Dear Shareholder,
 
 The global economy has withstood the recession though its recovery has
 been rather sluggish. World growth decelerated to nearly 3.8% during
 the second half of 2010 from 5.3% during the first half. The IMF
 forecasts a 4.3% global growth in 2011. The US economy grew at 3% last
 year. Growth in the Euro zone was muted at around 2%. In sharp contrast
 emerging economies have grown briskly - in excess of 7%. China and
 India are the clear standouts, peaking at over 10% and 9% growth
 respectively.
 
 With the global economic growth slowing, growth levels in India are
 likely to be impacted. Nevertheless, as we know, the fundamentals of
 the Indian economy remain strong. Over the past few years India’s track
 record has been impressive.  The country recorded almost twice the
 global growth rate. Whilst the country does face roadblocks in the
 short term, the medium to long term growth prospects for India are
 bright. These have a bearing on your Company’s growth and performance.
 
 For the Financial Year 2010-11, your Company’s consolidated revenues
 stood at US $ 4.7 billion (Rs. 21,585 crores) vis-à-vis US $ 4.3 billion
 (Rs. 20,195 crores) in the previous year. Net profit at US $ 501 million
 (Rs. 2,279 crores ) is lower by 17% in comparison to US $ 581 million (Rs.
 2,759 crores) – excluding extraordinary item in FY 2010.
 
 I must say that this year has been all about leadership through
 consolidation, employee engagement, performance management and customer
 focus.
 
 Leadership through consolidation
 
 In the Pulp and Fibre business, the acquisition of Domsjö Fabriker has
 indeed been a high point. This is a world-class company with cutting
 edge technology. Its production process, coupled with its
 state-of-the-art biorefinery, add enormous value. Its high quality pulp
 will enable us enhance the supply of top quality premium VSF to our
 customers. The acquisition is in line with our strategy of having a
 significant part of our speciality pulp for our consumption through a
 captive source. With Domsjö we are closer to this goal.
 
 Our growth plans in the VSF sector continue to be aggressive. We are
 the world’s No.1 in this sector with our Group’s current capacity, in
 excess of 744,000 tons. In China, we have nearly doubled our production
 capacity from 36,000 tons to 70,000 tons. At Harihar (Karnataka) a
 36,500 tpa Brownfield expansion will go on stream in the near future.
 Additionally, a 120,000 tpa VSF plant at Vilayat will be up and running
 by the year 2013. Our intent is to ramp up to 1 million tons, in the
 near future.
 
 Intensifying its focus on speciality products, your Company has begun
 manufacturing “micro modal” a finer denier modal widely used in
 knitwear and women’s wear. Your Company has also tied up with leading
 textile manufacturers for the use of its speciality fibres in denims
 for women, suitings and school uniforms.
 
 Cement Sector
 
 The acquisition of ETA Star Cement marked our foray beyond Indian
 shores. It has always been our aspiration to establish our leadership
 position in India and to have a formidable presence in the Indian Ocean
 rim.  This region is a focus area for your Company in the white cement
 sector as well. This acquisition along with the amalgamation of
 Samruddhi Cement, has bolstered UltraTech, your Company’s subsidiary
 leadership position. UltraTech has become a PAN India player.
 Alongside, we have gained a strong foothold in the growing markets in
 the Middle East and the neighbouring regions. Today, UltraTech’s
 capacity stands raised to 52 million tons. UltraTech is among the top-
 10 global cement companies.
 
 Capital outlays
 
 In the VSF sector, your Company’s capex stands at US $ 540 million (Rs.
 2,400 crores). This is towards the Greenfield and Brownfield projects
 at Vilayat (Gujarat) and Harihar (Karnataka) to which I have alluded
 earlier and partly towards modernization.
 
 To accelerate the pace of growth in cement, over the next 3 years, your
 Company has earmarked a capital outlay of US $ 2.5 billion (Rs. 11,000
 crores). We are investing in the setting up of additional
 clinkerisation plants at Chhattisgarh and Karnataka together with
 grinding units, bulk packaging terminals and ready mix concrete plants
 across the country. These expansions are expected to be operational in
 FY14 and will augment our cement capacity by 9.2 mtpa.
 
 Outlook
 
 I believe, the pricing of competitive fibres and cotton production will
 have a bearing on profitability in the short term. Rising input costs
 may impair earnings to some extent.
 
 In the cement sector, current issues such as the demand supply
 mismatch, infrastructural bottlenecks and rising input costs are
 challenges that we have to grapple with currently. In the last few
 years, new capacity additions of around 100 mtpa, coupled with the
 prevailing sluggish demand has resulted in a surplus scenario. At the
 same time, the substantial hike in coal and petro-products prices have
 led to a drastic increase in input costs. So, overall in the short term
 one feels bearish about the sector.
 
 In my view, over the long term the cement sector is likely to grow in
 excess of 8.5%. My optimism stems from the Government’s enhanced focus
 on urban as well rural infrastructure development and housing.
 Furthermore, the enhanced capital allocation towards infrastructure in
 the 12th - Five year plan will be a growth propeller. We are positive
 that we will continue to do well.
 
 To our teams
 
 I would like to say a big thank you to all of our teams for their
 consistent high performance. I take great pride in the performance of
 our people.
 
 The Aditya Birla Group in perspective
 
 Today, we are a multi ethnic, multi dimensional Group with a bench
 strength of 133,000 passionate and committed people, belonging to 42
 nationalities across 6 continents. For the year 2010-11, our
 consolidated revenues stand at US $ 35 billion, compared to US $ 29
 billion in the preceding year, recording a 22% growth. Our leadership,
 regardless of levels, has a penchant for collaborative and innovative
 solutions, for new ways of working that keep our Companies and our
 products on our clients and customers radar all the time. This is what
 drives our performance.
 
 I believe that purposive actions in the people area can be huge
 differentiators to our growth plans. For us, it is very important to
 know what our people think of us. So we recourse to a biannual
 Organizational Health Survey (OHS) conducted by Gallup as the barometer
 of the engagement at work index in our Group. Over 28,000 executives
 spanning 31 countries participated in OHS 7 (2010). The participation
 level at 97%, in Gallup’s opinion, sets a new benchmark. Given its
 objectivity and rigor of its process, there is immense value in its
 findings.
 
 It is a matter of great satisfaction for me that the key strength of
 the Group, as identified in the OHS, continues to be the great sense of
 pride that our employees experience and express in working for the
 Aditya Birla Group.  More importantly, this pride stems from our
 employees’ belief and conviction that we are a good corporate citizen.
 Given the decline in ethics we see in business today, that is a huge
 validation of our insistence on value-based leadership. Pride, in turn
 is a great driver of positive energy and performance.
 
 To capitalize on this positivity and to grow and hone the talent
 resident in the Group, we have launched several initiatives that
 further our Employee Value Proposition - a World of Opportunities. We
 have launched the ‘Career Management Services’ - a pioneering effort
 which is an integrated end-to-end career service aimed at all
 employees. This is already afoot in the cement business. Over the
 coming years it will be extended across other businesses in the Group.
 
 On the issue of grooming talent, collectively our Business Directors
 and Business Heads, along with me, have invested over 500 man-hours in
 discussing, reviewing and working through the development plans of each
 of our talent pool members at the Group level. Their development plans
 include engagement with special projects, coaching and mentoring by the
 top leadership team, besides attending cutting-edge functional and
 behavioural programmes globally that open the frontiers of their mind
 and goad them to defy limitations. That 60% of the total leadership
 positions were filled in from our existing talent in 2010-11 validates
 the talent honing processes which have laid a robust leadership
 pipeline within our Group.
 
 Our commitment to employee learning and development at all levels, is
 unrelenting. In 2010-11, there were 30,000 touch points with our
 learners through multiple formats of learning. More than 25,000
 employees enlisted in e-learning programmes at Gyanodaya, our Institute
 of Management Learning.  This year, at Gyanodaya, 200 colleagues at
 very senior levels attended specially designed programmes. They had the
 opportunity to interact with professors from leading Universities and
 B-Schools. They were a great faculty, drawn from Universities such as
 Stanford, RICE, Michigan and Duke at the global level along with
 professors from the IIMs and ISB (Hyderabad).  Our senior managers also
 derived immense value from training and learning sessions conducted by
 leading consultancies such as The Centre for Creativity Leadership
 (CCL), The Hay Group and The Works Partnership (TWP), among others.
 
 Finally, I am delighted to share with you that our employees have given
 a thumping vote of confidence to our Group as the ‘Best Employers’ in
 India and in Asia Pacific. Aditya Birla Group, of which your Company is
 an integral member, has been declared as one of the ‘Best Employers’ in
 India in the Aon Hewitt Survey conducted recently. We ranked 2nd from
 among 200 other Indian organizations, who participated in the survey.
 In Asia Pacific, we have been ranked among the top companies as well.
 Soon we hope to attain this stature in the rest of the world too -
 wherever we operate.
 
 Our people are our future. With them and the wind in our sails, we feel
 buoyant about achieving our stretch goal of becoming a 65 billion
 dollar Group by 2015.  Your Company will play an important role in
 reaching this destination.
 
 Yours sincerely,
 Kumar Mangalam Birla