ఆడిటర్ నివేదిక Sterling Holiday Financial Services Ltd.

Mar 31, 2014

We have audited the accompanying financial statements of Sterling Holiday Financial Services Limited, which comprise the Balance Sheet as at March 31, 2014, the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.

Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Company''s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.

Basis for Qualified Opinion

1) Note No. 16.2.2 regarding certain advances aggregating to Rs. 216.92 lakhs towards investments by way of shares in certain companies including a subsidiary company. In our opinion the amount is doubtful of recovery and has to be provided for fully. Non Provision of this amount results in understatement of current year loss and accumulated loss by the said amount.

2) Note No. 16.2.5 regarding non-provision of diminution in value of investments aggregating to Rs. 191.88 lakhs as on 31st March, in respect of quoted and unquoted investments, due to which loss for the year and accumulated loss is understated by the said amount.

3) Note No. 16.2.6 regarding non-availability of confirmation of balances/reconciliation in respect of balances towards hire purchase, lease, bills, intercorporate deposits, loans and advances, trade receivables, certain bank accounts, debentures and other liabilities. Adjustments which may arise on confirmation is not ascertainable at this stage and not provided for. The impact of adjustments due to non receipt of confirmation/reconciliation on the loss of the year, accumulated losses and on the position of respective Assets and Liabilities is not ascertainable at this stage.

4) Note No. 16.2.7 regarding provision not made towards certain non-performing advances aggregating to Rs. 71.32 lakhs due to which loss for the year and accumulated loss is understated by the said amount.

5) Note No. 16.2.8 regarding non-provision of interest in respect of debentures, the amount of interest if any payable, is unascertainable at this stage and not provided for. The impact of same on loss for the year and accumulated losses is unascertainable at this stage.

6) Note No. 16.3.3 regarding non-provision of interest on deposits, due to negotiation with depositors, the amount of interest if any payable, is unascertainable at this stage and not provided for. The impact of same on loss for the year and accumulated losses is unascertainable at this stage.

7) In respect of Hire Purchase dues from Sterling Holiday Resorts (I) Limited by allotment of Happy Vistas Units and other products of the borrower during earlier year, we are unable to express our opinion with regard to classification of the said advance aggregating to Rs. 653.58 lakhs as performing having regard to the ultimate realisation of the investments in the absence of required details.

8) The Company has not deposited the amount due to be transferred to Investors Education and Protection Fund, amounting to Rs. 33,59,031/- as detailed in Note No. 4.

Our audit opinion on the financial statements for the year ended March 31, 2014 was also qualified in respect of all the above matters.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in the Basis for Qualified Opinion paragraph, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2014;

b) in the case of the Statement of Profit and Loss, of the loss for the year ended on that date; and

c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by Section 227(3) of the Act, except for the matters stated in the Basis of Qualified Opinion and Qualification stated under the Companies (Auditor''s Report) Order, 2003, we report that:

a. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit.

b. In our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books.

c. The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this Report are in agreement with the books of account.

d. In our opinion the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report comply with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 to the extent such standards have been made applicable, with the exception of Accounting Standard-13 on Accounting for Investments, with regard to diminution in the value of investments and Accounting Standard-15 with regard to disclosure under the said standard.

e. Due to non payment of deposits on due dates all the directors are disqualified from being appointed as director of any other company in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

ANNEXURE TO THE AUDITOR''S REPORT

1. The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

2. Fixed assets were physically verified during the year by the management in accordance with a programme of verification, which in our opinion provides for physical verification of all the fixed assets at reasonable intervals. According to the information given to us no material discrepancies were noticed on such verification. However no physical verification of leased assets has been carried out by the Company during the year under review.

3. Substantial amount of fixed assets have not been disposed off during the year, affecting going concern.

4. The Company is not a manufacturing company and no inventories are handled by the Company. Hence no comment is offered in regard to physical verification of inventories, procedures of physical verification of inventories and maintenance of proper records of inventories.

5. The Company has taken loan from parties covered in the register maintained U/s. 301 of the Companies Act, 1956. The details of loans received and outstanding as on 31.03.2014 are as follows:

Name of the Party Balance as on Maximum amount 31.03.2014 0/s during the year

Sterling Holiday Resorts (India) Limited 50.00 Lakhs 50.00 Lakhs

The Company has given loans to parties covered in the register maintained U/s 301 of the Companies Act, 1956. The details of loans and advances extended and outstanding as on 31.03.2014 are as follows:

Name of the Party Balance as on Maximum amount 31.03.2014 0/s during the year

Sterling Holiday Resorts (India) Limited 89.69 Lakhs 89.69 Lakhs

Sterling Securities and Futures Limited 117.01 Lakhs 117.01 Lakhs

The terms of these loans are prejudicial to the interest of the Company as no interest income is received in respect of these loans and advances.

The above loans are outstanding for more than five years and are doubtful of recovery.

6. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of fixed assets and rendering of services. During the course of audit, we have not observed any continuing failure to correct major weakness in Internal Controls.

7. According to the information and explanations given to us, we are of the opinion that no transactions have been entered during the current year that need to be recorded into the register maintained U/s 301 of the Companies Act. 1956. Accordingly our comment as to whether the transactions have been made at prices which are reasonable having regard to prevailing market prices is not applicable.

8. In our opinion and according to the information and explanation given to us, the Company has not complied with the provisions of Section 58A and 58AA of the Companies Act, 1956 and the Rules framed thereunder and the directives issued by Reserve Bank of India and the provisions of Non Banking Financial Companies (Reserve Bank) Directions 1977 and the Rules framed thereunder in regard to Fixed Deposits accepted by the Company, with regard to:

a) Adequate liquid assets required under the Provisions of sub-section (2) of Section 45IB of the Reserve Bank of India Act have not been maintained as on 31.03.2014 as per books of the Company.

b) The matured deposits have not been fully paid. The Company Law Board, Southern Region Bench. Chennai has by its Order dated 24th December, 1998 permitted the Company to repay the deposits in a phased manner together with interest at 12% p.a from the date of maturity to the date of repayment. In the event of not being repaid as specified in the scheme, the Company has to pay overdue interest at 14% p.a from the date of maturity to the date of repayment. The Company has not adhered to the repayment schedule directed by the Company Law Board.

c) The Company has not complied with the Provisions of Section 58AA of the Companies Act, 1956.

9. The Company does not have an Internal Audit System during the year under review.

10. The Company is not required to maintain cost records under Section 209(i)(d) of the Companies Act, 1956, for any of the products of the Company.

11. (a) According to the information and explanations given to us, the Company has been regular in depositing undisputed statutory dues, except few cases of delayed remittance, including Provident Fund, Employees'' State Insurance, Income Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty, Cess and any other statutory dues with the appropriate authorities during the year, with exception of Investor Education and Protection Fund.

(b) Subject to our remarks under paragraph (3) of the Basis of Qualified Opinion and according to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales Tax, Customs Duty, Excise Duty and Cess were in arrears as at 31.03.2014 for a period of more than six months from the date they became payable, with the exception of the following:

Investor Education and Protection Fund:

* Non Convertible Debentures : Rs. 2,76,200

* Fixed Deposits : Rs. 30,42,916

* Share Application Money : Rs. 39,915

(c) According to the information and explanations given to us, there are no dues of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Excise Duty and Cess which have not been deposited on account of any dispute with the exception of the following:

Nature of the Dues Amount Period to which the Forum where (Rs. Lakhs) amount relates the dispute is pending

Income Tax 17.32 1095-1996 Appellate Tribunal

Income Tax 145.12 1997-1998 Appellate Tribunal

12. Taking into account the amount of loss not provided by the Company as detailed in our report, the Company''s accumulated losses as at the end of the year is more than 50% of its Net Worth, the Company has incurred cash losses during the current year. However, the Company has not incurred cash losses in the immediately preceding financial year.

13. We were informed that the Company has paid amount due under One Time Settlement in respect of all the institutions. However no due certificate is yet to be received in respect of one of the Institution.

14. The Company has not granted any loan or advance on the basis of security by way of pledge of shares, debentures and other securities, during the year under review.

15. In our opinion, the Company is not a chit fund or a nidhi, mutual benefit fund/society. Therefore the provisions of clause 4(xiii) of the Companies (Auditors'' Report) Order 2003 are not applicable to the Company.

16. In our opinion, the Company is not dealing or trading in shares, securities, debentures and other investments, other than investments already made in earlier years.

17. In our opinion and according to the information and explanations given to us the Company has not given any guarantee for any loans taken by others from banks and financial institutions.

18. The Company has not availed any term loans during the year and hence the clause relating to usage of term loans is not applicable.

19. According to the cash flow statement and other records examined by us and the information and explanation given to us, on an overall basis, funds raised on short term basis have, prima facie, not been used during the year for long term investment (fixed assets, etc.)

20. The Company has not issued or allotted any shares during the financial year.

21 .The Company has not issued any debentures during the year.

22. As the Company has not raised any money by public issue during the year, the question of verification of enduse of such funds does not arise.

23. To the best of our knowledge and according to information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.

for M/s. P. CHANDRASEKAR Chartered Accountants FRN 000580S

S. BABU Chennai Partner 29th May, 2014 M.No. 24136

---

Mar 31, 2013

Report on the Financial Statements

We have audited the accompanying financial statements of Sterling Holiday Financial Services Limited, which comprise the Balance Sheet as at March 31,2013, the Statement of Profit and Loss and Cash Flow Statement for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management''s Responsibility for the Financial Statements

Management is responsible for the preparation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the Accounting Standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 ("the Act"). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error

Auditor''s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor''s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company''s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Basis for Qualified Opinion

1) Note No.17.2.2 regarding certain advances aggregating to Rs.216.92 lakhs towards investments by way of shares in certain companies including a subsidiary company. In our opinion the amount is doubtful of recovery and has to be provided for fully.

2) Note No.17.2.5 regarding non-provision of diminution in value of investments aggregating to Rs. 191.37 lakhs in respect of quoted and unquoted investments, due to which the accumulated loss is understated by the said amount.

3) Note No. 17.2.6 regarding non-availability of confirmation of balances in respect of balances towards hire purchase, lease, bills, intercorporate deposits, loans and advances, certain bank accounts, debentures and other liabilities. Adjustments which may arise on confirmation is not ascertainable at this stage and not provided for.

4) Note No.17.2.7 regarding provision not made towards certain non-performing advances aggregating to Rs.74.47 lakhs due to which the accumulated loss is understated by the said amount.

5) Note No. 17.2.8 regarding non-provision of interest in respect of debentures, the amount of interest if any payable, is unascertainable at this stage and not provided for.

6) Note No. 17.3.3 regarding non-provision of interest on deposits, due to negotiation with depositors, the amount of interest if any payable, is unascertainable at this stage and not provided for.

7) In respect of Hire Purchase dues from Sterling Holiday Resorts (I) Limited by allotment of Happy Vistas Units and other products of the borrower during earlier year, we are unable to express our opinion with regard to classification of the said advance aggregating to Rs.654.31 lakhs as performing having regard to the ultimate realisation of the investments in the absence of required details.

Our audit opinion on the financial statements for the year ended March 31,2013 was also qualified in respect of all the above matters.

Qualified Opinion

In our opinion and to the best of our information and according to the explanations given to us, except for the effects of the matters described in the Basis for qualified opinion paragraph, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(a) in the case of the Balance Sheet, of the state of affairs of the Company as at March 31, 2013;

(b) in the case of the Statement of Profit and Loss, of the profit for the year ended on that date; and

(c) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

Report on Other Legal and Regulatory Requirements

1. As required by the Companies (Auditor''s Report) Order, 2003 ("the Order") issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Act, we give in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the Order.

2. As required by Section 227(3) of the Act, we report that:

a. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit.

b. In our opinion proper books of account as required by law have been kept by the Company so far as appears from our examination of those books.

c. The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this Report are in agreement with the books of account.

d. In our opinion the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956 to the extent such standards have been made applicable, with the exception of Accounting Standard -13 on Accounting for Investments, with regard to diminution in the value of investments and Accounting Standard -15 with regard to disclosure under the said standard.

e. Due to non payment of deposits on due dates all the directors are disqualified from being appointed as director of any other company in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

f. Since the Central Government has not issued any notification as to the rate at which the cess is to be paid under Section 441A of the Companies Act, 1956 nor has it issued any Rules under the said Section, prescribing the manner in which such cess is to be paid, no cess is due and payable by the Company.

ANNEXURE TO THE AUDITOR''S REPORT

1. The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

2. Fixed assets were physically verified during the year by the management in accordance with a programme of verification, which in our opinion provides for physical verification of all the fixed assets at reasonable intervals. According to the information given to us no material discrepancies were noticed on such verification. However no physical verification of leased assets has been carried out by the Company during the year under review.

3. Substantial amount of fixed assets have not been disposed off during the year, affecting going concern.

4. The Company is not a manufacturing company and no inventories are handled by the Company. Hence no comment is offered in regard to physical verification of inventories, procedures of physical verification of inventories and maintenance of proper records of inventories.

5. The Company has taken loan from parties covered in the register maintained U/s 301 of the Companies Act, 1956. The details of loans received and outstanding as on 31.03.2013 are as follows:

Name of the Party Balance as on Maximum amount O/s 31.03.2013 during the year

Sterling Holiday Resorts (India) Limited 50.00 Lakhs 50.00 Lakhs

The Company has given loans to parties covered in the register maintained U/s 301 of the Companies Act, 1956. The details of loans and advances extended and outstanding as on 31.03.2013 are as follows:

Name of the Party Balance as on Maximum amount O/s 31.03.2013 during the year

Sterling Holiday Resorts (India) Limited 89.69 Lakhs 89.69 Lakhs

Sterling Securities and Futures Limited 117.01 Lakhs 117.01 Lakhs

The terms of these loans are prejudicial to the interest of the Company as no interest income is received in respect of these loans and advances.

The above loans are outstanding for more than five years and are doubtful of recovery.

6. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of fixed assets and rendering of services. During the course of audit, we have not observed any continuing failure to correct major weakness in Internal Controls.

7. According to the information and explanations given to us, we are of the opinion that no transactions have been entered during the current year that need to be recorded into the register maintained U/s 301 of the Companies Act, 1956. Accordingly our comment as to whether the transactions have been made at prices which are reasonable having regard to prevailing market prices is not applicable.

8. In our opinion and according to the information and explanation given to us, the Company has not complied with the provisions of Section 58A and 58AA of the Companies Act, 1956 and the Rules framed thereunder and the directives issued by Reserve Bank of India and the provisions of Non Banking Financial Companies (Reserve Bank) Directions 1977 and the Rules framed thereunder in regard to Fixed Deposits accepted by the Company, with regard to:

a) Adequate liquid assets required under the Provisions of sub-section (2) of Section 45IB of the Reserve Bank of India Act have not been maintained as on 31.03.2013 as per books of the Company.

b) The matured deposits have not been fully paid. The Company Law Board, Southern Region Bench, Chennai has by its Order dated 24th December, 1998 permitted the Company to repay the deposits in a phased manner together with interest at 12% p.a from the date of maturity to the date of repayment. In the event of not being repaid as specified in the scheme, the Company has to pay overdue interest at 14% p.a f rom the date of maturity to the date of repayment. The Company has not adhered to the repayment schedule directed by the Company Law Board.

c) The Company has not complied with the Provisions of Section 58AA of the Companies Act, 1956.

9. The Company does not have an Internal Audit System during the year under review.

10. The Company is not required to maintain cost records under Section 209(i)(d) of the Companies Act, 1956, for any of the products of the Company.

11. (a) According to the information and explanations given to us, the Company has been regular in depositing undisputed statutory dues, including Provident Fund, Investor Education and Protection Fund, Employees'' State Insurance, Income Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty, Cess and any other statutory dues with the appropriate authorities during the year, with exception of Investor Protection Fund.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales Tax, Customs Duty, Excise Duty and Cess were in arrears as at 31.03.2013 for a period of more than six months from the date they became payable, with the exception of the following:

Investor Protection Fund:

- Non Convertible Debentures : Rs. 2,76,200

- Fixed Deposits : Rs. 30,42,916

- Share Application Money Rs. 39,915

(c) According to the information ana explanations given to us, there are no dues of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Excise Duty and Cess which have not been deposited on account of any dispute with the exception of the following:

Nature of the Amount Period to which the Forum where the Dues (Rs. Lakhs) amount relates Dispute is pending

Income Tax 17.32 1995-1996 Appellate Tribunal

Income Tax 145.12 1997-1998 Appellate Tribunal

12. The Company''s accumulated losses as at the end of the year is, more than 50% of its Net Worth and the Company has not incurred cash losses during the current year and also in the immediately preceeding financial year.

13. We were informed that the Company has paid amount due under One Time Settlement in respect of all the Institutions. However no due certificate is yet to be received in respect of one of the Institution.

14. The Company has not granted any loan or advance on the basis of security by way of pledge of shares, debentures and other securities, during the year under review.

15. In our opinion, the Company is not a chit fund or a nidhi, mutual benefit fund / society. Therefore the provisions of clause 4(xiii) of the-Companies (Auditors'' Report) Order 2003 are not applicable to the Company.

16. In our opinion, the Company is not dealing or trading in shares, securities, debentures and other investments, other than investments already made in earlier years.

17. In our opinion and according to the information and explanations given to us the Company has not given any guarantee for any loans taken by others from banks and financial institutions.

18. The Company has not availed any term loans during the year and hence the clause relating to usage of term loans is not applicable.

19. According to the cash flow statement and other records examined by us and the information and explanations given to us, on an overall basis, funds raised on short term basis have, prima facie, not been used during the year for long term investment (fixed assets, etc.,).

20. The Company has not issued or allotted any shares during the financial year.

21. The Company has not issued any debentures during the year.

22. As the Company has not raised any money by public issue during the year, the question of verification of enduse of such funds does not arise.

23. To the best of our knowledge and according to information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.



for M/s. P. CHANDRASEKAR

Chartered Accountants FRN 000580s



S. BABU Chennai Partner

30* May, 2013 M.No.24136

---

Mar 31, 2012

1. We have audited the attached Balance Sheet of M/s Sterling Holiday Financial Services Limited as at 31*1 March, 2012, related Statement of Profit and Loss and Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors' Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to above, we report that:

a. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit.

b. In our opinion, proper Books of Accounts as required by law have been kept by the Company so far as it appears from our examination of the books.

c. The Balance Sheet, Statement of Profit and Loss and Cash Flow Statement referred to in this report are in agreement with the Books of Accounts furnished to us.

d. In our opinion the Balance Sheet, Statement of Profit and Loss and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act 1956 to the extent such standards have been made applicable, with the exception of Accounting Standard - 13 on Accounting for Investments, with regard to diminution in the value of investments as detailed in para f (ii) below and Accounting Standard - 15 with regard to disclosure under the said standard.

e. Due to non payment of deposits on due dates all the directors are disqualified from being appointed as director of any other company in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

f. Attention is invited to the following:

(i) Note No.17.2.3 regarding certain advances aggregating to Rs 216 60 lakhs towards investments by way of shares in certain companies including a subsidiary company. In our opinion the amount is doubtful of recovery and has to be provided for fully.

(ii) Note No.17 2.6 regarding non-provision of diminution in value of investments aggregating to Rs.192.01 lakhs in respect of quoted investments and in respect of unquoted investments, due to which the loss is understated by the said amount.

(iii) Note No.17.2.8 regarding provision not made towards certain non-performing advances aggregating to Rs.101.86 lakhs due to which the loss is understated by the said amount.

(iv) Note No. 17.2.9 regarding non-provision of interest in respect of Debentures, the amount of interest if any payable, is unascertainable at this stage and not provided for.

(v) Note No. 17.2.7 regarding non-availabiiity of confirmation of balances in respect of balances towards hire purchase, lease, bills, intercorporate deposits, loans and advances, certain bank accounts and other liabilities. Adjustments which may arise on confirmation is not ascertainable at this stage and not provided for.

(vi) Note No.17.3.4 regarding non-provision of interest on deposits, due to negotiation with depositors, the amount of interest if any payable, is unascertainable at this stage and not provided for.

(vii) In respect of Hire Purchase dues from Sterling Holiday Resorts (I) Limited by allotment of Happy Vistas Units and other products of the borrower during earlier year, we are unable to express our opinion with regard to classification of the said advance aggregating to Rs.654.31 lakhs as performing having regard to the ultimate realisation of the investments in the absence of required details.

Para 4(f)(i) to 4(f)(iii) will have an impact of understatement of accumulated losses to the tune of Rs.510.47 lakhs. The impact of para 4(f)(iv) to 4(f)(vii) on the statement of Profit and Loss and the accumulated losses is not ascertainable.

Subject to the above:-

g. In our opinion and to the best of our information and according to the explanations given to us, the said Financial Statements read with the notes thereon, give the information required by the Companies Act, 1956, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) in the case of Balance Sheet, of the state of affairs of the Company as at 31" March, 2012:

(ii) in the case of Statement of Profit and Loss, of the Profit for the year ended on that date, and

(iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

ANNEXURE TO THE AUDITORS' REPORT

(REFERRED TO IN PARAGRAPH (3) OF OUR REPORT OF EVEN DATE)

1. The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

2. Fixed assets were physically verified during the year by the management in accordance with a programme of verification, which in our opinion provides for physical verification of all the fixed assets at reasonable intervals. According to the information given to us no material discrepancies were noticed on such verification. However no physical verification of leased assets has been carried out by the Company during the year under review.

3. Substantial amount of fixed assets have not been disposed off during the year, affecting going concern.

4. The Company is not a manufacturing company and no inventoiies are handled by the Company. Hence no comment is offered in regard to physical verification of inventories, procedures of physical verification of inventories and maintenance of proper records of inventories.

5. The Company has taken loan from parties covered in the register maintained U/s 301 of the Companies Act, 1956. The details of loans .received and outstanding as on 31.03.2012 are as follows:

Balance as on Maximum amount O/s Name of the Party 31.03.2012 during the year Sterling Holiday Resorts (India) Limited 50.00 Lakhs 50.00 Lakhs

The Company has given loans to parties covered in the register maintained U/s 301 of the Companies Act, 1956. The details of loans and advances extended and outstanding as on 31.03.2012 are as follows:



Balance as on Maximum amount O/s Name of the Party 31.03.2012 during the year_

Sterling Holiday Resorts (India) Limited 89.69 Lakhs 89.69 Lakhs

Sterling Securities and Futures Limited 116.69 Lakhs 116.59 Lakhs



The terms of these loans are prejudicial to the interest of the Company as no interest income is received in respect of these loans and advances.

The above loans are outstanding for more than five years and are doubtful of recovery.

The entire amount outstanding as on 31.03.2012 is overdue as on 31.03.2012.

6. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of fixed assets and rendering of services. During the course of audit, we have not observed any continuing failure to correct major weakness in Internal Controls.

7. According to the information and explanations given to us, we are of the opinion that no transactions have been entered during the current year that need to be recorded into the register maintained U/s 301 of the Companies Act, 1956. Accordingly our comment as to whether the transactions have been made at prices which are reasonable having regard to prevailing market prices is not applicable.

8. In our opinion and according to the information and explanation given to us, the Company has not complied with the provisions of Section 58A and 58 AA of the Companies Act, 1956 and the rules framed thereunder and the directives issued by Reserve Bank of India and the provisions of Non Banking Financial Companies (Reserve Bank) Directions 1977 and the rules framed thereunder in regard to Fixed Deposits accepted by the Company, with regard to:

a) Adequate liquid assets required under the Provisions of sub-section (2) of Section 45IB of the Reserve Bank of India Act have not been maintained as on 31.03.2012 as per books of the Company.

b) The matured deposits have not been fully paid. The Company Law Board, Southern Region Bench, Chennai has by its Order dated 24th December, 1998 permitted the Company to repay the deposits in a phased manner together with interest at 12% p.a from the date of maturity to the date of repayment. In the event of not being repaid as specified in the scheme, the Company has to pay overdue interest at 14% p.a from the date of maturity to the date of repayment. The Company has not adhered to the repayment schedule directed by the Company Law Board.

c) The Company has not complied with the Provisions of Section 58 AA of the Companies Act, 1956

9. The Company does not have an Internal Audit System during the year under review.

10. The Company is not required to maintain cost records under Section 209(i)(d) of the Companies Act, 1956, for any of the products of the Company.

11 (a) According to the information and explanations given to us, the Company has been regular in depositing undisputed statutory dues, including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty, Cess and any other statutory dues with the appropriate authorities during the year, with exception of Investor Protection Fund.

(b) According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales Tax, Customs Duty, Excise Duty and Cess were in arrears as at 31.03.2012 for a period of more than six months from the date they became payable, with the exception of the following:

Investor Protection Fund:

- Non Convertible Debentures : Rs. 2,76,200

- Fixed Deposits : Rs.30,42,916

- Share Application Money : Rs. 39,915

(c) According to the information and explanations given to us, there are no dues of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Excise Duty and Cess which have not been deposited on account of any dispute with the exception of the following:_

Nature of the Amount Period to which the Forum where the Dues (Rs. Lakhs) amount relates Dispute is pending

Income Tax 17.32 1995 - 1996 Appellate Tribunal

Income Tax 144.53 1997 - 1998 Appellate Tribunal



12. The Company's accumulated losses as at the end of the year is more than 50% of its Net Worth and the Company has not incurred cash losses during the current year and also in the immediately proceeding financial year.

13. We were informed that the Company has paid amount due under One Time Settlement in respect of all the Institutions. However no due certificate is yet to be received in respect of one of the Institution.

14. The Company has not granted any loan or advance on the basis of security by way of pledge of shares, debentures and other securities, during the year under review.

15. In our opinion, the Company is not a chit fund or a nidhi, mutual benefit fund / society. Therefore the provisions of clause 4(xiii) of the Companies (Auditors Report) Order 2003 are not applicable to the Company.

16. In our opinion, the Company is not dealing or trading in shares, securities, debentures and other investments, other than investments already made in earlier years.

17. In our opinion and according to the information and explanations given to us the Company has not given any guarantee for any loans taken by others from banks and financial institutions.

18. The Company has not availed any term loans during the year and hence the clause relating to usage of term loans is not applicable.

19. According to the cash flow statement and other records examined by us and the information and explanations given to us, on an overall basis, funds raised on short term basis have, prima facie, not been used during the year for long term investment (fixed assets, etc.,).

20. The Company has not issued or allotted any shares during the financial year.

21. The Company has not issued any debentures during the year.

22. As the Company has not raised any money by public issue during the year, the question of verification of enduse of such funds does not arise.

23. To the best of our knowledge and according to information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.



for M/s. P. CHANDRASEKAR

Chartered Accountants

S. BABU

Chennai Partner

31st August, 2012 M.No.24136

---

Mar 31, 2011

1. We have audited the attached Balance Sheet of W/s Sterling Holiday Financial Services Limited as at 31stMarch, 2011, related Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit

2 We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the management, as well as evaluating the overall financial statement presentation We believe that our audit provides a reasonable basis for our opinion

3 As required by the Companies (Auditors Report) Order. 2003 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act. 19S6. we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4 Further to our comments in the Annexure referred to above, we report that:

a. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit

b. In our opinion, proper Books of Accounts as required by law have been kept by the Company so far as it appears from our examination of the books.

c. The Balance Sheet, Profit and Loss Account and Cash Flow Statement referred to in this report are in agreement with the Books of Accounts furnished to us.

d. In our opinion the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act 1956 to the extent such standards have been made applicable, with the exception of Accounting Standard - 13 on Accounting far Investments, with regard to diminution in the value of investments as detailed in Para f(ii) below, and Accounting Standard - 15 with regard to disclosure under the said standard.

e. Due to non payment of deposits on due dates all the directors are disqualified from being appointed as director of any other company in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

f. Attention is invited to the following:

(i) Note No. 2.3 regarding certain advances aggregating to Rs.216.50 lakhs towards investments by way of shares in certain companies including a subsidiary company. In our opinion the amount is doubtful of recovery and has to be provided for fully.

(ii) Note No. 2.6 regarding non-provision of diminution in value of investments aggregating to Rs.1,90.92 lakhs in respect of quoted investments and in respect of unquoted investments, due to which the Idss is understated by the said amount.

(iii) Note No. 2.8 regarding provision not made towards certain non-performing advances aggregating to Rs.1,95 54 lakhs due to which the loss is understated by the said amount.

(iv) Note No. 2.9 regarding non-provision of interest in respect of Banks and Debentures, the amount of interest if any payable, is unascertainable at this stage and not provided for.

(v) Note No. 2.7 regarding non-availability of confirmation of balances in respect of balances towards hire purchase, lease, bills, intercorporate deposits, loans and advances, certain bank accounts and other liabilities. Adjustments which may arise on confirmation is not ascertainable at this stage and not provided for.

(vi) Note No. 3.4 regarding non-provision of interest on deposits, due to negotiation with depositors, the amount of interest if any payable, is unascertainable at this stage and not provided for.

(vii) In respect of Hire Purchase dues from Sterling Holiday Resorts (I) Limited by allotment of Happy Vistas Units and other products of the borrower during earlier year, we are unable to express our opinion with regard to classification of the said advance aggregating to Rs 657.3(5 lakhs as performing having regard to the ultimate realisation of the investments in the absence of required details Para 4(f)(i) to 4(f)(iii) will have an impact of understatement of accumulated losses to the tune of Rs,602,96 lakhs. The impact of Para 4(f)(iv) to 4(f)(vii) on the Profit and Loss account and the accumulated losses is not ascertainable.

g. In our opinion and to the best of our information and according to the explanations given to us, the said Financial Statements read with the notes thereon, give the information required by the Companies Act, 1958, in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) in the case of Balance Sheet, of the state of affairs of the Company as at 31s March, 2011;

(ii) in the case of Profit and Loss Account, of the Profit for the year ended on that date; and

iii) in the case of the Cash Flow Statement, of the cash flows for the year ended on that date.

ANNEXURETOTHE AUDITORS' REPORT

(REFERRED TO IN PARAGRAPH (3) OF OUR REPORT OF EVEN DATE)

1. The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

2. Fixed assets were physically verified during the year by the management in accordance with a programme of verification, which in our opinion provides for physical verification of all the fixed assets at reasonable intervals. According to the information given to us no material discrepancies were noticed on such verification. However no physical verification of leased assets has been carried out by the Company during the year under review.

3. Substantial amount of fixed assets have not been disposed off during the year, affecting going concern,

4. The Company is not a manufacturing company and no inventories are handled by the Company. Hence no comment is offered in regard to physical verification of inventories, procedures of physical verification of inventories and maintenance of proper records of inventories.

5. The Company has not taken any loan from parties covered in the register maintained U/s 301 of the Companies Act, 1956. The Company has given loans to parties covered in 1he register maintained U/s 301 of the Companies Act, 1956.

The details of loans and advances extended and outstanding as on 31.03.2011 are as follows:

Name of the Party Balance O/s as on Maximum amount O/s 31.03.2011 during the year

Sterling Holiday Resorts (India) Limited 90.69 Lakhs 90.69 Lakhs

Sterling Securities and Futures Limited 116.59 Lakhs 116.59 Lakhs

The terms of these loans are prejudicial to the interest of 1he Company as no interest income is received in respect q) these loans and advances.

The above loans are outstanding for more than five years and are doubtful of recovery.

The entire amount outstanding as on 31.03,2011 is overdue as on 31.03.2011.

6. In our opinion and according to the information and explanations given lo us, there are adequate internal control procedures commensurate with the size of the Company and the nature of its business for the purchase of fixed assets and rendering of services. During the course of audit, we have not observed any continuing failure 10 correct major weakness in Internal Controls.

7. According to the, information and explanations given 10 us, we are of the opinion that no transactions have been entered during the current year that need to be recorded into the register maintained U/s 301 of the Companies Act, 1956, Accordingly our comment as to whether the transactions have been made at prices which are reasonable having regard to prevailing market prices is not applicable.

8. In our opinion and according to the information and explanation given to us, the Company has not complied with the provisions of Section 58A and 58 AA of the Companies Act, 1956 and the rules framed there under and the directives issued by Reserve Bank of India and the provisions of Non Banking Financial Companies (Reserve Bank) Directions 1977 and the rules framed there under in regard to Fixed Deposits accepted by the Company, with regard to:

a) Adequate liquid assets required under the Provisions of sub-section (2) of Section 45IB of the Reserve Bank of India Act have not been maintained as on 31.03.2011 as per books of the Company.

b) The matured deposits have not been fully paid. The Company Law Board, Southern Region Bench, Chennai has by its Order dated 24th December, 1998 permitted the Company to repay the deposits in a phased manner together with interest at 12% p.a from the date of maturity to the date of repayment. In the event of not being repaid as specified in the scheme, the Company has to pay overdue interest at 14% p.a from the date of maturity 1o the date of repayment. The Company has not adhered to the repayment schedule directed by the Company Law Board.

c) The company has not complied with the Provisions of Section 58 AA of the Companies Act, 1956,

9. The Company does not have an Internal Audit System during the year under review,

10. The Company is nit required to maintain cost records under Section 209(i)(d) of the Companies Act, 1956, for any of the products of the Company.

11 (a), According to the information and explanations given to us, the Company has been regular in depositing undisputed statutory dues, including Provident Fund, Investor Education and Protection Fund, Employees' State Insurance, Income Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty, Cess and any other statutory dues with the appropriate authorities during the year, with exception of Investor Protection Fund.

11 (b). According to the information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales Tax, Customs Duty, Excise Duty and Cess were in arrears as at 31.03.2011 for a period of more than six months from the date they became payable, with the exception for the following:

Investor Protection Fund:

- Non Convertible Debentures : Rs.2,83,800

- Fixed Deposits : Rs.30,57,916

- Share Application Money : Rs.39,915

(c} According to the information and explanations given to us, there are no dues of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Excise Duty and Cess which have not been deposited on account of any dispute with the exception for the following:

Nature of the Amount Period to which the Forum where the Dues (Rs. Lakhs) amount relates Dispute is pending

Income Tax 16.73 1995-1996 CIT (Appeals)

Income Tax 144.53 1997-1998 High Court

12. The Company's accumulated losses as at the end of the year is more than 50% of its Net Worth and the Company has not incurred cash losses during the current year and also in the immediately proceeding financial year.

13. We were informed that the Company has paid the amount due under One Time Settlement in respect of ail the Institutions. However no due certificate is yet to be received of one of the Institution.

14. The Company has not granted any loan or advance on the basis of security by way of pledge of shares, debentures and other securities, during the year under review.

15. In our opinion, the Company is not a chit fund or a nidhi, mutual benefit fund / society. Therefore the provisions of clause 4(xiii) of the Companies (Auditors Report) Order 2003 are not applicable to the Company.

18. In our opinion, the Company is not dealing or trading in shares, securities, debentures and other investments, other than investments already made in earlier years.

17. In our opinion and according to the information and explanations given to us the Company has not given any guarantee for any loans taken by others from banks and financial institutions.

18. The Company has not availed any term loans during the year and hence the clause relating to usage of term loans is not applicable.

19. According to the cash flow statement and other records examined by us and the information and explanations given to us, on an overall basis, funds raised on short term basis five, prima facie, not been used during the year for long term investment (fixed assets, etc.,).

20. The Company has not issued or allotted any shares during the financial year.

21. The Company has not issued any debentures during the year.

22. As the Company has not raised any money by public issue during the year, the question of verification of end-use of such funds does not arise.

23. To the best of our knowledge and according to information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.

for M/s. P. CHANDRASEKAR

Chartered Accountants

S. BABU

Chennai Partner

3rd September, 2011 M.No.24136

---

Mar 31, 2010

1. We have audited the attached Balance Sheet of M/S STERLING HOLIDAY FINANCIAL SERVICES LIMITED as at 31st March, 2010 related Profit and Loss Account and Cash Flow Statement for the year ended on that date annexed thereto. These financial statements are the responsibility of the Companys Management. Our responsibility is to express an opinion on these financial statements based on our audit.

2. We conducted our audit in accordance with auditing standards generally accepted in India. Those standards require that we pian and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements An audit also includes assessing the accounting principies used and significant estimates made by the Management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

3. As required by the Companies (Auditors Report) Order, 2003 issued by the Central Government of India in terms of sub-section (4A) of Section 227 of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.

4. Further to our comments in the Annexure referred to above, we report that:

a. We have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit.

b. In our opinion, proper Books of Accounts as required by law have been kept by the Company so far as it appears from our examination of the books.

c. The Balance Sheet. Profit and Loss Account and Cash Flow Statement referred to in this report are in agreement with the Books of Accounts furnished to us.

d In our opinion the Balance Sheet, Profit and Loss Account and Cash Flow Statement dealt with by this report comply with the accounting standards referred to in sub-section (3C) of Section 211 of the Companies Act, 1956, to the extent such standards have been made applicable, with the exception of Accounting Standard - 13 on Accounting for Investments, with regard to diminution in the value of investments as detailed in para f(ii) below, and Accounting Standard - 15 with regard to disclosure under the said standard.

e. Due to non payment of deposits on due dates all the directors are disqualified from being appointed as director of any other company in terms of clause (g) of sub-section (1) of Section 274 of the Companies Act, 1956.

f. Attention is invited to the following:

(i) Note No. 2.3 regarding certain advances aggregating to Rs. 217.29 lakhs towards investments by way of shares in certain companies including a subsidiary company. In our opinion the amount is doubtful of recovery and has to be provided for fully.

(ii) Note No. 2.6 regarding non-provision of diminution it value of investments aggregating to Rs.192.41 lakhs in respect of quoted investments and in respect of unquoted investments, due to which the loss is understated by the said amount.

(iii) Note No. 2.8 regarding provision not made towards certain non-performing advances aggregating to Rs. 229.16 lakhs due to which the loss is understated by the said amount.

(iv) Note No. 2.9 regarding non-provision of interest in respect of Banks and Debentures, the amoun* of interest if any payable, is unascertainable at this stage and not provided for.

(v) Note No. 2.7 regarding non-availability of confirmation of balances in respect of balances towards hire purchase, lease, bills, intercorporate deposits, loans and advances, certain bank accounts and other liabilities. Adjustments which may arise on confirmation is not ascertainable at this stage and not provided for.

(vi) Note No. 3.3 regarding non-provision of interest on deposits, due to negotiation with depositors, the amount of interest if any payable, is unascertainable at this stage and not provided for.

(vii) In respect of Hire Purchase dues from Sterling Holiday Resorts (I) Limited by allotment of Happy Vistas Units and other products of the borrower during earlier year, we are unable to express our opinion with regard to classification of the said advance aggregating to Rs.724.60 lakhs as performing having regard to the ultimate realisation of the investments in the absence of required details.

Para 4(f)(i) to 4(f)(iii) will have an impact of understatement of accumulated losses to the tune of Rs.63S.86 lakhs.The impact of para 4(f)(iv) to 4(f) (vii) on the Profit and Loss Account and the accumulated losses is not ascertainable.

g. In our opinion and to the best of our information and according to the explanations given to us, the said Financial Statements read with the notes thereon, give the information required by the Companies Act, 1956 in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:

(i) in the case of Balance Sheet, of the state of affairs of the Company as at 31st March, 2010, (ii) in the case of Profit and Loss Account, of the profit for the year ended on that date; and (iii) in the case of the Casn Flow Statement, of the cash flows for the year ended on that date.

ANNEXURE TO THE AUDITORS REPORT (REFERRED TO IN PARAGRAPH (3) OF OUR REPORT OF EVEN DATE)

1. The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.

2. Fixed assets were physically verified during the year by the management in accordance with a programme of verification, which in our opinion provides for physical verification of all the fixed assets at reasonable intervals. According to the information given to us no material discrepancies were noticed on such verification. However no physical verification of leased assets has been carried out by the Company during the year under review.

3. Substantial amount of fixed assets have not been disposed off during the year, affecting going concern.

4. The Company is not a manufacturing company and no inventories are handled by the Company. Hence no comment is offered in regard to physical verifications of inventories, procedures of physical verification of inventories and maintenance of proper records of inventories.

5. The Company has not taken any loan from parties covered in the register maintained U/s 301 of the Companies Act, 1956. The Company has given loans to parties covered in the register maintained U/s 301 of the Companies Act, 1956. The details of loans and advances extended and outstanding as on 31.03.2010 are as follows:



Balance O/s as on Maximum amount O/s

Name of the Party

31.03.2010 during the year

Sterling Holiday Resorts (India) Limited 90.69 Lakhs 90.69 Lakhs

Sterling Securities and Futures Limited 117.38 Lakhs 117.38 Lakhs



The terms of these loans are prejudicial to the interest of the Company as no interest income is received in respect of these loans and advances.

The above loans are outstanding for more than five years and are doubtful of recovery.

The entire amount outstanding as on 31.03.2010 is overdue as on 31.03.2010.

6. In our opinion and according to the information and explanations given to us, there are adequate internal control procedures, commensurate with the size of the Company and the nature of its business for the purchase of fixed assets and rendering of services. During the course of audit, we have not observed any continuing failure to correct major weakness in Internal Controls.

7. According to the information and explanations given to us, we are of the opinion that no transactions have been entered during the current year that need to be recorded into the register maintained U/s 301 of the Companies Act, 1956. Accordingly our comment as to whether the transactions have been made at prices which are reasonable having regard to prevailing market prices is not applicable.

8. In our opinion and according to the information and explanations given to us, the Company has not complied with the provisions of Section 58A and 58AA of the Companies Act, 1956 and the rules framed thereunder and the directives issued by Reserve Bank of India and the provisions of Non Banking Financial Companies (Reserve Bank) Directions, 1977 and the rules framed thereunder in regard to Fixed Deposits accepted by the Company, with regard to:

(a) Adequate liquid assets required under the Provisions of sub-section (2) of Section 45IB of the Reserve Bank of India Act have not been maintained as on 31.03.2010 as per books of the Company.

(b) The matured deposits have not been fully paid. The Company Law Board, Southern Region Bench, Chennai has by its order dated 24th December, 1998 permitted the Company to repay the deposits in a phased manner together with interest at 12% p.a from the date of maturity to the date of repayment. In the event of not being repaid as specified in the scheme, the Company has to pay overdue interest at 14% p.a from the date of maturity to the date of repayment. The Company has not adhered to the repayment schedule directed by the Company Law Board.

(c) The Company has not complied with the provisions of Section 58 AA of the Companies Act, 1956.

9. The Company does not have an Internal Audit System during the year under review.

10. The Company is not required to maintain cost records under Section 209(i)(d) of the Companies Act, 1956, for any of the products of the Company.

11. (a) According to the information and explanations given to us, the Company has been regular in depositing undisputed statutory dues, including Provident Fund, Investor Education and Protection Fund, Employees State Insurance, Income Tax, Sales Tax, Wealth Tax, Customs Duty, Excise Duty, Cess and any other statutory dues with the appropriate authorities during the year, with exception of Investor Protection Fund.

(b) According to information and explanations given to us, no undisputed amounts payable in respect of Income Tax, Wealth Tax, Sales Tax, Customs Duty, Excise Duty and Cess were in arrears as at 31.03.2010 for a period of more than six months from the date they became payable, with the exception of the following:

Investor Protection Fund :

- Non Convertible Debentures Rs. 2,83,800

- Fixed Deposit Rs.30,62,916

- Share Application Money Rs. 39,915



(c) According to the information and explanations given to us, there are no dues of Sales Tax, Income Tax, Customs Duty, Wealth Tax, Excise Duty and Cess Which have not been deposited on account of any dispute with the exception of the following:

Nature of the Amount Period to which the Forum where the Dues (Rs. Lakhs) amount relates Dispute is pending

Income Tax 17.32 1995-1996 CIT (Appeals)

Income Tax 145.12 1997-1998 Appellate Tribunal



12. The Companys accumulated losses as at the end of the year is more than 50% of its Net Worth and the Company has not incurred cash losses during the current year and also in the immediately preceeding financial year.

13. The Company has defaulted in repayment of dues to Financial Institutions and Banks upto 31.03.2010, the details of amount of default as per the Books of the Company as at 31.03.2010 is as follows:

SI. Name of the Institution Amount of Default Period of Default

No. (Rs. Lakhs)

1. State Bank of Travancore Ltd. 561.84 More than 5 Years

2. Union Bank of India 136.58 - do-



14. The Company has not granted any loan or advance on the basis of security by way of pledge of shares, debentures and other securities, during the year under review.

15. In our opinion, the Company is not a chit fund or a nidhi, mutual benefit fund / society. Therefore the provisions of clause 4 (xiii) of the Companies (Auditors Report) Order, 2003 are not applicable to the Company.

16. In our opinion, the Company is not dealing or trading in shares, securities, debentures and other investments, other than Investments already made in earlier years.

17. In our opinion and according to the information and explanations given to us, the Company has not given any guarantee for any loans taken by others from banks and financial institutions.

18. The Company has not availed any term loans during the year and hence the clause relating to usage of term loans is not applicable.

19. According to the cash flow statement and other records examined by us and the information and explanations given to us, on an overall basis, funds raised on short term basis have, prima facie, not been used during the year for long term investment (fixed assets, etc.,).

20. The Company haj not issued or allotted any shares during the financial year.

21. The Company has not issued any debentures during the year.

22. As the Company has not raised any money by public issue during the year, the question of verification of end use of such funds does not arise.

23. To the best of our knowledge and according to information and explanations given to us, no fraud on or by the Company has been noticed or reported during the course of our audit.

for M/s. P. CHANDRASEKAR

Chartered Accountants

S. BABU

Chennai Partner

2nd September, 2010 M.No.24136