Birla Sun Life Pure Value Fund

(A 3-year Closed-end Equity Scheme with an Automatic Conversion into an Open-Ended Scheme upon Maturity)

Value investing
A timeless principal Focused on the fundamentals

Low volatility & stable returns

The value investors believes that markets are inefficient and looks to turn this to their advantage A disciplined value focus allows you to invest wisely, avoiding the excesses and profiting from collapses

Investing in Ignored Ideas & Opportunities

Value vs. Glamour

Value
Value Investing Focuses on past performance of the company & the current fundamentals Value investors look for bargains, or stocks that are trading at a discount to their usual valuation

Growth*
Growth Investing Investing in stocks with high future growth potential Growth investors believe in buying stocks with above-average earnings growth, no matter what the price

In the business world, the rearview mirror is always clearer than the windshield - Warren Buffet
* Growth style of investing has been perceived as glamour investing

Few quotes
We simply attempt to be fearful when others are greedy and to be greedy when others are fearful. Price is what you pay, value is what you get. By Warren Buffet

I am more concerned about the return of my money than the return on my money. By Will Rogers

Value Investing is solely concerned with getting the most profit at the lowest cost. Anonymous

Why value gets created & How value gets rewarded

Creation of value
Markets can be short-sighted
May ignore long term value creation

Otherwise, How do you explain sharp movements in prices based on quarterly results

External issues negatively influencing may be considered permanent

Fertilizer policy if unchanged for 5 years, makes us believe it will not change ever RBI does not cut rate, markets react as if it will never cut rate

Internal negatives may get overly highlighted

A shutdown for 5 days will have a reaction which is meaningless considered the long life cycle of an organization

Company could be in a matured stage, leading to nominal growth Some stocks are just ignored without any reason whatsoever

You dont need to wait for eternity

Value picks may get rewarded much sooner than you expect You dont have to wait for substantial surprises Stocks available at bargain prices, just need a positive Nudge
Changes in the external environment Disappearance of internal issues

Business plans of the companies to chart a higher growth path

Diversification in business activities

There are innumerable instance in the past that should give confidence on

the investment style

When value got rewarded

Reliance Energy
3,000 2,500 2,000 1,500 1,000 500 0
S-07 A-07 A-07 S-07 N-07 N-07 D-07 D-07 D-07 J-07 J-07 J-07 O-07 O-07 J-08

For most part 2006 & 2007 stock under performed the market Stock was a strong Value pick as cash on book was to the

extent of 50 to 60% of market cap

Huge cash helped the company bid for infra & power projects leading to significant re-rating

Stock Price in Rs.

Source Bloomberg; BSLMF Internal Research; Stocks referred above are illustrative and are not recommended by Birla Sun Life Mutual Fund / Birla Sun Life Asset Management Company Ltd. The Fund may or may not have any present or future positions in these stocks.

Neyveli Lignite
300 250
Stock Price in Rs.

As most of the power stocks Neyveli Lignite also under performed the market for most part of 2006 - 2007 Stock was a strong Value pick as was trading close to its book value Once the sector got re-rated in later part of 2007, Neyveli was among the top performers

200 150 100 50 0

S-06

A-06

N-06

D-06

A-07

A-07

S-07

N-07

O-06

O-07

D-07

J-07

J-07

J-07

F-07

M-07

Source Bloomberg; BSLMF Internal Research; Stocks referred above are illustrative and are not recommended by Birla Sun Life Mutual Fund / Birla Sun Life Asset Management Company Ltd. The Fund may or may not have any present or future positions in these stocks.

M-07

J-08

SAIL
350 300 250 200 150 100 50 0
S-06 A-06 N-06 D-06 A-07 A-07 S-07 N-07 O-06 O-07 D-07 J-07 J-07 J-07 F-07 M-07 M-07 J-08

During steels down cycle of 2005 & 06, SAIL was a strong Value buy on account of captive iron ore mines & coal facilities Once up cycle for the sector started, stock was among the top performers

Stock Price in Rs.

Source Bloomberg; BSLMF Internal Research; Stocks referred above are illustrative and are not recommended by Birla Sun Life Mutual Fund / Birla Sun Life Asset Management Company Ltd. The Fund may or may not have any present or future positions in these stocks.

Chennai Petroleum
500 450 400
Stock Price in Rs.

Chennai Petro is fundamentally among the most attractive oil refining companies During large part of 2006-07, with PE of 4-5 stock was trading at significant discount to peers & market Due to rising crude oil prices Gross Refinery Margins saw a significant upturn leading to significant re-rating of the stock

350 300 250 200 150 100 50 0

S-06

A-06

N-06

D-06

A-07

A-07

S-07

N-07

O-06

O-07

D-07

J-07

J-07

J-07

F-07

M-07

Source Bloomberg; BSLMF Internal Research; Stocks referred above are illustrative and are not recommended by Birla Sun Life Mutual Fund / Birla Sun Life Asset Management Company Ltd. The Fund may or may not have any present or future positions in these stocks.

M-07

J-08

Investment process for identifying value

Would be a blend of Stocks available at discount to intrinsic value

Attractive Price to Book Value Ratio

Lower PE Multiple but with a reasonable growth track record Lower market cap than the Replacement Cost

Companies having high level of Cash & Liquid Investments compared to market cap
Companies that reward investors with high & regular dividends

Sectors & Companies With Substantial VALUE currently

Fertilizer Sector
Current Scenario
ZERO domestic capacity addition since last one decade

Demand supply imbalance leading to increasing imports

Spiraling prices leading to higher subsidy burden High replacement cost
1 Million ton of Greenfield fertilizer capacity costs more than USD 1 billion

Stable cash flow aiding diversification into other sectors leading to earnings stability
Chemicals for vertical & horizontal integration Other growing sectors like shipping, real estate etc.
Source Bloomberg; BSLMF Internal Research

Valuations of Fertilizer Companies

Significant Discount to Replacement Cost
Company Tata Chemical Coromandel RCF GNFC Chambal Market Cap 6,988 1,492 5,850 2,936 1,953 Replacement Cost 10,190 6,000 10,000 5,650 7,680 Discount -31% -75% -42% -48% -75%

Source Bloomberg; BSLMF Internal Research; The stocks indicated above are illustrative & may or may not form part of portfolio.

Stocks Available at Attractive Price Multiples

Company GNFC GSFC

PE 9.20 7.30

P/B 1.86 1.39

Source Bloomberg; BSLMF Internal Research; The stocks indicated above are illustrative & may or may not form part of portfolio.

Why sector may unlock value

Positive Changes in the Fertilizer Policy have improved profitability of the companies in the sector over last 9 months.

Improved Gas Availability scenario may reduce the dependence on high cost imported feedstock.
Policy for Fertilizers under cabinet consideration to decide :
Policy for Greenfield/Brownfield Expansion
Pricing Policy refinements Further Issuance of Fertilizer Bonds

Source Bloomberg; BSLMF Internal Research

Oil & Gas (Oil Marketing Companies)

Current Scenario
Oil marketing companies are loosing money due price regulations by government. Refineries are enjoying healthy Gross Refining Margins (GRM) on the back of rising crude oil prices Global refining capacity is growing inline with global demand and is expected to do so for next five years Capacity addition in Asia Pacific to account for 37% of the global capacity addition
Indias capacity addition would be the highest and would account for nearly 29% of the capacity in Asia Pacific region
Source Bloomberg; BSLMF Internal Research

Valuations of oil marketing companies

Significant Discount to Replacement Cost

Company BPCL HPCL IOC

EV / CDU* 6,444 7,733 14,654

Replacement Cost 15,000 15,000 15,000

Discount -57% -48% -2%

* CDU represents Crude Distillate Unit I.e. refining capacities Source Bloomberg; BSLMF Internal Research; The stocks indicated above are illustrative & may or may not form part of portfolio.

Indian refineries are trading at a discount to their replacement cost on account of their losses in marketing activities.

Why sector may unlock value

Capacity addition in Asia Pacific to account for 37% of the global capacity addition
Indias capacity addition would be the highest and would account for nearly 29% of the capacity in Asia Pacific region

With mounting marketing losses, we expect the government to take corrective actions in order to reduce these losses Indian oil marketing companies have a good mix of refining & marketing assets and they are aggressively expanding refining capacities
On back of rising crude oil prices & rising GRMs this would act as the main trigger for value unlocking
Source Bloomberg; BSLMF Internal Research

Paper Sector
Current Scenario
Low per capita consumption of paper = Tremendous growth opportunity
Rising literacy levels will further push the demand up

India imports around 0.70 million tons of paper per year

Provides tremendous growth opportunity for domestic companies

High replacement cost

1 Million ton of Greenfield integrated paper capacity costs more than USD 900 million

Stable earnings growth & margin due to:

Capacity improvements
Process improvement leading to cost efficiencies
Source Bloomberg; BSLMF Internal Research

Valuations of Paper Companies

Significant Discount to Global Peers Despite Higher Margins & Returns Ratios
PAT Margins Indian Companies BILT TNPL Global Companies OJI Stora International Paper UPM-KYMM 11.60% 9.00% 2.00% 3.00% 2.00% 4.00% ROCE 12.00% 15.00% 4.00% 4.00% 3.00% 4.00% PE 9.30% 9.17% 35.20% 19.60% 15.75% 25.14%

Source Bloomberg; BSLMF Internal Research; The stocks indicated above are illustrative & may or may not form part of portfolio.

Significant Discount to Replacement Cost

Company BILT TNPL Market Cap 2,613 753 Replacement Cost 6,360 1,900 Discount -59% -60%

Source Bloomberg; BSLMF Internal Research; The stocks indicated above are illustrative & may or may not form part of portfolio.

Why sector may unlock value

Paper sector growth in a new trajectory given the projected GDP growth of above 10% for Indian Economy.
Paper being proxy to GDP growth rates.

Huge Capex finally paying off as evident in financial results. Industry looking for international acquisition and exposure.

Valuation Discount against global peers quite significant now.

New deals like BILT PE deal may change the valuations for the sector.

Source Bloomberg; BSLMF Internal Research

Shipping Sector
Current Scenario
Huge potential for trade growth
Asia accounts for 59% dry bulk imports with India being among the major consumer
Demand for oil, gas & coal for energy requirements will drive the shipping logistics in the Indian market

Industry is on a capacity addition spree Freight rates have corrected sharply & may start moving upwards in near future Asset prices of the ships have improved or remained firm despite the weak freight rates displaying buoyant long term outlook
Source Bloomberg; BSLMF Internal Research

Valuations of Shipping Companies

Significant Discount to NAV per Share
Company GESCO SCI Mercator Lines NAV 540 378 208 Price 414 250 120 Discount -23% -34% -42%

Why sector may unlock value now

Source Bloomberg; BSLMF Internal Research; The stocks indicated above are illustrative & may or may not form part of portfolio.

Indian Shipping Sector in process of being re-rated along the line of global peers. India and China have increased their dominance on the international trade as against developed countries. Recent downturn in shipping cycle beckons another upswing in the shipping cycle leading to increase in stock prices.
Source Bloomberg; BSLMF Internal Research

Cement Sector
Current Scenario
Significant slow down in growth of cement consumption
Currently the growth rate is below the 3 Month Moving Average
High base has caught up with cement demand growth

Profitability hit due to rising fuel costs despite high cement prices
International coal prices have increased from USD 40 per ton in Jan 06 to over USD 100 per ton in Jan 08, an increase of over 150% During the same period cement prices have moved from Rs. 165 per bag to Rs. 225 per bag, an increase of 36%

Source Bloomberg; BSLMF Internal Research

Valuations of Cement Companies

SN 1 2 3 4 5 6 7 8 9 10 11 12 Company ACC Birla Corporation Ltd Grasim Indus Gujarat Ambuja India Cements Madras Cements Mangalam Cement Prism Cements Shree Cement Ultratech Cements Ltd. Kesoram Industies Ltd J K Lakshmi Cement CMP 798 218 2,961 115 205 4,000 128 51 1,307 898 465 135 FY07 12.1 5.1 13.8 11.4 10.5 15.7 4.3 24.6 11.1 14.3 8.0 4.2 P/E FY08E 10.1 3.5 10.0 12.1 7.5 10.0 3.3 7.9 9.6 9.6 7.4 3.0 FY09E 9.9 4.0 8.4 11.3 7.7 7.8 3.2 6.1 8.1 9.2 6.9 3.6 FY07 182 70 185 257 173 232 51 136 233 165 118 92 EV/T FY08E 162 53 158 224 179 217 49 150 221 157 130 71 FY09E 144 39 96 166 145 143 33 142 149 142 109 55

Source Bloomberg; BSLMF Internal Research; The stocks indicated above are illustrative & may or may not form part of portfolio.

Anticipated supply has resulted in stocks being quoted below current Replacement Cost

Why sector may unlock value

USD 500 billion worth of infrastructure spending envisaged in XIth five year plan could spur cement demand growth beyond supply increase.

Captive power plants / tie up of coal sources can protect margins

Low valuations could trigger consolidation and M&A drive within the industry particularly when large MNCs looking to enter the 2nd largest (India) cement market in the world. Sustained profitability could result in significant free cash flow generation.

Source Bloomberg; BSLMF Internal Research

Sugar Sector
Current Scenario
Sugar exports were banned by the Government for nearly six months from July07, due to which supply in the domestic markets increased
As a result, sugar prices fell from the high of nearly Rs.18/kg to Rs.14/kg and below during the same period. Companies especially in U.P. suffered more on account of higher sugarcane prices.

Major sugar companies are trading almost at par with their replacement cost, Source Bloomberg; BSLMF Internal Research thus providing attractive valuation opportunities
Company Bajaj Hidustan Balrampur Chini Triveni Engineering Enterprise Value (EV) 6,116 3,262 3,885 Replacement Cost 5,233 2,922 3,413 EV / RC 1.17 1.12 1.14

Source Bloomberg; BSLMF Internal Research; The stocks indicated above are illustrative & may or may not form part of portfolio.

Why sector may unlock value

Sugar cycle expected to turn profitable, as the cane supplies for the sugar season of Oct-08 to Mar-09 is expected to decline.

With the exports ban being removed we expect higher exports in Financial Year 08-09, thus an improvement in domestic sugar prices.
Any reduction in sugar cane prices for Uttar Pradesh based companies would drive their profitability. Diversification into ethanol and power would help in improving the overall performance of the companies.

Source Bloomberg; BSLMF Internal Research

MNC Pharma Companies

More than 20% of market cap is represented by cash / liquid investments Consistent dividend payouts

Attractive valuations of around 10x FY08 Vs Market PE of around 20x FY08E earnings
Company Glaxo Aventis Pfizer Novartis Wyeth EPS Mar08 / Dec07 49.10 66.71 114.12 29.34 43.49 P/E Mar08 / Dec07 17.31 13.64 5.70 11.11 10.14 P/E Mar09 / Dec08 15.26 11.95 13.83 10.40 9.26 Dividend Yield (%) 3.76 3.52 2.31 3.07 6.80 Cash / Mkt Cap (%) 23.37 22.99 35.19 13.71 23.58

Source Bloomberg; BSLMF Internal Research; The stocks indicated above are illustrative & may or may not form part of portfolio.

Introduction of patented products to be key stock driver

Source Bloomberg; BSLMF Internal Research

Even simple stats tell the same story

A simulation was carried out on BSE 200 index. Fundamental criterias considered:
Price to Book Value (P/BV) and
Price to Earnings (P/E).

We evaluated stocks based on various parameters:

One with low P/E stocks, Second with Low P/BV Stocks & Stocks with low P/E & low P/BV.

Investment portfolio consists of top 30 stocks.

Costs have not been taken into consideration.

Source Cline; BSLMF Internal Research.

Rear View Glimpse

Portfolio Low P/E Low P/BV Low P/E & Low P/BV BSE 200 Index
Source Cline; BSLMF Internal Research.

Fundamental Traits Performance (%) P/E P/BV 2007 6.15 132 1.17 101 7.74 1.31 110 56

Value portfolio outperforms the Benchmark Index.

Model Portfolio
We have created a model portfolio of 30 stocks. Not more than 7% to be allocated to each stock.

Fundamental Traits:
An Return on capital employed (ROCE) of 16. Return on Equity (ROE) of 24. Price to Equity (P/E) of 10. Price to Book Value (P/BV) of 1.50. EV/EBIDTA of 9.70

Value for an investor.

Source Bloomberg; BSLMF Internal Research.

A dose of Value can ensure health

If your pre-dominantly high growth portfolio has an average PE of 18 - 20 Even a 20% allocation to value portfolio (assuming avg. PE of 10) can reduce the overall PE substantially Will help you compliment your existing portfolio Portfolio with strong fundamentals Can act as a shock absorber in your high growth portfolio Portfolio with low volatility

Value has to get unlocked in good quality companies

The only question is when? Leave that to us

Proof of our investment expertise

Fund Facts Scheme Name
Birla SunLife Equity Fund
(Inception Date - 27th Aug 1998)

Performance (%)
(As on 31st Jan 2008)

NAV
( 31st Jan 2008)

1 Year
Fund Benchmark Fund

3 Year
Benchmark Fund

5 Year
Benchmark

Since Inception
Fund Benchmark

Rs. 253.93 35.89

31.86

47.25

36.93

59.10

42.23

40.89

23.24

Benchmark BSE 200

Birla SunLife Frontline Equity Fund

(Inception Date - 30th Aug 2002)

Rs. 68.12 31.53

31.86

42.42

36.93

46.51

42.23

42.43

38.73

Benchmark BSE 200

Birla Mid Cap Fund

(Inception Date - 3rd Oct 2002)

Rs. 95.34 42.72

38.42

45.75

36.63

55.48

49.39

52.64

48.13

Benchmark CNX Midcap

Birla Sunlife Tax Relief 96

(Inception Date - 29th Mar 1996)

Rs. 136.15 43.92

31.86

43.56

36.93

49.67

42.23

40.87

17.05

Benchmark BSE 200

Performance has been calculated on NAV of growth plans. The returns for less than a year are in absolute terms & for more than a year its CAGR. Past performance is no guarantee of future performance. Sales load not considered for computation of returns.

Scheme features
Type of Scheme Investment Objective Asset Allocation*: Equity & Equity Related Instruments 85% to 100% Fixed Income Secuties (including money market instruments) New Fund Offer Price Date of opening of NFO Date of closing of NFO Plans / Options Available Subscriptions Load Structure (including SIP): Entry Load As per SEBI circular dated April 4, 2006 ref SEBI/IMD/Cir No. 1/64057/06, close end schemes are not permitted to charge entry load. Hence the scheme being close ended, no entry load is charged during the new fund offer period. Nil** (for all redemptions/switch outs made during the specified redemption period until the scheme remains closed-end).**Investors offering units for repurchase/ switch out during the specified redemption periods before maturity of the scheme/conversion of scheme into open ended scheme will be charged balance proportionate unamortized issue expenses on the applicable NAV. BSE 200 Ajay Argal 0% to 15% Rs. 10 per unit 17th January 2008 1st March 2008 Dividend & Growth; Dividend plan will offer Payout & Reinvestment facility Rs.5,000/- and in multiple of Re. 1 thereafter per application under each plan (during the NFO period) A 3-year Closed-end Equity Scheme with an Automatic Conversion into an Open-Ended Scheme upon Maturity Birla Sun Life Pure Value Fund seeks to generate consistent long-term capital appreciation by investing predominantly in equity and equity related securities by following value investing strategy.

Exit Load

Benchmark Index Fund Manager

* Refer to the offer document for further details

Statutory Details & Disclaimers

Statutory Details: Constitution: Birla Sun Life Mutual Fund has been set up as a Trust under the Indian Trust Act, 1882. Sponsors: Aditya Birla Nuvo Limited & Sun Life (India) AMC Investments Inc [liability restricted to seed corpus of Rs. 1 Lac]. Trustee: Birla Sun Life Trustee Company Pvt. Ltd. Investment Manager: Birla Sun Life Asset Management Company Ltd. Objective: To generate consistent long-term capital appreciation by investing predominantly in equity and equity related securities by following value investing strategy. Asset Allocation Pattern: Equity and Equity linked Instruments: 85%-100% and Fixed Income Securities (Including money market instruments): 0%-15%. Terms of issue: Rs. 10 per unit during the NFO period. Liquidity: The scheme will offer for redemption/switch-out of units at Monthly Intervals only during the specified redemption period i.e. first five business days of each month after the date of allotment at NAV based prices. The NAVs of the scheme will be announced on a weekly basis and on all business days during the specified redemption period. Entry Load: N.A.. Exit Load: Nil (all redemptions/switch-outs made during the specified redemption period until the scheme remains closed-end will be charged balance proportionate unamortized issue expenses on the applicable NAV.) Risk Factors: Mutual Funds & securities investments are subject to market risks & there can be no assurance or guarantee that the objectives of the Scheme will be achieved. As with any investment in securities, the NAV of the Units issued under the Scheme may go up or down depending on the various factors & forces affecting capital markets & money markets. Past performance of the Sponsor / Investment Manager / Mutual Fund does not indicate the future performance of the Scheme & may not necessarily provide a basis of comparison with other investments. Birla Sun Life Pure Value Fund is only the name of the Scheme & does not, in any manner, indicate either the quality of the Scheme or its future prospects or returns. Scheme Specific Risk Factors: The Scheme should have a minimum of 20 investors & no single investor should account for more than 25% of its corpus at the time of allotment as per SEBI guidelines. The Scheme is subject to market risks, investment style risk, risks due to changes in political and economic environment. For further Scheme Specific Risk Factors & other details please read the Offer Document carefully before investing. This document is meant for private circulation only and should not at any point of time be construed to be an invitation to the public for subscribing to the units of Birla Sun Life Mutual Fund. Birla Sun Life Mutual Fund does not solicit any action based on the information contained in the document and does not recommend any action based on the same. The information/graphs/charts contained in this document are based on certain assumptions and have been compiled from sources, which Birla Sun Life Asset Management Company Limited (BSLAMC) believes to be reliable, but cannot guarantee its accuracy or completeness. Opinions expressed and facts referred to in this document are subject to change without notice and BSLAMC is under no obligation to update the same. Please read the offer document carefully for scheme specific risk factors and other details before investing.

Other schemes details

Birla Sun Life Frontline Equity Fund
Investment Objective: An open-end growth scheme with the objective of long term growth of capital, through a portfolio with a target allocation of 100% equity by aiming at being as diversified across various industries and or sectors as its chosen benchmark index, BSE 200. Load Structure (Incl. for SIP): Entry Load* : < Rs. 5 crores - 2.25% >= Rs. 5 crores - Nil Exit Load : < Rs. 5 crores - 0.50% if redeemed / switched out within 6 months >= Rs. 5 crores Nil * Nil for direct investments

Birla Sun Life Equity Fund

Investment Objective: An open-end growth scheme with the objective of long term growth of capital, through a portfolio with a target allocation of 90% equity and 10% debt and money market securities. Load Structure (Incl. for SIP): Entry Load* : < Rs. 5 crores - 2.25% >= Rs. 5 crores - Nil Exit Load : < Rs. 5 crores - 0.50% if redeemed / switched out within 6 months >= Rs. 5 crores Nil * Nil for direct investments

Birla MidCap Fund

Investment Objective: An Open-ended growth scheme with the objective to achieve long-term growth of capital at controlled level of risk by primarily investing in midcap stocks. Load Structure (Incl. for SIP): Entry Load* : < Rs. 5 crores - 2.25% >= Rs. 5 crores - Nil Exit Load : < Rs. 5 crores - 0.50% if redeemed / switched out within 6 months >= Rs. 5 crores Nil * Nil for direct investments

Birla Sun Life Tax Relief '96

An Open-ended Equity Linked Savings Scheme (ELSS) with a lock-in of 3 years Investment Objective: An open-end equity linked savings scheme (ELSS) with the objective of long term growth of capital through a portfolio with a target allocation of 80% equity, 20% debt and money market securities Load Structure (Incl. for SIP): Entry Load* : < Rs. 5 crores - 2.25% >= Rs. 5 crores - Nil Exit Load : NIL * Nil for direct investments

Thank You