Notes to Accounts of Dolphin Hotels Ltd.

Mar 31, 2011

1. The Company has not complied with the guidelines those are made applicable to the listed Companies by Securities and Exchange Board of India, as the Company has opted for delisting from Stock exchanges and also not paid the Listing Fees.

2. a) Term Loans from Union Bank of India are secured by equitable mortgage of the

Land and Buildings of the Company and further secured by hypothecation of all the fixed assets of the Company both existing and future on pari-passu basis and also guaranteed by two of the Directors of the Company.

b) Working Capital Loan from Union Bank of India is secured by hypothecation of Stock of Provisions, Wines, Consumable Stores and Book Debts of Dolphin Hotel at Visakhapatnam and guaranteed by three of the Directors of the Company in their personal capacity to the extent of ? 25.00 Lakhs.

3. Interest on Unsecured Term Loan from a Director amounting to ? 36,35,47,043 up to 31st March, 2006 is not provided in the books of accounts. Consequent to that unsecured loans are under stated and Reserves and Surplus are over stated by that amount.

4. Donations shown under the head "General expenses” include the amounts given to the following political parties.

i) Communist Party of India Marxist Leninist ? 15,000 (Previous year ? 10,000)

ii) Communist Party of India (Marxist) ? Nil (Previous Year ? 10,000)

5. a) Depreciation on the assets of the company is provided on Straight line basis/written down value method as per Schedule XIV to the Companies Act 1956. However fixed Assets costing rupees Five thousand or less are fully depreciated in the year of acquisition.

b) Buildings constructed on lease hold land are depreciated over the Primary Lease period which is 15 years.

c) Costs incurred towards purchase of Computer Software being in the nature of intangible assets are amortised over its estimated life of five years.

6. Buildings costing ` 1,76,39,622 (previous year ` 1,76,39,622) are on leasehold land.

7. Fixed Deposits shown under the head Cash and Bank balances include deposits of Rs 36,14,830/- (previous year ` 36,14,830/-) the receipts in respect of which are in lien with bankers towards margin for guarantees issued by them.

8. Deposits recoverable include ` 15,79,886/- (previous ` 15,79,886/-) paid to Ushakiron Movies Limited, a Company which is under the same management towards Security Deposits. Maximum amount due at any time during the year is ` 15,79,886 /- (previous year ` 15,79,886/-).

9. The Company is in the process of obtaining confirmations from the debtors.

10. Disclosure of Sundry Creditors under current liabilities is based on the information available with the Company regarding the status of the suppliers as defined under the "Micro, Small and Medium Enterprises Development Act, 2006” and relied upon by the Auditors.

11. In the opinion of the management, the current assets, loans and advances are expected to realise at least the amount at which they are stated, if realised in the ordinary course of business and provision for all known liabilities have been adequately made in the accounts.

12. Estimated amount of contracts remaining to be executed on Capital Account and not provided for Rs 2,15,012 (Net of advances) (Previous year Rs Nil)

13. Remuneration paid to Managing Director included in other heads of account (Minimum remuneration as per Schedule XIII of the Companies Act, 1956)

14. Contingent Liabilities not provided for on account of

Current year Previous year Rs Rs

a) Claims against the company not acknowledged as debts : 5,09,16,395 3,73,75,332 out of which the company has counter claim to the extent of (3,89,09,346) (3,47,70,371)

b) Guarantees given by the bankers 3,27,64,830 3,28,64,830

c) Guarantees given by the company 38,82,216 38,82,216

15. The Company has imported certain goods under the Export Promotion Capital Goods scheme of the Government of India at concessional rates of duty on an undertaking to fulfill ` 1,41,16,680 (Previous Year Rs 3,83,87,858) which is to be fulfilled within next 5 years. Non fulfillment of the balance obligation within the said period render the company liable to pay the balance duty of ` 17,64,585 (Previous Year ` 48,54,438) and other penalties under the above referred scheme.

16. Disclosure relating to the Gratuity (funded) liability as per Accounting Standard 15 "Employee Benefits”

The rate of escalation in compensation considered in the above valuation is estimated taking into account inflation, seniority, promotion and other relevant factors and the above information is certified by an actuary.

17. As the Company’s main business is limited to only Hospitality services, there is no separate reportable segment as per the Accounting Standard (AS-17) on "Segment Reporting” .

18. The details of the transactions with related parties to be disclosed as required by Accounting Standard- 18 are as follows:

a) Names of Related parties and description of relationship

1. Key Management Personnel

: 1. Sri Ramoji Rao, Chairman

2. Smt. Ch. Vijayeswari, Managing Director

2. Relatives of Key Management Personnel

: 1. Smt. Ch. Rama Devi (Wife of Chairman)

2. Sri Ch. Kiron (Son of Chairman)

3. Sri Ch. Suman (Husband of M D)

4. Smt.Ch. Sailaja (Wife of Ch. Kiron)

3. Associates

: 1. Margadarsi Chit Fund Pvt. Ltd.

2. Ushodaya Enterprises Pvt. Ltd.

3. Ushakiron Movies Ltd.

4. Colorama Printers Pvt. Ltd.

5. Margadarsi Marketing Pvt. Ltd.

6. Margadarsi Housing Pvt. Ltd.

7. Margadarsi Financial Services Pvt. Ltd.

8. Various business concerns of Ramoji Rao (HUF)

9. Ushodaya Shipping Pvt. Ltd.

10. Variety Entertainment Pvt. Ltd.

11. Suman Advertising Pvt. Ltd.

12. Eenadu Relief Fund

13. M S M S Pvt. Ltd.

14. Ramadevi Trust

19. As required by Accounting Standards (AS 28) on "Impairment of Assets” as notified by Companies (Accounting Standards) Rules 2006, (as amended), the management has carried out the assessment of Impairment of assets and no impairment loss has been recognized during the year.

20. In the absence of convincing evidence that the Company will pay normal Income Tax within the specified period, the Minimum Alternative Tax (MAT) credit is not recognized during the year as an asset and the situation shall be reviewed at each Balance Sheet date.

21. Additional information as required to be given pursuant to the provisions of Part II of Schedule VI to the Companies Act, 1956 :

a) Since it is not practicable to give quantity wise details in respect of purchase, consumption, turnover, stock, etc, the Department of Corporate Affairs in exercise of its power conferred by sub-section (4) of section 211 of the Companies Act, 1956 by its order No. 46/3/2011-CL-III, dated 28th January, 2011 has exempted the company from giving such details for the year. However, the said order requires the company to disclose certain additional particulars, which are duly disclosed in financial statements.

22. The other particulars required under part II of Schedule VI to the Companies Act, 1956 are not applicable to the company.

23. Previous year’s figures have been regrouped and reclassified wherever necessary to make them comparable with those of current year.

---

Mar 31, 2010

1. The Company has not complied with the guidelines those are made applicable to the listed Companies by Securities and Exchange Board of India, as the Company has opted for delisting from Stock exchanges and also not paid the Listing Fees.

2. a) Term Loans from Union Bank of India are secured by equitable mortgage of the Land and Buildings of the Company and further secured by hypothecation of all the fixed assets of the Company both existing and future on pari-passu basis and also guaranteed by two of the Directors of the Company.

b) Working Capital Loan from Union Bank of India is secured by hypothecation of Stock of Provisions, Wines, Consumable Stores and Book Debts of Dolphin Hotel at Visakhapatnam and guaranteed by three of the Directors of the Company in their personal capacity to the extent of Rs. 25.00 Lakhs.

3. Interest on Unsecured Term Loan from a Director amounting to Rs. 36,35,47,043/- up to 31st March, 2006 is not provided in the books of accounts. Consequent to that unsecured loans are under stated and Reserves and Surplus are over stated by that amount.

4. Donations shown under the head "General expenses” include the amounts given to the following political parties.

i) Communist Party of India Marxist Leninist Rs. 10,000/-

ii) Communist Party of India (Marxist) Rs. 10,000/-

5. a) Depreciation on the assets of the company is provided on Straight line basis/written down value method as per Schedule XIV to the Companies Act 1956. However fixed Assets costing rupees Five thousand or less are fully depreciated in the year of acquisition.

b) Buildings constructed on lease hold land are depreciated over the Primary Lease period which is 15 years.

c) Costs incurred towards purchase of Computer Software being in the nature of intangible assets are amortised over its estimated life of five years.

6. Buildings costing Rs 1,76,39,622/- (previous year Rs. 4,26,42,002/-) are on leasehold land.

7. Fixed Deposits shown under the head Cash and Bank balances include deposits of Rs. 36,14,830/- (previous year Rs.7,04,530/-) the receipts in respect of which are in lien with bankers towards margin for guarantees issued by them.

8. Deposits recoverable include Rs. 15,79,886/- (previous Rs. 15,79,886/-) paid to Ushakiron Movies Limited, a Company which is under the same management towards Security Deposits. Maximum amount due at any time during the year is Rs.15,79,886 /- (previous year Rs.15,79,886/-).

9. The Company is in the process of obtaining confirmations from the debtors.

10. Disclosure of Sundry Creditors under current liabilities is based on the information available with the Company regarding the status of the suppliers as defined under the "Micro, Small and Medium Enterprises Development Act, 2006” and relied upon by the Auditors.

11. In the opinion of the management, the current assets, loans and advances are expected to realise at least the amount at which they are stated, if realised in the ordinary course of business and provision for all known liabilities have been adequately made in the accounts.

12. Estimated amount of contracts remaining to be executed on Capital Account and not provided for Rs. NIL/- (Net of advances) (Previous year Rs. 6,64,78,553/-)

13. Remuneration paid to Managing Director included in other heads of account (Minimum remuneration as per Schedule XIII of the Companies Act, 1956)

14. Contingent Liabilities not provided for on account of

Current year Previous year

Rs. Rs.

a) Claims against the company not acknowledged as debts (out of which the company has counter claim to the extent of Rs. 3,47,70,371/- ) 3,73,75,332 1,25,37,106

b) Guarantees given by the bankers 36,14,830 7,04,530

c) Guarantees given by the company 38,82,216 64,48,506

15. The Company has imported certain goods under the Export Promotion Capital Goods scheme of the Government of India at concessional rates of duty on an undertaking to fulfill quantified exports against which the remaining future obligation aggregates to Rs. 3,83,87,858/- (Previous Year Rs. 2,98,13,792/-) which is to be fulfilled within next 5 years. Non fulfillment of the balance obligation within the said period render the company liable to pay the balance duty of Rs. 1,36,69,034/- (Previous Year Rs. 37,26,724/-) and other penalties under the above referred scheme.

16. Disclosure relating to the Gratuity (funded) liability as per Accounting Standard 15 "Employee Benefits”

The rate of escalation in compensation considered in the above valuation is estimated taking into account inflation, seniority, promotion and other relevant factors and the above information is certified by an actuary.

17. As the Company’s main business is limited to only Hospitality services, there is no separate reportable segment as per the Accounting Standard (AS-17) on "Segment Reporting” .

18. The details of the transactions with related parties to be disclosed as required by Accounting Standard- 18 are as follows:

a) Names of Related parties and description of relationship

1. Key Management Personnel

: (1) Sri Ramoji Rao, Chairman (2) Smt. Ch. Vijayeswari, Managing Director

2. Relatives of Key Management Personnel

: (1) Smt. Ch. Rama Devi (Wife of Chairman) (2) Sri Ch. Kiron (Son of Chairman) (3) Sri Ch. Suman (Husband of Managing Director) (4) Smt.Ch. Sailaja Kiron (Wife of Ch. Kiron)

3. Associates

: (1) Margadarsi Chit Fund Pvt. Ltd. (2) Ushodaya Enterprises Pvt. Ltd. (3) Ushakiron Movies Ltd. (4) Colorama Printers Pvt. Ltd. (5) Margadarsi Marketing Pvt. Ltd. (6) Margadarsi Housing Pvt. Ltd. (7) Margadarsi Financial Services Pvt. Ltd. (8) Various business concerns of Ramoji Rao (HUF) (9) Ushodaya Shipping Pvt. Ltd. (10) Suman Advertising Pvt. Ltd. (11) Manpower Selection and Management Services Private Limited

19. In terms of Accounting Standard (AS 22) on "Accounting for Taxes on Income” as notified by Companies (Accounting Standards) Rules, 2006 (as amended), there is a net deferred tax asset as on 31st March, 2010. In compliance with the provisions of the Accounting Standard and based on general prudence, the Company has not recognised the said differed tax asset while preparing the accounts for the current year.

20. As required by Accounting Standards (AS 28) on "Impairment of Assets” as notified by Companies (Accounting Standards) Rules 2006, (as amended), the management has carried out the assessment of Impairment of assets and no impairment loss has been recognized during the year.

21. In the absence of convincing evidence that the Company will pay normal Income Tax within the specified period, the Minimum Alternative Tax (MAT) credit is not recognized during the year as an asset and the situation shall be reviewed at each Balance Sheet date.

22. Additional information as required to be given pursuant to the provisions of Part II of Schedule VI to the Companies Act, 1956 :

a) Since it is not practicable to give quantity wise details in respect of purchase, consumption, turnover, stock, etc, the Department of Corporate Affairs in exercise of its power conferred by sub-section (4) of section 211 of the Companies Act, 1956 by its order No. 46/147/2008-CL-III, dated 26th August, 2008 has exempted the company from giving such details for the years ended 31st March, 2008, 31st March, 2009 and 31st March, 2010. However, the said order requires the company to disclose certain additional particulars, which are duly disclosed in financial statements.

23. The other particulars required under part II of Schedule VI to the companies Act, 1956 are not applicable to the company.

24. Previous year’s figures have been regrouped and reclassified wherever necessary to make them comparable with those of current year.