1. Confidential Copyright © Aditya Birla Group 2010 - 2011 Union Budget Birla Sun Life Asset Management Company Ltd.

2. Confidential Copyright © Aditya Birla Group Government Finances Snapshot 2 All figures in Rs Crs2009-10 2010-11yoy change BEREBE BE FY11 over BE FY10 1. Revenue Receipts 614,497 577,294 682,21211.0% 2. Tax Revenue (net to Centre) 474,218 465,103 534,094 3. Non-tax Revenue 140,279 112,191 148,118 4. Capital Receipts (5+6+7) 406,341 444,253 426,5375.0% 5. Recoveries of Loans 4,225 4,254 5,129 6. Other Receipts 1,120 25,958 40,000 7. Borrowings and other Liabilities 400,996 414,041 381,408-4.9% 8. Total Receipts (1+4) 1,020,838 1,021,547 1,108,7498.6% 9. Non-plan Expenditure 695,689 706,371 736,1075.8% 10. On Revenue Account of which, 618,834 641,944 643,599 11. Interest Payments 225,511 219,500 248,664 12. On Capital Account 76,855 64,427 92,508 13. Plan Expenditure 325,149 315,176 373,09214.7% 14. On Revenue Account 278,398 264,411 315,125 15. On Capital Account 46,751 50,765 57,967 16. Total Expenditure (9+13) 1,020,838 1,021,547 1,109,1998.7% 17. Revenue Expenditure 897,232 906,355 958,724 18. Capital Expenditure - 115,192 150,475 19. Revenue Deficit (17-1) 123,606 329,061 276,512123.7% 4.59%5.34%3.99% 20. Fiscal Deficit 282,735 414,041 381,85835.1% {16-(1+5+6)}6.51%6.72%5.51% 21. Primary Deficit (20-11) 400,996 194,541 133,194-66.8% 2.85%3.16%1.92%

3. Copyright Aditya Birla Nuvo Limited 2008 Key Budget Highlights  Gross Tax Receipts are estimated at Rs 7,46,651 Crs  Non Tax Revenue Receipts are estimated at Rs 1,48,118 Crs  The Plan and Non Plan expenditures in BE 2010-11 are estimated at Rs 3,73,092 Crs and Rs 7,35,657 Crs respectively. While there is 15 per cent increase in Plan expenditure, the increase in Non Plan expenditure is only 6 per cent over the BE of previous year.  Fiscal deficit for FY11 is projected to be 5.5% of GDP, however this is mainly on account of only 6% increase projected in non-plan expenditure. CAGR of non-plan expenditure from FY04 to FY10 is 12.5%, thus there could be chances of slippage on this account.  The rolling targets for fiscal deficit are pegged at 4.8 per cent and 4.1 per cent for FY12e and FY13e, respectively.  Net borrowing for FY11e is projected at Rs 3,45,000 Crs which is lower than Rs 3,98,000 for FY10. However in the absence of support from RBI and MSS de- sequestering, net supply to the market would be higher by around Rs 82,000 Crs 3

4. Copyright Aditya Birla Nuvo Limited 2008 Direct Tax Highlights Personal Income Tax  Major tax savings of up to Rs 50,000 for individuals by introduction New Slabs for Personal Income Tax  Additional Deduction of Rs 20,000 for investments in Infrastructure bonds under section 80C. Corporate Tax  Reduction in surcharge paid by the domestic companies from 10% to 7.5%  Increase in MAT rate from 15% to 18% 4 New SlabOld SlabTax rateTax Savings over last year Up to Rs 1.6 Lakhs Nil Rs 1.6 Lakhs - Rs 5 LakhsRs 1.6 Lakhs –Rs 3 Lakhs10%Rs 20,000 Rs 5 Lakhs - Rs 8 LakhsRs 3 Lakhs- Rs 5 Lakhs20%Rs 30,000 Above Rs 8 LakhsAbove Rs 5 Lakhs30%

5. Copyright Aditya Birla Nuvo Limited 2008 FUND HOUSE OUTLOOK/STRATEGY 5

6. Copyright Aditya Birla Nuvo Limited 2008 Fixed Income: Portfolio Positioning & Strategy  Ultra Short term Funds: – 60% of the portfolio matures in 30 days, average maturity of liquid plus (65 days) and Cash Plus (30days) – Short Term Rates to move up further – Strategy: Buy 6m-9m Cd’s in the run up to march, current high levels reflect seasonal tightness. – Budget Impact for money market rates: Marginally positive since DDT on debt funds has remained same.

7. Copyright Aditya Birla Nuvo Limited 2008  Dynamic Bond: – Reduced duration to around 0.7 yeaRs – To buy 1 year CD’s in the run up to march, will add duration when 10- year Gsec touches 8.40%. – Budget Impact for 1-3 year bonds: Neutral  Gilt & Income Funds: – 1-2.5 year Duration in Income. Will go overweight on money market instruments in March. Will add duration risk in May. – Gilt fund running 1day-2 years maturity. Will add duration risk in May. – Expect credit markets to get worse, spreads should have bottomed out – Budget impact- Neutral, but we expect rates to harden in the 1QFY11. Fixed Income: Portfolio Positioning & Strategy

8. Copyright Aditya Birla Nuvo Limited 2008 Equity Outlook  Muted pre-budget expectations and absence of any major negatives and an emphasis on fiscal consolidation saw a post budget relief rally. Although a good balancing act, the Government could have taken some concrete steps for reforms in the budget.  The government has laid out a medium term plan for fiscal consolidation. This is positive for long-term portfolio flows into the country as they find comfort on the macro, in addition to the compelling India growth story.  The budget also confirmed government’s commitment to tax reforms by planning to implement the nationwide GST system from April 1, 2011.  As a result of personal income tax changes, more disposable income at he hands of the consumer (both urban and rural) the budget will stimulate consumption.  Overall sectoral impact of the budget is 8 PositivesNeutralNegatives Auto & Ancillaries, Agri Inputs, Financials, Construction & Infrastructure Metals, Oil & Gas, power, Software, Textiles, FMCG, Pharma Cement, Real Estate and Telecom

9. Copyright Aditya Birla Nuvo Limited 2008 Equity Outlook  In the near term market focus would again shift to factors like ; –Global markets which are still jittery on the back of the shaky recovery and increased risk aversion following the European crisis. –Domestic inflation : the budgetary actions by way of increase in excise and customs duty, fuel price hike and widening of service net will lead to inflation moving up sharply in the near- term. –New equity issuances : The PSU divestment target for FY11 is higher at Rs.40,000cr.  Despite some near term headwinds, we remain positive on market for medium to long-term and expect market outperformance in the second half of CY10 as inflation eases and earnings growth gathers momentum (22%+ earnings growth in FY11e)  Advice investors to accumulate in the current market volatility and any market weakness.  Long-term investment themes continue to be : Domestic Consumption and Infrastructure led growth. 9

10. Confidential Copyright © Aditya Birla Group SECTOR IMPACT

11. Confidential Copyright © Aditya Birla Group  Excise duty increased by 2% –In line with expectation –likely to be passed on given the strong demand.  Personal tax slab change –biggest positive as it increases the disposable income of consumers  Increase in Petrol and Diesel prices –marginally negative  Deduction for in-house R&D increased to 200% from 150% –beneficial for auto companies 11 Automobiles and Auto Ancillaries Budget Impact: Positive

12. Confidential Copyright © Aditya Birla Group  Subsidy of Rs 50,000 Crs to be paid in cash only – Positive for all fertilizer manufacturers as it improves cash flows.  Increase in deduction on R&D expenditure incurred by companies – Positive for Agriculture Input companies involved in Research.  Total Provision of Rs 900 Crs to provide impetus to Agriculture production and best practices in Agriculture – Positive for Agri-input companies  Exemption of Service tax on Testing and Certification – Marginally Positive for Crop Protection products and Seed Manufacturers, but the amount is not very large.  Introduction Of Nutrient Based Subsidy – Positive for Complex Fertilisers ManufactureRs  Increase in Urea Prices by 10% - Neutral Impact for Urea ManufactureRs 12 Agriculture Input Budget Impact: Positive

13. Confidential Copyright © Aditya Birla Group  Fiscal consolidation roadmap– Neutral for PSU Banks as pressure on bond yields may ease but only for short period till elevated inflation levels prompts RBI to tighten further.  RBI to consider giving additional banking licenses – Positive for new entrants, negative for smaller private sector and weaker PSU banks as competition likely to intensify.  Rs 16,500 Crs earmarked PSU bank’s Tier I ratio– Positive for smaller PSU Banks which have lower Tier I and lower government holding.  IIFCL refinance for infrastructure projects likely to take out Rs 25,000 Crs over next 3 years – Positive for Banks as they can manage their asset- liability better, would also free up capital for banks for higher growth.  Under the debt waiver and debt relief scheme extended by six months to June 30, 2010 – Positive for PSU Banks as it would likely aid recovery from farmers hit by drought.  Additional deduction of Rs 20,000 allowed for investment in long term infrastructure bonds as notified by the central government – Positive for infrastructure financing companies as it allows them to raise long term funds at cheaper rate. 13 Financials Budget Impact : Positive

14. Confidential Copyright © Aditya Birla Group  MAT rate increased from 15% to 18% –Negative for Infrastructure developers except for developers having SEZ status  Planned allocation for infrastructure increased to Rs 1,73,552 Crs.  Allocation for road transport increased by over 13 per cent from Rs 17,520 Crs to Rs 19,894 Crs. –The increase in allocations bodes well for order book growth for Construction and Infrastructure companies 14 Construction and Infrastructure Budget Impact: Positive

15. Confidential Copyright © Aditya Birla Group 15 Cement Budget Impact: Negative CementPresent RateProposed Rate Cleared in packaged form,- (i) of retail sale price not exceeding Rs 190/bag or Rs 3800/tRs. 230/tRs. 290/t (ii) of retail sale price exceeding Rs 190/bag or Rs 3800/t8% of retail sale price 10% of retail sale price Cleared other than in packaged formHigher of 8% or Rs 230/t Higher of 10% or Rs290/t Cement clinkerRs300/tRs 375/t  It would be difficult to pass on the increase completely to customers when the industry is likely to witness oversupply over next year.  Petrol and Diesel prices hikes of Rs2.7/l and Rs2.6/l respectively increases the transportation cost for the cement companies by 4-6% (depending on the rail/road mix). Freight costs account 18-20% of the cost structure.  Hike in Excise Duty

16. Confidential Copyright © Aditya Birla Group  Excise Duty hiked from 8% to 10% –Marginally negative in some product segments where customers do not produce excisable products (e.g. long steel products used in construction etc.) and hence would resist price increases. 16 Metals Budget Impact: Neutral

17. Confidential Copyright © Aditya Birla Group  Basic Customs Duty Increase Crude Oil from 0% to 5% Petroleum 2.5% to 7.5% Diesel 2.5% to 7.5% Other Products 5% to 10%, excluding LPG, Naphtha etc Positive for Upstream Oil Producers Negative for Oil Marketing Companies  Excise Duty Increase on Petrol and Diesel by Re 1 / ltr Negative for OMCs  Fuel Price Hike Neutralizes the above negative impact on OMCs 17 Oil & Gas Budget Impact: Neutral

18. Confidential Copyright © Aditya Birla Group  Increase in Plan Allocation from Rs 2,230 Crs to Rs 5,130 Crs - Positive  Plan to introduce competitive bidding for coal block allocation- Negative for Private Power Producers  Clean Energy Cess on Coal of Rs 100/t – Slightly negative for private players without cost plus based tariff.  Increase in MAT rate from 15% to 18% - Negative for Private Power producers  Excise Duty exemption on supply of goods to Mega Power Projects – Positive for the power producers developing such Projects  Plan outlay for the Ministry of New and Renewable Energy increased by 61 per cent from Rs 620 Crs in 2009-10 to Rs 1,000 Crs in 2010-11. – Positive for the Green Power companies. 18 Power Budget Impact: Neutral

19. Confidential Copyright © Aditya Birla Group  MAT rate increased from 15% to 18% –negative impact on cash flow and EPS if DTC gets implemented in FY12. However EPS neutral if DTC doesn’t get implemented due to creation of deferred tax liability when sunset clause on tax holiday expires in March 2011.  No extension of STPI benefit –Current tax holidays are available till March 2011, however can be dealt with in the next year budget.  Full exemption of SEZ profits with retrospective effect from FY07 19 Software Budget Impact: Neutral

20. Confidential Copyright © Aditya Birla Group  Government to continue interest subvention of 2 per cent for one more year for exports covering handicrafts, carpets, handlooms and small and medium enterprises.  One time grant of Rs 200cr to hosiery manufacturers in Tirupur, Tamil Nadu  Another key expectation from the textile sector was, higher allocation under TUF and an extension of TUFs to 2017, however there was no announcement on the same. 20 Textile Budget Impact: Neutral

21. Confidential Copyright © Aditya Birla Group  Higher disposable income on account of change in income tax slabs –Likely to promote consumption  Excise duty increased from 8% to 10%. –Negative for companies which do not have major production facility in excise free zone.  Effective excise duty increased in cigarette between 13 – 15%. Further union budget has approved the introduction of low price filter cigarettes –Net impact is negative for Cigarette producers.  MAT increased to 18% from 15% –negative for companies under MAT 21 Sector Name : FMCG Budget Impact: Neutral

22. Confidential Copyright © Aditya Birla Group  Allocation for Rajiv Awas Yojana (Slum rehabilitation) raised from Rs 150 Crs to Rs 1,270 Crs in FY11. –Positive for developers doing slum rehabilitation.  Interest subvention of 1% for housing loans upto Rs 10 lakhs for house value upto Rs 20 lakhs has been increased by a year.  Tax exemption under Section 80IB (10) for small housing units - of less than 1,000sqft in metros - for projects approved before Mar'08 was supposed to be only for projects completed by Mar'11 (4 years). This has been extended to 5 yrs and hence the projects can now be completed by March 2012. –This is positive for companies who had approvals exemption earlier of FY08. 22 Real Estate Budget Impact: Negative

23. Confidential Copyright © Aditya Birla Group  Has proposed weighted deduction on in house R&D expenditure from 150% to 200%. This should have resulted in effective taxes being lowered. However, most of the large companies are mostly on MAT. Benefit for non MAT companies would be marginal.  Excise duty on API to increase to 10% from 8% while that on formulations remains unchanged at 4%. Cost of raw material likely to go up for those companies buying API. Also since most of the companies have presence in excise free zone, they may not be able to claim CENVAT benefit from the increase in excise duty on API.  MAT rate has increased. Most of the large pharma companies are paying tax on MAT basis. Hence they are likely to be negatively impacted. 23 Pharmaceuticals Budget Impact: Neutral

24. Confidential Copyright © Aditya Birla Group  MAT rate increased from 15% to 18% –negative for select telecom services companies due to increased tax outgo  Diesel price hike –increase in operating expenditure for tower operations to impact operating margins by around 50 bps 24 Telecom Budget Impact: Negative

25. Copyright Aditya Birla Nuvo Limited 2008 25 16 June 2008 Disclaimer The information contained in this article is not a complete presentation of every material fact regarding any industry/security or the fund and is neither an offer for units nor an invitation to invest. This communication is meant for use by the recipient and not for circulation/reproduction without prior approval. Risk Factors: Mutual Fund investments are subject to market risks and the NAVs of the schemes may go up or down depending upon the factors and forces affecting the securities market. Past performance of the schemes managed by Birla Mutual Fund is not necessarily indicative of future performance of the schemes. Please refer to the offer document before investing.