M/s U G HOTELS AND RESORTS LIMITED, a public limited company established in 1986 and has set up the first 5 Star Resort Project in Himachal Pradesh, India. It has emerged a tourist destination of reckoning and is named as "Shilon Resort-Forty acres of Switzerland". The company is engaged in the business of running and maintaining "Hotel Business" and all other related and ancillary objects.

2. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

Statement of compliance

The financial statements are prepared under the historical cost convention on an accrual basis, in accordance with the generally accepted accounting principles in India and in compliance with the applicable accounting standards as notified under the Companies (Accounting Standards) Rules, 2006, as amended and as per Revised Schedule VI to the Companies Act, 1956. All assets and liabilities have been classified as current or non-current as per the Company's normal operating cycle and other criteria set out in the Revised Schedule VI to the Companies Act, 1956.

Use of estimates

The presentation of financial statements in conformity with the generally accepted accounting principles requires estimates and assumptions to be made that affect the reported amount of assets and liabilities and disclosure of contingent liabilities as on date of the financial statements and the reported amount of revenues and expenses during the reporting year. Differences between the actual results and estimates are recognized in the year in which the results are known or materialized.

3. CONTINGENT LIABILITIES

Particulars                                Current Year   Previous year

i) Suit filed against the Company by 
   UMAK Investment Company                 Rs. 12.30
                                           Crore          Rs. 12.30 
                                                          Crore 
   Private Limited

ii) Suit filed against the Promoter 
    Directors of the Company and others    Rs. 4.35
                                           Crore          Rs. 4.35 
                                                          Crore
    in their personal capacity by UMAK
    Investment Company Private Limited

iii) Tax demand notice under the H.P. 
     Tax on Luxuries ( in Hotels and       Rs. 43.64 
                                           Lacs           Nil
     Lodging Houses) Act, 1979 dated
     29/03/2013'

* The Company has filed appeal against this demand of Luxury tax liability at Honorable High Court of Shimla.

4. Demand Order under Section 7A of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 has passed for the period of 08/ 07 to 04/2010 of Rs. 2,30,119/-, Company has paid it on vide challan No. 00718 dated 7lh May, 2013.

5. Provision for Income Tax has not been made, there being no Income tax liability as there was a loss during the year and also accumulated losses from previous year.

6. Balance standing to the debit and credit of parties are subject to confirmation from them.

7. In the opinion of the management, all current assets, loans and advances have a value of realization at least equal to the extent considered good and stated in the Balance Sheet.

8. Ministry of Company Affairs has vide its Notification No. S.O. 301 (E) dated 08 February, 2011 has exempted the Company from the requirement of disclosure of quantitative details as per Part-ll of Schedule VI of the Companies Act 1956, in the financial statements subject to fulfillment of the conditions stipulated in paragraph 2 of this notification. Company has been complied all conditions as mentioned in Notification.

9. C.I.F. Value of Imports -NIL.

10. Value of consumption of raw material components and spare parts.

11. BASIC AND DILUTED EARNING PER SHARE

Basic earnings per share are computed by dividing the net profit/ (loss) attributable to equity shareholders for the year by the weighted average number of equity shares outstanding during the year. Diluted earnings per share are computed using the weighted average number of equity shares and also the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares. The dilutive potential equity shares are adjusted for the proceeds receivable, had the shares been actually issued at fair value. Dilutive potential equity shares are deemed converted as of the beginning of the year, unless they have been Issued at a later date. The number of equity shares and potential diluted equity shares are adjusted for stock split, bonus shares and the potential dilutive effect of employee stock option.plans as appropriate. Basic and diluted earning per share for the year-ended 31.03.2013 is as under:

12. RELATED PARTY TRANSACTION

Pursuant to Accounting Standard (AS-18) - "Related Party Disclosure" following parties are to be treated as Related Parties. Relationship Name of the related parties

i) Related parties where control exists

Subsidiary Company U. G. Buildcon Pvt. Ltd

ii) Other related parties

Key management personnel Mr. Umesh Phalpher

(Chairman & Managing Director) Mr. Harmit Ghai (Whole Time Director)

13. DEFERRED TAX

In compliance with Accounting Standard 22 (AS 22) - 'Accounting for taxes on income', as notified under the Companies (Accounting Standards) Rules, 2006, as amended, the Company in the absence of a virtual certainty of future profits, has not recognized any deferred tax assets during the current year.

14. EMPLOYEE BENEFITS

As per Accounting Standard 15" Employee Benefits" (Revised 2005), the disclosures of employee benefits as defined in Accounting Standard are given below:

The Company has classified the various benefits provided to employees as under:

I. Defined Contribution Plans

a. Provident Fund

b. Employer's Contribution to Employees' Pension Scheme 1995

During the year, the Company has recognized the following amounts in the Profit and Loss Account for the above Plans: Rs.0.57Lacs (P.Y.Rs.1.43 Lacs).

II. Defined Benefit Plans

Contribution to Gratuity Fund (Non- Funded Scheme)

In accordance with Accounting Standard 15 (Revised 2005), Actuarial Valuation was performed in respect of the aforesaid defined benefit plan based on the following assumptions:

15. The Company has a subsidiary company hence the requirements of Accounting Standard-21 relating to consolidate Financial Statements is applicable to the Company.

16. Previous year figures have been regrouped, rearranged & reclassified where ever considered necessary to confirm current year figures.