1st Nov 2006 07:01
Cairn Energy PLC01 November 2006 NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN, OR INTO, THE UNITED STATES,CANADA, AUSTRALIA OR JAPAN EMBARGOED FOR RELEASE AT 0700 1 November 2006 PART I CAIRN ENERGY PLC ("Cairn") Proposed flotation of Cairn India Limited ("Cairn India"), approval of new shareincentive arrangements and notice of extraordinary general meeting • Flotation of Cairn India creates two separate world class businesses in South Asia • Group to hold approximately 69.5 per cent. of Cairn India immediately following the Flotation(1) • Price to be determined following a "book building" process to set the Offer Price for Cairn India's shares in December 2006 • Illustrative gross proceeds of US$1.8 billion based on the value for the Indian Business implied by the Cairn Energy PLC Closing Share Price(2)(3) • Part of proceeds to be used to fund the Group's ongoing business; balance to be returned to shareholders - further details to be provided following Flotation • New share incentive arrangements proposed for Cairn India and Cairn • Current trading in line with interim results statement • Circular in connection with proposed flotation of Cairn India posted to Shareholders today • EGM to be held on 17 November 2006 Sir Bill Gammell, Chief Executive said: "I am delighted to report today that we have posted our Circular toshareholders. This is an important milestone in our progress towards achieving aflotation of the Indian business at the end of this year. The roadshow for thepre-flotation private placing has now commenced. I firmly believe that asuccessful flotation is in the best strategic interests of the Cairn Indiabusiness and will provide an opportunity to realise value for shareholders." Introduction The flotation of Cairn's Indian business on the Bombay Stock Exchange and theNational Stock Exchange of India is currently scheduled to take place inDecember 2006. In the meantime, due to the potential significance to the Companyof the proposed flotation (and associated sale), the Company is seeking priorapproval of Shareholders at an extraordinary general meeting. Benefits of the flotation The size of the main discoveries and the ongoing development in Rajasthan havesignificantly changed the nature of the Group's business in India, both in termsof value and scale and the Board believes it is now appropriate to realise partof the value of this business for Shareholders. Whilst the Group's Indian business is well-placed to take advantage of thepotential growth opportunities in India, the Board believes that the proposedflotation should further enhance that business by: • providing it with additional capital; • increasing local autonomy and management focus; • raising its local profile in order to position it more effectively; and • creating a discrete, focused investment opportunity for investors. Following the proposed flotation, there will be two arms to the Group'sbusiness: a majority shareholding in the listed Indian business and anexploration and production business (owned and operated by a wholly-ownedsubsidiary of the Company, Capricorn). Capricorn will focus initially on the Group's remaining assets in Bangladesh,Nepal and Northern India, but will additionally consider new material growthopportunities. The scope of Capricorn's activities in India (including Indianterritorial waters) will be the subject of the non-compete agreement enteredinto with Cairn India. The Board believes that the proposed flotation of the Group's Indian businesspresents the opportunity to create two separate world-class businesses in SouthAsia whilst at the same time realising value for Shareholders through the saleof part of the Company's interest in its Indian business. Consideration The Flotation, as currently proposed, involves two principal steps. Firstly anew company, Cairn India, will be floated on the Bombay Stock Exchange and onthe National Stock Exchange. Secondly, in conjunction with the Flotation, theGroup will dispose of its Indian Business to Cairn India in exchange for cashand the issue to the Group of a majority shareholding in Cairn India. The Offer Price set for Cairn India's Shares in the Flotation will determine thevalue of the Indian Business for the purpose of the Disposal. The Offer Price(and accordingly the amount of money to be raised in the Flotation) will befinalised following a "book building" process. It is expected that the OfferPrice will be announced by the Company in December 2006. The final amount of the consideration due to the Group from the Disposal will bedetermined once the Offer Price has been determined and will be a mix of cashand Cairn India Shares. The Board intends to set the lower end of the pricerange for the "book building" process at a price per Cairn India Share (theOffer Price Range Floor) that places an expected minimum pre-Flotation valuationon the Indian Business of approximately Rs 235.5 billion(4) (£2.7 billion),which, in the Board's view, is the value for the Indian Business implied by theCairn Energy PLC Closing Share Price. Accordingly, by way of illustration, if the Offer Price were to be set at anamount equal to the Offer Price Range Floor and Cairn India was to retain fundsamounting to Rs 27.1 billion (£316.3 million) from the expected gross proceedsof the Flotation of US$1.8 billion (or approximately US$1.9 billion in the eventthat the Over Allotment Option is exercised in full) to fund its ongoing workingcapital requirements, then it is expected that the gross cash proceeds of theDisposal which would be received by the Group would be approximately Rs 53billion (£618.0 million) (or approximately Rs 59 billion (£688.4 million) in theevent that the Over Allotment Option is exercised in full) and that the Groupwould hold approximately 69.5 per cent. of the issued share capital of CairnIndia immediately following the Flotation (or approximately 67.2 per cent. inthe event that the Over Allotment Option is exercised in full). The Offer Price and the proceeds of the Flotation to be retained by Cairn Indiato fund its ongoing working capital requirements have not yet been determinedand accordingly the gross cash proceeds of the Disposal and the proportion ofthe share capital of Cairn India to be issued to the Group may be different fromthis illustrative example. Use of proceeds If the Flotation and the Disposal proceed, the Board intends to utilise part ofthe net cash proceeds to fund the Group's ongoing business, with the balancebeing returned to Shareholders. The Board intends to return this cash toShareholders in a manner which will seek to be as tax efficient as practical andseeks to meet the differing tax and accounting requirements of Shareholders. Further details on the proposed return of cash will be communicated toShareholders after the Flotation becomes effective. Shareholders should note that the proposed return of cash is not guaranteed andthat the amount and the timing of any cash return and the means by which it isto be achieved have not yet been determined. Strategy of the Group following the Disposal and the Flotation Following the Disposal and the Flotation, the Company will own a majorityshareholding in Cairn India. The Company will also continue (through Capricorn)to undertake oil and gas exploration and production. If the Disposal and the Flotation proceed, the Group's principal focus will beto continue to pursue, through Capricorn, its proven strategy of buildingShareholder value from strategic positions in what the Board believes to be highpotential exploration acreage. In addition, the Company will continue to look atways in which it can seek to maximise value for Shareholders from the Group'sremaining majority shareholding in Cairn India including, subject to therestrictions imposed by Indian regulations and law, through the sale of itsCairn India Shares. In addition, the Board will continue to review and consider strategies andstructures to maximise Shareholder value going forward, which may include assetrealisation, asset related capital structures or direct Shareholderparticipation in the two arms of the Group's business. Circular The circular to shareholders in connection with the Flotation and Disposal andthe new share incentive arrangements will be posted to Shareholders today. TheEGM seeking shareholder approval for these proposals will be held on 17 November2006. The circular will shortly be available to the public for inspection at the UKListing Authority's Document Viewing Facility, which is situated at: Financial Services Authority25 The North ColonnadeCanary WharfLondonE14 5HSTel No. +44 (0)20 7066 1000, during normal business hours on any weekday(Saturdays, Sundays and public holidays excepted). The circular will also shortly be available on the Investor Relations section ofCairn's website at www.cairn-energy.plc.uk. Indicative Timetable Circular posted to shareholders 1 November 2006 Extraordinary General Meeting 17 November 2006 Cairn India Offering Document ('Red Herring Prospectus') filed post EGM in November 2006 Cairn India Initial Public Offer December 2006 This summary should be read in conjunction with Part II of this announcement,which includes further details regarding the Proposed Flotation of Cairn IndiaLimited and the proposed new share incentive arrangements. Enquiries to:Analysts/InvestorsBill Gammell Chief Executive Tel: 0131 475 3000Kevin Hart Finance DirectorMike Watts Exploration Director MediaDavid Nisbet, Head of Group Communications Brunswick Group LLP:Patrick Handley, Mark Antelme Tel: 0207 404 5959 Cautionary note regarding forward-looking statements This announcement includes certain forward-looking statements with respect tothe financial condition, results of operations and business of the Group and ofthe Cairn India Group and certain plans and objectives of the Board. Theseforward-looking statements can be identified by the fact that they do not relateto any historical or current facts. Forward-looking statements often use wordssuch as ''proposed'', ''anticipate'', ''expect'', ''estimate'', ''intend'',''plan'', ''believe'', ''will'', ''may'', ''should'', ''would'', ''could'' orother words with a similar meaning. These statements are based on assumptionsand assessments made by the Board in light of its experience and its perceptionof historical trends, current conditions, expected future developments and otherfactors it believes appropriate. By their nature, forward-looking statementsinvolve risk and uncertainty and there are a number of factors that could causeactual results and developments to differ materially from those expressed in, orimplied by, such forward-looking statements. Actual results may differ materially from those suggested by the forward-lookingstatements due to risks or uncertainties associated with the Group's and theCairn India Group's expectations with respect to, but not limited to: (i)regulatory changes pertaining to the oil and gas industries in India, Nepal andBangladesh and their respective abilities to respond to those changes and toimplement successfully their respective strategies; (ii) their growth andexpansion; (iii) technological changes; (iv) exposures to market risks; (v)general economic and political conditions in India, Nepal and Bangladesh, whichhave an impact on their respective business activities or investments; (vi) themonetary and fiscal policies of India, Nepal and Bangladesh; (vii) inflation,deflation, unanticipated turbulence of the financial markets in India, theUnited Kingdom and globally; (viii) changes in domestic laws, regulations andtaxes; and (ix) changes in competition in their industry. For further discussions of factors that could cause the Group's or the CairnIndia Group's actual results to differ, please see the section entitled ''RiskFactors'' set out in Part IX of the Circular. By their nature, certain marketrisk disclosures are only estimates and could be materially different from whatactually occurs in the future. As a result, actual future gains or losses couldmaterially differ from those that have been estimated. These forward-looking statements speak only as at the date of this announcement.Save as required by the requirements of the Financial Services Authority or theLondon Stock Exchange plc or otherwise arising as a matter of law, the Companyexpressly disclaims any obligation or undertaking to disseminate afterpublication of this announcement any updates or revisions to any forward-lookingstatements contained herein to reflect any change in the Group's or the CairnIndia Group's expectations with regard thereto or any change in events,conditions or circumstances on which any such statement is based. Cairn India Limited ("Cairn India") proposes to undertake a public issue inIndia and has filed a Draft Red Herring Prospectus with the Securities andExchange Board of India. This announcement is not an offer for sale, or asolicitation of offers to purchase, the shares in Cairn India to be offered inthe offering (the "Shares") in any jurisdiction. No action will be taken topermit the Shares to be sold in a public offer in any jurisdiction outsideIndia. In particular, no offer to the public will be made in any Member State ofthe European Economic Area or in the United States. The Shares have not been andwill not be registered under the US Securities Act of 1933, as amended. Thisannouncement and the information contained herein are not for publication,distribution or release in, or into, the United States, Canada, Australia orJapan. NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN, OR INTO, THE UNITED STATES,CANADA, AUSTRALIA OR JAPAN EMBARGOED FOR RELEASE AT 0700 1 November 2006 PART II CAIRN ENERGY PLC ("Cairn") Proposed flotation of Cairn India Limited ("Cairn India"), approval of new shareincentive arrangements and notice of extraordinary general meeting 1. Introduction On 14 March 2006, the Company announced that, having regard to the potentialgrowth opportunities available in India, it intended to examine a flotation ofits Indian business on the Bombay Stock Exchange and the National StockExchange, as a means both of increasing the autonomy of that business and ofrealising value for Shareholders. As announced by the Company on 5 September 2006, significant progress has beenmade towards this objective and preparations are on track for a flotation, whichis currently scheduled to take place in December 2006. The Board will make thefinal decision as to whether or not to proceed with the flotation (and, if so,on what terms) in due course (having regard to, amongst other things, prevailingmarket conditions). In the meantime, due to the potential significance to the Company of theproposed flotation (and associated sale), the Company is seeking prior approvalof Shareholders at an extraordinary general meeting. The purpose of the Circularis to: (i) explain the background to and reasons for the proposed flotation (andassociated sale); (ii) explain why the Board considers the proposed flotation(and associated sale) to be in the best interests of Shareholders as a whole;(iii) convene an extraordinary general meeting of the Company; (iv) seekShareholder approval for the flotation of the Group's Indian business and thesale by the Group of part of that business; (v) seek Shareholder approval forcertain new share incentive arrangements that the Board recommends be put inplace in light of the proposed flotation (and associated sale); and (vi)recommend that Shareholders vote in favour of the resolutions to be proposed atthe extraordinary general meeting. The proposed flotation would result in the sale of a minority interest in theGroup's Indian business and would leave the Group with two distinct arms: amajority shareholding in a listed Indian business and an exploration andproduction business focused principally on the Group's remaining assets inBangladesh, Nepal and Northern India. If the proposed flotation (and associatedsale) proceeds, the Board intends to utilise part of the net cash proceeds tofund the Group's ongoing business and to return the balance to Shareholders. The Board believes that the proposed flotation of the Group's Indian businesspresents the opportunity to create two separate world-class businesses in SouthAsia whilst at the same time realising value for Shareholders through the saleof part of the Company's interest in its Indian business. 2. Background to and reasons for the proposed flotation The Company's long-stated objective has been to add value for Shareholdersthrough exploration and to realise such value at the appropriate time. The sizeof the main discoveries and the ongoing development in Rajasthan havesignificantly changed the nature of the Group's business in India, both in termsof value and scale and the Board believes it is now appropriate to realise partof the value of this business for Shareholders. Whilst the Group's Indianbusiness is well-placed to take advantage of the potential growth opportunitiesin India, the Board believes that the proposed flotation should further enhancethat business by: • providing it with additional capital to finance its ongoing oil and gasexploration, production and development business; • increasing local autonomy and management focus to assist the Indian businessto: (i) manage more effectively its own resources; (ii) pursue strategies whichare appropriate to its market; and (iii) respond more quickly to opportunitieswithin its market; • raising its local profile in order to position it more effectively to: (i)interact with its growing number of stakeholders in India (including the IndianGovernment); (ii) benefit from potential growth opportunities in India; and(iii) attract, retain and motivate appropriately qualified personnel in India;and • creating a discrete, focused investment opportunity for investors, which wouldalso enable the Indian business to access the local capital markets if itrequired to do so in the future. Following the proposed flotation, there will be two arms to the Group'sbusiness: a majority shareholding in the listed Indian business and anexploration and production business (owned and operated by a wholly-ownedsubsidiary of the Company, Capricorn). Capricorn will focus initially on theGroup's remaining assets in Bangladesh, Nepal and Northern India, but willadditionally consider new material growth opportunities, where the Group cancontinue to execute its proven strategy of seeking to build shareholder valuethrough exploration (without also having to manage directly the next stage ofthe development of the Indian business). This strategy may involve significantexpenditure on high risk exploration. The scope of Capricorn's activities inIndia (including Indian territorial waters) will be the subject of thenon-compete agreement entered into with Cairn India. If the proposed flotation(and associated sale) proceeds, the Board intends to utilise part of the netcash proceeds to fund the Group's ongoing business and to return the balance toShareholders. 3. How is the Flotation to be effected? The Flotation, as currently proposed, involves two principal steps. Firstly anew company, Cairn India, will be floated on the Bombay Stock Exchange and onthe National Stock Exchange. Secondly, in conjunction with the Flotation, theGroup will dispose of its Indian Business to Cairn India in exchange for cashand the issue to the Group of a majority shareholding in Cairn India. The proposed transaction structure has not yet been approved by the appropriateIndian regulatory authorities, including RBI and SEBI. If these approvals arenot obtained, then the Disposal and the Flotation may not proceed, may requireto be restructured or may be delayed. Assuming that the Flotation proceeds onthe basis of the proposed structure and within the planned timetable,Shareholders should note the following principal points as regards each of thetwo steps. The Flotation The Flotation will comprise underwritten global institutional and Indian retailoffers of Cairn India Shares and the admission of those shares to trading on theExchanges. The Flotation will be preceded by a pre-Flotation private placing ofCairn India Shares that commenced during October 2006 with institutional andother investors. Its principal purpose will be to provide the Company and theUnderwriters with an indication of the likely valuation that the Indian Businessmight achieve on Flotation, whilst also seeking to establish a core group ofinvestors to increase the marketability of the Flotation. The pre-Flotationprivate placing will not be underwritten. The global and retail offers will be underwritten. Both the global institutionaland Indian retail offers will be ''book built'', with prospective investorsbeing invited (following receipt of a price-range prospectus) to submit bids tothe Underwriters for a specified number of Cairn India Shares at variousspecified prices. It is currently proposed that the price-range prospectus befiled with the Registrar of Companies in Mumbai on or around 22 November 2006,with the last date for submitting bids in the ''book build'' being on or around15 December 2006. Following the ''book building'' process, the Offer Price (andaccordingly the amount of money to be raised in the Flotation) will befinalised. This will determine the value of the Indian Business for the purposeof the Disposal. The final determination of the Offer Price will be made by therespective boards of Cairn India and the Company, in consultation with theUnderwriters, based on, amongst other things, the nature and level of demand forCairn India Shares and the objective of establishing an orderly after-market inthe Cairn India Shares on the Exchanges. It is expected that the Offer Pricewill be announced by the Company in December 2006. In addition, in connection with the Flotation, Cairn India may exercise the OverAllotment Option through Merrill Lynch. Merrill Lynch may use the over-allotmentto effect transactions with a view to supporting the market price of Cairn IndiaShares during a period of up to 30 days following the Flotation. In connectionwith the Over Allotment Option, Cairn UK Holdings (the subsidiary that will sellthe Group's outstanding interest in the Indian Business pursuant to theDisposal) has agreed to lend up to such number of Cairn India Shares asrepresents not more than 15 per cent. of the Cairn India Shares issued pursuantto the Flotation for the purpose of making such over-allotment. At the end ofthe period of price stabilisation, Cairn India will issue such number of CairnIndia Shares as is required to return to Cairn UK Holdings any shares which werepreviously loaned. The Disposal Pursuant to the Disposal, Cairn UK Holdings will sell its outstanding interestin Cairn India Holdings (the subsidiary through which the Group holds itsinterests in the Indian Business) to Cairn India (the company that is seeking alisting on the Exchanges). The final amount of the consideration due to Cairn UK Holdings from Cairn Indiafor Cairn India Holdings, will be determined once a value has been set for theIndian Business in the Flotation and will be a mix of cash and Cairn IndiaShares. The Board intends to set the lower end of the price range in the globaland retail offers at a price per Cairn India Share (the Offer Price Range Floor)that places an expected minimum pre-Flotation valuation on the Indian Businessof approximately Rs 235.5 billion(5) (£2.7 billion), which, in the Board's view,is the value for the Indian Business implied by the Cairn Energy PLC ClosingShare Price. Accordingly, by way of illustration, if the Offer Price were to be set at anamount equal to the Offer Price Range Floor and Cairn India was to retain fundsamounting to Rs 27.1 billion (£316.3 million) from the expected gross proceedsof the Flotation of US$1.8 billion (or approximately US$1.9 billion in the eventthat the Over Allotment Option is exercised in full) to fund its ongoing workingcapital requirements, then it is expected that the gross cash proceeds of theDisposal, which would be received by the Company or Cairn UK Holdings, would beapproximately Rs 53 billion (£618.0 million) (or approximately Rs 59 billion(£688.4 million) in the event that the Over Allotment Option is exercised infull) and that the Group would hold approximately 69.5 per cent. of the issuedshare capital of Cairn India immediately following the Flotation (orapproximately 67.2 per cent. in the event that the Over Allotment Option isexercised in full). The Offer Price and the proceeds of the Flotation to beretained by Cairn India to fund its ongoing working capital requirements havenot yet been determined and accordingly the gross cash proceeds of the Disposaland the proportion of the share capital of Cairn India to be issued to the Groupmay be different from this illustrative example. Shareholders should be aware that the Disposal and the Flotation may proceednotwithstanding the fact that the Offer Price (which will determine the value ofthe consideration due to the Group in respect of the Disposal) may be set belowthe Offer Price Range Floor but only if to do so is considered by the Board tobe reasonable and in the best interests of Shareholders as a whole. The Board isseeking Shareholder approval to proceed with the Disposal and the Flotation atsuch Offer Price as would satisfy these criteria, which may or may not be abovethe Offer Price Range Floor. If the Offer Price is set below the Offer PriceRange Floor, then the gross cash proceeds of the Disposal will be less andaccordingly the amount of cash available for return to Shareholders will also beless. If the Flotation becomes effective, Cairn India Shares will be admitted totrading on the Exchanges. Shareholders should note that the Cairn India Sharesheld by the Group will be subject to Indian regulatory and legal transferrestrictions, such that it is expected that: • in respect of 20 per cent. of the post-Flotation issued share capital of CairnIndia, no disposal by the Group will be permitted during the period of threeyears commencing on the date of allotment of Cairn India Shares in theFlotation; and • in respect of the balance of the Group's shareholding in Cairn India heldimmediately prior to the Flotation, no disposal by the Group will be permittedduring the period of 12 months commencing on the date of allotment of CairnIndia Shares in the Flotation. Use of proceeds The Disposal is subject to Shareholder approval and, if it proceeds, the Boardintends to utilise part of the net cash proceeds to fund the Group's ongoingbusiness, with the balance being returned to Shareholders. The Board intends toreturn this cash to Shareholders in a manner which will seek to be as taxefficient as practical and seeks to meet the differing tax and accountingrequirements of Shareholders. Following the receipt of the cash proceeds by theCompany and pending their return to Shareholders, the monies will be held in aninterest bearing deposit account. Further details on the proposed return of cashwill be communicated to Shareholders after the Flotation becomes effective.Shareholders should note that the proposed return of cash is not guaranteed andthat the amount and the timing of any cash return and the means by which it isto be achieved have not yet been determined. Following the completion of the Disposal, the Indian Business will be owned byCairn India and the remaining exploration and production business of the Groupwill be held through Capricorn. Further information on the Indian Business andon the remaining business of the Group is set out below. 4. Overview of Cairn India and the Cairn India Holdings Group Corporate structure and management In preparation for the Disposal and the Flotation, the Company has created astructure to enable the Indian Business to operate autonomously. New officeheadquarters for Cairn India have been established in the growing commercialarea of Gurgaon on the outskirts of New Delhi, providing good transportationlinks to Rajasthan and access to key Indian stakeholders (including the IndianGovernment). An executive management team with substantial experience in the oil and gasindustry, both internationally and in India, backed by a highly skilled andexperienced board, has been assembled for Cairn India. The Cairn India board ofdirectors (whose brief biographies are set out in Appendix I of thisannouncement) comprises: Name FunctionSir Bill Gammell Non-Executive ChairmanNorman Murray Non-Executive Deputy ChairmanRahul Dhir Chief Executive OfficerLawrence Smyth Chief Operating OfficerJann Brown Acting Chief Financial OfficerHamish Grossart Non-Executive DirectorNaresh Chandra Independent Non-Executive DirectorAman Mehta Independent Non-Executive DirectorDr Omkar Goswami Independent Non-Executive Director In addition, under the arrangements for the separation of the Indian Businessfrom the rest of the Group, certain employees who have been involved in theacquisition or development of the Indian Business will transfer to Cairn India.At 30 June 2006 Cairn India had approximately 425 employees. In Rajasthan, adevelopment team is in place and staffed with industry experts possessing awealth of experience in large-scale international development projects. TheRajasthan development team currently consists of approximately 50 members ofstaff. To carry out Cairn India's operations in the Rajasthan Block, Cairn Indiaexpects to reach a peak employment of approximately 140 people who will providedirect support for its operations in Rajasthan towards the end of 2007. Inaddition, in areas where the rest of the Group and Cairn India believe it iseconomical to do so, Cairn India has contracted with certain other members ofthe Group to receive administrative and operational support from those Groupmembers for a transitional period of 6 months (or longer for certain legal andtax services) following the Flotation. Accordingly, the Board considers that the framework and resource base arealready in place to facilitate the autonomous operation of the Indian Businessfollowing the Disposal and the Flotation. Assets and summary financial information In addition to creating an appropriate corporate structure, the Group has beenreorganised such that the Cairn India Holdings Group holds all of the oil andgas interests which are to be acquired by Cairn India. These include: • operated interests in producing fields at Ravva in Block PKGM-1 in theKrishna-Godavari Basin offshore eastern India (a 22.5 per cent. workinginterest) and at Lakshmi and Gauri in Block CB/OS-2 in the Cambay Basin offshorewestern India (a 40 per cent. working interest). Crude oil and natural gasproduction from Ravva commenced in 1993. Production of natural gas commencedfrom Lakshmi in 2002 and from Gauri in 2004. Production of commingled crude oilfrom Gauri commenced in 2005; • a 70 per cent. working interest in a development area of 1,858 km2 in theRajasthan Block (awarded until 2020), which includes the Mangala, Aishwariya,Saraswati and Raageshwari fields; • a 100 per cent. participating interest in an appraisal area of 2,885 km2 inthe Rajasthan Block, which was awarded for an 18 month period in June 2005(expiring on 14 November 2006). The licence in respect of this area is thesubject of a six month extension application. The Cairn India Holdings Groupwill however retain its interests in any discoveries made in this area on expiryof the licence including the existing Bhagyam and Shakti discoveries; and • equity interests in ten blocks where there is currently no production ordevelopment but which are in various stages of exploration. The three mainbasins where the Indian Business is currently actively involved in exploringinclude the Cambay, Krishna-Godavari and Himalayan Foreland Basins. As at 30 June 2006, the estimated gross proved and probable reservesattributable to the fields in production or under development in which the CairnIndia Holdings Group has an interest were 754 mmboe and its estimated networking interest in these reserves was 472 mmboe. The Cairn India Holdings Group has also applied (in certain cases, jointly withmembers of the Capricorn Group) for a number of blocks in the recent NELP VIlicensing round (which closed on 15 September 2006) and a separate update willbe issued to Shareholders in due course once the results of those applicationsare known. The Company believes that bidding in that round may have been verycompetitive. As at 30 June 2006, the gross assets of the Cairn India Holdings Group wereapproximately $829 million and, in the six months ended 30 June 2006, therevenue was approximately $121 million and profit attributable to the equityholders for the period was approximately $52 million. For the twelve monthsended 31 December 2005, the revenue of the Cairn India Holdings Group wasapproximately $174 million and profit attributable to the equity holders for theperiod was approximately $52 million. 5. Proposed share incentive arrangements for the Cairn India Group Introduction In order to seek to align more closely the interests of the executive directorsand employees of Cairn India with the interests of its shareholders (includingCairn UK Holdings, the subsidiary through which the Company will hold itsmajority shareholding in Cairn India following the Disposal and the Flotation),it is proposed that three new management and employee share incentivearrangements be put in place. In the course of structuring these arrangements,the Board consulted with certain major Shareholders. Cairn India Senior Management Plan The first of the three new proposed arrangements is the Cairn India SeniorManagement Plan. It is proposed that only Rahul Dhir (Cairn India's ChiefExecutive Officer) and Lawrence Smyth (Cairn India's Chief Operating Officer)will be granted options under this plan over 6,714,233 and 1,584,480 Cairn IndiaShares respectively as soon as practicable following the EGM. The Cairn IndiaShares over which these options will be granted will be worth (at a value perCairn India Share calculated by reference to the Offer Price Range Floor)approximately £11.7 million(6) and £2.7 million respectively. The aggregateexercise price payable in relation to these options will be in the region of£2.6 million in the case of Mr Dhir's award and £0.62 million in the case of MrSmyth's. In terms of Mr Dhir's award, vesting will generally occur as follows: • one-third of the award will vest on the day after the Flotation becomeseffective; • a further third will vest eighteen months after the date on which theFlotation becomes effective; and • conditional on the Flotation becoming effective, the final third will vest onachieving certain specified production targets relating to the RajasthanDevelopment Area. In the case of Mr Smyth's award, vesting will generally occur as follows: • one-half will vest on the day after the Flotation becomes effective; and • conditional on the Flotation becoming effective, the balance of the award willvest in two equal tranches on achieving certain specified targets relating tothe Rajasthan Development Area. Any Cairn India Shares acquired on the exercise of these options will generallybe subject to a 12 month lock-in period following the Flotation during whichthey cannot be sold. In Mr Dhir's case, the above award is required to attract a highly sought afterexecutive from investment banking into an Indian chief executive officer'sposition in the oil and gas sector. The Board firmly believes that Mr Dhir hasthe right credentials to take on this role and develop Cairn India over thecoming years. He was an outstanding candidate for the post with all thenecessary sector experience so, whilst the above arrangements are unusual, theBoard considers them appropriate in the circumstances. In Mr Smyth's case, the above award is necessary to ensure the continuedservices of this highly experienced individual and to reflect the significanceof his enhanced role within the Cairn India organisation. It is not expected that any other individuals will receive awards under theCairn India Senior Management Plan and no further awards will be grantedpursuant to this arrangement following the Flotation. Cairn India POP and Cairn India ESOP In addition, it is also proposed that Cairn India will establish the Cairn IndiaPOP and the Cairn India ESOP. The Cairn India POP is intended to be used for senior executives, includingexecutive directors of Cairn India. Under the plan, regular awards over CairnIndia Shares will be made, the vesting of which will generally be dependent onboth continued employment with Cairn India and the extent to which predeterminedperformance conditions are met over a specified period of at least three years. Initially, the performance condition attaching to awards will be based on thetotal shareholder return ("TSR") of Cairn India compared to the TSRs of a groupof exploration, production and integrated oil companies. No awards will vest forbelow median performance and full vesting will require an upper quartileranking. In addition, in order for any awards to vest, the remunerationcommittee of Cairn India will need to be satisfied that there has been asatisfactory and sustained improvement in Cairn India's underlying performance. The Cairn India ESOP is intended to be used for less senior employees of theCairn India Group. Under this plan, selected employees will receive market valueoptions over Cairn India Shares. These options will generally be exercisableafter three years, subject to the individuals remaining in employment. Inaccordance with generally prevailing market practice in India, the ability toexercise these options will not be subject to satisfying any additionalperformance criteria. If approved by Shareholders, it is intended that the initial awards and optionsunder the Cairn India POP and the Cairn India ESOP will be granted prior to, andconditionally upon, the completion of the Flotation. Given the provisions of theCairn India Senior Management Plan, it is not intended that Rahul Dhir andLawrence Smyth will participate in these initial awards. Following theFlotation, no further awards or options will be granted until the Cairn IndiaPOP and ESOP have been ratified by Cairn India's shareholders in generalmeeting. Dilution under the Cairn India POP and the Cairn India ESOP will be limited to88,265,718 Cairn India Shares, being approximately 5 per cent. of the expectedissued share capital of Cairn India immediately following the Flotation(assuming no exercise of the Over Allotment Option). Shareholder approval The adoption of the above plans requires the approval of Shareholders. 6. Overview of the Group following the Disposal and the Flotation Corporate structure and management Following the Disposal and the Flotation, the Company will remain headquarteredin Edinburgh, with the interests of the Group that are not the subject of theDisposal being held by Capricorn, a wholly-owned subsidiary of the Company. TheBoard of the Company, which will remain the parent of the Group, will besubstantially the same. The only changes will be that Kevin Hart will resign asFinance Director of the Company and be replaced by Jann Brown (currently GroupFinancial Controller) and that Simon Thomson (currently Group CommercialManager) will be appointed as Commercial & Legal Director. It is currentlyenvisaged that the effective date of Kevin Hart's resignation and of JannBrown's and Simon Thomson's appointments will be following the EGM. Assets Following the Disposal and the Flotation, the Company will own a majorityshareholding in Cairn India. The Company will also continue (through theCapricorn Group) to undertake oil and gas exploration and production. TheCapricorn Group's principal interests include: • an operated interest in the Sangu gas field in Bangladesh (a 75 per cent.participating interest), which commenced production in June 1998; and • significant exploration acreage in Bangladesh, Nepal and Northern India. The Capricorn Group has also applied (jointly with members of the Cairn IndiaHoldings Group) for a number of blocks in the recent NELP VI licensing round anda separate update will be issued to Shareholders in due course once the resultsof those applications are known. The Company believes that bidding in that roundmay have been very competitive. As at 30 June 2006, the estimated gross proved and probable reservesattributable to the Sangu gas field in Bangladesh, the Capricorn Group's onlyproducing asset, were 58.7 mmboe and its estimated net working interest in thesereserves was 44 mmboe. Future strategy If the Disposal and the Flotation proceed, the Group's principal focus will beto continue to pursue, through the expertise within the Capricorn Group, itsproven strategy of building Shareholder value from strategic positions in whatthe Board believes to be high potential exploration acreage. In addition, theCompany will continue to look at ways in which it can seek to maximise value forShareholders from the Group's remaining majority shareholding in Cairn Indiaincluding, subject to the restrictions imposed by Indian regulations and law,through the sale of its Cairn India Shares. In addition, the Board will continue to review and consider strategies andstructures to maximise Shareholder value going forward, which may include assetrealisation, asset related capital structures or direct Shareholderparticipation in the two arms of the Group's business. 7. Proposed share incentive arrangements for the Group Introduction The Board recognises that, following the Disposal and the Flotation, theCompany's existing share incentive plans will no longer be appropriate.Accordingly, it is proposed that, subject to the Flotation becoming effective,the New Group LTIP and New Group Share Option Plan be established. Thesearrangements reflect the fact that, on an ongoing basis, the Company will havetwo distinct arms to its business (namely, a shareholding in Cairn India and theactivities of the Capricorn Group) and therefore will seek to incentivisemanagement and employees of the Group in relation to the performance of the arm(s) which they can affect. This will be achieved through the granting of awards and options over notional "units" in Capricorn and Cairn India, the value and vesting of which will depend on the success of the relevant part of thebusiness. It is acknowledged and accepted by the Board that the way in which thesearrangements have been structured is unusual. However, as noted above, they areintended to reflect the specific structure of the Group and the specialcircumstances that will exist following completion of the Disposal and theFlotation. In the course of formulating these new plans, the Company consultedwith certain major Shareholders. New Group LTIP Under the New Group LTIP, senior executives (including executive directors) willreceive awards of units on a regular basis, the vesting of which will generallybe dependent on both continued employment of the individual with the Group andthe extent to which predetermined performance conditions are met over aspecified performance period of at least three years. Whilst most executiveswill be concentrating on Capricorn, the Company's remuneration committee feelsthat the executive directors should all have a portion of their awards based onCairn India's performance, thereby ensuring that their interests areappropriately aligned with those of Shareholders. It is, therefore, intendedthat Sir Bill Gammell will receive 50 per cent. of his units in Capricorn and 50per cent. in Cairn India. The other directors will receive variable weightings,depending on their role, but no more than 75 per cent. will apply to either typeof unit. The performance conditions for the initial awards under the New Group LTIP willbe based on the notional total shareholder return ("TSR") of a Capricorn orCairn India unit, compared to a group of similarly sized oil and gas explorationcompanies (in the case of Capricorn units) or a selection of mature oil and gascompanies (in the case of Cairn India units). No part of an award will vest forbelow median performance and full vesting will require at least an upper decileranking. To ensure that the New Group LTIP adequately encourages and rewardsexceptional performance, where a TSR ranking of upper decile level or above isachieved, executives can receive further awards through the application of a'multiplier' that is linked to the absolute TSR actually achieved. Irrespective of the TSR outcome, no part of an award will vest unless theCompany's remuneration committee is satisfied that there has been overallsatisfactory and sustained improvement in the performance of the Company. New Group Share Option Plan Under the proposed New Group Share Option Plan (which is intended for lesssenior employees who do not participate in the New Group LTIP and in any eventwill not be used for executive directors), participants will be granted optionsover Capricorn units only, with a notional 'exercise price' generally equal tothe Capricorn unit price around the time of grant. These awards will normallyvest after three years depending on remaining in employment and upon thesatisfaction of a performance criterion based on the growth in the value of aCapricorn unit. In addition, no part of an option will vest unless the TSR of aCapricorn unit is sufficient to place it at or above median compared to the samecomparator group chosen for the purposes of the New Group LTIP. Dilution and implementation It is intended that any gains made on the vesting of awards under the New GroupLTIP and New Group Share Option Plan will be settled in the form of Shares,although the remuneration committee of the Company will be able to settle theawards in cash if appropriate or necessary. Under the New Group LTIP, only 50per cent. of the Shares to which a participant is entitled will be released onvesting, with the receipt of the balance generally being deferred for a furtherperiod of one year. Dilution under all of the Company's share schemes (i.e. the New Group Schemes,the Cairn LTIP and the Cairn Share Schemes) will be limited to 10 per cent. ofthe Company's issued share capital from time to time in any ten-year period,with an inner 5 per cent. limit applying to selective plans. It is intended that the initial awards under the New Group LTIP and New GroupShare Option Plan will be made as soon as reasonably practicable after theFlotation. Awards and options which have already been granted under the existingCairn LTIP and Cairn Share Schemes will not be altered or affected by theseproposals, but no further grants will be made under those arrangements once theproposed new plans have been approved by Shareholders. Shareholder approval The adoption of the New Group LTIP and the New Group Share Option Plan requiresthe approval of Shareholders. 8. Principal arrangements in respect of the ongoing relationship between theCairn India Group and the rest of the Group Following the Flotation, the Cairn India Group will be a stand-alone business,which will operate independently from the rest of the Group. The Group (throughCairn UK Holdings) will, however, continue to hold a majority shareholding inCairn India and both businesses will continue to operate in South Asia. Thatbeing so, the Company and Cairn India have entered into a number of agreementsto manage certain aspects of their ongoing relationship. These include: • a relationship agreement relating to the management of certain aspects of thecorporate relationship between the Company, Cairn UK Holdings (the subsidiary ofthe Company through which it will hold a majority shareholding in Cairn Indiafollowing the Disposal and the Flotation) and Cairn India, including access tofinancial information relating to Cairn India and the adoption by Cairn India ofcertain standards of risk management, corporate governance and corporate socialresponsibility policies and procedures. The relationship agreement also statesthat the parties intend to seek to ensure that all dealings between Cairn Indiaand the rest of the Group are on terms approved by the audit committee of CairnIndia; • a non-compete agreement governing the relationship between Cairn India andCapricorn in respect of opportunities in South Asia; and • transition support agreements relating to the provision of certain corporateand technical functions which Cairn India and Cairn Energy India Pty Limited (amember of the Cairn India Holdings Group) may require from the Group during aninitial period of 6 months (or longer for certain legal and tax services)following the Flotation. In preparation for the Disposal and the Flotation, the registrations of the"Cairn" name and logo have been transferred to Cairn India and certainarrangements as regards the future use of the ''Cairn'' name have also beenagreed between the Company and Cairn India. In addition to these agreements andarrangements, the Group has certain rights under the Cairn India Articles,including (subject to the satisfaction of certain conditions) the right toappoint up to three directors of Cairn India. 9. Financial effects of the Disposal and the Flotation As at 30 June 2006, the Group had consolidated net assets of approximately$742.7 million. The illustrative consolidated net assets of the Group as at 30June 2006, on a pro forma basis and adjusted to reflect the Disposal and theFlotation (as if they had taken place at that date), would have beenapproximately $2.6 billion (before any adjustment is made for minorityinterests). 10. Current trading and prospects for the Group Current trading is in line with the trends and conditions observed in theinterim results of the Company for the six months ended 30 June 2006, announcedon 5 September 2006. The Board believes that the prospects for the Group in thecurrent financial year are satisfactory. 11. Extraordinary general meeting The Disposal, the Flotation, the adoption of the Cairn India Schemesand the adoption of the New Group Schemes are conditional, amongst other things,upon Shareholder approval being obtained at the EGM. As regards the Disposal,Shareholder approval is required under the Listing Rules of the UK ListingAuthority because of the size of the Cairn India Holdings Group (the subject ofthe Disposal) relative to the size of the Group. As regards the Flotation,Shareholder approval is required under the Listing Rules of the UK ListingAuthority because the Group's percentage interest in Cairn India (the companythat will be floated on the Exchanges) will be diluted as a result of theFlotation. As regards the adoption of the Cairn India Schemes and the New GroupSchemes, Shareholder approval is required pursuant to the Listing Rules of theUK Listing Authority. Accordingly, the circular includes a notice convening theEGM to be held at 50 Lothian Road, Edinburgh EH3 9BY at 11.00 a.m. on 17November 2006, at which ordinary resolutions will be proposed to approve theDisposal, the adoption of the Cairn India Schemes and the adoption of the NewGroup Schemes. 14. Recommendation The Board, which has received financial advice from Rothschild, considers theDisposal and the Flotation to be in the best interests of Shareholders as awhole. In providing advice to the Board, Rothschild has relied upon the Board'scommercial assessment of the Disposal and the Flotation. The Board alsoconsiders that the adoption of the Cairn India Schemes and the adoption of theNew Group Schemes are in the best interests of Shareholders as a whole. Accordingly, the Board recommends that Shareholders vote in favour of theresolutions to be proposed at the EGM, as they intend to do in respect of theirown beneficial holdings of Shares amounting in aggregate to 1,530,956 Shares,representing approximately 0.953 per cent. of the issued ordinary share capitalof the Company (as at 29 October 2006). 15. Other Unless otherwise indicated, all references in this document to ''poundssterling'' or ''£'' are to the lawful currency of the United Kingdom, allreferences to ''US dollars'', ''US$'' and ''$'' are to the lawful currency ofthe United States and all reference to ''Rupees'' or ''Rs'' are to the lawfulcurrency of India. For the purpose of this announcement and unless otherwisestated, a pound sterling to Rupee exchange rate of 1:85.15 and a US dollar toRupee exchange rate of 1:46.04 have been applied for illustrative purposes(source: Financial Times: closing mid rate of exchange on 30 June 2006). Suchtranslations should not be considered as a representation that such currenciescould have been or could be converted into pounds sterling, US dollars or Rupees(as the case may be) at any particular rate, the rates stated above or at all. Enquiries to:Analysts/InvestorsBill Gammell Chief Executive Tel: 0131 475 3000Kevin Hart Finance DirectorMike Watts Exploration Director MediaDavid Nisbet, Head of Group Communications Brunswick Group LLP:Patrick Handley, Mark Antelme Tel: 0207 404 5959 Cautionary note regarding forward-looking statements This announcement includes certain forward-looking statements with respect tothe financial condition, results of operations and business of the Group and ofthe Cairn India Group and certain plans and objectives of the Board. Theseforward-looking statements can be identified by the fact that they do not relateto any historical or current facts. Forward-looking statements often use wordssuch as ''proposed'', ''anticipate'', ''expect'', ''estimate'', ''intend'',''plan'', ''believe'', ''will'', ''may'', ''should'', ''would'', ''could'' orother words with a similar meaning. These statements are based on assumptionsand assessments made by the Board in light of its experience and its perceptionof historical trends, current conditions, expected future developments and otherfactors it believes appropriate. By their nature, forward-looking statementsinvolve risk and uncertainty and there are a number of factors that could causeactual results and developments to differ materially from those expressed in, orimplied by, such forward-looking statements. Actual results may differ materially from those suggested by the forward-lookingstatements due to risks or uncertainties associated with the Group's and theCairn India Group's expectations with respect to, but not limited to: (i)regulatory changes pertaining to the oil and gas industries in India, Nepal andBangladesh and their respective abilities to respond to those changes and toimplement successfully their respective strategies; (ii) their growth andexpansion; (iii) technological changes; (iv) exposures to market risks; (v)general economic and political conditions in India, Nepal and Bangladesh, whichhave an impact on their respective business activities or investments; (vi) themonetary and fiscal policies of India, Nepal and Bangladesh; (vii) inflation,deflation, unanticipated turbulence of the financial markets in India, theUnited Kingdom and globally; (viii) changes in domestic laws, regulations andtaxes; and (ix) changes in competition in their industry. For further discussions of factors that could cause the Group's or the CairnIndia Group's actual results to differ, please see the section entitled ''RiskFactors'' set out in Part IX of the Circular. By their nature, certain marketrisk disclosures are only estimates and could be materially different from whatactually occurs in the future. As a result, actual future gains or losses couldmaterially differ from those that have been estimated. These forward-looking statements speak only as at the date of this announcement.Save as required by the requirements of the Financial Services Authority or theLondon Stock Exchange plc or otherwise arising as a matter of law, the Companyexpressly disclaims any obligation or undertaking to disseminate afterpublication of this announcement any updates or revisions to any forward-lookingstatements contained herein to reflect any change in the Group's or the CairnIndia Group's expectations with regard thereto or any change in events,conditions or circumstances on which any such statement is based. Cairn India Limited ("Cairn India") proposes to undertake a public issue inIndia and has filed a Draft Red Herring Prospectus with the Securities andExchange Board of India. This announcement is not an offer for sale, or asolicitation of offers to purchase, the shares in Cairn India to be offered inthe offering (the "Shares") in any jurisdiction. No action will be taken topermit the Shares to be sold in a public offer in any jurisdiction outsideIndia. In particular, no offer to the public will be made in any Member State ofthe European Economic Area or in the United States. The Shares have not been andwill not be registered under the US Securities Act of 1933, as amended. Thisannouncement and the information contained herein are not for publication,distribution or release in, or into, the United States, Canada, Australia orJapan. Appendix I - Board of Cairn India The current members of the board of Cairn India are as follows: Sir Bill Gammell (Non-Executive Chairman) (aged 53) Sir Bill Gammell was appointed as Non-Executive Chairman of Cairn India on 22August 2006. He holds a BA in Economics and Accountancy from StirlingUniversity. He founded the Company and was appointed Chief Executive on itsinitial listing in 1988. He has over 25 years' experience in the internationaloil and gas industry. He is Chairman of the Scottish Institute of SportFoundation, a director of the Scottish Institute of Sport and a director ofArtemis AiM VCT plc. He was awarded a Knighthood for services to industry inScotland in the 2006 UK New Years Honours List. Norman Murray (Non-Executive Deputy Chairman) (aged 58) Norman Murray was appointed as Non-Executive Deputy Chairman of Cairn India on22 August 2006. He was appointed an independent non-executive director of theCompany in 1999 and Chairman in 2002. He is a qualified chartered accountant andhas been involved in the venture capital industry for over 25 years. He was aco-founder and former Chairman of Morgan Grenfell Private Equity Limited, adirector of Morgan Grenfell Asset Management Limited and a non-executivedirector of Bristow Helicopter Group Limited. He is a past Chairman of theBritish Venture Capital Association and is currently President of the Instituteof Chartered Accountants of Scotland. He is also a non-executive director ofGreene King plc, Robert Wiseman Dairies PLC and Penta Capital Partners HoldingsLimited. Rahul Dhir (Chief Executive Officer) (aged 40) Rahul Dhir joined the Group in May 2006 and was appointed Chief Executive ofCairn India on 22 August 2006. He was educated at the Indian Institute ofTechnology in Delhi (Bachelor of Technology), the University of Texas at Austin(Master of Science) and the Wharton Business School in Pennsylvania (Master ofBusiness Administration). He started his career as an oil and gas reservoirengineer before moving into investment banking. He has worked at SBC Warburg,Morgan Stanley and Merrill Lynch where he managed a team advising several majoroil companies and a number of independent E&P companies on merger andacquisition and capital market related issues. Before joining Cairn India, hewas managing director and co-head of Energy and Power Investment Banking atMerrill Lynch. Lawrence Smyth (Chief Operating Officer) (aged 61) Lawrence Smyth joined the Group (as managing director of Cairn Energy India PtyLimited) in April 2005 and was appointed a director of Cairn India on 22 August2006. He began his career in upstream refinery engineering and has been involvedin major projects. He also has experience of the exploration and productionaspects of the oil and gas industry. He has spent his 35-year professionalcareer in the oil and gas business. In the past decade, he has filled a numberof executive roles including, President of British Petroleum's business inColombia and President of the Sidanco Oil Company in Russia prior to its mergerwith TNK/BP. During his technical and managerial career, he has sat on a numberof company boards and industry committees. Jann Brown (Acting Chief Financial Officer) (aged 51) Jann Brown was appointed acting Chief Financial Officer of Cairn India in August2006. She is currently Group Financial Controller of the Company. It iscurrently envisaged that she will replace Kevin Hart as Finance Director of theCompany following the EGM. She has served on the Group management board forapproximately seven years. She holds an MA from the University of Edinburgh andjoined the Company after a career in the accountancy profession, mainly withKPMG. She is a member of the Institute of Chartered Accountants of Scotland andThe Chartered Institute of Taxation. Hamish Grossart (Non-Executive Director) (aged 49) Hamish Grossart was appointed a Non-Executive Director of Cairn India on 22August 2006. He was appointed an independent non-executive director of theCompany in 1994 and became Deputy Chairman in 1996. He has 20 years' experienceon public company boards in a wide range of industries, both in an executive andnon-executive capacity. He is currently also Deputy Chairman of BritishPolythene Industries PLC, Chairman of IndigoVision Group plc and a director ofArtemis Investment Management Limited. Naresh Chandra (Independent Non-Executive Director) (aged 72) Naresh Chandra was appointed a Non-Executive Director of Cairn India on 1September 2006. He was previously the Chairman of the Indian GovernmentCommittee on Corporate Governance, the Indian Government Ambassador to theUnited States, an adviser to the Indian Prime Minister, the Cabinet Secretary tothe Indian Government and Chief Secretary of the State of Rajasthan. Mr Chandrais currently a Non-Executive Director on a number of boards, including TataConsultancy Services Limited, Hindustan Motors Limited and Electrosteel CastingsLimited, amongst others. Aman Mehta (Independent Non-Executive Director) (aged 60) Aman Mehta was appointed a Non-Executive Director of Cairn India on 4 September2006. Until 2003 he was the Chief Executive Officer of HSBC Asia Pacific. He iscurrently also a non-executive director of Jet Airways (India) Limited, TataConsultancy Services Limited and Vedanta Resources plc. Dr Omkar Goswami (Independent Non-Executive Director) (aged 50) Dr Omkar Goswami was appointed a Non-Executive Director of Cairn India on 4September 2006. Previously, he was Chief Economist for the Confederation ofIndian Industry and the Editor of ''Business India''. Dr Goswami has sincefounded his own consultancy providing advice to companies on corporategovernance, corporate strategy, business restructuring and economic research. Heis currently a non-executive director on a number of boards, including InfosysTechnologies Limited. Appendix II - Definitions The following definitions apply throughout this announcement, unless the contextrequires otherwise: ''ABN AMRO the unincorporated equity capital markets joint venture betweenRothschild'' ABN AMRO Bank N.V. and Rothschild, represented in the role of book running lead manager by ABN AMRO Securities (India) Private Limited;''Board'' the board of directors of the Company;''Bombay Stock The Bombay Stock Exchange Limited;Exchange''"Cairn Energy the closing middle market quotation of a share as derived fromPLC Closing the Daily Official List of the London Stock Exchange plc as atShare Price" 27 October 2006 (the latest practicable date prior to the publication of this announcement);''Cairn India'' Cairn India Limited;''Cairn India the articles of association of Cairn India;Articles''''Cairn India the Cairn India Employee Stock Option Plan (2006), which isESOP'' proposed to be approved at the EGM;''Cairn India Cairn India and its subsidiary and associated undertakings (butGroup'' excluding the rest of the Group);''Cairn India Cairn India Holdings Limited, the subsidiary of Cairn UKHoldings'' Holdings that will be the subject of the Disposal;''Cairn India Cairn India Holdings and its subsidiary and associatedHoldings Group'' undertakings from time to time (but excluding the rest of the Group);''Cairn India the Cairn India Performance Option Plan (2006), which isPOP" proposed to be approved at the EGM;''Cairn India the Cairn India ESOP, Cairn India POP and the Cairn IndiaSchemes'' Senior Management Plan;''Cairn India the Cairn India Senior Management Plan, which is proposed to beSenior approved at the EGM;ManagementPlan''''Cairn India equity shares in the share capital of Cairn India;Shares''''Cairn LTIP'' the Cairn Energy PLC Long Term Incentive Plan (2002);''Cairn Share the Cairn Energy PLC 1996 Second Share Option Scheme, the CairnSchemes'' Energy PLC 2002 Unapproved Share Option Plan and the Cairn Energy PLC 2003 Approved Share Option Plan;''Cairn UK Cairn UK Holdings Limited, a wholly-owned subsidiary of theHoldings'' Company;''Capricorn'' Capricorn Energy Limited, a wholly-owned subsidiary of the Company;''Capricorn Capricorn and its subsidiary and associated undertakings (butGroup'' excluding the Cairn India Group);"Circular" The circular in connection with the proposed flotation of Cairn India Limited, approval of new share incentive arrangements and notice of extraordinary general meeting''the Company'' Cairn Energy PLC;''connected shall have the meaning given to it by section 346 of theperson'' Companies Act 1985, as amended;''Directors'' the directors of the Company;''Disposal'' the proposed disposal of Cairn India Holdings by Cairn UK Holdings to Cairn India pursuant to the Subscription and Sale Agreement and the Share Purchase Deed;''EGM'' the extraordinary general meeting of the Company to be held at 50 Lothian Road, Edinburgh EH3 9BY at 11.00 a.m. on 17 November 2006 (or any adjournment thereof);''Exchanges'' the Bombay Stock Exchange and the National Stock Exchange;''Flotation'' the proposed flotation of Cairn India on each of the Exchanges and the associated offerings of Cairn India Shares and other arrangements connected therewith, as more fully described in the Circular;''the Group'' the Company and its subsidiary and associated undertakings from time to time (including the Cairn India Group following the Disposal);''Indian the business of developing the oil and gas assets and exploringBusiness'' the exploration acreage referred to in Part II of the Circular;''Indian The Government of India;Government''''Merrill DSP Merrill Lynch Limited;Lynch''''Morgan JM Morgan Stanley Private Limited;Stanley''''National Stock The National Stock Exchange of India Limited;Exchange''''NELP'' India's New Exploration Licensing Policy;"NELP VI" the sixth NELP licensing round taking place in 2006;''New Group the Company Long Term Incentive Plan (2006), which it isLTIP'' proposed be approved at the EGM;''New Group the New Group LTIP and the New Group Share Option Plan;Schemes''''New Group the Company Share Option Plan (2006), which it is proposed beShare Option approved at the EGM;Plan''''Offer Price'' the final price at which Cairn India Shares are allotted and issued in the Flotation;''Over Allotment the option agreement among Cairn India, Cairn UK Holdings andOption'' Merrill Lynch dated 12 October 2006 to enable Merrill Lynch to over-allot Cairn India Shares in the Flotation and to undertake price stabilisation activities following the Flotation;"Rajasthan Block RJ-ON-90/1, India;Block""Rajasthan a development area of 1,858 km2 in the Rajasthan Block, whichDevelopment includes the Mangala, Aishwariya, Saraswati and RaageshwariArea" fields;''RBI'' the Reserve Bank of India;''Relationship the agreement among Cairn India, Cairn UK Holdings and theAgreement'' Company dated 4 October 2006 setting out certain aspects of the relationship between the Group and the Cairn India Group;''Resolutions'' the resolutions to be proposed at the EGM, as set out in the notice of EGM at the end of the Circular;''Rothschild'' N M Rothschild & Sons Limited;''SEBI'' The Securities and Exchange Board of India constituted under the Securities and Exchange Board of India Act 1992;''SEBI SEBI (Disclosure and Investor Protection) Guidelines 2000, asGuidelines'' amended from time to time;''Shareholders'' holders of Shares;"Share Purchase the share purchase deed among the Company, Cairn India andDeed" Cairn UK Holdings dated 12 October 2006;''Shares'' ordinary shares of 10 pence each in the share capital of the Company;''Subscription the subscription and sale agreement among the Company, Cairnand Sale India Holdings, Cairn UK Holdings and Cairn India dated 15Agreement'' September 2006 for the sale by Cairn UK Holdings and the purchase by Cairn India of 21.85 per cent. of the issued share capital of Cairn India Holdings (as amended by an amendment agreement dated 5 October 2006);''Underwriters'' ABN AMRO Rothschild, Merrill Lynch, Morgan Stanley, Citigroup Global Markets India Private Limited, Kotak Mahindra Capital Company Limited, HSBC Securities and Capital Markets (India) Private Limited, ABN AMRO Asia Equities (India) Limited, JM Morgan Stanley Financial Services Private Limited and Kotak Securities Limited;''UK or ''United the United Kingdom of Great Britain and Northern Ireland;Kingdom''''UK Listing the Financial Services Authority acting in its capacity as theAuthority'' competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000; and''US'' or '' the United States of America, its territories and possessions,United States'' any State of the United States of America and the District of Columbia. -------------------------- (1) Or approximately 67.2 per cent. in the event that the Over Allotment Optionis exercised in full (2) Assuming Cairn India was to retain funds amounting to Rs 27.1 billion(£316.3 million) from the expected gross proceeds of the Flotation of US$1.8billion (or approximately US$1.9 billion in the event that the Over AllotmentOption is exercised in full) to fund its ongoing working capital requirements (3) Based on a pound sterling to Rupee exchange rate of 1:85.7097, a US dollarto Rupee exchange rate of 1:45.19 and a pound sterling to US dollar exchangerate of 1:1.8967 (source: Financial Times: closing mid rate of exchange on 27October 2006) 1 The currency amounts set out in the paragraph entitled "Consideration" arebased on a pound sterling to Rupee exchange rate of 1:85.7097, a US dollar toRupee exchange rate of 1:45.19 and a pound sterling to US dollar exchange rateof 1:1.8967 (source: Financial Times: closing mid rate of exchange on 27 October2006) (5) The currency amounts set out in the paragraph entitled "The Disposal" arebased on a pound sterling to Rupee exchange rate of 1:85.7097, a US dollar toRupee exchange rate of 1:45.19 and a pound sterling to US dollar exchange rateof 1:1.8967 (source: Financial Times: closing mid rate of exchange on 27 October2006) (6) The currency amounts set out in this paragraph are based on a pound sterlingto Rupee exchange rate of 1:85.7097, a US dollar to Rupee exchange rate of 1:45.19 and a pound sterling to US dollar exchange rate of 1:1.8967 (source:Financial Times: closing mid rate of exchange on 27 October 2006) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Capricorn Energy PLC