annual report 2010 - malaysiastock.biz innovative and compelling engineering solutions to customers...

ANNUAL REPORT 2010

OUR VISIONTo be the market leader and pre-eminent supplier of innovative and compelling engineering solutions to customers worldwide.

OUR MISSIONOur core business is to produce high precision tooling, components and advanced automation equipments for the global market.

To achieve sustainable, profitable growth, we combine market leading process technology with a highly skilled and committed workforce to achieve manufacturing excellence which is reflected in the products and services we offer.

Success is measured by our ability to create economic value, bond with our customers and suppliers, promote a sense of pride and ownership amongst our employees and produce a higher return of equity to our shareholders.

OUR VALUES & BELIEFSOur shared values and beliefs are the foundation upon which our company is built. We believe that our people, striving towards a shared vision and guided by a common set of values and beliefs are our most valuable asset and the ultimate sustainable source of our competitive advantage.

We are guided by our A.C.T.I.O.N.S. which underlie the culture of the KOBAY group of companies.

A g i l i t y

C a n - D o A t t i t u d e

T e a m w o r k

I n i t i a t i v e & A c c o u n t a b i l i t y

O w n e r s h i p & P r i d e

N e v e r S t o p L e a r n i n g

S a t i s f y t h e C u s t o m e r s

1Kobay Technology Bhd. (Company No.: 308279-A) • Annual Report 2010

2 Corporate Information

3 - 5 Notice of Annual General Meeting and Notice of Dividend Entitlement and Payment

6 Statement Accompanying Notice of Annual General Meeting

7 Corporate Structure

8 - 11 Board of Directors

12 - 13 Chairman’s Statement

14 - 20 Corporate Governance Statement

21 Corporate Social Responsibilities

22 Internal Control Statement

23 Directors’ Responsibilities Statement

24 - 27 Audit Committee Report

28 - 29 Other Information

29 Recurrent Related Party Transactions

30 - 83 Financial Statements

84 - 85 Statistics of Shareholdings

86 - 87 List of Properties

CONTENTS

2 Kobay Technology Bhd. (Company No.: 308279-A) • Annual Report 2010

CORPORATE INFORMATION

Board of Directors

Koay Cheng LyeExecutive Chairman / Chief Administrative Officer

Dato’ Koay Hean EngManaging Director / Chief Executive Officer

Koay Ah Bah @ Koay Cheng HockNon-Independent and Non-Executive Director

Lim Swee ChuanExecutive Director / Chief Financial Officer

Tan Yok Cheng DJN, PJK, PJM

Independent and Non-Executive Director

Dato’ Abdul Rahman Bin Mohammed HashimSenior Independent and Non-Executive Director

Dr. Mohamad Zabdi Bin ZamrodIndependent and Non-Executive Director

Khaw Eng Peng(appointed on 30/7/2010)Independent and Non-Executive Director

Wee Hoe Soon @ Gooi Hoe Soon(resigned on 30/7/2010)Independent and Non-Executive Director

Audit Committee


Chairman

Dato’ Abdul Rahman Bin Mohammed HashimMember

Dr. Mohamad Zabdi Bin ZamrodMember

Khaw Eng Peng(appointed on 30/7/2010)Member

Wee Hoe Soon @ Gooi Hoe Soon(resigned on 30/7/2010)Member

Nomination Committee


Chairman


Koay Ah Bah @ Koay Cheng HockMember

Khaw Eng Peng (appointed on 30/7/2010)Member

Remuneration Committee


Chairman


Dato’ Koay Hean EngMember

Secretaries

Chan Mun Shee (MAICSA 7003071)

Wong Mee Choon (LS0040)

Email: [email protected]

Registered Office

Plot 30, Hilir Sungai Kluang 1,Bayan Lepas Industrial Park,Phase 4, Bayan Lepas,11900 Penang.Tel: (04) 6411888Fax: (04) 6412888

Registrar

Agriteum Share Registration Services Sdn. Bhd.2nd Floor, Wisma Penang Garden,42, Jalan Sultan Ahmad Shah,10050 Penang.Tel: (04) 2282321Fax: (04) 2272391Email: [email protected]

Auditors

Crowe HorwathChartered AccountantsSuite 701 & 702, 7th Floor,11, Lorong Kinta,10400 Penang.Tel: (04) 2277061Fax: (04) 2278011

Bankers

Malayan Banking Berhad

Alliance Bank Malaysia Berhad

Public Bank Berhad

Stock Exchange Listing

Main Market, Bursa Malaysia Securities Berhad(Stock Code: 6971)

Website

www.kobaytech.com


NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT the Sixteenth (16th) Annual General Meeting of Kobay Technology Bhd. will be held at Plot 30, Hilir Sungai Kluang 1, Bayan Lepas Industrial Park, Phase 4, Bayan Lepas, 11900 Penang on Friday, 17 December 2010 at 3.30 p.m. for the following purposes:

ORDINARY BUSINESS

1. To receive the Audited Financial Statements for the financial year ended 30 June 2010 and the Reports of the Directors and Auditors thereon.

Resolution 1

2. To approve the payment of a first and final tax exempt dividend of 1.5 sen per ordinary share in respect of the financial year ended 30 June 2010.

Resolution 2

3. To re-elect the following Directors retiring in accordance with Article 95 of the Company’s Articles of Association:(i) Dato’ Koay Hean Eng (ii) Dato’ Abdul Rahman Bin Mohammed Hashim

Resolution 3Resolution 4

4. To re-elect Mr. Khaw Eng Peng retiring in accordance with Article 102 of the Company’s Articles of Association.

Resolution 5

5. To re-appoint Messrs. Crowe Howarth as Auditors of the Company and to authorise the Directors to fix their remuneration.

Resolution 6

SPECIAL BUSINESS

To consider and if thought fit, to pass the following resolutions as Ordinary Resolutions:

6. ORDINARY RESOLUTION PAYMENT OF DIRECTORS’ FEES

“THAT the payment of Directors’ fees totaling Ringgit Malaysia Twenty Five Thousand (RM25,000) only to the Non-Executive Directors for the financial year ended 30 June 2010 be and is hereby approved.”

Resolution 7

7. ORDINARY RESOLUTION AUTHORITY TO ALLOT SHARES IN ACCORDANCE TO SECTION 132D OF THE COMPANIES ACT, 1965

“THAT subject always to the Companies Act, 1965 and approval from the relevant governmental and/or regulatory authorities, the Directors of the Company be and are hereby empowered pursuant to Section 132D of the Companies Act, 1965, to issue shares in the capital of the Company from time to time upon such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fit PROVIDED THAT the aggregate number of shares to be issued pursuant to this resolution does not exceed 10% of the issued share capital of the Company for the time being AND THAT such authority shall continue in force until the conclusion of the next Annual General Meeting.”

Resolution 8


8. ORDINARY RESOLUTION PROPOSED RENEWAL OF SHARE BUY-BACK AUTHORITY

“THAT subject to the Companies Act, 1965 (“Act”), the Company’s Memorandum and Articles of Association and all applicable laws, regulations and guidelines and the approvals of all relevant authorities, approval be and is hereby given to the Company to purchase and/or hold such amount of ordinary shares of RM1.00 each in the Company (“shares”) as may be determined by the Directors of the Company from time to time through the Bursa Malaysia Securities Berhad (“Bursa Securities”) upon such terms and conditions as the Directors may deem fit in the interest of the Company PROVIDED THAT the aggregate number of shares purchased and/or held pursuant to this resolution does not exceed ten per cent (10%) of the total issued and paid-up share capital of the Company at any given point in time and that an amount not exceeding retained profits and/or the share premium accounts of the Company be allocated by the Company for the proposed purchase.

THAT authority be and is hereby given to the Directors to treat the shares so purchased in accordance with the provisions of the Act, which allows a company that has purchased its own shares to either retain the shares as treasury shares or to cancel the shares, or a combination of both. The shares so purchased and retained as treasury shares by the Company may, either be cancelled, distributed as share dividends or resold on Bursa Securities at a price which is not less than the weighted average market price for the shares for five (5) market days immediately preceding the date of such resale.

THAT such authority from the shareholders would be effective immediately upon passing of this resolution and would continue to be in force until:

(a) the conclusion of the next AGM of the Company following the AGM at which such resolution was passed, at which time it shall lapse unless by ordinary resolution passed at that meeting, the authority is renewed either unconditionally or subject to conditions; or

(b) the expiration of the period within which the next AGM is required by law to be held; or

(c) revoked or varied by ordinary resolution passed by the shareholders of the Company in a general meeting,

whichever occurs first.

AND THAT authority be and is hereby given to the Directors to take all such steps as are necessary (including the opening and maintaining of a central depositories account(s) under the Securities Industry (Central Depositories) Act 1991) and entering into all other agreements, arrangements and guarantees with any party or parties to implement, finalise and give full effect to the aforesaid purchase with full powers to assent to any conditions, modifications, re-valuations, variations and/or amendments (if any) as may be imposed by the relevant authorities from time to time.”

Resolution 9

9. To transact any other ordinary business of which due notice shall have been given.

NOTICE OF ANNUAL GENERAL MEETING (cont’d)



NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT

NOTICE IS ALSO HEREBY GIVEN THAT, subject to the approval of the shareholders at the Sixteenth (16th) Annual General Meeting, the first and final tax-exempt dividend of 1.5 sen per ordinary share in respect of the financial year ended 30 June 2010 will be paid on 28 February 2011 to depositors registered in the Records of Depositors on 31 January 2011.

A depositor shall qualify for entitlement to the dividend only in respect of:

a) Shares transferred into the Depositor’s securities account before 4.00 p.m. on 31 January 2011 in respect of ordinary transfers;

b) Shares bought on Bursa Malaysia Securities Berhad (“Bursa Securities”) on a cum entitlement basis according to the rules of Bursa Securities.

BY ORDER OF THE BOARD

CHAN MUN SHEE (MAICSA 7003071)WONG MEE CHOON (LS0040)Company Secretaries

Penang, 25 November 2010

NOTES:

1. A member entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy/proxies who may but need not be a member/members of the Company to attend and vote in his/her stead and Section 149 (1)(b) of the Companies Act, 1965 shall not apply.

2. When a member appoints two or more proxies the appointments shall be invalid unless he/she specifies the proportions of his/her holdings to be represented by each proxy.

3. The instruments appointing a proxy shall be in writing under the hand of the appointer or his/her attorney duly authorised in writing or if the appointer is a corporation, either under its common seal or under the hand of an officer or attorney duly authorised.

4. The instruments appointing a proxy must be deposited at the Registered Office of the Company at Plot 30, Hilir Sungai Kluang 1, Bayan Lepas Industrial Park, Phase 4, 11900 Bayan Lepas, Penang at least forty-eight (48) hours before the time appointed for holding the Meeting or any adjournment thereof.

EXPLANATORY NOTES :

Resolution 7The proposed Ordinary Resolution under item 6 is to obtain shareholders’ approval for the payment of Directors’ fees totaling Ringgit Malaysia Twenty Five Thousand (RM25,000) only to the five Non-Executive Directors for the financial year ended 30 June 2010 as required under Article 103 of the Company’s Articles of Association.

Resolution 8The proposed Ordinary Resolution under item 7 is of renewal. The mandate sought and was approved by the members during the Fifteenth (15th) AGM held on 10 December 2009. No proceeds were raised from the previous mandate.

If the proposed Ordinary Resolution is passed, the Directors will be empowered to issue and allot shares in the Company including such shares as may be issued pursuant to the Employee Share Option Scheme at any time and for such purposes as the Directors consider would be in the interests of the Company up to an aggregate not exceeding 10% of the Company’s issued capital without convening a general meeting. This authority unless revoked or varied at the general meeting, will expire at the next AGM.

Resolution 9The proposed Ordinary Resolution under item 8, if passed, will allow the Company to purchase up to ten per cent (10%) of the total issued and paid-up share capital of the Company. This authority unless revoked or varied at the general meeting, will expire at the next AGM. The details of this proposal are set out in the Circular to Shareholders dated 25 November 2010.


STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING

The profile of the Directors who are standing for re-election (as per Resolutions 3, 4 and 5 as stated in the Notice of Annual General Meeting) at the Sixteenth (16th) Annual General Meeting of Kobay Technology Bhd. which will be held at Plot 30, Hilir Sungai Kluang 1, Bayan Lepas Industrial Park, Phase 4, 11900 Bayan Lepas, Penang on Friday, 17 December 2010 at 3.30 p.m., are stated in pages 8 - 11 of the Annual Report 2010.

There is no individual standing for election as Director (excluding Directors standing for re-election) at this forthcoming Annual General Meeting.



BUSINESS UNIT Effective equity interest @ 08.11.10

Precision Tooling & Mould DivisionPolytool Technologies Sdn. Bhd. 100.00 %Megatool Precision (Suzhou) Co., Ltd. 100.00 %Maker Technologies Sdn. Bhd. 100.00 %

Precision Components DivisionLipo Corporation Berhad and subsidiaries 52.09 %- Paradigm Precision Components Sdn. Bhd.* 52.09 %- Paradigm Metal Industries Sdn. Bhd.* 52.09 %- Paradigm Precision Machining Sdn. Bhd.* 52.09 %- Paradigm Precision Components (Thailand) Ltd.* 52.09 %- Lipo Precision Industry (Suzhou) Co., Ltd.* 52.09 %- Micro Surface Treatment Sdn. Bhd.* 45.84 %

Automation DivisionPolytool Integration Sdn. Bhd. 85.00 %Microhandling Asia Pte. Ltd. ** 30.48 %

Oil & Gas DivisionBend Weld Engineering Sdn. Bhd. 100.00 %KWH Technologies Sdn. Bhd. 59.90 %

Others (Investment, Properties Management & Trading Division etc)Polytool Precision Sdn. Bhd. 100.00 %Opar Holdings Sdn. Bhd. 100.00 %Kobay Assets Sdn. Bhd. 100.00 %Unetsys Sdn. Bhd. 60.00 %Super Tropica Development Sdn. Bhd.* 52.09 %Kobay SCM (S) Pte. Ltd. 60.00 %- United Manufacturing Corporation Pte. Ltd.** 36.00 %Kobay Sawin Sdn. Bhd. 100.00 %Polytool Automation Sdn. Bhd. 100.00 %Kewjaya Sdn. Bhd. 100.00 %LD Global Sdn. Bhd.(formerly known as Lucky Desserts Sdn. Bhd. and preceding to this known as Polytool Systems

Sdn. Bhd.)

60.00 %

Elite Paper Trading Sdn. Bhd. 55.00 %Megatool Precision Sdn. Bhd. 100.00 %Kobay SCM Sdn. Bhd. 100.00 %

* Subsidiaries of Lipo Corporation Berhad** Subsidiaries of Kobay SCM (S) Pte. Ltd.

CORPORATE STRUCTURE


Koay Cheng LyeMalaysian - aged 62Executive Chairman / Chief Administrative Officer / Member of Executive Committee

Mr. Koay Cheng Lye was appointed as Executive Director to the Board on 17 September 1994 and subsequently appointed as Executive Chairman on 11 October 2002. He is also the Executive Chairman and Chief Administrative Officer of Lipo Corporation Berhad (“Lipo”), a public company listed on the Main Market of the Bursa Malaysia Securities Berhad and sits on the Board of a number of subsidiaries of the Company as well as Lipo’s subsidiaries and other private limited companies. Being the co-founder of Kobay Group, he has more than 26 years of experience in the precision engineering industry and possesses in-depth knowledge of the overall operations of the Group.

As at 8 November 2010, Mr. Koay Cheng Lye has direct shareholding of 586,995 ordinary shares in the Company. He also has indirect shareholding of 17,523,007 ordinary shares in the Company, by virtue of his direct interest in Kobay Holdings Sdn. Bhd., a major shareholder of the Company. He is also deemed to have an interest in the shares of all the subsidiary companies of the Company to the extent that the Company has an interest, by virtue of his shareholding in the Company.

Dato’ Koay Hean EngMalaysian - aged 52 Managing Director / Chief Executive Officer / Member of Remuneration Committee, ESOS Committee and Executive Committee

Dato’ Koay Hean Eng was appointed to the Board on 17 September 1994. He holds a certificate of vocational education and is the co-founder of Kobay Group. With more than 28 years of experience in the precision engineering industry, he has significantly contributed to the growth of Kobay Group. He is also the Managing Director and Chief Executive Officer of Lipo Corporation Berhad (“Lipo”), a public company listed on the Main Market of the Bursa Malaysia Securities Berhad and holds directorships in the subsidiaries of the Company as well as Lipo’s subsidiaries and other private limited companies.

As at 8 November 2010, Dato’ Koay Hean Eng has direct shareholding of 1,654,154 ordinary shares in the Company. He also has indirect shareholding of 17,523,007 ordinary shares in the Company, by virtue of his direct interest in Kobay Holdings Sdn. Bhd., a major shareholder of the Company. He has balance option to subscribe for 600,000 ordinary shares in the Company. He is also deemed to have an interest in the shares of all the subsidiary companies of the Company to the extent that the Company has an interest, by virtue of his shareholding in the Company.

Dato’ Koay Hean Eng is subject to retirement by rotation under Article 95 of the Company’s Article of Association at the forthcoming Annual General Meeting and being eligible for re-election.

Koay Ah Bah @ Koay Cheng HockMalaysian - aged 64 Non-Independent Non-Executive Director / Member of Nomination Committee

Mr. Koay Ah Bah @ Koay Cheng Hock, was appointed to the Board on 25 January 1999. He also sits on the Board of Polytool Technologies Sdn. Bhd., a subsidiary of the Company. He has more than 26 years of experience in mechanical engineering field and was a proprietor of an auto mechanical business prior to joining the Group in 1992.

As at 8 November 2010, Mr. Koay Ah Bah @ Koay Cheng Hock has direct shareholding of 569,665 ordinary shares in the Company. He also has indirect shareholding of 17,523,007 ordinary shares in the Company, by virtue of his direct interest in Kobay Holdings Sdn. Bhd., a major shareholder of the Company. He is also deemed to have an interest in the shares of all the subsidiary companies of the Company to the extent that the Company has an interest, by virtue of his shareholding in the Company.

BOARD OF DIRECTORS


BOARD OF DIRECTORS (cont’d)

Lim Swee ChuanMalaysian - aged 44Executive Director / Chief Financial Officer / Member of ESOS Committee and Executive Committee

Mr. Lim Swee Chuan was appointed to the Board on 29 November 2001. He oversees the Kobay Group’s financial aspects and also holds directorships in several subsidiaries of the Company. He graduated in 1991 with a Bachelor of Accounting (Honours) degree from Universiti Utara Malaysia. He is a Chartered Accountant and a member of the Malaysian Institute of Accountants as well as Malaysian Institute of Taxation. Upon graduation, he worked for Cycle & Carriage (M) Sdn. Bhd. as a Group Internal Audit Executive from 1991 to 1992. Between 1992 and 1995, he was attached to Price Waterhouse (now known as PricewaterhouseCoopers) where his last position was an Audit Senior. He joined Kobay as an accountant in 1995 and is presently the Chief Financial Officer of Kobay Group. He also holds directorship in Lipo Corporation Berhad and its subsidiaries.

As at 8 November 2010, Mr. Lim Swee Chuan has has no direct/indirect shareholding in Kobay but has balance option to subscribe for 250,000 ordinary shares in the Company.


Malaysian - aged 52 Independent Non-Executive Director / Chairman of Audit Committee, Nomination Committee and Remuneration Committee

Mr. Tan Yok Cheng was appointed to the Board on 15 October 1997. From 1988 to 1994, he was employed under Emico Plastic Industries Sdn. Bhd., a manufacturer of trophy and awards components, souvenirs, custom designed promotional items and related supplies, in which his last position was as Group Human Resources and Administration Manager. Since 1994, he has been involved in his own business namely Pewterlink Creations Marketing, of which its principal activity is the supply of pewter ware. He was a Penang Municipal Councilor.

As at 8 November 2010, Mr. Tan Yok Cheng has direct shareholding of 1,250 ordinary shares in the Company.

Dato’ Abdul Rahman Bin Mohammed HashimMalaysian - aged 53 Senior Independent Non-Executive Director / Member of Audit Committee, Nomination Committee and Remuneration Committee

Dato’ Abdul Rahman Bin Mohammed Hashim was appointed to the Board on 25 January 1999. He holds a Law Degree from University of Westminster in 1982. He was called to the English Bar (Lincoln’s Inn) in 1983 and was accepted as a member of the Malaysian Bar in 1984. He was employed as a Legal Officer in Petronas and subsequently practiced as a Legal Assistant with a leading law firm in Kuala Lumpur before setting up his own practice in September 1988.

As at 8 November 2010, Dato’ Abdul Rahman Bin Mohammed Hashim has direct shareholding of 1,250 ordinary shares in the Company.

Dato’ Abdul Rahman Bin Mohammed Hashim is subject to retirement by rotation under Article 95 of the Company’s Article of Association at the forthcoming Annual General Meeting and being eligible for re-election.


Dr. Mohamad Zabdi Bin ZamrodMalaysian - aged 68 Independent Non-Executive Director / Member of Audit Committee

Dr. Mohamad Zabdi Bin Zamrod was appointed to the Board on 30 March 2002. He holds a Doctorate in Curriculum and Teaching from the Columbia University, New York. He was a lecturer in Universiti Sains Malaysia for more than 10 years before retiring.

Dr. Mohamad Zabdi has no direct/indirect shareholding in Kobay as at 8 November 2010.

Khaw Eng PengMalaysian - aged 43Independent Non-Executive Director/Member of Audit Committee and Nomination Committee

Mr. Khaw Eng Peng was appointed as a Director to the Board of Kobay on 30 July 2010. Mr. Khaw is a fellow member of the Association of Chartered Certified Accountants and a member of Malaysian Institute of Accountants. Upon completion of his professional examination, he joined Messrs. Coopers & Lybrand (now merged under the firm PricewaterhouseCoopers) in 1993, attaching to audit and compliance services division of the firm. In 1996, he left audit practice, as Assistant Audit Manager and joined Oriental Interest Berhad (“OIB”) Group as Senior Manager in Finance and Administration Department. He was promoted to Assistant General Manager in year 2001, overseeing all financial reporting, corporate compliance and administration aspects for OIB Group. On 5 November 2007, Mr Khaw was appointed to his current position as Executive Director of OIB. Mr Khaw also sits on the Board of Lipo Corporation Berhad.

Mr. Khaw Eng Peng was appointed as member of the Nomination Committee of the Company on 30 July 2010 and has no direct/indirect shareholding in Kobay as at 8 November 2010.

Mr. Khaw Eng Peng is subject to retirement by rotation under Article 102 of the Company’s Articles of Association at the forthcoming Annual General Meeting and being eligible for re-election.

OTHER INFORMATION

Family RelationshipDato’ Koay Hean Eng, Mr. Koay Cheng Lye and Mr. Koay Ah Bah @ Koay Cheng Hock are brothers and they are also major shareholders of the Company via their shareholdings in Kobay Holdings Sdn. Bhd., a major shareholder of the Company.

Save for the above, none of the Directors have any family relationship with other Directors or major shareholders of the Company.

Conflict of InterestNone of the Company’s Directors has acted in conflict in any arrangement, contract or transaction during the financial year.

Conviction for OffencesNone of the Company’s Directors had convicted any offence (other than traffic offences, if any) within the past ten (10) years.

Number of board meetings attended in the financial year ended 30 June 2010Four (4) board meetings were held during the financial year ended 30 June 2010. Details of attendance of Directors at the board meetings are as follows:

Directors AttendanceKoay Cheng Lye 4/4Dato’ Koay Hean Eng 4/4Koay Ah Bah @ Koay Cheng Hock 4/4Lim Swee Chuan 4/4Dato’ Abdul Rahman Bin Mohammed Hashim 3/4Dr. Mohamad Zabdi Bin Zamrod 3/4Tan Yok Cheng 4/4Wee Hoe Soon @ Gooi Hoe Soon

(resigned on 30.07.2010)2/4



OTHER INFORMATION (cont’d)

Directors’ and Major Shareholders’ Interests

No. of shares held in Kobay as at 08.11.2010

Name

DirectNo. of ordinary shares

of RM1.00 each % ^

IndirectNo. of ordinary shares

of RM1.00 each % ^DirectorsDato’ Koay Hean Eng 1,654,154 2.46 *17,523,007 26.02Koay Cheng Lye 586,995 0.87 *17,523,007 26.02Koay Ah Bah @ Koay Cheng Hock 569,665 0.85 *17,523,007 26.02Khaw Eng Peng – – – –Tan Yok Cheng 1,250 # – –Lim Swee Chuan – – – – Dato’ Abdul Rahman Bin Mohammed Hashim 1,250 # – –Dr. Mohamad Zabdi Bin Zamrod – – – –

Major ShareholdersKobay Holdings Sdn. Bhd. (“KHSB”) 17,523,007 26.02 – –Norinv Kapital Sdn. Bhd. 7,732,400 11.48 – –Dato’ Koay Hean Eng 1,654,154 2.46 *17,523,007 26.02Koay Cheng Lye 586,995 0.87 *17,523,007 26.02Koay Ah Bah @ Koay Cheng Hock 569,665 0.85 *17,523,007 26.02

By virtue of their interest in the shares of Kobay, Dato’ Koay Hean Eng, Mr. Koay Cheng Lye and Mr. Koay Ah Bah @ Koay Cheng Hock are also deemed to have an interest in the shares of all the subsidiary companies of Kobay to the extent that Kobay has an interest.

Notes:* Deemed interest by virtue of the Directors’ direct interest in KHSB, a major shareholder of the Company# Interest is less than 0.01%^ The percentage of shareholding is calculated based on the issued and paid-up capital of the Company of RM68,080,750 comprising of

68,080,750 ordinary shares and after deduction of 728,200 treasury shares retained by the Company as per Record of Depositors



On behalf of the Board of Directors, I am pleased to present to you the Annual Report and Financial Statements of Kobay Technology Bhd. for the financial year ended 30 June 2010.

FINANCIAL REVIEW

For the financial period under review, business conditions were extremely challenging in first half of the financial year due to the 2008/2009 global financial and economic meltdown, worst-ever of the century, with recoveries in the second half of 2010 through strong, well coordinated monetary and fiscal policies adopted by world major economies.

Despite the difficult and challenging times, for the financial year ended 30 June 2010, the Group reported a net profit attributable to shareholders of the Company of RM1.4 million with a revenue of RM81.8 million as compared to a net profit and revenue of RM1.6 million and RM56.0 million respectively for the year ended 30 June 2009.

The increase in revenue of RM25.8 million (45.8%) was mainly due to increased contribution by Lipo Corporation Berhad, a 52.09% owned subsidiary listed on Bursa Malaysia Securities Berhad and the inclusion of results of newly acquired companies, namely Microhandling Asia Pte. Ltd. and KWH Technologies Sdn. Bhd..

Although higher revenue was recorded, the Group’s net profit was lower by RM0.2 million as compared to preceding year. The decrease was mainly due to profit contribution from Lipo Group and others were off set by loss in oil & gas division.

However, the Group has managed to preserve the cash resources in crisis time and retained a healthy balance sheet. Our net assets per share attributable to shareholders as at 30 June 2010 stood at RM1.56, with a cash balance of RM49.1 million or cash per share of RM0.72.

OPERATION REVIEW

The Group’s major business units, namely precision components division (under Lipo Corporation Berhad Group of companies), precision tooling & mould division, automation division and oil & gas division had experienced a mixed fortune in their business operations during the financial year under the review.

For precision components division, it has performed well and contributed more than half of the Group’s revenue and net profit. The division provides ultra high precision component parts and mechanical parts assembly to various industries such as semiconductor, telecommunication, electronics and others. During the financial year, it had experience slow business in first quarter in continuation of the effect of global financial crisis. However, business sentiments started to improve from second quarter onwards as the world economy recovered and the division received increasing orders from multinational corporations as a result of replenishment for depleting inventory. The incoming orders remained steady throughout three quarters of the financial year. The diversification of customer base and strategy in providing one stop solution engineering needs for customers have started to show result. The division has managed to move upwards in customers’ supply value chain and contributed to the positive results.

For precision tooling & mould division, the division has contributed positively towards the Group’s profit. During the year, the division has reviewed its manpower structure and applied lean management in the production activities to manage costs. It has successfully secured die sets and mould orders from key customers which have better margin as compared to tooling parts. The division’s business was lying low in the first two quarters of the year and recovered from third quarters onwards.

For oil & gas division which provides heavy machining and fabrication for oil and gas industry particularly subsea structure, it did not perform and incurred losses during the financial year. The division did not receive major orders from oil industry players due to holding back of new capital expenditures on projects, coupled with high overhead costs have affected the division’s bottom line. Nevertheless, during the difficult year, the division has embarked on securing new customers and has successfully qualified as approved suppliers for a few oil majors. A new production plant has been constructed on the Johor land which was acquired in 2009 and has started commissioning operations. With the new production space at the 4 hectares land, we are ready to cater for projects of bigger size sub-sea oil extraction structure. Towards the end of financial year, the division has received encouraging incoming orders from oil industry players and we believe it has bright prospects ahead.

During the year, the Group has acquired a 59.9% equity interest in KWH Technologies Sdn. Bhd. which involves in provision of mechanical engineering, maintenance and shut down works for the oil & gas and power sectors. This is a further expansion of the Group’s businesses into oil & gas related industry.

The automation division did not fair well either. The division’s venture into providing automation solutions for solar energy sector has met with obstacles as the customer working with was having business reorganisation and ownership restructuring and did not turn in repeat orders. However, our investment in Singapore by strategic alliance with foreign partners on automation business in supply chain management has started to yield results. The company has produced an impressive result for the first year in operations.

CHAIRMAN’S STATEMENT


CHAIRMAN’S STATEMENT (cont’d)

OUTLOOK AND PROSPECT

There are signs that the global economy is shifting towards recovery phase through coordinated policies and stimulus packages executed by the governments around the world. However, high level of sovereign debts and timing of stimulus exit are the main concerns affecting the outlook of global economy.

For the outlook of semiconductor industry, in Semiconductor Industry Association’s annual forecast of global semiconductor sales, it has projected sales will grow by 10.2% to USD242.1 billion in 2010 and by 8.4% to USD262.3 billion in 2011. According to the press release, the unit sales of key demand drivers including PCs and cell phone have been stronger than previously predicted and cautiously optimistic for the longer term. The current forecast is closely tied to projections of continuing improvement in the worldwide economy.

Although the worst global economic meltdown ever faced by the Group since inception has subsided, the journey ahead for the Group is challenging in view of the fragile world economy conditions, uncertainties and the competitive business environment surrounding the industries we are dealing with.

We will manage these challenges with close monitoring of business units’ Key Performance Indicators, implementing sales order, stock and debt management, budgetary and cost control programs. To further bond with our customers and foster good relationships, innovative and compelling solution and fast respond time will be our strategies in providing value-added and satisfied services to our customers.

Moving forward, we will stay focus on industries we are comfortable with, expanding our customer base to mitigate the effect of over reliance of single industry sector. In this respect, our precision components division has obtained certification for Aerospace Quality Management System, AS9100:2004 and is ready to venture into aerospace industry. It is also moving into modular assembly for higher end products which has a better margin.

The Group is continuously engaged with foreign potential customers to promote our production capabilities and market our products through participation of events conducted by government agencies in matching local manufacturers with overseas partners.

The Group recognises the importance of investing in the future. We will continuously explore for good business opportunity to strengthen our income base and diversify into different industries to cushion off impact of the ups and downs of economic cycle.

With the efforts we have poured in articulation of Kobay Practices into work culture of shared values and beliefs, alignment of organization structure, system set up for a strong foundation, we believe we are ready for actions and can produce better results for the coming financial year.

DIVIDENDS

To reward our loyal shareholders, the Board of Directors has recommended the payment of first and final tax exempt dividend of 1.5 sen in respect of the financial year ended 30 June 2010.

APPRECIATION

I would like to take this opportunity, on behalf of the Board of Directors, to record our sincere appreciation of the unwavering support of our customers, business partners and government authorities to the Group businesses. I would also like to express our heartfelt thanks to all our employees for their hard work, dedication and commitment.

Last but not least, I would like to specially thank Mr. Wee Hoe Soon @ Gooi Hoe Soon who resigned on 30 July 2010 due to his heavy commitment in other listed corporations, for his invaluable guidance to the Board as Independent Director. I am pleased to welcome Mr. Khaw Eng Peng who was on board as an Independent Director on the even date and will contribute his vast experience and knowledge to the Group.

Thank you.

KOAY CHENG LYEExecutive Chairman


In recognizing good corporate governance as set by the Malaysian Code of Corporate Governance (“Code”) and being entrusted with the stewardship from both the shareholders and stakeholders of the Company, the Board of Directors (“Board”) is committed and undertakes full accountability of actions towards creation of wealth in achieving the short term and long term shareholders’ value.

Below are statements of the Company in applying the principles and best practices of good governance in compliance to the Code.

BOARD OF DIRECTORS AND ITS COMMITTEES

The Board is entrusted to lead and manage the business of the Company. The Board meets regularly to discuss and align the strategic aims of the Company and reviews the management’s performance quarterly especially on the financial and human resources were in place to meet the Company’s objective in protecting the shareholders’ and stakeholders’ interest whilst moving forward in a challenging market environment.

There are total eight (8) Directors in the Board of which three (3) out of the total are Executive Directors whereas four (4) out of the five (5) Non-Executive Directors are independent. Independent Directors’ presence are important especially each of the Non-Executive Director could contribute their skill and expertise in various scope and profession to ensure the strategies formulated or major transactions proposed by the management are of the best interest of the Company and the minority shareholders. The Board views the current composition fairly represents the interest of the shareholders. All the Independent Non-Executive Directors are members of the Audit Committee whilst two of them sit on the Nomination Committee and Remuneration Committee. Dato’ Abdul Rahman Bin Mohammed Hashim has been identified as Senior Independent Non-Executive Director. Profile of Directors are set in pages 8 - 10 in the Annual Report elaborates each of the Director’s background and experiences.

During the financial year ended 30 June 2010, the Board has had four (4) Board Meetings where they reviewed and discussed the Group’s operations, periodic financial statements, strategic plans and risk management matters inclusive but not limited to the reports from Board Committees on various scope of coverage of each Board Committee to ensure obligations to shareholders and stakeholders are met. Special Board Meetings would be called should there be urgent and important issues to be discussed and decided.

Members of the Board are furnished with sufficient and timely information in relations to any corporate or business issue to be discussed in the meeting so to enable them to discharge their duties. The Board members review updates and/or reports inclusive board attendance, resolutions passed quarterly, Directors’ dealing in securities, financial information, internal control report, external auditor feedback and corporate developments. Proposals are circulated prior to the meeting to provides adequate time and information to the Directors so that they can deliberate on the issue when raised at the meeting. Records of the deliberation, issues discussed and conclusion were minuted by the Secretaries of the meeting and then circulated to all Directors for their confirmation.

No individual or group of individuals dominates the Board’s decision making. Each Director contributes his skill, experience and expertise accordingly and issue raised is carefully considered by each of them prior to conclusion. The Company Secretaries attended all meetings and minutes have been recorded down of which were signed off by the Chairman of the meeting and kept at the Company’s registered office.

Each and every Director is able to access directly to the senior management and/or to the advice and services of the Company Secretaries, whenever is necessary. The Company Secretaries are appointed by the Board to carry out the duties in which the post entails, providing effective support to ensure the effective functioning of the Board. Removal of any Company Secretary is a matter for the Board as a whole. Directors may also seek external independent professionals’ advice for more information to be well informed prior to any decision made by them at the Company’s expense, on a case to case basis, if necessary.

The roles of the Chairman and the Chief Executive Officer are segregated to ensure that there is a balance of power and authority. The Chairman is responsible for ensuring the effectiveness of the Group’s policies and conduct whilst the Chief Executive Officer is responsible for the day-to-day running of operations, organisational effectiveness, overseeing as well as coordinating the development and implementation of Group’s policies, corporate strategies and decisions. The Chairman of the Board chaired every Board meetings held in the financial year ended 30 June 2010. Both the Chairman and the Chief Executive Officer are brothers.

As an integral part of good corporate governance and in discharging the Board’s fiduciary duties, the Board Committees as disclosed below were appointed and its powers were delegated respectively in each area to these Committees. The Terms of Reference of each Committee has been approved by the Board and where applicable, comply with the recommendations of the Code. The Board reviews these Committees performance from time to time and will revise, if necessary, their authorities granted.

CORPORATE GOVERNANCE STATEMENT


BOARD OF DIRECTORS AND ITS COMMITTEES (cont’d)

Executive Committee

The Board has established an Executive Committee which comprises of all the Executive Directors to manage the day-to-day operations of the Group. The primary function of the Committee among others include:

a) executes all matters decided by the Board;b) assists the Board in monitoring the operational performance of the business units;c) reviews and approve proposals on annual budget, business project, strategic plan, capital expenditure and other

corporate matters within the limit as authorised by the Board; andd) reviews and recommends to the Board on all legal administrative policies, organisation, by-laws, rules and

regulations.

Audit Committee

The Board has established an Audit Committee on 1 September 2001. The Committee comprises of four members, all of them are Independent Non-Executive Directors and are financially literate where one of them is a member of an accounting association or body. The Audit Committee’s composition, terms of reference and the report are set out in pages 24 - 27 of this Annual Report.

Nomination Committee

Established on 1 September 2001, the Nomination Committee comprises of two (2) Independent Non-Executive Directors and one (1) Non-Independent Non-Executive Director. Detail of the composition is set out on page 2 of this Annual Report.

This Committee is responsible to recommend to the Board of any new Director, Non-Executive or Executive, appointment and assessment of the effectiveness of each Director or the Board as a whole on an on-going basis. The Committee has on 15 November 2010 evaluated the performance of the Board as a whole, the Committees of the Board, contribution of each Director and has recommended to the Board those Directors retired and eligible for re-election during the AGM set on 17 December 2010. The assessments and evaluations carried out by the Nomination Committee in the discharge of all its functions are properly documented.

Remuneration Committee

The Remuneration Committee comprising two (2) Independent Non-Executive Directors and one (1) Executive Director was set up on 1 September 2001 and its detailed composition is set on page 2 of this Annual Report.

This Committee is responsible in determining, reviewing and recommending salary, benefits, general remuneration policy and practices of the Company’s Executive Directors. Remuneration of Non-Executive Directors is determined by the Board as a whole and Non-Executive Directors shall abstain in the discussion of their own remuneration. The Committee had on 15 November 2010 evaluated the performance of the Executive Directors and individual Director who eligible to salary increment were awarded with amount correlates with their yearly performance in accordance to the Company’s Human Resource Policy and Procedure.

Appointment and Re-election of Directors

Pursuant to the Company’s Articles of Association, one-third (1/3) of the Directors including Managing Director for the time being, shall retire from office by rotation at each AGM. Provided always that all Directors shall retire from office once at least in each three (3) years and if eligible, they can offer themselves for re-election. Directors newly appointed to the Board, either to fill a casual vacancy or as an addition to the existing Directors are subject to re-election by the shareholders at the next AGM to be held subsequent to their appointments.

Directors aged above seventy (70) years old are required to submit themselves for re-appointment annually in accordance with Section 129(6) of the Companies Act, 1965.

Nomination Committee will evaluate all appointment or re-election of Directors to the Board before recommendation being forwarded to the Board for approval. The retiring Directors who eligible for re-election are listed in pages 8 - 10 of this Annual Report.

CORPORATE GOVERNANCE STATEMENT (cont’d)


BOARD OF DIRECTORS AND ITS COMMITTEES (cont’d)

Directors’ Training

All Directors have attended and successfully completed the Mandatory Accreditation Programme and scored the requisite points to be acquired under the Continuing Education Programmes within the stipulated timeframe as prescribed by Bursa Malaysia Securities Berhad (“Bursa Securities”).

Newly appointed Directors will be given an orientation on the Company’s background and information inclusive the strategic plans and directive.

The Board acknowledges the importance of training and encourage the Directors to attend training programmes in order to keep abreast of the latest development, advances in corporate governance and to further enhance their skills and knowledge where relevant so to enable them to contribute to the Company.

Besides briefings/updates/presentations made during the Board meeting to all Directors present during the meeting, in house monthly/quarterly training of the topic stated herein are attended by them.

Date Topic/Area/Matter CoveredDuring Board Meeting 27.08.2009 Corporate Governance Guidelines towards Boardroom Excellence

In-House Training attended by Dato’ Koay Hean Eng, Mr Koay Cheng Lye & Mr Lim Swee Chuan12.11.2009 Conducting Effective Performance Appraisal10.12.2009 Basic Labour Law - Understanding Domestic Inquiry17.12.2009 Handling People Skills - Motivation, Delegation and Training methods25.02.2010 Coaching and Counselling Skills

The followings are additional courses and training programmes attended by the Directors for the financial year ended 30 June 2010:

Directors Training Programmes Attended DateLim Swee Chuan Update of Financial Reporting Standards in Malaysia 2010 Version 28.10.2009 &

29.10.2009Tan Yok Cheng Forum on FRS139 Implementation 21.10.2010



DIRECTORS’ REMUNERATION

The Remuneration Committee is guided by the need to “attract and retain” during establishment of remuneration package and at the same time, link the rewards to corporate and individual Executive Director’s performance. The compensation of Non-Executive Directors are proposed by the Remuneration Committee which link to their experience and level of responsibility taken and approved by the Board as a whole. The Company pays its Executive Directors salaries, bonuses and other emoluments and for Non-Executive Directors, Directors’ fees that are approved at the AGM. A summary of the Directors’ remuneration is reflected as follows:

1. Directors’ Fees

Directors’ fees are payable only to Non-Executive Directors. For the year under review, the Board proposed a fee of RM5,000 for each Non-Executive Director. Director who has not served the full financial year, the payable Director fee will be apportioned accordingly. Breakdown of Directors’ fees payable to each and every Non-Executive Director for the financial year ended 30 June 2010 is as follows :

Non-Executive DirectorProposed Directors’ Fees

(RM)Mr. Koay Ah Bah @ Koay Cheng Hock 5,000Dato’ Abdul Rahman Bin Mohammed Hashim 5,000Dr. Mohamad Zabdi Bin Zamrod 5,000Mr. Tan Yok Cheng 5,000Mr. Wee Hoe Soon @ Gooi Hoe Soon 5,000

Total Payable 25,000

2. Non-Executive Directors’ Other Benefit

Non-Executive Directors are paid a perquisite for their attendance to every quarterly meeting and during the financial year ended 30 June 2010, a total of RM7,350 meeting expenses have been paid to Non-Executive Directors.

3. Directors’ Remuneration

A summary of the Directors’ remuneration of the Group basis, both for Executive and Non-Executive Directors, categorised into appropriate components and into each successive band of RM50,000 is disclosed below:

Executive Directors(RM)

Non-Executive Directors

(RM)Total(RM)

Fees – 25,000 25,000Other benefits – 7,350 7,350Salary and other emoluments *712,813 #35,571 748,384Bonus *46,180 #2,775 48,955Allowance & Statutory Contributions *93,067 #4,816 97,883



DIRECTORS’ REMUNERATION (cont’d)

3. Directors’ Remuneration (cont’d)

Per annum Executive Directors Non-Executive Directors0 to RM 50,000 – #5RM50,001 to RM100,000 – –RM100,001 to RM150,000 – –RM150,001 to RM200,000 – –RM200,001 to RM250,000 *1 –RM250,001 to RM300,000 *1 –RM300,001 to RM350,000 *1 –RM350,001 to RM400,000 – –

Executive Directors(No. of options over

ordinary shares)

Non-Executive Directors(No. of options over

ordinary shares)

Total(No. of option over ordinary

shares)Employees’ Share Option Scheme 850,000 – 850,000

Note:# 1 Non-Executive Director of the Company also serves as Executive Director of a subsidiary company* 3 Executive Directors of the Company also serves as director of the listed subsidiary company



COMMUNICATION WITH SHAREHOLDERS/INVESTORS

Communication is a powerful and foundation of every Company’s success where the Board acknowledges. The Board took opportunity at every General Meeting to interact with shareholders in person beside the written communication formally sent to shareholders via Notice of General Meetings and Circular to Shareholders. The Board will ensure sufficient information is disclosed in the Notice of Meeting, Annual Report and Circular to Shareholders.

The Company disseminates information on all its announcements through Bursa Securities’ website (www.bursamalaysia.com). Shareholders and stakeholders could also access through the Company’s website (www.kobaytech.com) globally to obtain information in relates to Group’s strategy, performance and major development besides communicating through e-mail. The Company will review and update related information quarterly for information of the shareholders and public at large.

Shareholders may direct or post to Dato’ Abdul Rahman Bin Mohammad Hashim, the Senior Independent Non-Executive Director for any queries or concerns regarding the Company at the registered office of the Company at Plot 30, Hilir Sungai Kluang Satu, Bayan Lepas Industrial Park, Phase 4, 11900 Penang. At all times, shareholders may contact the Company Secretary, Ms. Chan Mun Shee or Ms. Wong Mee Choon via phone or email to [email protected] for information.

ACCOUNTABILITY AND AUDIT

Financial Reporting

The Audit Committee, on behalf of the Board, scrutinises information to be disclosed to shareholders and public in its quarterly announcements (within 2 months after each quarter end) and annual financial statements (within 4 months after the financial year end) prior to the Board’s approval for announcement via Bursa Securities’ website in compliance with the Listing Requirements.

A Statement of Directors’ Responsibilities is shown on page 23 of this Annual Report.

Internal Audit

The Board acknowledges that internal audit function is an integral part of an effective system of corporate governance and has an in house Internal Audit Department to periodically review the adequacy, effectiveness and integrity of the Group’s internal control system, management information system, risk management and governance processes. The internal auditor reviews and highlights weaknesses in control procedures and makes recommendations for improvement. One of internal auditor’s functions is also to investigate any complaints on mismanagement of Company’s properties and assets and any instances of fraud or malpractice. The Internal Audit Department reports directly to the Audit Committee, to ensure the independence of the internal audit function.

Summary of the activities of the Internal Audit Department is set out in the Audit Committee Report on page 27 of this Annual Report.



ACCOUNTABILITY AND AUDIT (cont’d)

Internal Control

The purpose of internal control is to manage and control risk. The Directors are aware and responsible in ensuring that the Company maintains an effective internal control system. The Company maintains written documentation of the Company’s values, expected code of conduct, policies and procedures besides clearly defines authorities and responsibilities for the Board, its Committees, each manager, employee and department.

The management is accountable to the Board in monitoring the Company’s internal control system and provides reasonable assurance regarding the reliability of the financial information used within the business, as well as safeguarding the assets against unauthorised use or disposition and problems are identified on a timely basis with suggested solutions.

The Company has also implemented its customized Enterprise Resource Management System (ERM) which enables the management to monitor and manage each individual subsidiary company’s key performance indicator to ensure their operations are operating to the management expectation.

The Board or its Committee reviews individual subsidiary’s internal control activities during the monthly and quarterly meetings as an on-going monitoring process.

The Internal Control Statement is set out on page 22 of this Annual Report.

Risk Management

As regards to risk management, there is a yearly strategic planning programme conducted which analyse the strengths, weaknesses, opportunities and threats faced by the Group. Strategic plans and goals and Key Performance Indicators (“KPI”) are drawn out for each of the business operating units. On a quarterly basis, the strategic plans and goals and KPIs are reviewed and action plans are discussed for implementation.

The strategic planning programme is an on-going process carried out by the Group in identifying, evaluating and managing significant risks faced during the journey of attaining its vision and mission.

RELATIONSHIP WITH AUDITORS

The Company has established transparent and appropriate relationship with both its internal and external auditors. External auditors have been invited to all Audit Committee Meetings held by the Company. Separate dialogue sessions have been held by the Audit Committee without the presence of the Executive Directors with the internal and external auditors at quarterly meetings held on 16 November 2009 and 26 May 2010 during the financial year ended 30 June 2010.

STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OF THE CODE

The Company has complied with the Code during the financial year under review except for disclosure of details of the remuneration of each Director. The Board is of the view that disclosure of Directors’ remuneration by applicable bands of RM50,000 under Listing Requirements of Bursa Securities is sufficient to meet the principle of the Code.

The Board has reviewed this Corporate Government Statement and has approved it on 8 November 2010.



CORPORATE SOCIAL RESPONSIBILITY

To achieve sustainable growth, a Company as a corporate citizen needs to commit towards realizing its social responsibility on top of achieving its manufacturing excellence. The Company acknowledges that success is measured by our ability to satisfy not only shareholders but also stakeholders which comprise customers, vendors, employees and community at large. As such, commitment towards Corporate Social Responsibility is vital in individual Company’s success.

EmployeesThe Company recognizes the importance of employees as the greatest assets. We are not only continually provide in-house training programmes for all employees monthly but also sending employees to attend external trainings so to enrich their skills, soft and hard in order to be able to compete globally.

The Company does care about employees’ physical and mentally health, henceforth encourage employees’ interaction via quarterly teambuilding activities to cultivate team spirit and via annual dinner to recognize employees’ service and hard work with their peers.

The Company also grooms employee in other personal area so that they could be a wiser person in life via briefing and talk provided by third party to enrich their knowledge for example financial planning by external consultants.

Workplace SafetyKobay has continuously promote quality and safe work environment through proper housekeeping conceptualised under the 5S programme and enforced it via periodic audits. The best business unit in maintaining and sustaining the work environment clean and safe is rewarded annually.

The management has also raised the awareness of safety via several briefings which conducted by Fire Prevention Association to the employees so to benefit them not only at the work place more so at home for the love one.

SuppliersAll suppliers are our partners. The Company believes that we only be successful in business if we have helped our suppliers to achieve and sustain the requirements under our quality standard especially in quality of the products and services as well as delivery. Periodically, we met them for rectifying actions in areas where weaknesses were noted via Suppliers’ Day conducted by business units.

Customers Customers are our long-term business partners and with customers’ continual support, we will grow and profitable. We have periodically monitor our delivery and service to our customers via Key Performance Indices set and weekly meeting to ensure all customer issues are attended to.

Community In co-operation with Rotary Club of Tanjung Bungah, the Company provided warehouse space for wheel chair project to store wheel chairs which to be donated out with the hope of reaching the under privileged community. We also donated proceeds from scrap sales of papers and books to “Tzu Chi Foundation” whom provided medical and home for the poor.

EnvironmentWe undertake to provide products and services in compliance to Restriction of Hazardous Substances or RoHS requirements.

The Group also embarks to reduce printing out report via setting up of electronic document management system where the management could download soft copy of reports via internet. This project has enabled us to reduce paper waste and save our trees.



The Board of Directors acknowledges its responsibilities on the Group’s system of internal control and reviewing the system adequacy and integrity. The Board is fully aware that the system of internal control cannot totally eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss. For the purpose of this statement, associates and investment companies are not dealt with as part of the Group.

This Statement is guided by Bursa Malaysia Securities Berhad’s guidelines on “Statement on Internal Control – Guidance for Directors of Public Listed Companies”. For the year under review, the Board confirms that there is an on-going process of identifying, evaluating and managing significant risks faced by the Group and reviewing the system of internal control to safeguard the shareholders’ investment and the Group’s assets. The key elements are described below:

1. Formal organisation structure clearly defines the framework for the line of reporting and hierarchy of authority and the segregation of Group’s core activities into strategic business groups.

2. Group Policies and Procedures Manuals on Financial, Human Resource and Sales and Operations lay down the objectives, scopes, policies and operating procedures to be complied by the business units.

3. Clearly defined authorisation limits at appropriate levels are set out in a financial authority matrix for controlling and approving capital and revenue expenditure.

4. Budgetary control system is in place to establish the responsibilities and accountabilities of each business unit in term of resources employed and contribution, control over costs and expenses and for measuring the business unit’s overall financial performance. Executive Committee of the Board (“EXCO”) that consists of Executive Directors approves the budgets.

5. Subsidiary companies with active business operations hold monthly management meeting to review the financial performance, business overview, direction and development with senior management staff at corporate level.

6. EXCO members hold weekly EXCO meeting to discuss and resolve any major issues arising from business operations and plan for corrective actions.

7. Internal Audit Department reports directly to Audit Committee and is assigned with tasks to assist Audit Committee in discharging its duties and responsibilities.

8. Regular internal audit visits to business units are carried out to ensure compliance with Group Policies and Procedures and to review effectiveness of the existing internal control systems.

9. Internal control issues are tabled for discussion and resolution during monthly management meeting and then presented in operational review meeting at EXCO level. Improvements in the existing policies and procedures or implementation of new policies and procedures are carried out when needed to keep in pace with the evolving business environment.

10. Audit Committee and Board of Directors hold quarterly meeting to discuss on internal audit reports, periodic financial statements and issues that warrant the Committee’s and Board’s attentions.

The Group’s system of internal control is in place and functioning. There was no significant material internal control weakness noted during the financial year under review. The management is continuously taking measures to strengthen and improve the internal control environment.

This Statement is made in accordance with the resolution of the Board of Directors dated 8 November 2010.

INTERNAL CONTROL STATEMENT


The Board of Directors is required under the Listing Requirements of Bursa Malaysia Securities Berhad to issue a statement explaining their responsibilities for preparing the annual audited financial statements.

The Directors are required by the Companies Act, 1965 to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and the Group at the end of the financial year and of their results and cash flows for the financial year then ended.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time, the financial position of the Company and the Group and taking such steps that are reasonably open to them to safeguard the assets of the Company and the Group and to prevent and detect fraud and other irregularities.

In preparing financial statements for the financial year under review, the Directors has:• selectedsuitableaccountingpoliciesandthenapplythemconsistently;• madejudgmentsandestimatesthatarereasonableandprudent;• ensuredthattheapplicableaccountingstandardshavebeenfollowed;and• preparedthefinancialstatementsonthegoingconcernbasis.

The Board has reviewed the content/disclosure of this Annual Report inclusive of the Corporate Governance Statement, Internal Control Statement and Audit Committee Report and approved this Annual Report for dissemination to all shareholders.

The Statement is made in accordance with the resolution of Board of Directors dated 8 November 2010.

DIRECTORS’ RESPONSIBILITIES STATEMENT


COMPOSITION AND DESIGNATION

Members of the Audit Committee

1. Tan Yok Cheng DJN, PJK, PJM

Chairman, Independent Non-Executive Director

2. Dato’ Abdul Rahman Bin Mohammed Hashim Senior Independent Non-Executive Director

3. Dr. Mohamad Zabdi Bin Zamrod Independent Non-Executive Director

4. Wee Hoe Soon @ Gooi Hoe Soon (resigned on 30 July 2010) Independent Non-Executive Director

5. Khaw Eng Peng (appointed on 30 July 2010) Independent Non-Executive Director Secretaries to the Audit Committee

1. Chan Mun Shee (MAICSA 7003071)

2. Wong Mee Choon (LS0040)

TERMS OF REFERENCE

1. Composition

1.1 The Committee members shall consist of at least three (3) members appointed by the Board of Directors from amongst the Directors of whom all the members of the Committee are Non-Executive Directors with majority are independent and financial literate. At least one Committee member shall be a member of an accounting association or body or fulfills such other requirements as prescribed and approved by Bursa Malaysia Securities Berhad.

The definition of “Independent Directors” shall have the meaning given in Chapter 1.01 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad and the Practice Note 13.

1.2 No alternate Director shall be appointed as a member of the Committee.

1.3 The members of the Audit Committee shall select a Chairman from among their number who shall be an Independent Director.

1.4 The Chairman of the Committee should engage with senior management such as the Chairman, Chief Executive Officer, the Head of Internal Audit and the external auditors on a continuous basis, in order to be kept informed of matters affecting the Company.

1.5 In the event of any vacancy in the Audit Committee resulting in the non-compliance of sub-paragraph 1.1 above, the Board of Directors shall fill the vacancy within three (3) months.

1.6 The term of office and performance of the Audit Committee and each of its members shall be reviewed by the Board of Directors at least once every three (3) years to determine whether the Audit Committee and its members have carried out their duties in accordance with the Terms of Reference.

AUDIT COMMITTEE REPORT


TERMS OF REFERENCE (cont’d)

2. Authority

2.1 The Committee is authorised by the Board:

(a) to investigate any matter within its terms of reference;(b) to have the resource which are required to perform its duties;(c) to have full and unrestricted access to any information pertaining to the Company;(d) to have direct communication channels with the external auditors and person(s) carrying out the internal audit

functions or activity and be able to obtain independent professional or other advice and invite outsiders with relevant experience to attend; and

(e) to be able to convene meetings with the external auditors, the internal auditors or both, excluding the attendance of other Directors and employees of the Company, whenever deemed necessary.

3. Duties and Responsibilities

3.1 The duties of the Audit Committee should include the following:

(a) review the following and report the same to the Board of Directors of the Company:(i) with the external auditors, their audit plan, evaluation of the system of internal controls and audit

report; (ii) the quarterly results and year end financial statements, prior to the approval by the Board of Directors,

focusing particulars on:(aa) changes in or implementation of major accounting policy changes;(bb) significant adjustments arising from the audit;(cc) the going concern assumption;(dd) significant and unusual events; and(ee) compliance with accounting standards and other legal requirements;

(iii) in relation to internal audit functions, to do the following:(aa) the adequacy of the scope, functions, competency and resources of the internal audit functions and

that it has the necessary authority to carry out its work;(bb) the internal audit programme, process, the results of the internal audit programme, processes or

investigation undertaken and whether or not appropriate action is taken on the recommendations of the internal audit function;

(cc) review any appraisal or assessment of the performance of members of the internal audit function;(dd) approve any appointment or termination of senior staff members of the internal audit function; and(ee) inform itself of resignations of internal audit staff members and provide the resigning staff member

an opportunity to submit his reasons for resigning;

(b) review any related party transaction and conflict of interest situation that may arise within the Company or the Group including any transaction, procedure or course of conduct that raises questions of management integrity;

(c) discuss with the external auditors before the audit commences, the nature and scope of the audit, and ensure co-ordination where more than one audit firm is involved;

(d) discuss problems and reservations arising from the interim and final audits, and any matter the auditors may wish to discuss (in the absence of management where necessary);

(e) review the external auditors’ management letter and management’s response on findings arising from the interim and final audits;

(f) consider and recommend the appointment of the external auditors, the audit fee and any question of resignation or dismissal;

(g) review major findings of internal investigations and management’s response;

(h) verify the allocation of options pursuant to the Company’s Employees’ Share Option Scheme in compliance with the criteria as stipulated in the by-laws of the scheme at the end of each financial year; and

(i) discuss any other topics or functions as may be agreed to by itself and the Board of Directors.

AUDIT COMMITTEE REPORT (cont’d)


TERMS OF REFERENCE (cont’d)

4. Meetings and Quorum

4.1 The Audit Committee should meet regularly, at least every quarter with due notice of issues to be discussed and should record its conclusions in discharging its duties and responsibilities. Majority of Committee members present must be Independent Director to form a quorum to the meeting.

4.2 At least twice a year, the Audit Committee shall meet with the external auditors, the internal auditors or both, without the presence of Executive Directors and employees of the Company.

4.3 The Chief Financial Officer, Head of Internal Audit and a representative of the external auditors shall attend the Audit Committee meetings. Other Board members may attend meetings upon invitation of the Audit Committee.

4.4 The Company Secretary shall be the secretary of the Committee.

5. Reporting Procedures

5.1 The Chairman of the Audit Committee is continuously engage with senior management and auditors in order to be kept informed of any matters affecting the Company.

5.2 The Secretary of Audit Committee may regulate its procedure, in particular:

(a) the calling of meetings;(b) the notice to be given of such meetings;(c) the voting and proceedings of such meetings;(d) the keeping of minutes; and(e) the custody, production and inspection of such minutes.

MEETINGS

The Audit Committee met four times in the financial year ended 30 June 2010. The meetings were structured through the use of appropriate agenda and reports, which were distributed to members with sufficient notification and minutes recorded on its conclusions in discharging its duties and responsibilities. Details of attendance were as follows:

Name of Audit Committee Members AttendanceTan Yok Cheng 4/4Dato’ Abdul Rahman Bin Mohammed Hashim 3/4Dr. Mohamad Zabdi Bin Zamrod 3/4Wee Hoe Soon @ Gooi Hoe Soon (resigned on 30 July 2010) 2/4

The Audit Committee held a dialogue session with the external auditors together with the internal auditors on 16 November 2009 and 26 May 2010 and noted no specific issue that required further discussion.



SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE

During the financial year, the Audit Committee has reviewed:

1. the external audit plan with the external auditors.2. the quarterly unaudited results and the audited annual financial statements before submission to Board for their

consideration and approval for the purpose of announcement to Bursa Malaysia Securities Berhad. 3. the management letter of external auditors and management response. 4. the Internal Control Statement, Audit Committee Report and Recurrent Related Party Transactions for disclosure in

the Annual Report. 5. the circular to shareholders in relation to the proposed renewal of share buy-back authority. 6. the semi-annual returns before submission to the Board for approval for the purpose of submission to Bursa Malaysia

Securities Berhad.7. the related party transactions and recurrent related party transactions transacted within the Group.8. the re-appointment of Messrs. Crowe Horwath as external auditors of the Company. 9. the internal audit plan and the internal audit activities.

The details of training attended by members of the Audit Committee are disclosed in page 16 of this Annual Report.

Internal Audit Function

The Company has an Internal Audit Department, which reports directly to the Audit Committee and assists the Committee in discharging its functions and duties. The internal audit function is independent of operational activities and has its own service charter to ensure the internal audit activities are performed with impartiality, proficiency and due professional care. The costs incurred for the internal audit function in respect of the financial year ended 30 June 2010 amounted to RM56,287.

During the financial year, the Internal Audit Department carried out the following:

a) reviewed the internal control system of the Group on its compliance and effectiveness taking into consideration factors that have arisen from evolving business environment.

b) conducted compliance, operational and financial audits covering Group Policies and Procedures and key internal control areas.

c) presented audit findings and discussed corrective actions to be taken in business unit’s management meeting, corporate level’s operations review meeting and in the quarterly Audit Committee meetings.

d) conducted follow-up audits to ensure corrective actions on audit reports were implemented.e) reviewed related party transactions in relation to the Bursa Malaysia Securities Berhad’s Listing Requirements.

Statement pertaining to the Allocation of Share Options to Employees

During the financial year 2010, the Company did not allocate or grant any share options to eligible employees pursuant to the Company’s Employees’ Share Option Scheme. There are no options being offered to and/or exercised by Non-Executive Directors pursuant to the Company’s Employees’ Share Option Scheme in respect of the financial year ended 30 June 2010.



UTILISATION OF PROCEEDS

No proceeds were raised by the Company from any corporate proposals during the financial year.

SHARE BUY-BACKS

The Board has obtained a mandate from the shareholders of the Company through its Annual General Meeting held on 10 December 2009 to purchase and/or hold its own shares up to a maximum of ten per cent (10%) of the issued and paid-up share capital of the Company.

During the financial year under review, the Company did not purchase any of its own shares and none of the 728,200 treasury shares currently held by the Company in accordance with Section 67A of the Companies Act, 1965 were resold or cancelled by the Company.

OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES EXERCISE

The Company has not issued any option, warrants or convertible securities during the financial year under review.

AMERICAN DEPOSITORY RECEIPT (“ADR”)/ GLOBAL DEPOSITORY RECEIPT (“GDR”)

During the financial year, the Company did not sponsor any ADR or GDR programme.

SANCTIONS AND/OR PENALTIES

There were no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or management by the relevant regulatory bodies.

NON-AUDIT FEES

There were no non-audit fees paid to the Group’s external auditors for the financial year under review.

OTHER INFORMATION


OTHER INFORMATION (cont’d)

VARIATION IN RESULTS

There is no significant variance between the results for the financial year and the unaudited results previously announced. The Company did not make any release on the profit estimate, forecast or projections for the financial year under review.

PROFIT GUARANTEE

During the financial year under review, there was no profit guarantee given by the Company.

REVALUATION POLICY

The Company and its subsidiaries carried its long leasehold and short leasehold land and buildings at revalued amounts and placed reliance on the transitional provision when Malaysian Accounting Standards Board first adopted International Accounting Standards 16 which provides exemption from the need to make regular revaluations for such assets. Since financial year ended 30 June 1997, no further revaluation was carried out.

MATERIAL CONTRACTS

There was no material contracts entered into by the Company and its subsidiary companies which involving Directors’ and substantial shareholders’ interests either still subsisting at the end of financial year 2010 or entered into since the end of the previous financial year.

RECURRENT RELATED PARTY TRANSACTIONS

Shareholders’ mandate was not procured for recurrent related party transactions entered into during financial year ended 30 June 2010. The amounts transacted during the financial year were within the threshold as prescribed by Bursa Malaysia Securities Berhad’s Listing Requirements and no announcement was made.

32 - 36 Directors’ Report

37 Statement by Directors

37 Statutory Declaration

38 - 39 Independent Auditors’ Report

40 Consolidated Balance Sheet

41 Consolidated Income Statement

42 Consolidated Statement of Changes in Equity

43 - 44 Consolidated Cash Flow Statement

45 Balance Sheet

46 Income Statement

47 Statement of Changes in Equity

48 Cash Flow Statement

49 - 83 Notes to the Financial Statements

CONTENTS


The directors hereby submit their report and the audited financial statements of the Group and the Company for the financial year ended 30 June 2010.

PRINCIPAL ACTIVITIES

The principal activities of the Company are those of investment holding and provision of management services. The principal activities of the subsidiaries are disclosed in Note 7 to the financial statements. Other than those changes arising from the acquisition of subsidiaries, there have been no significant changes in the nature of the principal activities of the Group and the Company during the financial year.

RESULTS

The Group The CompanyRM RM

Net profit for the financial year attributable to shareholders of the Company 1,411,460 2,779,974

DIVIDENDS

During the financial year, the Company paid a final dividend of 2.0 sen per share, tax exempt, amounting to RM1,347,051 in respect of the financial year ended 30 June 2009.

A final dividend of 1.5 sen per share, tax exempt, amounting to RM1,010,288 in respect of the financial year ended 30 June 2010 will be proposed for shareholders’ approval at the forthcoming Annual General Meeting.

RESERVES AND PROVISIONS

There were no material transfers to or from reserves or provisions during the financial year apart from those disclosed in the financial statements.

ISSUE OF SHARES OR DEBENTURES

There was no issue of shares or debentures by the Company during the financial year.

PURCHASE OF OWN SHARES

The shareholders of the Company, by a resolution passed at the Extraordinary General Meeting held on 3 July 2002, approved the Company’s plan to purchase its own shares. The directors are committed to enhancing the value of the Company to its shareholders and believe that the purchase plan can be applied in the best interests of the Company and its shareholders.

There was no purchase of own shares by the Company during the financial year.

The renewal mandate given by the shareholders at the Annual General Meeting held on 10 December 2009 will expire at the forthcoming Annual General Meeting at which a resolution will be tabled for shareholders to grant a fresh mandate for another year.

Directors’ Report


EMPLOYEES’ SHARE OPTION SCHEME

The Employees’ Share Option Scheme (“ESOS”) of the Company is governed by the Bye-Laws approved by the shareholders at an Extraordinary General Meeting held on 27 December 2002.

The principal features of the ESOS are as follows:

(i) The maximum number of shares in the Company which may be subscribed on the exercise of options granted under the ESOS shall not, in aggregate, exceed 10% of the issued and paid-up share capital of the Company or such maximum percentages as allowable by any other relevant authorities at any point of time during the existence of the ESOS.

(ii) In order to qualify for participation in the ESOS, a participant must be an eligible executive director or employee of the Group. Eligibility, however, does not confer an eligible executive director or employee a claim or right to participate in the ESOS unless an offer has been extended to the eligible executive director or employee.

(iii) The number of new shares that may be offered and allotted to any eligible executive director and employee of the Group, who are entitled to participate in the ESOS, shall be at the discretion of the committee appointed by the Board of Directors (“Option Committee”) after taking into consideration the performance, seniority and length of service of the eligible executive directors and employees in the Group and such other factors that the Option Committee may deem relevant subject to the following:

(a) not more than 50% (or such percentage as allowable by the relevant authorities) of the shares available under the ESOS shall be allocated, in aggregate, to directors and senior management of the Group; and

(b) not more than 10% (or such percentage as allowable by the relevant authorities) of the shares available under the ESOS shall be allocated to any individual director or employee who, either singly or collectively through his/her associates (as defined in the Companies Act 1965), holds 20% or more in the issued and paid-up share capital of the Company;

provided always that it is in accordance with any prevailing guidelines issued by the Securities Commission (“SC”) or any other relevant authorities as amended from time to time.

(iv) The ESOS shall continue to be in force for a period of 10 years and expiring on 17 February 2013.

(v) The price payable upon exercise of each of the option shares granted under the ESOS shall be set based on the 5-days weighted average market price of the Company’s shares, as quoted on Bursa Malaysia Securities Berhad, immediately preceding the date the option is granted, with a discount of not more than 10%, if deemed appropriate, or such lower or higher limit in accordance with any prevailing guidelines issued by the SC or any other relevant authorities as amended from time to time, or at the par value of each of the shares in the Company, whichever is higher.

(vi) The new shares to be allotted and issued upon exercise of any option shall upon allotment rank pari passu in all respects with the existing issued and paid-up shares in the Company except that the new shares so allotted shall not be entitled to any dividend, rights, allotment or other distribution unless the shares so allotted have been credited into the relevant securities accounts maintained by Bursa Malaysia Depository Sdn. Bhd. before the entitlement date and will be subject to all the provisions of the Articles of Association of the Company relating to the transfer, transmission or otherwise of the shares in the Company.

The movements in the number of options during the financial year are as follows:

Exercise Number of Options over Ordinary Shares of RM1.00 eachPrice At At

Exercisable from RM 1.7.2009 Granted Exercised Lapsed 30.6.2010

18 February 2003 1.20 2,669,000 – – (213,000) 2,456,00015 May 2003 1.20 131,000 – – (131,000) –

2,800,000 – – (344,000) 2,456,000

Directors’ Report (cont’d)


BAD AND DOUBTFUL DEBTS

Before the financial statements of the Group and the Company were made out, the directors took reasonable steps to ascertain that action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and satisfied themselves that all known bad debts had been written off and that adequate allowance had been made for doubtful debts.

At the date of this report, the directors are not aware of any circumstances which would render the amount written off for bad debts or the amount of the allowance made for doubtful debts inadequate to any substantial extent.

CURRENT ASSETS

Before the financial statements of the Group and the Company were made out, the directors took reasonable steps to ascertain whether any current assets, other than debts, were unlikely to realise in the ordinary course of business their values as shown in the accounting records of the Group and the Company and to the extent so ascertained were written down to an amount that they might be expected to realise.

At the date of this report, the directors are not aware of any circumstances that would render the values attributed to the current assets in the financial statements of the Group and the Company misleading.

VALUATION METHODS

At the date of this report, the directors are not aware of any circumstances which have arisen which render adherence to the existing methods of valuation of assets or liabilities of the Group and the Company misleading or inappropriate.

CONTINGENT AND OTHER LIABILITIES

At the date of this report, there does not exist:

(i) any charge on the assets of the Group or the Company that has arisen since the end of the financial year which secures the liabilities of any other person; or

(ii) any contingent liability in respect of the Group or the Company that has arisen since the end of the financial year.

No contingent liability or other liability of the Group or the Company has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may substantially affect the ability of the Group or the Company to meet their obligations as and when they fall due.

CHANGE OF CIRCUMSTANCES

At the date of this report, the directors are not aware of any circumstances, not otherwise dealt with in this report or in the financial statements of the Group and the Company that would render any amount stated in the respective financial statements misleading.

ITEMS OF AN UNUSUAL NATURE

The results of the operations of the Group and the Company for the financial year were not, in the opinion of the directors, substantially affected by any item, transaction or event of a material and unusual nature.

There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors, to affect substantially the results of the operations of the Group and the Company for the financial year in which this report is made.



DIRECTORS OF THE COMPANY

The directors who served since the date of the last report are:

Dato’ Koay Hean EngKoay Cheng LyeKoay Ah Bah @ Koay Cheng HockTan Yok Cheng, D.J.N., P.J.K., P.J.M.Dato’ Abdul Rahman Bin Mohammed HashimLim Swee ChuanDr. Mohamad Zabdi Bin ZamrodWee Hoe Soon @ Gooi Hoe Soon (resigned on 30.7.2010)Khaw Eng Peng (appointed on 30.7.2010)

Particulars of the interests in shares in the Company and its related corporations of the directors in office at the end of the financial year, as shown in the Register of Directors’ Shareholdings, are as follows:

Number of Ordinary Shares of RM1.00 eachDirect Interest Deemed Interest

Name of DirectorAt

1.7.2009 Bought SoldAt

30.6.2010At

1.7.2009At

30.6.2010

Shares in the Company(Kobay Technology Bhd.)Dato’ Koay Hean Eng 1,654,154 – – 1,654,154 17,523,007 17,523,007Koay Cheng Lye 586,995 – – 586,995 17,523,007 17,523,007Koay Ah Bah

@ Koay Cheng Hock 569,665 – – 569,665 17,523,007 17,523,007Tan Yok Cheng,

D.J.N., P.J.K., P.J.M. 1,250 – – 1,250 – –Dato’ Abdul Rahman Bin

Mohammed Hashim 1,250 – – 1,250 – –

Number of Options over Ordinary Shares of RM1.00 eachAt At

Name of Director 1.7.2009 Granted Exercised 30.6.2010

Options in the Company(Kobay Technology Bhd.)

Dato’ Koay Hean Eng 600,000 – – 600,000Lim Swee Chuan 250,000 – – 250,000

Number of Options over Ordinary Shares of RM1.00 eachAt At

Name of Director 1.7.2009 Granted Exercised 30.6.2010

Options in a Subsidiary(Lipo Corporation Berhad)

Koay Cheng Lye 500,000 – – 500,000

By virtue of their interests in shares in the Company, Dato’ Koay Hean Eng, Koay Cheng Lye and Koay Ah Bah @ Koay Cheng Hock are also deemed to have interests in shares in the subsidiaries to the extent of the Company’s interests, pursuant to Section 6A of the Companies Act 1965.

Save as disclosed above, none of the other directors in office at the end of the financial year held any interests in shares in the Company or its related corporations during the financial year.



DIRECTORS’ BENEFITS

Since the end of the previous financial year, no director of the Company has received or become entitled to receive any benefit (other than the directors’ remuneration received or receivable from the Company and related corporations) by reason of a contract made by the Company or a related corporation with the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest.

Neither during nor at the end of the financial year, was the Company a party to any arrangement, apart from the ESOSs of the Company and a subsidiary, whose object is to enable the directors to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

AUDITORS

The auditors, Messrs. Crowe Horwath (formerly known as Messrs. Horwath), have expressed their willingness to continue in office.

SIGNED IN ACCORDANCE WITH A RESOLUTION OF THE DIRECTORSDATED 28 SEPTEMBER 2010

Dato’ Koay Hean Eng

Lim Swee Chuan



We, Dato’ Koay Hean Eng and Lim Swee Chuan, being two of the directors of Kobay Technology Bhd., do hereby state that in the opinion of the directors, the financial statements set out on pages 40 to 83 have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and the Company as at 30 June 2010 and of their financial performance and cash flows for the financial year then ended.

SIGNED IN ACCORDANCE WITH A RESOLUTION OF THE DIRECTORSDATED 28 SEPTEMBER 2010

Dato’ Koay Hean Eng

Lim Swee Chuan

Statutory Declaration

I, Lim Swee Chuan, being the director primarily responsible for the financial management of Kobay Technology Bhd., do solemnly and sincerely declare that the financial statements set out on pages 40 to 83 are, to the best of my knowledge and belief, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act 1960.

Subscribed and solemnly declared by Lim Swee Chuan at Georgetown in the State of Penang on this 28 September 2010

Lim Swee Chuan

Before me

Nachatar Singh A/L Bhag Singh PJK (No.P126)

Commissioner for Oaths

Statement by Directors


REPORT ON THE FINANCIAL STATEMENTS

We have audited the financial statements of Kobay Technology Bhd. (“the Company”) and its subsidiaries (“the Group”) set out on pages 40 to 83, which comprise the balance sheets as at 30 June 2010, and the income statements, statements of changes in equity and cash flow statements for the financial year then ended, and a summary of significant accounting policies and other explanatory notes.

Directors’ Responsibility for the Financial Statements

The directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with Financial Reporting Standards and the Companies Act 1965 in Malaysia (“the Act”). This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards and the Act so as to give a true and fair view of the financial position of the Group and the Company as at 30 June 2010 and of their financial performance and cash flows for the financial year then ended.

Independent Auditors’ Report To The Members Of KOBAY TECHNOLOGY BHD.


REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

In accordance with the requirements of the Act, we also report the following:

(i) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and the subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.

(ii) We have considered the financial statements and the auditors’ reports thereon of the subsidiaries of which we have not acted as auditors, as indicated in Note 7 to the financial statements.

(iii) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes.

(iv) The auditors’ reports on the financial statements of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3) of the Act.

OTHER MATTERS

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Act and for no other purpose. We do not assume responsibility to any other person for the content of this report.

Crowe HorwathFirm No: AF 1018Chartered Accountants

Eddy Chan Wai HunApproval No: 2182/10/11(J)Chartered Accountant

Penang28 September 2010

Independent Auditors’ Report To The Members Of KOBAY TECHNOLOGY BHD. (cont’d)


2010 2009Note RM RM

NON-CURRENT ASSETS Property, plant and equipment 4 45,427,802 51,304,023 Prepaid lease payments 5 9,996,789 14,629,358 Land held for property development 6 7,106,546 – Other investments 8 2,612,361 2,967,325 Intangible assets 9 414,239 – Deferred tax assets 10 – 331,000

Loan receivables 11 15,638 33,742

65,573,375 69,265,448

CURRENT ASSETS

Assets held for sale 12 8,246,410 – Inventories 13 11,181,280 8,456,719 Trade and other receivables 14 28,025,215 11,189,020 Loan receivables 11 3,097,009 148,304 Prepayments 723,381 1,106,340 Current tax assets 1,159,888 2,715,909

Cash and cash equivalents 15 49,108,604 60,600,506

101,541,787 84,216,798

CURRENT LIABILITIES Trade and other payables 16 19,372,722 8,808,862

Current tax liabilities 1,255,413 148,749

20,628,135 8,957,611

NET CURRENT ASSETS 80,913,652 75,259,187

NON-CURRENT LIABILITIESDeferred tax liabilities 10 3,691,497 4,200,977

Deferred income on government grants 17 164,351 26,962

3,855,848 4,227,939

NET ASSETS 142,631,179 140,296,696

FINANCED BY:Share capital 18 68,080,750 68,080,750 Treasury shares 18 (888,447) (888,447)Share premium 1,680,086 1,680,086 Currency translation reserve 267,095 899,882

Retained profits 36,785,640 36,526,604

SHAREHOLDERS’ EQUITY 105,925,124 106,298,875

Minority interest 36,706,055 33,997,821

TOTAL EQUITY 142,631,179 140,296,696

Consolidated Balance SheetAs At 30 June 2010

The annexed notes form an integral part of these financial statements.


2010 2009Note RM RM

Revenue 19 81,804,222 56,097,022

Cost of sales (64,098,181) (47,858,515)

Gross profit 17,706,041 8,238,507 Other income 3,098,063 5,616,111 Administrative and general expenses (12,959,580) (10,727,212)Selling and distribution expenses (2,136,736) (1,908,328)Finance costs (698) (52,106)

Share of results of associates – 550,081

Profit before tax 20 5,707,090 1,717,053

Tax expense 22 (1,600,169) (559,387)

Net profit for the year 4,106,921 1,157,666

Attributable to:- Shareholders of the Company 1,411,460 1,663,238

- Minority interest 2,695,461 (505,572)

4,106,921 1,157,666

Basic and diluted earnings per share (sen) 23 2.10 2.47

Consolidated Income StatementFor The Financial Year Ended 30 June 2010


No

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at

1 J

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– –

– –

– –

(88,

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of s

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– –

– –

– –

33,1

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59

33,1

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Acq

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of s

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– –

– –

493,

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493,

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Dis

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– –

– –

(59,

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– –

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s–

– –

937,

945

– 93

7,94

5 69

9,63

3 1,

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pro

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loss

) for

the

yea

r–

– –

– 1,

663,

238

1,66

3,23

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6

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inco

me

– –

– 93

7,94

5 1,

663,

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2,60

1,18

3 19

4,06

1 2,

795,

244

Bal

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at

30

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00

968

,080

,750

(8

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1,68

0,08

6 89

9,88

2 36

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,604

10

6,29

8,87

5 33

,997

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14

0,29

6,69

6

Bal

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at

1 J

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20

09

68,0

80,7

50

(888

,447

)1,

680,

086

899,

882

36,5

26,6

04

106,

298,

875

33,9

97,8

21

140,

296,

696

Div

iden

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– –

– –

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51)

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– (1

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sha

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s–

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s–

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– –

– 56

4,06

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– 19

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– 61

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(632

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1,41

1,46

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0,63

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6 26

7,09

5 36

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5,92

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2010 2009Note RM RM

CASH FLOWS FROM OPERATING ACTIVITIESProfit before tax 5,707,090 1,717,053 Adjustments for:Allowance for diminution in value of other investments written back – (9,461)Allowance for doubtful debts 86,811 92,118 Allowance for doubtful debts written back (139,991) (329,382)Amortisation of deferred income on government grants (68,060) (20,221)Amortisation of prepaid lease payments 241,655 209,570 Bad debts written off 64,650 153,775 Depreciation of property, plant and equipment 6,974,271 5,371,787 (Gain)/Loss on disposal of property, plant and equipment (117,204) 6,285 Gain on disposal of other investments (471,939) (442,368)Gain on disposal of subsidiaries – (499,891)Gross dividend income – (35,517)Impairment loss of property, plant and equipment – 127,220 Interest expense 698 52,106 Interest income (1,179,094) (1,245,932)Inventories written down – 2,757,567 Loss on winding up of subsidiary 61,877 – Negative goodwill – (731,074)Property, plant and equipment written off 69,527 155,433 Share of results of associates – (550,081)Unrealised loss/(gain) on foreign exchange 15,166 (2,567)

Operating profit before working capital changes 11,245,457 6,776,420

(Increase)/Decrease in inventories (2,724,561) 5,122,702 (Increase)/Decrease in receivables and prepayments (18,695,515) 16,154,595 Increase/(Decrease) in payables 9,390,172 (4,943,153)

Cash (absorbed by)/generated from operations (784,447) 23,110,564

Tax paid (919,969) (402,920)Tax refunded 1,854,389 1,415,787

Net cash from operating activities 149,973 24,123,431

Consolidated Cash Flow StatementFor The Financial Year Ended 30 June 2010



2010 2009Note RM RM

CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of shares from minority shareholders (298,131) (307,414)Acquisition of subsidiaries, net of cash acquired 7 501,369 17,876,796 Disposal of subsidiaries, net of cash disposed of – (10,139)Dividends received – 28,607 Government grants received 205,449 – Interest received 1,211,186 1,202,847 Proceeds from disposal of other investments 6,239,393 6,302,378 Proceeds from disposal of property, plant and equipment 9,840 23,027 Purchase of land held for property development (7,106,546) – Purchase of other investments (5,412,490) (8,040,499)Purchase of property, plant and equipment (5,754,243) (1,136,678)

Net cash (used in)/from investing activities (10,404,173) 15,938,925

CASH FLOWS FROM FINANCING ACTIVITIESCapital repayment to minority shareholders (105,280) (900,000)Dividend paid (1,347,051) (2,020,577)Dividends paid to minority shareholders (225,360) (88,500)Interest paid (698) (52,106)Issue of shares to minority shareholders 745,609 – Placement of term deposits pledged as security (82,985) (7,595)Repayment of term loan – (1,729,978)

Net cash used in financing activities (1,015,765) (4,798,756)

Currency translation differences (304,922) 887,461

Net (decrease)/increase in cash and cash equivalents (11,574,887) 36,151,061

Cash and cash equivalents brought forward 60,290,556 24,139,495

Cash and cash equivalents carried forward 15 48,715,669 60,290,556

Consolidated Cash Flow Statement (cont’d)

For The Financial Year Ended 30 June 2010



2010 2009Note RM RM

NON-CURRENT ASSETS Property, plant and equipment 4 451,751 548,054 Investments in subsidiaries 7 40,237,053 38,961,120

Other investments 8 2,253,200 1,466,264

42,942,004 40,975,438

CURRENT ASSETS

Amounts owing by subsidiaries 7 15,013,248 10,232,651 Other receivables 14 32,884 99,647 Current tax assets 662,775 350,750

Cash and cash equivalents 15 20,548,140 26,061,450

36,257,047 36,744,498

CURRENT LIABILITIES Amounts owing to subsidiaries 7 1,997,000 1,968,360

Other payables 16 80,463 62,911

2,077,463 2,031,271

NET CURRENT ASSETS 34,179,584 34,713,227

NET ASSETS 77,121,588 75,688,665

FINANCED BY:Share capital 18 68,080,750 68,080,750 Treasury shares 18 (888,447) (888,447)Share premium 1,680,086 1,680,086

Retained profits 8,249,199 6,816,276

SHAREHOLDERS’ EQUITY 77,121,588 75,688,665


Balance SheetAs At 30 June 2010


2010 2009Note RM RM

Revenue 19 4,221,238 2,921,581

Other income 839,707 849,601

Administrative and general expenses (2,287,996) (2,339,570)

Profit before tax 20 2,772,949 1,431,612

Tax income/(expense) 22 7,025 (3,078)

Net profit for the year 2,779,974 1,428,534


Income StatementFor The Financial Year Ended 30 June 2010


Non-distributable Distributable

Share Treasury Share Retainedcapital shares premium profits Total

RM RM RM RM RM

Balance at 1 July 2008 68,080,750 (888,447) 1,680,086 7,408,319 76,280,708

Dividend (Note 24) – – – (2,020,577) (2,020,577)

Net profit for the year – – – 1,428,534 1,428,534

Balance at 30 June 2009 68,080,750 (888,447) 1,680,086 6,816,276 75,688,665

Dividend (Note 24) – – – (1,347,051) (1,347,051)

Net profit for the year – – – 2,779,974 2,779,974

Balance at 30 June 2010 68,080,750 (888,447) 1,680,086 8,249,199 77,121,588


Statement Of Changes In EquityFor The Financial Year Ended 30 June 2010


2010 2009Note RM RM

CASH FLOWS FROM OPERATING ACTIVITIESProfit before tax 2,772,949 1,431,612 Adjustments for:Allowance for doubtful debts 65,816 – Bad debts written off 5,280 – Depreciation of property, plant and equipment 106,960 108,669 Gain on disposal of other investments (18,776) – Gain on disposal of subsidiaries – (2)Gain on winding up of subsidiary (128,675) – Gross dividend income (3,795,413) (2,613,181)Interest income (687,906) (849,087)Loss on disposal of property, plant and equipment – 17 Property, plant and equipment written off 996 1,062

Operating loss before working capital changes (1,678,769) (1,920,910)

Increase in receivables (14,092) (46,667)Increase/(Decrease) in payables 17,552 (164,817)Increase in amounts owing to subsidiaries 28,640 920,000

Cash absorbed by operations (1,646,669) (1,212,394)

Tax refunded – 1,415,787

Net cash used in operating activities (1,646,669) 203,393

CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of shares from minority shareholders (298,131) (307,414)Acquisition of subsidiaries (214,811) (1,397,751)Capital repayment from subsidiary 128,675 1,100,000 Dividends received 3,490,413 2,442,681 (Increase)/Decrease in amounts owing by subsidiaries (4,785,877) 7,764,092 Interest received 702,945 822,962 Proceeds from disposal of other investments 1,485,040 – Proceeds from disposal of property, plant and equipment – 250 Proceeds from disposal of subsidiaries – 2 Purchase of other investments (2,253,200) (1,014,300)Purchase of property, plant and equipment (11,653) (189,546)Subscription for shares in subsidiary (762,991) –

Net cash (used in)/from investing activities (2,519,590) 9,220,976

CASH FLOWS FROM FINANCING ACTIVITYDividend paid (1,347,051) (2,020,577)

Net cash used in financing activity (1,347,051) (2,020,577)

Net (decrease)/increase in cash and cash equivalents (5,513,310) 7,403,792

Cash and cash equivalents brought forward 26,053,450 18,649,658

Cash and cash equivalents carried forward 15 20,540,140 26,053,450

Cash Flow StatementFor The Financial Year Ended 30 June 2010



1. GENERAL INFORMATION

The Company is a public company limited by shares, incorporated and domiciled in Malaysia and listed on the Main Market of Bursa Malaysia Securities Berhad.

The principal activities of the Company are those of investment holding and provision of management services. The principal activities of the subsidiaries are disclosed in Note 7 to the financial statements.

The registered office and principal place of business of the Company are located at Plot 30, Hilir Sungai Kluang 1, Bayan Lepas Industrial Park, Phase 4, 11900 Penang.

The consolidated financial statements set out on pages 40 to 44 together with the notes thereto cover the Company and its subsidiaries (“the Group”). The separate financial statements of the Company set out on pages 45 to 48 together with the notes thereto cover the Company solely.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors dated 28 September 2010.

2. SIGNIFICANT ACCOUNTING POLICIES

2.1 Basis of Preparation of Financial Statements

The financial statements of the Group and the Company are prepared under the historical cost convention, modified to include other bases of measurement as disclosed in other sections of the significant accounting policies, and in accordance with Financial Reporting Standards (“FRSs”) and the Companies Act 1965 in Malaysia.

The financial statements are presented in Ringgit Malaysia (RM).

The Group and the Company have not applied the following FRSs and IC Interpretations which have been issued as at the balance sheet date but are not yet effective:

Standard/Interpretation

Effective for financial periods beginning on or

after

Amendments to FRS 1 First-time Adoption of Financial Reporting Standards and FRS 127 Consolidated and Separate Financial Statements: Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate

1 January 2010

Amendment to FRS 1 Limited Exemption from Comparative FRS 7 Disclosures for First-time Adopters

1 January 2011

Amendments to FRS 2 Share-based Payment: Vesting Conditions and Cancellations 1 January 2010Amendments to FRS 2 Share-based Payment 1 July 2010Amendments to FRS 5 Non-current Assets Held for Sale and Discontinued Operations 1 July 2010Amendments to FRS 7 Improving Disclosures about Financial Instruments 1 January 2011Amendments to FRS 132 Financial Instruments: Presentation 1 January 2010/

1 March 2010Amendments to FRS 138 Intangible Assets 1 July 2010Amendments to FRS 139 Financial Instruments: Recognition and Measurement, FRS 7 Financial

Instruments: Disclosures and IC Interpretation 9 Reassessment of Embedded Derivatives1 January 2010

Amendments to FRS 139 Financial Instruments: Recognition and Measurement 1 January 2010Amendments to IC Interpretation 9 Reassessment of Embedded Derivatives 1 July 2010Amendments to FRSs contained in the document entitled “Improvements to FRSs (2009)” 1 January 2010FRS 1 First-time Adoption of Financial Reporting Standards (revised in 2010) 1 July 2010FRS 3 Business Combinations (revised in 2010) 1 July 2010FRS 4 Insurance Contracts 1 January 2010FRS 7 Financial Instruments: Disclosures 1 January 2010FRS 101 Presentation of Financial Statements (revised in 2009) 1 January 2010FRS 123 Borrowing Costs 1 January 2010

Notes To The Financial StatementsFor The Financial Year Ended 30 June 2010


2. SIGNIFICANT ACCOUNTING POLICIES (cont’d)

2.1 Basis of Preparation of Financial Statements (cont’d)

Standard/Interpretation

Effective for financial periods beginning on or

afterFRS 127 Consolidated and Separate Financial Statements (revised in 2010) 1 July 2010FRS 139 Financial Instruments: Recognition and Measurement 1 January 2010IC Interpretation 9 Reassessment of Embedded Derivatives 1 January 2010IC Interpretation 10 Interim Financial Reporting and Impairment 1 January 2010IC Interpretation 11 FRS 2 - Group and Treasury Share Transactions 1 January 2010IC Interpretation 12 Service Concession Arrangements 1 July 2010IC Interpretation 13 Customer Loyalty Programmes 1 January 2010IC Interpretation 14 FRS 119 - The Limit on a Defined Benefit Asset, Minimum Funding

Requirements and their Interaction1 January 2010

IC Interpretation 15 Agreements for the Construction of Real Estate 1 January 2012IC Interpretation 16 Hedges of a Net Investment in a Foreign Operation 1 July 2010IC Interpretation 17 Distributions of Non-cash Assets to Owners 1 July 2010

The management foresees that the initial application of the above FRSs and IC Interpretations will not have any significant impacts on the financial statements except as follows:

Amendments to FRS 117 Leases

Included in Improvements to FRSs (2009) are amendments to FRS 117 which clarify that the classification of leasehold land as a finance lease or an operating lease shall be based on the extent to which risks and rewards incidental to ownership lie. In accordance with the transitional provisions of the amendments, the Group will reassess the classification of leasehold land on the effective date and make the necessary reclassification, if any, retrospectively.

FRS 3 Business Combinations (revised in 2010)

FRS 3 (revised in 2010), which supersedes FRS 3 Business Combinations (issued in 2005), introduces significant changes to the accounting for business combinations, both at the acquisition date and post acquisition, and requires greater use of fair values. In addition, all acquisition-related costs, other than the costs to issue debt or equity securities, shall be expensed as incurred. In accordance with the transitional provisions of FRS 3 (revised in 2010), the Group and the Company will apply this FRS prospectively to business combinations for which the acquisition date is on or after the effective date.

FRS 7 Financial Instruments: Disclosures and FRS 139 Financial Instruments: Recognition and Measurement

By virtue of the exemptions given by FRS 7 and FRS 139, the impacts on the financial statements upon initial application of these FRSs (and the amendments thereto) are not disclosed.

FRS 101 Presentation of Financial Statements (revised in 2009)

FRS 101 (revised in 2009), which supersedes FRS 101 Presentation of Financial Statements (revised in 2005), affects the presentation of owner changes in equity and comprehensive income. It requires an entity to present all owner changes in equity in a statement of changes in equity. All non-owner changes in equity (i.e. comprehensive income) are required to be presented in one statement of comprehensive income or two statements (a separate income statement and a statement of comprehensive income). FRS 101 (revised in 2009) also changes the titles of the financial statements to reflect their function more closely, for example, the titles “balance sheet” and “cash flow statement” are renamed as “statement of financial position” and “statement of cash flows” respectively.

Notes To The Financial Statements (cont’d)




2.1 Basis of Preparation of Financial Statements (cont’d)

FRS 127 Consolidated and Separate Financial Statements (revised in 2010)

FRS 127 (revised in 2010), which supersedes FRS 127 Consolidated and Separate Financial Statements (revised in 2005), requires the total comprehensive income of a subsidiary to be attributed to the owners of the parent and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. The revised standard also requires the changes in a parent’s ownership interest in a subsidiary that do not result in a loss of control to be accounted for as equity transactions. In accordance with the transitional provisions of FRS 127 (revised in 2010), the aforementioned amendments will be applied prospectively.

2.2 Basis of Consolidation

A subsidiary is an entity that is controlled by the Group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.

The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries made up to the end of the financial year using the purchase method. The results of the subsidiary acquired or disposed of during the financial year are included in the consolidated financial statements from the date of acquisition or up to the date of disposal. Intragroup balances, transactions, income and expenses are eliminated in full on consolidation.

The excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary acquired at the acquisition date represents goodwill. Goodwill is recognised as an asset at cost less accumulated impairment losses, if any. When the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary acquired at the acquisition date exceeds the cost of acquisition, the excess (hereinafter referred to as “negative goodwill”), after reassessment, is recognised in the income statement.

2.3 Financial Instruments

Recognised Financial Instruments

The accounting policies for recognised financial instruments are disclosed in the individual policies associated with each item.

Unrecognised Financial Instruments

The Group and the Company do not have any unrecognised financial instruments.

Fair Values

The carrying amounts of financial assets and liabilities with short maturity periods are assumed to approximate their fair values.

The fair values of quoted investments are estimated based on quoted market prices.

The fair values of long-term receivables are estimated based on the present values of future cash flows discounted using the prevailing market interest rates.





2.4 Property, Plant and Equipment

Property, plant and equipment are stated at cost or at valuation less accumulated depreciation and accumulated impairment losses, if any.

The last revaluation of certain buildings was made in 1997 and has not been updated. The Group has followed the transitional provisions of IAS 16 (Revised) Property, Plant and Equipment issued by the Malaysian Accounting Standards Board to retain the carrying amounts of the assets on the basis of their previous revaluation subject to continuity in their depreciation and impairment policies.

A revaluation increase is credited to equity as revaluation surplus or recognised as income in the income statement to the extent that the increase reverses a revaluation decrease of the same asset previously recognised as an expense. A revaluation decrease is recognised as an expense in the income statement or debited against any related revaluation surplus to the extent that the decrease does not exceed the amount held in the revaluation surplus of that asset.

Freehold land and capital work-in-progress are not depreciated. Other property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets using the following annual rates:

Buildings 2 %Building improvement and renovation 2-33 %Factory machinery, moulds and equipment 9-20 %Furniture, fittings, office equipment and computer software 9-33 %Tools and accessories 10 %Motor vehicles 10-20 %

The residual value, useful life and depreciation method of an asset are reviewed at least at each balance sheet date and any changes in expectations from previous estimates are accounted for prospectively as changes in accounting estimates.

2.5 Prepaid Lease Payments

The upfront payments for a lease of land under an operating lease are recognised as prepaid lease payments and amortised on a straight-line basis over the lease term.

2.6 Land Held for Property Development

Land held for property development is stated at cost less accumulated impairment losses, if any.

2.7 Investments

Subsidiaries

As required by the Companies Act 1965, the Company prepares separate financial statements in addition to the consolidated financial statements. In the separate financial statements of the Company, investments in subsidiaries are stated at cost less impairment losses, if any.

Other Investments

Other investments in shares, unit trusts and bond are stated at cost and accounted for using settlement date accounting. An allowance for diminution in value is made when there is a decline other than temporary in the value of the investment. The decline is recognised as an expense in the period in which it is identified.





2.8 Intellectual Property

Intellectual property is stated at cost less accumulated amortisation and accumulated impairment losses, if any.

Intellectual property is amortised on a straight-line basis over its estimated useful life.

2.9 Non-current Assets Held for Sale

A non-current asset is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. Immediately before the initial classification as held for sale, the carrying amount of the relevant asset is measured in accordance with applicable FRSs. Upon classification as held for sale, the asset, other than financial assets within the scope of FRS 139 Financial Instruments: Recognition and Measurement, is measured at the lower of its carrying amount and fair value less costs to sell. Any initial or subsequent write-down to, or any subsequent increase in, fair value less costs to sell is recognised in the income statement.

2.10 Impairment of Assets

The carrying amounts of assets, other than deferred tax assets, inventories, financial assets within the scope of FRS 139 Financial Instruments: Recognition and Measurement and non-current assets classified as held for sale, are reviewed at each balance sheet date to determine whether there is any indication that an item of asset may be impaired. If any such indication exists, the recoverable amount of the asset, being the higher of its fair value less costs to sell and its value in use, is estimated. Irrespective of whether there is any indication of impairment, goodwill is tested for impairment annually. Any excess of the carrying amount of the asset over its recoverable amount represents an impairment loss and is recognised as an expense in the income statement.

An impairment loss of an asset, other than goodwill, is reversed if there has been a change in the estimates used to determine the recoverable amount and it is reversed only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, had no impairment loss been recognised. The reversal is recognised in the income statement. An impairment loss of goodwill is not reversed.

2.11 Inventories

Inventories are valued at the lower of cost (determined principally on the first-in, first-out basis) and net realisable value. Cost consists of all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and costs necessary to make the sale.

2.12 Receivables

Receivables are carried at anticipated realisable values. Bad debts are written off when identified. An estimate is made for doubtful debts based on a review of all outstanding amounts as at the balance sheet date.

2.13 Payables

Payables are recognised at cost which is the fair value of the consideration to be paid in the future for goods and services received.





2.14 Foreign Currency Transactions and Translation

The consolidated financial statements and separate financial statements of the Company are presented in Ringgit Malaysia, which is also the Company’s functional currency, being the currency of the primary economic environment in which the entity operates. Items included in the financial statements of each individual entity within the Group are measured using the individual entity’s own functional currency.

A foreign currency transaction is recorded in the functional currency using the exchange rate at transaction date. At the balance sheet date, foreign currency monetary items are translated into the functional currency using the closing rate. Foreign currency non-monetary items measured at cost are translated using the exchange rate at transaction date whereas those measured at fair value are translated using the exchange rate at valuation date. Exchange differences arising from the settlement or translation of monetary items are recognised in the income statement. Any exchange component of the gain or loss on a non-monetary item is recognised on the same basis as that of the gain or loss, i.e. directly in equity or in the income statement.

In translating the financial position and results of an entity whose functional currency is not the required presentation currency, i.e. Ringgit Malaysia, assets and liabilities are translated into the presentation currency using the closing rate whereas income and expenses are translated using the average exchange rate for the financial year. All resulting exchange differences are recognised directly in equity. Any goodwill and fair value adjustments arising from the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation to be expressed in its functional currency and translated into the presentation currency using the closing rate.

2.15 Share Capital

Ordinary shares are classified as equity. Transaction costs that relate to the issue of new shares are accounted for as a deduction from equity.

Own shares purchased are held as Treasury Shares in accordance with the requirements of Section 67A of the Companies Act 1965. The total amount of consideration paid, including directly attributable costs, is debited to equity.

Dividends on shares declared and unpaid at the balance sheet date are recognised as a liability whereas dividends proposed or declared after the balance sheet date are disclosed by way of note to the financial statements.

2.16 Income Recognition

Income from the sale of goods is recognised when the significant risks and rewards of ownership have been transferred to the buyer.

Income from the rendering of services is recognised when the services are performed.

Dividend income is recognised when the right to receive payment is established.

Interest income is recognised using the effective interest method.

Rental income is recognised on an accrual basis.





2.17 Income Taxes

Income taxes for the year comprise current tax and deferred tax.

Current tax represents the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is provided for under the balance sheet liability method in respect of all temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base except for those temporary differences associated with goodwill, negative goodwill or the initial recognition of an asset or liability in a transaction which is not a business combination and affects neither accounting nor taxable results at the time of the transaction.

A deferred tax liability is recognised for all taxable temporary differences whereas a deferred tax asset is recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on the tax rates that have been enacted or substantively enacted by the balance sheet date.

2.18 Grants

Grants are recognised when there is reasonable assurance that the Group will comply with the conditions attaching to the grants and that the grants will be received. Grants are recognised as income over the periods necessary to match them with the related costs which they are intended to compensate, on a systematic basis. Grants related to assets are presented in the balance sheet as deferred income which is amortised on a straight-line basis over the estimated useful lives of the assets. Grants related to income are presented under “other income” in the income statement.

2.19 Employee Benefits

Short-term Employee Benefits

Short-term employee benefits such as wages, salaries, bonuses and social security contributions are recognised as an expense in the period in which the associated services are rendered by the employee.

Defined Contribution Plans

As required by law, employers in Malaysia make contributions to the state pension scheme, Employees Provident Fund (“EPF”). Such contributions are recognised as an expense in the period in which the associated services are rendered by the employee.

Equity Compensation Benefits

The Employees’ Share Option Schemes (“ESOSs”) of the Company and a subsidiary grant the Group’s eligible employees options to subscribe for shares in the Company and the subsidiary at pre-determined subscription prices. These equity compensation benefits are recognised as an expense with a corresponding increase in equity over the vesting period as share option reserve. The total amount to be recognised is determined by reference to the fair value of the share options at grant date and the estimated number of share options expected to vest on vesting date.

2.20 Cash and Cash Equivalents

Cash and cash equivalents comprise cash in hand, bank balances, demand deposits, term deposits (excluding those pledged as security), bank overdrafts and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.




3. CRITICAL JUDGEMENTS AND ESTIMATION UNCERTAINTY

Critical Judgements

In the process of applying the accounting policies of the Group and the Company, the management makes the following judgements that can significantly affect the amounts recognised in the financial statements:

(i) Allowance for Inventories

Reviews are made periodically by the management on inventories for excess inventories, obsolescence and decline in net realisable value below cost. These reviews require the use of judgements and estimates. Possible changes in these estimates could result in revisions to the valuation of inventories.

(ii) Allowance for Doubtful Debts

The Group and the Company make allowance for doubtful debts based on an assessment of the recoverability of receivables. Allowance is applied to receivables where events or changes in circumstances indicate that the balances may not be recoverable. The management specifically analyses historical bad debts, customer concentration, customer creditworthiness, current economic trends and changes in customer payment terms when making a judgement to evaluate the adequacy of the allowance for doubtful debts. Where expectations are different from previous estimates, the difference will impact on the carrying amounts of receivables.

Key Sources of Estimation Uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

(i) Depreciation of Property, Plant and Equipment

Property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives of the assets. The management estimates the useful lives to be within 3 to 50 years. Changes in the expected level of usage and technological development will impact on the economic useful lives and residual values of the assets and therefore, future depreciation charges may be revised.

(ii) Impairment of Assets

When the recoverable amount of an asset is determined based on its value in use, estimates on future cash flows and appropriate discount rate are required to determine the present value of those cash flows.

(iii) Income Taxes

There are certain transactions and computations for which the ultimate tax determination may be different from the initial estimates. The Group and the Company recognise tax liabilities based on their understanding of the prevailing tax laws and estimates of whether such taxes will be due in the ordinary course of business. Where the final tax outcome of these matters is different from the amounts initially recognised, the difference will impact on the tax provisions in the period in which the outcome is determined.



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4. PROPERTY, PLANT AND EQUIPMENT (cont’d)

The Company

Renovation

Furniture, fittings

and office equipment

Tools and accessories

Motor vehicles Total

RM RM RM RM RM

CostBalance at 1 July 2008 43,735 682,862 825 542,168 1,269,590 Additions – 189,546 – – 189,546

Disposals/Write-offs – (4,285) – – (4,285)

Balance at 30 June 2009 43,735 868,123 825 542,168 1,454,851 Additions – 11,653 – – 11,653

Write-offs – (6,888) – – (6,888)

Balance at 30 June 2010 43,735 872,888 825 542,168 1,459,616

Accumulated DepreciationBalance at 1 July 2008 22,201 302,407 825 475,651 801,084 Depreciation 4,373 66,466 – 37,830 108,669

Disposals/Write-offs – (2,956) – – (2,956)

Balance at 30 June 2009 26,574 365,917 825 513,481 906,797 Depreciation 4,374 74,171 – 28,415 106,960

Write-offs – (5,892) – – (5,892)

Balance at 30 June 2010 30,948 434,196 825 541,896 1,007,865

Carrying Amount

Balance at 1 July 2008 21,534 380,455 – 66,517 468,506

Balance at 30 June 2009 17,161 502,206 – 28,687 548,054

Balance at 30 June 2010 12,787 438,692 – 272 451,751

Certain buildings of the Group stated at valuation were revalued by the directors in 1997 based on the valuation carried out by independent professional valuers on an open market value basis. Had the revalued buildings been stated in the financial statements at cost less accumulated depreciation, the carrying amount would be RM4,928,194 (2009 : RM5,040,854).

Certain buildings and building improvement of the Group with a total carrying amount of RM2,958,357 (2009 : RM3,061,149) have been pledged as security for credit facilities granted to the Group.




5. PREPAID LEASE PAYMENTS

The Group

Long-term leasehold

land

Short-term leasehold

land TotalRM RM RM

Cost/ValuationBalance at 1 July 2008 – 10,589,914 10,589,914 Acquisition of subsidiaries 2,257,794 4,320,000 6,577,794

Balance at 30 June 2009 2,257,794 14,909,914 17,167,708

Representing:- Cost 2,257,794 8,710,914 10,968,708 - Valuation – 6,199,000 6,199,000

2,257,794 14,909,914 17,167,708

Balance at 1 July 2009 2,257,794 14,909,914 17,167,708 Transfer to assets held for sale – (4,390,914) (4,390,914)

Balance at 30 June 2010 2,257,794 10,519,000 12,776,794

Representing:- Cost 2,257,794 4,320,000 6,577,794 - Valuation – 6,199,000 6,199,000

2,257,794 10,519,000 12,776,794

Accumulated AmortisationBalance at 1 July 2008 – 1,376,226 1,376,226 Acquisition of subsidiaries 345,148 607,406 952,554 Amortisation 25,388 184,182 209,570

Balance at 30 June 2009 370,536 2,167,814 2,538,350 Amortisation 33,849 207,806 241,655

Balance at 30 June 2010 404,385 2,375,620 2,780,005

Carrying AmountBalance at 1 July 2008 – 9,213,688 9,213,688

Balance at 30 June 2009 1,887,258 12,742,100 14,629,358

Balance at 30 June 2010 1,853,409 8,143,380 9,996,789

The short-term leasehold land stated at valuation was revalued by the directors in 1997 based on the valuation carried out by independent professional valuers on an open market value basis. As allowed by the transitional provisions of FRS 117 Leases, the unamortised revalued amount has been retained as the surrogate carrying amount of the prepaid lease payments.

Short-term leasehold land with a carrying amount of RM1,854,756 (2009 : RM1,907,623) has been pledged as security for credit facilities granted to the Group.

6. LAND HELD FOR PROPERTY DEVELOPMENT

The Group

2010 2009RM RM

Freehold land, at cost 7,106,546 –




7. INVESTMENTS IN SUBSIDIARIES

The Company

2010 2009RM RM

Unquoted shares, at cost 19,973,362 18,927,488Impairment losses (4,704,581) (4,771,509)

15,268,781 14,155,979Quoted shares in Malaysia, at cost 24,968,272 24,805,141

40,237,053 38,961,120

Market value of quoted shares in Malaysia 15,737,760 12,963,950

The details of the subsidiaries are as follows:

Name of Subsidiary Country of

Incorporation

Effective Interest Held

2010 2009 Principal Activity

Lipo Corporation Berhad Malaysia 52.09% 51.49% Investment holding and provision of management services

Bend Weld EngineeringSdn. Bhd.

Malaysia 100.00% 100.00% Manufacture of all types of metal works and structures, modules and parts for oil & gas production and extraction equipment

Polytool IntegrationSdn. Bhd.

Malaysia 85.00% 85.00% Design and manufacture of sawing machines, vision and inspection machines/ systems, fluid/epoxy dispensing machines, test handling machines, production machinery and parts thereof for solar industry

Polytool SystemsSdn. Bhd.*

Malaysia 85.00% 85.00% Design and development of software automation solutions

Megatool PrecisionSdn. Bhd.*

Malaysia 100.00% 100.00% Trading of high-end steel and carbide precision parts for tools, dies and moulds and precision tools, dies and moulds

Polytool TechnologiesSdn. Bhd.*

Malaysia 100.00% 100.00% Manufacture of measuring devices, industrial equipment, machinery parts and tooling, encapsulation moulds, trim and form dies and progressive tooling for lead frames

Polytool Precision Sdn. Bhd.* Malaysia 100.00% 100.00% Investment holding

Megatool Precision(Suzhou)Co., Ltd.*

China 100.00% 100.00% Manufacture, design, sale and after-sale service of precision moulds and monotype precise tools and fittings

Maker TechnologiesSdn. Bhd.*

Malaysia 100.00% 100.00% Manufacture of all kinds of precision moulds and parts

Kobay Assets Sdn. Bhd.* Malaysia 100.00% 100.00% Property letting

Kobay SCM Sdn. Bhd.* Malaysia 100.00% 100.00% General trading




7. INVESTMENTS IN SUBSIDIARIES (cont’d)

Name of Subsidiary Country of

Incorporation

Effective Interest Held

2010 2009 Principal Activity

Kewjaya Sdn. Bhd.* Malaysia 100.00% 100.00% Money lending and leasing

Opar Holdings Sdn. Bhd.* Malaysia 100.00% 100.00% Investment holding

Kobay Sawin Sdn. Bhd.* Malaysia 100.00% 100.00% Inactive

Unetsys Sdn. Bhd.* Malaysia 60.00% 60.00% Inactive

Polytool AutomationSdn. Bhd.**

Malaysia 85.00% 85.00% Inactive

Elite Paper TradingSdn. Bhd.**


Polytool Industries Phils.,Inc.***

Philippines 0.00% 100.00% Inactive

Kobay SCM (S) Pte. Ltd.* Singapore 60.00% 0.00% Investment holding

KWH TechnologiesSdn. Bhd.

Malaysia 59.90% 0.00% Provision of mechanical engineering, maintenance and shut down works for oil, gas and petrochemical sectors

Subsidiaries of Lipo Corporation BerhadParadigm Precision

Components Sdn. Bhd.Malaysia 52.09% 51.49% Manufacture of precision machined

components

Paradigm Metal IndustriesSdn. Bhd.

Malaysia 52.09% 51.49% Manufacture of precision metal stamping and sheet metal parts

Paradigm PrecisionMachining Sdn. Bhd.*


Paradigm PrecisionComponents (Thailand) Ltd.*

Thailand 52.09% 51.49% Manufacture of metal products attribute from machining

Lipo Precision Industry(Suzhou) Co. Ltd.*

China 52.09% 51.49% Manufacture of precision machined parts

Micro Surface TreatmentSdn. Bhd.*

Malaysia 45.84% 45.31% Precision plating and surface treatment

Super Tropica DevelopmentSdn. Bhd.*

Malaysia 52.09% 0.00% Property development

Subsidiary of Kobay SCM (S) Pte. Ltd.

Microhandling AsiaPte. Ltd.*

Singapore 30.48% 0.00% Manufacture of semiconductor assembly and testing equipment

* Not audited by Crowe Horwath** In the process of members’ voluntary winding up*** Wound up in September 2009





Acquisition of Subsidiaries

2010

In July 2009, the Company incorporated a 60.00% owned subsidiary, Kobay SCM (S) Pte. Ltd. (“Kobay SCM”), for RM14,811. In October 2009, Kobay SCM acquired 50.80% of the equity interest in Microhandling Asia Pte. Ltd. for RM596,901. The acquisition gave rise to goodwill of RM14,998.

In November 2009, a subsidiary, Lipo Corporation Berhad (“Lipo”), acquired the entire equity interest in Super Tropica Development Sdn. Bhd. for RM2.

In December 2009, the Company acquired 50.90% of the equity interest in KWH Technologies Sdn. Bhd. (“KWH”) for RM200,000. The acquisition gave rise to goodwill of RM199,491.

The total net profit of the aforementioned subsidiaries since the acquisition dates included in the Group’s net profit for the financial year attributable to shareholders of the Company amounted to approximately RM10,000. Had the acquisition dates been 1 July 2009, the management estimates that the Group’s revenue and net profit for the financial year attributable to shareholders of the Company would have been approximately RM82,330,000 and RM1,432,000 respectively.

2009

In September 2008, the Company acquired additional 1.29% of the equity interest in Lipo from the open market for RM397,751, resulting in Lipo to become a 50.29% owned subsidiary of the Company. The acquisition gave rise to negative goodwill of RM891,429.

In October 2008, the Company acquired the remaining 81.00% of the equity interest in Maker Technologies Sdn. Bhd. for RM1,000,000. The acquisition gave rise to goodwill of RM160,355.

The total net loss of the aforementioned subsidiaries since the acquisition dates included in the Group’s net profit for the financial year attributable to shareholders of the Company amounted to approximately RM302,000. Had the acquisition dates been 1 July 2008, the management estimates that the Group’s revenue and net profit for the financial year attributable to shareholders of the Company would have been approximately RM67,559,000 and RM1,629,000 respectively.

The carrying amounts of the subsidiaries’ assets and liabilities immediately before the acquisition dates, determined in accordance with Financial Reporting Standards and approximating their fair values recognised at the acquisition dates, are as follows:

2010 2009RM RM

Property, plant and equipment 38,731 34,299,819Prepaid lease payments – 5,625,240Intangible assets 199,750 –Deferred tax assets 50,384 –Inventories – 3,949,588Receivables and prepayments 733,031 10,724,762Current tax assets – 1,441,219Cash and cash equivalents 1,298,272 19,274,547Cash and cash equivalents (pledged as security) – 19,779Payables (1,173,688) (5,473,280)Current tax liabilities – (122,846)Deferred tax liabilities – (2,115,458)Deferred income on government grants – (47,183)Net identifiable assets 1,146,480 67,576,187





Acquisition of Subsidiaries (cont’d)

The cash flow effects of the acquisition of subsidiaries on the consolidated cash flow statement are as follows:

2010 2009RM RM

Net identifiable assets 1,146,480 67,576,187Share of net assets previously held as associates – (31,983,769)Share of net assets previously held as other investments – (312,634)Minority interest (564,066) (33,150,959)Goodwill/(Negative goodwill) 214,489 (731,074)

Consideration paid 796,903 1,397,751Cash and cash equivalents acquired (1,298,272) (19,274,547)

Acquisition of subsidiaries, net of cash acquired (501,369) (17,876,796)

Acquisition of Shares From Minority Shareholders

2010

In July 2009, the Company acquired additional 0.60% of the equity interest in Lipo from the open market for RM163,131.

In May 2010, the Company acquired additional 9.00% of the equity interest in KWH for RM135,000.

2009

In December 2008 and March 2009, the Company acquired additional 1.20% of the equity interest in Lipo from the open market for RM307,414.

Amounts Owing By Subsidiaries

2010 2009RM RM

Bearing interest at 5.25% per annum 7,415,760 272,863Non-interest bearing 7,684,892 10,539,568

15,100,652 10,812,431Allowance for doubtful debts (87,404) (579,780)

15,013,248 10,232,651

The amounts owing by subsidiaries are unsecured and repayable on demand.

Amounts Owing To Subsidiaries

The amounts owing to subsidiaries are unsecured, non-interest bearing and repayable on demand.




8. OTHER INVESTMENTS

The Group The Company2010

RM2009

RM2010

RM2009

RM

CostQuoted shares in Malaysia 359,161 1,589,540 – –Unit trusts 2,001,500 500,000 2,001,500 500,000Bond 251,700 1,014,300 251,700 1,014,300

2,612,361 3,103,840 2,253,200 1,514,300

Allowance for Diminution in ValueQuoted shares in Malaysia – (88,479) – –Unit trusts – (48,036) – (48,036)Bond – – – –

– (136,515) – (48,036)

Carrying AmountQuoted shares in Malaysia 359,161 1,501,061 – –Unit trusts 2,001,500 451,964 2,001,500 451,964Bond 251,700 1,014,300 251,700 1,014,300

2,612,361 2,967,325 2,253,200 1,466,264

Market ValueQuoted shares in Malaysia 354,000 1,625,544 N/A N/AUnit trusts 2,018,829 440,616 2,018,829 440,616Bond 266,954 1,033,189 266,954 1,033,189

9. INTANGIBLE ASSETS

The Group

GoodwillIntellectual

property TotalRM RM RM

Balance at 1 July 2009 – – –Acquisition of subsidiaries 214,489 199,750 414,239Balance at 30 June 2010 214,489 199,750 414,239




10. DEFERRED TAX ASSETS/(LIABILITIES)

The Group

2010 2009RM RM

Balance at 1 July (3,869,977) (1,599,331)Acquisition of subsidiaries 50,384 (2,115,458)Deferred tax expense relating to origination and reversal of temporary differences (1,438) (150,534)Deferred tax expense relating to differential tax rates – (52,272)Deferred tax liabilities over provided in prior year 129,534 47,618

Balance at 30 June (3,691,497) (3,869,977)

Disclosed as:- Deferred tax assets – 331,000- Deferred tax liabilities (3,691,497) (4,200,977)

(3,691,497) (3,869,977)

The deferred tax liabilities are in respect of the following items:

2010 2009RM RM

(Taxable)/Deductible temporary differences of:- property, plant and equipment (3,757,251) (4,173,545)- prepaid lease payments (225,857) (258,538)- inventories 74,000 –- receivables and payables – (8,894)Unused capital allowances 131,592 136,000Unused tax losses 86,019 435,000

(3,691,497) (3,869,977)




10. DEFERRED TAX ASSETS/(LIABILITIES) (cont’d)

Save as disclosed above, as at 30 June 2010, deferred tax liabilities and deferred tax assets have also effectively been recognised and offset against each other by the Group and the Company to the extent of approximately RM170,000 and RM110,000 (2009 : RM142,000 and RM127,000) respectively. No further deferred tax assets have been recognised for the excess of the deductible temporary differences, unused capital allowances and tax losses over the taxable temporary differences as follows:


RM2009

RM2010

RM2009

RM

Deductible temporary differences of receivables and payables 2,000,000 2,013,000 – –

Unused capital allowances 1,530,000 1,402,000 582,000 581,000Unused tax losses 7,959,000 6,177,000 18,000 18,000Taxable temporary differences of property, plant

and equipment (679,000) (569,000) (439,000) (507,000)

10,810,000 9,023,000 161,000 92,000

11. LOAN RECEIVABLES

The Group

2010 2009RM RM

Loan receivables 5,112,647 2,182,046Allowance for doubtful debts (2,000,000) (2,000,000)

3,112,647 182,046

Disclosed as:- Non-current assets 15,638 33,742- Current assets 3,097,009 148,304

3,112,647 182,046

The effective interest rates of loan receivables range from 6% to 10% (2009 : 6% to 18%) per annum.




12. ASSETS HELD FOR SALE

The Group

2010 2009RM RM

Balance at 1 July – –Short-term leasehold land transferred from prepaid lease payments* 4,390,914 –Building transferred from property, plant and equipment* 3,855,496 –

Balance at 30 June 8,246,410 –

* Presented in “unallocated non-operating segments” for segment reporting purposes

During the financial year, the Group, through a subsidiary, Unetsys Sdn. Bhd., committed to a plan to sell the aforementioned properties and initiated an active programme to locate a buyer.

13. INVENTORIES

The Group

2010 2009RM RM

Raw materials and consumables 2,997,980 2,627,185Work-in-progress 5,142,407 3,411,482Finished goods 3,040,893 2,418,052

11,181,280 8,456,719

14. TRADE AND OTHER RECEIVABLES


RM2009

RM2010

RM2009

RM

Trade receivables 26,954,538 9,960,664 – –Allowance for doubtful debts (35,958) (194,964) – –

26,918,580 9,765,700 – –

Other receivables 4,842,461 5,093,330 3,768,710 3,769,657Allowance for doubtful debts (3,735,826) (3,670,010) (3,735,826) (3,670,010)

1,106,635 1,423,320 32,884 99,647

28,025,215 11,189,020 32,884 99,647

The currency exposure profile of trade and other receivables is as follows:

The Group The Company2010 2009 2010 2009

RM RM RM RM

Ringgit Malaysia 14,263,380 4,951,590 32,884 99,647Australian Dollar 2,475 – – –Euro 225,724 2,202 – –Japanese Yen 308,776 34,353 – –Pound Sterling 280,885 75,275 – –Renminbi 4,744,435 3,422,688 – –Singapore Dollar 373,297 198,817 – –Thai Baht 196,790 268,005 – –US Dollar 7,629,453 2,236,090 – –

28,025,215 11,189,020 32,884 99,647

The credit terms of trade receivables range from 30 to 120 days.




15. CASH AND CASH EQUIVALENTS


RM RM RM RM

Highly liquid investments 4,674,344 5,975,754 598,615 1,918,778Term deposits with licensed banks 37,635,130 46,335,947 19,677,691 23,967,789Cash and bank balances 6,799,130 8,288,805 271,834 174,883

49,108,604 60,600,506 20,548,140 26,061,450

The effective interest rates of term deposits range from 0.24% to 3.3% (2009 : 0.15% to 3.7%) per annum.

The currency exposure profile of cash and cash equivalents is as follows:


RM RM RM RM

Ringgit Malaysia 45,536,889 54,252,039 20,548,140 26,061,450Euro 30,198 3,867 – –Japanese Yen 5,129 127,913 – –Philippines Peso – 1,943 – –Renminbi 1,428,225 2,104,979 – –Singapore Dollar 100,082 – – –Thai Baht 349,452 558,111 – –US Dollar 1,658,629 3,551,654 – –

49,108,604 60,600,506 20,548,140 26,061,450

For the purpose of cash flow statements, cash and cash equivalents exclude certain term deposits pledged as security for credit facilities granted to the Group and the Company as follows:


RM RM RM RM

Cash and cash equivalents 49,108,604 60,600,506 20,548,140 26,061,450Term deposits pledged as security (392,935) (309,950) (8,000) (8,000)

48,715,669 60,290,556 20,540,140 26,053,450




16. TRADE AND OTHER PAYABLES


RM RM RM RM

Trade payables 11,902,730 3,567,393 – –Other payables 7,469,992 5,241,469 80,463 62,911

19,372,722 8,808,862 80,463 62,911

Included in other payables of the Group are amounts totalling RM3,701,300 (2009 : RM3,348,800) owing to minority shareholders of certain subsidiaries. The amounts due are unsecured, non-interest bearing and repayable on demand.

The currency exposure profile of trade and other payables is as follows:


RM RM RM RM

Ringgit Malaysia 12,442,929 6,656,714 80,463 62,911Euro 161,760 1,684 – –Japanese Yen 26,332 27,044 – –Philippines Peso – 227 – –Pound Sterling 31,409 – – –Renminbi 1,792,245 1,887,994 – –Singapore Dollar 383,476 16,276 – –Thai Baht 75,188 46,183 – –US Dollar 4,459,383 172,740 – –

19,372,722 8,808,862 80,463 62,911

The credit terms of trade payables range from 30 to 120 days.

17. DEFERRED INCOME ON GOVERNMENT GRANTS

The Group

2010 2009RM RM

Balance at 1 July 26,962 –Acquisition of subsidiaries – 47,183Grants received 205,449 –Amortisation (68,060) (20,221)

Balance at 30 June 164,351 26,962

The Group received grants from the local government for the purchase of waste water treatment plant and Enterprise Resource Planning software. The grants were recognised as deferred income and amortised on a straight-line basis over the useful lives of the assets. The grants covered 50% of the project budgets as approved by the local government.




18. SHARE CAPITAL

2010 2009RM RM

Authorised:100,000,000 ordinary shares of RM1.00 each 100,000,000 100,000,000

Issued and fully paid-up:68,080,750 ordinary shares of RM1.00 each 68,080,750 68,080,750

Purchase of Own Shares

The shareholders of the Company, by a resolution passed at the Extraordinary General Meeting held on 3 July 2002, approved the Company’s plan to purchase its own shares. The directors are committed to enhancing the value of the Company to its shareholders and believe that the purchase plan can be applied in the best interests of the Company and its shareholders. The details of the shares purchased from the open market using internally generated funds and held as Treasury Shares are as follows:

2010 2009Number of

Shares RMNumber of

Shares RM

Balance at 1 July/30 June 728,200 888,447 728,200 888,447

The number of outstanding shares in issue after excluding the Treasury Shares is 67,352,550 (2009 : 67,352,550).

Employees’ Share Option Scheme

The Employees’ Share Option Scheme (“ESOS”) of the Company is governed by the Bye-Laws approved by the shareholders at an Extraordinary General Meeting held on 27 December 2002.

The principal features of the ESOS are as follows:

(i) The maximum number of shares in the Company which may be subscribed on the exercise of options granted under the ESOS shall not, in aggregate, exceed 10% of the issued and paid-up share capital of the Company or such maximum percentages as allowable by any other relevant authorities at any point of time during the existence of the ESOS.

(ii) In order to qualify for participation in the ESOS, a participant must be an eligible executive director or employee of the Group. Eligibility, however, does not confer an eligible executive director or employee a claim or right to participate in the ESOS unless an offer has been extended to the eligible executive director or employee.

(iii) The number of new shares that may be offered and allotted to any eligible executive director and employee of the Group, who are entitled to participate in the ESOS, shall be at the discretion of the committee appointed by the Board of Directors (“Option Committee”) after taking into consideration the performance, seniority and length of service of the eligible executive directors and employees in the Group and such other factors that the Option Committee may deem relevant subject to the following:

(a) not more than 50% (or such percentage as allowable by the relevant authorities) of the shares available under the ESOS shall be allocated, in aggregate, to directors and senior management of the Group; and

(b) not more than 10% (or such percentage as allowable by the relevant authorities) of the shares available under the ESOS shall be allocated to any individual director or employee who, either singly or collectively through his/her associates (as defined in the Companies Act 1965), holds 20% or more in the issued and paid-up share capital of the Company;

provided always that it is in accordance with any prevailing guidelines issued by the Securities Commission (“SC”) or any other relevant authorities as amended from time to time.

(iv) The ESOS shall continue to be in force for a period of 10 years and expiring on 17 February 2013.




18. SHARE CAPITAL (CONT’D)

Employees’ Share Option Scheme (cont’d)

(v) The price payable upon exercise of each of the option shares granted under the ESOS shall be set based on the 5-days weighted average market price of the Company’s shares, as quoted on Bursa Malaysia Securities Berhad, immediately preceding the date the option is granted, with a discount of not more than 10%, if deemed appropriate, or such lower or higher limit in accordance with any prevailing guidelines issued by the SC or any other relevant authorities as amended from time to time, or at the par value of each of the shares in the Company, whichever is higher.

(vi) The new shares to be allotted and issued upon exercise of any option shall upon allotment rank pari passu in all respects with the existing issued and paid-up shares in the Company except that the new shares so allotted shall not be entitled to any dividend, rights, allotment or other distribution unless the shares so allotted have been credited into the relevant securities accounts maintained by Bursa Malaysia Depository Sdn. Bhd. before the entitlement date and will be subject to all the provisions of the Articles of Association of the Company relating to the transfer, transmission or otherwise of the shares in the Company.

The movements in the number of options during the financial year are as follows:

Number of Weighted WeightedOptions over Average Range of Average

Ordinary Exercise Exercise RemainingShares of Price Prices Contractual

RM1.00 each RM RM Life

Outstanding at 1 July 2008 3,301,000 1.20

Lapsed (501,000) 1.20

Outstanding at 30 June 2009 2,800,000 1.20 1.20 3.5 years

Exercisable at 30 June 2009 2,800,000 1.20

Outstanding at 1 July 2009 2,800,000 1.20

Lapsed (344,000) 1.20

Outstanding at 30 June 2010 2,456,000 1.20 1.20 2.5 years

Exercisable at 30 June 2010 2,456,000 1.20




19. REVENUE


RM RM RM RM

Sale of goods 76,466,148 56,012,549 – –Rendering of services 5,154,889 – 425,825 308,400Dividend income 25,206 35,517 3,795,413 2,613,181Interest income 157,979 31,029 – –Rental income – 17,927 – –

81,804,222 56,097,022 4,221,238 2,921,581

20. PROFIT BEFORE TAX


RM RM RM RM

Profit before tax is arrived at after charging:

Allowance for doubtful debts 86,811 92,118 65,816 –Amortisation of prepaid lease payments 241,655 209,570 – –Auditors’ remuneration- current year 167,827 132,515 20,000 20,000- prior year 8,950 35,832 – 20,000Bad debts written off 64,650 153,775 5,280 –Depreciation of property, plant and equipment 6,974,271 5,371,787 106,960 108,669Directors’ remuneration- fees

- current year 25,000 25,000 25,000 25,000- prior year – (2,500) – (2,500)

- other emoluments 895,222 798,157 590,516 575,238Impairment loss of property, plant and

equipment* – 127,220 – –Interest expense 698 52,106 – –Inventories written down – 2,757,567 – –Loss on disposal of property, plant and

equipment – 6,285 – 17Loss on foreign exchange- realised 442,950 – 1,714 –- unrealised 15,166 – – –Loss on winding up of subsidiary 61,877 – – –Property, plant and equipment written off 69,527 155,433 996 1,062




20. PROFIT BEFORE TAX (cont’d)


RM RM RM RM

Rental expenses- machinery and equipment 217,085 3,479 – –- premises 995,301 743,106 24,000 38,000- others – 1,324 – –Research and development costs 199,930 130,810 – –

and crediting:

Allowance for diminution in value of other investments written back – 9,461 – –

Allowance for doubtful debts written back 139,991 329,382 – –Amortisation of deferred income on government

grants 68,060 20,221 – –Bad debts recovered – 43,215 – –Gain on disposal of other investments 471,939 442,368 18,776 –Gain on disposal of property, plant and

equipment 117,204 – – –Gain on disposal of subsidiaries – 499,891 – 2Gain on foreign exchange- realised 10,697 989,442 – 512- unrealised – 2,567 – –Gain on winding up of subsidiary – – 128,675 –Government grants 2,188 30,553 – –Gross dividend income from:- quoted shares in Malaysia – 35,517 – –- subsidiaries – – 3,795,413 2,613,181Interest income 1,337,073 1,276,961 687,906 849,087Negative goodwill** – 731,074 – –Rental income- machinery and equipment – 45,000 – –- premises 27,429 74,627 – –

* Included in administrative and general expenses** Included in other income




21. EMPLOYEE BENEFITS EXPENSE


RM RM RM RM

Short-term employee benefits 22,656,282 15,687,893 1,549,611 1,550,062Defined contribution plan 1,684,350 1,283,014 182,829 187,646

24,340,632 16,970,907 1,732,440 1,737,708

22. TAX EXPENSE/(INCOME)


RM RM RM RM

Tax based on results for the year:Malaysian income tax 1,337,999 191,671 103,829 –Overseas income tax 386,147 96,005 – –Deferred tax 1,438 202,806 – –

1,725,584 490,482 103,829 –Tax under/(over) provided in prior year:Malaysian income tax 4,119 116,523 (110,854) 3,078Deferred tax (129,534) (47,618) – –

1,600,169 559,387 (7,025) 3,078

The numerical reconciliation between the applicable tax rate, which is the statutory income tax rate, and the average effective tax rate on results for the year is as follows:


% % % %

Applicable tax rate 25.00 25.00 25.00 25.00Non-deductible expenses 11.85 35.08 2.70 2.98Non-taxable income (8.06) (23.85) (24.59) (33.72)Pioneer income exempted (3.78) (49.31) 0.00 0.00Reinvestment allowances claimed (10.13) (10.15) 0.00 0.00Effect of differential tax rates 7.63 12.80 0.00 0.00Increase in unrecognised deferred tax assets 7.73 39.00 0.63 5.74

Average effective tax rate 30.24 28.57 3.74 0.00

Certain subsidiaries have been granted pioneer status by the Ministry of International Trade and Industry Malaysia. Under this incentive, 70% to 100% of the subsidiaries’ statutory income from the pioneer products is exempted from income tax for 5 to 10 years.

As at 30 June 2010, the Company has sufficient tax credits and tax exempt income to frank/distribute its entire retained profits if paid out as dividends. It may also distribute its entire retained profits as at 30 June 2010 as tax exempt dividends under the single tier tax system.




23. EARNINGS PER SHARE

The Group

The basic earnings per share is calculated by dividing the Group’s net profit for the financial year attributable to shareholders of the Company by the weighted average number of ordinary shares in issue during the financial year as follows:

2010 2009

Net profit attributable to shareholders of the Company (RM) 1,411,460 1,663,238

Weighted average number of shares in issue 67,352,550 67,352,550

Basic earnings per share (sen) 2.10 2.47

The diluted earnings per share equals the basic earnings per share due to the anti-dilutive effect of the share options which has been ignored in calculating the diluted earnings per share.

24. DIVIDEND

The Group and the Company

2010 2009RM RM

Final dividend of 3.0 sen per share, tax exempt, in respect of the financial year ended 30 June 2008 – 2,020,577

Final dividend of 2.0 sen per share, tax exempt, in respect of the financial year ended 30 June 2009 1,347,051 –

1,347,051 2,020,577

A final dividend of 1.5 sen per share, tax exempt, amounting to RM1,010,288 in respect of the financial year ended 30 June 2010 will be proposed for shareholders’ approval at the forthcoming Annual General Meeting.




25. RELATED PARTY DISCLOSURES

Significant transactions with related parties during the financial year are as follows:


RM RM RM RM

Key management personnel compensation- short-term employee benefits 1,489,408 839,752 552,302 536,132- defined contribution plan 123,270 96,757 63,214 61,606

1,612,678 936,509 615,516 597,738Capital repayment from subsidiary – – 128,675 1,100,000Disposal of property, plant and equipment to

subsidiary – – – 250Dividends received from subsidiaries – – 3,490,413 2,442,681Interest charged to subsidiaries – – 148,840 141,078Management fees charged to subsidiaries – – 425,825 308,400Rental of machinery charged to associate – 45,000 – –Rental of premises charged by subsidiary – – 24,000 38,000Rental of premises charged to associates – 12,000 – –Sale of goods to associates – 2,304 – –Sub-contract charges charged by associates – 15,586 – –Subscription for shares in subsidiary – – 762,991 –

26. SEGMENT REPORTING

The Group

Operating Segments

For management purposes, the Group is organised into business units based on their products and services and has the following reportable operating segments:

(i) Precision tooling and moulds - Manufacture of machinery parts, tools, dies and moulds

(ii) Precision components - Manufacture of precision machined components, precision stamping, sheet metal parts and surface treatment

(iii) Automation and metal works - Design and manufacture of automated machines, development of automation software and manufacture of metal works, modules and parts for oil and gas production

Except as indicated above, no operating segments have been aggregated to form the above reportable segments. “Other operating segments” category consists of small operations related to general trading, money lending, oil and gas maintenance services and property development.

The accounting policies and measurement bases of the segment items reported are the same as those disclosed in Note 2 to the financial statements. Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with external parties.



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59

(86,

267)

559,

387


26. SEGMENT REPORTING (cont’d)

Geographical Information

In presenting information about geographical areas, segment revenue is based on the geographical location of customers whereas segment assets are based on the geographical location of assets.

External Revenue Non-current Assets2010 2009 2010 2009

RM RM RM RM

Malaysia 46,734,918 26,776,018 55,656,799 56,935,144China 11,137,614 7,855,100 6,648,377 8,479,838Singapore 12,814,306 885,411 265,915 –United States of America 4,029,394 10,811,351 – –Other foreign countries 7,087,990 9,769,142 374,285 518,399

81,804,222 56,097,022 62,945,376 65,933,381

Major Customer

Revenue from one major customer of the Group’s automation and metal works segment contributed approximately RM9,710,000 (2009 : NIL) of the Group’s total revenue.

27. COMMITMENT FOR PURCHASE OF PROPERTY, PLANT AND EQUIPMENT

The Group

2010 2009RM RM

Contracted but not provided for 278,000 2,519,000

28. FINANCIAL INSTRUMENTS

Recognised Financial Instruments

The information about the extent and nature of significant recognised financial instruments is disclosed in the individual notes associated with each item.

Unrecognised Financial Instruments

The Group and the Company do not have any unrecognised financial instruments.

Fair Values

The carrying amounts of financial assets and liabilities of the Group and the Company as at 30 June 2010 and 2009 approximate their fair values except for the other investments of which the fair values are disclosed in Note 8 to the financial statements.




29. FINANCIAL RISK MANAGEMENT

The activities of the Group expose it to certain financial risks, including currency risk, price risk, credit risk and liquidity risk. The overall financial risk management objective of the Group is to maximise shareholders’ value by minimising the potential adverse impacts of these risks on its financial position, performance and cash flows.

The Board of Directors explicitly assumes the responsibilities of financial risk management which is carried out mainly through risk reviews and internal control systems.

Currency Risk

The Group’s exposure to currency risk arises mainly from transactions entered into by individual entities within the Group in currencies other than their functional currencies.

The Group monitors the movements of exchange rates and acts accordingly to minimise its exposure to currency risk. Such exposure is also partly mitigated in the following ways:

(i) The Group’s foreign currency sales and purchases provide a natural hedge against fluctuations in foreign currencies.

(ii) The Group maintains part of its cash and cash equivalents in foreign currency accounts to meet future obligations in foreign currencies.

Price Risk

The Group’s exposure to price risk arises mainly from quoted investments.

The Group manages its exposure to price risk by evaluating investment opportunities, continuously monitoring investment performance and assessing market risk relevant to which the investment operates.

Credit Risk

The Group’s exposure to credit risk arises mainly from receivables. The maximum credit risk exposure is best represented by the total carrying amount of these financial assets in the balance sheet.

The Group manages its exposure to credit risk by assessing counter parties’ financial standings on an ongoing basis, setting and monitoring counter parties’ limits and credit terms. The Group does not have any significant concentration of credit risk relating to any individual customer or counter party.

Liquidity Risk

The Group practises prudent liquidity risk management by maintaining sufficient cash and the availability of funding through certain committed credit facilities.




30. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE

(i) In August 2010, the Group, through a subsidiary, Kobay SCM (S) Pte. Ltd., acquired 60% of the equity interest in United Manufacturing Corporation Pte. Ltd., a company incorporated in Singapore, for RM92,040. The acquisition gave rise to negative goodwill of RM17,184. The carrying amounts of the subsidiary’s assets and liabilities immediately before the acquisition date, determined in accordance with Financial Reporting Standards and approximating their fair values recognised at the acquisition date, are as follows:

RM

Property, plant and equipment 46,662Inventories 69,762Receivables and prepayments 79,333Cash and cash equivalents 26,889Payables (40,606)

Net identifiable assets 182,040

(ii) In September 2010, the Group, through the Company, entered into a share sale agreement to dispose of its 60% of the equity interest in Unetsys Sdn. Bhd. (“Unetsys”) for RM8,700,000. Consequently, the leasehold land and building owned by Unetsys and held for sale as disclosed in Note 12 to the financial statements will be disposed of together.




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Authorized Share Capital : RM100,000,000Issued and Paid Up Capital : RM67,352,550 (excluding 728,200 treasury shares)Class of Equity Shares : Ordinary Shares of RM1.00 eachVoting Rights : One vote per shareholder on a show of hands or one vote per ordinary share on a poll

ANALYSIS OF SHAREHOLDINGS

Size of Shareholdings Shareholders ShareholdingsNumber %^ Number %^

1 - 99 484 9.099 23,237 0.035100 - 1,000 412 7.746 272,100 0.4041,001 - 10,000 3,934 73.961 11,402,278 16.92910,001 - 100,000 462 8.686 10,958,398 16.270100,001 - 3,367,626 25 0.470 19,441,130 28.8653,367,627 and above 2 0.038 25,255,407 37.497

TOTAL 5,319 100.000 67,352,550 100.000

SUBSTANTIAL SHAREHOLDERS

Name of Substantial Shareholders Direct Interest Deemed InterestNo. of Shares %^ No. of Shares %^

Kobay Holdings Sdn. Bhd. 17,523,007 26.02 – –Norinv Kapital Sdn. Bhd. 7,732,400 11.48 – –Dato’ Koay Hean Eng 1,654,154 2.45 *17,523,007 26.02Koay Cheng Lye 586,995 0.87 *17,523,007 26.02Koay Ah Bah @ Koay Cheng Hock 569,665 0.85 *17,523,007 26.02

DIRECTORS’ SHAREHOLDING IN THE COMPANY

Name of Directors Direct Interest Deemed InterestNo. of Shares %^ No. of Shares %^

Dato’ Koay Hean Eng 1,654,154 2.45 *17,523,007 26.02Koay Cheng Lye 586,995 0.87 *17,523,007 26.02Koay Ah Bah @ Koay Cheng Hock 569,665 0.85 *17,523,007 26.02Tan Yok Cheng 1,250 # - -Lim Swee Chuan - - - -Dato’ Abdul Rahman Bin Mohammed Hashim 1,250 # - -Dr. Mohamad Zabdi Bin Zamrod - - - -Khaw Eng Peng - - - -

Notes:* Deemed interest by virtue of the Directors’ direct interest in Kobay Holdings Sdn. Bhd., a major shareholder of Kobay# Interest is less than 0.01%^ The percentage of shareholding is calculated based on the issued and paid-up capital of the Company of RM68,080,750 comprising of

68,080,750 ordinary shares and after deduction of 728,200 treasury shares retained by the Company as per Record of Depositors.

Dato’ Koay Hean Eng, Mr. Koay Cheng Lye and Mr. Koay Ah Bah @ Koay Cheng Hock are deemed to have interest in the shares of all the subsidiary companies of Kobay Technology Bhd. (“Kobay”) to the extent that Kobay has an interest, by virtue of their deemed interests in the shares of Kobay.

Statistics of ShareholdingsAs At 8 November 2010


THIRTY (30) LARGEST SHAREHOLDERS

Name of ShareholdersNo. of

Shares Held%

Shareholding^1. Kobay Holdings Sdn. Bhd. 17,523,007 26.022. Norinv Kapital Sdn. Bhd. 4,369,600 6.493. Norinv Kapital Sdn. Bhd. 3,362,800 4.994. Ho Kok Seng 3,291,100 4.895. Premiergrow Capital Sdn. Bhd. 2,946,600 4.386. Inna Capital Sdn.Bhd. 1,788,716 2.667. Ch’ng Chuon Ghee 1,729,700 2.578. Inna Capital Sdn.Bhd. 1,531,200 2.279. Ch’ng Kean Hong 1,110,000 1.6510. Koay Hean Eng 1,000,054 1.4911. Tan Lai Hock 714,600 1.0612. Alliancegroup Nominees (Tempatan) Sdn. Bhd. 654,100 0.97

Pledged Securities Account for Koay Hean Eng13. Koay Cheng Lye 586,995 0.8714. Koay Ah Bah @ Koay Cheng Hock 569,665 0.8515. Lai Chin Loy 486,600 0.7216. Tan Shuan Soon 470,000 0.7017. Ong Kok Hoe 357,000 0.5318. Chan Foong Cheng 240,000 0.3619. Kong Food Kim 220,600 0.3320. Ch’ng Chuon Ghee 212,000 0.3221. Multi-Purpose Insurans Bhd. 182,200 0.2722. Sapiah Binti Abu 162,500 0.2423. Lew Yok Kee 155,000 0.2324. Lee Eng Wooi 140,100 0.2125. Chan Kai Lum 140,000 0.2126. Ariffin Bin Mohamed Isa 111,250 0.1627. Chan Foong May 110,000 0.1628. Tan Saw Ho 109,500 0.1629. Ch’ng Way Aik 102,600 0.1530. Tong Hin Huat 100,000 0.15

TOTAL : 44,477,487 66.04

Note:^ The percentage of shareholding is calculated based on the issued and paid-up capital of the Company of RM68,080,750 comprising of

68,080,750 ordinary shares and after deduction of 728,200 treasury shares retained by the Company as per Record of Depositors.

Statistics of Shareholdings (cont’d)

As At 8 November 2010


Location with Address Description/Existing useLand Area/(Build-up Area)

Date of Acquisition

Tenure/(Age of Bui ld ings )

Net Book Value

@ 30/6/10(RM’000)

* HS(D) No. HSD 11895, PT 3020, Mukim 12, Daerah Barat Daya, Pulau Pinang

Plot 38, Phase IV Hilir Sungai Kluang 2, Bayan Lepas Industrial Park, 11900 Pulau Pinang

Single storey factory

Existing use : Industrial use as factory premises

Approx. 45,738 sq. ft/(12,102 sq. ft)

09.07.1992 Leaseho ld for 60 years expiring on 24.11.2053/ (16 years)

2,101

* HS(D) PN5918, Lot 12383, Mukim 12, Daerah Barat Daya, Pulau Pinang

Plot 30, Phase IV, Hilir Sungai Kluang 1, Bayan Lepas Industrial Park, Pulau Pinang

Single storey factory with an annexed two storey office block in front


Approx. 130,681 sq. ft/(85,007 sq. ft)


8,707

* HS(D) No. PN3002, Lot 7149, Mukim 12, Daerah Barat Daya, Pulau Pinang

Plot 75, Lintang Kampung Jawa, Bayan Lepas Industrial Park, Pulau Pinang

Single storey factory building with two storey office block in-front


Approx. 20,206 sq. ft/ (13,806 sq. ft)

03.07.1987 Leaseho ld for 60 years expiring on 14.08.2047 (19 years)

1,381

HS(D) No. HSD 15249, PT1, Mukim 12, Daerah Barat Daya, Pulau Pinang

Plot 201, Lebuh Kg. Jawa, Bayan Lepas, Free Industrial Zone, Phase III, 11900 Bayan Lepas, Pulau Pinang

Double storey factory building


Approx. 217,612 sq. ft./(240,000 sq. ft.)

12.01.2007 Leaseho ld for 60 years expiring on 1 . 4 . 2 0 4 1 / (17 years)

8,246

Hakmilik No. PN4028, Lot 12461, Mukim 12, Daerah Barat Daya, Pulau Pinang

Plot 83, Medan Bayan Lepas, Bayan Lepas Industrial Park IV, 11900 Pulau Pinang

Single storey factory building with an annexed two storey office block


Approx. 87,599 sq. ft/ (41,797 sq. ft)


5,466

HS(D) No. HBM38, PT 1528 & HS(D) No. HBM39, PT 1530, Mukim 1, Daerah Seberang Prai Tengah, Pulau Pinang

2631, Lorong Perusahaan 10, Phase 3, Prai Industrial Estate, 13600 Pulau Pinang

Single storey factory building with an annexed two storey office block


Approx. 118,099 sq. ft/(73,336 sq. ft)


3,873

Geran 94526, Lot 3611, Mukim Rimba Terjun, Daerah Pontian, Negeri Johor.

Single storey factory


Approx.490,317 sq. ft/(25,000 sq. ft)

10.06.2009 Freehold 3,778

List Of PropertiesAs At 30 June 2010


List Of Properties (cont’d)

As At 30 June 2010

Location with Address Description/Existing useLand Area/(Build-up Area)

Date of Acquisition

Tenure/(Age of Bui ld ings )

Net Book Value

@ 30/6/10(RM’000)

HS(D) No. HSD 42050, PT 5, Mukim 1, Daerah Seberang Perai Tengah, Pulau Pinang

967, Kawasan Perusahaan MIEL, Pulau Pinang

Single storey factory building


Approx. 22,500 sq. ft/ (20,000 sq. ft)


841

HS(D) No. HSD 11700, PT80020 Mukim of Hulu Kinta, District of Kinta, Perak

Plot 19, Zon Perdagangan Bebas, Jelapang II, Jalan Jelapang, 30020 Ipoh, Perak

Single storey factory building

Existing use : Vacant

Approx. 449,801 sq. ft/(122,123 sq. ft)


5,368

Jenis dan No. Hakmilik : GRN52732 Lot 990; GRN52733 Lot 992; GRN28219 Lot 996; GRN46882 Lot 36; and GRN28204 Lot 249 Bandar Tanjung Bungah, Daerah Timur Laut, Pulau Pinang

Land


Approx.31,812 sq. ft

01.12.2009 Freehold 4,588

Jenis dan No. Hakmilik : GRN28217 Lot 993; GRN28218 Lot 995; GRN46881 Lot 35; and GRN44961 Lot 251 Bandar Tanjung Bungah, Daerah Timur Laut, Pulau Pinang

Land


Approx.15,872 sq. ft

25.02.2010 Freehold 2,518

Note:* The property was revalued at 22 August 1996. The Group carried its long leasehold and short leasehold land and buildings at

revalued amounts and placed reliance on the transitional provision when Malaysian Accounting Standards Board first adopted International Accounting Standards 16 which provides exemption from the need to make regular revaluations for such properties.


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Kobay Technology Bhd. (Company No.: 308279-A)

Plot 30, Hilir Sungai Kluang 1Bayan Lepas Industrial Park, Phase 411900 Penang, MalaysiaTel: 604-6411 888 Fax: 604-6412 888

www.kobaytech.com

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