1.  We have audited the attached Balance Sheet of M/s SAN ENGINEERING &
 LOCOMOTIVE CO. LTD., Whitefield Road, Bangalore - 560 048, as at
 31.03.2010 and also the Profit & Loss Account for the year ended on
 that date, annexed thereto and the Cash Flow Statement for the year
 ended on that date. These financial statements are responsibility of
 the Companys management. Our responsibility is to express an opinion
 on these financial statements based on our audit.
 
 2.  We conducted our audit in accordance with auditing standards
 generally accepted in India.  Those standards require that we plan and
 perform the audit to obtain reasonable assurance about whether the
 financial statements are free of material misstatement. An audit also
 includes assessing the accounting principles used and significant
 estimates made by management, as well as evaluating the overall
 financial statement presentation. We believe that our audit provides a
 reasonable basis for our opinion.
 
 3.  As required by the Companies (Auditors report) order, 2003 issued
 by the Central Government of India in terms of sub-section (4A) of
 section 227 of the Companies Act, 1956, we give in the Annexure a
 statement on the matters specified in paragraphs 4 & 5 of the said
 order.
 
 4.  Further to our comments in Annexure referred to in paragraph 3
 above, we report that:
 
 i) We have obtained all the information and explanations, which to the
 best of our knowledge and belief were necessary for the purposes of our
 audit ;
 
 ii) In our opinion, proper books of account as required by law have
 been kept by the Company so far as appears from our examination of
 those books ;
 
 iii) The Balance Sheet, Profit and Loss Account and the Cash Flow
 Statement dealt with by this report are in agreement with the Books of
 Account;
 
 iv) In our opinion, the Balance Sheet, Profit and Loss Account and the
 Cash Flow Statement dealt with by this report comply with the
 Accounting Standards referred to in Sub Section (3C) of Section 211 of
 the Companies Act, 1956 ;
 
 v) In our opinion, and to the best of our information and according to
 the explanations given to us, the said accounts give the information
 required by the Companies Act, 1956, in the manner so required and give
 a true and fair view in conformity with the accounting principles
 generally accepted in India ;
 
 a) in the case of the Balance Sheet, of the state of affairs of the
 Company as at 31st March, 2010 ;
 
 b) in the case of the Profit and Loss Account of the PROFIT for the
 year ended on that date ; and
 
 c) in the case of the Cash Flow Statement, of the cash flows of the
 Company for the year ended on that date.
 
 5. On the basis of the written representations received from the
 Directors as on 31st March 2010, and taken on record by the Board of
 Directors, we report that none of the director is disqualified as on
 31st March, 2010 from being appointed as a Director in terms of clause
 (g) of sub section (1) of Section 274 of the Companies Act, 1956.
 
 Annexure to Auditors Report Annexure Referred to in paragraph 3 of the
 report of even date of the auditors to the members of M/s SAN
 Engineering & Locomotive Co. Ltd.,
 
 On the basis of such checks, as we considered appropriate and in terms
 of the information and explanations given to us, we report that :
 
 1.  a.  The Company has maintained proper records showing the full
 particulars including quantitative details and situation of fixed
 assets.
 
 b.  The fixed assets are being physically verified by the management
 under a phased programme, in our opinion, is reasonable, and no
 material discrepancies have been noticed on such verification.
 
 c.  The Company has not disposed off substantial part of its fixed
 assets during the year.
 
 2.  a.  As explained to us, inventories have been physically verified
 during the year by the management.
 
 b.  The procedures of physical verification of inventories followed by
 the management are, in our opinion, reasonable and adequate in relation
 to the size of the Company and the nature of its business.
 
 c.  According to the inventory records produced to us for our
 verification, we are of the opinion that the Company is maintaining
 proper records of its inventory and the discrepancies noticed on
 physical verification between physical stocks and the book records were
 not material.
 
 3.  a.  According to information and explanations
 
 given to us, the Company has not granted any loan, secured or
 unsecured, to companies, firms or other parties covered in the register
 maintained under section 301 of the Companies Act, 1956.
 
 b. According to the information and explanations given to us, the
 company has taken loans from parties listed in the register maintained
 under section 301 of the Companies Act, 1956. The rate of interest and
 other terms and conditions of such loans are in our opinion, prima
 facie not prejudicial to the Company.
 
 4.  In our opinion and according to the information and explanations
 given to us, there is an adequate internal control procedure
 commensurate with the size of the Company and the nature of its
 business with regard to purchase of inventory and fixed assets and for
 sale of goods and services. Further, on the basis of our examination of
 the books and records of the Company, we have neither come across nor
 have been informed of any continuing failure to correct major
 weaknesses in the aforesaid internal control procedures.
 
 5.  The Company has complied with the provisions of Sections 58 A and
 58 AA of the Act and the Companies (Acceptance of Deposit) Rules 1975
 with regard to deposits accepted from public.
 
 6.  a.  According to the information and explanations
 
 given to us, we are of the opinion that the particulars of contracts or
 arrangements that need to be entered into the register maintained under
 section 301 of the Companies Act, 1956, have been so entered in the
 register required to be maintained under the section.
 
 b. In our opinion and according to the information and explanations
 given to us, the transactions in pursuance of such contracts or
 arrangements have been made at prices which are reasonable having
 regard to prevalent market prices at the relevant time as evaluated on
 the basis of quotations obtained from parties / and considering that
 having regard to certain items purchased / sold are of a special nature
 in respect of which suitable alternative sources do not exist for
 obtaining comparative quotations in general.
 
 7.  In our opinion, the Companys internal audit system is commensurate
 with its size and nature of its business.
 
 8.  We are informed that the Central Government has not prescribed the
 maintenance of cost records under Section 209 (1) (d) of the Companies
 Act, 1956 for any of the products of the Company.
 
 9.  a.  The Company is regular in depositing with the appropriate
 authorities the undisputed statutory dues relating to Provident Fund,
 Investor Education and Protection Fund, Employees State Insurance,
 Income Tax, Value Added Tax, Customs Duty, Excise Duty, Service Tax and
 other statutory dues applicable to it.
 
 b. According to the information and explanations given to us, no
 undisputed amounts in respect of the statutory dues referred to above
 were outstanding as at 31st March, 2010 for a period of more than six
 months from the date they become payable, except a sum of Rs.1,33,833/-
 disputed before the Central Excise Department as at 31st March 2010.
 
 10.  The Company has no accumulated losses as at 31st March 2010 nor it
 has incurred any cash losses during the financial year covered by our
 audit or in the immediately preceding financial year.
 
 11.  The Company has not granted any loans or advances on the basis of
 security by way of pledge of shares, debentures and other securities.
 
 12.  The provision of any special statute applicable to a chit fund /
 nidhi / mutual benefit fund / societies are not applicable to the
 Company.
 
 13.  The Company is not dealing or trading in shares, securities,
 debentures and other investments.  Accordingly, the provisions of
 clause 4 (xiv) of the Companies (Auditors Report) order 2003 are not
 applicable to the Company.
 
 14.  The Company has not given any guarantees for loan taken by others
 from banks or financial institutions.
 
 15.  According to the information and explanation given to us, the
 Company has not made any preferential allotment of shares during the
 year to parties and Companies covered in the register maintained under
 Section 301 of the Act.
 
 16.  The Company has not issued any debentures during the year under
 audit.
 
 17.  The Company has not raised any money by public issues during the
 year under audit.
 
 18.  According to the information and explanations given to us and to
 the best of our knowledge and belief, no fraud on or by the Company has
 been reported or noticed during the year.
 
                                       For N. R. RAJAGOPALAN & CO.,
                                              Chartered Accountants
 
 Place : Bangalore                                  (R. NARASIMHAN)
 
 Date  : 7,th July, 2010                                   Partner