Sterling Holiday Resorts- Limited Review For The Quarter Ended Jun 30, 2007

Sterling Holiday Resorts India Ltd has informed that in the limited review report of the Company for the quarter ended June 30, 2007, the Auditors of the Company have made the following observations:

1. The Gratuity liability for the quarter ended June 30, 2007 has been provided based on estimate by Management. The Company has not ascertained the Gratuity liability at the end of the period in accordance with the Accounting standard - AS 15 (revised). Hence the additional provision on this account, if required to be made, has not been considered in the results. The Company has also not ascertained and provided for the liability towards Short Term employee benefits namely, leave encashment and leave travel allowance for the quarter ended June 30, 2007.

2. The Company is negotiating with certain unsecured creditors for settlement of their liabilities including principal and interest, Pending final settlement, the quantum of unprovided interest and penal interest that may eventually arise is unascertainable and hence not provided for.

The effect of our observations in para 1 & 2 above would have the effect of understatement of losses for the quarter ended June 30, 2007 which is not ascertainable at this stage.