Notes to Accounts of Sterling Holiday Resorts (I) Ltd.

Mar 31, 2014

1) During the fnancial year 2011-12, pursuant to One Time Settlement (OTS) scheme, the Company had fully settled the dues of a Financial Institution (FI) and also obtained a ''No Due'' certifcate. However, the FI has not released the title deeds of the properties given as security for the reason that a Third Party has fled a writ petition against the FI challenging the cancellation of sale of the said property to them. The Company is also a party to the said writ petition. The said writ petition was disposed off by Hon''ble High Court of Madras, against the Company. The Company has preferred Special leave Petition (SlP) before the Hon''ble Supreme Court and the Court has ordered ''Status quo'' in all respects concerning the said properties. The management is confdent of getting a favourable decision.

2) During the fnancial year 2013-14, the Company has fully settled the Term loan availed from Il&FS Financial Services limited (Il&FS). The Company is awaiting ''No Due'' certifcate and has taken steps for the release of title deeds of properties given as security to Il&FS.

3) The Company had revalued certain lands in the years 1989, 1992 and 1999 by appointing an external valuer, based on the then prevailing market value. The surplus on revaluation amounting to INR 1,959.20 lakhs (after making adjustment for sales effected till date), stands credited to Revaluation Reserve.

4) Registration of lease in respect of land and building situated at Peermedu (INR 1,684 lakhs), is pending.

5) The Company holds 98% shares in Sterling Holidays (Ooty) limited and Sterling Holiday Resorts (Kodaikanal) limited and invested INR 9.80 lakhs towards share capital (Previous year INR 9.80 lakhs). The sum due from subsidiaries as at March 31, 2014 is INR 1,240.07 lakhs (Previous year INR 1,283.65 lakhs). The accumulated losses as on March 31, 2014 of these subsidiaries are INR 576.17 lakhs and INR 710.91 lakhs (Previous year INR 591.49 and INR 734.38 lakhs), respectively. The subsidiary companies have reported improved business and achieved operational profts during the year and is confdent of sustaining the performance in future. Further, during the year, the subsidiary companies have repaid advances of INR 1,058.02 lakhs. Considering these aspects, the Management is of the view that there is no permanent diminution in the value of investments / advances and these amounts are good and recoverable.

6) Five cottages located at Ooty - Fern Hill and included under ''Buildings'' are given on lease for a period of 99 years to a customer.

7) The Capital Work-In-Progress (CWIP) includes value of certain properties under construction for more than 10 years. The Company has started development of some of the properties and is in the process of developing other properties, in a phased manner. In the opinion of the management, no impairment provision is required in respect of such properties as their estimated market value together with the market value of appurtenant land far exceeds the book value of those properties as per valuations carried out by the Company.

8) The Company had in the past transferred a property at Goa and part of the sale consideration amounting to INR 527.10 lakhs (Previous year INR 527.10 lakhs) (included under "Other non Current Assets") is retained by the buyer pending compliance of certain conditions. The Company is confdent of recovering this amount as it has taken effective steps for discharge of its obligations. The Company is also legally advised that it has the right of vendor''s lien against the immovable property sold to the extent of amount due and it can seek legal remedy to recover the same. In view of the above, the Management is of the view that same is considered good and recoverable.

9) Deferred income grouped under Non-Current and Current liabilities, aggregating to INR 27,208.40 lakhs (Previous year INR 24,476.19 lakhs), represents "Advance Subscription towards Customer Facilities (ASCF)" and "Entitlement Fee" to be recognised as income, over the remaining holiday entitlement period.

10) SECURITISATION

The Company has securitised a portion of trade receivables including future interest receivable thereon. The consideration received over the principal amount (net of reversals in respect of cancelled members) is recognised as income in the year of securitisation.

11) The Company has strengthened its capital base by way of infusion of additional equity in the current year. The long-term debts have been fully repaid. It has a comfortable working capital cycle. The Company continues to invest in refurbishment / re-development of the existing resorts and also has plans for developing Greenfeld resorts. There has been signifcant improvement in the overall performance and the losses are being progressively reduced. The Company expects to sustain the growth in the turnover and improve proftability in the ensuing years. Hence in the view of the management, the "Going Concern Assumption" is not affected.

13) The Company has circulated confrmation of balances to majority of creditors including in respect of Trade Payables, Advances and Resort debtors. Confrmations have been received from signifcant portion of debtors and creditors.

14) The breakup of Deferred Tax liabilities (DTl) and Deferred Tax Assets (DTA) as on 31.03.2014 is as under:

As a prudent measure, Deferred Tax Asset (DTA) has been recognised only to the extent of Deferred Tax liability (DTl).

15) SEGMENT REPORTING:

The Company has "Vacation Ownership" as the only primary reportable segment, for the purpose of Accounting Standard 17.

16) The fgures for the current year include operating results of Manchanda Resorts Private limited (MRPl) [Transferor Company], the wholly owned subsidiary company of Sterling Holiday Resorts (India) limited [Transferee Company], which has been amalgamated with the Transferee Company effective from April 1, 2012 as per the Scheme of Amalgamation (the Scheme) sanctioned by the Hon''ble High Court of Madras.

The Transferor Company was engaged in the business of hospitality services. The Transferee Company is mainly engaged in the business of sale of Vacation Ownership.

The scheme became effective on August 26, 2013, the appointed date being April 1, 2012.

In accordance with the scheme and as approved by High Court:

a. The assets, liabilities, reserves, rights and obligations of Transferor Company have been transferred to and vested with the Transferee Company with effect from April 1, 2012 and have been recorded at their fair values under the ''Purchase method'' of accounting for amalgamation as prescribed in Accounting Standard 14 (AS 14) – ''Accounting for Amalgamations''.

b. Being a wholly owned subsidiary of Transferee Company, 19000000 Equity Shares issued by the Transferor Company have been cancelled and no shares have been issued in pursuance to scheme of amalgamation.

c. The operating profts for the period from April 1, 2012 to March 31, 2013 amounting to INR 32.59 lakhs has been adjusted against ''Surplus'' under ''Reserves & Surplus''

d. Details of assets and liabilities acquired on amalgamation and treatment of the difference between the net assets acquired and purchase consideration is summarised below:

17) The lists of undertaking covered under the "Micro, Small and Medium Enterprises Development Act (MSMDA), 2006" were determined by the Company on the basis of information available with the Company. According to the Company, there were no principal and / or interest due remaining unpaid as at March 31, 2014 in respect of undertakings covered by the MSMDA.

18) Disclosure pursuant to Accounting Standard – 15 (Revised) "Employee Benefts"

a. Defned Contribution Plans:

Contribution of INR 203.92 lakhs (Previous year INR 164.05 lakhs) towards Defned Contribution Plan is recognized as expense and included in employee cost (Note No.21) in the Statement of Proft and Loss.

19) The Company has entered into commercial leases for certain resorts. Future minimum rentals payable under non-cancellable lease are as follows:

20) Pursuant to the Share Subscription Agreement (SSA) and Share Purchase Agreement (SPA) executed by Thomas Cook (India) limited (TCl), Thomas Cook Insurance Services (India) limited (TCISl), Company, Investors and Promoters, TCISl has acquired 30051191 Equity Shares of INR 10 each representing 33.82% of the diluted Equity Share Capital of the Company including subscription to new shares of the Company. TCl, TCISl and the Company have also executed a ''Merger Co-operation Agreement'' in terms of which it is proposed that the Timeshare and Resort business of the Company will be demerged and merged with TCISl and the residual business representing Holiday activities division will be merged with TCIl. The appointed date of such scheme of arrangement shall be April 1, 2014. The Company has taken appropriate steps to comply with the terms of the above agreements.

21) Figures have been re-grouped / re-classifed wherever necessary to correspond with the current year''s classifcation / disclosure.

22) In the opinion of the management and to the best of their knowledge and belief the value on realisation of current assets and loans and advances would not be less than the amount at which they are stated in the balance sheet.

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Mar 31, 2013

1. Estimated amount of contracts remaining to be executed on Capital Account and not provided for - INR 2''804 lakhs (Previous year INR 2''273.04 lakhs)

2. Contingent liabilities not provided for:

(a) INR 404.21 lakhs (Previous year INR 360.99 lakhs)'' comprises of Customer related cases - INR 208.64 lakhs (Previous year INR 204.59 lakhs)'' Vendor related cases - INR 98.40 lakhs (Previous year INR 65.17 lakhs)'' Employee related cases- INR 12.64 lakhs (Previous year INR 14.83 lakhs) and Property related INR 84.52 lakhs (Previous year INR 76.40 lakhs).

(b) INR433.64 lakhs'' (Previousyear INR433.64 lakhs)'' in respect of a suit filed by NOIDA creditors'' in which the Company was included as one of the defendants.

(c) Advance Subscription towards Customer Facilities (ASCF) being 55% of sale value is treated as Deferred Income and recognised as income overthe period of entitlement. In respect of Assessment Years 1997-98 to 2001-02'' the Income Tax Appellate Tribunal'' Chennai (ITAT) has passed orders against the said accounting treatment followed "by the Company and to treat them as income in the respective year of receipt. There will be no Tax Liability on account of such order in view of carry forward losses and unabsorbed depreciation available under Income Tax Act. The Company has appealed against these Orders before Honb''le High Court of Madras and the case is pending. The ITAT'' Chennai has recently decided in favour of Company''s accounting treatment of ASCF for assessment years 2002-03'' 2006-07'' 2007-08 and 2008-09.

In respect of assessment year 2009-10'' against Orders received from Assessing Officer (AO)'' with reference to treatment of ASCF and other disallowances'' the Company has filed appeals before Commissioner of Income Tax - Appeals'' Chennai and the same is pending. There is no Tax Demand on account of carry forward losses and unabsorbed depreciation.

In view of the above'' Management is of the opinion that no provision is required in respect of disputed Income Tax at this stage.

(d) The Company has filed appeal before Deputy Commissioner (Appeals) and obtained stay against the Order received from the Assessing Officer towards Luxury Tax on utility charges for the financial year 2006-07 and 2007-08 amounting to INR 16.01 lakhs (Previous year INR NIL). The Company has pre-deposited a sum of INR 2.72 lakhs. The Company is advised by its legal counsel that the stand taken by the Company is valid and hence no provision is considered necessary at this stage.

(e) Service Tax'' Interest and Penalty aggregating to INR 557.03 lakhs (Previous year INR 557.03 lakhs) have been demanded by Service Tax Authorities. The Company has appealed against the above said order before CESTAT and pre- deposited a sum of INR 30 lakhs. The Company is advised by its legal counsel that the stand taken by the Company is valid and hence no provision is considered necessary at this stage.

3. During the financial year 2011-12'' pursuant to One Time Settlement (OTS) Scheme'' the Company has fully settled the dues of the Financial Institution (Fl) and also obtained a No Due certificate. However'' the Fl has not released the title deeds of the properties given as security for the reason that a Third Party has filed a writ petition against the Fl challenging the cancellation of sale of the said property to tnem. The Company is also a party to the said writ petition pending before the Honb''le Madras High Court.

4. The Company had revalued certain lands in the years 1989'' 1992 and 1999 by appointing an external valuer based on the then prevailing market value. The surplus on revaluation amounting to INR 1''959.20 lakhs (after making adjustment for sales effected in the interim period)'' stands credited to Revaluation Reserve.

5. Registration of lease in respect of land and building situated at Peermedu (INR 1''684 lakhs)'' and Kullu Manali (INR 2''053.68 lakhs) is pending.

6. During the year the Company has carried out detailed physical verification of Fixed Assets and reconciliation with reference to the Fixed Assets register'' which has been reconstructed. Based on such exercise'' certain categories of Fixed Assets have been regrouped. Consequent to such reconciliation and regrouping'' a sum of INR 117.45 lakhs (net) being excess depreciation provided in the earlier years nas been written back and credited to Statement of Profit and Loss and grouped under Exceptional Items.

7. Pursuant to the Scheme of Amalgamation of Manchanda Resorts Private Limited (Transferor Company) with Sterling Holiday Resorts (India) Limited (Transferee Company) filed with High Court of Madras'' it is proposed to merge Transferor Company with the Transferee Company'' the appointed date being April 1'' 2012. The scheme shall be given effect to in the books of Company with effect from the appointed date'' on receipt of necessary approvals.

8. (a) Leasehold lands Include INR 2''053.68 lakhs'' being lease rent paid in advance (Previous year INR 2''053.68 lakhs) to Manchanda Resorts Private Ltd (MRPL)'' a Wholly Owned Subsidiary towards long-term lease of the property at Kullu Manall. The Company has also Invested INR 60.09 lakhs (Previous year INR 60.09 lakhs) In the Equity of MRPL. MRPL has accumulated losses of INR 1''371.26 lakhs (Previous year INR 1''409.60 lakhs) as on March 31'' 2013. In view of the proposed merger as detailed In Note no. 7 above and considering the present value of the properties (vide Valuation Report dated December 2012) owned by the transferor Company'' the Management Is of the view that no provision Is considered necessary In respect of lease deposits/Investments.

(b) The Company holds 98% Shares In Sterling Holidays (Ooty) Limited and Sterling Holiday Resorts (Kodalkanal) Limited and Invested INR 9.80 lakhs towards Share Capital (Previous year INR 9.80 lakhs). The sum due from subsidiaries as at March 31'' 2013 Is INR 1''283.65 lakhs (Previous year INR 1''146.71 lakhs). The accumulated losses as on March 31'' 2013 of these subsidiaries are INR 591.49 lakhs and INR 734.38 lakhs (Previous year INR 606.91 lakhs and INR 640.23 lakhs) respectively In view of the steps taken by the these companies to turn around the operations'' the future business plan approved by the respective Companies Board and further funding taking place In the said properties for Improving the quality of resorts'' the Management Is of the view that there Is no permanent diminution In the value of Investments/advances and these amounts are good and recoverable.

9. Five cottages located at Ooty - Fern Hill and Included under ''Buildings'' are given on lease for a period of 99 years to a customer.

10. The Capital Work In Progress (CWIP) Includes value of certain properties under construction for more than 10 years. The Company Is In the process of developing such properties'' In a phased manner. In the opinion of the Management'' no Impairment provision Is required In respect of such properties as their estimated market value together with the market value of appurtenant land far exceeds the book value of those properties as per valuation report of November 2010.

11. The Company had In the past transferred a property at Goa and part of the sale consideration amounting to INR 527.10 lakhs (Previous year INR 527.10 lakhs) (Included under "Other Non- Current Assets") Is retained by the buyer pending compliance of certain conditions. The Company Is confident of recovering this amount as It has taken effective steps for discharge of Its obligations. The Company Is also legally advised that It has the right of vendor''s lien against the Immovable property sold to the extent of amount due and It can seek legal remedy to recover the same. In view of the above'' the same Is considered good and recoverable.

12. Deferred Income grouped under Non-Current and Current Liabilities'' aggregating to INR 24''476.19 lakhs (Previous year INR22''285.88 lakhs)'' represents "Advance Subscription towards Customer Facilities (ASCF)" and "Entitlement Fee" to be recognised as Income'' over the remaining holiday entitlement period.

13. SECURITISATION

The Company has securltlsed a portion of trade receivables Including future Interest receivable thereon. The excess of consideration received over the principal amounts (net of reversals In respect of cancelled members) Is recognised as Income.

14. The Company has Infused additional funds Into operation by way of Equity as well as debt In the last few years. It has a comfortable working capital cycle. Substantial Improvements are being made to the quality of resorts by refurbishment/renovation. The marketing team has been strengthened by recruiting qualified and experienced personnel. There has been significant improvement In the overall performance and the Company expects to sustain the growth In the turnover and improve profitability In the ensuing years. Hence In the view of the Management'' the "Going Concern Assumption" Is not affected.

15. Trade Receivables'' Trade Payables and Advances are subject to confirmation. The Company has however circulated confirmation of balances to majority of creditors.

16 RELATED PARTY INFORMATION

Disclosure of related party transactions In accordance with Accounting Standard (AS-18) "Related Party Disclosure" Issued by the Institute of Chartered Accountants of India.

(a) The list of Related Parties as Identified by the Management is as under:

17. SEGMENT REPORTING

The Company has "Tlmeshare" as the only primary reportable segment'' for the purpose of Accounting Standard 17.

18. The lists of undertaking covered under the "Micro'' Small and Medium Enterprises Development Act (MSMDA)'' 2006" were determined by the Company on the basis of Information available with the Company. As explained by the Company'' there were no principal and/or Interest due remaining unpaid as at March 31'' 2013 In respect of undertakings covered by the MSMDA.

19. Disclosure pursuant to Accounting Standard - 15 (Revised) "Employee Benefits"

(a) Defined Contribution Plans:

Contribution of INR 164.05 iakhs (Previous year INR 100.79 iakhs) towards Defined Contribution Plan is recognised as expense and included in employee cost (Note No.21) in the Statement of Profit and Loss.

(b)Disclosure for Defined Benefit Plans based on actuarial valuation as on March 31'' 2013:

20. The Company has entered into commercial ieases for certain resorts. Future minimum rentals payable under non- cancellable lease are as follows:

21. In the opinion of the Management and to the best of their knowledge and belief the value on realisation of Current Assets and Loans and Advances would not be less than the amount at which they are stated in the Balance Sheet.

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Mar 31, 2012

1. a) Estimated amount of contracts remaining to be executed on capital account and not provided for- Rs 2273.04 lakh (Previous year Rs 319.63 lakh)

b) Disclosures for the purpose of "Other Commitments" are given only in respect of material contracts the cancellation of which will result in a penalty disproportionate to the benefits involved.

2. Contingent liabilities not provided for:

a) Rs 122 lakh (Previous year Rs 284.86 lakh), comprises of Customer related cases - Rs 22.38 lakh (Previous year Rs 180.35lakh), Vendor related cases -Rs 65.06 lakh (Previous year Rs 92.00 lakh), Employee related cases- Rs 14.83 lakh (Previous year Rs 12.51 lakh) and Property related Rs 19.73 (Previous year Rs Nil lakh).

b) Rs 433.64 lakh, (Previous year Rs 433.64 lakh), in respect of a suit filed by NOIDA creditors, in which Company was included as one of the defendants.

c) Simple interest calculated at contracted rates in respect of certain loans availed by the Company from others amounts to Rs 238.27 (Previous year Rs 208.27 lakh) upto March 31, 2012. In the opinion of the Management, no provision is considered necessary in respect of the above as the matter is in the process of settlement and the Company does not expect any liability to arise in the future.

d) The Company has filed appeal before the Income Tax Appellate Tribunal (ITAT), Chennai and Commissioner of Income Tax - Appeals, Chennai, against tax demand of Rs 103 lakh (Previous year Rs 38.34 lakh) in respect of assessment year 2006-07 with reference to the treatment of ASCF and other disallowances. Pending outcome of the appeal and considering carried forward losses and unabsorbed depreciation available under Income Tax Act, no provision is considered necessary in respect of the above.

3. Service tax, Interest, penalty and additional penalty aggregating to Rs 557.03 lakh (Previous year Rs 557.03 lakh) have been demanded by Service Tax Authorities. The Company has appealed against the above said order before CESTAT and pre deposited a sum of Rs 30 lakh. The Company is advised by its legal counsel that the stand taken by the Company is valid and hence no provision is considered necessary at this stage.

4. Advance Subscription towards Customer Facilities (ASCF) being 55% of sale value is treated as Deferred Income and recognised as income over the period of the respective contracts. In respect of assessment years 1997-98 to 2001-02, the ITAT has passed orders against the said accounting treatment followed by the Company and to treat them as income in the respective year of receipt. There will be no tax liability on account of such order in view of carry forward losses and unabsorbed depreciation available under Income Tax Act. The Company has appealed against these Orders before High Court of Madras and the case is pending. The ITAT, Chennai has recently decided in favour of the assesee in a similar case and accepted the treatment followed by that Company. In view of the above, management is of the view that no provision is required for the above at this stage.

In respect of assessment years 2002-03, 2007-08, 2008-09 and 2009-10, against the assessment orders received with reference to the treatment of ASCF and other disallowances, the Company has filed appeals before Commissioner of Income Tax - Appeals, Chennai, and the ITAT, Chennai. In view of the carry forward losses and unabsorbed depreciation, there were no tax demands.

5. During the year Company has reached an understanding on the One Time Settlement (OTS) Scheme with a Financial Institution. In terms of such an understanding, the Company has fully settled the dues of the Financial Institution in the current year. The payment over and the above the amount of liability outstanding in the books of the Company, amounting to Rs 631.71 lakh is accounted as interest and other charges and grouped under "Exceptional items". The financial institution has not released the title deed of the properties given as security against the said loan.

6. The Company had revalued certain lands in the years 1989, 1992 and 1999 by appointing an external valuer based on the then prevailing market value. The surplus on revaluation amounting to Rs 1959.20 lakh (after making adjustment for sales effected in the interim period), stands credited to Revaluation Reserve. During the current year, the Company has sold a portion of the land at a location which was revalued in the earlier years. Consequently, revaluation reserve to the extent of Rs 61.38 lakh (Previous year Rs 61.38 lakh) has been withdrawn in the current year.

7. Registration of lease in respect of land and building situated at Peermedu (Rs 1684 lakh), and Kulumanali (Rs 2053.68 lakh) is pending.

8. a. Leasehold lands include Rs 2053.68 lakh (Previous year Rs 2053.68) paid to Manchanda Resorts Private Ltd (MRPL), a subsidiary towards long term lease of the property at Kulu Manali. The Company has also invested Rs 60.09 lakh (Previous year Rs 60.09 lakh) in the equity of MRPL. MRPL has accumulated losses of Rs 1409.60 lakh (Previous year Rs 1412.90 lakh) as on 31.03.2012. The Management is of the opinion that no provision is required; at this stage as the present value of the property as per the valuation report of Nov 2010 exceeds such value of deposits/investments.

b. The Company holds 98% shares in Sterling Holidays (Ooty) Limited and Sterling Holiday Resorts (Kodaikanal Limited and invested Rs 9.80 lakh towards share capital (Previous year Rs 9.80 lakh). The sum due from subsidiaries as at March 31, 2012 is Rs 1146.71 lakh (Previous year Rs 1016.92 lakh). The accumulated losses as on 31.3.2012 of these subsidiaries are Rs 606.91 lakh and Rs 640.23 lakh (Previous year Rs 597.47 and Rs 558.74 lakh) respectively. In view of the steps taken by the these companies to turn around the operations, the future business plan approved by the respective Companies Board and further funding planned in the said properties for improving the quality of resorts, the Management is of the view that there is no permanent diminution in the value of investments/advances and these amounts are good and recoverable.

9. Five cottages located at Ooty-Fern Hill and included under 'Buildings' are given on lease for a period of 99 years to a customer.

10. The Capital Work-in-Progress (CWIP) includes value of certain resorts under construction for more than 10 years. The Company is in the process of developing such properties. In the opinion of the Management, no impairment provision is required in respect of such properties as their estimated market value together with the market value of appurtenant land far exceeds the book value of those properties as per valuation report of Nov 2010.

11. Short term loans and advances include amount paid to Sterling Holiday Financial Services Limited (SHFSL) amounting to Rs 56.59 lakh (Previous year Rs 50.59 lakh). The Management is of the view that this loan is good and recoverable.

12. The Company has transferred land and buildings at Goa and Himachal Pradesh as per the Arbitration Award in respect of disputes with certain parties. As per the terms of the Arbitration, one of the parties has agreed to hand over possession of certain buildings equivalent to a value of Rs 192.27 lakh (Previous year Rs 192.27 lakh) and the same is shown as "Capital Advances" under Long Term Loans and Advances, which, in the opinion of the Management is considered as good and recoverable.

13. The Company had in the past transferred a property at Goa and part of the sale consideration amounting to Rs 527 lakh (Previous year Rs 527 lakh) (included under "Other non Current Assets") is retained by the buyer pending compliance of certain conditions. The Company is confident of recovering this amount as it has taken effective steps for discharge of its obligations. In view of the above, the same is considered as good and recoverable.

14. Deferred income grouped under Non-Current and Current Liabilities, aggregating to Rs 22285.88 lakh (Previous year Rs 20972.00 lakh), represents "Advance Subscription received towards Customer Facilities (ASCF)" and "Entitlement Fee" to be taken to credit of Statement of Profit and Loss, over the holiday entitlement period.

15. The Company has infused additional funds into operation by way of Equity as well as debt in the last few years and has also fully repaid loans to financial institutions. It has a comfortable working capital cycle. Substantial improvements are being made to the quality of resorts by refurbishment/renovation. The marketing team has been strengthened by recruiting qualified and experienced personnel. There has been significant improvement in the overall performance and the Company expects to sustain the growth in the turnover and improve profitability in the ensuing years. Hence in the view of the Management, the "Going Concern Assumption" is not affected.

16. Debtors, Creditors balances and Loans and Advances are subject to confirmation.

As a prudent measure, Deferred Tax Asset (DTA) has been recognized only to the extent of Deferred Tax Liability (DTL).

17. RELATED PARTY INFORMATION

Disclosure of related party transactions in accordance with Accounting Standard (AS - 18) "Related Party Disclosure" issued by the Institute of Chartered Accountants India.

a) The list of related parties as identified by the Management is as under:

18.SEGMENT REPORTING

The Company has identified "Timeshare" as the only primary reportable segment.

19. The lists of undertaking covered under the "Micro, Small and Medium Enterprises Development Act (MSMDA), 2006" were determined by the Company on the basis of information available with the Company. As explained by the Company, there were no principal and/or interest due remaining unpaid as at March 31, 2012 in respect of undertakings covered by the MSMDA.

20. Disclosure pursuant to Accounting Standard -15 (Revised) "Employee Benefits"

a. Defined Contribution Plans:

A sum of Rs 100.79 lakh (Previous year Rs 62.47 lakh) towards Defined Contribution Plan is recognized as expense and included in employee benefit expense (Note No.21) in the Statement of Profit and Loss.

The Company is expected to contribute Rs 35 lakh for Gratuity and Rs 25 lakh for long term compensated absence in 2012 - 2013

The estimate of future salary increases considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand in the employment market.

b. Employees Stock Purchase Scheme [ESPS] - 2010

The Company has instituted Employees Stock Purchase Scheme (ESPS) vide resolution passed at the Annual General Meeting held on September 29, 2010 in terms of which the Company can issue shares upto 21 lakh Equity Shares to eligible employees. During the year, 6,57,019 Equity Shares were allotted under the above scheme.

c. Employees Stock Purchase Scheme [ESPS] - 2011

The Company has instituted Employees Stock Purchase Scheme (ESPS) vide resolution passed at the Extraordinary General Meeting held on August 13, 2011 in terms of which the Company can issue shares upto 35 lakh Equity Shares to eligible employees. During the year, 9,48,514 Equity Shares were allotted under the above scheme.

21. During the year ended March 31, 2012, the revised Schedule VI notified under the Companies Act, 1956 has become applicable to the Company for preparation and presentation of its financial statements. The adoption of revised Schedule VI does not impact recognition and measurement principles followed for preparation of financial statement. However, it has significant impact on presentation and disclosures made in the financial statements. The Company has also reclassified the previous year figures in accordance with the requirements applicable in the current year. The figures are rounded off to the nearest rupee.

22. In the opinion of the Management and to the best of their knowledge an belief the value on realization of current assets and loans and advances would not be less than the amount at which they are stated in the balance sheet.

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Mar 31, 2011

1. Estimated amount of contracts remaining to be executed on capital account and not provided for Rs 319.63 lacs (Previous Year Rs.Nil)

2. Claims against the company not acknowledged as debts Rs 60.47 lacs (Previous Year Rs.60.47 lacs).

3. Contingent liabilities not provided for

a) Rs.284.86 lacs (Previous Year Rs.517.81 lacs), comprises of customer related cases - Rs.180.35 lacs (Previous Year Rs.332.03lacs), Vendor related cases - Rs.92.00 lacs (Previous Year Rs.89.02 lacs), Employee related cases - Rs.12.51 lacs (Previous Year Rs.23.69lacs), Property Related Rs.Nil (Previous Year Rs 6.36 lacs) and Sales Tax Rs Nil (Previous Year Rs 66,7 lacs).

b) Rs.433.64 lacs, (Previous Year Rs.433.64 lacs), in respect of a suit filed by NOIDA creditors, in which the Company was included as one of the defendants.

c) Simple interest calculated at contracted rates in respect of certain loans availed by the company from others, amounts to Rs.208.27 lacs (Previous Year Rs.158.27 lacs) upto 31st March 2011. In the opinion of the Management, no provision is considered necessary in respect of the above as the matter is in the process of settlement and the company does not expect any liability to arise in the future.

d) In respect of Assessment Year 2006-07, 2007-08 and 2008-09 the company has filed appeals before the Commissioner of Income Tax - Appeals, against tax demand of Rs.38.34 lacs and with reference to the treatment of ASCF. Pending outcome of the appeal and considering the set off against carried forward losses and unabsorbed depreciation, no provision has been made in respect of the above.

4. Service Tax, Interest, Penalty and Additional Penalty aggregating to Rs.557.03 lacs (Previous Year Rs.557.03 lacs) have been demanded by Service Tax authorities. The company has appealed against the above said order before CESTAT and pre deposited a sum of Rs.30 lacs. The company is advised by its legal counsel that the stand taken by the company is valid and hence no provision is considered necessary at this stage.

5. ASCF being 55% of sale value is treated as Deferred Income and recognised as income over the period of the respective contracts. In respect of Assessment Years from 1997-98 to 2001- 02, the Income Tax Appellate Tribunal (ITAT) has passed orders against the said accounting treatment followed by the company and to treat them as income in the respective year of receipt. There are no tax demand on account of available carried forward losses unabsorbed depreciation. The company has appealed against this before High Court of Madras and the case is pending. The ITAT Chennai has recently decided in favour of Assesee in a similar case and accepted the treatement followed by the company. In view of the above, management is of the view that no provision for Income Tax is required at this stage.

6. A financial institution took symbolic possession of a property situated at Ooty - Fern Hill under the Securitization and Reconstruction of Financial Asset and Enforcement of Security Interest Act (SARFAESI) for default in repayment of loans together with interest/penal interest. The case is pending before Debt Recovery Appellate Tribunal (DRAT) with regard to adjudication in respect of One Time Settlement (OTS) scheme proposed by the Company. Any incremental liability which may accrue pursuant to the OTS will be accounted in the year of such settlement. Pending settlement as on 31st Mar 2011, the company has deposited with the institution a sum of Rs.536 lacs as per directions of Debt Recovery Tribunal (DRT) / DRAT.

The company has been providing interest at the contracted rate on the principal portion of loan amount, whereas, the lender has been claiming compound interest including penal interest. The Management considers that no additional provision towards such claim is required at this stage, pending disposal of the OTS proposal.

7. The company had revalued certain lands in the years 1989, 1992 and 1999 by appointing an external valuer based on the then prevailing market value. The surplus on revaluation amounting to Rs.2020.58 lacs (after making adjustment for sale effected in the interim period), stands credited to Revaluation Reserve. During the current year, the company has sold a portion of the land at a location which was revalued in the earlier years. Consequently, revaluation reserve to the extent of Rs.61.3S lacs has been withdrawn in the current year.

8. Registration of leasehold lands and buU~ngs situated at Peermedu (Rs.1684 lacs), and Kulumanali (Rs.2053.68 lacs) taken on lease are pending and action is being taken to get them registered.

9. a) Leasehold lands include Rs.2053.68 lacs paid to Manchanda Resorts Private Ltd (MRPL), a wholly owned subsidiary towards long term lease of the property at Kulu Manali. The company has also invested Rs.60.08 lacs in the equity of MRPL. MRPL has accumulated losses of Rs.1412.90 lacs as on 31.03.2011. The Management is of the opinion that no provision is required in respect of such deposits/investments as the present value of the property is estimated at Rs.3139.60 lacs as per valuation report dated 22.11.2010.

The said property has also been provided as a security in respect of the loans availed by the company.

b) The Company holds 98% shares in Sterling Holidays (Ooty) Limited and Sterling Holiday Resorts (Kodaikanal) Limited and invested Rs.9.80 lacs towards share capital. (Previous Year Rs.9.80 lacs). The company has advanced Rs.1013.51 lacs (Previous year Rs.807.35 lacs) towards resorts running and maintenance expenses. The accumulated losses as on 31.3.2011 of these subsidiaries are Rs.597.47 lacs and Rs.558.74 lacs (Rs.488.96 and Rs.379.16 lacs) respectively. In view of the steps taken by the these companies to turn around the operations, the future business plan approved by the respective Companies Board and further funding planned in the said properties for improving the quality of resorts, the Management is of the view that there is no permanent diminution in the value of investment and sum advanced and these amounts are good and recoverable.

10. Five cottages located at Ooty - Fern Hill and included under 'Buildings' are given on lease for a period of 99 years to a customer.

11. The capital work in progress (CWIP) includes value of certain resorts under construction for more than 10 years. The Company intends to develop such properties during the ensuing years. In the opinion of the Management, no impairment provision is required in respect of such properties as their estimated market value together with the market value of appurtenant land far exceeds the book value of those properties as per valuation report dated 22.11.2010.

12. During the year, the Company has advanced Rs.50 lacs (Previous Year Nil) to Sterling Holiday Financial Services Limited (SHFSL). The management is of the view that this loan is good and recoverable considering that this is a short term loan and SHFSL has adequate resources to repay such loan.

13. The Company has transferred land and buildings at Goa and Himachal Pradesh as per the Arbitration Award in respect of disputes with certain parties. As per the terms of the Arbitration, one of the parties has agreed to hand over possession of certain buildings equivalent to a value of Rs.150 lacs (Previous Year Rs.150 lacs) and the same is shown as under Loans and Advances, which in the opinion of the Company is good and recoverable.

14. The Company had in the past transferred a property at Goa and part of the sale consideration amounting to Rs.527 lacs (included in Sundry Debtors) is retained by the buyer pending compliance of certain conditions. The company is confident of recovering this amount as it has taken effective steps for discharge of its obligations. In view of the above, the same is considered as good and recoverable.

15. Secured Loan - Security Details

15.1 Term Loan from a Financial Ir itution is secured by i) Deposit of title deeds of the immovable assets (other than Time share portion) both present and future at Fern Hill - Ooty.

ii) Guarantee of former Managing Director and a former Director of the Company.

15.2 Loan from Others viz., a Non Banking Finance Company (NBFC) is secured by equitable mortgage of properties belonging to the Company situated at Munnar, Yercaud, Puri, Darjeeling and Mussorie. This is also further secured by property at Kulu Manali belonging to Manchanda Resorts Private Limited, the wholly owned subsidiary of the Company.

16. In respect of term loan availed from NBFC:

I. Financial investors have executed an undertaking agreeing not to sell/alienate their shareholding in the company during the currency of the term loan.

ii. Sanction condition requires the Company to deposit the funded interest portion of the loan amount disbursed in a separate bank account or with debt funded instrument. Pursuant to this, the Company has invested such amounts in debt funded instrument and the same is grouped under current investments. The balance as at the year end is Rs.209.84 lacs (Previous Year Rs.Nil).

17. Deposit account under bank balance includes margin deposit with banks towards guarantees obtained, of Rs.22,47,684 (Previous Year Rs.16,95,327).

18. Advance Subscription towards Customer Facilities (ASCF) referred to under Accounting policies represent income to be taken credit for in the Profit & Loss account of future years, spread over the holiday entitlement period and the same is shown under the head "Deferred Income" in the Balance Sheet under "Sources of Funds". The Company has made an application dated 28.06.2002, under section 211(4) of the Companies Act, 1956, to the Department of Company Affairs, New Delhi, seeking their approval for the presentation of the same.

19. The Company has infused additional funds into operation by way of equity as well as debt in the last few years and has substantially repaid its high cost debt and also has plans to raise additional equity in the immediate future. It has a comfortable working capital cycle. Substantial improvements are being made to the quality of resorts by refurbishment / renovation. The marketing team is being strengthened by recruiting qualified and experienced personnel.

In view of this, the Company expects to substantially improve the operating performance in the ensuing years. Hence in the view of the Management, the "Going Concern Assumption" is not affected.

20. Debtors, Creditors Balances and Loans and Advances are subject to confirmation.

21. The breakup of Deferred Tax Liabilities (DTL) and Deferred Tax Assets (DTA) as on 31.03.2011 is as under:

As a prudent measure, Deferred Tax Asset (DTA) has been recognized only to the extent of Deferred Tax Liablity (DTL).

22. RELATED PARTY INFORMATION

Disclosure of related party transactions in accordance with Account Standard (AS -18) "Related Party Disclosure" issued by the Institute of Chartered Accountants India.

(a) The list of Related Parties as identified by the Management is as under

Key Management Personnel (KMP)

1) Mr. R.Subramanian - Chairman and Managing Director (CMD)

2) Mr. Sidarth Shankar - Joint Managing Director (JMD)

Subsidiary Companies

1) Sterling Holidays (Ooty) Limited

2) Sterling Holiday Resorts (Kodaikanal) Limited

3) Manchanda Resorts Private Limited

Enterprise owned by / over which Key Managerial Personnel is able to exercise significant influence

1) Sterling Tree Magnum India Limited

2) Brindavan Farms Private Limited

3) Madurai Meenakshi Farms Private Limited

4) CGK Finvest (Madras) Private Limited

5) Kamadhenu Business Fortune Limited

6) Concorde Digital Technologies Pvt.Ltd

7) V Serve India Manpower Limited

8) Srivari Farms Pvt Ltd

9) Spring Field Holiday Services Private Ltd

10) Sterling Marketing Services Private Limited

Notes on Segment Reporting

a. Business Segments

The Company has considered business segment as the primary segment for disclosure.

The business segments are: Time Share Sales & Resorts and Hotel Sales.

The above segments have been identified taking into account the organization structure as well as the differing risks and returns of the segments.

b. Segment Assets include all operating assets used by the respective segment and consist principally of operating cash, debtors, inventories and fixed assets net of allowances and provisions. Segment Liabilities include all operating liabilities and consist primarily of creditors and accrued liabilities. Segment Assets and Liabilities do not include Income Tax Assets and Liabilities.

24.The lists of undertaking covered under the Micro, Small and Medium Enterprises Development Act (MSMDA), 2006, were determined by the company on the basis of information available with the company. As explained by the company, there were no principal and /or interest due remaining unpaid as at 31st March 2011 in respect of undertakings covered by the MSMDA.

25.Disclosure pursuant to Accounting Standard - 15 (Revised) "Employee Benefits"

a. Defined Contribution Plans

Contribution of Rs.62.47 lacs (Previous Year Rs.26.72 lacs) towards Defined Contribution Plan is recognized as expense and included in employee cost (Sch 13) in the Profit and Loss account.

c. Employees Stock Purchase Scheme [ESPS] - 2010

The Company has instituted Employees Stock Purchase Scheme (ESPS) vide resolution passed at the Annual General

Meeting held on 29.09.2010 in terms of which the Company can issue upto 21,00,000 Equity Shares to eligible employees. The scheme is proposed to be implemented in 2011- 2012 on receipt of approval from Bombay Stock Exchange (BSE).

d) Value of Imports calculated on CIF basis - Rs.Nil (Previous Year Rs. Nil)

e) Expenditure in foreign currency - Rs.9.81 Lacs (Previous Year Rs. Nil)

f) Earnings in foreign currency - Rs.NIL (Previous Year Rs. Nil)

26. In the opinion of the Management and to the best of their knowledge and belief the value on realization of current assets and loans and advances would not be less than the amount at which they are stated in the Balance Sheet.

27. The figures are rounded off to the nearest rupee. Previous year figures, are regrouped wherever necessary, to match with current year's grouping.

---

Mar 31, 2010

1. Estimated amount of Contracts remaining to be executed on Capital Account and not provided for is Nil (Previous year Rs. Nil)

2. Claims against the company not acknowledged as debts Rs.60.47 lacs (Previous year Rs.Nil)

3. Contingent liabilities not provided for :a) Rs. 517.81 lacs (previous year Rs.492.26 lacs), comprises of Customer related cases - Rs.332.03 lacs, Vendor related cases -Rs.89.02 lacs, Employee related cases- Rs.23.70 lacs, property related cases - Rs.6.36 lacs and sales tax cases- Rs.66.70lacs.

b) Rs. 433.64 lacs, (previous year Rs.312 lacs), in respect of a suit field by NOIDA creditors, in which company was included as one of the defendants.

4. Service tax, Interest, penalty and additional penalty aggregating to Rs.557.03 lacs (previous year Rs. 557.03 lacs) has been demanded by Service Tax Authorities. The company has appealed against the above said order before CESTAT and pre deposited a sum of Rs. 30 lacs. The company is advised by its legal counsel that the stand taken by the company is valid and no provision is considered necessary at this stage.

5. The Income Tax Appellate Tribunal (ITAT) has disallowed certain claims of the company with reference to treatment of ASCF in respect of Assessment years 1996-97 to 2000-01. Though there is no tax demand, the company has appealed against .the above order before the High Court of Madras. In respect of assessment year 2006-07, the company has filed appeal before the Commissioner of Income Tax Appeals, in respect of tax demand of Rs.38.34 lacs on similar grounds.

6. A) A financial institution has taken symbolic possession of a property situated at Ooty - Fernhill under the Securitization and Reconstruction of Financial Asset and Enforcement of Security Interest Act (SARFAESI) for default in repayment of principal of Rs.159 lacs along with interest/penal interest. The company is in the process of negotiating with the institution for an One Time Settlement (OTS) of liability. Pending such settlement, the company has deposited with the institution a sum of Rs. 426 lacs towards the total liability. The company has also filed an appeal before the Debt Recovery Appellate Tribunal (DRAT) against the order passed by Debt Recovery Tribunal (DRAT). Any incremental liability which may accrue pursuant to the OTS will be accounted in the year of such settlement.

b) One time settlement (OTS) has been at reached with Gujarat Industrial Investment Corporation (GIIC) in June 10 and as per the terms of OTS, the Company will have to settle before 24.12.2010, a sum of Rs. 1331.72 lacs (Net) in installment after appropriating the amount already pre-deposited with High Court of Gujarat. The promoters shares pledged with them is retained as security till the repayment of dues as per OTS. Pursuant to OTS, additional

No provision is considered necessary in respect of above interest / penal interest as the company has obtained or in the process of obtaining waiver of such interest / penal interest and expects favorable outcome in all the above cases.

7. The company had revalued certain lands in the years 1989,1992 and 1999 by appointing an external valuer based on the then prevailing market value. The surplus on revaluation amounting to Rs. 2081.96 lacs (after making adjustment for sale effected in the interim period), stands credited to Revaluation Reserve.

8. The company has entered into an agreement of sale in respect of certain Free hold land at Cochin-Vypeen (book value of Rs. 60.60 lacs), in the year 2001 and the buyer has the possession of the same. Due to non compliance of certain terms of the agreement, the company has filed a suit for repossession of the property which has been dismissed against the company. The company has gone on appeal before the High Court of Kerala.

9. Registration of Lease hold lands and buildings situated at Peermedu (Rs.1684 lacs), Shirdi (Rs. 80 lacs) and Kulumanali (Rs.2053.68 lacs) taken on lease are pending and action is being taken to get them registered.

10. Manchanda Resorts Private Ltd (MRPL), has become a wholly owned subsidiary of the company effective from 30th April 2009.The company has given a sum of Rs.2053.68 lacs towards long term lease of the property owned by MRPL at Kulu Manali.The company has also invested a sum of Rs.60.08 lacs in

the equity of MRPL. MRPL has accumulated loss of Rs 1420.03 lacs as on 31.03.2010. However, MRPL has become wholly owned subsidiary of the company and since present market value of the property is Rs.2857.00 lacs as per valuation report dated 29-07-2010, management is of the opinion that no provision is required in respect of such deposit / investment. Consequently a sum of Rs.45.65 lacs being provision made in the previous year against such investments have been withdrawn in the current year.

11. Five cottages located at Ooty-Fern hill and included under Buildings are given on lease for a period of 99 years to a customer.

12. The capital work in progress (CWIP) represents value of buildings under construction for more than 10 years. The company intents to develop such properties during the ensuing year. In the opinion of the company, no impairment provision is required in respect of such assets as the estimated market value of the properties, (as supported by a valuation report taken earlier) exceeds the book value.

13. The company has invested Rs.978 lacs (previous year Rs. 978 lacs) in teak units of Sterling Tree Magnum Co Ltd. (STM) acquired from the unit holders and also has paid Rs.93.77 lacs (previous year Rs. 93.77 lacs) towards further investment and is pending for transfer of teak units by STM. Considering the present status of Teak farm and the future prospects, the management is of the opinion that there is no permanent diminution in the value of investment.

14. The company has transferred land and buildings at Goa and Himachal Pradesh as per the Arbitration Award in respect of disputes with certain parties. As per the terms of the Arbitration, one of the parties has agreed to hand over possession of certain building valued at Rs. 130.00 lacs (previous year Rs. 130.00 lacs) and the same is shown as receivable which in the opinion of the Company is good and recoverable.

15. Against dues of Rs. 1692.44 lacs (previous year Rs. 1692.44 lacs) from Sterling Holiday Resorts International Limited, the company holds the documents relating to the Property valued at Rs. 1191.18. lacs. The company has made provision of Rs.501.26 lacs in respect of shortfall in the security value.

16. Securities offered as Hypothecation/mortgage for borrowings referred to in schedule 3 are as follows.

Term Loan from a Financial Institution is secured by:-

i) Deposit of title deeds of the

immovable assets (other than Time share portion) both present and future at Fernhill Ooty.

ii) Guarantee of the Managing Director and a former Director of the Company.

17. (a) Advance Subscription towards Customer Facilities (ASCF) referred to under Accounting policies represent income to be taken credit for in the profit & Loss Account of future years, spread over the holiday entitlement period and the same is shown under the head "Deferred Income" in the Balance Sheet under "Sources of Funds". The Company has made an

- application dated 28.06.2002, under section 211 (4) of the Companies Act, 1956, to the Department of Company

- Affairs, New Delhi, seeking their approval for the presentation of the same.

(D) Since the amount of ASCF is not refundable to the customers, in the opinion of the management the same is to be treated as part of "Net worth".

(c) The accounts of the company have been complied on "Going Concern Assumption", in view of the improved operating performance for the

Past few years. The management is confident of further improving the operating performance and progress in the ensuing year. During the year the company has infused additional capital and has substantially restructured its debts. It has a comfortable working capital cycle. Hence in the view of the management, the "Going Concern Assumption" is valid and appropriate.

18. Debtors, Creditors balances and Loans and advances are subject to confirmation.

19. The Company has not recognized the Deferred Tax Asset, since in the opinion of management there is no virtual certainty that sufficient future taxable income will be available against which, such deferred tax assets can be realized.

20. RELATED PARTY INFORMATION.

Disclosure of related party transactions in accordance with Account Standard (AS - 18) "Related Party Disclosure" issued by the Institute of Chartered Accountants India.

(a) The list of Related Parties as identified by the Management is as under:

1) Mr.R.Subramanian Chairman and MD

Key Management Personnel 2) Mr Sidarth Shankar Joint MD

1) Sterling Holidays (Ooty) Limited

Subsidiary Companies 2) Sterling Holiday Resorts (Kodaikanal) Limited

3) Manchanda Resorts Private Limited

1) Sterling Tree Magnum India Limited

Enterprise owned by/over 2) Brindavan Farms Private Limited

which Key Managerial 3) Madurai Meenakshi Farms Private Limited

Personnel is able to exercise 4) CGK Finvest (Madras) private Limited

significant influence 5) Kamadhenu Business Fortune Limited

6) Concorde Digital Technologies Pvt.Ltd

7) V Serve India Manpower Limited

8) Srivari Farms Pvt Ltd

9) Spring Field Holiday Services Private Ltd

Notes on Segment Reporting

a. Business Segments

The Company has considered business segment as the primary segment for disclosure.

The business segments are: Time Share Sales & Resorts and Hotel Sales.

The above segments have been identified taking into account the organization structure as well as the differing risks and returns of the segments

b. Segment Assets include all operating assets used by the respective segment and consist principally of operating cash, debtors, inventories and fixed assets net of allowances and provisions. Segment Liabilities include all operating liabilities and consist primarily of creditors and accrued liabilities. Segment Assets and Liabilities do not include Income Tax Assets and Liabilities

21. The lists of undertaking covered under the "Micro, Small and Medium Enterprises Development Act (MSMDA), 2006"

were determined by the company on the basis of information available with the company. As explained by the company, there were no principal and /or interest due remaining unpaid as at 31st March 2010 in respect of undertakings covered by the MSMDA.

22. Disclosure pursuant to Accounting Standard - 15 (Revised) "Employee Benefits"

a. Effective 1st April07, the company has adopted accounting standard 15 (revised 2005) "Employee Benefits" issued by ICAI. The Company has classified the various benefits provided to employees as under:

Employee Stock Option Scheme 2009 (ESOS 2009)

In 2009 2010, the Company instituted Employee Stock Option Scheme 2009 (ESOS 2009). The Board of Directors and the Shareholders approved the scheme on 01.09.2009 and 29-09- 2009 respectively. The Scheme provides for issue of 15,00,000 options convertible into one Equity Share of Rs. 10 each at par to the Employees / Directors. The Compensation Committee administers the Employees Stock Option Scheme 2009. During the year 2009 - 2010, the Company has recognized a sum of Rs.6,49,50,000 as Deferred Employee Compensation Expense, being the difference between Fair Value of Options and the Exercise Price, of which a sum of Rs.62,63,671 has been recognized as expense in the current year in accordance with SEBI Guidelines.

d) Value of Imports calculated on CIF basis Rs.Nil

(Previous Year Rs. Nil)

e) Expenditure in foreign currency Rs.NIL (Previous Year Rs. Nil)

f) Earnings in foreign currency Rs.NIL (Previous Year Rs. Nil)

28 In the opinion of the management and to the best of their knowledge and belief the value on realization of current assets and loans and advances would not be less than the amount at which they are stated in the balance sheet.

29 The figures are rounded off to the nearest rupee. Previous year figures, are regrouped wherever necessary, to match with current years grouping

---

Mar 31, 2009

1. Estimated amount of Contracts remaining to be executed on Capital Account and not provided for is Nil (previous year Rs. 6.66 Lacs)

2. Claims against the company not acknowledged as debts for:

Interest and charges, claims of Financial Institutions, Banks and creditors as quantfied in point 8 (b).

3. Contngent liabilites not provided for :

a) Rs.492.26 lacs (previous year Rs.255 lacs), in respect of cases relatng to Consumer forum, civil cases, Cheques dishonored and other criminal cases, Property related, employee related disputes, which are pending in various Courts and Forums, wherein proceedings are at various stages and not concluded.

b) Rs.312 lacs, (previous year Rs.312 lacs), in respect of a suit field by NOIDA creditors, in which company was included as one of the defendants.

4. In the case of Service Tax and Education Cess thereon, the Service Tax `Department has demanded taxes aggregatng to Rs. 257.03 lacs and interest thereon and penalty of Rs 300 lacs and further additonal penalty for non registraton, etc, demanded by Department. The company has appealed against the order before CESTAT and pre-deposited Rs. 30 lacs. No provision is considered necessary as the Company is confident and as advised by the legal counsel that the stand taken by the Company will be upheld and further the mater is at appeal stage.

5. The Company has gone on appeal in the income tax case for the assessment years 1996-97 to 2000-01 in High Court of Madras against the ITAT ruling relatng to disallo ing the treatment of deferring the revenue. There is no tax liability in respect to these years on account of business loss. For the assessment year 2006-07, the Company has appealed to CIT (Appeals) towards the demand of Rs. 38.34 lacs on the similar grounds.

6. Gujarat Industrial Investment Corporaton. (GIIC) has filed a civil suit for recovery of Rs. 775 lacs including interest in the High Court of Gujarat. The Company has pre-deposited the suit amount in the High Court of Gujarat. Pending adjudicaton of the suit, any additonal liability or reducton towards the interest and charges will be accounted in the year of setlement.

7. In the opinion of the management and to the best of their knowledge and belief the value on realizaton of current assets and loans and advances would not be less than the amount they are stated in the balance sheet.

8. a) The company has received notce under the Securitzaton and Reconstructon of financial asset and enforcement of security interest act (SARFAESI) from two Institutions for the default in repayment of principal of Rs.385 Lacs plus interest/penal interest. The company is in the process of negotatng with the Institutions for one tme setlement. The incremental liability to pay additonal sum or amount receivable pursuant to the OTS negotaton will be accounted in the year of such setlement.

9. Free hold land at Cochin-Vypeen, for which the company had entered into an agreement for sale in the year 2001 and the buyer has the possession of the same. Due to non compliance of certain terms of the agreement, the company has filed a suit for repossession of the property which has been dismissed against the company. The company has gone on appeal against the same to High Court of Kerala.

10. Registraton of Lease hold lands and buildings situated at Peermedu (Rs.1684 lacs), Shirdi (Rs. 80 lacs) and Kulumanali (Rs.1656 lacs) taken on lease are pending and legal acton being taken to get it registered.

11. Five cotages located at Ooty and shown under ‘Buildings are given on lease for a period of 99 years.

12. The capital work in progress (CWIP) represents the value of buildings under constructon for more than 10 years. In the opinion of the company (supported by a valuaton report taken earlier), the Estimated market value together with the land on which it is constructed exceeds the book value and hence the CWIP is not impaired.

13. a) The Company has invested Rs. 978 lacs in teak units of Sterling Tree Magnum Co. Ltd. (STM) acquired from the unit holders. It has paid Rs. 93.77 lacs towards further investment and is pending for transfer of teak units by STM. A scheme of setlement in this regard has been recommended by the commitee appointed and forwarded for the approval of the High Court of Madras. Pending approval of the scheme and considering the long term associaton with STM, in the opinion of the Company there is no permanent diminuton in the value of investment and hence no provision is considered thereon.

b) Fall in value of quoted investments are considered to be in temporary nature and no provision is made.

14. The company has transferred land and buildings at Goa and Himachal Pradesh as per the arbitraton award in respect of disputes with builder and buyers. As per the terms of the Arbitraton the buyer has agreed to hand over possession of certain building valued at Rs. 130.00 lacs (previous year Rs. nil) and shown as receivable which in the opinion of the Company is good and recoverable.

15. Against the dues of Rs. 1191.18 lacs (previous year Rs. 1692.44 lacs) from Sterling Holiday Resorts Internatonal Limited, the company holds the documents relatng to the property for equal value. In the opinion of the company, the due is good and recoverable.

16. Securites offered as Hypothecaton/mortgage for borrowings referred to in schedule 3 are as follows.

a) Term Loans from Banks and Financial Institutions are secured by: -

i) A first charge on the whole of the movable and immovable propertes of the Company situated at Munnar and Cochin-Vypeen.

ii) Deposit of title deeds of the immovable assets (Non-Time share porton) both present and future at Fernhill – Ooty.

iii) Guarantee of the Managing Director and a former Director of the Company.

b)Hire Purchase Loans are secured by:

Hypothecaton of various assets taken on hire purchase, and Guarantees given by the Managing Director / former Director.

c) Inter Corporate Deposits are secured by way of deposit of title deeds of certain propertes of the company and of another company to whom the Company has given advances.

17. Zero percent term loan (ZTL) borrowed from ICICI Bank Ltd and carved out of existng term loan carries an opton of conversion into equity share by company/promoters/Bank, of the whole or part the loan, within a maximum period of 18 months from the date of sancton of ZTL namely 31.12.2007. In the event of conversion opton not exercised, the term loan will have to be repaid on 30.09.2015 by way of a bullet payment.

18. Advance Subscripton towards Customer Facilites (ASCF) referred to under Accountng policies represent income to be taken credit for in the profit & Loss Account of future years, spread over the holiday entitlement period and the same is shown under the head "Deferred Income" in the Balance Sheet under "Sources of Funds". The Company has made an applicaton dated 28.06.2002, under Section 211 (4) of the Companies Act, 1956, to the Department of Company Affairs, New Delhi, seeking their opinion for the presentaton of the same.

19. Balances from the Debtors, Creditors and appearing under Loans and advances are subject to confirmation. In respect of the suit filed accounts of Financial Insttuton, confirmation of balance has not been received.

20. The Company has not recognized the net deferred tax asset comprising of tax loss and the tming difference of depreciaton, since in the opinion of management it cannot be said with virtual certainty that sufficient future taxable income will be available against which such net deferred tax assets can be realized.

21. RELATED PARTY INFORMATION.

Disclosure of related party transactions in accordance with Account Standard (AS - 18) "Related Party Disclosure" issued by theInstitute of Chartered Accountants of India.

(a) The list of Related Partes as identfied by the Management is as under:

Key Management Personnel

1) Mr.R.Subramanian

2) Mr. S.Sidarth Shankar

3) Mr.K.Chandrasekaran

4) Mr.M.N.Rangamani

Enterprise owned by/ over which Key Managerial Personnel is able to exercise significant influence

1) Sterling Tree Magnum India Limited

2) Sterling Hotels (Madurai) Private limited

3) Sterling Holiday (Ooty) Limited

4) Sterling Holiday Resorts (Kodaikanal) Limited

5) Brindavan Farms Private Limited

6) Sterling Resort Home Finance Limited

7) Madurai Meenakshi Farms Private Limited

8) Manchanda Resorts Private Limited

9) MYTV Network India Private Limited

10) Srivari Aromatcs Private Limited

11) Omega Feeds and Nutrients Private Limited

12) STM Investments Private Limited

13) Maxworth Orchards (India) Limited

14) Maxworth Investments Private Limited

15) Sterling Holiday Financial Services Limited

16) Sterling Securites and Futures Limited

17) Sterling Holiday Finvest Limited

18) CGK Finvest (Madras) Private Limited

19) Premier Farms Private Limited

20) Emmennar Informaton Technology Pvt Ltd

21) Kamadhenu Business Fortune Limited

22) Sai Castngs Private Limited

23) Concorde Digital Technologies Pvt.Ltd

24) Sterling Holiday Travels (India) Ltd

25) STM Management Services Limited

22. The lists of undertaking covered under the "Micro, Small and Medium Enterprises Development Act (MSMDA), 2006" were determined by the company on the basis of informaton available with the company. As explained by the company, there were no principal and /or interest due remaining unpaid as at 31st March 2009 in respect of undertakings covered by the MSMDA.

23. Share capital includes 12,00,000 Equity Shares of Rs.10 each alloted to Employees / Directors under Employees Stock Opton Scheme 2005 on 31.03.2007. In 2007 – 2008, the CompanyInstituted Employee Stock Opton Plan 2007 (ESOS – 2007). The Board of Directors and the Shareholders approved the scheme in April 2007 and November 2007 respectvely. The plan provides for issue of 25,00,000 optons convertble into one Equity Share of Rs.10 each at part to the Employees / Directors. The Compensaton Commitee administers the Employees Stock Opton Scheme 2007. During the year 2007 - 2008, the Company has recognized a sum of Rs.6,72,50,000 as Deferred Employee Compensaton Expense, being the difference between Fair Value of Optons and the Exercise Price, of which a sum of Rs.1,34,50,000 has already been recognized as expense, being 1/5th of the Deferred Employee Compensaton, as per SEBI Guidelines. Since the entre 25,00,000 optons were vested on 15.07.2008, the balance in Deferred Employee Compensaton Expense amountng to Rs.5,38,00,000 has been recognized as expenses during the year as per SEBI Guidelines, pending allotment of optons.

24. Due from companies in which Directors of the company are directors are interested – Rs.Nil (previous Year Rs. Nil)

25. The figures are rounded off to the nearest rupee. Previous year figures, are regrouped wherever necessary, to match with current years grouping