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

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

1. The Gratuity liability for the quarter ended September 30, 2007 has been provided based for on an estimate basis. The Company has not ascertained the Gratuity liability at the end of the period as per the basis given in 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 like leave encashment, leave travel allowance and bonus for the quarter ended September 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.

3. The Company has entered into an agreement for One Time Settlement (OTS) of dues to Bank(s) subject to certain conditions which are pending for compliance by the Company. Impact thereof by way of interest and / or penal interest is not ascertainable and hence not provided for.

The effect of Auditors observations in Para (1) to (3) above would have the effect of overstatement of profits for the quarter ended September 30, 2007 which is not ascertainable at this stage.

Further, in respect of the observations in the limited review report, the management has clarified as follows:

Para 1:

With regard to provision of Gratuity to employees on an estimated basis, liability under this head is provided for, based on an actuarial valuation at annual interval and accordingly the same will be accounted in the year end, i.e. March 31, 2008. As regards short term employee benefits, the same will be given effect to in the year end.