1. FEB13 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, It's been a Bloodbath in Markets over the past 6 Weeks. Yesterday's Budget fall added salt to the Injury. The Biggest wounds has been in the Mid-Caps and SmallCaps which have been beaten out of Shape. There are several Stocks which have fallen over 40% over the past few weeks and the Indices is not reflecting the real pain in the Markets. Companies with very High debt and Pledged Share holding have been hit the most. While Markets have consistently foxing Investors on the upside, we believe that the Markets are setting themselves up with clear Capitulation where the Weak Hands will get completely wiped out and Smart Investors continuing to accumulate Shares. While it has been extremely difficult to time these, we believe that by building up a Portfolio of Quality Stocks - we would do well over a Period of time. Mid-Cap and Small-Cap stocks have continued to Under-perform the Markets for quite some time and the discount of Small/ Midcaps to Large Caps are at a 4 year High and this will reverse going forward. We believe that while some of our Portfolio Stocks may be Volatile, these are Good Business bought at very attractive Valuations. While our Stocks have corrected, we believe that relatively the damage is less considering the fact that we have stayed away from Stocks which are having High Pledged shareholding or companies where the Business model is weak. Even though they have corrected, considering their Quality they would bounce back sooner or later. We have also attached the Quarterly Results analysis of our Portfolio Stocks here,#912, 1F Main, Girinagar 2nd Phase, BSK 3rd Stage, BLR - 85Page 1

2. HBJ CAPITAL VENTURES LLPFEB13All our Portfolio Stocks have come out with their Q3-FY 13 Results. Before we go into the Results analysis of our Portfolio stocks, let me give a broad Idea on the Quarterly Results performance of the Overall market. Generally Earnings performance of companies has been much below expectations as the Economy continues to be subdued. One Striking feature of this Results season has been the Pressure which India Inc is facing in the current Economic slowdown. The divergence in the Performance of different companies also has been very wide. While the Large Cap companies have been able to maintain their Margins to an extent, the Mid-Cap and Small-Cap stocks have seen pressure on both their Topline as well as Margins. These are well reflected in the Share prices, with a Carnage in the prices of Small Cap and Mid-Cap over the past 6 weeks. We believe with the Economy going through a touch phase, this may continue over the next 2 Quarters. Our Portfolio has seen a Sharp correction, but we have a healthy Portfolio where most of our Stocks have reported decent Earnings. The real bad results were that of XX and YY. Most of the other Portfolio stocks have delivered Healthy numbers and in spite of being Mid-Caps and Small-Caps, they have been able to perform well on the back of Strong Business Model and Moats. While we believe that a few Stocks may face pressures in the immediate Quarters, the strength of their Business models will help them to sail through. We definitely dont have stocks where there is High Pledged Holding or Stocks which are facing huge Debt#912, 1F Main, Girinagar 2nd Phase, BSK 3rd Stage, BLR - 85Page 2 3. FEB13 HBJ CAPITAL VENTURES problems. These are the stocks which are more scary and our Portfolio is clearly LLP away from these Stocks. Even in Mid-Cap and Small-Cap stocks, most of our companies are Market leaders in their own sub-segment or have enough Pricing power and hence, even if the wider Mid-Cap indices dont perform well, our Portfolio would perform better. As we continue to say, a Portfolio which has great Quality Stocks will definitely do well over a period of time and performance shouldnt be compared on a Month on Month basis. Stocks like G**C, I**B etc has performed brilliantly in a Tough Environment where even the larger players are struggling. Most of the Portfolio stocks have structural Triggers which will improve Valuations. We would also like to point that, Equity Markets are forward looking and probably the worst for these Stocks might be over. With the Indian Economy bottoming out along with some steps taken by the Government to revive Economic growth, we believe there will be better Earnings going forward. None of our Stock picks have any fundamental problems as such where the Management is bad or underlying Business dynamics is weak. As Investors, it's very important to get through this phase to benefit going forward. While the Overall Economic sentiment has made sure that there are no Retail buyers, we see these are Classic signs of Markets getting ready for a major up move. With proper Government policies, this up move can indeed turn out to be a very Big Bull Market. In those cases, Our Portfolio continues to be well positioned with high Quality businesses with decent Pricing power. We would also like to believe that once Retail public comes in or selling pressure abates, there could be a sharp run in these Stocks. Our Portfolio has a decent enough Cash Component and we will use this Market conditions to add more to our high Conviction bets. Anyways, with this Portfolio we will continue to beat Markets in a healthy Margin along with Compounding your Wealth at an attractive rate of 20-30%. We will continue to Beat Markets by over 5% Yearly on a 3 Year Cycle. With a proper balanced Equity Portfolio in place, we continue to believe that our Portfolio will continue to Outperform markets consistently over a 3-Year cycle. Most of our Stocks have very strong Investment thesis backed with Research which ensures Lower risks and Higher returns (Large Alpha). We continue to have little churn in our Portfolio but will take advantage of the emerging opportunities. Regards,#912, 1F Main, Girinagar 2nd Phase, BSK 3rd Stage, BLR - 85Page 3 4. HBJ CAPITAL VENTURES LLPFEB13[Principal Fund Manager, HBJ Capital Venture LLP] Date: January 31st 2013, Place: Bangalore, India#912, 1F Main, Girinagar 2nd Phase, BSK 3rd Stage, BLR - 85Page 4