M r. V i k r a m L i m a y e Chairman M r. E r i c W a r d D r. R a j e e v U b e r o i M r. S u n i l K a k a r

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1 290 i d f c a n n u a l r e p o r t Idfc Investment Advisors Limited Board Of Directors M r. V i k r a m L i m a y e Chairman M r. E r i c W a r d D r. R a j e e v U b e r o i M r. S u n i l K a k a r Auditors S. V. G h a t a l i a & A s s o c i a t e s Chartered Accountants Principal Bankers H d f c B a n k L i m i t e d Registered Office One India Bulls Centre, 841 Jupiter Mills Compound, Senapati Bapat Marg, Elphinstone Road (West), Mumbai

2 I D F C i n v e s t m e n t a d v i s o r s L I M I T E D 291 D i r e c t o r s R e p o r t TO THE MEMBERS We are pleased to present the Sixth Annual Report to the Members, along with the Audited Profit and Loss Account for the period ended and the Balance Sheet as on. F I N A N C I A L R E S U LT S (Amount in `) Year ended Year ended Gross Income 125,008, ,036,045 Profit before Interest, Depreciation & Tax 39,906,871 14,622,674 Provision for Tax 12,862,759 7,955,803 Profit after Tax 27,044,112 6,666,871 P R I N C I PA L A CT I V I T I E S The Company is registered as a Portfolio Manager with the Securities and Exchange Board of India (SEBI) to carry out Portfolio Management Services pursuant to SEBI (Portfolio Managers) Regulations, IDFC Hybrid Infrastructure Portfolio (HIP) was the first portfolio offering for domestic retail investors under the PMS platform of the Company. The investment objective of HIP is to invest in permitted securities/instruments issued by companies operating in the Infrastructure space, and endeavour to achieve risk adjusted medium to longterm capital appreciation. The proposed investment strategy is summarised as below: Focus on growth opportunities/companies: The idea is to provide growth capital for business opportunities especially to midsized companies with sound track record and reputation and ride the growth curve with them. Optimise Returns through Portfolio Diversification: In order to achieve superior risk adjusted portfolio returns the Portfolio Manager will seek to achieve a diversified portfolio. This PMS offering received overwhelming response from investors. HIP discretionary portfolio collected approximately ` crore in capital commitment. HIP investors have been given online access wherein they can log into the website for a 24x7 access to Portfolio and Capital Registers. More reports are planned and would be subsequently added to the bouquet of existing reports. The quarterly newsletters from the Fund Managers are also made available on the site. The second PMS product offering was IDFC Growth Portfolio (IGP). The investment objective of IGP is to focus on companies seeking to benefit from the rise in the purchasing power of the Indian middle class. Typically, such companies would stand to benefit exponentially from the growth boom prevalent in the country. The growth boom currently is at a nascent stage and it is expected that the effects and impact of the boom would continue to be felt for several years. The third PMS product offering was IDFC Farm to Fork Portfolio with an objective is to focus on companies which qualify as value adders for agricultural output. The fourth PMS product offering was IDFC Farm Opportunities Portfolio with an objective to look at investing over the medium term into companies which essentially fall along the agricultural value chain. The focus would be on companies which aid and abet the agricultural process and who have shown strong growth in the recent past. The portfolio would be limited to 15 companies on an average. The Fifth PMS product offering was IDFC India Consumption Portfolio with an objective to invest in companies which have taken advantage of these changes in consumption trends and are focusing their product lines on these changes. The companies would typically stand to benefit from the consumption boom which is taking place in India. The Sixth PMS product offering was IDFC Aspire Portfolio with an objective to invest in companies which cater to the increasingly aspirant needs of the consumer. The portfolio is to be constructed keeping in view the aspiration needs of the Indian population and the companies which would benefit from these changes. The companies typically would focus not on mass market products but on premium and luxury products. The Seventh PMS product offering was IDFC Financials Portfolio with an objective to generate capital appreciation over the medium term by investing in a diversified pool of listed equities. The portfolio shall endeavour to invest in companies that are expected to benefit from an important driver of domestic consumption Financial services.

3 292 i d f c a n n u a l r e p o r t D i r e c t o r s R e p o r t The Company also acts as an Investment Advisor to India Infrastructure Opportunities Fund Ltd. ( the Fund ), and its activities are to provide investment advisory services, identify, evaluate investment opportunities to the Fund and to monitor investments of the Fund in the Indian companies. D I V I D E N D The Company wishes to retain profits to maintain future growth. Hence the Board of Directors do not recommend declaring any equity dividend for the financial year P U B L I C D E P O S I T S During the year under review, your Company has not accepted deposits under the provisions of Section 58A of the Companies Act, S H A R E C A P I T A L No further equity share capital was issued by the Company during the year. D I R E CT O R S In terms of the provisions of the Articles of Association of the Company and Companies Act, 1956, Dr. Rajeev Uberoi would retire at the ensuing Annual General Meeting and being eligible, offers himself for reappointment. Mr. Sadashiv Rao resigned from the directorship of the Company with effect from November 23, The Board wishes to place on record its sincere appreciation for his guidance and valuable contribution to the Company. In accordance with the provisions of the Companies Act, 1956 and the Company s Articles of Association, Mr. Eric Ward was appointed as additional director of the Company by the Board of Directors on December 8, 2011 and was confirmed at the Extraordinary General Meeting of the members of the Company held on December 8, A U D I T C O M M I TT E E During the year, Mr. Sadashiv Rao and Mr. Vikram Limaye resigned as members of the Audit Committee. The Audit Committee was reconstituted on December 8, 2011 comprising of three Directors, Mr. Sunil Kakar as Chairman, Dr. Rajeev Uberoi and Mr. Eric Ward. The functions of the Committee include reviewing the half yearly and annual financial statements, internal control systems and significant accounting policies of the Company and discussing the audit findings and recommendations of the internal and statutory auditors of the Company. Five Board and two Audit Committee meetings were held during the year. A U D I T O R S M/s. M. P. Chitale, Chartered Accountants, retires at the conclusion of ensuing Annual General Meeting. S. V. Ghatalia & Associates, Chartered Accountants shall be appointed as new auditors in place of retiring Auditors subject to the approval of the shareholders of the Company in the forthcoming Annual General Meeting S. V. Ghatalia & Associates, Chartered Accountants have confirmed that their appointment, if made, would be in conformity with the provisions of Sections 224 and 226 of the Companies Act, 1956 and have also indicated their willingness to be appointed. You are requested to consider their appointment. F O R E I G N E X C H A N G E E A R N I N G S A N D E X P E N D I T U R E The details of income or expenditure in foreign currency are given in Note No. 25 to the Financial Statements. P E R S O N N E L A N D O T H E R M ATT E R S As required by the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, names and other particulars of the employees are set out in the annexure to the Directors Report. Since the Company does not own any manufacturing facility, the disclosure of information on other matters required to be disclosed in terms of Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1998, are not applicable and hence not given. D I R E CT O R S R E S P O N S I B I L I TY ST AT E M E N T The Directors confirm that: in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to the material departures; they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at and the loss of the Company for the year ended on that date;

4 I D F C i n v e s t m e n t a d v i s o r s L I M I T E D 293 D i r e c t o r s R e p o r t they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company and detecting fraud and other irregularities; and they have prepared the annual accounts on a going concern basis. A C K N OW L E D G E M E N T S The Directors thank the investors of India Infrastructure Opportunities Fund, IDFC SPICE Fund, clients of discretionary PMS and regulatory authorities such as the Reserve Bank of India and the Securities and Exchange Board of India for their continued support to the Company. The Directors also express their gratitude for the unstinted support and guidance received from IDFC Asset Management Company Limited and other IDFC group companies. For and on behalf of the Board of Directors V i k r a m L i m ay e Chairman Mumbai, June 8, 2012

5 294 i d f c a n n u a l r e p o r t A u d i t o r s R e p o r t To The Members of IDFC Investment Advisors Limited We have audited the attached Balance Sheet of IDFC Investment Advisors Limited as at and also the Statement of Profit and Loss and the Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company s Management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Auditing Standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by Management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. (1) As required by the Companies Auditor s Report Order (CARO) 2003, issued by the Central Government of India in terms of Section 227 (4A) of the Companies Act, 1956, we enclose as Annexure, a Statement on the matters specified in paragraphs 4 and 5 of the said Order. (2) Further to our comments in the Annexure referred to in paragraph (1) above, we state that: (a) (b) (c) (d) (e) (f) We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit; In our opinion, proper books of account as required by law have been kept by the Company, so far as appears from our examination of those books; The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with in this report are in agreement with the books of account; In our opinion, the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in Section 211 (3C) of the Companies Act, 1956 to the extent applicable; On the basis of written representation received by the Company from the Directors, we report that none of the Directors is disqualified as on from being appointed as a Director in terms of clause (g) of sub section (1) of Section 274 of the Companies Act, 1956; In our opinion and to the best of our information and according to the explanations given to us, the accounts read with notes thereon give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India: (i) in so far as it relates to the Balance Sheet, of the state of affairs of the Company as at, (ii) in so far as it relates to the Statement of Profit and Loss, of the profit of the Company for the year ended on that date, and (iii) in so far as it relates to the Cash Flow Statement of the Company for the year ended on that date. For M. P. Chitale & Co. Chartered Accountants (Registration No W) V i d y a B a r j e Partner (Membership No ) Mumbai, April 23, 2012

6 I D F C i n v e s t m e n t a d v i s o r s L I M I T E D 295 A n n e x u r e to the Auditors Report Annexure referred to in paragraph 1 of the report of even date of the Auditors to the members of IDFC Investment Advisors Limited (i) (a) The Company has maintained proper records, showing full particulars including quantitative details and situation of Fixed Assets. (b) The fixed assets were physically verified during the year by the Management in accordance with a program of verification, which in our opinion provides for the physical verification of all the fixed assets at reasonable intervals and discrepancies observed during the verification have been properly dealt with in the books of account. (ii) (c) The Company has not disposed of substantial part of fixed assets during the year. The Company has not granted any loans to Companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, (iii) The Company has not taken any loans from Companies, firms or other parties covered in the register maintained under Section 301 of the Companies Act, (iv) In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for purchase of fixed assets and for the services rendered. (v) In our opinion and according to the information and explanations given to us, there are no transactions that need to be entered into a register in pursuance of Section 301 of the Companies Act, (vi) In our opinion and according to the information and explanations given to us, the Company has not accepted any deposits from the public. (vii) Company has an internal audit system commensurate with its size and nature of business. (viii) Central Government has not prescribed maintenance of cost records under Section 209 (1) (d) of the Companies Act, (ix) (a) (x) (b) According to the information and explanations given to us and the records of the Company examined by us, in our opinion, the company is regular in depositing undisputed statutory dues including Provident Fund, Investor Education and Protection Fund, employees state insurance, Incometax, Salestax, Wealth tax, Service Tax, Customs duty, Excise duty, cess and any other statutory dues as applicable with the appropriate authorities. According to the information and explanations given to us, there were no undisputed amounts payable in respect of Provident Fund, Investor Education and Protection Fund, Employees state insurance, Incometax, Salestax, Wealth tax, Service Tax, Customs duty, Excise duty, cess and any other statutory dues outstanding as at for a period of more than six months from the date they became payable. There are no dues of Incometax, Sales Tax, Wealth Tax, Service Tax or Cess which have not been deposited on account of any dispute except as disclosed below. Details of income tax which were not deposited as on on account of dispute are: Amount in ` Period to which it relates Forum where the dispute is pending 8,044,089 A.Y ITAT (Appeal) 6,624,881 A.Y ITAT (Appeal) 2,527,190 A.Y CIT (Appeal) The Company does not have accumulated losses at the end of the financial year and it has not incurred any cash losses in the financial year ended on that date or in the immediately preceding financial year. (xi) In our opinion and according to the information and explanations given to us, during the year, the Company has not taken any loan and no amounts were due towards principal or interest to financial institution, bank or debenture holders during the year. (xii) According to the information and explanations given to us, the Company has not granted loans and advances on the basis of security by way of pledge of shares, debentures and other securities. (xiii) According to the information and explanations given to us, the Company is not dealing or trading in shares, securities, debentures and other securities. (xiv) According to the information and explanations given to us, the Company has not given any guarantee for loans taken by others from bank or financial institutions. (xv) According to the information and explanations given to us, the Company has not taken any term loan. (xvi) According to the information and explanations given to us, during the year, the Company has not raised any funds. (xvii) During the year, the Company has not made any preferential allotment of shares to parties and companies covered and recorded in the register maintained under Section 301 of the Act.

7 296 i d f c a n n u a l r e p o r t A n n e x u r e to the Auditors Report (xviii) According to the information and explanations given to us, the Company has not issued any debentures up to. (xix) The Company has not raised money from public issue. (xx) According to the information and explanations given to us, no fraud on or by the Company has been noticed or reported during the year. (xxi) Considering the nature of the business and the services rendered by the Company, clauses (ii) and (xiii) under Clause 4 of the CARO are not applicable. For M. P. Chitale & Co. Chartered Accountants (Registration No W) V i d y a B a r j e Partner (Membership No ) Mumbai, April 23, 2012

8 I D F C i n v e s t m e n t a d v i s o r s L I M I T E D 297 B a l a n c e S h e e t as at march 31, 2012 Notes as at as at I. E q u i ty A n d L i a b i l i t i e s S h a r eholders funds (a) Share capital 3 100,000, ,000,000 (b) Reserves and surplus 4 42,632,093 15,587, ,632, ,587,982 Noncurrent liabilities (a) Longterm provisions 5 2,594,596 3,866,460 2,594,596 3,866,460 Current liabilities (a) Trade Payables 41,454,806 8,822,387 (b) Other current liabilities 6 80,365,054 19,565,326 (b) Shortterm provisions 7 426, , ,246,473 28,567,369 TOTA L 267,473, ,021,811 I I. A S S E T S Noncurrent assets (a) Fixed assets 8 (i) Tangible assets 1,021,143 1,136,204 (ii) Intangible assets 998,836 2,780,020 2,019,979 3,916,224 (b) Noncurrent investments 9 10,000 (c) Deferred tax assets (net) 800, ,093 (d) Longterm loans and advances 12 49,373,840 14,051,603 Total Non Current Assets 52,204,154 18,830,920 Current assets (a) Current investments ,816,727 98,281,920 (b) Trade receivables 11 5,305,305 4,988,545 (c) Cash and bank balances 2,165,719 3,165,753 (d) Shortterm loans and advances 12 23,981,257 22,754,673 Total Current Assets 215,269, ,190,891 TOTA L 267,473, ,021,811 Summary of significant accounting policies 2 See accompanying notes to the financial statements. In terms of our report of the even date attached. For M.P. CHITALE & CO. Chartered Accountants (Registration No W) For and on behalf of the Board of Directors of IDFC INVESTMENT ADVISORS Limited V I D Y A B A R J E S u n i l K a k a r R a j e e v U b e r o i Partner Director Director (Membership No ) J y o t h i K r i s h n a n Mumbai April 23, 2012 Company Secretary & Manager

9 298 i d f c a n n u a l r e p o r t Statement of profit and loss For The year ended I. I n c o m e Notes (` ) Revenue from operations ,728, ,309,995 Other income 14 9,279,807 4,726,050 Tota l Inco m e (I) 125,008, ,036,045 I I. E x p e n s e s Employee benefits expense 15 43,755,218 86,149,262 Depreciation and amortisation expense 8 2,210,887 2,397,681 Other expenses 16 39,135,454 66,866,426 Tota l expenses (II) 85,101, ,413,369 I I I. P r o f i t B e f o r e T a x ( I I I ) 39,906,871 14,622,676 I V. T a x e x p e n s e Current tax 12,800,000 9,200,000 Deferred tax 62,759 (1,244,197) Tota l ta x expense (IV) 12,862,759 7,955,803 V. P r o f i t A ft e r T a x ( I I I I V ) 27,044,112 6,666,873 V i. E a r n i n g s p e r e q u i ty s h a r e ( n o m i n a l v a l u e p e r s h a r e ` 1 0 ) Basic Summary of significant accounting policies 2 See accompanying notes to the financial statements. In terms of our report of the even date attached. For M.P. CHITALE & CO. Chartered Accountants (Registration No W) For and on behalf of the Board of Directors of IDFC INVESTMENT ADVISORS Limited V I D Y A B A R J E S u n i l K a k a r R a j e e v U b e r o i Partner Director Director (Membership No ) J y o t h i K r i s h n a n Mumbai April 23, 2012 Company Secretary & Manager

10 I D F C i n v e s t m e n t a d v i s o r s L I M I T E D 299 C a s h f l o w s tat e m e n t For The year ended A. B. C a s h F l ow f r o m O p e r at i n g A ct i v i t i e s Profit Before Tax 39,906,871 14,622,676 Adjustments for: Provision for gratuity 3,021,210 4,046,116 Depreciation/amortisation 2,210,887 2,397,681 Fixed asset writen off 27,057 Operat i n g loss before Working Capital Changes 45,166,025 21,066,473 Movements in working capital : (Increase)/Decrease in loans and advances (22,687,555) 7,781,448 (Increase)/Decrease in sundry debtors (316,760) 95,939,447 Increase/(Decrease) in current liabilities 89,386,030 (53,652,224) Cas h generat e d from Operations 111,547,740 71,135,144 Direct taxes paid (26,661,265) (9,855,370) N E T CAS H ( US E D I N )/FROM OPERATING ACTIVITIES (A) 84,886,475 61,279,774 C a s h f l ow f r o m I n v e st i n g A ct i v i t i e s Purchase of fixed assets (352,281) (603,791) Sale Proceeds from fixed assets 10,580 23,325 Purchase of investments (10,000) NET CASH (USED IN) INVESTING ACTIVITIES (B) (351,701) (580,466) Net change in cash and cash equivalent (A+B) 84,534,774 60,699,308 Cash and cash equivalent as at the beginning of the year 101,447,673 40,748,365 Cash and cash equivalent as at the end of the year (refer note below) 185,982, ,447,673 (84,534,774) (60,699,308) Note to Cash Flow Statement : Cash & cash equivalents Cash and bank balance 2,165,719 3,165,753 Add : Current investments at cost 183,816,727 98,281, ,982, ,447,673 In terms of our report of the even date attached. For M.P. CHITALE & CO. Chartered Accountants (Registration No W) For and on behalf of the Board of Directors of IDFC INVESTMENT ADVISORS Limited V I D Y A B A R J E S u n i l K a k a r R a j e e v U b e r o i Partner Director Director (Membership No ) J y o t h i K r i s h n a n Mumbai April 23, 2012 Company Secretary & Manager

11 300 i d f c a n n u a l r e p o r t n o t e s t o f i n a n c i a l s tat e m e n t s 1 N at u r e o f O p e r at i o n s The Company provides Portfolio Management Services through its various products. It also provides investment advisory services to Indian as well as Offshore Funds. 2 S i g n i f i c a n t a c c o u n t i n g p o l i c i e s a. P r e s e n t at i o n a n d d i s c l o s u r e o f f i n a n c i a l st at e m e n t s During the year ended, the revised schedule VI notified under the Companies Act, 1956 has become applicable to the Company, for preparation and presentation of its financial statements. Accordingly, the figures for the previous year have been regrouped, wherever necessary to confirm with the current year s classification. b. Sy st e m o f A c c o u n t i n g The Company adopts the accrual concept in the preparation of the accounts. The preparation of financial statements as per this policy requires the Management to make estimates and assumptions considered in the reported amounts of assets and liabilities (including contingent liabilities) as of the date of the financial statements and the reported income and expenses during the reporting period. Management believes that the estimates used in preparation of the financial statements are prudent and reasonable. Future results could differ from these estimates. c. I n f l at i o n Assets and liabilities are recorded at historical cost to the Company. These costs are not adjusted to reflect the changing value in the purchasing power of money. d. I n v e st m e n t s Investments which are readily realisable and intended to be held for not more than one year from the date on which such investments are made are classified as current investments in accordance with the Accounting Standard 13 on Accounting for Investments as notified by the Companies (Accounting Standards) Rules, All other investments are classified as longterm investments. Long Term Investments are carried at acquisition cost. A provision is made for diminution other than temporary on an individual basis. Current Investments are carried at the lower of cost or fair value / market value on an individual basis. e. F i x e d A s s e t s a n d I n t a n g i b l e A s s e t s Depreciation on tangible fixed assets, excluding certain electronic items is provided on the written down value method, at the rates prescribed by Schedule XIV of the Companies Act, Certain electronic items are depreciated over a period of two years on straightline method based on the Management s estimate of the useful life of assets. Depreciation on additions during the year is provided on a prorata basis. Assets costing less than ` 5,000 each are written off in the year of capitalisation. Intangible assets and amortisation Intangible Assets comprising of computer software are stated at cost of acquisition, including any cost attributable for bringing the asset to its working condition, less accumulated amortisation. Any technology support cost or annual maintenance cost for such software is charged annually to the Statement of Profit and Loss. Intangible assets are being amortised over a period of three years on a straightline method. f. R e v e n u e R e c o g n i t i o n Revenue is recognized when no significant uncertainty as regards to its measurement and collection exists. g. O p e r at i n g L e a s e s Leases of assets under which all the risks and benefits of ownership are effectively retained by the lessor are classified as operating leases. Payments under operating leases are charged to the Statement of Profit and Loss, on a straight line basis, over the lease term. h. I n c o m e T a x The accounting treatment for incometax in respect of the Company s income is based on Accounting Standard 22 on Accounting for Taxes on Income as notified by the Companies (Accounting Standards) Rules, The provision made for incometax in the accounts comprises both, the current tax and the deferred tax. The deferred tax assets and liabilities for the year arising on account of timing differences are recognised in the Statement of Profit and Loss and the cumulative effect thereof is reflected in the Balance Sheet. Deferred tax is measured based on the tax rates and the tax laws enacted or substantively enacted at the reporting date. Deferred tax assets are recognised only to the extent that there is reasonable certainty that sufficient future taxable income will be available against which such deferred tax assets can be realised. In situations where the Company has unabsorbed depreciation or carried forward losses, deferred tax assets are recognised only if there is virtual certainty supported by convincing evidence that the same can be realised against future taxable profits.

12 I D F C i n v e s t m e n t a d v i s o r s L I M I T E D 301 n o t e s t o f i n a n c i a l s tat e m e n t s i. F o r e i g n C u r r e n c y T r a n s a ct i o n s The transactions in foreign exchange are accounted at exchange rate prevailing on the date of transactions. Any exchange gains or losses arising from the settlement of such transactions are recognised in the Statement of Profit and Loss. Receivables/Payables in foreign currency at the year end are translated at the yearend exchange rate. j. P r o v i s i o n s A provision is recognised when the Company has a present obligation as a result of past event; it is probable that an outflow of resources will be required to settle the obligation, in respect of which a reliable estimate can be made. Provisions are not discounted to its present value and are determined based on best estimate required to settle the obligation at the Balance Sheet date. These are reviewed at each Balance Sheet date and adjusted to reflect the current best estimates. k. E m p l o y e e b e n e f i t s Defined contribution plan The Company s contribution to provident fund is charged to the statement of profit and loss for the year when the contribution is due and the same is deposited with the Regional Provident Fund Commissioner. The Company has also taken a superannuation policy for future payment of superannuation and the Company s contribution paid/payable during the year is charged to the Statement of Profit and Loss for the year. Defined benefit plan The net present value of the Company s obligation towards gratuity to employees is funded and actuarially determined as at the reporting date based on the projected unit credit method. Actuarial gains and losses are recognised in the Statement of Profit and Loss for the year. Employees are not permitted to accumulated leave. Based on the leave rules of the Company, unavailed privilege leave to the extent encashable is paid to the employees and charged to the Statement of Profit and Loss. l. B r o k e r a g e E x p e n s e s Brokerage is paid to brokers as per the terms of agreement entered into with respective brokers. In case of IDFC Hybrid Infrastructure Portfolio ( HIP ) product & IDFC Spice Fund product, the Company amortises the brokerage expenses of corporate brokers over the tenure of the product or commitment period. Unamortised Brokerage is treated as current loans and advances considering the normal operating cycle of the period. 3 S h a r e C a p i ta l As At As At Number Number Authorised 10,000,000 Equity shares of `10 each 10,000, ,000,000 10,000, ,000,000 Issu e d, Su bsc r i bed & Paidup 10,000,000 Equity shares of ` 10 each fully paidup 10,000, ,000,000 10,000, ,000,000 Tota l 100,000, ,000,000 (a) Reconciliation of the number of shares outstanding at the beginning and at the end of the year. Equity Shares of ` 10 each Equity Shares of ` 10 each Number Number Outstanding at the beginning of the year 10,000, ,000,000 10,000, ,000,000 Issued during the year Outstanding at the end of the year 10,000, ,000,000 10,000, ,000,000 (b) Terms/rights attached to equity shares The Company has only one class of equity shares having a par value of ` 10 per share. Each holder of equity shares is entitled to one vote per share. (c) Deta i ls of the Shareholders Holding more than 5% of the Share capital Name of Shareholder As At As At Number % of Holding Number % of Holding IDFC Asset Management Company Limited 10,000, % 10,000, %

13 302 i d f c a n n u a l r e p o r t n o t e s t o f i n a n c i a l s tat e m e n t s 4 R e s e r v e s & S u r p l u s As At As At Surplus in the Statement of Profit and Loss Opening balance 15,587,981 8,921,108 Add : Net Profit for the year 27,044,112 6,666,873 Tota l 42,632,093 15,587,981 5 L o n g T e r m P r o v i s i o n s As At As At Provision for employee benefits Gratuity 2,594,596 3,866,460 Tota l 2,594,596 3,866,460 6 O t h e r C u r r e n t L i a b i l i t i e s As At As At Fees received in advance 54,750,943 Others (Statutory & other Payables) 25,614,111 19,565,326 Tota l 80,365,054 19,565,326 7 Short Term Provisions As At As At Provision for employee benefits 426, ,656 Tota l 426, ,656 8 F I X E D A S S E T S GROSS BLOCK DEPRECIATION AND AMORTISATION NET BLOCK As at April 1, 2011 Additions D elet ions B alance as at As at A pril 1, 2011 Additions D elet ions Balance as at Balance as at Balance as at A B TA N G I B L E S Furniture and fittings 299, ,632 79,256 39, , , ,376 Office equipment 1,237,447 69, ,568 1,158, , , , , , ,693 Computer hardware 1,766, , ,388 1,661,094 1,389, , ,912 1,275, , ,135 I N TA N G I B L E Computer software 6,462,267 6,462,267 3,682,247 1,781,184 5,463, ,836 2,780,020 Tota l Ta n g i b l e & Intangible Asset 9,766, , ,956 9,581,472 5,849,924 2,210, ,319 7,561,492 2,019,979 3,916,224 Previous Year 9,194, ,787 32,000 9,766,147 3,460,917 2,397,681 8,674 5,849,924 3,916,224

14 I D F C i n v e s t m e n t a d v i s o r s L I M I T E D 303 n o t e s t o f i n a n c i a l s tat e m e n t s 9 N o n C u r r e n t I n v e s t m e n t s As At As At Number Number A. Investments in Venture Capital Units (Unquoted) IDFC Spice Fund 10,000 10,000 Tota l 10, C u r r e n t I n v e s t m e n t s A. M utua l Fu n ds (Unquoted) Number of Units As At As At Number of Units IDFC Money Manager FundTreasury PlanInst Plan BGrowth 4,811,412 82,487,727 6,264,359 98,281,920 IDFC Dynamic Bond Fund Plan B Growth 8,183, ,329,000 Tota l 183,816,727 98,281,920 (a) (b) Current investments are carried at the lower of cost or fair value on an individual basis. Aggregate amount of investments in unquoted mutual funds Cost 183,816,727 98,281,920 Market value 184,429,073 98,370,481 Market value of investments in unquoted mutual funds represents the repurchase price of the units issued by the mutual funds. 1 1 T r a d e R e c e i va b l e s As At As At Noncurrent portion Current maturities Noncurrent portion Current maturities Considered Good 5,305,305 4,988,544 Tota l 5,305,305 4,988, L o a n s a n d a d va n c e s ( u n s e c u r e d, c o n s i d e r e d g o o d ) As At As At Noncurrent portion Current maturities Noncurrent portion Current maturities Other loans and advances Advances recoverable in cash or in kind or for value to be received 21,805,500 23,981, ,528 22,754,673 Advance payment of Income tax (net of provision) 27,568,340 13,707,075 Tota l Cu r r e n t Loa n s and Advances 49,373,840 23,981,257 14,051,603 22,754, R e v e n u e f r o m O p e r at i o n s Portfolio management fees 100,404, ,099,218 Performance fees 2,046,822 15,347,197 Advisory fees 13,277,690 33,863,580 Tota l 115,728, ,309,995

15 304 i d f c a n n u a l r e p o r t n o t e s t o f i n a n c i a l s tat e m e n t s 1 4 O t h e r I n c o m e Dividend from units of mutual fund 1,176,603 4,686,050 Profit on sale of investements 8,088,204 40,000 Miscellaneous income 15,000 Tota l 9,279,807 4,726, E m p l o y e e B e n e f i t E x p e n s e s Salaries & bonus 40,878,177 84,687,671 Contribution to provident and other funds 1,564,605 1,120,426 Staff welfare expenses 1,312, ,165 Tota l 43,755,218 86,149,262 (a) Salaries & bonus include additional charge of ` 450,000 on account of change in estimate in provision of bonus in previous year ended 31 March O t h e r E x p e n s e s Rent 1, ,001 Repairs and Maintenance Others 196,093 7,548 Insurance Charges 53, ,703 Brokerage Expenses 21,376,362 45,137,246 Travelling and Conveyance 1,970,938 1,270,796 Printing and Stationery 1,609,915 1,650,372 Postage, Telephone and Fax 183,615 1,517,477 Advertising and Publicity 2,028, ,603 Professional Fees 909,704 4,686,809 Data Storage & Retrieval Charges 1,373,935 Loss on Foreign Exchange Fluctuation 11,127 2,618,630 Computer Software Expenses 1,984,739 1,965,419 Interest & other expense 1, ,192 Registration, Notary & Franking Charges 2,498, ,374 Membership and Subscription 1,286,533 1,306,393 Business Centre Expenses 2,676,000 2,676,000 Miscellaneous Expenses 125,844 1,582,725 Auditors remuneration (refer note a below) 847, ,138 Tota l 39,135,454 66,866,426 (a) Break up of Auditors remuneration: Audit fees 250, ,000 Tax audit fees 75,000 75,000 Other services 494, ,597 Out of pocket expenses 28,095 26,541 Tota l 847, ,138

16 I D F C i n v e s t m e n t a d v i s o r s L I M I T E D 305 n o t e s t o f i n a n c i a l s tat e m e n t s 1 7 In accordance with Accounting Standard 20 on Earnings Per Share as notified by the Companies (Accounting Standards) Rules, 2006: i. The basic earnings per share has been calculated based on the following: Net profit after tax 27,044,112 6,666,873 Weighted average number of equity shares (nos.) 10,000,000 10,000,000 Basic earnings per share S e g m e n t I n f o r m at i o n The Company is engaged in the business of providing investment advisory services. During the year, the Company was engaged in only one business segment. As such, there are no separate reportable segments as per Accounting Standards 17 on Segment Reporting as notified by the Companies (Accounting Standards) Rules employee Benefit expenses include ESOP compensation cost of ` 263,927 paid to Infrastructure Development Finance Company Limited (IDFC) towards ESOP grants given to the employees of the parent company under the IDFC ESOP scheme. The parent company follows the intrinsic method for computing the compensation cost, for options granted under the scheme. The difference if any, between the intrinsic value and the grant price, being the compensation cost is amortized over the vesting period of the options. 20 All assets & liabilities have been classified as current or non current as per the Company s normal operating cycle and other criteria set out in the Schedule VI to the Companies Act, no interest has been paid/payable by the Company during the year to the Suppliers covered under the Micro, Small and Medium Enterprises Development Act, The above information is based on the records available with the Company. 22 There are no contracts remaining to be executed and not provided for as at. 23 As per Accounting Standard 18 on Related Party Disclosures as notified by the Companies (Accounting Standards) Rules, 2006, the related parties of the Company are as follows: I. II. III. Ultimate Holding Company: Infrastructure Development Finance Company Limited Holding Company: IDFC Asset Management Company Limited Fellow Subsidiaries: IDFC AMC Trustee Company Limited IDFC Pension Fund Management Company Limited IDFC Investment Managers (Mauritius) Limited IV. Key management personnel: Ms. Sheela Krishnan Manager (1Apr2011 to 13Jul2011) Ms. Jyothi Krishnan Manager (14Jul2011 to 31Mar2012) Mr. Naval Bir Kumar President & CEO The nature and volume of transactions carried out with the above related parties in the ordinary course of business are as follows: Name of related party and nature of relationship I. Ultimate Holding Company Infrastructure Development Finance Company Limited Esop cost Reimbursement of expenses Management Fees Income Management Fees received in advance Initial Issue Expenses (Spice Fund) Balance outstanding 291,109 (851,233) 4,945, , ,701 58,432,086 7,140,059 II. Holding Company III. IV. IDFC Asset Management Company Limited Fellow Subsidiary IDFC Investment Managers (Mauritius) Limited Key management personnel Ms. Sheela Krishnan Manager Reimbursement of expenses Business Centre Expenses Advance taken & repaid Reimbursement of Salary Balance outstanding Management Fees Income Balance outstanding Remuneration Paid Balance outstanding 1,283,309 2,951,628 (7,798,133) 11,533, , , ,000 Excess managerial remuneration paid during the year of ` 450,000 has been shown as recoverable from manager as on. 12,350,266 2,951,628 2,771,294 31,413,193 1,860,417 3,280,932

17 306 i d f c a n n u a l r e p o r t n o t e s t o f i n a n c i a l s tat e m e n t s 24 In accordance with Accounting Standard 19 on Leases as notified by the Companies (Accounting Standards) Rules, 2006, the following disclosures in respect of operating leases are made: The Company has taken vehicles for one employee under Cancellable Operating Leases which is included under Staff Expenses as follows: Name of the Lessor ALD Automative Private Limited 355, O t h e r S tat u t o r y I n f o r m at i o n Name of the Lessor Earnings in Foreign Currency Advisory Fees 33,477,914 Expenditure in Foreign Currency Membership and Subscription Charges 238,390 Registration Fees 457, , , In accordance with Accounting Standard 15 on Employee Benefits as notified by the Companies (Accounting Standards) Rules, 2006 the following disclosures have been made: i. The Company has recognised the following amounts in the Statement of Profit and Loss towards contribution to defined contribution plans which are included under contribution to provident and other funds: Provident fund 1,395,805 1,120,426 Superannuation fund 372, ,938 Pension Fund 168,800 ii. The details of the Company s postretirement benefit plans for gratuity for its employees are given below which are certified by the actuary and relied upon by the auditors: Change in the defined benefit obligations: Liability as at the beginning of the year 4,046,116 Current service cost 1,044,403 4,242,958 Interest cost 415, ,175 Benefits paid (1,894,991) Actuarial loss/(gain) (589,375) (420,017) Liability as at the end of the year 3,021,210 4,046,116 Fair value of plan assets: Fair value of plan assets at the beginning of the year Expected return on plan assets Contributions Benefits paid Actua r i a l loss / ( gain) on plan assets Fair value of plan assets as at the end of the year Tota l actua r i a l loss/(gain) to be recognised Actual return on plan assets: Expected return on plan assets Actuarial loss / (gain) on plan assets Actual return on plan assets Amount recognised in Balance Sheet: Liability as at the end of the year 3,021,210 4,046,116 Fair Value of Plan Assets as at the end of the year Amount recognised in Balance Sheet under Provision for Retirement Benefits 3,021,210 4,046,116 E x p e n s e recog n i sed in the statement of profit and loss : Current service cost 1,044,403 4,242,958 Interest on Defined Benefit Obligation 415, ,175 Expected return on plan assets Net actuarial loss/(gain) to be recognised (589,375) (420,017) Past Service Cost Loss/(Gains) on Acquisition/Divestiture

18 I D F C i n v e s t m e n t a d v i s o r s L I M I T E D 307 n o t e s t o f i n a n c i a l s tat e m e n t s Liabilities assumed on acquisition/(settled on divestiture) Expense recognised in the statement of Profit and Loss under staff expenses 870,085 4,046,116 R e co n c i l i at i o n of the liability recognised in the balance sheet: Opening net Liability 4,046,116 Expense recognised 870,085 4,046,116 Contribution by the Company (1,894,991) Amount recognised in the balance sheet under Provision for employee benefits 3,021,210 4,046,116 Expected employer s contribution next year Experience adjustments : Defined benefit obligation 3,021,210 4,046,116 Plan assets Surplus/(deficit) (3,021,210) (4,046,116) Experience adjustments on plan liabilities (614,013) (311,089) Experience adjustments on plan assets Principal Assumptions: Discount Rate 8.38% 8.30% Expected Rate of Return on Assets Salary Escalation Rate 8.00% 8.00% 27 Details of Movement in Provisions, in terms of Accounting Standard 29 as notified by Companies (Accounting Standards) Rules, 2006, is as under: Nature of Provision Balance as at April 1, 2011 Additions during the year Reversal/ adjustment Balance as at Provision for Income Tax 13,850,000 12,800,000 26,650,000 Provision for Deferred Tax (Asset)/Liability (863,093) (487,123) 549,881 (800,334) Contingent Liability 14,668,970 2,527,190 17,196, C o n t i n g e n t L i a b i l i t y n o t p r o v i d e d f o r i n r e s p e c t o f (a) Claims not acknowledged as debts in respect of : Incometax demands disputed by the Company Pertaining AY The matter in dispute are under CIT appeal (b) Incometax demands disputed by the Company Pertaining AY The matter in dispute are under ITAT appeal (c) Incometax demands disputed by the Company Pertaining AY The matter in dispute are under ITAT appeal. 2,527,190 8,044,089 8,044,089 6,624,881 6,624, In compliance with the Accounting Standard 22 relating to Accounting for Taxes on Income as notified by Companies (Accounting Standards) Rules, 2006, the Company has taken credit in the Statement of Profit and Loss towards deferred tax asset (net) on account of timing differences. The major components of deferred tax assets and liabilities arising on account of timing differences are: (a) Depreciation (180,048) (417,422) (b) Preliminary Expenses (32,450) (c) Gratuity Provision 980,383 1,312, , ,093 For and on behalf of the Board of Directors of IDFC INVESTMENT ADVISORS Limited S u n i l K a k a r Director R a j e e v U b e r o i Director Mumbai April 23, 2012 J y o t h i K r i s h n a n Company Secretary & Manager