KOBAY Financial Annual Report 2011

8/2/2019 KOBAY Financial Annual Report 2011

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Annual Report 2011


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To be the market leader and pre-eminent supplier o innovative and compelling engineeringsolutions to customers worldwide.

Our core business is to pursue excellence in business, sales & marketing and manuacturingto serve our customers in the global market.

To achieve sustainable, protable growth, we combine market leading process technologywith a highly competent and committed workorce to achieve business excellence which isrefected in the products and services we oer.

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

Our shared values and belies are the oundation upon which our company is built. Webelieve that our people, striving towards a shared vision and guided by a common set o

values and belies are our most valuable asset and the ultimate sustainable source o ourcompetitive advantage.

OURVALUES & BELIEFS

OURMISSION

OURVISION

A gility

C an-Do Attitude

T eamwork

I nitiative & Accountability

O wnership & Pride

N ever Stop Learning

S atisy the Customers

We are guided by our A.C.T.I.O.N.S. which underlie theculture o the KOBAY Group o Companies.


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CONTENTS

Corporate Inormation 2

Notice o Annual General Meeting and Notice o Dividend Entitlement and Payment 3 - 6

Statement Accompanying Notice o Annual General Meeting 6

Corporate Structure 7

Board o Directors 8 - 11

Chairmans Statement 12 - 13

Corporate Governance Statement 14 - 19

Corporate Social Responsibility 20

Internal Control Statement 21

Directors Responsibilities Statement 22

Audit Committee Report 23 - 26

Other Inormation 27

Financial Statements 30 - 92

Statistics o Shareholdings 93 - 94

List o Properties 95 - 96


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2 Kobay Technology Bhd. (Company No.: 308279-A) Annual Report 2011

CORPORATE INFORMATION

BOARD OF DIRECTORSKoay Cheng LyeExecutive Chairman / Chie Administrative Ofcer

Dato Koay Hean EngManaging Director / Chie Executive Ofcer

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

Lim Swee ChuanExecutive Director / Chie Financial Ofcer

Tan Yok Cheng DJN, PJK, PJMSenior Independent Non-Executive Director(Redesignated on 17.12.2010)

Dato Abdul Rahman Bin Mohammed HashimSenior Independent Non-Executive Director(Retired on 17.12.2010)

Dr. Mohamad Zabdi Bin ZamrodIndependent Non-Executive Director

Khaw Eng PengIndependent Non-Executive Director

AUDIT COMMITTEETan Yok Cheng DJN, PJK, PJMChairman

Dato Abdul Rahman Bin Mohammed HashimMember (Vacated due to retirement on 17.12.2010)

Dr. Mohamad Zabdi Bin ZamrodMember

Khaw Eng PengMember

NOMINATION COMMITTEETan Yok Cheng DJN, PJK, PJMChairman


Koay Ah Bah @ Koay Cheng HockMember

Khaw Eng PengMember

REMUNERATION COMMITTEETan Yok Cheng DJN, PJK, PJMChairman


Dato Koay Hean EngMember

Dr. Mohamad Zabdi Bin ZamrodMember(Appointed on 17.12.2010)

SECRETARIESChan Mun Shee (MAICSA 7003071)Wong Mee Choon (LS0040)E-mail: [email protected]

REGISTERED OFFICEPlot 30, Hilir Sungai Kluang 1Bayan Lepas Industrial Park Phase 4,11900 Bayan Lepas, PenangTel: (04) 6411888Fax: (04) 6412888

REGISTRARAgriteum Share Registration Services Sdn. Bhd.2nd Floor, Wisma Penang Garden42, Jalan Sultan Ahmad Shah10050 PenangTel: (04) 2282321

Fax: (04) 2272391E-mail: [email protected]

AUDITORSCrowe HorwathChartered Accountants17.01, Menara Boustead Penang39, Jalan Sultan Ahmad Shah10050 PenangTel: (04) 2277061Fax: (04) 2278011

BANKERSMalayan Banking BerhadAlliance Bank Malaysia BerhadPublic Bank Berhad

STOCK EXCHANGE LISTINGMain Market, Bursa Malaysia Securities Berhad(Stock Code: 6971)

WEBSITEwww.kobaytech.com


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3Kobay Technology Bhd. (Company No.: 308279-A) Annual Report 2011

NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT the Seventeenth (17th) Annual General Meeting o Kobay Technology Bhd. will beheld at Plot 30, Hilir Sungai Kluang 1, Bayan Lepas Industrial Park, Phase 4, 11900 Bayan Lepas, Penang on Thursday,

15 December 2011 at 3.30 p.m. or the ollowing purposes:-

ORDINARY BUSINESS

1. To receive the Audited Financial Statements or the nancial year ended 30 June 2011 and theReports o the Directors and Auditors thereon.

Resolution 1

2. To approve the payment o a rst and nal tax exempt dividend o 2.0 sen per ordinary sharein respect o the nancial year ended 30 June 2011.

Resolution 2

3. To re-elect the ollowing Directors retiring in accordance with Article 95 o the CompanysArticles o Association:-(i) Tan Yok Cheng(ii) Lim Swee Chuan

Resolution 3Resolution 4

4. To re-appoint Messrs. Crowe Horwath as Auditors o the Company and to authorise theDirectors to x their remuneration.

Resolution 5

SPECIAL BUSINESS

To consider and i thought t, to pass the ollowing resolutions as Ordinary Resolutions:

5. ORDINARY RESOLUTIONPAYMENT OF DIRECTORS FEES

THAT the payment o Directors ees totaling Ringgit Malaysia Twenty Two Thousand and FiveHundred (RM22,500) only to the Non-Executive Directors or the nancial year ended 30 June2011 be and is hereby approved.

Resolution 6

6. ORDINARY RESOLUTIONAUTHORITY TO ALLOT SHARES IN ACCORDANCE TO SECTION 132D OF THE COMPANIES

ACT, 1965

THAT subject always to the Companies Act, 1965 and the approvals rom the relevantgovernmental and/or regulatory authorities, the Directors o the Company be and are herebyempowered pursuant to Section 132D o the Companies Act, 1965, to issue and allot sharesin the capital o the Company rom time to time upon such terms and conditions and or suchpurposes as the Directors may, in their absolute discretion, deem t PROVIDED THAT theaggregate number o shares to be issued pursuant to this resolution does not exceed 10% othe issued share capital o the Company or the time being and at any given point in time ANDTHAT the Directors are also empowered to obtain the approval or the listing o and quotationor the additional shares so issued on the Bursa Malaysia Securities Berhad (Bursa Securities)AND THAT such authority shall continue in orce until the conclusion o the next Annual GeneralMeeting o the Company.

Resolution 7


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7. ORDINARY RESOLUTIONPROPOSED RENEWAL OF SHARE BUY-BACK AUTHORITY

THAT subject to the Companies Act, 1965 (Act), the Companys Memorandum and Articles o

Association and all applicable laws, regulations and guidelines and the approvals o all relevantauthorities, approval be and is hereby given to the Company to purchase and/or hold suchamount o ordinary shares o RM1 each in the Company (shares) as may be determined by theDirectors o the Company rom time to time through the Bursa Malaysia Securities Berhad (BursaSecurities) upon such terms and conditions as the Directors may deem t in the interest o theCompany PROVIDED THAT the aggregate number o shares purchased and/or held pursuantto this resolution does not exceed ten per cent (10%) o the total issued and paid-up sharecapital o the Company at any given point in time and that an amount not exceeding retainedprots and/or the share premium accounts o the Company be allocated by the Company orthe proposed purchase.

THAT authority be and is hereby given to the Directors to treat the shares so purchased inaccordance with the provisions o the Act, which allows a company that has purchased its ownshares to either retain the shares as treasury shares or to cancel the shares, or a combination oboth. The shares so purchased and retained as treasury shares by the Company may, either becancelled, distributed as share dividends or resold on Bursa Securities at a price which is notless than the weighted average market price or the shares or ve (5) market days immediatelypreceding the date o such resale.

THAT such authority rom the shareholders would be e ective immediately upon passing o thisresolution and would continue to be in orce until:-

(i) the conclusion o the next Annual General Meeting (AGM) o the Company ollowing theAGM at which such resolution was passed, at which time it shall lapse unless by ordinaryresolution passed at that meeting, the authority is renewed either unconditionally or subjectto conditions; or

(ii) the expiration o 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 o the Company in ageneral meeting,

whichever occurs rst.

AND THAT authority be and is hereby given to the Directors to take all such steps as arenecessary (including the opening and maintaining o a central depositories account(s) underthe Securities Industry (Central Depositories) Act 1991) and entering into all other agreements,arrangements and guarantees with any party or parties to implement, nalise and give ulleect to the aoresaid purchase with ull powers to assent to any conditions, modications, re-valuations, variations and/or amendments (i any) as may be imposed by the relevant authoritiesrom time to time.

Resolution 8

8. To transact any other ordinary business o which due notice shall have been given.

NOTICE OF ANNUAL GENERAL MEETING (contd)


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NOTICE OF DIVIDEND ENTITLEMENT AND PAYMENT

NOTICE IS ALSO HEREBY GIVEN THAT, subject to the approval o the shareholders at the Seventeenth (17th) AnnualGeneral Meeting, the rst and nal tax-exempt dividend o 2.0 sen per ordinary share in respect o the nancial

year ended 30 June 2011 will be paid on 29 February 2012 to depositors registered in the Record o Depositors on31 January 2012.

A depositor shall qualiy or entitlement to the dividend only in respect o :-

a) Shares transerred into the Depositors securit ies account beore 4.00 p.m. on 31 January 2012 in respect o ordinarytransers;

b) Shares bought on Bursa Malaysia Securities Berhad (Bursa Securities) on a cum entitlement basis according to therules o Bursa Securities.

BY ORDER OF THE BOARD

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

Penang, 23 November 2011

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 notbe a member/members o the Company to attend and vote in his/her stead and Section 149 (1)(b) o the Companies Act, 1965 shall

not apply.2. When a member appoints two or more proxies the appointments shall be invalid unless he/she specifes the proportions o his/her

holdings to be represented by each proxy.

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

4. The instruments appointing a proxy must be deposited at the Registered Ofce o the Company at Plot 30, Hilir Sungai Kluang 1,Bayan Lepas Industrial Park, Phase 4, 11900 Bayan Lepas, Penang at least orty-eight (48) hours beore the time appointed or holding

the Meeting or any adjournment thereo.



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EXPLANATORY NOTES :

Resolution 6The proposed Ordinary Resolution under item 5 is to obtain shareholders approval or the payment o Directors ees

totaling Ringgit Malaysia Twenty Two Thousand and Five Hundred (RM22,500) only to the ve Non-Executive Directorsor the nancial year ended 30 June 2011 as required under Article 103 o the Companys Articles o Association.

Resolution 7A mandate was sought and approved by the members during the Sixteenth (16th) AGM held on 17 December 2010. Nonew shares were issued and no proceeds were raised rom the previous mandate.

I the proposed Ordinary Resolution is passed, the Directors will be empowered to issue and allot shares in the Companyat any time and or such purposes as the Directors consider would be in the interests o the Company up to an aggregatenot exceeding 10% o the Companys issued capital without the need to convene separate general meetings to obtainits shareholders approval so as to avoid incurring additional cost and time. This authority unless revoked or varied atthe general meeting, will expire at the next AGM.

The mandate will provide fexibility to the Company or any possible und raising exercises including but not limited toplacing o shares or the purpose o unding uture investment project(s), working capital and/or acquisition(s) and suchother application as the Directors may deem t in the best interest o the Company.

Resolution 8The proposed Ordinary Resolution under item 7 is o renewal and i passed, will allow the Company to purchase upto ten per cent (10%) o the total issued and paid-up share capital o the Company. This authority unless revoked orvaried at the general meeting, will expire at the next AGM. The details o this proposal are set out in the Statement toShareholders dated 23 November 2011.

STATEMENT ACCOMPANYING NOTICE OF ANNUAL GENERAL MEETING

The prole o the Directors who are standing or re-election (as per Resolutions 3 and 4 as stated in the Notice o

Annual General Meeting) at the Seventeenth (17th) Annual General Meeting o Kobay Technology Bhd. which will beheld at Plot 30, Hilir Sungai Kluang 1, Bayan Lepas Industrial Park, Phase 4, 11900 Bayan Lepas, Penang on Thursday,15 December 2011 at 3.30 p.m., are stated on page 9 o the Annual Report 2011.

There is no individual standing or election as Director (excluding Directors standing or re-election) at this orthcomingAnnual General Meeting.



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CORPORATE STRUCTURE

BUSINESS UNIT Eective equity interest @ 01.11.2011

Precision Tooling & Automation DivisionPolytool Technologies Sdn. Bhd. 100.00 %

Megatool Precision (Suzhou) Co., Ltd. 100.00 %Maker Technologies Sdn. Bhd. 100.00 %Polytool Integration Sdn. Bhd. 85.00 %Microhandling Asia Pte. Ltd. ** 30.48 %

Precision Metal Components DivisionLipo Corporation Berhad and Subsidiaries 53.16 %- Paradigm Precision Components Sdn. Bhd.* 53.16 %- Paradigm Metal Industr ies Sdn. Bhd.* 53.16 %- Paradigm Precision Machining Sdn. Bhd.* 53.16 %- Lipo Precision Industry (Suzhou) Co., Ltd.* 53.16 %- Suzhou Univex Metal Tech Co. Ltd. * (Incorporated on 04.07.2011) 53.16 %- Micro Surace Treatment Sdn. Bhd.* 46.78 %

Metal Fabrication DivisionBend Weld Engineering Sdn. Bhd. 100.00 %

Hotel and Food DivisionLD Global Sdn. Bhd. 100.00 %Lodge 18 Sdn. Bhd. (ormerly known as Opar Holdings Sdn. Bhd.) 100.00 %

Others (Investment, Properties Management & Trading, etc)Kobay Assets Sdn. Bhd. 100.00 %Kobay Sawin Sdn. Bhd. 100.00 %Polytool Precision Sdn. Bhd. 100.00 %Kewjaya Sdn. Bhd. 100.00 %Megatool Precision Sdn. Bhd. 100.00 %

Kobay SCM Sdn. Bhd. 100.00 %Kobay SCM (S) Pte. Ltd. 60.00 %- United Manuacturing Corporation Pte. Ltd.** 60.00 %Elite Paper Trading Sdn. Bhd. 55.00 %Super Tropica Development Sdn. Bhd.* 53.16 %

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


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BOARD OF DIRECTORS

Koay Cheng LyeMalaysian aged 63Executive Chairman / Chie Administrative Ocer / Member o Executive Committee

Mr. Koay Cheng Lye was appointed as Executive Director to the Board on 17 September 1994 and subsequentlyappointed as Executive Chairman on 11 October 2002. He is also the Executive Chairman and Chie AdministrativeOcer o Lipo Corporation Berhad (Lipo), a public company listed on the Main Market o the Bursa Malaysia SecuritiesBerhad and sits on the Board o a number o subsidiaries o the Company as well as Lipos subsidiaries and other privatelimited companies. Being the co-ounder o Kobay Group, he has more than 26 years o experience in the precisionengineering industry and possesses in-depth knowledge o the overall operations o the Group.

As at 1 November 2011, Mr. Koay Cheng Lye has direct shareholding o 586,995 ordinary shares in the Company. Healso has indirect shareholding o 17,523,007 ordinary shares in the Company, by virtue o his direct interest in KobayHoldings Sdn. Bhd., a major shareholder o the Company. He is also deemed to have an interest in the shares o all thesubsidiary companies o the Company to the extent that the Company has an interest, by virtue o his shareholding inthe Company.

Dato Koay Hean EngMalaysian aged 53Managing Director / Chie Executive Ocer / Member o Remuneration Committee, ESOS Committee and ExecutiveCommittee

Dato Koay Hean Eng was appointed to the Board on 17 September 1994. He holds a certicate o vocational educationand is the co-ounder o Kobay Group. With more than 30 years o experience in the precision engineering industry,he has contributed signicantly to the growth o Kobay Group. He is also the Managing Director and Chie ExecutiveOcer o Lipo Corporation Berhad (Lipo), a public company listed on the Main Market o the Bursa Malaysia SecuritiesBerhad and holds directorships in the subsidiaries o the Company and other private limited companies.

As at 1 November 2011, Dato Koay Hean Eng has direct shareholding o 1,654,154 ordinary shares in the Company. Healso has indirect shareholding o 17,523,007 ordinary shares in the Company, by virtue o his direct interest in Kobay

Holdings Sdn. Bhd., a major shareholder o the Company. He has balance option to subscribe or 600,000 ordinaryshares in the Company. He is also deemed to have an interest in the shares o all the subsidiary companies o theCompany to the extent that the Company has an interest, by virtue o his shareholding in the Company.

Koay Ah Bah @ Koay Cheng HockMalaysian aged 65Non-Independent Non-Executive Director / Member o Nomination Committee

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

As at 1 November 2011, Mr. Koay Ah Bah @ Koay Cheng Hock has direct shareholding o 569,665 ordinary shares inthe Company. He also has indirect shareholding o 17,523,007 ordinary shares in the Company, by virtue o his directinterest in Kobay Holdings Sdn. Bhd., a major shareholder o the Company. He is also deemed to have an interest in theshares o all the subsidiary companies o the Company to the extent that the Company has an interest, by virtue o hisshareholding in the Company.


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BOARD OF DIRECTORS (contd)

Lim Swee ChuanMalaysian aged 45Executive Director / Chie Financial Ocer / Member o ESOS Committee and Executive Committee

Mr. Lim Swee Chuan was appointed to the Board on 29 November 2001. He oversees the Kobay Groups nancialaspects and also holds directorships in several subsidiaries o the Company. He graduated in 1991 with a Bacheloro Accounting (Honours) degree rom Universiti Utara Malaysia. He is a Chartered Accountant and a member o theMalaysian Institute o Accountants as well as Malaysian Institute o Taxation. Upon graduation, he worked or Cycle &Carriage (M) Sdn. Bhd. as a Group Internal Audit Executive rom 1991 to 1992. Between 1992 and 1995, he was attachedto Price Waterhouse (now known as PricewaterhouseCoopers) where his last position was an Audit Senior. He joinedKobay as an accountant in 1995 and is presently the Chie Financial Ocer o Kobay Group. He also holds directorshipin Lipo Corporation Berhad and its subsidiaries.

As at 1 November 2011 Mr. Lim Swee Chuan has no direct/indirect shareholding in Kobay but has balance option tosubscribe or 250,000 ordinary shares in the Company.

Mr Lim Swee Chuan is subject to retirement by rotation under Article 95 o the Companys Article o Association at theorthcoming Annual General Meeting and being eligible, has oered himsel or re-election.

Tan Yok Cheng DJN, PJK, PJMMalaysian aged 53Senior Independent Non-Executive Director / Chairman o Audit Committee, Nomination Committee and RemunerationCommittee

Mr. Tan Yok Cheng was appointed to the Board on 15 October 1997. On 17 December 2010, upon the recommendationo the Nomination Committee o the Company, Mr. Tan Yok Cheng was re-designated to Senior Independent Non-Executive Director by the Board in replacement o ormer Director, Dato Abdul Rahman Bin Mohammed Hashim whoretired at the last Annual General Meeting o the Company.

From 1988 to 1994, he was employed under Emico Plastic Industries Sdn. Bhd., a manuacturer o trophy and awards

components, souvenirs, custom designed promotional items and related supplies, in which his last position was asGroup Human Resources and Administration Manager. Since 1994, he has been involved in his own business namelyPewterlink Creations Marketing, o which its principal activity is the supply o pewter ware. He was a Penang MunicipalCouncilor.

As at 1 November 2011, Mr. Tan Yok Cheng has direct shareholding o 1,250 ordinary shares in the Company.

Mr Tan Yok Cheng is subject to retirement by rotation under Article 95 o the Companys Article o Association at theorthcoming Annual General Meeting and being eligible, has oered himsel or re-election.

Dr. Mohamad Zabdi Bin ZamrodMalaysian aged 69Independent Non-Executive Director / Member o Audit Committee and Remuneration Committee.

Dr. Mohamad Zabdi Bin Zamrod was appointed to the Board on 30 March 2002. On 17 December 2010, upon therecommendation o the Nomination Committee o the Company, Dr. Mohamad Zabdi Bin Zamrod was appointed asa member o the Remuneration Committee by the Board in replacement o ormer Director, Dato Abdul Rahman BinMohammed Hashim who retired at the last Annual General Meeting o the Company.

Dr. Mohamad Zabdi holds a Doctorate in Curriculum and Teaching rom the Columbia University, New York. He was alecturer in Universiti Sains Malaysia or more than 10 years beore retiring.

Dr. Mohamad Zabdi has no direct/indirect shareholding in Kobay as at 1 November 2011.


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Khaw Eng PengMalaysian aged 44Independent Non-Executive Director / Member o Audit Committee and Nomination Committee

Mr. Khaw Eng Peng was appointed as a Director to the Board o Kobay on 30 July 2010. Mr. Khaw is a ellow membero the Association o Chartered Certied Accountants and a member o Malaysian Institute o Accountants. Uponcompletion o his proessional examination, he joined Messrs. Coopers & Lybrand (now merged under the rmPricewaterhouseCoopers) in 1993, attaching to audit and compliance services division o the rm. In 1996, he letaudit practice as Assistant Audit Manager and joined Oriental Interest Berhad (OIB) Group as Senior Manager inFinance and Administration Department. He was promoted to Assistant General Manager in year 2001, overseeing allnancial reporting, corporate compliance and administration aspects or OIB Group. On 5 November 2007, Mr. Khawwas appointed to his current position as Executive Director o OIB. Mr. Khaw also sits on the Board o Lipo CorporationBerhad.

Mr. Khaw Eng Peng has no direct/indirect shareholding in Kobay as at 1 November 2011.

OTHER INFORMATION

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

Save or the above, none o the Directors have any amily relationship with other Directors or major shareholders o theCompany.

Conict o InterestNone o the Companys Directors has acted in confict in any arrangement, contract or transaction during the nancialyear.

Conviction or OencesNone o the Companys Directors had convicted any oence (other than trac oences, i any) within the past ten (10)years.

Number o board meetings attended in the fnancial year ended 30 June 2011Four (4) board meetings were held during the nancial year ended 30 June 2011. Details o attendance o Directors atthe board meetings are as ollows:

Directors Attendance

Koay Cheng Lye 4/4

Dato Koay Hean Eng 4/4

Koay Ah Bah @ Koay Cheng Hock 4/4

Lim Swee Chuan 4/4

Dr. Mohamad Zabdi Bin Zamrod 4/4Tan Yok Cheng 4/4

Dato Abdul Rahman Bin Mohammed Hashim (Retired on 17.12.2010) 1/2

Khaw Eng Peng 4/4



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Directors and Major Shareholders Interests

No. o shares held in Kobay as at 01.11.2011

Name

Direct

No. o ordinary shareso RM1 each %

Indirect

No. o ordinary shareso RM1 each %

Directors

Dato Koay Hean Eng 1,654,154 2.46 *17,523,007 26.02

Koay Cheng Lye 586,995 0.87 *17,523,007 26.02

Koay Ah Bah @ Koay Cheng Hock 569,665 0.85 *17,523,007 26.02

Khaw Eng Peng

Tan Yok Cheng 1,250 #

Lim Swee Chuan

Dr. Mohamad Zabdi Bin Zamrod

Major Shareholders

Kobay 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 26.02

Koay Cheng Lye 586,995 0.87 *17,523,007 26.02

Koay Ah Bah @ Koay Cheng Hock 569,665 0.85 *17,523,007 26.02

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

Notes:-

* Deemed interest by virtue o the Directors direct interest in KHSB, a major shareholder o the Company# Interest is less than 0.01%

^ The percentage o shareholding is calculated based on 67,352,550 ordinary shares ater deducting 728,200 treasury shares

(retained by the Company as per Record o Depositors) rom the ully issued and paid-up capital o the Company o RM68,080,750

consisting o 68,080,750 ordinary shares o RM1 each.



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On behal o the Board o Directors, I am delighted to present to you the Annual Report and Financial Statements oKobay Technology Bhd. or the nancial year ended 30 June 2011.

FINANCIAL REVIEW

The Groups businesses recovered in the nancial year 2011 as compared to nancial year 2010. The Group recordedan improved perormance with net prot attributable to shareholders o the Company o RM6.5 million and revenue oRM111.2 million, a remarkable improvement as compared to net prot and revenue o RM1.4 million and RM81.8 millionrespectively or the year ended 30 June 2010.

The major contributors or the commendable improvement in Groups revenue by RM29.4 million (36%) and net protby RM5.1 million (364%) as compared to preceding nancial year were precision metal components division and gainson disposal o property and subsidiary which amounted to about RM5.3 million. It is worth noting that precision metalcomponents division has achieved excellent perormance in the nancial year under review. I would like to record aspecial thanks or their hard work in achieving the sterling results.

In terms o nancial position, the Group maintains its sound nancial ooting with net assets per share o RM1.66 as at30 June 2011 and cash and cash equivalents o RM61.5 million or RM0.91 per share.

OPERATION REVIEWThe precision metal components division (under Lipo Corporation Berhad Group o Companies), major contributor oGroups revenue and net prot, achieved another excellent year o perormance. The division provides CNC precisionmachined parts, sheet metal abrication, metal stamping components, modular assembly and metal sur ace treatmentto semiconductor, telecommunication, electronics, aerospace industries and others. With their strengths in providingvalue-added services to customers, coupled with good quality, competitive costs and on time delivery, the customershad given additional product loadings throughout the period under review and resulted in the rise o sales volume. Theventuring into modular assembly products which command better pricing also contributed to the good results.

During the nancial year, as part o the Groups realignment exercise, the business unit in Thailand has ceased operationson January 2011 in view o its limited earnings potentials.

Lipo Group has also taken steps to diversiy its revenue sources. In its Annual General Meeting held on 17 December

2010, Lipo Group has obtained shareholders approval or diversication o business into property development. Upto 31 October 2011, Lipo Group has acquired about 65,015 square eet o reehold land with a view o venturing intoproperty development in the uture.

The precision tooling business unit has perormed well and seen a rise in die sets and mould orders rom its keycustomers which have better margin as compared to conventional tooling parts. The satised services in providing onestop engineering solution have met up with customers expectations resulted more orders coming in. At the same time,it has also successul in broadening its customer base with additional new customers bringing in new orders.

The automation business unit which involves in advanced automation equipments and the metal abrication divisionwhich provides heavy machining and abrication or oil and gas industry did not perorm well during the period underreview. On prudence basis, the slow down in the business has also prompted the divisions to undertake inventorywrite down o about RM2.9 million during the nancial year. However, the divisions restless eorts in penetrating newcustomers and being qualied as approved vendors o a ew customers have shed some lights near nancial year end.Hopeully, these will turn into a prospective business in the coming nancial year.

In December 2010, the entire equity interest in KWH Technologies Sdn. Bhd. which involves in providing mechanicalengineering, maintenance and shut down works or oil & gas industry has been disposed o. This was in view o thecompany has not perormed as anticipated and incurring losses since acquisition.

CHAIRMANS STATEMENT


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Lodge 18 Sdn. Bhd., a wholly-owned subsidiary has acquired a piece o land with a 9-storey hotel building situatedat Butterworth, Penang on January 2011 or a cash consideration o RM4.5 million or the Groups venture into hotelbusiness. This is part o the Groups diversication plan into hospitality industry that provides resilient income stream.The Group has also ventured into ood industry with the operation o outlet providing dessert, ood and beverages via

its subsidiary, LD Global Sdn. Bhd..

OUTLOOK AND PROSPECTThe serious sovereign debts crisis acing by the United States and Europe has nally caused havoc in the world economyand the probability o having recession is high. The journey ahead or the Group is extreme challenging in view o theragile world economy conditions and uncertainties. Challenges and chaos will continue to rein in the business markets.We are mindul o the current volatile world economic conditions and we will manage with thrive by optimizing resourcesand prudent cost management. Close monitoring o business units Key Perormance Indicators, implementing strictcontrol on sales order, inventory and debt management, budgetary and cost savings programs will be our top priorities.We will urther intensiy strategies to bond and oster close relationships with our customers, improving our capabilitiesin oering innovative and cost competitive solutions, providing ast respond time and product turn-around in order todeliver value-added and satised services to the customers.

Not orgetting that there is always opportunity in every crisis, we will continuously explore or good business opportunityto make use o our healthy nancial position. We will explore on diversication into dierent industries that we arecurrently in to strengthen our income base and cushion o impact o the ups and downs o economic cycle.

We believe that our current strategies and articulation o Kobay work culture will enable us to brace through theturbulence in global economy ahead.

DIVIDENDSTo reward our loyal shareholders, the Board o Directors has recommended the payment o rst and nal tax exemptdividend o 2.0 sen per ordinary share in respect o the nancial year ended 30 June 2011.

APPRECIATIONI would like to take this opportunity, on behal o the Board o Directors, to record our sincere appreciation and gratitude

o the unwavering support o our customers, business partners and government authorities or working alongside withus in order to reach common objectives. We would also like to express our heartelt thanks to all our employees or theirhard work, dedication and commitment.

Lastly, I would like to express our thanks and appreciation to Dato Abdul Rahman Bin Mohammed Hashim who retiredon 17 December 2010 or his services and leadership to the Group.

Thank you.

KOAY CHENG LYEExecutive Chairman

CHAIRMANS STATEMENT (contd)


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In recognizing good corporate governance as set by the Malaysian Code o Corporate Governance (Code) and beingentrusted with the stewardship rom both the shareholders and stakeholders o the Company, the Board o Directors(Board) is committed and undertakes ull accountability o actions towards creation o wealth in achieving the shortterm and long term shareholders value.

Below are statements o the Company in applying the principles and best practices o good governance in complianceto the Code.

BOARD OF DIRECTORS AND ITS COMMITTEES

The Board is entrusted to lead and manage the business o the Company. The Board meets regularly to discuss and alignthe strategic aims o the Company and reviews the Groups perormance quarterly to meet the Companys objectivein protecting the shareholders and stakeholders interest whilst moving orward in a challenging market environment.

During the Board o Directors meeting held on 25 November 2010, the Board has deliberated and adopted the BoardCharter o the Company which constitute and orm an integral part o each Directors duties and responsibilities.Its objective is to ensure that all Board members acting on behal o the Company are aware o their duties andresponsibilities as Board members and the various legislation and regulations aecting their conduct and best practiceso good Corporate Governance are applied in all their dealings in respect and on behal o the Company.

There are total seven (7) Directors in the Board o which three (3) out o the total are Executive Directors whereasthree (3) out o the our (4) Non-Executive Directors are independent. Independent Directors presence are importantespecially each o the Non-Executive Director could contribute their skill and expertise in various scope and proessionto ensure the strategies ormulated or major transactions proposed by the management are o the best interest o theCompany and the minority shareholders. The Board views the current composition airly represents the interest o theshareholders. All the Independent Non-Executive Directors are members o the Audit Committee whilst two o them siton the Nomination Committee and Remuneration Committee respectively. Mr. Tan Yok Cheng has been redesignatedas Senior Independent Non-Executive Director on 17 December 2010. Prole o Directors are set in page 810 in thisAnnual Report elaborates each o the Directors background and experiences.

During the nancial year ended 30 June 2011, the Board had our (4) Board Meetings where they reviewed and discussed

the Groups operations, periodic nancial statements, strategic plans and risk management matters inclusive but notlimited to the reports rom Board Committees on various scope o coverage o each Board Committee to ensureobligations to shareholders and stakeholders are met. Special Board Meetings would be called should there be urgentand important issues to be discussed and decided.

Members o the Board are urnished with sucient and timely inormation in relations to any corporate or business issueto be discussed in the meeting so to enable them to discharge their duties. The Board members review updates and/orreports inclusive Board attendance, resolutions passed quarterly, Directors dealing in securities, nancial inormation,internal control report, external auditor eedback and corporate developments. Proposals are circulated prior to themeeting to provide adequate time and inormation to the Directors so that they can deliberate on the issue when raisedat the meeting. Records o the deliberation, issues discussed and conclusion were minuted by the Secretaries o themeeting and then circulated to all Directors or their conrmation.

No individual or group o individuals dominates the Boards decision making. Each Director contributes his skill,experience and expertise accordingly and issue raised is careully considered by each o them prior to conclusion. TheCompany Secretaries attended all meetings and minutes have been recorded down o which were signed o by theChairman o the meeting and kept at the Companys registered oce.

Each and every Director is able to access directly to the senior management and/or to the advice and services othe Company Secretaries, whenever is necessary. The Company Secretaries are appointed by the Board to carry outthe duties in which the post entails, providing eective support to ensure the eective unctioning o the Board.Removal o any Company Secretary is a matter or the Board as a whole. Directors may also seek external independentproessionals advice or more inormation to be well inormed prior to any decision made by them at the Companysexpense, on a case to case basis, i necessary.

CORPORATE GOVERNANCE STATEMENT


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The roles o the Chairman and the Chie Executive Ocer are segregated to ensure that there is a balance o power andauthority. The Chairman is responsible or ensuring the eectiveness o the Board policies and conduct whilst the ChieExecutive Ocer is responsible or the day-to-day running o operations, organisational eectiveness, overseeing aswell as coordinating the development and implementation o Board policies, corporate strategies and decisions. The

Chairman o the Board chaired every Board meetings held in the nancial year ended 30 June 2011. Both the Chairmanand the Chie Executive Ocer are brothers.

As an integral part o good corporate governance and in discharging the Boards duciary duties, the Board Committeesas disclosed below were appointed and its powers were delegated respectively in each area to these Committees.The Terms o Reerence o each Committee has been approved by the Board and where applicable, comply with therecommendations o the Code. The Board reviews these Committees perormance rom time to time and will revise, inecessary, their authorities granted.

Executive Committee

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

a) executes all matters decided by the Board;b) assists the Board in monitoring the operational perormance o 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 o three members,all o them are Independent Non-Executive Directors and are nancially literate where one o them is a member o anaccounting association or body. The Audit Committees composition, terms o reerence and the report are set out inpage 23-26 o this Annual Report.

Nomination Committee

Since establishment on 1 September 2001, Nomination Committee comprises o two (2) Independent Non-ExecutiveDirectors and one (1) Non-Independent Non-Executive Director. Detail o the composition is set out on page 2 o thisAnnual Report.

This Committee is responsible to recommend to the Board o any new Director, Non-Executive or Executive, appointmentand assessment o the eectiveness o each Director or the Board as a whole on an on-going basis. The Committee hason 1 November 2011 evaluated the perormance o the Board as a whole, the Committees o the Board, contribution oeach Director and has recommended to the Board those Directors retired and eligible or re-election during the AnnualGeneral Meeting (AGM) set on 15 December 2011. The assessments and evaluations carried out by the NominationCommittee in the discharge o all its unctions are properly documented.

Remuneration Committee

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

This Committee is responsible in determining, reviewing and recommending salary, benets, general remunerationpolicy and practices o the Companys Executive Directors. Remuneration o Non-Executive Directors is determinedby the Board as a whole and Non-Executive Directors shall abstain in the discussion o their own remuneration. TheCommittee had on 1 November 2011 evaluated the perormance o the Executive Directors and individual Director whoeligible to salary increment were awarded with amount correlates with their yearly perormance in accordance to theCompanys Human Resource Policy and Procedure.

CORPORATE GOVERNANCE STATEMENT (contd)


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Appointment and Re-election o Directors

Pursuant to the Companys Articles o Association, one-third (1/3) o the Directors including Managing Director or thetime being, shall retire rom oce by rotation at each AGM. Provided always that all Directors shall retire rom oce

once at least in each three (3) years and i eligible, they can o er themselves or re-election. Directors newly appointedto the Board, either to ll a casual vacancy or as an addition to the existing Directors are subject to re-election by theshareholders at the next AGM to be held subsequent to their appointments.

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

Nomination Committee will evaluate all appointment or re-election o Directors to the Board beore recommendationbeing orwarded to the Board or approval. The retiring Directors who eligible or re-election are listed in page 9 o thisAnnual Report.

Directors Training

All Directors have attended and successully completed the Mandatory Accreditation Programme and obtainedthe requisite points to be acquired under the Continuing Education Programmes within the stipulated timerame asprescribed by Bursa Malaysia Securities Berhad (Bursa Securities).

Newly appointed Directors will be given an orientation on the Companys background and inormation inclusive thestrategic plans and directive.

The Board acknowledges the importance o training and encourages the Directors to attend training programmes inorder to keep abreast o the latest development, advances in corporate governance and to urther enhance their skillsand knowledge where relevant so to enable them to contribute to the Company.

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

Date Topic/Area/Matters CoveredDuring Board Meeting

25.11.2010 Introduction o Board Charter

In-House Training attended by Dato Koay Hean Eng, Mr. Koay Cheng Lye, Mr. Lim Swee Chuan and Mr. Koay Ah Bah@ Koay Cheng Hock

30.09.2010 Eective Communication Eective Meeting Channels

14.10.2010 5 Pillars o Business Success

25.11.2010 Kobay Leadership Model

The ollowings are additional courses and training programmes attended by the Directors or the nancial year ended30 June 2011:

Directors Training Programmes Attended Date

Lim Swee Chuan

Updates on Financial Reporting Standards (FRS)Seminar Pengenalan Akta Persaingan 2010The Economic Transormation Programme (ETP) and its Impact to the

Penang Business Community

16 & 17.08.201012.10.201011.05.2011

Khaw Eng Peng OCBC Treasury SeminarDealings By Directors

17.12.201005.04.2011



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DIRECTORS REMUNERATION

The Remuneration Committee is guided by the need to attract and retain during establishment o remunerationpackage and at the same time, link the rewards to corporate and individual Executive Directors perormance. Thecompensation o Non-Executive Directors are proposed by the Remuneration Committee which link to their experienceand level o responsibility taken and approved by the Board as a whole. The Company pays its Executive Directorssalaries, bonuses and other emoluments and or Non-Executive Directors, Directors ees that are approved at theAGM. A summary o the Directors remuneration is refected as ollows:-

1. Directors FeesDirectors ees are payable only to Non-Executive Directors. For the year under review, the Board proposed a ee oRM5,000 or each Non-Executive Director. Director who has not served the ull nancial year, the payable Directoree will be apportioned accordingly. Breakdown o Directors ees payable to each and every Non-ExecutiveDirector or the nancial year ended 30 June 2011 is as ollows :-

Non-Executive Director Proposed Directors Fees (RM)

Mr. Koay Ah Bah @ Koay Cheng Hock 5,000

Dato Abdul Rahman Bin Mohammed Hashim (Retired on 17.12.2010) 2,500

Dr. Mohamad Zabdi Bin Zamrod 5,000

Mr. Tan Yok Cheng 5,000

Mr. Khaw Eng Peng 5,000

Total Payable 22,500

2. Non-Executive Directors Other BeneftNon-Executive Directors are paid a perquisite or their every attendance o quarterly meeting and during thenancial year ended 30 June 2011, a total o RM7,700 meeting expenses have been paid to Non-Executive Directors.

3. Directors RemunerationA summary o the Directors remuneration o the Company, both or Executive and Non-Executive Directors,categorised into appropriate components and into each successive band o RM50,000 is disclosed below :-

Executive Directors(RM)

NonExecutive Directors(RM)

Fees 22,500

Other benets 7,700

Salary and other emoluments 768,684# 41,225*

Bonus 122,236#

Allowance & Statutory Contributions 106,719# 5,195*

Per annum Executive Directors NonExecutive Directors

0 to RM 50,000 4*

RM50,001 to RM100,000 1

RM100,001 to RM150,000

RM150,001 to RM200,000

RM200,001 to RM250,000

RM250,001 to RM300,000 1

RM300,001 to RM350,000 1

RM350,001 to RM400,000

RM400,001 to RM450,000 1

Executive Directors(No. o options over

ordinary shares)

NonExecutive Directors(No. o options over

ordinary shares)

Total(No. o options

over ordinaryshares)

Employees Share Option Scheme 850,000 850,000

Note:-* One (1) Non-Executive Director o the Company also serves as Executive Director o a subsidiary company

# Three (3) Executive Directors o the Company also serve as Director o the listed subsidiary company



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COMMUNICATION WITH SHAREHOLDERS/INVESTORS

Communication is a powerul and oundation o every Companys success where the Board acknowledges. The Boardtook opportunity at every General Meeting to interact with shareholders in person beside the written communication

ormally sent to shareholders via Notice o General Meetings and Circular to Shareholders. The Board will ensuresucient inormation is disclosed in the Notice o Meeting, Annual Report and Circular to Shareholders.

The Company disseminates inormation on all its announcements through Bursa Securities website (www.bursamalaysia.com). Shareholders and stakeholders could also access through the Companys website (www.kobaytech.com) globallyto obtain inormation in relates to Groups strategy, perormance and major development besides communicatingthrough e-mail. The Company will review and update related inormation quarterly or inormation o the shareholdersand public at large.

Shareholders may direct or post to Mr. Tan Yok Cheng, the Senior Independent Non-Executive Director or any queries orconcerns regarding the Company at the registered oce o the Company at Plot 30, Hilir Sungai Kluang 1, Bayan LepasIndustr ial Park, Phase 4, 11900 Bayan Lepas, Penang. At all times, shareholders may contact the Company Secretary, Ms.Chan Mun Shee or Ms. Wong Mee Choon via oce contact number or email to [email protected] or inormation.

ACCOUNTABILITY AND AUDIT

Financial Reporting

The Audit Committee, on behal o the Board, scrutinises inormation to be disclosed to shareholders o the Companyand public in its quarterly (within 2 months ater each quarter end) and annual nancial statements (within 4 monthsater the nancial year end) prior to the Boards approval or announcement via Bursa Securities website in compliancewith the Listing Requirements.

A Statement o Directors Responsibilities is shown on page 22 o this Annual Report.

Internal Audit

The Board acknowledges internal audit unction is an integral part o an eective system o corporate governance andhas an in house Internal Audit Department to periodically review on the adequacy, eectiveness and integrity o theGroups internal control system, management inormation system, risk management and governance processes. Theinternal auditor reviews and highlights weaknesses in control procedures and makes recommendations or improvement.One o internal auditors unctions is also to investigate any complaints on mismanagement o Companys propertiesand assets and any instances o raud or malpractice. The Internal Audit Department reports directly to the AuditCommittee, to ensure the independence o the internal audit unction.

Summary o the activities o the Internal Audit Department is set out in the Audit Committee Report on page 26 o thisAnnual Report.



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Internal ControlThe purpose o internal control is to manage and control risk. The Board o Directors is aware and responsible in ensuringthat the Company maintains an eective internal control system. The Company maintains written documentation othe Companys values, expected code o conduct, policies and procedures besides clearly denes authorities and

responsibilities or the Board, its Committees, each manager, employee and department.

The management is accountable to the Board in monitoring the Companys internal control system and providesreasonable assurance regarding the reliability o the nancial inormation used within the business, as well assaeguarding the assets against unauthorised use or disposition and problems are identied on a timely basis withsuggested solutions.

The Company has also implemented its customized Enterprise Resource Management System (ERM) which enables themanagement to monitor and manage each individual subsidiary companys key perormance indicators to ensure theiroperations are operating to the management expectation.

The Board or its Committee reviews individual subsidiarys internal control activities during the monthly and quarterlymeetings as an on-going monitoring process.

The Internal Control Statement is set out on page 21 o this Annual Report.

Risk Management

As regards to risk management, there is a strategic planning programme conducted which analyse the strengths,weaknesses, opportunities and threats ace by the Group. Strategic plans and goals and Key Perormance Indicators(KPI) are drawn out or each o the business operating units. On quarterly basis, the strategic plans and goals and KPIsare reviewed and action plans are discussed or implementation.

The strategic planning programme is an on-going process carried out by the Group in identiying, evaluating andmanaging signicant risks aced during the journey o at taining 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 sessionshave been held by the Audit Committee without the presence o the Executive Directors with the internal and externalauditors at quarterly meeting held on 25 November 2010 and 26 May 2011 during the nancial year ended 30 June 2011.

STATEMENT OF COMPLIANCE WITH THE BEST PRACTICES OF THE CODE

The Company has complied with the Code during the nancial year under review except or disclosure o details o theremuneration o each Director. The Board is o the view that disclosure o Directors remuneration by applicable bandso RM50,000 under Listing Requirements o Bursa Securities is sucient to meet the principle o the Code.

The Board has reviewed this Corporate Government Statement and has approved it on 1 November 2011.



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To achieve sustainable growth, a company as a corporate citizen needs to commit towards realizing its social responsibilityon top o achieving its business excellence. The Company acknowledges that success is measured by our ability tosatisy not only shareholders but also stakeholders which comprise customers, vendors, employees and community atlarge. As such, commitment towards Corporate Social Responsibility is vital in individual Companys success.

EmployeesThe Company recognizes the importance o employees as the greatest assets. We are not only continually provide in-house training programmes or all employees but also sending employees to attend external trainings so to enrich theirskills in order to be able to compete globally.

The Company adopts a philosophy o caring or its employees physical and mental health, henceorth encouragingemployees interaction through quarterly teambuilding activities to cultivate team spirit and via annual dinner torecognize employees service and hard work with their colleagues and peers.

The Company is supportive to its employees in enriching their general knowledge or the benet o sel grooming,awareness and wisdom through educational programmes provided by third parties. Educational talks held during thenancial year 2011, conducted by May Partners on the Importance o Will Writing over luncheon gatherings were wellreceived by its employees, promoting sharing and interaction with each other.

Workplace SaetyKobay has continuously promotes quality and sae work environment or its employees through proper housekeepingprocedures conceptualised under the 5S programme that are enorced through periodic audits. The best businessunit in maintaining and sustaining a clean and sae working environment is rewarded annually.

The management has also raised the awareness o saety through several briengs which were conducted by the FirePrevention Association to the employees to educate them on workplace saety practices that benets their loved onesat home as well.

SuppliersAll suppliers are our partners. The Company believes that we only be successul in business i we have helped oursuppliers to achieve and sustain the requirements under our quality standard especially in quality o the products and

services as well as delivery. Periodically, we met them or rectiying actions in areas where weaknesses were noted viaSuppliers Day conducted by business units.

CustomersCustomers are our long-term business partners and with customers continual support, we will grow and protable. Weperiodically monitor on our delivery and service to our customers via Key Perormance Indicators set at weekly meetingto ensure all customer issue are attended to.

CommunityIn carrying out its belie in giving back to the society, the Company had sponsored a Chinese New Year Party organisedby the Rotary Club, Penang or the inmates o Cheshire Home and Eden Handicap Service Centre held at CheshireHome Penang. The social interaction through network o associations paved ways or the Company to contribute to thewell-being o society through simple gesture o caring to the less ortunate and underprivileged.

The Group also participates in employment creation and skills by carrying out internships and hiring o workers withdisablement as part o community involvement in its various operations and departments.

EnvironmentWe undertake to provide products and services in compliance to Restriction o Hazardous Substances or RoHSrequirements, where applicable. We are working responsibly towards minimising environmental accidents through ourown enorcement and implementation, thus building up our business eciency as well. The Group also undertakes tore-cycle papers and books in support o the environmental good practice apart rom contributing back to the societyvia donation o the proceeds.

The Group also embarks on reducing its documents in prints via setting up o electronic document management systemwhere the management could retrieve sot copy o documents via internet downloads. The Company also encouragesits sta within the Group to initiate energy savings measures such as maintaining an acceptable temperature o air-con

set throughout the oce daily use amongst others, in eorts to minimise resources use.

CORPORATE SOCIAL RESPONSIBILITY


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The Board o Directors (Board) acknowledges its responsibilities on the Groups system o internal control and inreviewing the system adequacy and integrity. The Board is ully aware that the system o internal control cannot totallyeliminate the risk o ailure to achieve business objectives, and can only provide reasonable and not absolute assuranceagainst material misstatement or loss. This Statement is prepared based on Bursa Malaysia Securities Berhads guidelines

on Statement on Internal Control Guidance or Directors o Public Listed Companies.

For the year under review, the Board conrms that there is an on-going process o identiying, evaluating and managingsignicant risks aced by the Group and reviewing internal control system to saeguard shareholders investment andGroups assets. Key elements o the Groups system o internal control are described below: -

1. Formal Group Organisation Structure denes clearly the ramework on line o reporting and hierarchy o authorityand the Groups core activities are managed by segregation into dierent strategic business groups.

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

3. Clearly dened authorisation limits at appropriate management levels are set out in a Financial Authority Matrix orcontrolling and approving capital and revenue expenditure.

4. Budgetary control system is in place to establish the responsibilities and accountabilities o each business unit interm o resources employed and contributions, control over costs and expenses and or measuring the businessunits overall nancial perormance. Executive Committee o the Board (EXCO) that consists o Executive Directorsapproves the budgets.

5. Individual companies with active business operations hold monthly management meeting to review the nancialperormance, business overview, direction and development with senior management sta at corporate level.

6. Executive Directors hold weekly EXCO meeting to discuss and resolve any major issues arising rom businessoperations and plan or corrective actions.

7. Internal Audit Department is established to report 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 by Internal Audit Department to ensure compliance oGroup Policies and Procedures and to review eectiveness o the existing internal control system.

9. Internal control issues noted are tabled or discussion and resolution in business units monthly management meeting

and presented in operational review meeting at EXCO level. Improvements in existing policies and procedures orimplementation o new policies and procedures are carried out when needed to keep in pace with the evolvingbusiness environment.

10. Audit Committee and Board o Directors hold quarterly meeting to discuss on internal audit reports, periodicnancial statements and issues that warrant the Committees and Boards attentions.

The Board would like to conrm that the Groups system o internal control is in place and unctioning. There wasno signicant material internal control weakness noted during the nancial year under review. The management iscontinuously taking measures to strengthen and improve the Groups internal control environment.

This Statement is made in accordance with the resolution o the Board o Directors dated 19 October 2011.

INTERNAL CONTROL STATEMENT


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DIRECTORS RESPONSIBILITIES STATEMENT

The Board o Directors is required under the Listing Requirements o Bursa Malaysia Securities Berhad to issue astatement explaining their responsibilities or preparing the annual audited nancial statements.

The Directors are required by the Companies Act, 1965 to prepare nancial statements or each nancial year which

give a true and air view o the state o aairs o the Company and the Group at the end o the nancial year and o theirresults and cash fows or the nancial year then ended.

In preparing the nancial statements or the nancial year under review, the Directors have: selectedsuitableaccountingpoliciesandthenapplythemconsistently; madejudgementsandestimatesthatarereasonableandprudent; ensuredthattheapplicableaccountingstandardshavebeenfollowed;and preparedthenancialstatementsonagoingconcernbasis.

The Directors have kept proper accounting records which disclose with reasonable accuracy at any time, the nancialposition o the Company and the Group and taking such steps that are reasonably open to them to saeguard the assetso the Company and the Group and to prevent and detect raud and other ir regularities.

The Board has reviewed the content/disclosure o this Annual Report inclusive o the Corporate Governance Statement,Internal Control Statement and Audit Committee Report and approved this Annual Report or dissemination to allshareholders.

The Statement is made in accordance with the resolution o Board o Directors dated 1 November 2011.


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COMPOSITION AND DESIGNATION

Members o the Audit Committee

1. Tan Yok ChengDJN, PJK, PJM Chairman, Senior Independent Non-Executive Director

2. Dato Abdul Rahman Bin Mohammed HashimSenior Independent Non-Executive Director (Vacated due to retirement on 17.12.2010)

3. Dr. Mohamad Zabdi Bin ZamrodIndependent Non-Executive Director

4. Khaw Eng PengIndependent 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 o at least three (3) members appointed by the Board o Directorsrom amongst the Directors o whom all the members o the Committee are Non-Executive Directors andnancial literate with majority are Independent Directors. At least one committee member shall be a membero an accounting association or body or ullls such other requirements as prescribed and approved by BursaMalaysia Securities Berhad.

The denition o Independent Directors shall have the meaning given in Chapter 1.01 o the Main MarketListing Requirements o Bursa Malaysia Securities Berhad and the Practice Note 13.

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

1.3 The members o the Audit Committee shall select a Chairman rom among their number who shall be anIndependent Director.

1.4 The Chairman o the Committee shall engage with senior management such as the Chairman o the Board,Chie Executive Ocer, the Head o Internal Audit and the external auditors on a continuous basis, in order tobe kept inormed o matters a ecting the Company.

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

1.6 The term o oce and perormance o the Audit Committee and each o its members shall be reviewed bythe Board o Directors at least once every three (3) years to determine whether the Audit Committee and itsmembers have carried out their duties in accordance with the Terms o Reerence.

AUDIT COMMITTEE REPORT


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AUDIT COMMITTEE REPORT (contd)

2. Authority

2.1 The Committee is authorised by the Board:

(a) to investigate any matter within its terms o reerence;(b) to have the resources which are required to perorm its duties;(c) to have ull and unrestricted access to any inormation pertaining to the Company;(d) to have direct communication channels with the external auditors and person(s) carrying out the internal

audit unctions or activity and be able to obtain independent proessional or other advice; and(e) to be able to convene meetings with the external auditors, the internal auditors or both, excluding the

attendance o other Directors and employees o the Company, whenever deemed necessary.

3. Duties and Responsibilities

3.1 The duties o the Audit Committee should include the ollowing:

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

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

ocusing particularly on:(aa) changes in or implementation o major accounting policy changes;(bb) signicant adjustments arising rom the audit;(cc) the going concern assumption;(dd) signicant and unusual events; and(ee) compliance with accounting standards and other legal requirements;

(iii) in relation to internal audit unctions, to do the ollowing :(aa) the adequacy o the scope, unctions, competency and resources o the internal audit unctions

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

investigation undertaken and whether or not appropriate action is taken on the recommendations

o the internal audit unction;(cc) review any appraisal or assessment o the perormance o members o the internal audit unction;(dd) approve any appointment or termination o senior sta members o the internal audit unction;

and(ee) inorm itsel o resignations o internal audit sta members and provide the resigning sta

member an opportunity to submit his reasons or resigning;

(b) review any related party transaction and confict o interest situation that may arise within the Company orthe Group including any transaction, procedure or course o conduct that raises questions o managementintegrity;

(c) discuss with the external auditors beore the audit commences, the nature and scope o the audit, andensure co-ordination where more than one audit rm is involved;

(d) discuss problems and reservations arising rom the interim and nal audits, and any matter the auditorsmay wish to discuss (in the absence o management where necessary);

(e) review the external auditors management letter and managements response on ndings arising rom theinterim and nal audits;

() consider and recommend the appointment o the external auditors, the audit ee and any question oresignation or dismissal;

(g) review major ndings o internal investigations and managements response;

(h) veriy the allocation o options pursuant to the Companys Employees Share Option Scheme in compliancewith the criteria as stipulated in the by-laws o the scheme at the end o each nancial year; and

(i) discuss any other topics or unctions as may be agreed to by itsel and the Board o Directors.


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4. Meetings and Quorum

4.1 The Audit Committee should meet regularly, at least every quarter with due notice o issues to be discussedand should record its conclusions in discharging its duties and responsibilities. Majority o Committee members

present must be Independent Director to orm 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 o Executive Directors and employees o the Company.

4.3 The Chie Financial Ocer, Head o Internal Audit and a representative o the external auditors shall attendthe Audit Committee meetings. Other Board members may attend meetings upon invitation o the AuditCommittee.

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

5. Reporting Procedures

5.1 The Chairman o the Audit Committee is continuously engage with senior management and auditors in orderto be kept inormed o any matters aecting the Company.

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

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

MEETINGS

The Audit Committee met our times in the nancial year ended 30 June 2011. The meetings were structured through

the use o appropriate agenda and reports, which were distributed to members with sucient notication and minutesrecorded on its conclusions in discharging its duties and responsibilities. Details o attendance were as ollows:

Name o Audit Committee Members Attendance

Tan Yok Cheng 4/4

Dato Abdul Rahman Bin Mohammed Hashim (Vacated due to retirement on 17.12.2010) 1/2

Dr. Mohamad Zabdi Bin Zamrod 4/4

Khaw Eng Peng 4/4

The Audit Committee held a dialogue session with the external auditors together with the internal auditors on25 November 2010 and 26 May 2011 and noted no speciic issue that required urther discussion.



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SUMMARY OF ACTIVITIES OF THE AUDIT COMMITTEE

During the nancial year, the Audit Committee has reviewed:

1. the external audit plan with the external auditors.2. the quarterly unaudited results and the audited annual nancial statements beore submission to Board or their

consideration and approval or the purpose o announcement to Bursa Malaysia Securities Berhad.3. the audit review memorandum o external auditors and management response.4. the Internal Control Statement, Audit Committee Report and Recurrent Related Party Transactions or disclosure in

the Annual Report.5. the semi-annual returns beore submission to the Board or approval or the purpose o submission to Bursa Malaysia

Securities Berhad.6. the related party transactions and recurrent related party transactions transacted within the Group.7. the re-appointment o Messrs. Crowe Horwath as external auditors o the Company8. the internal audit plan and the internal audit activities.

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

Internal Audit Function

The Company has an Internal Audit Department, which reports directly to the Audit Committee and assists theCommittee in discharging its unctions and duties. The internal audit unction is independent o operational activitiesand has its own service charter to ensure the internal audit activities are perormed with impartiality, prociency anddue proessional care. The costs incurred or the internal audit unction in respect o the nancial year ended 30 June2011 amounted to RM63,719.

During the nancial year, the Internal Audit Department carried out the ollowing:a) reviewed the internal control system o the Group on its compliance and eectiveness taking into consideration

actors that have arisen rom evolving business environment.b) conducted compliance, operational and nancial audits covering Group Policies and Procedures and key internal

control areas.

c) presented audit ndings and discussed corrective actions to be taken in business units management meeting,corporate levels operations review meeting and in the quarterly Audit Committee meetings.

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

Statement pertaining to the Allocation o Share Options to Employees

During the nancial year ended 30 June 2011, the Company did not allocate or grant any share options to eligibleemployees pursuant to the Companys Employees Share Option Scheme. There are no options being oered to and/or exercised by Non-executive Directors pursuant to the Companys Employees Share Option Scheme in respect o thenancial year ended 30 June 2011.



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UTILISATION OF PROCEEDS

No proceeds were raised by the Company rom any corporate proposals during the nancial year.

SHARE BUY-BACKS

The Board has obtained a mandate rom the shareholders o the Company through its Annual General Meeting heldon 17 December 2010 to purchase and/or hold its own shares up to a maximum o ten per cent (10%) o the issued andpaid-up share capital o the Company.

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

OPTIONS, WARRANTS OR CONVERTIBLE SECURITIES EXERCISE

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

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

During the nancial 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 bythe relevant regulatory bodies.

NON-AUDIT FEES

There were no non-audit ees paid to the Groups external auditors or the nancial year under review.

VARIATION IN RESULTS

There is no signicant variance between the results or the nancial year and the unaudited results previously announced.The Company did not make any release on the prot estimate, orecast or projections or the nancial year under review.

PROFIT GUARANTEE

During the nancial year under review, there was no prot guarantee given by the Company.

REVALUATION POLICY

The Company and its subsidiaries carried its leasehold land and buildings at revalued amounts and placed reliance onthe transitional provision when Malaysian Accounting Standards Board (Revised) rst adopted International AccountingStandards 16 which provides exemption rom the need to make regular revaluations or such assets. Since nancial yearended 30 June 1997, no urther revaluation was carried out.

MATERIAL CONTRACTS

There was no material contracts entered into by the Company and its subsidiary companies which involving Directorsand substantial shareholders interests during the nancial year.

RECURRENT RELATED PARTY TRANSACTIONS

Shareholders mandate was not procured or recurrent related party transactions entered into during nancial yearended 30 June 2011. The amounts transacted during the nancial year were within the threshold as prescribed by BursaMalaysia Securities Berhads Listing Requirements and no announcement was made.

OTHER INFORMATION


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FINANCIAL STATEMENTS30 June 2011

CONTENTS

PAGE

Directors Report 30 34

Statement by Directors 35

Statutory Declaration 35

Independent Auditors Report 36 37

Consolidated Statement o Financial Position 38

Consolidated Statement o Comprehensive Income 39

Consolidated Statement o Changes in Equity 40

Consolidated Statement o Cash Flows 41 42

Statement o Financial Position 43

Statement o Comprehensive Income 44

Statement o Changes in Equity 45

Statement o Cash Flows 46

Notes to the Financial Statements 47 92

Supplementary Inormation Realised and Unrealised Prots or Losses 92


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The directors hereby submit their report and the audited nancial statements o the Group and the Company or thenancial year ended 30 June 2011.

PRINCIPAL ACTIVITIES

The principal activities o the Company are those o investment holding and provision o management services. Theprincipal activities o the subsidiaries are disclosed in Note 7 to the nancial statements. Other than those changesarising rom the acquisition and disposal o subsidiaries, there have been no signicant changes in the nature o theprincipal activities o the Group and the Company during the nancial year.

RESULTS

The Group The Company

RM RM

Prot or the nancial year attributable to:-

- Owners o the Company 6,552,955 7,029,121- Non-controlling interests 3,229,399

9,782,354 7,029,121

DIVIDENDS

During the nancial year, the Company paid a nal dividend o 1.5 sen per share, tax exempt, amounting to RM1,010,288in respect o the nancial year ended 30 June 2010.

A nal dividend o 2.0 sen per share, tax exempt, amounting to RM1,347,051 in respect o the nancial year ended 30June 2011 will be proposed or shareholders approval at the orthcoming Annual General Meeting.

RESERVES AND PROVISIONS

There were no material transers to or rom reserves or provisions during the nancial year apart rom those disclosedin the nancial statements.

ISSUE OF SHARES OR DEBENTURES

There was no issue o shares or debentures by the Company during the nancial year.

PURCHASE OF OWN SHARES

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

There was no purchase o own shares by the Company during the nancial year.

The renewal mandate given by the shareholders at the Annual General Meeting held on 17 December 2010 will expire atthe orthcoming Annual General Meeting at which a resolution will be tabled or shareholders to grant a resh mandateor another year.

DIRECTORS REPORT


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EMPLOYEES SHARE OPTION SCHEME

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

The principal eatures o the ESOS are as ollows:-

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

(ii) In order to qualiy or participation in the ESOS, a participant must be an eligible executive director or employeeo the Group. Eligibility, however, does not coner an eligible executive director or employee a claim or right toparticipate in the ESOS unless an oer has been extended to the eligible executive director or employee.

(iii) The number o new shares that may be oered and allotted to any eligible executive director and employee o theGroup, who are entitled to participate in the ESOS, shall be at the discretion o the committee appointed by theBoard o Directors (Option Committee) ater taking into consideration the perormance, seniority and lengtho service o the eligible executive directors and employees in the Group and such other actors that the OptionCommittee may deem relevant subject to the ollowing:-

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

(b) not more than 10% (or such percentage as allowable by the relevant authorities) o the shares available underthe ESOS shall be allocated to any individual director or employee who, either singly or collectively throughhis/her associates (as dened in the Companies Act 1965), holds 20% or more in the issued and paid-up sharecapital o 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 rom time to time.

(iv) The ESOS shall continue to be in orce or a period o 10 years and expiring on 17 February 2013.

(v) The price payable upon exercise o each o the option shares granted under the ESOS shall be set based on the5-days weighted average market price o the Companys shares, as quoted on Bursa Malaysia Securities Berhad,immediately preceding the date the option is granted, with a discount o not more than 10%, i deemed appropriate,or such lower or higher limit in accordance with any prevailing guidelines issued by the SC or any other relevantauthorities as amended rom time to time, or at the par value o each o the shares in the Company, whichever ishigher.

(vi) The new shares to be allotted and issued upon exercise o any option shall upon allotment rank pari passu in allrespects with the existing issued and paid-up shares in the Company except that the new shares so allotted shall notbe entitled to any dividend, rights, allotment or other distribution unless the shares so allotted have been creditedinto the relevant securities accounts maintained by Bursa Malaysia Depository Sdn. Bhd. beore the entitlementdate and will be subject to all the provisions o the Ar ticles o Association o the Company relating to the transer,transmission or otherwise o the shares in the Company.

The movements in the number o options during the nancial year are as ollows:

Exercise Number o Options over Ordinary Shares o RM1.00 each

Price At At

Exercisable rom RM 1.7.2010 Granted Exercised Lapsed 30.6.2011

18 February 2003 1.20 2,456,000 (87,000) 2,369,000

DIRECTORS REPORT


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DIRECTORS REPORT

BAD AND DOUBTFUL DEBTS

Beore the nancial statements o the Group and the Company were made out, the directors took reasonable steps toascertain that action had been taken in relation to the writing o o bad debts and the making o allowance or doubtul

debts and satised themselves that all known bad debts had been written o and that adequate allowance had beenmade or doubtul debts.

At the date o this report, the directors are not aware o any circumstances which would render the amount writ ten oor bad debts or the amount o the allowance made or doubtul debts inadequate to any substantial extent.

CURRENT ASSETS

Beore the nancial statements o the Group and the Company were made out, the directors took reasonable steps toascertain whether any current assets, other than debts, were unlikely to realise in the ordinary course o business theirvalues as shown in the accounting records o the Group and the Company and to the extent so ascertained were writtendown to an amount that they might be expected to realise.

At the date o this report, the directors are not aware o any circumstances that would render the values attributed t

KOBAY Financial Annual Report 2011

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