THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

If you are in any doubt as to the course of action you should take, you should consult your stockbroker, bank manager, solicitor,accountant or other professional adviser immediately. If you have sold or transferred all your ordinary shares in KOBAYTECHNOLOGY BHD., you should at once hand this Circular together with the accompanying Form of Proxy to the agentthrough whom the sale or transfer was effected for onward transmission to the purchaser.

The Kuala Lumpur Stock Exchange takes no responsibility for the contents of this Circular, and makes no representation as to itsaccuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in relianceupon the whole or any part of the contents of this Circular.

(Company No.: 308279-A )(Incorporated in Malaysia)

CIRCULAR TO SHAREHOLDERSin relation to the

• PROPOSED RENEWAL OF SHARE BUY-BACK AUTHORITY

• PROPOSED SHAREHOLDERS’ MANDATE FOR RECURRENT RELATED PARTYTRANSACTIONS OF A REVENUE OR TRADING NATURE

A relevant extract of the Notice of the Ninth Annual General Meeting of the Company which will be held at Plot 30, HilirSungai Kluang Satu, Bayan Lepas Industrial Park, Phase 4, 11900 Penang on Wednesday, 24 December 2003 at 3.30 p.m. isenclosed together in this Circular.

The Form of Proxy is enclosed in the 2003 Annual Report of the Company. The Form of Proxy should be lodged at theRegistered Office of the Company at Lot 1.02 First Floor, Acctax Corporate Centre, No. 2 Jalan Bawasah, 10050 Penang,not later than forty-eight (48) hours before the time of the meeting. The lodging of the Form of Proxy will not preclude youfrom attending and voting in person at the meeting if you subsequently wish to do so.

This Circular is dated 2 December 2003

DEFINITIONS

Except where the context otherwise requires, the following definitions shall apply throughout thisCircular:-

“Act” : The Companies Act, 1965

“AGM” : Annual General Meeting

“A-PAC” : A-Pac Multimedia Sdn Bhd (495452-P)

“BWE” : Bend Weld Engineering Sdn Bhd (203565-P)

“Code” : The Malaysian Code on Take-overs and Mergers,1998

“Elite” : Elite Paper Trading Sdn. Bhd. (575367-U)

“EPS” : Earnings Per Share

“GETT” : Global Electronic Trade Technologies Sdn. Bhd.(Formerly known as Powercations Sdn. Bhd.)

“KV” : Kobay Ventures Sdn. Bhd. (581589-D)(Formerly known as ITT Kobay Sdn. Bhd.)

“KA” : Kobay Assets Sdn Bhd (124270-M)

“Kew” : Kewjaya Sdn. Bhd. (576802-P)

“KHSB” : Kobay Holdings Sdn Bhd (280918-D)

“KLSE” : Kuala Lumpur Stock Exchange

“Kobay” or the “Company” : Kobay Technology Bhd. (308279-A)

“Kobay Group” or the “Group” : Kobay and its subsidiaries

“KT” : Kobay Tecnica Sdn Bhd (565652-D)

“KTM” : Kobay Tecnica Manufacturing Sdn Bhd (567614-A)

“KTMT” : KT Machine Tools Sdn Bhd (568463-X)

“KYM” : KYM Electronics Sdn. Bhd. (602899-X)

“Lipo” : Lipo Corporation Berhad (491485-V)

“Listing Requirements” : Listing Requirements of the KLSE

“LPI” : Lipo Precision Industry (Suzhou) Co. Ltd.

“MAKER” : Maker Technologies Sdn Bhd (413580-V)

“MP” : Megatool Precision Sdn Bhd (251883-K)

“MPS” : Megatool Precision (Suzhou) Co. Ltd.

i

“NTA” : Net tangible assets

“OPAR” : Opar Holdings Sdn Bhd (276729-T)

“PA” : Polytool Automation Sdn Bhd (267261-U)

“PI” : Polytool Industries Sdn Bhd (207441-M)

“PIN” : Polytool Integration Sdn Bhd (558907-K)

“PI(P)” : Polytool Industries Phils., Inc. (C200251137)

“PI(T)” : Polytool Industries (Thailand) Ltd. (11954500067)

“PMI” : Paradigm Metal Industries Sdn. Bhd. (205290-X)

“PNS” : Penang Network Services Sdn Bhd (390460-W)

“PNT” : Penang Network Technologies Sdn Bhd (533651-W)

“PP” : Polytool Precision Sdn Bhd (456164-X)

“PPC” : Paradigm Precision Components Sdn Bhd (217167-U)

“PPM” : Paradigm Precision Machining Sdn Bhd (201691-T)

“Proposals” : Comprising collectively the Proposed Share Buy-Backand Proposed Shareholders’ Mandate

“Proposed Shareholders’ Mandate” : Proposed shareholders’ mandate to be obtained byKobay pursuant to Chapter 10, Paragraph 10.09 of theListing Requirements in relation to RRPTs

“Proposed Share Buy-Back” : The proposed purchase and/or hold by Kobay of itsown shares of up to 10% of its issued and paid-upshare capital at any given point in time, if deemed fitand expedient by the Directors of the Company

“PT” : Polytool Technologies Sdn Bhd (522554-K)

“Related Party(ies)” A director or major shareholder of Kobay or personconnected with such a director or major shareholder asdefined under Chapter 1 and Chapter 10 of the ListingRequirements

“RM” and “sen” : Ringgit Malaysia and sen respectively

“RRPTs” : Recurrent related party transactions of a revenueand/or trading nature, which are necessary for the day-to-day operations of the Kobay Group, and are in theordinary course of business of the Kobay Group

“SC” : Securities Commission

“share(s)” : Ordinary share(s) of RM1.00 each

“UP” : Unitedprise Sdn Bhd (456157-P)

-ii-

CONTENTSPAGE

DIRECTORS' LETTER TO THE SHAREHOLDERS CONTAINING:-

1.0 INTRODUCTION............................................................................................................1

2.0 PROPOSED SHARE BUY BACK....................................................................................12.1 Details of the Proposed Share Buy-Back .....................................................................12.2 Rationale of the Proposed Share Buy-Back..................................................................32.3 Potential advantages and disadvantages of the Proposed Share Buy-Back......................32.4 Financial effects of the Proposed Share Buy-Back........................................................32.5 Public shareholding....................................................................................................52.6 Previous purchase or resale by Kobay of its own shares ................................................52.7 Approvals required.....................................................................................................62.8 Directors’ and major shareholders’ interests, and implications relating to the Code.........62.9 Historical share prices ................................................................................................6

3.0 PROPOSED SHAREHOLDERS’ MANDATE FOR RECURRENT RELATED PARTYTRANSACTIONS ...........................................................................................................73.1 Introduction ...............................................................................................................73.2 Principal activities of the Kobay Group........................................................................73.3 Details of transacting parties ......................................................................................93.4 Details of the Proposed Shareholders’ Mandate.......................................................... 103.5 Validity period ......................................................................................................... 183.6 Rationale for and benefit of the Proposed Shareholders’ Mandate ............................... 183.7 Financial effects of the Proposed Shareholders’ Mandate............................................ 183.8 Review procedures................................................................................................... 183.9 Statement by the Audit Committee ............................................................................ 193.10 Approval required .................................................................................................. 193.11 Directors’ and major shareholders’ interests.............................................................. 20

4.0 DIRECTORS’ RECOMMENDATION............................................................................ 21

5.0 AGM............................................................................................................................. 21

6.0 FURTHER INFORMATION .......................................................................................... 21

APPENDIX I

FURTHER INFORMATION ...................................................................................................... 22

-iii-

1

KOBAY TECHNOLOGY BHD.(Company No.: 308279-A )(Incorporated in Malaysia)

BOARD OF DIRECTORS : REGISTERED OFFICE :

Koay Cheng Lye (Chairman and Executive Director) Lot 1.02, First FloorDato’ Koay Hean Eng ( Managing Director) Acctax Corporate CentreKoay Ah Bah @ Koay Cheng Hock (Non-Independent Non-Executive Director) No. 2, Jalan BawasahOng Teik Kooi (Executive Director) 10050 PenangTan Yok Cheng (Independent Non-Executive Director)Dato’ Abdul Rahman Bin Mohammed Hashim (Senior Independent Non-ExecutiveDirector)Dr. Mohamad Zabdi Bin Zamrod (Independent Non-Executive Director)Lim Swee Chuan (Executive Director) 2 December 2003

To : The Shareholders of Kobay

Dear Sir/Madam,

• PROPOSED RENEWAL OF SHARE BUY-BACK AUTHORITY

• PROPOSED SHAREHOLDERS’ MANDATE FOR RECURRENT RELATED PARTYTRANSACTIONS OF A REVENUE OR TRADING NATURE

1. INTRODUCTION

1.1 At the Company’s AGM held on the 27 December 2002, the Board of Directors of Kobay hadobtained its shareholders’ approval to purchase through the KLSE up to 10% of the issuedand paid-up share capital of the Company and Shareholders’ Mandate to enter into recurrentrelated party transactions of a revenue or trading nature.

1.2 The existing authority to undertake the Share Buy-Back and the Shareholders’ Mandate toenter into recurrent related party transactions of a revenue or trading nature shall, inaccordance with the Listing Requirements, lapse at the conclusion of the forthcoming AGMunless the authority or mandate is renewed.

1.3 The Board of Directors proposes to seek a fresh authorisation from the shareholders of theCompany for the Proposals. The purpose of this Circular is to provide you with theinformation on the Proposals and to seek your approval for the Ordinary Resolutions to betabled at the forthcoming AGM to be convened at Plot 30, Hilir Sungai Kluang Satu, BayanLepas Industrial Park, Phase 4, 11900 Penang on Wednesday, 24 December 2003 at3.30 p.m.. The Notice of AGM together with the accompanying Form of Proxy are enclosedin this Circular

1.4 The Company had on 8 October 2003 made the announcement to the KLSE pertaining to theabove-mentioned Proposals.

2.0 PROPOSED SHARE BUY-BACK

2.1 Details of the Proposed Share Buy-Back

2.1.1 The Board of Directors of Kobay proposes to seek the mandate from the shareholders of theCompany to authorise the Company to purchase and/or hold its own shares up to a maximumof ten per cent (10%) of the issued and paid-up share capital of the Company subject tocompliance with Section 67A of the Act and any prevailing laws, rules, regulations, orders,guidelines and requirements issued by the relevant authorities. The Proposed Share Buy-Backwill be carried out through the KLSE via a stockbroker to be appointed at a later date.

2

2.1.2 The approval from the shareholders for the Proposed Share Buy-Back will be effectiveimmediately upon the passing of the ordinary resolution for the Proposed Share Buy-Backand will continue to be in force until:-

(i) the conclusion of the next AGM of the Company following the forthcoming AGM, atwhich time it shall lapse unless by ordinary resolution passed at that meeting, theauthority is renewed, either unconditionally or subject to conditions; or

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

(iii) revoked or varied by ordinary resolution passed by the shareholders in a generalmeeting,

whichever occurs first.

2.1.3 Kobay may purchase its own shares or resell its treasury shares (if any) on the KLSE, subject to:-

(a) a price for the purchase of own shares of not more than fifteen per cent (15%) above theweighted average market price of Kobay shares for the five (5) market days immediatelyprior to the purchase; or

(b) a price for the resale of treasury shares of not less than the weighted average marketprice of Kobay shares for the five (5) market days immediately prior to the resale.

2.1.4 The Proposed Share Buy-Back shall be made wholly out of the retained profits and/or sharepremium accounts of the Company. In order to implement the Proposed Share Buy-Back, anappropriate amount of internally generated funds of the Group would need to be allocated bythe Company and such allocation (the final quantum of which is to be determined later by theDirectors of the Company) shall not exceed the aggregate balance standing in the retainedprofits and/or share premium accounts of the Company. The audited retained profits and sharepremium accounts of the Company as at 30 June 2003 are RM10,291,553 and RM1,606,086respectively. As at 30 September 2003, the retained profits and share premium accounts of theCompany stood at RM10,304,415 and RM1,658,486 respectively.

2.1.5 The actual number of shares to be purchased and the timing of such purchase(s) woulddepend on, inter-alia, market conditions, retained profits and share premium accounts of theCompany as well as the availability of financial resources/funds necessary to give effect tosuch purchase(s).

2.1.6 The Company intends to treat the shares so purchased in accordance with the provisions ofthe Act, which allows a company that has purchased its own shares to either retain the sharesas treasury shares or to cancel the shares, or a combination of both. The shares so purchasedand retained as treasury shares by the Company may either be cancelled, distributed as sharedividends or resold on the KLSE at a price which is not less than the weighted average marketprice for the shares for five (5) market days immediately preceding the date of such resale.

2.1.7 It is the present intention of the Board of Directors to retain the purchased shares as treasuryshares and subsequently resell on the KLSE if the opportunity arises for the Company torealise gains from such resale on the market. However, the Board may distribute thepurchased shares as share dividends which will depend on the availability of, amongst others,retained profits, share premium account and tax credit (in relation to Section 108 of theIncome Tax Act, 1967) of the Company or cancel the purchased shares if the Board ofDirectors decides to change the capital structure of the Company.

3

2.1.8 For shares held as treasury shares, the rights attached thereto, including voting right, rights todividends and participation in other distributions are suspended and the treasury shares shallnot be taken into account in calculating the number or percentage of shares or of a class ofshares in the Company for any purposes, including major shareholdings, takeovers andquorum for meetings.

2.2 Rationale for the Proposed Share Buy-Back

2.2.1 The Proposed Share Buy-Back would enable Kobay to utilise its financial resources, whichare not immediately required, for the purpose of purchasing its own shares, if deemed fit andexpedient by the Directors of the Company. The Proposed Share Buy-Back may enhance theEPS and reduce the liquidity level of the shares of the Company on the KLSE, which, in turnis expected to benefit the shareholders of the Company.

2.2.2 In addition, the purchased shares can be held as treasury shares and re-sold on the KLSE withthe intention of realising a potential gain without affecting the total issued and paid-up sharecapital of the Company. Should any treasury shares be distributed as share dividends, thiswould serve to reward the shareholders of the Company.

2.3 Potential advantages and disadvantages of the Proposed Share Buy-Back

2.3.1 The potential advantages and disadvantages of the Proposed Share Buy-Back to the Companyand its shareholders are as follows:-

Advantages:-

(i) allows the Company the flexibility in attaining its desired capital structure; and

(ii) rewards the shareholders in the event the treasury shares are distributed as sharedividends.

Disadvantages:-

(i) the Proposed Share Buy-Back will reduce the financial resources of the Group andmay result in the Group forgoing better investment opportunities that may emerge inthe future; and

(ii) as the Proposed Share Buy-Back can only be made out of retained profits and sharepremium accounts of the Company, it may result in the reduction of financialresources available for distribution to shareholders in the immediate future.

The Board of Directors will be mindful of the Company and its shareholders in undertakingthe Proposed Share Buy-Back and in the subsequent resale of treasury shares on the KLSE, ifany.

2.4. Financial effects of the Proposed Share Buy-Back

2.4.1 On share capital

The effects of the Proposed Share Buy-Back on the issued and paid-up share capital of Kobaywould depend on the timing and the number of shares so purchased, if any. However, forillustration only, the Proposed Share Buy-Back would have the following effect on the issuedand paid-up share capital of the Company, assuming that a maximum number of 6,797,375shares or ten per cent (10%) of the Company's issued and paid-up share capital of 67,973,750shares as at 14 November 2003 are purchased by the Company and thereafter, immediatelycancelled:-

4

No. of shares %Issued and paid-up share capital as at 14 November 2003 67,973,750 100.00

Maximum number of shares to be purchased under theProposed Share Buy-Back

(6,797,375) (10.00)

Reduced issued and paid-up share capital 61,176,375 90.00

However, there will be no effect on the issued and paid-up share capital of the Company if theshares so purchased are retained as treasury stocks.

2.4.2 On earnings

The Proposed Share Buy-Back is not expected to have any material impact on the earnings ofthe Group. However, the resultant reduction in the number of Kobay shares in issue would beexpected to correspondingly increase the EPS of Kobay, at Company and Group levels, if theshares so purchased are cancelled or retained as treasury shares.

2.4.3 Dividends

The Proposed Share Buy-Back will reduce the amount of distributable reserves of theCompany available for payment of dividends if the retained profits have been utilised tofacilitate the Proposed Share Buy-Back.

The Company did not declare any dividend for the financial year ended 30 June 2003.

2.4.4 On NTA

The Proposed Share Buy-Back may increase or decrease the NTA of Kobay depending onvarious factors which include the treatment of the shares purchased, ie. to cancel or retain astreasury shares, the timing, purchase price and the number of shares so purchased, if any, andthe eventual treatment of any treasury shares arising.

The Proposed Share Buy-Back will reduce the NTA per share of Kobay Group when thepurchase price exceeds the NTA per share of Kobay Group at the relevant point in time. Onthe contrary, the NTA per share of Kobay Group will be increased when the purchase price isless than the NTA per share of Kobay Group at the relevant point in time.

2.4.5 On working capital

Although the Proposed Share Buy-Back would reduce the working capital of the Group to theextent of the amount of funds utilised for the purchase of the Company’s shares, it is notexpected to have an adverse material effect on the working capital of the Group.

2.4.6 On shareholdings of the Directors and major shareholders

The effects of the Proposed Share Buy-Back on the shareholdings of the Directors and majorshareholders of Kobay would depend on the timing and the number of shares so purchased, ifany. However, for illustration, the Proposed Share Buy-Back would have the following effecton the percentage of the shareholdings of the Directors and major shareholders of Kobay,assuming that a maximum number of 6,797,375 shares are purchased from the publicshareholders :-

5

Existing as at 14 November 2003After ProposedShare Buy-Back

Direct Indirect Direct IndirectNo. of shares No. of shares No. of shares No. of shares

Directors

Dato’ Koay Hean Eng 1,654,154(2.43%)

* 17,523,007(25.78%)

1,654,154(2.70%)

* 17,523,007(28.64%)

Koay Cheng Lye 586,995(0.86%)

* 17,523,007(25.78%)

586,995(0.96%)

* 17,523,007(28.64%)

Koay Ah Bah @ KoayCheng Hock

569,665(0.84%)

* 17,523,007(25.78%)

569,665(0.93%)

* 17,523,007(28.64%)

Ong Teik Kooi - ** 4,300,000(6.33%)

- ** 4,300,000(7.03%)

Tan Yok Cheng 1,250#

- 1,250#

-

Dato’ Abdul RahmanBin MohammedHashim

1,250#

- 1,250#

-

Dr. Mohamad ZabdiBin Zamrod

- - - -

Lim Swee Chuan 20,000(0.03%)

- 20,000(0.03%)

-

Major ShareholdersKHSB 17,523,007

(25.78%)- 17,523,007

(28.64%)-

Noorzalila Binti Ismail 4,300,000(6.33%)

- 4,300,000(7.03%)

-

* Deemed interest by virtue of their major shareholdings in KHSB, a major shareholder of Kobay** Deemed interest by virtue of his spouse’s major shareholding i.e. Noorzalila Binti Ismail in Kobay# Interest is less than 0.01%

2.5 Public shareholding

2.5.1 According to the Record of Depositors and the Register of Major Shareholders of theCompany, the total percentage of the issued and paid-up share capital of Kobay which is heldby the public (in accordance with the public shareholding spread requirements of the KLSEand SC) as at 14 November 2003, was 63.64%, representing 43,260,003 shares in Kobay.Pursuant to the Proposed Share Buy-Back, the aforesaid public shareholding of Kobay wouldbe reduced to approximately 59.60% or 36,462,628 shares in Kobay based on the assumptionsthat the maximum number of 6,797,375 shares are purchased, and that all the shares sopurchased are from the public shareholders of Kobay.

2.6 Previous purchase or resale by Kobay of its own shares

2.6.1 Kobay has not made any purchase or resale of its own shares in the previous twelve (12)months and does not have any treasury shares.

6

2.7 Approvals required

2.7.1 The Proposed Share Buy-Back is subject to the approval of the shareholders of Kobay at theforthcoming AGM.

2.8 Directors’ and major shareholders’ interests, and implications relating to the Code

2.8.1 None of the Directors and major shareholders of Kobay or any other companies which is itssubsidiary and/or persons connected with them has any interest, whether direct or indirect, inthe Proposed Share Buy-Back or resale of treasury shares.

2.8.2 Based on the shareholdings as set out in Section 2.4.6 above, the percentage shareholdings ofthe major shareholders and Directors of Kobay (whether acting individually or in concert withother shareholders) will not be increased in a manner which would give rise to a mandatoryoffer obligation under the Code in relation to the remaining shares held in Kobay as a result ofthe Proposed Share Buy-Back.

2.9 Historical share prices

2.9.1 The monthly highest and lowest prices of Kobay shares traded on the KLSE for the past 12-month period ended 31 October 2003 are as follows:-

HighRM

LowRM

2002November 1.74 1.35December 1.40 1.20

2003January 1.55 1.20February 1.30 1.16March 1.21 1.02April 1.24 1.09May 1.41 1.11June 1.72 1.30July 1.77 1.43August 1.54 1.37September 1.60 1.30October 1.51 1.33

Last transacted market prices of Kobay shares on 7 October 2003, RM1.39prior to the announcement by Kobay of the Proposed Share-Buy Back.

Last transacted market prices of Kobay shares on 18 November 2003, RM1.30being the latest practicable date prior to printing of this Circular.

Source: the Star

7

3.0 PROPOSED SHAREHOLDERS’ MANDATE FOR RECURRENT RELATED PARTYTRANSACTIONS

3.1 Introduction

3.1.1 Under Part E, Paragraph 10.09 of the Listing Requirements, a listed issuer may seekshareholders’ mandate in respect of related party transactions involving RRPTs of a revenueor trading nature which are necessary for its day-to-day operations subject to the following:-

(a) the transactions are in the ordinary course of business and are on terms not morefavourable to the related party than those generally available to the public;

(b) the shareholders’ mandate is subject to annual renewal and disclosure is made in theannual report of the aggregate value of transactions conducted pursuant to theshareholders’ mandate during the financial year; and

(c) in a meeting to obtain shareholders’ mandate, the interested director, interested majorshareholder or interested person connected with a director or major shareholder andwhere it involves the interest of an interested person connected with a director ormajor shareholder, such director or major shareholder must not vote on the resolutionapproving the transactions. An interested director or interested major shareholdermust ensure that persons connected with him abstain from voting on the resolutionapproving the transactions.

3.1.2 The Listing Requirements define “director”, “major shareholder”, “related party” and “relatedparty transaction” as follows:-

“Director” shall have the meaning given in Section 4 of the Act and includes any person whois or was within the preceding 12 months of the date on which the terms of the transactionwere agreed upon, a director of the listed issuer (or any other company which is its subsidiaryor holding company or a subsidiary of its holding company).

“Major shareholder” means a person who has an interest or interests in one or more votingshares in a company and the nominal amount of that share, or the aggregate of the nominalamounts of those shares, is not less than 5% of the aggregate of the nominal amounts, of allthe voting shares in the company. For the purpose of this definition, “interest in shares” shallhave the meaning given in Section 6A of the Act. Major shareholder shall include any personwho is or was within the preceding 12 months of the date on which the terms of transactionwere agreed upon, a major shareholder of the listed issuer (or any other company which is itssubsidiary or holding company or a subsidiary of its holding company).

“Related party” means a director, major shareholder or person connected with such director ormajor shareholder.

“Related party transaction” means a transaction entered into by the listed issuer or itssubsidiaries which involves the interest, direct or indirect, of a related party.

3.2 Principal activities of the Kobay Group

3.2.1 Kobay is principally an investment holding and management services company, whilst theprincipal activities of its subsidiaries are as follows:-

8

CompanyCountry ofincorporation

Effectiveequityinterest

Principal activities

Subsidiary companies

PI Malaysia 100% Manufacture of carbide tooling parts andautomated machines

KA Malaysia 100% Letting of properties

BWE Malaysia 100% Manufacture of all types of metal works andequipment

PA Malaysia 85% Designing and manufacturing of automatedmachine and automated machine parts

MP Malaysia 100% Manufacture of high end steel and carbideprecision parts for tools, dies and moulds andprecision tools, dies and moulds

PP Malaysia 100% Manufacture of jigs and fixtures, precision tools,dies and moulds

UP Malaysia 100% General trading

PT Malaysia 100% Manufacture of measuring devices, industrialequipment, machining parts and toolings

PIN Malaysia 85% Designing and manufacturing of automatedmachine and automated machine parts

A-PAC Malaysia 60% Investment holding

OPAR Malaysia 100% Investment holding

KT Malaysia 61% Investment holding

MPS China 100% Manufacture of precision components of moulds,dies, tools and jig fixtures

Elite Malaysia 55% Distribution of all kinds of paper products

Kew Malaysia 100% Money Lending and leasing

KYM Malaysia 80% Solutions and technical know how provider andresearcher for all or any kinds of microelectronicsindustry, electronic and electrical industry

KV Malaysia 100% Dormant

PI(T) Thailand 100% Manufacturing of precision tooling, dies andmoulds, jigs and fixtures

PI(P) Philippines 100% Manufacturing of mould parts, trim and form dieparts, jigs and fixtures

KTM, subsidiary of KT Malaysia 61% Manufacture all types of computer numericcontrolled (“CNC”) machines

9

3.3 Details of Transacting parties

3.3.1 The details of the transacting parties with whom the Kobay Group is/will be transacting withare as follows:-

Company Principal activities Relationship

KTMT Servicing and trading ofmachinery and machine tools

KTMT is a 69.99% owned subsidiaryof KT of which in turn is a 61%subsidiary of Kobay.

Lipo Investment holding andmanagement services company

Lipo is a 45.30% owned associatecompany of Kobay

PPC Manufacturing of precisionmachined components

PPC is a wholly owned subsidiary ofLipo of which in turn is a 45.30%owned associate company of Kobay

PMI Manufacturing of precisionmetal stamping parts

PMI is a wholly owned subsidiary ofLipo of which in turn is a 45.30%owned associate company of Kobay

PPM Manufacturing of precisionmachining parts andcomponents

PPM is a wholly owned subsidiary ofLipo of which in turn is a 45.30%owned associate company of Kobay

LPI Manufacturing of precisionmetal components

LPI is a wholly owned subsidiary ofLipo of which in turn is a 45.30%owned associate company of Kobay

MAKER Manufacture all kinds ofprecision moulds and parts

MAKER is a 19% owned investmentcompany of Kobay

PNS Provision of multimedia visualnetwork via internet and/orprivate network

PNS is a 60.10% owned subsidiarycompany of A-PAC of which in turn isa 60% owned subsidiary of Kobay.

PNT Provision of system integrationservices, internet value addedservices and trading of relatedproducts

PNT is a 85% owned subsidiary ofPNS of which in turn is a 60.10%owned company of A-PAC. A-PAC isa 60% owned subsidiary of Kobay.

GETT Provision of hosted Rosetta Nete-supply chain managementservices and solutions

GETT is a wholly owned subsidiary ofPNS of which in turn is a 60.10%owned company of A-PAC. A-PAC isa 60% owned subsidiary of Kobay

Mega PublicationsHolding Sdn. Bhd.

Investment holding andmanagement services company

Mega Publications Holding Sdn. Bhd. isa 45% major shareholder of Elite.

CP Stationery Sdn. Bhd. Trading in paper stationeries CP Stationery is a wholly ownedsubsidiary of Mega PublicationsHolding Sdn. Bhd., a 45% majorshareholder of Elite.

10

3.4 Details of the Proposed Shareholders’ Mandate

3.4.1 The RRPTs which are carried out with the Related Parties are mainly for its day-to-dayoperations. The Related Parties are both good customers as well as reliable suppliers of goodsand services required by the Kobay Group. Except for transactions involving payment ofrental of office and factory and payment of management fee which occur monthly, othertransactions mentioned and disclosed in Section 3.4.2 below could arise as and when thesituation warrants.

3.4.2 The RRPTs are to be entered into at arm’s length based on Kobay’s normal commercial termsand are not prejudicial to the shareholders nor they are on terms more favourable to theRelated Parties than those generally available to the public and are also not to the detriment ofthe minority shareholders of the Company. Such RRPTs will be subject to the reviewprocedures as set out in Section 3.8.

THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK

11

The details of the RRPTs are set out below:-

Companieswithin theKobayGroup

Transactingparties

Interested parties Nature of transactions

*Estimatedaggregate valuefrom date of the

forthcomingAGM to the dateof the next AGM

RM

PA

PIN

KT

Elite

KYM(a)

Kobay Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock and Lim SweeChuan.

Payment of management fee byPA, PIN, KT, Elite and KYM toKobay

450,000

BWE(b) MAKER@

PIN#

PA#

PMI+

PPC+

Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock and Lim Swee Chuan

Receipt of metal works servicesin respect of stainless steelequipment, clean- room trolleys,custom made cabinet to jig andfixtures, aluminium deckformwork, die set and machineparts by MAKER, PIN, PA,PMI and PPC from BWE

610,000

MP(c) PIN#

PMI+

PPC+

Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @Koay Cheng Hock and Lim SweeChuan

Manufacturing and provision ofsteel and carbide precision partsservices by MP to PMI, PIN andPPC

62,000

PT(d) PMI+ Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock and Lim Swee Chuan

Manufacturing and provision ofprecision metal stamping partsby PMI to PT

Manufacturing of machine partsand provision of toolingservices by PT to PMI

13,000

66,000

PT MAKER@ Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock and Lim Swee Chuan

Manufacturing of machine partsand provision of toolingservices by PT to MAKER

Receipt of manufacturing ofmachining parts services by PTfrom MAKER

53,000

53,000

12

Companieswithin theKobayGroup

Transactingparties

Interested parties Nature of transactions

*Estimatedaggregate valuefrom date of the

forthcomingAGM to the dateof the next AGM

RM

KA(e) PIN#

Lipo+

KYM#

Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock and Lim Swee Chuan

Receipt of rental of officebuilding and factory located atPlot 30, Hilir Sungai KluangSatu, Bayan Lepas IndustrialPark, Phase 4, 11900 Penang byKA from PIN, Lipo and KYM.

172,000

KA(f) KTM#

MAKER@

Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock, Lim Swee Chuanand Ngan Kwang Boon

Receipt of rental of officebuilding and factory located atPlot 75, Lintang KampongJawa, Bayan Lepas IndustrialEstate, Mukim 12, Daerah BaratDaya, 11900 Penang by KAfrom KTM and MAKER.

20,000

PIN(g) PT# Dato’ Koay Hean Eng, KoayCheng Lye and Koay Ah Bah @Koay Cheng Hock

Manufacturing and provision ofautomated machine andautomated machine partsservices by PIN to PT

Receipt of manufacturing ofmachining parts and provisionof tooling services by PIN fromPT

264,000

13,000

PIN(h) PPC+ Dato’ Koay Hean Eng, KoayCheng Lye and Koay Ah Bah @Koay Cheng Hock

Manufacturing and provision ofautomated machine andautomated machine partsservices by PIN to PPC

Fabrication of precisioncomponents from PPC to PIN

66,000

66,000

PT(i) LPI+ Dato’ Koay Hean Eng, KoayCheng Lye and Koay Ah Bah @Koay Cheng Hock

Receipt of fabrication ofmachining parts and precisiontooling services by LPI from PT

13,000

UP(j) PIN#

PPC+

MAKER@

Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock and Lim Swee Chuan

Sale of machine components,general trading of machine andmeasurement equipmentaccessories by UP to PIN, PPCand MAKER

79,000

13

Companieswithin theKobayGroup

Transactingparties

Interested parties Nature of transactions

*Estimatedaggregate valuefrom date of the

forthcomingAGM to the dateof the next AGM

RM

PIN MAKER@ Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock and Lim Swee Chuan

Receipt of manufacturing ofmachining parts services by PINfrom MAKER

Manufacturing and provision ofautomated machine andautomated machine partsservices by PIN to MAKER

53,000

53,000

PA(k) PIN# Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock, Lim Swee Chuan,Yee San Khien and Ong Eng Seng

Sale of machine and machineparts by PA to PIN

Manufacturing and provision ofautomated machine andautomated machine partsservices by PIN to PA

660,000

220,000

PIN(l) PA# Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock, Lim Swee Chuan,Yee San Khien and Ong Eng Seng

Receipt of rental of FixedAssets by PA from PIN

11,000

KTM KTMT#

PIN#

Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock, Lim Swee Chuanand Tseng Sheng-Lung

Sale of machine parts by KTMto KTMT and PIN

57,000

KTM PI(T) Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock, Lim Swee Chuanand Ong Teik Kooi

Sale of machine by KTM toPI(T)

55,000

KTM PPM+

Lipo+

Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock and Lim Swee Chuan

Sale of machine by KTM toPPM and Lipo

495,000

KTMT KTM# Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock, Lim Swee Chuanand Tseng Sheng-Lung

Sale of machine parts by KTMTto KTM

43,000

KTMT(m) KT# Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock, Lim Swee Chuanand Tseng Sheng-Lung

Payment of loan interest byKTMT to KT

5,000

14

Companieswithin theKobayGroup

Transactingparties

Interested parties Nature of transactions

*Estimatedaggregate valuefrom date of the

forthcomingAGM to the dateof the next AGM

RM

KTMT

KTM

KT# Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock, Lim Swee Chuanand Tseng Sheng-Lung

Payment of management fee byKTMT and KTM to KT

26,000

KTM(n) MP# Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock and Lim Swee Chuan

Receipt of rental of space inPlot 24, Bayan Lepas IndustrialPark, Phase 4, 11900 Penang byMP to KTM

59,000

UP(o) PPC+ Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock and Lim Swee Chuan

Fabrication of precisioncomponents by PPC to UP

7,000

UP MAKER@ Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock and Lim Swee Chuan

Fabrication of machining partsand provision of toolingservices by MAKER to UP

13,000

BWE(p) PMI+ Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock and Lim Swee Chuan

Manufacturing of precisionmetal stamping parts from PMIto BWE

13,000

BWE MAKER@ Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock and Lim Swee Chuan

Receipt of manufacturing ofmachining parts services byBWE from MAKER

132,000

PT PPC+ Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock and Lim Swee Chuan

Fabrication of precisioncomponents by PPC to PT

Receipt of manufacturing ofmachining parts and provisionof tooling services by PPC fromPT

132,000

396,000

Elite CPStationerySdn Bhd,wholly-ownedsubsidiary ofMegaPublicationsHolding SdnBhd

Tan Kheng Beng and MegaPublications Holding Sdn Bhd

Sale of paper products by Eliteto CP Stationery Sdn Bhd

770,000

15

Companieswithin theKobayGroup

Transactingparties

Interested parties Nature of transactions

*Estimatedaggregate valuefrom date of the

forthcomingAGM to the dateof the next AGM

RM

Elite (q) MegaPublicationsHolding SdnBhd,shareholderof Elite

Tan Kheng Beng Payment of warehouse andstorage charges by Elite toMega Publications Holding SdnBhd

Payment of utilities andfacilities charges by Elite toMega Publications Holding SdnBhd

317,000

138,000

Elite (r) Kobay Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock and Lim Swee Chuan

Payment of loan interest byElite to Kobay

238,000

KEW MAKER@ Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock and Lim Swee Chuan

Receipt of interest payment oflease rental by KEW fromMAKER

13,000

KYM (s) KA# Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock and Lim Swee Chuan

Sale of lamps by KYM to KA 6,000

KYM (t) UP# Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock and Lim Swee Chuan

Sale of production consumables,general trading of machine andmeasurement equipmentaccessories by UP to KYM

11,000

KEW (u) KYM# Dato’ Koay Hean Eng, KoayCheng Lye, Koay Ah Bah @ KoayCheng Hock and Lim Swee Chuan

Payment of loan interest byKYM to KEW

32,000

BWE

Kobay

PT

PP

MP

PIN

PNT, asubsidiarycompany ofPNS+

Dato’ Koay Hean Eng Purchase of computer hardware/software by Kobay, PIN, BWE,PT, PP and MP from PNT

101,000

16

Companieswithin theKobayGroup

Transactingparties

Interested parties Nature of transactions

*Estimatedaggregate valuefrom date of the

forthcomingAGM to the dateof the next AGM

RM

BWE(v)

Kobay(v)

PT(v)

PP(v)

MP(v)

PIN(v)

GETT, asubsidiarycompany ofPNS+

Dato’ Koay Hean Eng Purchase of computer hardware/software and subscription andmaintenance licence fee forhosted supply chain services byKobay, PIN, BWE, PT, PP andMP from GETT

464,000

TOTAL 6,520,000

Notes:- * The estimated transaction values for the period from the date of the forthcoming AGM up to thedate of the next AGM are based on the information available at the point of estimation whichinclude business trend, agreement, orders, project estimate cost and sales forecast. Due to thenature of the transactions, the actual value of transactions may vary from the estimated valuedisclosed above

# Subsidiary company of Kobay

@ A 19% owned investment company of Kobay

+ Associate company of Kobay

New Transactions not covered by the previous mandate

(a) Payment of management fee by KYM to Kobay amounting to RM21,000(b) Receipt of metal works services by PA from BWE amounting to RM35,000(c) Manufacturing and provision steel carbide precision parts services by MP amounting to RM11,000

each to PMI and PIN(d) Manufacturing and provision of metal stamping parts by PMI to PT amounting to RM13,000 and

Manufacturing machine parts and provision of tooling services by PT to PMI amounting to RM66,000(e) Receipt of rental of office building and factory located at Plot 30, Hilir Sungai Kluang Satu, Bayan

Lepas Industrial Park, Phase 4, 11900 Penang by KA from KYM amounting to RM21,000,.(f) Receipt of rental of office building and factory located at Plot 75, Lintang Kampong Jawa, Bayan

Lepas Industrial Estate, Mukim 12, Daerah Barat Daya, 11900 Penang by KA from KTM andMAKER amounting to RM13,000 and RM7,000 respectively.

(g) Manufacturing and provision of automated machine and automated machine parts services by PIN toPT and PPC amounting to RM66,000. Receipt of manufacturing of machining parts and provision oftooling services by PIN from PT and PPC amounting to RM66,000

(h) Manufacturing and provision of automated machine and automated machine parts services by PIN toPPC amounting to RM66,000 and fabrication of precision components from PPC to PIN amounting toRM66,000

(i) Receipt of manufacturing of machining parts and provision of tooling services by PT amounting toRM13,000 from LPI

(j) Sale of machine components, general trading of machine and measurement equipment accessories byUP to PPC amounting RM26,000

(k) Sale of machine and machine parts by PA to PIN amounting to RM660,000(l) Receipt of rental of Fixed Assets by PA from PIN amounting to RM11,000(m) Payment of loan interest by KTMT to KT amounting RM4,000. The loan interest is based on the

provision of loan to KTMT amounting to RM90,000. This loan is for working capital purposes and iswithin the ambit of Paragraph 5.0 of Practice Note 14/2002.

17

(n) Receipt of rental of space in Plot 24, Bayan Lepas Industrial Park, Phase 4, 11900 Penang by KTMfrom MP amounting to RM59,000

(o) Fabrication of precision components by PPC to UP amounting to RM7,000(p) Manufacturing of precision metal stamping parts from PMI to BWE amounting to RM13,000(q) Warehouse and Storage charges amounting to RM317,000 and Utilities and Facilities charges

amounting to RM138,000 by Mega Publications Sdn Bhd to Elite(r) Payment of loan interest amounting RM238,000 by Elite to Kobay. The loan interest is based on the

provision of loan to Elite amounting to RM3,600,000. This loan is for working capital purposes and iswithin the ambit of Paragraph 5.0 of Practice Note 14/2002.

(s) Sale of lamps by KYM to KA amounting to RM6,000(t) Sale of production consumables, general trading of machine and measurement equipment accessories

by UP to KYM amounting to RM11,000(u) Payment of loan interest amounting RM32,000 by KYM to KEW. The loan interest is based on the

provision of loan to KYM amounting to RM350,000. This loan is for working capital purposes and iswithin the ambit of Paragraph 5.0 of Practice Note 14/2002.

(v) Purchase of computer hardware/ software and subscription and maintenance licence fee for hostedsupply chain services by Kobay, PIN, BWE, PT, PP and MP amounting to RM464,000 from GETT

Nature of relationship of the Interested Parties

a) Dato’ Koay Hean Eng is a Director of Kobay, PNS, KT, MPS, KV, KYM and Lipo. He was also a Director ofPPC. He has 2.43% direct and 25.78% indirect interest in Kobay by virtue of his 75% equity interest in KHSB, amajor shareholder of the Company. He also has indirect interest in Lipo through the Company’s 45.30% equityinterest in Lipo.

b) Koay Cheng Lye is a Director of Kobay, PT, KA, KYM, Lipo, PPC, PMI and LPI. He has 0.86% direct and25.78% indirect interest in Kobay by virtue of his 15% equity interest in KHSB, a major shareholder of theCompany. He also has indirect interest in Lipo through the Company’s 45.30% equity interest in Lipo.

c) Koay Ah Bah @ Koay Cheng Hock is a Director of Kobay and PT. He was also a Director of PI and PPC. Hehas 0.84% direct and 25.78% indirect interest in Kobay by virtue of his 10% equity interest in KHSB, a majorshareholder of the Company. He also has indirect interest in Lipo through the Company’s 45.30% equity interestin Lipo.

d) Lim Swee Chuan is a Director of Kobay, MP, UP, PA, BWE, KA, KTM, KT, PIN, MAKER, KTMT, Elite,KEW, MPS, KYM, Lipo and LR. He was also a Director of PPC and PMI. He has 0.03% direct interest inKobay.

e) Ong Teik Kooi is a Director of Kobay. He was also a Director of PI and PT. He is deemed interested by virtue ofhis spouse’s interest of 6.33% in Kobay.

f) Ong Eng Seng is a Director of PIN and has 10% direct interest in both PIN and PA.

g) Tseng Sheng-Lung was a Director of KT, KTM and KTMT. He has 35% direct interest in KT. He also indirectinterest in KTM and KTMT through KT direct interest. KT has 100% and 70% equity interest in KTM andKTMT respectively.

h) Mr. Tan Kheng Beng is a Director of Elite, Mega Publications Holding Sdn. Bhd. and CP Stationery Sdn. Bhd.He also holds 34.99% equity interest in Mega Publications Holding Sdn. Bhd..

i) CP Stationery Sdn. Bhd. is a wholly owned subsidiary of Mega Publications Holding Sdn. Bhd., a 45% majorshareholder of Elite.

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3.5 Validity period

3.5.1 If approved at the forthcoming AGM, the Proposed Shareholders’ Mandate, which is subject toannual renewal, will take effect from the date of the passing of the Ordinary Resolution theretoand will continue to be in force until:-

(a) the conclusion of the next AGM of the Company at which time it shall lapse unless byordinary resolution passed at that meeting, the authority is renewed, eitherunconditionally or subject to conditions; or

(b) the expiration of the period within which the next AGM of the Company after the date itis required to be held pursuant to section 143(1) of the Act (but shall not extend to suchextension as may be allowed pursuant to section 143(2) of the Act); or

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

whichever is earlier.

3.6 Rationale for and benefit of the Proposed Shareholders’ Mandate

3.6.1 The Proposed Shareholders’ Mandate are to enable Kobay to seek mandate for the RRPTs to beentered into by the Group. The RRPTs are necessary for the day-to-day operations of the Groupand contribute to its operational sales revenue. By obtaining the Proposed Shareholders’ Mandateand where appropriate, the subsequent renewal thereof on an annual basis, the necessity toannounce or convene separate general meetings from time to time to procure shareholders' priorapproval for such transactions will not arise. This will reduce substantially the administrativetime and expenses associated with the convening of such meetings, without compromising thecorporate objectives of the Group or adversely affecting the business opportunities available tothe Group.

3.7 Financial effects of the Proposed Shareholders’ Mandate

3.7.1 The Proposed Shareholders’ Mandate will not have any effect on the issued and paid-up sharecapital and major shareholders’ shareholdings of Kobay, and are not expected to have any effecton the earnings and NTA of Kobay for the financial year ending 30 June 2004.

3.8 Review procedures

3.8.1 To ensure that the RRPTs are undertaken on arm’s length basis and on normal commercial terms,which are consistent with Kobay’s usual business practices and policies (taking intoconsideration the prevailing market rate/prices of products/services rendered, preferential ratesand discounts for bulk purchases, rental of premises by Related Parties) and are on terms notmore favourable to the Related Parties than those extended to third parties/ the public and are notto the detriment of the minority shareholders of Kobay, the audit committee (“AuditCommittee”) has been tasked with the review and approval of such transactions.

The Audit Committee currently comprises of:-

Name Designation

Tan Yok Cheng Independent Non-Executive Director / ChairmanDato’ Abdul Rahman Bin Mohammed Hashim Independent Non-Executive Director / MemberLim Swee Chuan Executive Director /Member

19

3.8.2 To monitor the RRPTs, the following review procedures have been implemented by theCompany:-

(i) records will be maintained by the Company to capture all RRPTs which are entered intopursuant to the shareholders’ mandate;

(ii) all members of the Board and Audit Committee who are directly or indirectly interestedin any RRPTs shall declare their interest and abstain from deliberations and voting inrespect of these RRPTs;

(iii) the internal auditor will review the terms of the RRPTs as part of the annual auditactivities;

(iv) records, agreements, contracts and other relevant documents on all RRPTs will be madeavailable to the Audit Committee for review; and

(v) transaction prices and rental of such RRPTs to be entered into will always take intoaccount the level of service (ie. terms of the complexity of jobs), quality of service (ie. interms of on time delivery and quality of products) and on competitive pricing in the openmarket and are not more favourable to the Related Parties than those generally availableto the public and will not be detrimental to minority shareholders; and

(vi) the Audit Committee will review half yearly, the RRPTs that may arise within the Groupto ensure that such transactions will be carried out at arm’s length, and on normalcommercial terms, and the terms are not more favourable than those generally availableto the public and are not to the detriment of the minority shareholders. The AuditCommittee shall assist to ascertain that all procedures established to monitor RRPTshave been complied with. The review shall be done half yearly

3.8.3 Disclosure will be made in the Company’s Annual Report of the breakdown of the aggregatevalue of transactions conducted, types of transactions made, names of related parties involvedand their relationship with the Company pursuant to the Proposed Shareholders’ Mandate duringthe financial year, and in the Annual Reports for subsequent financial years that the ProposedShareholders’ Mandate continues to be in force.

3.9 Statement by the Audit Committee

3.9.1 The Audit Committee of Kobay has considered the review procedures mentioned in Section 3.8above and is of the view that the said procedures are adequate to ensure that all RRPTs will becarried out at arm's length basis, and on normal commercial terms which are not more favourableto the related parties than those generally available to the public and are not to the detriment ofthe minority shareholders of the Company.

The Audit Committee may, at its discretion adopt new review and disclosure procedures and/oramend the existing procedures to ensure that the RRPTs are at all times, on the terms consistentwith the Group's practices.

3.10 Approval required

3.10.1 The Proposed Shareholders’ Mandate is subject to the approval of the shareholders of Kobay atthe forthcoming AGM.

20

3.11 Directors’ and major shareholders’ interests

3.11.1 The details of the interested Directors and/or major shareholders and their shareholdings inKobay as at 14 November 2003 are as follows:-

No. of shares held in KobayName Direct % Indirect %

DirectorsDato’ Koay Hean Eng 1,654,154 2.43 * 17,523,007 25.78Koay Cheng Lye 586,995 0.86 ** 17,523,007 25.78Koay Ah Bah @ Koay Cheng Hock 569,665 0.84 *** 17,523,007 25.78Ong Teik Kooi - - @ 4,300,000 6.33Lim Swee Chuan 20,000 0.03 - -

No. of shares held in KobayName Direct % Indirect %

Major Shareholders

KHSB 17,523,007 25.78 - -Noorzalila Binti Ismail 4,300,000 6.33 - -

Notes:-* Deemed interest by virtue of his 75% direct interest in KHSB, a major shareholder of Kobay** Deemed interest by virtue of his 15% direct interest in KHSB, a major shareholder of Kobay*** Deemed interest by virtue of his 10% direct interest in KHSB, a major shareholder of Kobay@ Deemed interest by virtue of his wife’s shareholding, i.e Noorzalila Binti Ismail in Kobay

3.11.2 Accordingly Dato’ Koay Hean Eng, Koay Cheng Lye, Koay Ah Bah @ Koay Cheng Hock, OngTeik Kooi and Lim Swee Chuan, who are deemed to be interested in the Proposed Shareholders’Mandate have abstained and will continue to abstain from all Board deliberations and voting onthe RRPTs at the relevant Board of Directors’ Meetings. KHSB is an interested party by virtue ofits shareholders’ (namely Dato’ Koay Hean Eng, Koay Ah Bah @ Koay Cheng Hock, and KoayCheng Lye) directorships in Kobay. KHSB is therefore considered as a person connected toDato’ Koay Hean Eng, Koay Cheng Lye and Koay Ah Bah @ Koay Cheng Hock. NoorzalilaBinti Ismail is an interested party by virtue of her being the wife of Ong Teik Kooi and istherefore considered as a person connected to Ong Teik Kooi. Accordingly, Dato’ Koay HeanEng, Koay Cheng Lye, Koay Ah Bah @ Koay Cheng Hock, Ong Teik Kooi, Lim Swee Chuan,KHSB and Noorzalila Binti Ismail who are deemed to be interested in the ProposedShareholders’ Mandate will also abstain from voting in respect of their direct and/or indirectshareholdings in Kobay on the resolution pertaining to the Proposed Shareholders’ Mandate to betabled at the forthcoming AGM of the Company.

3.11.3 The interested Directors and/or major shareholders have undertaken to ensure that personsconnected to them as mentioned above shall abstain from voting on the resolution relating to theProposed Shareholders’ Mandate at the forthcoming AGM.

3.11.4 Save as disclosed above, none of the other Directors and/or major shareholders of Kobay and/orpersons connected with them have any interest, direct or indirect in the RRPTs.

21

4.0 DIRECTORS’ RECOMMENDATION

4.1 The directors (except for Dato’ Koay Hean Eng, Koay Cheng Lye, Koay Ah Bah @ Koay ChengHock, Ong Teik Kooi and Lim Swee Chuan who are deemed to be interested in the ProposedShareholders’ Mandate and have abstained from expressing any opinion and recommendation inrelation to the Proposed Shareholders’ Mandate) are of the opinion that the Proposals are in thebest interest of the Company. Accordingly, the aforesaid Directors recommend that you vote infavour of the resolutions relating to the Proposals to be tabled at the forthcoming AGM.

5.0 AGM

5.1 The relevant extract of the Notice convening the Ninth AGM of the Company for the Proposalsis enclosed. The AGM will be held at Plot 30, Hilir Sungai Kluang Satu, Bayan Lepas IndustrialPark, Phase 4, 11900 Penang on Wednesday, 24 September 2003 at 3.30 p.m. for the purpose ofconsidering and if thought fit, passing the resolutions to approve the Proposals.

5.2 If you are unable to attend and vote at the AGM in person, please complete, sign and return theForm of Proxy in accordance with the instructions printed thereon as soon as possible and in anyevent, so as to arrive at the Registered Office of the Company not later than forty eight (48) hoursbefore the time appointed for holding the AGM. The completion, signing and return of the Formof Proxy will not preclude you from attending and voting in person at the AGM should yousubsequently wish to do so.

6.0 FURTHER INFORMATION

6.1 Shareholders are advised to refer to the attached appendix for further information.

Yours faithfully,For and on behalf of the Board of DirectorsKOBAY TECHNOLOGY BHD.

DATO’ ABDUL RAHMAN BIN MOHAMMED HASHIMIndependent Non-Executive Director

THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK

22

APPENDIX IFURTHER INFORMATION

1. DIRECTORS’ RESPONSIBILITY STATEMENT

This Circular has been seen and approved by the Directors of Kobay and they collectively andindividually accept full responsibility for the accuracy of the information given and confirm thatafter making all reasonable enquiries, to the best of their knowledge and belief, there are no otherfacts, the omission of which would make any statement herein misleading.

2. MATERIAL LITIGATION

Save as disclosed below, neither Kobay nor its subsidiary companies are engaged in any materiallitigation, claims or arbitration either as plaintiff or defendant, and as at the date of this Circular,the Directors of Kobay are not aware of any proceeding pending or threatened against theCompany or its subsidiary companies or of any facts likely to give rise to any proceeding whichmay materially affect the position or business of Kobay or its subsidiary companies.

(a) Kobay Tecnica Sdn. Bhd. (565652-D)(“KT”), a 61% owned subsidiary of KobayTechnology Bhd. (“Kobay”/”the Company”) and Kobay Tecnica Manufacturing Sdn. Bhd.(567614-A)(“KTM”), a wholly owned subsidiary of KT have filed in a Statement of Claimin the Kuala Lumpur High Court against one of the shareholders cum Ex-Managing Directorof KT, namely Ricky Tseng Sheng Lung (“Ricky”) and others on 24 July 2003. KT andKTM have claimed Ricky for breaching his fiduciary duties as Managing Director of KTand KTM, and together with five (5) other Defendants, either acting by himself or incollusion committed the fraudulent or negligent acts causing a loss of profit in KTM forapproximately RM 241,633, actual loss of approximately RM72,786, and other loss ordamages to be assessed by the Court. On 8 October 2003, Kobay, KT and its principalofficers have received the defence from Ricky denying all the claims and have madecounter-claimed against Kobay, KT and others for fraud, deceits and oppression andbreaching of the Shareholders Agreement and his Service Agreement with a claim ofRM15,703 together with interest on the rate of 8% per annum accruing from 1-1-2003 untilfull settlement and general damages. The Company had been advised by its solicitors thatthe claims are purely based on conjectures and is not substantiated by any facts and istherefore void of merits. The claims are not expected to have any material financial impacton the Company.

3. MATERIAL CONTRACTS

Save for the followings, there are no other material contracts (not being contracts entered into inthe ordinary course of business) which have been entered into by Kobay and/or its subsidiarycompanies within the two (2) years immediately preceding the date of this Circular:-

(a) Shareholders Agreement dated 8 March 2002 between KT and Ng Koon Peng and Lim LeeChing to promote and form a company namely, KT Machine Tools Sdn Bhd (formerlyknown as Sysronic Sdn Bhd) (“KTMT”) to undertake the trading of machinery and machinetools. The shareholdings of the parties in KTMT are approximately 70% (KT):30% (NgKoon Peng and Lim Lee Ching).

23

(b) Acquisition by the Company of 550,000 shares representing 55% equity interest in ElitePaper Trading Sdn Bhd on 9 May 2002 by way of subscription of 549,999 shares andtransfer of 1 share for a total cash consideration of RM550,000.

(c) Shares Sale Agreement dated 17 May 2002 between the Company and Tai Bee Kiat wherebythe Company purchased from Tai Bee Kiat 120,000 shares constituting 10% equity interestin Polytool Automation Sdn Bhd for a cash consideration of RM412,000. Upon completionof the acquisition, the equity interest of Kobay in Polytool Automation Sdn Bhd increased to90%.

(d) Shares Sale Agreement dated 17 May 2002 between the Company and Tai Bee Kiat wherebythe Company purchased from Tai Bee Kiat 10,000 shares constituting 10% equity interest inPolytool Integration Sdn Bhd. for a cash consideration of RM8,000. Upon completion of theacquisition, the equity interest of Kobay in Polytool Integration Sdn Bhd increased to 90%.

(e) Joint Venture Agreement dated 21 May 2002 between the Company and ITT Industries Inc(“ITT”), a company incorporated under the law of the State of Indiana, USA to set up a jointventure company bearing the name “ITT Kobay Sdn Bhd”, which are engaged in themanufacture and sale of control systems products. The shareholdings of the parties in KobayVentures Sdn. Bhd. (Formerly known as ITT Kobay Sdn Bhd) are 60% (ITT):40% (theCompany).

(f) Indemnity Agreement dated 20 August 2002 between the Company and Mega PublicationsHolding Sdn Bhd whereby Mega Publications Holding Sdn Bhd (the other shareholder ofElite Paper Trading Sdn Bhd with 45% equity interest) agreed to indemnify the Company upto 45% of the liability, demands and claims made under a corporate guarantee ofRM4,500,000 provided by the Company to OCBC Bank (Malaysia) Berhad for bankingfacilities granted to in Elite Paper Trading Sdn Bhd.

(g) Joint Venture Agreement dated 22 January 2003 between Kobay Assets Sdn. Bhd. and OkayDevelopment Sdn. Bhd. for the development of the land known as Lots No. 1560 and 1561,Section 2, Town of Georgetown, Daerah Timur Laut, Pulau Pinang comprised in Grantregistration no. 9708 and 9709 respectively into a residential and/or commercial project andor any such type of projects.

(h) Indemnity Agreement dated 24 January 2003 between the Company and Mega PublicationsHolding Sdn. Bhd. whereby Mega Publications Holding Sdn. Bhd. (the other shareholderElite Paper Trading Sdn. Bhd. with 45% equity interest) agreed to indemnify the Companyup to 45% of the liability, demands and claims made under a corporate guarantee ofRM4,500,000 provided by the Company to HSBC Bank Malaysia Berhad for bankingfacilities granted to Elite Paper Trading Sdn. Bhd.

(i) Indemnity Agreement dated 24 January 2003 between the Company and Mega PublicationsHolding Sdn. Bhd. whereby Mega Publications Holding Sdn. Bhd. (the other shareholderElite Paper Trading Sdn. Bhd. with 45% equity interest) agreed to indemnify the Companyup to 45% of the liability, demands and claims made under a corporate guarantee ofRM2,000,000 provided by the Company to Ambank Berhad for banking facilities granted toElite Paper Trading Sdn. Bhd

(j) Shares Sale Agreement dated 13 February 2003 between the Company and Mr. Yee SanKhien to dispose of 60,000 ordinary shares of RM1.00 each representing 5% of equityinterest in Polytool Automation Sdn Bhd for a cash consideration of RM170,520.

(k) Shares Sale Agreement dated 13 February 2003 between the Company and Mr. Yee SanKhien to dispose of 5,000 ordinary shares of RM1.00 each representing 5% of equity interestin Polytool Integration Sdn Bhd for a cash consideration of RM10,390.

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(l) Shares Sale Agreement dated 27 May 2003 between the Company and Mr. Ch’ng KeanHong to acquire 5,000 ordinary shares of RM1.00 each representing 5% of equity interest inMegatool Precision Sdn. Bhd. for a cash consideration of RM235,130.82.

(m) Rescission Agreement dated 17 July 2003 between the Company and ITT Industries Inc.(“ITT”) to revoke and rescind the Joint Venture Agreement (“JV Agreement”) with ITTwhich was signed on 2 May 2002 for setting up of Kobay Ventures Sdn. Bhd. (formerlyknown as ITT Kobay Sdn. Bhd.). ITT shall transfer all its entire shareholdings in KobayVentures Sdn. Bhd. being the six (6) Ordinary Shares of RM1,000/- each to Kobay (“the saidshares”) at a total consideration of RM1/- only. The subsidiary agreements made pursuant tothe JV Agreement are, ipso facto, deemed to have been cancelled.

4. DOCUMENTS FOR INSPECTION

Copies of the following documents will be made available for inspection during normal businesshours at the Registered Office of Kobay at Lot 1.02 First Floor, Acctax Corporate Centre, No. 2Jalan Bawasah, 10050 Penang, from the date of this Circular up to and including the date of theAGM:-

(a) Memorandum and Articles of Association of Kobay;

(b) The material contracts referred to in Section 3 above;

(c) The material litigation referred to in Section 2 above; and

(d) The audited accounts of Kobay for the past two(2) financial years ended 30 June 2002and 2003 and the quarterly report on the unaudited 3 months results for the period ended30 September 2003.

THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK

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(Company No.: 308279-A)(Incorporated in Malaysia)

EXTRACT OF NOTICE OF THE NINTH ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Ninth Annual General Meeting (“AGM”) of Kobay Technology Bhd.(“Kobay” or “Company”) will be held at Plot 30, Hilir Sungai Kluang Satu, Bayan Lepas Industrial Park,Phase 4, 11900 Penang on Wednesday, 24 December 2003 at 3.30 p.m. for the purpose of considering, and ifthought fit, passing the following resolutions, with or without any modifications:-

ORDINARY RESOLUTION 8PROPOSED RENEWAL OF SHARE BUY-BACK AUTHORITY

“THAT subject to the Companies Act, 1965 (“Act”), the Company’s Memorandum and Articles ofAssociation 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 ofRM1.00 each in the Company (“shares”) as may be determined by the Directors of the Company from time totime through the Kuala Lumpur Stock Exchange (“KLSE”) upon such terms and conditions as the Directorsmay deem fit in the interest of the Company PROVIDED THAT the aggregate number of shares purchasedand/or held pursuant to this resolution does not exceed ten per cent (10%) of the total issued and paid-up sharecapital of the Company at any given point in time and that an amount not exceeding retained profits and/or theshare premium accounts of the Company be allocated by the Company for the proposed purchase.

AND THAT authority be and is hereby given to the Directors to treat the shares so purchased in accordancewith the provisions of the Act, which allows a company that has purchased its own shares to either retain theshares as treasury shares or to cancel the shares, or a combination of both. The shares so purchased andretained as treasury shares by the Company may, either be cancelled, distributed as share dividends or resoldon the KLSE 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.

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

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

(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 generalmeeting,

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 withany party or parties to implement, finalise and give full effect to the aforesaid purchase with full powers toassent to any conditions, modifications, re-valuations, variations and/or amendments (if any) as may beimposed by the relevant authorities from time to time.”

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ORDINARY RESOLUTION 9PROPOSED SHAREHOLDERS’ MANDATE FOR RECURRENT RELATED PARTYTRANSACTIONS OF A REVENUE OR TRADING NATURE

“THAT pursuant to Chapter 10.09 of the Listing Requirements of the KLSE, a mandate of the shareholders beand is hereby granted to allow recurrent related party transactions of a revenue or trading nature ("RRPTs"),which are necessary for the day-to-day operations of the Company and/or its subsidiary companies (“KobayGroup”), to be entered into by the Kobay Group in the ordinary course of business, PROVIDED THAT suchtransactions are entered into at arm’s length basis and on normal commercial terms which are not morefavourable to the related parties than those generally available to the public and are not to the detriment of theminority shareholders of the Company, the particulars of such transactions are set out in Section 3.4.2 of theCircular to Shareholders of Kobay dated 2 December 2003 (“Proposed Shareholders’ Mandate”);

AND THAT disclosure of the breakdown of the aggregate value of transactions conducted will be made basedon the type of RRPTs made, names of the related parties involved in each type of the RRPTs made and theirrelationship with the Company, in the annual report of the Company during the current financial year and inthe annual reports for the subsequent financial years during which the Proposed Shareholders’ Mandate is inforce;

AND THAT the authority conferred by this resolution shall commence immediately upon the passing of thisOrdinary Resolution and shall continue to be in force until:-

(a) the conclusion of the next Annual General Meeting (“AGM”) of the Company, at which time it shalllapse unless by ordinary resolution passed at that meeting, the authority is renewed, eitherunconditionally or subject to conditions; or

(b) the expiration of the period within which the next AGM of the Company after the date it is required tobe held pursuant to section 143(1) of the Companies Act, 1965 (but shall not extend to such extensionas may be allowed pursuant to section 143(2) of the Companies Act, 1965); or

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

whichever is earlier.

AND THAT the Directors of the Company and/or any of them be and are hereby authorised to give effect tothe Proposed Shareholders’ Mandate with full powers to deal with all matters relating thereto and to completeand do all acts and things (including executing such documents as may be required) in connection with theProposed Shareholders’ Mandate.”

BY ORDER OF THE BOARD

CHAN MUN SHEE (MAICSA 7003071)WONG MEE CHOON (LS 0040)Company Secretaries

Penang2 December 2003

Notes:-1. A member entitled to attend and vote at the Ninth 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 theCompanies 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 ofhis/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 authorisedin writing or if the appointer is a corporation, either under its common seal or under the hand of an officer or attorney dulyauthorised.

4. The instruments appointing a proxy must be deposited at the Registered Office of the Company at Lot 1.02 First Floor,Acctax Corporate Centre, No.2 Jalan Bawasah, 10050 Penang at least forty-eight (48) hours before the time appointed forholding the Meeting or any adjournment thereof.

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EXTRACT OF THE PROXY FORM

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

I / We ________________________________________________ (Full Name in Block Letters) of_________________________________________________________________________ (Address)being a member / members of Kobay Technology Bhd. hereby appoint _____________________

of ___________________________________________________________________________or failing him, __________________________________________________________________of ___________________________________________________________________________

or failing him/her, Chairman of the Meeting as my/our proxy/proxies to attend and vote for me/us onmy/our behalf, and if necessary, to demand a poll, at the Ninth (9th) Annual General Meeting of theCompany to be held at Plot 30, Hilir Sungai Kluang Satu, Bayan Lepas Industrial Park, Phase 4, 11900Penang on Wednesday, 24 December 2003 at 3.30 p.m. or at any adjournment thereof in the mannerindicated below:-

I/We direct my/our proxy/proxies to vote for or against the Resolution to be proposed at the meeting asindicated thereunder. If no specific directions as to voting is given or in the event of any item arising notsummarised below, my/our proxy/proxies may vote or abstain from voting at his/her discretion.

ResolutionNo.

For* Against*

8 Proposed Renewal of Share Buy-Back Authority9 Proposed Shareholders’ Mandate for Recurrent Related Party

Transactions of a Revenue or Trading Nature

* Please indicate your vote “For” or “Against” with an “X” within the box provided.

Total number of Shares held

Signed this _________ day of _________ 2003 ---------------------------------------Signature / Common Seal ofShareholder(s)

Notes:-1. A member entitled to attend and vote at the Ninth 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 theCompanies 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 ofhis/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 authorisedin writing or if the appointer is a corporation, either under its common seal or under the hand of an officer or attorney dulyauthorised.

4. The instruments appointing a proxy must be deposited at the Registered Office of the Company at Lot 1.02 First Floor,Acctax Corporate Centre, No.2 Jalan Bawasah, 10050 Penang at least forty-eight (48) hours before the time appointed forholding the Meeting or any adjournment thereof.