the Markets and thereby generating significant Alpha for our Long Term Investors.Looking forward to deliver strong Returns over the next Year. Regards,#912, 1F Main, Girinagar 2nd Phase, BSK 3rd Stage, BLR - 85Page 3 4. HBJ CAPITAL VENTURES LLPMar13[Principal Fund Manager, HBJ Capital Venture LLP] Date: March 31st 2013, Place: Bangalore, India#912, 1F Main, Girinagar 2nd Phase, BSK 3rd Stage, BLR - 85Page 4