1.  We have audited the attached Balance Sheet of Sterling Holiday
 Resorts (India) Limited as at 31st March, 2011 and the Profit and Loss
 Account for the year ended on that date and the cash flow statement of
 the Company thereto.  These financial statements are the responsibility
 of the Company''s management. Our responsibility is to express an
 opinion on the financial statements based on our audit.
 
 2.  We conducted our audit in accordance with the auditing standards
 generally accepted in India. Those standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatement. An audit
 includes examining, on a test basis, evidence supporting the amounts
 and disclosures in the financial statements. An audit also includes
 assessing the accounting principles used and significant estimates made
 by management, as well as evaluating the overall financial statement
 presentation. We believe that our audit provides a reasonable basis for
 our opinion.
 
 3.  As required by the Companies (Auditor''s 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 Annexurea
 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:
 
 i. We have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the purposes of our
 Audit;
 
 ii. In our opinion, proper books of account as required by law have
 been kept by the Company so far as it appears from our examination of
 those books;
 
 iii. The Company''s Balance Sheet, Profit and Loss Account and Cash Flow
 Statement dealt with by this report are in agreement with the books of
 Account;
 
 iv. In our opinion, the Balance Sheet and 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 applicable;
 
 v. On the basis of written representations received from the Directors
 and taken on record by the Board of Directors, we report that none of
 the Directors are disqualified as on 31st March 2011 from being
 appointed as a Director in terms of clause (g) of sub-section (1) of
 section 274 of the Companies Act, 1956;
 
 vi. In our opinion and to the best of our information and according to
 the explanations given to us, the said accounts and read with the
 significant accounting policies and other 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 :
 
 (a) In the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March 2011,
 
 (b) In the case of the Profit and Loss account 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.
 
 ANNEXURE REFERRED TO IN PARAGRAPH 3 OF OUR REPORT OF EVEN DATE.
 
 1.  (a) The Company has maintained records showing full particulars
 including quantitative details and situation of Fixed Assets except in
 respect of plant and machinery, office equipments and furniture and
 fixtures. The management informs that the updation of fixed assets
 register for the said assets is in progress.
 
 (b) We are informed that during the year the Fixed Assets (other than
 plant and machinery, office equipments and furniture and fixtures)
 located at Resorts and at Head Office have been physically verified by
 the Management and no material discrepancies were noticed on such
 verification. In our view the periodicity of verification is
 reasonable. The Management has represented to us that the physical
 verification of plant and machinery, office equipments and furniture
 and fixtures will be carried out in the subsequent year.
 
 (c) As per information and explanations given to us, the disposals of
 fixed assets during the year were not substantial and hence it does not
 affect the going concern.
 
 2.  (a) The inventory has been physically verified at the end of the
 year by the Management. In our opinion, the frequency of verification
 was reasonable.
 
 (b) In our opinion, the procedures of physical verification of
 inventories followed by the management are reasonable and adequate in
 relation to the size of the Company and nature of its business.
 
 (c) On the basis of the records examined by us and relying on the
 information provided to us, in our opinion, the Company is maintaining
 proper records of inventories and no material discrepancies were
 noticed on physical verification as compared to the record of
 inventories.
 
 3.  (a) The Company has not granted any loans secured or unsecured to
 companies, firms or other parties listed in the register maintained
 under section 301 of the Companies Act, 1956.
 
 (b) The company has not taken any loan secured or unsecured from
 companies, firms or other parties listed in the register maintained
 under section 301 of the Companies Act, 1956.
 
 4.  In our opinion and according to the information and explanations
 given to us, the internal control systems, are commensurate with the
 size of the Company and the nature of its business for purchase of
 inventory, fixed assets, sale of goods and services.  During the course
 of audit, we have not observed any continuing failure to correct major
 weaknesses in the internal control system.
 
 5.  (a) Based on the audit procedures applied by us, to the best of our
 knowledge and according to the information and explanations given to
 us, the particulars of contracts or arrangements referred to in Section
 301 of the Companies Act, 1956 have been entered in the register
 required to be maintained under that section.
 
 (b) Sub Clause 5 (b) of Para 4 of the Order is not applicable as there
 are no transactions exceeding the value of Rs.5,00,000/- in respect of
 any party in the financial year.
 
 6.  In our opinion and according to the information and explanations
 given to us, the Company has not accepted any deposits from the public.
 We are informed by the Management that no order has been passed by the
 Company Law Board or National Company Law Tribunal or Reserve Bank of
 India or any Court or any other Tribunal under Sections 58A and 58AA of
 the Companies Act, 1956.
 
 7.  The Company has an internal audit system commensurate with the size
 of the Company and the nature of its business.
 
 8.  According to the information and explanations given to us, the
 Central Govt, has not prescribed maintenance of cost records under
 Section 209(1) (d) of the Companies Act, 1956 for the services rendered
 by the Company.
 
 9. (a) According to the information and explanations given to us, the
 Company has been regular in depositing, undisputed statutory dues
 representing, Provident Fund, Sales Tax (VAT) and other statutory dues
 with appropriate authorities. There has been delay in remittance of
 Income Tax, Service Tax, Employees State Insurance and Cess and Luxury
 Tax. There is no liability to remit Wealth Tax, customs Duty and Excise
 Duty, Investor Education and Protection Fund.
 
 (b) According to the information and explanations given to us,
 undisputed statutory dues representing Fringe Benefit Tax of Rs.
 101.34 lacs, service tax of Rs.0.85 lacs and ESI of Rs.0.49 lacs and
 professional tax of Rs.4.27 lacs and consent fees to Tamil Nadu
 Pollution Control Board of Rs.1.36 lacs were outstanding at the year
 end for a period of more than 6 months from the date they become
 payable.
 
 Further, since the Central Government has till date not prescribed the
 amount of Cess payable under section 441A of the Companies Act, 1956,
 we are not in a position to comment upon the regularity or otherwise of
 the company in depositing the same.
 
 (c) According to the information and explanations given to us and the
 basis of examination of records of the Company the dues of Income
 Tax/Wealth Tax/Service Tax/Cess as at 31st March 2011 which have not
 been deposited on account of any dispute are as follows:
 
                                                      (Rs. In Lacs)
 
 Name of Statute / 
 nature of dues      Period          Forum where dispute is pending
 
                                 High  Appellate  Appellate  Grand Total
 
                                Court  Tribunal $ Authority @
 
 Income Tax Act, 
 1961 (Income       2006-07                -        38.34       38.34
 Tax Including 
 penalty & 
 interest
 wherever 
 applicable)
 
 Service Tax Rules 
 (Service Tax      16.06.05 to  557.03      -           -      557.03
 including penalty 
 & interest          30.09.06
 wherever 
 applicable)
 
 $ Appellate Tribunal includes STAT, ITAT
 
 @ Appellate Authority includes Commissioner Appeals, Assistant
 Commissioner Appeals, Deputy Commissioner Appeals, and Joint
 Commissioner Appeals
 
 10.  The accumulated loss at the end of the Financial Year exceeds 50%
 of its net worth inclusive of Advance Subscription towards Customer
 Facilities (ASCF). The company has incurred cash loss during the
 Current Financial year and In the preceding Financial Year.
 
 11.  In our opinion and according to the information and explanations
 given to us, the company has defaulted in the repayment of dues to a
 Financial Institution from Jan 2001 as stated in note no. B.6 of
 schedule 14.
 
 12.  The Company has not granted any loans and advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 13.  The provisions of clause 4 (xiii) of the Order relating to Chit
 Funds are not applicable to the Company.
 
 14.  In our opinion, the Company is not dealing or trading in shares,
 securities, debentures and other investments other than investing in
 mutual fund units. Proper records of the transactions and contracts
 have been maintained and timely entries have been made. The said
 investments have been held by the company In its own name.
 
 15.  According to the information and explanations given to us, the
 Company has not given any guarantee for any loan taken by others from
 any bank or financial institution.
 
 16.  The company has availed term loan from a non banking finance
 company. According to the information and explanations given to us and
 related information made available to us, the Company has applied the
 term loan for the purpose for which the same was availed.
 
 17.  According to the information and explanations given to us, based
 on an overall examination of the balance sheet of the Company, related
 information made available to us and as represented to us by the
 Management, funds raised on short term basis, prima facie, have not
 been used during the year for long term investment.
 
 18.  According to the information and explanations given to us, the
 Company has during the year made allotment of shares to warrant holders
 on conversion of such warrants issued on preferential basis to parties
 covered in register maintained under section 301 of the Companies Act,
 1956.  The issue price of shares so allotted has been determined in
 accordance SEBI (Disclosure and Investor Protection) Guidelines 2000.
 Hence, it is not prejudicial to the interest of the Company.
 
 19.  The Company has not issued any debentures during the year and
 therefore the question of creating security or charge in respect
 thereof does not arise.
 
 20.  The Company has not made public issue of securities during the
 year and therefore the question of disclosing the end-use of money
 raised by way of public issue does not arise.
 
 21.  Based on the audit procedures performed and on the basis of
 representation obtained from the management, we report that no instance
 of fraud on or by the Company, have been noted or reported by the
 Management, during the year.
 
 For V.SANKAR AIYAR & CO           For R.SUBRAMANIAN AND COMPANY
 
 Chartered Accountants,            Chartered Accountants
 
 ICAI regd. No. 109208W            ICAI regd. No. 004137S
 
 S.VENKATARAMAN                    A.S.RAMANATHAN
 
 Partner                           Partner
 
 M.NO : 023116                     M.No : 011072
 
 Place: Chennai
 
 Date : 28th July 2011.