1 Scheme of Arrangement
 
 Celebrity Fashions Limited was operating with Two Divisions namely
 Exports Division and Domestic Division. Exports Division is further
 divided into Tops Division and Bottoms Division.  The Domestic Division
 operates under the Brand name, Indian Terrain.
 
 The Company filed a Scheme of Arrangement under Sections 391 to 394 of
 the Companies Act, 1956 (the Scheme) to demerge the Domestic Division
 into a new Company, Indian Terrain Fashions Limited and hive-off the
 Bottoms Division of Exports to Celebrity Clothing Limited through a
 Slump Sale and on going concern basis. Further the Scheme also
 envisaged write off of accumulated losses of the Company against the
 Securities Premium Account to the extent available and/or agains the
 General Reserves / Capital Reserves, if any, in accordance with Section
 78 and Section 100 to 103 and other applicable provisions of the
 Companies Act, 1956 and /or any other regulations, as may be
 applicable. The Appointed Date of the Scheme was 1st April 2010.
 
 The Honorable High Court of Madras vide its order dated 16th August
 2010, has sanctioned the Scheme in toto except to the extent of
 transfer of Bottoms Division of Exports to Celebrity Clothing Limited
 through Slump Sale. The Scheme became effective 3rd September 2010.
 
 In terms of the Scheme, the Share holders of the Company as on the
 Record Date of 27th October 2010 were eligible for 2 shares of Indian
 Terrain Fashions Limited for every 7 shares held in the Company.
 
 Consequent to transfer of the Domestic Division of the Company, the
 financial statements of the Company for the year ended 31st March 2011
 does not include the operations of the Domestic Division business and
 is therefore not strictly comparable with the figures of the previous
 year ended 31st March 2010.
 
 All the assets and liabilities of the Domestic Division as on the
 appointed date of 1st April 2010 have been transferred to Indian
 Terrain Fashions Limited and the excess of assets over liabilities
 relating to the Domestic Business has been adjusted against the
 reserves in accordance with the terms of the Scheme. Further the
 investment in Indian Terrain Fashions Limited existing prior to the
 date of demerger was cancelled and taken to Capital Reserve in
 accordance with the Scheme. The Company did not envisage the hiving off
 of Bottoms Division of the Exports Division into Celebrity Clothing
 Limited on account of the following:
 
 The main object of hiving off the bottoms division was to facilitate
 easy entry of Strategic / Financial Investor. The same did not
 materialise and in the absence of the same having two different
 entities would only result in additional costs and administrative
 inconvenience. Hence the Board of Directors of the respective Companies
 decided to withdraw the proposal of hiving- off the Bottoms Division
 and accordingly the Honorable
 
 High Court of Madras upon filing of affidavits by the Companies has
 approved the modification to the Scheme of Arrangement vide Clause 25
 of the Scheme.
 
 The accumulated losses as on 31st March 2010 were written off against
 the available Securities Premium A/c and General / Capital Reserves
 existing as on 1st April 2010 as per terms of the Scheme of
 Arrangement.
 
 The Company, in the Scheme, also proposed to fair value its immovable
 properties as on 1st April 2010 and record the premiums under
 revaluation reserve. Though the same was approved by Honorable High
 Court of Madras, the Company did not pursue the same.
 
 2 Erosion of Net worth
 
 The Company''s net worth was eroded on 31st March 2010 under the
 provisions of Sick Industrial Companies Act (SICA). Accordingly the
 Company filed a reference with Board for Industrial and Financial
 Reconstruction (BIFR) under section 15(1) of SICA. The reference was
 taken by for consideration by BIFR and upon submissions made and
 material on record, BIFR has declared the Company as Sick Industrial
 Company u/s 3(1 )(o) of SICA vide its order dated 19th April 2011.
 BIFR has given directions to the lenders and to the Company to submit a
 Rehabiliation Scheme as per Section 18 of SICA. As at the year end the
 Accumulated losses have resulted in erosion of net worth of the Company.
 The Accounts of the Company have been prepared on the basis of ''Going
 Concern Concept'' despite negative net worth as on 31st March 2011 in
 view of the various strategic initiatives that the company is exploring
 and also considering the Rehabiliation Scheme to be submitted to the
 BIFR. The Management is confident of being able to continue and operate
 the business and bring positive results in future.
 
 3 Secured Loans:
 
 The loans under the Multiple Banking Arrangement have been secured as
 under:
 
 First Charge on Inventories in the form of Raw Materials, Stock In
 Process and Finished Goods, Receivables and other current assets of the
 Company both present and future for the loans in the form of Export
 Packing Credit, Cash Credit, Export Bills Discounting facility extended
 by State Bank of India.
 
 First Charge on paripassu basis by way of hypothecation of Company''s
 current assets including stock and book debts against the Term loans
 extended by State Bank of India and HDFC Bank.
 
 Collateral Securities:
 
 First Charge to State Bank of India and Second Charge on to HDFC Bank
 for Term loans over the following assets:
 
 * Entire Plant and Machinery - present and future
 
 * Land and building situated at 107-A, GST Road, Chrompet, Chennai
 
 * Factory land and building situated at Thiruvanchery, Agaram Road,
 Tambaram Taluk, Chennai
 
 * Factory land and building situated at 72/1, Poonamalle Bypass Road,
 Poonamalle, Chennai Leasehold rights of land and Factory building
 situated at plot SDF - IV & C2,3rd Main Road, MEPZ/SEZ,
 Tambaram,Chennai - 600045
 
 Loans from State Bank of India is further secured by Pledge of
 Promoters Shares in the Company to an extent of 53,52,516 Equity Shares
 and Personal Guarantee by Promoters. Further the Lease rental
 receivables from the property let out on lease are assigned to Termloan
 of State Bank of India.
 
 Loans from HDFC Bank is further secured by Pledge of Promoters Shares
 in the Company to an extent of 8,00,000 Equity Shares and Personal
 Guarantee is limited to an extent of 8,00,000 Equity Shares in the
 Company.
 
 Sanction letter from HDFC Bank pursuant to Demerger and Transfer of
 Limits to Indian Terrain Fashions Limited is pending to be received.
 
 4 The Company has not received any information/memorandum (as required
 to be filed by the I supplier with the notified authority under the
 Micro, Small and Medium Enterprises Development I Act,2006) claiming
 their status as on 31st March 2011 as Micro, Small or Medium
 Enterprises. I Consequently the amount paid / payable to such parties
 during the year is disclosed as Nil.
 
 5 No amount is paid / payable by the company U/s 441 A of the Companies
 Act,1956 (cess on I turnover) since the rules specifying the manner in
 which the cess shall be paid has not been I notified yet by the Central
 Government.
 
 6 Managerial Remuneration:
 
 The Shareholders have approved the re-appointment and payment of
 minimum remuneration under Section 198(4) read with Section II of Part
 II of Schedule XIII of the Companies Act, 1956 to Mr. V. Rajagopal at
 the Annual General Meeting held in September 2010.  Mr. V. Rajagopal is
 also the Chairman and Managing Director of Indian Terrain Fashions
 Limited.
 
 Pursuant to the demerger of the domestic division, Indian Terrain, the
 Board of Directors felt the need for independent Managing Directors for
 the two different entities. Hence, the Board recommended and
 unanimously approved the appointment of Mr. S. Surya Narayanan as
 Managing Director of Celebrity Fashions Limited w.e.f. 29th March 2011
 and with a remuneration of Rs.2,00,000/- (Two lakhs only) subject to
 the approval of the Shareholders in the ensuing Annual General Meeting.
 
 Consequent to the appointment of Mr. S. Surya Narayanan as Managing
 Director, Mr. V.
 
 Rajagopal resigned from the post of Managing Director.
 
 Mr. V. Rajagopal continues to be the Chairman of the Company.
 
 The details of remuneration paid to the directors is as below:
 
 Directors Remuneration
 
 Remuneration excludes:
 
 1.  Communication facilities at Residence of Directors
 
 2.  Company Car for Company''s business including the Cost of the
 Vehicle, maintenance and chauffer salary
 
 3.  Medical Insurance Premium
 
 The Computation of Profits under Section 349 of the Companies Act, 1956
 has not been given as no commission is payable to the Directors.
 
 7 Disclosure as per amendment to Clause 32 of the Listing agreement
 Loans and advances in the nature of Loans given to Subsidiaries,
 Associates and Others - To be read with our report of even date