1st March 2012

Premier was conceptualized to invest into ideas early into their lifecycle. A typical business cycle adopts a 3-5 year window through which it transitions through. Thus the ideal holding period in each idea is spread out over 3-5 years. The focus is not essentially market timing and more buying into emerging and good companies when valuations are right.

Our portfolio construction has revolved around picking a right market opportunity and buying business around that opportunity. In other words it is about polarizing capital into strong business trends. This has enabled us to manage the same thought process across a larger pool of capital. Notable absentees in Premier are Pharmaceuticals, IT and the commodity basket.

The Last Year

2011 we diversified the portfolio, which was skewed in favour of a large consumer trend, and de-risked the specific opportunity. This worked reasonable well into the end of 2011. On the other hand we did not deviate from our style of allocating capital -

- Consolidating Businesses

- Thought Leaders

- Market Leaders And

- Companies which were financially solvent

The portfolio did hit a few mine fields with companies that emerged with corporate governance issues which were rectified. We also dropped a large part of the portfolio in the Farm-To-Fork opportunity as soft commodity prices eased and the value chain saw erosion in demand down the line.

Our current Construct of the Portfolio is

The current structure largely weights around a very balanced domestic opportunity of the investment economy and the consumer economy. This realignment took place with the monies raised in the first quarter when we opened the fund for fresh subscriptions. As it stands today the portfolio needs to allocate money to the fastest growing part of the economy, so we have to choose.

The Consumer

Highlights of the consumer -

- Deleveraged

- Young Demographics (Average age at the end of the decade 27 years)

- Rising Incomes, Household Incomes rising significantly faster than Individual Incomes

- Aspirational and Upwardly Mobile

Our view of the consumer eco-system:

We intend to capture the entire chain of events. Our bias on growth remains and most business that cater to the above are financially sound, they are consolidated businesses - large barriers to entry and have seen moderate levels of competition with demand still growing faster than supply. The downside to all of this is that these companies remain at relative high premium levels.

This will be the mainstay of our current strategy. If we get it right in putting together a stock portfolio of these companies we would have two moving parts expansion of multiples and the growing earnings which would contribute to growth in price which would tend to be higher than just the growth in earning.

The Investment Economy

For long this part of the economy will remain stressed. The difference today is that it is more identifiable. In the last quarter results the banking system reported NPA's + Restructured Assets at 9.5%. At its peak in the last cycle at the beginning of the last decade this number was in its mid teens. At this stage now we do not run the risk of seeing the cycle move from 2/3% to their mid teen levels. We are closer now and it is easier to asses risk at this level.

On the asset side the situation is also homogenous. Debt dominates the Infrastructure space. Our contention is that a business cannot expand without cash flows. In the near term most entrepreneurs will deleverage either through profits from operations or sale of assets. We can see very early signs of the same beginning to unravel which by itself an opportunity.

Reason's enough for opening Premier

Currently the portfolio is extremely broad based, given the market conditions have not been conducive to run a concentrated portfolio last year. We believe 2012 would be a better time to build a portfolio. What is also important to note is that the market has been at a similar level as in 2007 and has been consolidating itself. The worst of the domestic economic and International news flow will give us numerous opportunities to polarize the portfolio into a couple of scalable ideas. The current has around 40+ companies and some residual cash. The environment remains conducive to participate with the breadth of corporate India's expansionary phase. We would in this round like to broad base our portfolio to capture the breadth of corporate India's growth phase. The bias would be on the consumer eco-system.

Disclaimer:

The Disclosures of opinions/in house views incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alterations to this statement as may be required from time to time. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information, which is already available in publicly accessible media or developed through analysis of IDFC Mutual Fund. Neither the IDFC Mutual Fund / Board of Trustee/ IDFC Asset Management Co. Pvt. Ltd nor IDFC, its Directors or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.

Risk Factors: Mutual Funds and securities investments are subject to market risks, reinvestment risk, changes in political, economic environment and government policy and there is no assurance or guarantee that the objectives of the Scheme/s will be achieved. The NAV of the Scheme/s can go up or down depending on factors and forces affecting the Securities Market including fluctuation in interest rates, trading volumes and reinvestment risk. Past performance of the Sponsor/AMC/Mutual Fund is not necessarily indicative of the future performance of the Scheme/s and may not necessarily provide a basis for comparison with other investments. IDFC Premier Equity Fund (IDFC - PEF) is name of the Scheme and do not in any manner indicate either the quality of the Schemes, their future prospects or returns. The Sponsor or any of its associates is not responsible or liable for any loss resulting from the operation of the Schemes beyond the corpus of the Trust of Rs. 30,000/-. Load Structure: IDFC - PEF: Entry Loads - Nil. Exit Load: All investment including SIP/STP/Micro SIP/STP/FOF if redeemed / switched out within 365 days from the date of allotment-1%. No Entry Load/ Exit Loads/CDSC shall be chargeable in case of switches made between different options of the scheme. Investment Objectives: IDFC - PEF: The Scheme shall seek to generate long-term capital growth from an actively managed portfolio of predominantly equity and equity related instruments. However there is no assurance that the investment objective of the scheme will be realized..Statutory Details: IDFC Mutual Fund has been set up as a trust by Infrastructure Development Finance Company Limited (IDFC) (liability restricted to corpus of Trust of Rs. 30,000) with IDFC AMC Trustee Company Ltd as the trustee and IDFC Asset Management Company Ltd as the investment manager. Investors in the scheme(s) are not being offered any guaranteed or assured rate of return. Copy of Scheme Information Document and Key Information Memorandum along with application form for all the schemes may be obtained from the office of IDFC Mutual Fund, One India Bulls Centre, 841, Jupiter Mills Compound, Senapati Bapat Marg,, Elphinstone Road, (West), Mumbai 400 013. Contact 1-800-226622 for details.

For details please read the respective Scheme Information Document (SID) (including those of FMPs)/ Offer Document (OD) / Statement of Additional Information (SAI) carefully before investing.