CAPITAL LETTER

Volume 2 August 7,7, 20102010 IssueIssue 88 Greetings from FundsIndia! FundsIndia gets funded! My name is Srikanth; I’m a director at FundsIndia. Thanks for taking the time out to read this August 2010 issue of our monthly news letter. Recently, we made an announcement in our website. In case you missed it, here it is in full: We would like to share some good news.

FundsIndia has completed a Series-A round of investment from Inventus Capital Partners, a venture capi- tal firm in Bangalore. You can read more about this in the press release we have issued (available in the ‘Media’ link from our home page)

Inventus Capital Partners are wonderful people. The firm is led by Kanwal Rekhi, a legend in the field of entrepreneurship and venture capital - not just in India, but around the world. We had a great time work- ing with him, his colleagues John Dougherty, Samir Kumar, and Parag Dhol over the past couple of months as we finalized the deal. They like our business model and are very enthusiastic about FundsIn- dia's prospects in the retail world in India.

Almost two years ago, when Chandra and I started putting this company, business and platform together, we had a vision for both how the service should be, and how the business would work. We have been work- ing with our wonderful team of technical, customer service and operations folks to turn this vision into re- ality. We still have quite a distance to go before we have a finished product in our hands. However, it gives a tremendous boost of confidence and energy when a firm like Inventus reposes faith in us and choses to invest in our potential success.

Our goal is to be the number one online financial service provider in the country and thanks to the suc- cessful closing of this investment from Inventus, we are confident of achieving that goal.

What does this mean to our customers?

Firstly, it means that we are here to stay. We are here to make a difference, and we will be an enduring so- lution for investors around the country for a long, long time to come.

Secondly, it means that our customers can see our platform improve in many different ways - more ser- vices, wider offerings and improved user experience on and off the online platform.

Also, the investment gives us the opportunity to take our offering to more and more people around the country. We have had many of our customers asking us wondering why we are not advertising more. Well, that will begin to happen now.

In summary, we will be able to take our services to more people and serve them all better.

One thing that will not change, however, is our commitment to providing great customer service to all our customers regardless of their portfolio size.

Many, many of our customers have encouraged and participated in the growth of our platform and ser- vices over the past year and a half. Our sincere, heartfelt thanks to all of them for their support!

Happy Investing!

Disclaimer: Investments are subject to market risks. Please read all scheme related documents carefully before investing.

Top MF schemes in FundsIndia (for July 2010) Equity schemes Debt Schemes

HDFC Top 200 (G) Reliance MIP (G)

HDFC Prudence (G) HDFC MIP-LTP (G)

Reliance Regular Savings—Equity(G) UTI Mahila Unit (G)

Birla SunLife Mid Cap—A (G) Reliance MIP (MD)

Reliance Growth—Retail (G) IDFC SSIF—MT (G)

What’s new in FundsIndia Tata Mutual fund schemes now on FundsIndia! Mutual fund schemes of Tata AMC are now available for online transactions in FundsIndia. Portfolio values on your mobile! Now you can access the current value of your portfolio by simply placing a missed call to a number! FundsIndia has partnered with ZipDial.com to bring you this unique, innovative service. How to use it? • You will need to use your registered mobile number that you used at the time of regis- tering with FundsIndia. • From this number please call these numbers: • For Mutual fund portfolio value, 080 4251 2737 • For Equity portfolio value, 080 4251 2738 • The call will ring once and immediately, automatically disconnect. • Within seconds, you will receive an SMS with a consolidated, portfolio level values as requested. Please let us know if you like this feature, or if you have any trouble using it. Thanks!

Online payments for Fixed Deposits We are glad to inform that you can now make online payments while applying for some of the fixed deposit products available on our platform. Two companies have been enabled thus far for this feature: • Shriram Transport Finance Corporation • Dewan Housing Finance Limited • Mahindra and Mahindra (shortly) Once the online payment is completed, the deposit will become active from the date of reali- zation of funds via the online payment. Please note that the deposit application paperwork would still need to be completed post payment—within seven business days.

Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.

Adopt and Adapt—Value investing in India

Dhirendra Kumar

For equity investors around the world, trying to be like Warren Buffett is be- coming an increasingly common obsession. On the face of it, copying what an expert does doesn't seem like a smart way to become an expert. This has noth- ing much to do with investments or even business. Consider the batting skills of Sachin Tendulkar. Could anyone, just anyone, become a top-notch batsman by simply copying the strokes that Tendulkar plays? It sounds unlikely, to say the least. Anyone who tried to do so would very quickly come up against a set of limitations that Tendulkar doesn't have. Perhaps he would discover that one of the prerequisites are reflexes of a speed that the average person lacks, and that none of Tendul- kar's shots work very well when executed by someone with average reflexes. However, that does- n't mean watching Sachin Tendulkar play would be useless for an aspiring cricketer. What he would need to do is to try and distil general techniques and principles instead of trying to copy exact actions. This is perhaps the only way in which it makes sense to try and benefit from study- ing what Warren Buffett does. There's little point in trying to look for India's Coca Cola or India's Kraft or India's Borsheims because Buffett has invested in those companies in America. The char- acteristics that embody those in the US may be completely different from what similar companies in India would offer to investors. Instead one has to try and figure out what the under- lying principles are and then try and see which stocks, if any, they would throw up in India.

When I try and distil these principles down to their basics, they boil down to what one could call the three Ps of Buffettology. The three Ps are: Predictability, Price and People.

Predictability . Buffett's liking for some sectors and his famous refusal to get into some sectors like technology boils down to predictability. His investment choices are entirely based on prod- ucts whose basic demand will remain predictable for decades to come. Not just that, the factors that will determine success or failure will also remain the same as they are today. At the core of Buffett's portfolio, there are companies that dominate businesses like soft drinks, shaving blades, candy, cheese, furniture, jewellery and (recently) railway freight services. I don't see any upheav- als there.

Price. This is the heart of value investing. Investments must be made at a low or at least fair price. This rules out any hot growth stocks, at least at any point of their history when they are widely recognised as growth stocks.

People. If you read what Buffett writes or says about his investments, he always lays great em- phasis on the quality of management in his investments. Even in his private investments that he has taken complete control of, he ensures that the original management is not disturbed.

How would you apply these principles to your investments in Indian stocks? Do note that we are not claiming that a complete replication is possible. Maybe it isn't, just like Tendulkar's. But adopting the broad principles may greatly improve your investment returns.

— Syndicated from Value Research Online —

Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.

Investment resolutions for an investor P.V.Subhramanyam—www.subramoney.com Normally resolutions are made at the beginning of the year or on a birthday. However here are some resolutions that an investor can take/do any time:

1. I promise to reduce mutual fund costs: If you are in a diversified mutual fund which charges 2.5% (max) shift to some scheme which charges less (say 1.89% like Top 200) – it is worthwhile saving costs. You are actually shifting to a fund with a higher corpus which more people seem to be trusting. It is worth the shift!

2. Sell shares on which you are losing money: Do sell losers and hold on to winners. That is what successful investors do!

3. Sell shares of companies which treat shareholders badly: need I say anything more?

4. Know the REAL cost of holding your shares. If you bought Deccan Gold in 2006 for Rs. 30, your cost now is not 30. In normal market returns it should have almost doubled. So if you see today’s price of Rs. 24, your loss is Rs. 60 MINUS 24 = Rs. 36. Each person / share has to work this out depending on his cost of capital or expected returns.

5. Check the amount of life and general insurance that you need vs. the insurance cover you have.

6. Check your asset allocation 2-3 times a year and act once in a year and rebalance it.

7. If you suspect a bubble, STAY AWAY. If you think ‘Silverbullet’ is a lousy share – but see the price going up from Rs. 30 to Rs. 300, it looks a good share to short! Though this strategy is sen- sible the share may go to Rs. 1200 and then come down with a thus wipe you out! If you see the price movement of gold from the year 2002 to 2010, it looks great. If you look at the prices from 1975 to 2000, the current 3-4 years looks like a bubble.

8. Talk about money, investment, risk and insurance with all stakeholders in your life. These in- clude grandchildren, children, parents, employees et al

9. Clean your portfolio and create a ‘hand-over document’ which should contain everything that your dependents should know about – just in case you are not there.

10. Ignore ads by the financial services industry. A friend who works for compliance in a big, big Investment banking firms says ‘You are investing at your own risk levels, overconfidence lev- els…..’ and it could be injurious to health. Many of our clients would have benefited with this ad- vice.

11. Be ready for creating an ‘End of the world portfolio’. All governments, many companies and all Americans are living beyond their means. This could lead to runaway inflation – start preparing!!

Source: http://www.subramoney.com/2010/08/investment-resolutions-of-an-investor/

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Disclaimer: Mutual Fund Investments are subject to market risks. Please read all scheme related documents carefully before investing.