Directors Report of Sterling Holiday Resorts (I) Ltd.

Mar 31, 2014

The Directors are pleased to present the Twenty-seventh Report together with audited fnancial statements of your Company for the year ended March 31, 2014.

FINANCIAL HIGHLIGHTS

(INR in lakhs)

2013-14 2012-13

Sales 11931 9897

Profit before Interest Depreciation & Tax (177.83) (1333.90)

less: Interest 581.10 122.29

Profit / (Loss) before Depreciation & Tax (758.93) (1456.19)

less: Depreciation 877.00 632.51

Profit / (Loss) before Tax (1635.93) (2088.71)

less Provision for Tax --- ---

Profit / (Loss) for the year (1635.93) (2088.71)

OPERATIONS AND FINANCIAL OVERVIEW

For the fnancial year ended March 31, 2014, your Company declared Positive EBIDTA of INR 627 lakhs on Total Operating Income of INR 13,606 lakhs, as compared to a negative EBITDA of INR 1,358 lakhs in the previous year. Total Operating Income grew by 25% over the previous year from INR 10,868 lakhs to INR 13,606 lakhs. Income from Sales of Vacation Ownership Plans rose to INR 5,993 lakhs, an increase of 13%, while Total Income from Resort Operations rose to INR 4,673 lakhs, up by 27%. The Total Income from Resort Operations includes Income from non-members booking holidays and MICE. Notably, your Company''s performance has improved with net losses reducing in FY14 to INR 974 lakhs (before exceptional items), as compared to INR 2,243 lakhs in the previous year.

It is also notable that your Company reported Total Operating Income of INR 3,883 lakhs in the last quarter of FY14, an increase of 35% over the same period of the previous fscal. Income from Sales of Vacation Ownership Plans grew by 72%, indicating an accelerated momentum in the Company''s growth. Your Company declared a Proft after Tax (before exceptional items) of INR 131 lakhs for the quarter.

The signifcant improvement in your Company''s performance in the year is an indicator of the strong resurgence of Brand Sterling, a result of the strategic turnaround initiatives over the last couple of years. The substantial investments your Company made in enhancing the overall customer holiday experience through refurbishment of its resorts and an expanded menu of recreational and culinary experiences have resulted in a healthy rise in the number of Vacation Ownership members and non-members holidaying at the Company''s resorts, leading to an increase in resort occupancy to 49% from 41% in the previous year.

Over the course of the year, your Company added a new resort in Yelagiri, taking the total room inventory to 1512 across 19 resorts. With the inventory on hand, and an active member base of over 70,000 Vacation Ownership members, your Company continues to have a healthy customer to room ratio. In FY14, your Company added 3,650 new Vacation Ownership members as compared to 3,409 in the previous year, refecting a 7% growth. Your Company''s member acquisition program during the year was challenged by dampened consumer sentiment caused by an uncertain economic environment and high interest rates negatively affecting discretionary spending power. In the light of this, your Company''s performance can be said to be commendable especially since Vacation Ownership Membership prices increased by 7.5% during the year; a move that was taken to communicate the signifcantly enhanced holiday experience being delivered post investing in an expanded destination network, resort renovation and higher service standards.

During the year, your Company continued to invest in upgrading its existing resorts to global, best-in-class standards. Major refurbishment in your Company''s Yercaud property was commenced during the year while renovation of accommodation was undertaken in other resorts across the network. To improve effciency, your Company began work on Information Technology platforms in the areas of Enterprise Resource Planning, Property Management and lead Management systems in FY14. In the area of soft skills, your Company continued to invest in Human Resources and Training.

Your Company''s performance has been improving consistently over the last couple of years, indicating that it is well on track to achieving the stated goal of becoming the market leader in the leisure Hospitality and Vacation Ownership industry in India. Already, all the strategic turnaround initiatives taken during the last couple of years have begun to yield positive results with your Company turning EBITDA positive for FY14.

The proposed merger with Thomas Cook and the resultant fresh injection of capital will further strengthen your Company''s market position. The investments made will allow your Company to accelerate the pace of expansion into new holiday destinations. The merger will also beneft your Company as there are multiple natural synergies.

CAPITAL EXPENDITURE

In FY14, your Company added INR 2462 lakhs to its gross block, comprising investment in new resorts, renovation of existing resorts and Information Technology. The Capital work in progress as on March 31, 2014 stood at INR 5297 lakhs; an amount representing project expenditure on resorts under renovation.

MATERIAL CHANGES

(1) Merger and De-merger with Thomas Cook Group:

Your Company entered into a composite scheme of arrangement and amalgamation with Thomas Cook Insurance Services (India) limited ("TCISIl"), having its registered offce at Thomas Cook Building, Dr. D. N. Road Fort, Mumbai, Maharashtra - 400001, India and Thomas Cook (India) limited ("TCIl"), having its registered offce at Thomas Cook Building, Dr. D. N. Road Fort, Mumbai, Maharashtra - 400001, India pursuant to which the following shall be undertaken:

(i) the resort and timeshare business carried out by your Company shall be transferred by way of de-merger from your Company to TCISIl, in lieu whereof such number of Equity Shares of TCIl as set out in the Scheme will be issued to the shareholders of your Company; and

(ii) the entire residual business remaining in your Company following the said de-merger shall be amalgamated into TCIl in lieu whereof such number of Equity Shares of TCIl as set out in the Scheme will be issued to the shareholders of your Company.

(2) Open Offer:

Thomas Cook Insurance Services (India) limited ("Acquirer") with Thomas Cook (India) limited and Travel Corporation (India) limited ("Persons Acting in Concert / PAC") have made an Open Offer for Acquisition of up to 23486264 fully paid Equity Shares of the face value of INR 10 each of Sterling Holiday Resorts (India) limited representing 26% of the Voting Capital, at a price of INR 98 per Equity Share from all the Equity Shareholders of your Company.

SHARE CAPITAL

During the year under review, your Company has raised its Equity Share capital through the following issues as described hereunder:

- INR 230.82 lakhs through issue of 487171 Equity Shares of INR 10 each at a premium of INR 37.38 Under ESPS 2011.

- INR 9.4 lakhs through issue of 20651 Equity Shares of INR 10 each at a premium of INR 35.55 Under ESPS 2011.

- INR 18,686.18 lakhs through issue of 20650000 Equity Shares of INR 10 each at a premium of INR 80.49 under preferential allotment.

Further during the current year, your Company has raised INR 697.86 lakhs through issue of 1023258 Equity Shares of INR 10 each at a premium of INR 58.20 under ESPS 2011.

PROCEEDS OF ISSUES

The details of utilisation of proceeds arising out of various issues made during the year ended March 31, 2014 are set out in Annexure A.

CORPORATE GOVERNANCE REPORT

Your Company has complied with the Corporate Governance Code as stipulated under Clause 49 of the listing Agreement with the Stock Exchanges. A separate Section on Corporate Governance, along with a certifcate from the Statutory Auditors of the Company confrming the compliance is annexed.

Salary and perquisite paid to Mr. Ramesh Ramanathan during the year FY14 is given below:

Particulars Amount in INR

Salary 64,15,200

Provident Fund – Employers Contribution 5,04,000

Medical Reimbursement 2,31,620

Insurance 41,250

Gratuity liability 2,02,020

TOTAL 73,94,090

During the year ended March 31, 2014, following shares were issued to Mr. Ramesh Ramanathan, Managing Director under the Employees Stock Purchase Scheme 2011:

1) 487171 Equity Shares of INR 10 each at INR 47.38 per share with a discount of INR 28.72 per share.

2) 20651 Equity Shares of INR 10 each at INR 45.55 per share with a discount of INR 14.40 per share.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed analysis of your Company''s operational and fnancial performance and initiatives taken by your Company in key functional areas is separately discussed under the Management Discussion and Analysis section, as per Clause 49 of the listing Agreement of the Stock Exchanges.

STOCK OPTIONS

EMPLOYEE STOCK OPTION SCHEME / EMPLOYEE STOCK PURCHASE SCHEME

Under the Employees Stock Purchase Scheme 2010, 657019 Equity Shares were allotted. The balance 1442981 Shares are yet to be allotted.

Under the Employees Stock Purchase Scheme 2011, 1931569 Equity Shares were allotted. The balance 1568431 Equity Shares are yet to be allotted.

Under the Employees Stock Option Scheme 2012, 750000 Options were granted. Balance of 250000 Options are available for future grants.

The details of Equity Shares issued under ESPS 2010 and ESPS 2011 and Stock Options granted under ESOS 2012 are given in Annexure B in accordance with SEBI (Employees Stock Option Scheme & Employees Stock Purchase Scheme) Guidelines, 1999.

DIRECTORS

Mr. Sidharth Shankar, Vice Chairman shall retire by rotation at the ensuing Annual General Meeting and being eligible, offer himself for re-appointment.

Mr. Madhavan Karunakaran Menon, Mr. Harsha Raghavan, Mr. Mahendra Kumar Sharma were appointed as Additional Directors on the board of your Company with effect from March 14, 2014. Your Company has received notices under section 160(1) of the Companies Act, 2013 from the members signifying their intention to propose Mr. Madhavan Karunakaran Menon, Mr. Harsha Raghavan, Mr. Mahendra Kumar Sharma as candidates for the offce of Directors.

Mr. Pradipta K. Mohapatra and Mr. Anil Kumar Madhok were appointed as Additional Directors on the board of your Company with effect from April 25, 2014. Your Company has received notices under section 160(1) of the Companies Act, 2013 from the members signifying their intention to propose Mr. Pradipta K. Mohapatra and Mr. Anil Kumar Madhok as candidates for the offce of Director.

As stipulated in Clause 49 of the listing Agreement with the Stock Exchanges, brief resume of the above Directors is provided in the report on Corporate Governance, which forms part of this Annual Report.

Mr. Siddharth Mehta, Chairman, Mr. K. Chandrasekaran, Mr. M. N. Rangamani, Mr. Utpal Sheth, Directors resigned from the Board of your Company with effect from March 14, 2014 and Mr. Shahzaad Siraj Dalal, Director resigned on April 25, 2014. The Board of Directors recorded their sincere appreciation for their valuable services rendered to your Company.

Mr. Amit Jatia, Director shall retire by rotation at the ensuing Annual general meeting and has expressed that he is not seeking re-appointment. Mr. Darshanbhai Naranbhai Patel, Director was appointed as Additional director on the board of your Company with effect from October 26, 2013 who ceases to hold the offce of Director at the ensuing Annual General Meeting. The Board of Directors recorded their sincere appreciation for their valuable services rendered by them to your Company.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors to the best of their knowledge and belief confrm that:

1. In the preparation of the Proft and Loss Account for the fnancial year ended March 31, 2014, and the Balance Sheet as at that date ("Annual Accounts"), the applicable accounting standards have been followed.

2. That the Directors had 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 your Company at the end of the fnancial year and of the Proft and Loss of your Company for that year.

3. That the Directors had taken proper and suffcient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of your Company and for preventing and detecting fraud and other irregularities.

4. That the Directors had prepared the Annual Accounts for the fnancial year ended March 31, 2014 on ''Going Concern'' basis.

SUBSIDIARY COMPANIES

As on March 31, 2014, your Company had two Subsidiary Companies as below:

1. Sterling Holidays (Ooty) limited

2. Sterling Holiday Resorts (Kodaikanal) limited

There has been no material change in the nature of business of the subsidiaries.

As required under the listing Agreements with the Stock Exchanges, a Consolidated Financial Statement of you Company and all its subsidiaries is attached. The Consolidated Financial Statements have been prepared in accordance with the relevant Accounting Standards as prescribed under Section 211(3C) of the Companies Act, 1956 ("Act"). These fnancial statements disclose the assets, liabilities, income, expenses and other details of your Company and its subsidiaries.

Pursuant to the provision of Section 212(8) of the Act, the Ministry of Corporate Affairs vide its circular dated February 8, 2011 has granted general exemption from attaching the Balance Sheet, Proft and Loss Account and other documents of the subsidiary companies with the Balance Sheet of companies. A statement containing brief fnancial details of your Company''s subsidiaries for the fnancial year ended March 31, 2014 is included in the Annual Report. The annual accounts of these subsidiaries and the related detailed information will be made available to any member of your Company / its subsidiaries seeking such information at any point of time and are also available for inspection by any member of your Company / its subsidiaries at the registered offce of your Company. The annual accounts of the said subsidiaries will also be available for inspection, as above, at the head offces / registered offces of the respective subsidiary companies. The Company shall furnish a copy of details of annual accounts of subsidiaries to any shareholder on demand.

MANCHANDA RESORTS PRIVATE LIMITED

As reported earlier, your Company had fled the petition with the Hon''ble High Court, Madras for sanctioning the Scheme of Amalgamation of Manchanda Resorts Private limited (Subsidiary Company) with your Company. The Honble High Court of Madras has approved the scheme of Amalgamation vide order dated August 26, 2013.

AUDITORS

The Statutory Auditors of the Company, R. Subramanian and Company, Chartered Accountants (ICAI Registration Number 004137S) and V. Sankar Aiyar & Co., Chartered Accountants, (ICAI Registration Number 109208W) shall be retiring at the ensuing Annual General Meeting of your Company. Your Company has received notices from the Statutory Auditors of their intention of not seeking re-appointment at the ensuing Annual General Meeting of your Company.

Your Company has received a special notice from a member of your Company, in terms of the applicable provisions of the Companies Act, 2013 signifying his intention to propose the appointment of M/s. Price Waterhouse & Co., Chartered Accountants, Bangalore (Firm Registration Number 007567S) as the statutory auditors of your Company from the conclusion of this Annual General Meeting till the conclusion of the next Annual General Meeting. M/s. Price Waterhouse & Co, Chartered Accountants, Bangalore (Firm Registration Number 007567S) expressed their willingness to act as statutory auditors of your Company, if appointed, and have further confrmed that the said appointment would be in conformity with the provisions of the Companies Act, 2013 read with the rules made thereunder.

With reference to the Auditors Remarks in their report dated April 26, 2014, your Directors reply is as under:- 1. Reply to Para 9(a) of the Auditors Report:

The outstanding amount of INR 73.12 lakhs relate to Fringe Beneft Tax to be adjusted against the refund receivable from the Income Tax department on completion of assessment.

2. Reply to Para 10 of the Auditors Report:

Your Company has been continuously infusing additional funds into operation by way of Equity. There has been signifcant improvement in the overall performance and your Company expects to sustain the growth in the turnover and improve proftability in the ensuing years. The Board of Directors are confdent that because of such positive signs, your Company will improve its performance.

PUBLIC DEPOSITS, LOANS AND ADVANCES

Your Company has not accepted any Deposits from the public or its employees during the year under review.

The details of outstanding loans and Advances are dealt with in the Accounts.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

In terms of the Companies (Disclosure Of Particulars In The Report Of The Board Of Directors) Rules, 1988, the particulars relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo required 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, 1988 are given in Annexure C which forms part of the Directors'' Report.

AUDIT, INVESTOR GRIEVANCES, REMUNERATION AND COMPENSATION COMMITTEES

In terms of Clause 49 of the listing Agreement entered with the Stock Exchanges and pursuant to the provisions of the Companies Act, 2013 the details pertaining to Audit Committee, Stakeholders'' Relationship Committee, Nomination and Remuneration Committee, Share Transfer Committee are furnished in the Report on Corporate Governance which is annexed herewith.

PARTICULARS OF EMPLOYEES AS REqUIRED UNDER SECTION 217(2A) OF THE COMPANIES ACT, 1956 AND RULES MADE THEREUNDER

Your Company had employees who were in receipt of remuneration of not less than INR 60,00,000 during the year ended March 31, 2014 or not less than INR 5,00,000 per month during any part of the said year.

However as per the provisions of Section 219(1)(b)(iv) of the Companies Act, 1956, the Directors'' Report and Accounts are being sent to all the shareholders of the Company excluding the statement of particulars of employees. Any shareholder interested in obtaining the copy of the statement may write to the Company.

DEMATERIALISATION OF EqUITY SHARES

As mentioned in our earlier Annual Reports, the Company''s Equity Shares are in the compulsory Demat mode with effect from August 28, 2000, as per Circular No.SMDRP / Policy / CIR-23 / 2000 dated May 29, 2000 issued by Securities and Exchange Board of India (SEBI). This has been facilitated through arrangement with National Securities Depository limited (NSDl) and Central Depository Services (India) limited (CDSl). A large number of our shareholders have taken advantage of Dematerialisation facility. The Cameo Corporate Services limited, Chennai, has been appointed as the Registrar and Share Transfer Agents.

CEO / CFO CERTIFICATION

The Managing Director (CEO) and the Senior Vice President - Finance (CFO) have submitted a certifcate to the Board regarding the fnancial statements and other matters as required under clause 49(V) of the listing Agreement.

ACKNOWLEDGEMENTS

The Board of Directors take this opportunity to express their sincere thanks to the Central and State Governments, Financial Institutions and Bankers and other Creditors for their valuable support and assistance during this period. The Directors also wish to thank the Shareholders and Timeshare Customers who have supported the Company in this hour of need. Our Directors look forward to receiving continued support from them.

The Directors also wish to thank the employees of the Company for their dedicated performance and place on record their wholehearted commitment to your Company and combined efforts to turnaround your Company''s performance.

For and on behalf of the Board

Place: Chennai

Date: April 26, 2014 PRADIPTA K. MOHAPATRA

CHAIRMAN

---

Mar 31, 2013

The Directors are pleased to present the Twenty-sixth Report together with audited accounts of your Company for the year ended March 31'' 2013.

FINANCIAL HIGHLIGHTS

(INR in lakhs)

2012 - 2013 2011 - 2012

Sales 9''897.01 6''679.24

Profit before Interest''

Depreciation & Tax (1''333.90) (3''228.08)

Less: Interest 122.29 335.71

Profit/(Loss) before

Depreciation & Tax (1''456.19) (3''563.79)

Less: Depreciation 632.51 480.29

Profit/(Loss) before Tax (2''088.70) (4''044.08)

Less : Provision for Tax

Profit/(Loss) for the year (2''088.70) (4''044.08)

OPERATIONS AND FINANCIAL OVERVIEW

Your Company crossed a significant milestone during the year by crossing INR 10''000 lakhs in turnover. For the financial year ended March 31'' 2013'' the Total Operating Income of the Company was reported as INR 10''868 lakhs'' as compared to INR 7''009 lakhs for FY12'' representing a 55% growth in revenue. Sales of Vacation Ownership Plans (earlier called Timeshare) rose to INR 7''320 lakhs'' an increase of 72%'' while Total Income from Resort Operations rose to INR 4''350 lakhs'' up by 23%. Notably'' the Company''s performance has improved with net losses reducing in FY13 by INR 1''955 lakhs'' as compared to the previous fiscal year.

Over the course of the year'' your Company added 4 new resorts in Dharamshala'' Gangtok'' Lonavala and North Goa'' taking the total room inventory to 1477 across 19 resorts. With the expansion in the resort network to 19 across India'' your Company continues to have a healthy member to room ratio'' giving its base of around 67''000 active members more opportunities to holiday in various seasons and locales. In FY13'' your Company added 3''409 new Vacation Ownership members as compared to 2''490 in the previous year.

Your Company continued to invest in upgrading its existing resorts to global'' best-in-class standards. In the year under review'' three renovated resorts - Kodai - By The Lake'' Munnar - Terrace Greens and Ooty - Fern Hill- began welcoming Members and Guests to a vastly enhanced holiday experience. Your Company also undertook renovation of accommodation across its other resorts'' completing a significant portion of the total owned room inventory.

The ongoing effort to substantially raise the standards of the Company''s product and service'' and deliver an enhanced holiday experience has resulted in a clear and significant increase in Member and Guest satisfaction ratings of your Company''s resorts. These ratings are monitored through ongoing Guest Service Tracking Systems (GSTS) at the resorts'' post-holiday surveys'' and analysis of Sterling''s reputation in social media networks and other online forums.

The increase in positive reviews has also had a positive impact on your Company''s One-Time Hotel Stays business'' which saw a healthy increase year-on-year in FY13. The One-Time Hotel Stays and Meetings'' Incentives'' Conferences and Exhibitions (MICE) business are important revenue earning streams as it enables your Company to cater to multiple market segments such as One-Time leisure holidays for non-members'' booked directly or through Online Travel Agencies (OTAs)'' and corporate houses looking for attractive off- site destinations to host their meetings and conferences. In this connection'' it is notable that your Company saw a significant increase in room nights from the fast growing OTA segment in the Travel & Tourism industry.

In terms of strategic direction'' your Company is on track to achieving its growth plans by expanding its destination network and upgrading the holiday experience it delivers to its Members and Guests. As the strategy sees execution'' your Company''s resorts will include professionally managed spas and a sophisticated'' multi-cuisine Food & Beverage experience. With these inclusions'' Sterling Members and Guests will enjoy a significantly enhanced holiday experience'' leading to greater member satisfaction and goodwill.

Your Company continued its investments in upgrading its Information Communications Technology (ICT) backbone with the goal of improving service efficiencies and employee productivity. Your Company rolled out a Human Resource Management System (HRMS) to manage payroll'' intranet'' etc.'' apart from establishing a virtual branch network across locations and an Information Security Management System (ISMS). In the area of Member Relations'' your Company initiated an SMS and email update system across various touch points of the member life cycle apart from introducing e-versions of the confirmation voucher''

Sterling World (our member magazine) and membership kit'' thereby reducing our carbon footprint and the lead time for dispatch to members.

To achieve the goal of rapid growth In the Vacation Ownership and Leisure Hospltalltymarket''yourCompany further expanded Its Management team by bringing on board a new Head of Resort Operations'' who Is a veteran In the Hospitality and Vacation Ownership Industry with over 22 years of experience across Europe. Another recent addition to strengthen the Management team was the Head of Human Resources'' who comes with over 21 years of Industry experience and the achievement of having played a pivotal role across several leading companies In India. To set culinary standards of an International level'' your Company brought on board a highly skilled and competent Corporate Chef'' whose experience spans over 25 years with renowned International hospitality chains'' to manage the Company''s culinary operations and to create an unmatched food and dining experience. The enhanced Leadership Team'' backed with an expanded and trained work force'' has been working hard to bring about the Company''s resurgence and growth.

All the measures In the last few years have yielded results leading to your Company now being an INR 10''000 lakhs plus organisation.

CAPITAL EXPENDITURE

ln2012-13''theCompanyaddedlNR4''941lakhstoltsgross block'' comprising Investment In new resorts'' renovation of existing resorts and Information Technology. The Capital Work In Progress as on March 31'' 2013 stood at INR 5''416.58 lakhs; an amount representing project expenditure on resorts under renovation.

SHARE CAPITAL

During the year under review'' your Company has raised Its Equity Share Capital through various Issues as described hereunder:

INR 4''237.50 lakhs (being 75% of consideration amount) through Issue of 75''33''333 Equity Shares of INR 10 each at a premium of INR 65 per Equity Share upon conversion of Warrants Issued on preferential basis.

INR 140 lakhs through Issue of 2''77''557 Equity Shares of INR 10 each at a premium of INR 40.44 per Equity Share under ESPS 2011.

INR 51.32 lakhs through Issue of 1''00''000 Equity Shares of INR 10 each at a premium of INR 41.32 per Equity Share under ESPS 2011.

INR 50.48 lakhs through Issue of 97''676 Equity Shares of INR 10 each at a premium of INR 41.68 per Equity Share under ESPS 2011.

Further during the current year your Company has raised:

INR 230.82 lakhs through Issue of 4''87''171 Equity Shares of INR 10 each at a premium of INR 37.38 per Equity Share under ESPS 2011.

INR 9.41 lakhs through Issue of 20''651 Equity Shares of INR 10 each at a premium of INR 35.55 per Equity Share under ESPS 2011.

PROCEEDS OF ISSUES

The details of utilisation of proceeds arising out of various Issues made during the year ended March 31'' 2013 are set out In Annexure A.

CORPORATE GOVERNANCE REPORT

The Company has compiled with the Corporate Governance Code as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges. A separate Section on Corporate Governance'' along with a certificate from the Statutory Auditors of the Company confirming the compliance Is annexed.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed analysis of the Company''s operational and financial performance and Initiatives taken by the Company In key functional areas Is separately discussed under the Management Discussion and Analysis section'' as per Clause 49 of the Listing Agreement of the Stock Exchanges.

STOCK OPTIONS

EMPLOYEE STOCK OPTION SCHEME/EMPLOYEE STOCK PURCHASE SCHEME

Under the Employee Stock Purchase Scheme 2010'' 6''57''019 Equity Shares were allotted. The balance 14''42''981 Shares are yet to be allotted.

Under the Employee Stock Purchase Scheme 2011'' 19''31''569 Equity Shares were allotted. The balance 15''68''431 Equity Shares are yet to be allotted.

Underthe Employee Stock Option Scheme 2012''7''50''000 Options were granted. Balance of 2''50''000 Options are available for future grants.

The details of Equity Shares Issued under ESPS 2010 and ESPS 2011 and Stock Options granted under ESOS 2012 are given In Annexure B In accordance with SEBI (Employee Stock Option Scheme & Employee Stock Purchase Scheme) Guidelines 1999.

DIRECTORS

K. Chandrasekaran'' Director and S. Sldharth Shankar'' Director retire by rotation at the ensuing Annual General Meeting and being eligible'' offer themselves for reappointment. As stipulated In Clause 49 of the Listing Agreement with the Stock Exchanges'' brief resumes of K. Chandrasekaran and S. Sldharth Shankar'' are provided In the report on Corporate Governance'' which forms as a part of this Annual Report.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act'' 1956'' the Directors to the best of their knowledge and belief confirm that:

1. In the preparation of the Profit and Loss Account for the financialyear ended March 31''2013'' and the Balance Sheet as at that date ("Annual Accounts")'' the applicable accounting standards have been followed

2. That the Directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the Profit and Loss of the Company for that year

3. That the Directors had 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 for preventing and detecting fraud and other irregularities

4. That the Directors had prepared the Annual Accounts for the financial year ended March 31'' 2013 on ''Going Concern'' basis.

SUBSIDIARY COMPANIES

As on March 31'' 2013'' your Company had three Subsidiary Companies as below:

1. Sterling Holidays (Ooty) Limited

2. Sterling Holiday Resorts (Kodalkanal) Limited

3. Manchanda Resorts Private Limited

There has been no material change In the nature of business of the subsidiaries. A statement containing brief financial details of the subsidiaries Is Included In the Annual Report.

As required under the Listing Agreements with the Stock Exchanges'' a Consolidated Financial Statement of the Company and all Its subsidiaries Is attached. The Consolidated Financial Statements have been prepared In accordance with the relevant Accounting Standards as prescribed under Section 211(3C) of the Companies Act'' 1956 ("Act"). These financial statements disclose the assets'' liabilities'' Income'' expenses and other details of the Company and Its subsidiaries.

Pursuant to the provision of Section 212(8) of the Act'' the Ministry of Corporate Affairs vide Its circular dated February 8'' 2011 has granted general exemption from attaching the Balance Sheet'' Profit and Loss Account and other documents of the subsidiary companies with the Balance Sheet of the Company. A statement containing brief financial details of the Company''s subsidiaries for the financial year ended March 31''2013 is Included In the Annual Report. The annual accounts of these subsidiaries and the related detailed Information will be made available to any member of the Company/Its subsidiaries seeking such Information at any point of time and are also available for Inspection by any member of the Company/Its subsidiaries at the registered office of the Company. The annual accounts of the said subsidiaries will also be available for Inspection'' as above'' at the head offices/registered offices of the respective subsidiary companies. The Company shall furnish a copy of details of annual accounts of subsidiaries to any member on demand.

During the year under review'' your Company has made an application to the Hon''ble High Court'' Madras seeking approval for merging the Company''s subsidiary Manchanda Resorts Private Limited with Sterling Holiday Resorts (India) Limited. The Court had convened the meeting of Equity shareholders of your Company on April 2'' 2013 and the shareholders have approved the Scheme of Amalgamation. Your Company also filed the Petition with the Hon''ble High Court'' Madras for sanctioning the Scheme of Amalgamation of Manchanda Resorts Private Limited with Sterling Holiday Resorts (India) Limited.

AUDITORS

The Joint Statutory Auditors of the Company R Subramanlan and Company'' Chartered Accountants'' Chennal'' and V Sankar Alyar & Co.'' Chartered Accountants'' Chennal'' retire at the conclusion of this Annual General Meeting and are eligible for reappointment. The Company has received confirmation that their appointment will be within the limits prescribed under Section 224(1B) of the Companies Act'' 1956. The Audit Committee of the Board has recommended their appointment. The necessary resolution Is being placed before the shareholders for approval.

PUBLIC DEPOSITS'' LOANS AND ADVANCES

The Company has not accepted any Deposits from the public or Its employees during the year under review.

The details of outstanding Loans and Advances are dealt within the Accounts.

CONSERVATION OF ENERGY'' TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars relating to Conservation of Energy'' Technology Absorption and Foreign Exchange Earnings and Outgo required in terms of Section 217(l)(e) of the Companies Act'' 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules'' 1988 are given in Annexure C which forms as a part of the Directors'' Report.

STATUS OF PROCEEEDINGS UNDER SECTION 408 OF THE COMPANIES ACT'' 1956

The Members are informed that the Hon''ble High Court had passed an Order'' setting aside the Orders of the Hon''ble Company Law Board'' Chennai in respect of Appeal made under CMA No. 3647 of 2005.

AUDIT'' INVESTOR GRIEVANCES'' REMUNERATION AND COMPENSATION COMMITTEES

In terms of Clause 49 of the Listing Agreement of the Stock Exchanges and pursuant to the provisions of Section 292A of the Companies Act'' 1956'' the details pertaining to Audit Committee'' Investor Grievances Committee'' Remuneration Committee'' Share Transfer Committee and Compensation Committee are furnished in the Report on Corporate Governance which is annexed herewith.

PARTICULARS OF EMPLOYEES AS REQUIRED UNDER SECTION 217(2A) OF THE COMPANIES ACT'' 1956 AND RULES MADE THEREUNDER

The Company had two employees who were in receipt of remuneration of not less than INR 60''00''000 during the year ended March 31'' 2013 or not less than INR 5''00''000 per month during any part of the said year.

However'' as per the provisions of Section 219(l)(b)(iv) of the Companies Act'' 1956 the Directors'' Report and Accounts are being sent to all the shareholders of the Company excluding the statement of particulars of employees. Any shareholder interested in obtaining a copy of the statement may write to the Company.

DEMATERIALISATION OF EQUITY SHARES

As mentioned in our earlier Annual Reports'' the Company''s Equity Shares are in the compulsory Demat mode with effect from August 28'' 2000'' as per Circular No. SMDRP/Policy/CIR-23/2000 dated May 29'' 2000 issued by Securities and Exchange Board of India (SEBI). This has been facilitated through arrangement with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL). A large number of our shareholders have taken advantage of Dematerialisation facility. The Cameo Corporate Services Limited'' Chennai'' has been appointed as the Registrar and Share Transfer Agents of the Company.

CEO/CFO CERTIFICATION

The Managing Director and the Senior Vice President'' Finance have submitted a certificate to the Board regarding the financial statements and other matters as required under Clause 49V of the Listing Agreement.

ACKNOWLEDGEMENTS

Your Directors take this opportunity to express their sincere thanks to the Central and State Governments'' Financial Institutions and Bankers'' and other Creditors for their valuable support and assistance during this period. Your Directors also wish to thank the Shareholders and Vacation Ownership Members for their continued support. The Directors are looking forward to receiving continued support from them.

The Directors also wish to thank the employees of the Company for their dedicated performance and wholehearted commitment to achieving the Company''s mission and business goals.

For and on behalf of the Board

Place : Chennai SIDDHARTH MEHTA

Date : July 25'' 2013 CHAIRMAN

---

Mar 31, 2012

The Directors are pleased to present their Twenty-fifth Report together with audited accounts of your Company for the year ended March 31, 2012

FINANCIAL HIGHLIGHTS

(Rs in Lakh) 2011-2012 2010-2011

Sales 6,769.67 3,814.58

Profit before Interest (3,228.08) (2,278.00)

Depreciation & Tax

Less: Interest 335.71 280.36

Profit/(Loss) before (3,563.79) (2,558.37) Depreciation & Tax

Less: Depreciation 480.28 425.75

Profit/(Loss) before Tax (4,044.07) (2,984.12)

Less: Provision for Fringe - 19.75 Benefit Tax

Profit/(Loss) for the year (4,044.07) (3,003.88)

OPERATIONS AND FINANCIAL OVERVIEW

Your Company witnessed significant growth in Vacation Ownership Sales and Resort Income during the year. Total Operating Income of the Company was reported as Rs 7,093 lakh, as compared to Rs 3,891 lakh in 2010-11, representing a 82.3% growth in revenues. Sales of Vacation Ownership Plans rose to Rs 2,691 lakh, an increase of 174.3%, while Total Income from Resort Operations rose to Rs 3,464 lakh, up by 49.85%.

During the year, your Company added 2,490 new Vacation Ownership members as compared to 1,135 in 2010-11. The surge in Vacation Ownership Sales was an outcome of several factors. 5 new resorts were added in Corbett, Goa, Karwar and Thekkady. Two of these new, contemporary resorts are located in the popular holiday destination of Goa - Villagio in South Goa and Camphor in North Goa. With these additions, your Company now has a network of 18 resorts across the Indian sub-continent.

Your Company also embarked on an accelerated renovation program with the objective of upgrading its existing resorts to global, best-in-class standards. While the Company began the renovation process in 2010-11, when it commenced refurbishment of rooms across several resorts in phases, 2011-12 saw two resorts - Lake View in Kodaikanal and Green Vistas in Munnar - being earmarked for a total makeover. These two resorts were temporarily shut down between January- April 2012 to enable complete renovation of all public areas and accommodation. In April 2012, both resorts opened their doors to welcome guests with a new identity - Kodai-By The Lake and Munnar-Terrace Greens - developed to represent a vastly enhanced holiday experience.

In terms of strategic direction, 2011-12 was a year of resurgence for your Company and the Sterling brand. Besides resort network expansion and renovation, the Company renewed its focus on its Vacation Ownership business by re-opening sales offices in key markets such as Mumbai, Delhi, Kolkata, Chandigarh and Lucknow. To widen its reach amongst potential Vacation Ownership customers, 10 Direct Sales Agents in key markets were also appointed.

Your Company also invested significantly in upgrading its Information Communications Technology (ICT) backbone with the goal of improving service efficiencies and employee productivity. A Customer Relationship Management (CRM) program was implemented during the year using the globally reputed Salesforce.com platform. In the area of Customer Relations, a centralized Call Centre backed by a Solutions system using Altitude software, was set up to enable more efficient and smoother processing of member reservations and enquiries.

To achieve the goal of rapid growth in the Vacation Ownership and Leisure Hospitality market, your Company strengthened the Management Team by bringing on board skilled and experienced senior and middle management personnel across all key functions including Human Resources, Marketing and Sales, Resort Operations, Customer Relations, Finance, Legal and Projects. The new Leadership Team, backed with an expanded and trained work force, has been working hard to bring about the Company's resurgence and growth.

All the measures taken during the year has already begun to yield results with your Company turning EBITDA positive in the last quarter of 2011-12.

CAPITAL EXPENDITURE

In 2011-12, the Company added Rs 809.94 lakh to its gross block, comprising investment in new resorts, renovation of existing resorts and Information Technology. The Capital work- in-progress as on March 31, 2012 stood at Rs 4874.22 lakh; an amount representing project expenditure on resort under renovations.

SHARE CAPITAL

During the year under review, your Company has raised its Equity Share Capital through various Issues as described hereunder:

- Rs 6000 lakh through issue of 80,00,000 Equity Shares of Rs 10/- each at a premium of Rs 65/- per Equity Share on Preferential basis.

- Rs 500 lakh through issue of 666,667 Equity Shares of Rs 10/- each at a premium of Rs 65/- per Equity Share upon conversion of Warrants.

- Rs 127.55 lakh through issue of 172,019 Equity Shares of Rs 10/- each at a premium of Rs 64.15 per Equity Share under ESPS 2010.

- Rs 94.85 lakh through issue of 9,48,514 Equity Shares of Rs 10/- each at par, under ESPS -2011.

- Rs 48.50 lakh through issue of 4,85,000 Equity Shares of Rs 10/- each at a price of Rs 10/- under ESPS 2010.

- Rs 41.20 lakh through issue of 4,12,000 Equity Shares of Rs 10/- each at a price of Rs 10/- under ESOS 2009.

- Rs 8.80 lakh through issue of 88,000 Equity Shares of Rs 10/- each at par, under ESOS - 2009.

Further, during the current year, Rs 2539.58 lakh was raised through issue of 33,86,111 Equity Shares of Rs 10/- each at a premium of Rs 65/- per Equity Share upon conversion of Warrants.

ISSUE OF 82,00,000 WARRANTS ON PREFERENTIAL BASIS

The Members at the Extraordinary General Meeting held on August 13, 2011 have passed a special resolution for issue and allotment of 82,00,000 warrants at a price of Rs 75/- per warrant on preferential basis. Subsequently, 82,00,000 Warrants were allotted at the Board Meeting held on September 17, 2011. Out of the aforesaid, 82,00,000 Warrants 666,667 Warrants were converted into 666,667 Equity Shares on March 08, 2012 and 33,86,111 Warrants were converted into 33,86,111 Equity Shares on April 10, 2012 and the balance 41,47,222 Warrants are yet to be converted. The said Equity Shares were listed on the Bombay Stock Exchange Limited and the Madras Stock Exchange Limited.

PROCEEDS OF PREFERENTIAL ISSUES

The details of utilization of proceeds of Preferential issues upto March 31, 2012 are set out in Annexure A.

CORPORATE GOVERNANCE REPORT

The Company has complied with the Corporate Governance Code as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges. A separate section on Corporate Governance, along with a certificate from the Statutory Auditors of the Company confirming the compliance is annexed.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed analysis of the Company's operational and financial performance and initiatives taken by the Company in key functional areas is separately discussed in the Management Discussion and Analysis Report, which forms part of this report as per Clause 49 of the Listing Agreement of the Stock Exchanges.

STOCK OPTIONS EMPLOYEE STOCK OPTION SCHEME / EMPLOYEES STOCK PURCHASE SCHEME

Under the Employees Stock Option Scheme - 2009, 5,00,000 Equity Shares were allotted and no Stock Options are pending.

Under the Employees Stock Purchase Scheme - 2010, 6,57,019 Equity Shares were allotted. The balance 14,42,981 Equity Shares are yet to be allotted.

Under the Employees Stock Purchase Scheme - 2011, 9,48,514 Equity Shares were allotted. The balance 25,51,486 Equity Shares are yet to be allotted.

The details of Stock Options granted under ESOS - 2009 and the Equity Shares issued under ESPS 2010 and ESPS 2011 are given in Annexure "B" in accordance with SEBI (Employees Stock Option Scheme & Employees Stock Purchase Scheme) Guidelines 1999 and any modifications thereto.

DIRECTORS

Mr. Amit Jatia, Director and Mr. M.N. Rangamani, Director retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. As stipulated in Clause 49 of the Listing Agreement with the Stock Exchanges, brief resumes of Mr. Amit Jatia and Mr. M.N. Rangamani, are provided in the report on Corporate Governance, which forms part of this Annual Report.

Mr. Utpal Sheth has been appointed as Additional Director on the Board of the Company with effect from November 7, 2011 and shall hold office up to the date of the Annual General Meeting. The Company has received notice under Section 257 of the Companies Act, 1956, along with a deposit of Rs 500/- from a member signifying the intention to propose Mr. Utpal Sheth as candidate for the Office of Director.

Mr. R. Subramanian resigned as Chairman and Managing Director from the Board of the Company on July 1, 2011. He pioneered the concept of Vacation Ownership (or Time Sharing as it was then popularly known) in the Leisure Hospitality industry in India. He, as a visionary, had the foresight to build Sterling into one of Asia's largest vacation businesses. The Board of Directors recorded their sincere appreciation for the valuable services rendered by Mr. R. Subramanian during the past 25 years.

Mr. Siddharth Mehta has been designated as Chairman of the Company with effect from July 1, 2011. Mr. S. Sidharth Shankar has been designated as Vice Chairman of the Company with effect July 1, 2011.

Mr. Ramesh Ramanathan has been appointed as Managing Director & CEO of the Company for a period of 5 (Five) years with effect from July 1, 2011. The Ministry of Corporate Affairs, New Delhi has approved the said appointment and payment of remuneration to him vide their Letter No. SRN B20924403/4/2011-CL-VII dated May 25, 2012.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors' to the best of their knowledge and belief confirm that:

1. In the preparation of the Profit and Loss Account for the Financial Year ended March 31, 2012, and the Balance Sheet as at that date ("Annual Accounts"), the applicable accounting standards have been followed;

2. That the Directors' had 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 at the end of the financial year and of the profit and loss of the Company for that year;

3. That the Directors had 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 for preventing and detecting fraud and other irregularities;

4. That the Directors had prepared the Annual Accounts for the Financial Year ended March 31, 2012 on a going concern basis.

SUBSIDIARY COMPANIES

As on March 31, 2012, Your Company had three Subsidiary Companies:

1. M/s. Sterling Holidays (Ooty) Limited.

2. M/s. Sterling Holiday Resorts (Kodaikanal) Limited and

3. M/s. Manchanda Resorts Private Limited.

There has been no material change in the nature of business of the subsidiaries. A statement containing brief financial details of the subsidiaries is included in the Annual Report.

As required under the Listing Agreements with the Stock Exchanges, a Consolidated Financial Statement of the Company and all its subsidiaries is attached. The Consolidated Financial Statements have been prepared in accordance with the relevant Accounting Standards as prescribed under Section 211(3C) of the Companies Act, 1956 ("Act"). These financial statements disclose the assets, liabilities, income, expenses and other details of the Company and its subsidiaries.

Pursuant to the provision of Section 212(8) of the Act, the Ministry of Corporate Affairs vide its circular dated February 8, 2011 has granted general exemption from attaching the Balance Sheet, Profit and Loss Account and other documents of the subsidiary companies with the Balance Sheet of the Company. A statement containing brief financial details of the Company's subsidiaries for the financial year ended March 31, 2012 is included in the Annual Report. The annual accounts of these subsidiaries and the related detailed information will be made available to any member of the Company/its subsidiaries seeking such information at any point of time and are also available for inspection by any member of the Company/ its subsidiaries at the registered office of the Company. The annual accounts of the said subsidiaries will also be available for inspection, as above, at the head offices/registered offices of the respective subsidiary companies. The Company shall furnish a copy of details of annual accounts of subsidiaries to any member on demand.

AUDITORS

The Joint Statutory Auditors of the Company M/s. R. Subramanian and Company, Chartered Accountants, Chennai, and M/s. V. Sankar Aiyar & Co., Chennai, retire at the Conclusion of this Annual General Meeting and are eligible for re- appointment.

The Company has received confirmation that their appointment will be within the limits prescribed under Section 224(1B) of the Companies Act, 1956. The Audit Committee of the Board has recommended their appointment. The necessary resolution is being placed before the shareholders for approval.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARN- INGS AND OUTGO

In terms of the Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988, the particulars relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo required 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, 1988 are given in Annexure - "C" which forms part of the Directors' Report.

STATUS OF PROCEEEDINGS UNDER SECTION 408 OF THE COMPANIES ACT, 1956

The Members are informed that the Honourable High Court passed an Order, granting stay of the Orders of the Honourable Company Law Board, Chennai, pending disposal of the Appeal under CMA No. 3647 of 2005. The stay is still in force

PUBLIC DEPOSITS, LOANS AND ADVANCES

The Company has not accepted any Deposits from the public or its employees during the year under review. Your Company has also not made any loans or advances which are required to be disclosed in the Annual Accounts of the Company pursuant to Clause 32 of the Listing Agreement.

AUDIT, INVESTOR GRIEVANCES, REMUNERATION AND COMPENSATION COMMITTEES

In terms of Clause 49 of the Listing Agreement of the Stock Exchanges and pursuant to the provisions of Section 292A of the Companies Act, 1956, the details pertaining to Audit Committee, Investor Grievances Committee, Remuneration Committee, Share Transfer Committee and Compensation Committee are furnished in the Report on Corporate Governance which is annexed herewith.

PARTICULARS OF EMPLOYEES AS REQUIRED UNDER SECTION 217(2A) OF THE COMPANIES ACT, 1956 AND RULES MADE THEREUNDER

In terms of the provisions of Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 as amended, the names and other particulars of the employees are set out in the Annexure to the Directors' Report. Having regard to the provisions of Section 219(1)(b) (iv) of the said Act, the Annual Report excluding the aforesaid information is being sent to all the members of the Company and others entitled thereto. Any member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

DEMATERIALISATION OF EQUITY SHARES

As mentioned in our earlier Annual Reports, the Company's Equity Shares are in the compulsory Demat mode with effect from August 28, 2000, as per Circular No.SMDRP / Policy / CIR- 23/2000 dated May 29, 2000 issued by Securities and Exchange Board of India (SEBI). This has been facilitated through arrangement with National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL).

A large number of our shareholders have taken advantage of Dematerialisation facility. The Cameo Corporate Services Limited, Chennai, has been appointed as the Registrar and Share Transfer Agents of the Company.

CEO / CFO CERTIFICATION

The Managing Director and the Senior Vice President - Finance have submitted a certificate to the Board regarding the Financial statements and other matters as required under clause 49 V of the Listing Agreement.

ACKNOWLEDGEMENTS

The Board of Directors take this opportunity to express their sincere thanks to the Central and State Governments, Financial Institutions and Bankers and other Creditors for their valuable support and assistance during this period. The Directors also wish to thank the Shareholders and Timeshare Customers who have supported the Company in this hour of need. Our Directors look forward to receiving continued support from them.

The Directors also wish to thank the employees of the Company for their dedicated performance and also place on record their wholehearted commitments to the Company and combined efforts to turnaround the Company.

For and on behalf of the Board

Place: Chennai SIDDHARTH MEHTA

Date: May 29, 2012 CHAIRMAN

---

Mar 31, 2011

Dear Members,

The Directors of your Company hereby present the 24th Annual Report of the Company together with the Accounts for the year ended 31st March, 2011.

FINANCIAL RESULTS (Rs. in Crores)

2010 - 2011 2009 - 2010

Sales 38.66 30.65

Profit before Interest

Depreciation & Tax (23.35) 5.25

Less: Interest 2.23 10.06

Profit / (Loss) before

Depreciation & Tax (25.58) (4.81)

Less: Depreciation 4.26 4.12

Profit / (Loss) before tax (29.84) (8.93)

Less: Provision for fringe

benefit tax 0.20 0.09

Profit / (Loss) for the year (30.04) (9.02)

OPERATIONS AND BUSINESS PLAN

During the year under review your company has achieved the total sale of Rs.38.66 crores, comprising the sale of Time Shares Rs.9.9 crores and through Resort Operations Rs.28.76 crores.

Resort Operations

During the year, the Company embarked on a renovation program of its resorts in order to raise the standards of the accommodation and resort ambience to contemporary standards. Renovation and refurbishment work commenced in August of last year. Painting of the exteriors and interiors of all resorts was undertaken, along with considerable work in landscaping and ground maintenance. New linen, television sets and room amenities have been introduced across the network. In addition, considerable progress was achieved in the area of replacing mattresses and furnishings. It is to be noted that approximately 70 rooms have been completely renovated to modern design standards.

In 2010-11, the Company also focused on considerably raising the service standards of the resorts. To achieve this, the Company inducted new management teams at all resorts and added 400 employees to its resort team strength. Simultaneously, the Company redefined its product and service design standards to meet the expectations of India's increasingly discerning consumers. In the area of Food & Beverage, service infrastructure was upgraded and considerable effort taken to train staff to deliver a superior Food & Beverage experience. New menus were introduced to serve guests a choice of Indian and Global cuisine.

In addition to the above efforts, the Company also added several new facilities in the areas of in- house and destination related Holiday Activities and Recreation. Each resort has a Holiday Activities team who interact with guests, encouraging them to participate in fun-filled activities during the day and entertainment filled with games, music and dance in the evenings.

One major initiative undertaken during the year has been the introduction of Wellness Spas at several of the Company's resorts. Staffed with trained personnel in wellness regimes, the spas offer guests a menu of timeless therapies to rejuvenate the mind, body and spirit.

DIRECTORS

Your Directors, Mr.Sidharth Shankar and Mr.K.Chandrasekaran retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment.

Mr.E.S.Ganapathy, Mr.G.Sundaram and Mr.S.Sethuraman, have resigned as Directors from the Board of the Company with effect from 07-02-2011. The Board placed on record its appreciation for the excellent services rendered by them during their tenure as Directors of the Company.

Mr.Siddharth Mehta and Mr.Shahzaad Dalai have been appointed as Additional Directors on the Board of the Company with effect from 07-02-2011 and shall hold office up to the date of the Annual General Meeting. The Company has received notices under Section 257 of the Companies Act, 1956, along with a deposit of Rs.500/- from the Members signifying their intention to propose Mr.Siddharth Merita and Mr.Shahzaad Dalai for the Office of Director of the Company.

Mr.R.Subramanian resigned as Chairman and Managing Director from the Board of the Company on 1st July, 2011. He pioneered the then novel concept of Vacation Ownership (or Time Sharing as it was popularly known) in the Holiday Industry in India. This made Holidays hassle- free and affordable to more than one lakh members who joined the Sterling family. He steered the Company from a single resort started in 1988 to 14 resorts spread across the country in all important tourism destinations. His timely professional guidance enabled the Company to overcome the challenges faced during the period of Global economic crisis particularly in the Hospitality segment. The Board of Directors recorded their sincere appreciation for the valuable services rendered by Mr.R.Subramanian during the past 25 years.

Mr.Ramesh Ramanathan has been appointed as an Additional Director and as Managing Director & CEO of the Company for a period of 5 (Five) years with effect from 1st July, 2011. He holds office up to the date of the ensuing Annual General Meeting. The Company has received a Notice under Section 257 of the Companies Act 1956, along with the deposit of Rs.500/- from a member signifying his intention to propose Mr.Ramesh Ramanathan as candidate for the Office of the Director.

Mr.Siddharth Mehta has been designated as Chairman of the Company with effect from 1st July, 2011. Mr.Sidharth Shankar has been designated as Vice Chairman of the Company with effect 1st July, 2011.

EMPLOYEE STOCK OPTION SCHEME / EMPLOYEES STOCK PURCHASE SCHEME

Under the Employees Stock Option Scheme-2007, 16,66,000 Equity Shares of Rs.10/- each were allotted and no options are pending.

Under the Employees Stock Option Scheme-2009, 14,12,000 equity shares were allotted. The Balance 88,000 options are yet to be exercised.

Under the Employees Stock Purchase Scheme-2010, 4,85,000 shares have been allotted. The balance 16,15,000 shares are yet to be allotted the details of options granted under ESOS-2007 and ESOS-2009 are given in Annexure-A in accordance with SEBI (Employees Stock Option Scheme & Employees Stock Purchase Scheme) Guidelines 1999 and any modifications thereto.

SHARE CAPITAL

Your Company has raised Rs.538.65 lakhs (being 90%) through issue of 17,10,000 Equity Shares of Rs.10/- each at a price of Rs.35/- (including a premium of Rs.25/- per Equity Share) on conversion of Warrants.

Your Company has raised Rs.131.25 lakhs (being 75%) through issue of 5,00,000 Equity Shares of Rs.10/- each at a price of Rs.35/- (including a premium of Rs.25/- per Equity Share) on conversion of Warrants.

Your Company has raised Rs.166.60 lakhs through issue of 16,66,000 Equity Shares of Rs.10/- each at par, under ESOS-2007 .

Your Company has raised Rs.100.00 lakhs through issue of 10,00,000 Equity Shares of Rs.10/- each at par, under ESOS-2007 and ESOS - 2009.

Further, during the current year your Company has raised Rs.41.20 lakhs through issue of 4,12,000 Equity shares of Rs.10/- each under ESOS-2009 on 14-07-2011 and Rs.48.50 lakhs through issue of 4,85,000 Equity Shares of Rs.10/- each under ESPS-2010 on 14-07-2011.

ISSUE OF 30,00,000 WARRANTS ON PREFERENTIAL BASIS.

The Members at the Extraordinary General Meeting held on 28-01-2009 have passed a special resolution for issue and allotment of 30,00,000 Warrants at a price of Rs.35/- per Warrant on preferential basis. Subsequently, 30,00,000 Warrants were allotted at the Board Meeting held on 12-02-2009. The In-principle approval was granted by both Bombay Stock Exchange Limited (BSE) and Madras Stock Exchange Limited (MSE). The 12,90,000 warrants were converted into 12,90,000 Equity Shares on 25th March, 2010, 6,35,000 Warrants were converted into 6,35,000 Equity Shares on 8th April, 2010 and the balance 10,75,000 Warrants were converted into 10,75,000 Equity Shares on 4th August 2010. The said Equity Shares are listed on the Madras Stock Exchange Limited and Bombay Stock Exchange Limited.

ISSUE OF 5,00,000 WARRANTS ON PREFERENTIAL BASIS.

The Members at the Extraordinary General Meeting held on 25-05-2009 have passed a special resolution for issue and allotment of 5,00,000 Warrants at a price of Rs.35/- per Warrant on preferential basis. Subsequently, 5,00,000 Warrants were allotted at the Board Meeting held on 04-06-2009. The In-principle approval was granted by both Bombay Stock Exchange Limited (BSE) and Madras Stock Exchange Limited (MSE). Out of the above, 4,00,000 Warrants were converted into 4,00,000 Equity Shares on 20th August, 2010 and the balance 1,00,000 Warrants were converted into 1,00,000 Equity Shares on 02-12-2010. The said Equity Shares are listed on the Madras Stock Exchange Limited and Bombay Stock Exchange Limited.

PROCEEDS OF PREFERENTIAL ISSUES

The details of utilization of proceeds of Preferential Issues upto 31st March, 2011 are setout in the statement attached herewith in Annexure - B.

STATUS OF PROCEEEDINGS UNDER SECTION 408 OF THE COMPANIES ACT, 1956

The Members are informed that the Hon'ble High Court passatkan Order, granting stay of the Orders of the Hon'ble Company Law Board, Chennai, pending disposal of the Appeal under CMA No.3647 of 2005. The stay is still in force.

FIXED DEPOSIT

Your Company has not accepted any fresh Deposits from the public during the year.

AUDITORS

The Joint-Auditors of the Company M/s.R.Subramanian and Company, Chartered Accountants, Chennai, and M/s.V.Sankar Aiyar & Co., Chennai, retire at the conclusion of this Annual General Meeting and are eligible for re- appointment.

The Company has received confirmation that their

appointment will be within the limits prescribed under Section 224(1B) of the Companies Act, 1956. The Audit Committee of the Board has recommended their appointment. The necessary resolution is being placed before the shareholders for approval.

AUDIT, INVESTOR GRIEVANCES, REMUNERATION AND COMPENSATION COMMITTEES

In terms of Clause 49 of the Listing Agreement of the Stock Exchanges and pursuant to the provisions of Section 292A of the Companies Act, 1956, the details pertaining to Audit Committee, Investor Grievances Committee, Remuneration Committee, Share Transfer Committee and Compensation Committee are furnished in the Report on Corporate Governance which is annexed herewith.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

In terms of Clause 49 of the Listing Agreement of the Stock Exchanges, Management Discussion and Analysis Report is annexed herewith and forms part of this Report.

REPORT ON CORPORATE GOVERNANCE

The Company has complied with the Corporate Governance Code as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges. A separate section on Corporate Governance, along with a certificate from the Statutory Auditors of the Company confirming the compliance is annexed.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors' to the best of their knowledge and belief confirm that

1. in the preparation of the Profit and Loss Account for the Financial Year ended 31st March, 2011 and the Balance Sheet as at that date ("Annual Accounts"), the applicable accounting standards have been followed;

2. that the Directors' had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a True and Fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that year;

3. that the Directors had 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 for preventing and detecting fraud and other irregularities;

4. that the Directors had prepared the Annual Accounts for the Financial Year ended 31st March, 2011 on a going concern basis.

SUBSIDIARY COMPANIES

As on 31st March, 2011, Your Company had three Subsidiary Companies namely,

1. M/s.Sterling Holidays (Ooty) Limited.

2. M/s.Sterling Holiday Resorts (Kodaikanal) Limited and

3. M/s.Manchanda Resorts Private Limited.

There has been no material change in the nature of business of the subsidiaries. A statement containing brief financial details of the subsidiaries is included in the Annual Report.

In compliance with the provisions of the Listing Agreements entered into by the Company with the Stock Exchanges, a Consolidated Financial Statement of the Company and all its subsidiaries is attached. The Consolidated Financial Statements have been prepared in accordance with the relevant Accounting Standards as prescribed under Section 211(3C) of the Companies Act, 1956 ("Act"). These financial statements disclose the assets, liabilities, income, expenses and other details of the Company and its subsidiaries.

Pursuant to the provision of Section 212(8) of the Act, the Ministry of Corporate Affairs vide its circular dated February 8, 2011 has granted general exemption from attaching the Balance Sheet, Profit and Loss Account and other documents of the subsidiary companies with the Balance Sheet of the Company. A statement containing brief financial details of the Company's subsidiaries for the Financial Year ended 31st March, 2011 is included in the Annual Report. The annual accounts of these subsidiaries and the related detailed information will be made available to any member of the company/its subsidiaries seeking such information at any point of time and are also available for inspection by any member of the Company/its subsidiaries at the registered office of the Company. The annual accounts of the said subsidiaries will also be available for inspection, as above, at the head offices/registered offices of the respective subsidiary companies. The Company shall furnish a copy of details of annual accounts of subsidiaries to any member on demand.

COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, 1988

In terms of the above Rules, the particulars relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo required in terms of Section 217(l)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are given in Annexure - C which forms part of the Directors' Report.

PARTICULARS OF EMPLOYEES

There are no employees of your Company who come within the purview of Sec. 217(2A) of the Companies Act, 1956 during the year under review.

DEMATERIAUSATION OF EQUITY SHARES

As mentioned in our earlier Annual Reports, the Company's Equity Shares are in the compulsory demat mode with effect from 28th August, 2000, as per Circular No.SMDRP / Policy / CIR-23/2000 dated 29th May, 2000 issued by Securities and Exchange Board of India (SEBI). This has been facilitated through arrangement with M/s.National Securities Depository Limited (NSDL) and M/s.Central Depository Services (India) Limited (CDSL). A large number of our shareholders have taken advantage of dematerialisation facility. M/s.Cameo Corporate Services Limited, Chennai, has been appointed as the Registrar and Share Transfer Agent of the Company.

CEO / CFO CERTIFICATION

The Managing Director and the Senior Vice President -Finance have submitted a certificate to the Board regarding the Financial statements and other matters as required under Clause 49 V of the Listing Agreement.

"OPEN OFFER" ANNOUNCED BY M/S.INDUS HOSPITALITY FUND LTD AND M/S.INDIA DISCOVERY FUND LTD.

The Board of Directors of the Company at their meeting held on 04-06-2009 have allotted 78,82,200 Equity Shares to M/s.lndus Hospitality Fund Ltd, pursuant to the Special Resolution passed at the Extraordinary General Meeting held on 25-05-2009. M/s.lndus Hospitality Fund Ltd along with M/s.lndia Discovery Fund Ltd have issued Public Announcement on 08-06-2009, to acquire 95,85,717 fully paid Equity Shares of the Company at an offer price at Rs.36.25 per share in accordance with the Regulations and Guidelines issued by SEBI.

M/s.Gujarat Industrial Investment Corporation Limited (GIIC) have filed a Civil suit in the Hon'ble Court of 2nd Additional Senior Civil Judge at Gandhinagar, Gujrat in connection with the convening of Extraordinary General Meeting on 25th May, 2009, wherein the allotment of Equity Shares on preferential basis to M/s.lndus Hospitality Fund Limited and M/s.Blue Ocean Investment Trust was approved by the shareholders.

The Company has taken necessary legal action to defend the case in this regard. Subsequently, a One Time Settlement has been reached between the Company and GIIC. The Open Offer opened on 10-11-2010 and closed on 29-11-2010 and 6,518 Equity Shares have been acquired by the Acquirer.

ACKNOWLEDGEMENTS

The Board of Directors take this opportunity to express their sincere thanks to the Central and State Governments, Financial Institutions and Bankers and other Creditors for their valuable support and assistance during this period. The Directors also wish to thank the Shareholders and Timeshare Customers who have supported the Company in this hour of need. Our Directors look forward to receiving continued support from them.

The Directors also wish to thank the employees of the Company for their dedicated performance and also place on record their wholehearted commitments to the Company and combined efforts to turnaround the Company.

For and on behalf of the Board

Place: Chennai SIDDHARTH MEHTA

Date: 13th August 2011 CHAIRMAN

---

Mar 31, 2010

The Directors of your Company hereby present the 23rd Annual Report of the Company together with the Accounts for the Year ended 31 st March, 2010.

FINANCIAL RESULTS

2009-2010 2008-2009 Rs in crores Rs in crores

Sales 30.59 31.02

Profit before Interest Depreciation & Tax 5.25 (15.49)

Less: Interest 10.06 1.34

Profit / (Loss) before :

Depreciation & Tax (4.81) (16.83)

Less:Depreciation 4.12 4.84

Profit / (Loss) before Tax (8.93) (21.67)

Less: Provision for Fringe

Benefit Tax 0.09 0.15

Profit / Loss for the year (9.02) (21.82)

OPERATIONS AND BUSINESS PLAN

During the year, under review your company has achieved total sale of Rs.30.59 crores, comprising the sale of Time Shares Rs.7.46 crores and through Resort operations Rs.23.13 crores.

A strengthened financial position has helped your company clear its past liabilities and become a totally debt-free company. The immediate focus is the refurbishment of resorts. 15 % of rooms have been taken up for refurbishment and over the next three years, your company intends to complete the entire refurbishment efforts across all existing properties. With 10 owned and 3 leased resorts, plans are on to open 11 new resorts in the next 10 years. And construction permission is available for 1,150 rooms in current and new resorts.

A professional sales team is being hired and trained to drive the Vacation Ownership Sales and increase membership to 2,60,000 from 1,08,251 with 55% active members, in the next ten years. Your companys endeavor to provide customer delight will also extend

to providing contemporary Customer Service experience to vacation ownership customers and hotel guests. Finally, on the Marketing front, your company has got itself a new brand identity. And major alliances and cross selling arrangements are being rolled out to take the brand to every target family in the country and make it a brand to remember in the product category.

Settlement of Loans and Liabilities

Your Company has settled substantial creditors including Banks and Financial Institutions such as ICICI, GIIC, TFCI, SIDBI, Bank of Punjab Limited (HDFC), Catholic Syrian Bank Limited, South Indian Bank Limited and other trade creditors and also settled most of the Statutory dues and employees dues with the money raised in the above allotment of Equity Shares on preferential basis. In addition, a part of the money raised was used for refurbishing of resorts.

Refurbishment of Resorts

As reported in previous report, internal painting, change of upholstery, replacement of furniture, changing of flooring and up-gradation of Toilets and other Amenities were taken up wherever required. All out efforts have been taken to complete the balance developmental work with the funds available and the same is expected to be completed shortly. The customer feed back on the developmental work, amenities provided and renovation of resorts are satisfactory and encouraging.

Directors

Your Directors, Mr. M.N. Rangamani and Mr. S. Sethuraman retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re- appointment.

EMPLOYEES STOCK OPTION SCHEME

Under the Employees Stock Option Scheme - 2007, 19,44,000 of Equity shares of Rs.10/- each were allotted.

Also 5,56,000 options which were surrendered are included in the Common pool and was granted to eligible employees on 30-10-2009.

Under the Employees Stock Option Scheme 2009, 15,00,000 Stock Options were granted to employees on 07-10- 2009.

The details of options granted under ESOS 2007 and ESOS 2009 are given in Annexure "A" in accordance with SEBI (Employees Stock Option Scheme & Employees Stock Purchase Scheme) Guidelines 1999 and any modifications thereto.

SHARE CAPITAL

Your Company has raised Rs.33.34 crores through issue of 95,26,500 equity shares of Rs.10/- each at a price of Rs.35/- (including the premium of Rs.25/- per equity share) and Rs.0.44 crores through issue of 5,00,000 warrants of Rs.35/- each (being 25%) on 04-06-2009. Also your Company has raised Rs.0.83 crores through issue of 8,34,000 equity shares of Rs.10/- each at par, under ESOS-2007 and Rs.4.06 crores (being 90%) through issue of 12,90,000 equity shares of Rs.10/- at a price of Rs.35/- (including a premium of Rs.25/- per equity share) on conversion of warrants on 25- 03-2010.

Further during the Current year your Company has raised Rs.1.11 Crores through issue of 11,10,000 Equity Shares under ESOS-2007 on 05-04-2010, Rs.2 Crores (being 90%) through issue of 6,35,000 equity shares of Rs.10/- at a price of Rs.35/-(including a premium of Rs.25/- per equity share) on conversion of warrants on 08-04-2010 and Rs.3.39 Crores (being 90%) through issue of 10,75,000 equity shares of Rs.10/- at a price of Rs.35/- (including a premium of Rs.25/- per equity share)

On conversion of warrants on 04-08- 2010, and Rs.1.05 Crores (being 75%) through issue of 4,00,000 equity shares of Rs.10/- at a price of Rs.35/- (including a premium of Rs.25/- per equity share) on conversion of warrants on 20-08-2010.

ISSUE OF 30,00,000 WARRANTS ON PREFERENTIAL BASIS.

The Members at the Extraordinary General Meeting held on 28-01-2009 have passed a special resolution for issue and allotment of 30,00,000 warrants at a price of Rs.35/- per warrant on preferential basis. Subsequently, 30,00,000 Warrants were allotted at the Board Meeting held on 12-02-2009. The In-principle approval was granted by both Bombay Stock Exchange Limited (BSE) and Madras Stock Exchange Limited (MSE).The 12,90,000 Warrants were converted into 12,90,000 equity shares on 25th March, 2010, 6,35,000 Warrants were converted into 6,35,000 equity shares on 8th April, 2010 and the balance 10,75,000 Warrants were converted into 10,75,000 equity shares on 4th August 2010.

ISSUE OF 5,00,000 WARRANTS ON PREFERENTIAL BASIS.

The Members at the Extraordinary General Meeting held on 25-05-2009 have passed a special resolution for issue and allotment of 5,00,000 warrants at a price of Rs.35/- per warrant on preferential basis. Subsequently, 5,00,000 Warrants were allotted at the Board Meeting held on 04-06-2009. The In-principle approval was granted by both Bombay Stock Exchange Limited (BSE) and Madras Stock Exchange Limited (MSE). Out of the above, 4,00,000 warrants were converted into 4,00,000 equity shares on 20th August, 2010.

ISSUE OF 95,26,500 EQUITY SHARES ALLOTTED ON PREFERENTIAL BASIS.

The Members at the Extraordinary General Meeting held on 25-05-2009 have passed a special resolution for issue and allotment of 95,26,500 Equity

shares of Rs. 10/- each at a price of Rs.35/- per share (including the premium of Rs.25/- per equity share). Subsequently, 95,26,500 Equity shares were allotted at the Board Meeting held on 04-06-2009. The said Equity Shares are listed with Madras Stock Exchange Limited and Bombay Stock Exchange Limited.

PROCEEDS OF PREFERENTIAL ISSUES

The details of utilization of proceeds of Preferential issues upto 31st March, 2010 are setout in the statement attached herewith in Annexure B.

STATUS OF PROCEEDINGS UNDER SECTION 408 OF THE COMPANIES ACT, 1956

The Members are informed that the Honble High Court was pleased to pass an Order, granting stay of the Orders of the Honble Company Law Board, Chennai, pending disposal of the Appeal under CMA No.3647 of 2005. The stay is still in force.

FIXED DEPOSIT

Your Company has not accepted any fresh Deposits from the public during the current year.

AUDITORS

The Joint-Auditors of the Company M/s.R.Subramanian and Company, Chartered Accountants, Chennai, and M/s.V.Sankar Aiyar & Co., Chartered Accountants, Chennai, retire at the Conclusion of this Annual General Meeting and are eligible for re- appointment.

The Company has received confirmation that their appointment will be within the limits prescribed under Section 224(1 B) of the Companies Act, 1956. The Audit Committee of the Board has recommended their appointment. The necessary resolution is being placed before the shareholders for approval.

AUDIT, INVESTOR GRIEVANCES, REMUNERATION AND COMPENSATION COMMITTEES

In terms of Clause 49 of the Listing

Agreement of the Stock Exchanges and pursuant to the provisions of Section 292A of the Companies Act, 1956, the details pertaining to Audit Committee, Investor Grievances Committee, Remuneration Committee, Share Transfer Committee and Compensation Committee are furnished in the Report on Corporate Governance which is annexed herewith.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

In terms of Clause 49 of the Listing Agreement of the Stock Exchanges, Management Discussion and Analysis Report is annexed herewith and forms part of this Report.

REPORT ON CORPORATE GOVERNANCE

The Company has complied with the Corporate Governance Code as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges. A separate section on Corporate Governance, along with a certificate from the Statutory Auditors of the Company confirming the compliance is annexed.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors to the best of their knowledge and belief confirm that:

1. in the preparation of the Profit and Loss Account for the Financial Year ended 31 st March, 2010 and the Balance Sheet as at that date ("Annual Accounts"), the applicable accounting standards have been followed;

2 that the Directors had selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a True and Fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that year;

3. that the Directors had 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 for preventing and detecting fraud and other irregularities;

4. that the Directors had prepared the Annual Accounts for the Financial Year ended 31st March, 2010 on a going concern basis.

Subsidiary Companies

As on 31st March, 2010, Your Company had three Subsidiary Companies namely,

1. M/s.Sterling Holidays (Ooty) Limited

2. M/s.Sterling Holiday Resorts (Kodaikanal) Limited and

3. M/s. Manchanda Resorts Private Limited

The accounts of the subsidiaries are consolidated with the accounts of the Company in accordance with Accounting Standards 21 (AS 21) prescribed by The Institute of Chartered Accountants of India. The consolidated accounts duly audited by the Statutory Auditors and the consolidated financial information of the subsidiaries form part of the annual report.

An application in terms of Section 212(8) of the Companies Act, 1956 has been made to the Central Government, seeking exemption from attaching the balance sheet and profit and loss account of the subsidiaries along with the report of the Board of Directors and

that of the auditors thereon, with the Companys accounts and the Company awaits the approval of the Central Government.

The annual accounts, reports and other documents of the subsidiary companies will be made available to the Members and investors on receipt of a request from them.

The annual accounts of the subsidiary companies will be available at the registered office of the Company and at the respective subsidiary companies concerned, if any member or investor wishes to inspect the same during the business hours of any working day.

COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, 1988

In terms of the above Rules, the particulars relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo required 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, 1988 are given in Annexure "C" which forms part of the Directors Report.

PARTICULARS OF EMPLOYEES

Details of remuneration paid for the Financial Year ended 31.03.2010, as per Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) (Amendment) Rules, 2002, are provided in Annexure-"D" which forms part of the Directors Report.

DEMATERIALISATION OF EQUITY SHARES

As mentioned in our earlier Annual Reports, the Companys Equity Shares are in the compulsory demat mode with effect from 28th August, 2000, as per Circular No.SMDRP / Policy / CIR- 23/2000 dated 29th May, 2000 issued by

Securities and Exchange Board of India (SEBI).This has been facilitated through arrangement with M/s.National Securities Depository Limited (NSDL) and M/s.Central Depository Services (India) Limited (CDSL). A large number of our shareholders have taken advantage of dematerialisation facility. M/s.Cameo Corporate Services Limited, Chennai, has been appointed as the Registrar and Share Transfer Agents of the Company.

CEO/CFO CERTIFICATION

The Joint-Managing Director and the Senior Vice President Finance have submitted a certificate to the Board regarding the Financial statements and other matters as required under Clause 49V of the Listing Agreement.

"OPEN OFFER" ANNOUNCED BY M/S.INDUS HOSPITALITY FUND LTD AND M/S.INDIA DISCOVERY FUND LTD.

The Board of Directors of the Company at their meeting held on 04-06-2009 have allotted 78,82,200 equity shares to M/s.Indus Hospitality Fund Ltd, pursuant to the Special resolution passed at the Extraordinary General Meeting held on 25-05-2009. M/s.lndus Hospitality Fund Ltd along with M/s.India Discovery Fund Ltd have issued Public Announcement on 08-06-2009, to acquire 95,85,717 fully paid Equity Shares of the Company at an offer price at Rs.36.25/- per share in accordance with the Regulations and Guidelines issued by SEBI.

M/s.Gujarat Industrial Investment Corporation Limited (GIIC) have filed a Civil suit in the Honble Court of 2nd Additional Senior Civil Judge at Gandhinagar, Gujrat in connection with the convening of Extraordinary General Meeting on 25th May, 2009, wherein the allotment of Equity Shares on preferential basis to M/s.lndus Hospitality Fund Limited and M/s.Blue Ocean Investment Trust was approved

by the Shareholders. However, the Company has taken necessary legal action to defend the case in this regard. Subsequently, a settlement has been arrived at between the Company and GIIC. As per the settlement, the above mentioned Civil . Suit was withdrawn by GIIC.

Necessary steps are being taken by the Investors to complete the Open Offer.

ACKNOWLEDGEMENTS

The Board of Directors take this opportunity to express their sincere thanks to the Central and State Governments, Financial Institutions and Bankers and other Creditors for their valuable support and assistance during this period.The Directors also wish to thank the Shareholders and Timeshare Customers who have supported the Company in this hour of need. Our Directors look forward to receiving continued support from them,

The Directors also wish to thank the employees of the Company for their dedicated performance and also place on record their wholehearted commitments to the Company and combined efforts to turnaround the Company.

For and on behalf of the Board

Place:Chennai R.SUBRAMANIAN

Date : 28-08-2010 Chairman and

Managing Director

---

Mar 31, 2009

The Directors of your Company hereby present the 22nd Annual Report of the Company together with the Accounts for the Year ended 31st March, 2009.

FINANCIAL RESULTS 2008- 2009 2007 - 2008 Rs. in Crores Rs. in Crores

Sales 31.02 36.85

Profit before Interest Depreciaton & Tax (14.35) 7.01

Less: Interest 2.84 2.72

Profit / (Loss) before Depreciaton & Tax (17.19) 4.29

Less : Depreciaton 4.48 4.80

Profit / (Loss) before tax (21.67) (0.51)

Less Provision for fringe benefit tax 0.15 0.39

Profit / (Loss) for the year (21.82) (0.90)

OPERATIONS

During the year, your company has achieved the total sale of Rs.31.02 crores, comprising the sale of Time Shares Rs.7.58 crores and through Resort operatons Rs.23.44 crores.

Your Company has raised Rs.17,02,22,220/- through issue of 45,63,492 equity shares of Rs.10/- each at a price of Rs.35/- (including the premium of Rs.25/- per equity share) and 30,00,000 Warrants of Rs.35/- each (allotment money Rs.3.50 per warrant) on 12-02-2009. Also your Company raised Rs.33,78,02,500/- through issue of 95,26,500 equity shares of Rs.10/- each at price of Rs.35/- (including the premium of Rs.25/- per equity share) and 5,00,000 warrants of Rs.35/- each (allotment money Rs.8.75 per warrant) on 04-06-2009.

SETTLEMENTT OF LOANS AND LIABILITIES

Your Company has setled substantal creditors including Banks and Financial Institutions and other trade creditors, with the money raised in the above allotment of Equity Shares on preferental basis. In additon, a part of the money raised was used for refurbishing some of the resorts.

REFURBISHMENT OF RESORTS

As reported in previous report, internal paintng, change of upholstery, replacement of furniture, changing of flooring and up-gradaton of Toilets and other Amenites were taken up wherever required. All out efforts have been taken to complete the balance developmental work with the funds available and the same is expected to be completed within a year. The customer feed back on the developmental work, amenites provided and renovaton of resorts are satsfactory and encouraging.

DIRECTORS

Your Directors, Mr.G.Sundaram and Mr.K.Chandrasekaran retire by rotaton at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. Mr.Alan David Whitehouse ceased to be Director on 30.01.2009.

Mr.Amit Jata has been appointed as Additonal Director of the Company with effect from 12.02.2009 and shall hold office upto the date of this Annual General Meeting. A notce under Section 257 of the

Companies Act, 1956, along with a deposit of Rs.500/- has been received from a member proposing Mr.Amit Jata as a Director of the Company.

The tenure of appointment of Mr.R.Subramanian as Chairman and Managing Director of the Company expires on 16-11-2009. The Board of Directors propose the re-appointment of MR.R.Subramanian as Chairman and Managing Director for a period of five years with effect from 16.11.2009.

EMPLOYEE STOCK OPTION SCHEME – 2007

Under the Employees Stock Opton Scheme 2007, 25,00,000 Stock Optons were vested by the Compensaton Commitee at its Meeting held on 15-07-2008 in favor of the grantees.

The details of optons granted under ESOS – 2007 are given in Annexure "A" in accordance with SEBI (Employees Stock Opton Scheme & Employ- ees Stock Purchase Scheme) Guidelines 1999 and any modifications thereto.

ISSUE OF 30,00,000 WARRANTS ON PREFERENTIAL BASIS.

The Members at the Extraordinary General Meeting held on 28-01-2009 have passed the special resolution for issue and allotment of 30,00,000 warrants at a price of Rs.35/- per warrant on preferental basis. Subse- quently, 30,00,000 Warrants were alloted at the Board Meeting held on 12-02-2009. The In-principle approval was granted by both Bombay Stock Exchange Limited (BSE) and Madras Stock Exchange Limited (MSE).

ISSUE OF 45,63,492 EQUITY SHARES ALLOTTED ON PREFERENTIAL BASIS.

The Members at the Extraordinary General Meeting held on 28-01-2009 have passed a special resolution for issue and allotment of 58,83,276 Equity shares of Rs. 10/- each at a price of Rs.35/- per share (including the premium of Rs.25/- per equity share). Subsequently, 45,63,492 Equity shares were alloted at the Board Meeting held on 12-02-2009. The said Equity Shares are listed with Madras Stock Exchange Limited and Bombay Stock Exchange Limited.

PROCEEDS OF PREFERENTIAL ISSUES

The details of utlizaton of proceeds of Preferental issues upto 31st March, 2009 are setout in the statement atached herewith in Annexure - B

STATUS OF PROCEEEDINGS UNDER SECTION 408 OF THE COMPANIES ACT, 1956

The Members are informed that the Honble High Court was pleased to pass an Order, grantng stay of the Orders of the Honble Company Law Board, Chennai, untl further Orders of the Honble High Court of Madras, pending disposal of the Appeal under CMA No.3647 of 2005. The stay is stll in force.

FIXED DEPOSIT

Your Company has not accepted any fresh Deposits from the public during the current year.

AUDITORS

The Joint-Auditors of the Company M/s.R.Subramanian and Company, Chartered Accountants, Chennai, and M/S.V.Sankar Aiyar & Co., Chennai, retire at the Conclusion of this Annual General Meeting and are eligible for re-appointment.

The Company has received confirmation that their appointment will be within the limits prescribed under Section 224(1B) of the Compa- nies Act, 1956. The Audit Commitee of the Board has recommended their appointment. The necessary resolution is being placed before the shareholders for approval.

AUDIT, INVESTOR GRIEVANCES, REMUNERATION AND COMPENSA- TION COMMITTEES

In terms of Clause 49 of the Listng Agreement of the Stock Exchanges and pursuant to the provisions of Section 292A of the Companies Act, 1956, the details pertaining to Audit Commitee, Investor Grievances Commitee, Remuneraton Commitee, Share Transfer Commitee and Compensaton Commitee are furnished in the Report on Corporate Governance which is annexed herewith.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

In terms of Clause 49 of the Listng Agreement of the Stock Exchanges, Management Discussion Analysis Report is annexed herewith and forms part of this Report.

REPORT ON CORPORATE GOVERNANCE

The Company has complied with the Corporate Governance Code as stpulated under Clause 49 of the Listng Agreement with the Stock Exchanges. A separate Section on Corporate Governance, along with a certficate from the Statutory Auditors of the Company confirming the compliance is annexed.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors to the best of their knowledge and belief confirm that:

1. in the preparaton of the Profit and Loss Account for the Financial Year ended 31st March, 2009 and the Balance Sheet as at that date ("Annual Accounts"), the applicable accountng standards have been followed;

2. that the Directors had selected such accountng policies and applied them consistently and made judgements and estmates that are reasonable and prudent so as to give a True and Fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that year;

3. that the Directors had taken proper and sufficient care for the maintenance of adequate accountng records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventng and detectng fraud and other irregularites;

4. that the Directors had prepared the Annual Accounts for the Financial Year ended 31st March, 2009 on a going concern basis.

COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES, 1988

In terms of the above Rules, the partculars relatng to Conservaton of Energy, Technology Absorpton and Foreign Exchange Earnings and Outgo required in terms of Section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Partculars in the Report of Board of Directors) Rules, 1988 are given in Annexure – "C" which forms part of the Directors Report.

PARTICULARS OF EMPLOYEES

Details of remuneraton paid for the Financial Year ended 31.03.2009, as per Section 217(2A) of the Companies Act, 1956 read with Compa- nies (Partculars of Employees) (Amendment) Rules, 2002, are provided in Annexure-"D" which forms part of the Directors Report.

DEMATERIALISATION OF EQUITY SHARES

As mentoned in our earlier Annual Reports, the Companys Equity Shares are in the compulsory demat mode with effect from 28th August, 2000, as per Circular No.SMDRP / Policy / CIR-23/2000 dated 29th May, 2000 issued by Securites and Exchange Board of India (SEBI). This has been facilitated through arrangement with M/s.Natonal Securites Depository Limited (NSDL) and M/s.Central Depository Services (India) Limited (CDSL). A large number of our shareholders have taken advantage of dematerialisaton facility. M/s.Cameo Corporate Services Limited, Chennai, has been appointed as the Registrar and Share Transfer Agents of the Company.

SHIFTING OF REGISTERED OFFICE OF THE COMPANY

The Registered office of the Company has been shifed to No.163, T.T.K. Road, Alwarpet, Chenai – 600 018, with effect 02-03-2009.

CEO / CFO CERTIFICATION

The Joint-Managing Director and the Senior Vice President – Finance have submited a certficate to the Board regarding the Financial statements and other maters as required under clause 49. V. of the Listng Agreement.

"OPEN OFFER" ANNOUNCED BY M/S.INDUS HOSPITALITY FUND LTD AND M/S.INDIA DISCOVERY FUND LTD.

The Board of Directors of the Company at their Meeting held on 04-06-2009 have alloted 78,82,200 equity shares to M/s.Indus Hospitality Fund Ltd, pursuant to the Special resolution passed at the Extraordinary General Meeting held on 25-05-2009. M/s.Indus Hospitality Fund Ltd along with M/s.India Discovery Fund Ltd have issued Public Announcement on 08-06-2009, to acquire 95,85,717 fully paid Equity Shares of the Company at an offer price at Rs.36.25/- per share in accordance with the regulations and Guidelines issued by SEBI.

M/s.Gujarat Industrial Investment Corporaton Limited (GIIC) have filed a Civil suit in the Honble Court of 2nd Additonal Senior Civil Judge at Gandhinagar, Gujrat in connecton the convening of Extraordi- nary General Meeting on 25th May, 2009, wherein the allotment of Equity Shares on preferental basis to M/s.Indus Hospitality Fund Limited and M/s.Blue Ocean Investment Trust was approved by the Shareholders. However, the Company has taken necessary legal acton to defend the case in this regard.

ACKNOWLEDGEMENTS

The Board of Directors take this opportunity to express their sincere thanks to the Central and State Governments, Financial Institutions and Bankers and other Creditors for their valuable support and assistance during this period. The Directors also wish to thank the Shareholders and Timeshare Customers who have supported the Company in this hour of need. Our Directors look forward to receiving contnued support from them.

The Directors also wish to thank the employees of the Company for their dedicated performance and also place on record their wholehearted commitments to the Company and combined efforts to turnaround the Company.

For and on behalf of the Board

Place : Chennai R.SUBRAMANIAN

Date: 01.09.2009 CHAIRMAN AND MANAGING DIRECTOR