DIRECTORS REPORT TO THE SHARE HOLDERS
 
 The Directors have great pleasure in presenting to you “19th Annual
 Report” of your Company along with the Audited Accounts for the year
 ended 31st March 2011.
 
 1.  FINANCIAL RESULTS:
 
 The Financial Results for the year ended 31 st March 2011 are furnished
 below:                                              
                                                  (Rs. In Lakhs)
 
 Particulars                                  2009-10   2010-11
 
 Operating Income                              334.38    406.49
 
 Other Income                                    7.28     14.45
 
 Profit before Depreciation & Tax              116.71    138.32
 
 Depreciation                                   56.70     59.36
 
 Cash Profit                                    62.77     69.47
 
 During the year under review your company has recorded a 21.47% growth
 in its gross operating income.  However the same was offset by increase
 in ''marketing overheads''. The growth in the business was possible with
 steps initiated by the Board members to enter new markets.
 
 2.  SUBSIDIARY COMPANIES:
 
 During the year under review the Subsidiary Companies incorporated were
 not able to record any progress since activities undertaken are in the
 initial phase. However efforts are being made to utilize the
 subsidiaries if necessary by associating with other business partners
 (and also by effecting the required changes in the objects as well as
 the names) for the new proposals by the boards as mentioned in the
 later paragraphs of the ''Management''s Perception''.
 
 3.  DIVIDEND:
 
 The Directors have taken a decision not to recommend any dividend for
 the year 2010-11, mainly with intention of boosting up company owned
 funds. While taking such decision the Directors have taken into account
 to strengthen Financials of the company by retaining earned profits.
 
 4.  PUBLIC DEPOSITS:
 
 During the year under review the company has not accepted any ''public
 deposit'' as in defined in provision of Section 58A of the Companies
 Act, 1956 read with Companies (Acceptance of Deposits) Rules 1975 as
 amended from time to time. There are no outstanding unclaimed deposits
 as on 31st March 2011.
 
 5.  MANAGEMENT''S PERCEPTION:
 
 PRESENT STATE OF AFFAIRS - AN OVERVIEW
 
 Cost Enhancement of the Project and the Delay in obtaining the required
 additional funds:
 
 The company raised funds in 2006 by way of rights issue, for the
 purpose of expansion including updating the medical equipment by way of
 replacing the obsolete and old medical equipment with the new ones. Due
 to the time taken for the process involved, newer models of diagnostic
 equipment have in the mean time been introduced into the market and the
 level of the originally envisaged sophistication for updating has gone
 up and so also the cost.  In addition, the company opted to establish a
 Clinical Research Unit along with the needed diagnostic equipment in
 Hyderabad as per the ''business plan'' mentioned in the ''Rights Issue
 prospectous'' of the company. For this your company had to approach the
 banks for the additional funds needed to meet the enhanced cost
 requirements.  Your company has got the loan sanctioned, but due to the
 extraordinary delay in the bank at various stages of processing,
 sanction as well as the disbursement, the whole process got delayed too
 much. This unexpected extraordinary delay for the company to go ahead
 with its updating & expansion plans, saw many other new similar centres
 with similar sophisticated equipment cropping up in the vicinity of the
 unit during this period. Finally after the installation of the updated
 new equipment, due to the heavy competition created because of the
 mushrooming of the diagnostic centres during this delay period, the
 marketing expenditure increased out of proportion and some undue sops
 and price discounts had to be extended to most of the supporters and
 service providers and also the private/Government organizations which
 are in tie up with the company for utilizing the diagnostic services.
 Thus, in spite of substantial increase in the income of the company
 over the past 6 years, the profits are not reflected proportionately.
 
 Global Recession and Delay in materialization of import of equipment,
 and unenvisaged additional Interest Burden:
 
 In addition, the supply and import of some sophisticated high end
 equipment got extraordinarily delayed as a consequence of the then
 global recession in its peak and other external factors affecting the
 import. This resulted in the company incurring huge interest burden
 (not provided for in the scheduled budget) during the period between
 ordering the equipment by way of payment and the installation and
 commencement of commercial operations of various medical equipments
 purchased. This also resulted in different equipments getting installed
 at different time intervals. The net effect was that, the company
 suffered huge amounts of interest burden (unprovided for and
 unexpected) as well as the need for the regular organizational
 maintenance, even while the revenues suffered heavily due to the non
 commencement of many new equipments as per schedule. As such the
 company suffered severely in many ways in terms of revenue streams –
 which had a consequential bearing on the profitability of the company.
 
 Need for more comprehensiveness:
 
 Due to delay in the implementation of the project and installation of
 various equipments at different times, the supporters/service providers
 had confused knowledge about the details of equipments available and
 the total services provided. A lot of marketing expenditure had to be
 spent for awareness creation on the services provided in the centre
 from time to time.
 
 The Present Problem of stand alone Diagnostic Centres:
 
 It is understood from the market forces that a stand alone Diagnostic
 business model is day by day becoming more difficult to sustain. This
 business is mostly dependant on referrals from Nursing homes and
 General Practitioners. Today with large (corporate) hospitals coming
 with their own inhouse diagnostic facilities with high investment and
 internal captive clients, it has hit the stand alone diagnostic
 business. In addition to this, the introduction of ''Arogyasri'' free
 health scheme to poor patients by the govt. in association with big &
 corporate hospitals, prompted them to have in-house diagnostic
 facilities of their own. Because of this, referrals to stand alone
 diagnostic centres from big hospitals decreased drastically and as a
 consequence, the competition becasue heavy and the marketing expenses
 involved shot up beyond the permissible levels. As a net effect the
 margins for most of the diagnostic procedures are substantially
 decreased.
 
 Withdrawal of the loan sanctioned by the bank for the Hyderabad Unit
 and the consequent effects on the company:
 
 When the preliminary operational efforts and activities for
 establishing & commencing the Hyderabad unit were in full swing in
 2009, the bank has abruptly issued a letter on 07.08.2009 intimating
 the withdrawal of the loan for the Hyderabad Unit - citing delay in the
 implementation as the reason. However, it was clearly explained to the
 bank about the justified reasons for the delay in implementation of the
 Hyderabad Unit. Whereas the global financial recession which was at its
 peak in 2008-09 casued the withdrawal/reduction of the outsourcing of
 the clinical trials from the west, also resulted in delayed approval
 and implementation of the MOUs entered into bey the Company with
 foreign life sciences companies. The company by then already spent the
 required amounts for the preliminary and preoperative works and also a
 substantial amount among others for the rennovation & modification of
 the leased out huge premises for this purpose. Because of this, the
 substantial expenditure spent on the Hyderabad Unit till then become
 ineffective and redundant. Thus while we were on the verge of making
 things happen even in that difficult scenario, the bank has suddenly
 issued the loan withdrawal letter, resulting in loss of time and
 efforts and also the amount already spent on the Hyderabad unit till
 then. This also had a bearing on the subsequent financial resilience of
 the company and adversely impacted the financials and growth of the
 company. In addition, because of this, the company also suffered huge
 potential loss in terms of ''to have obtained'' revenues and
 profitability through the unit as originally envisaged by the board and
 management.
 
 Concerted Management Efforts:
 
 The Revenues increased year-by-year (i.e, for FY 2005-06-Rs.213.43
 lakhs, FY 2006-07-Rs.246.99 lakhs, FY 2007-08-Rs.260.33 lakhs, FY
 2008-09-Rs.270.23 lakhs, FY 2009-10-Rs.334.38 lakhs and FY 2010-
 11-Rs.406.49 lakhs). Inspite of the unit performing exceedingly well in
 terms of increased revenues year-by- year, it has little profit margins
 left for the prompt servicing of loans every month for the reasons
 mentioned in the above paragraphs in detail. However, as a result of
 the focussed efforts of the management, the performance and revenues of
 the Company during the completed year also did improve but with higher
 marketing expenses. With its concerted efforts, the management has been
 paying the bank loans almost regularly, though with some strain on the
 finances of the company.
 
 STEPS PROPOSED BY THE BOARD FOR FUTURE BUSINESS DEVELOPMENT AND
 ENHANCED PROFITABILITY
 
 To accomplish the Comprehensiveness of Diagnostic Services:
 
 The board proposes to take every step needed to further improve the
 operational revenues by making the unit a Specialised Diagnostic
 Centre. The provision of high end specialised diagnostic sophisticated
 equipment will not normally be available in almost all the hospitals
 and hence they would approach the spicality diagnostic centres with
 those faciilties. This would result in increasing the operational
 profit margins of your company. To achieve this objective, the company
 proposes to complete the comprehensiveness of the diagnostic services
 by updating the existing clinical laboratory equipment and also
 introduce some of the latest and more sophisticated laboratory
 equipment for operating the clinical laboratory services on an enhanced
 scale including Biochemical, Microbiological, Immunological,
 Pathological, Molecular diagnostics etc. As it is a well known fact in
 the industry that the profits margins for specialised clinical
 laboratory services are sufficiently high, taking the necessary steps
 in this direction will enhance the profitability of the company
 suitably.
 
 Completion of the comprehensiveness of the existing imaging services of
 the company by also adding the remaining required services like
 mammography, high end X-ray etc., will add to the completeness and also
 enhance the profitability of the services by way of making all the
 imaging services under one roof.
 
 Association with others for expanding the operational base:
 
 The company is also contemplating to expand its operational base by
 associating with similar centres in new areas especially in potential
 places in the region and also by investing/making advance deposits or
 make financial commitments/transactions in any suitable manner with
 those organisations, if necessary, in return for getting the benefits
 like outsourcing of operations etc., expected to be beneficial to our
 company. The business potential and the local contacts of the parties
 to be associated with, will also be considered while finalizing the
 associations.
 
 Establishing ''Cash Green'' Projects – Creating separate Business Units
 for Medical & Non Medical Projects:
 
 To further enhance the profitability, your company is now making
 efforts towards diversifying its activities to more profitable
 activities like pyrolysis plants and other ''cash green'' activities. The
 Board is now working out a detailed plan for this purpose. The Board is
 actively considering not only taking-up non medical project/s, but also
 separating the business units of medical and non medical projects so
 that the medical operations could be hived off or conducted in
 association with like minded companies/parties or a portion of services
 can be outsourced for the company or associations in any flexible
 manner as and when thought and decided fit to be advantageous to the
 company.
 
 6.  CONSERVATION OF ENERGY, TECHNOLOGY, ABSORPTION & FOREIGN EXCHANGE
 EARNINGS AND OUT GO: The required information as per Sec.217 (1) (e) of
 the Companies Act 1956 is provided hereunder:
 
 A : CONSERVATION OF ENERGY:
 
 The Company has taken necessary steps to conserve the energy
 utilization during the year under review.
 
 B.  TECHNOLOGY ABSORPTION:
 
 1.  Research and Development (R&D)                    NIL
 
 2.  Technology absorption, adoption and innovation    NIL
 
 C.  FOREIGN EXCHANGE EARNINGS AND OUT GO:
 
 Foreign Exchange Earnings                             NIL
 
 Foreign Exchange Outgo                                NIL
 
 7.  INTERNAL CONTROL AND ITS ADEQUACY:
 
 The Board is committed to ensure that the Company''s ''internal control''
 system remains effective and efficient in areas such as operations and
 Security. For this purpose proper planning and effective conduct of the
 ''internal audit'' is given top-most attention.
 
 8.  DIRECTORS'' RESPONSIBILITY:
 
 To best of their knowledge and belief and on the basis of information
 furnished to them the Directors make following statement, which is
 required to be made in terms of Section 217 (2AA) of the Companies Act,
 1956:
 
 (i) While preparing Annual Accounts, the applicable accounting
 standards have been followed along with proper explanations
 
 (ii) Appropriate accounting policies have been selected and applied
 consistently and have made judgments and estimates that are reasonable
 and prudent so as to give a true and fair view of the state of affairs
 of the company as at March 31, 2011 and of the profits of the company
 for the year ended on that date.
 
 (iii) Proper and sufficient care has been taken for the maintenance of
 adequate accounting records in accordance with the provisions of the
 Companies Act, 1956 for safeguarding the assets of the company and for
 preventing and detecting fraud and other irregularities.
 
 (iv) The Annual Accounts of the Company have been prepared on basis of
 a ''going concern''.
 
 9.  CORPORATE GOVERNANCE:
 
 a) A note on Management Discussion and Analysis of Report is enclosed.
 
 b) As per clause 49 of the Listing Agreement with the Stock Exchanges,
 a separate section on Corporate Governance Practices followed by the
 Company together with a certificate obtained from the auditors of the
 Company is set out in Annexure, forming part of this report.
 
 10.  PARTICULARS OF EMPLOYEES:
 
 During the year under review, no employee of the company was in receipt
 of remuneration for the whole year which in the aggregate was
 Rs.60,00,000/- or more per annum nor was any employee in receipt of
 remuneration Rs.5,00,000/- or more per month for the any part of the
 year in accordance with the provisions of Section 217(2A) of the
 Companies Act, 1956, read with the Companies (Particulars of Employees)
 Rules, 1975 as amended.
 
 During the year under review, industrial relations of the company
 continued to be cordial and peaceful.
 
 11.  DIRECTORS:
 
 In accordance with requirements of the Companies Act, 1956 and Articles
 of Association of the Company, Mr.  Narendra Seena Karkera retires by
 rotation. He however is eligible for reappointment. The board has
 therefore recommended his reappointment.
 
 12.  AUDITORS:
 
 M/S Pinnamaneni & Co, Chartered Accountants, the Company''s auditors
 term office will conclude with this Annual General Meeting. They have
 expressed willingness to accept the assignment for a further period on
 one more year. They have also confirmed their eligibility for such an
 appointment under Section 224(1B) of the Companies Act, 1956.The Board
 recommends firms re-appointment as Company''s auditors.
 
 13.  LISTING AT STOCK EXCHANGES:
 
 The Equity Shares of the Company are listed on Bombay Stock Exchange
 Limited, Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai - 400 001.
 
 The listing fees to the Exchange have been paid up to date.
 
 14.  ACKNOWLEDGEMENTS:
 
 Your Directors thank and appreciate all the executives, staff, Bankers,
 Customers and Workers of the Company for their dedicated services.
 
                                            //By Order of the Board// 
                                 For DOLPHIN MEDICAL SERVICES LIMITED 
                                        Sd/-                     Sd/-
                       Dr. G.V. MOHAN PRASAD     Dr. M. LAKSHMI SUDHA 
                           MANAGING DIRECTOR      WHOLE TIME DIRECTOR
 
 Place  Vijayawada, 
 Date   14.08.2011.