Sinopec Engineering Group Co Ltd. — Interim / Quarterly Report 2012

Mar 28, 2012

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2011/12 Interim Report 中期報告

Universe International Holdings Limited Interim Report 2011/2012

CORPORATE INFORMATION

Executive Directors

Mr Lam Shiu Ming, Daneil (Chairman) Mr Yeung Kim Piu

Independent Non-executive Directors

Mr Ng Kwok Tung Dr Leung Shiu Ki, Albert Mr Ma Chun Fung, Horace

Company Secretary

Mr Chan Hau Chuen

Authorized Representatives

Mr Lam Shiu Ming, Daneil Mr Chan Hau Chuen

Principal Bankers

The Hongkong and Shanghai Banking Corporation Limited Wing Hang Bank, Limited Chong Hing Bank Limited

Auditor

PricewaterhouseCoopers Certified Public Accountants

Legal Advisers

So Keung Yip & Sin 2203-2205, 22nd Floor Wheelock House 20 Pedder Street Central Hong Kong

Share Registrar

Tricor Abacus Limited 26th Floor, Tesbury Centre 28 Queen’s Road East Hong Kong

Audit Committee

Mr Ng Kwok Tung (Chairman) Dr Leung Shiu Ki, Albert Mr Ma Chun Fung, Horace

Remuneration Committee

Mr Ma Chun Fung, Horace (Chairman) Mr Ng Kwok Tung Dr Leung Shiu Ki, Albert Mr Lam Shiu Ming, Daneil

Nomination Committee

Dr Leung Shiu Ki, Albert (Chairman) Mr Ng Kwok Tung Mr Ma Chun Fung, Horace Mr Lam Shiu Ming, Daneil

Registered Office

Clarendon House 2 Church Street Hamilton HM 11 Bermuda

Head Office and Principal Place of Business

18th Floor Wyler Centre Phase II 192-200 Tai Lin Pai Road Kwai Chung New Territories

Websites

www.uih.com.hk www.u333.com

Stock Code

1046

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Universe International Holdings Limited Interim Report 2011/2012

The board of directors (the “Director(s)”) (the “Board”) of Universe International Holdings Limited (the “Company”) announces the unaudited condensed consolidated balance sheet as at 31st December 2011 and the unaudited condensed consolidated statement of comprehensive income, the unaudited condensed consolidated statement of changes in equity and the unaudited condensed consolidated statement of cash flows of the Company and its subsidiaries (collectively, the “Group”) for the six months ended 31st December 2011 as follows:

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET

SHEET
	Note	Unaudited As at 31st December 2011	Audited As at 30th June 2011 HK$’000
		HK$’000
ASSETS Non-current assets Leasehold land Property, plant and equipment Investment properties Other intangible assets Film rights and films in progress Film deposits Deferred income tax assets Available-for-sale financial assets Deposits paid	5 5 5 5 5 6		3,277 17,845 6,100 1,858 66,467 32,502 625 1,275 1,730
		3,236
		17,737
		6,500
		1,858
		83,627
		34,188
		650
		3,005
		–
			131,679
		150,801
Current assets Inventories Accounts receivable Deposits paid, prepayments and other receivables Cash and cash equivalents	8		3,619 50,518 6,810 79,432
		3,786
		34,284
		7,189
		91,470
			140,379
		136,729
Total assets			272,058
		287,530

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Universe International Holdings Limited Interim Report 2011/2012

UNAUDITED CONDENSED CONSOLIDATED BALANCE

SHEET (Continued)

SHEET(Continued)
	Note	Unaudited As at 31st December 2011	32,492 127,211 821 79,379 239,903 640 4,529 8,511 17,400 1 71 1,003 31,515 32,155 272,058 108,864 240,543 Audited As at 30th June 2011 HK$’000
		HK$’000
EQUITY Capital and reserves attributable to the equity holders of the Company Share capital Share premium Other reserves Retained earnings	9
		34,235
		135,293
		967
		73,375
Total equity
		243,870
LIABILITIES Non-current liabilities Deferred income tax liabilities
		603
Current liabilities Accounts payable Other payables and accrued charges Deposits received Amount due to the ultimate holding company Obligations under finance leases Taxation payable	13 11
		4,706
		10,251
		26,833
		1
		46
		1,220
		43,057
Total liabilities
		43,660
Total equity and liabilities
		287,530
Net current assets
		93,672
Total assets less current liabilities
		244,473

The notes on pages 8 to 26 are an integral part of this unaudited condensed consolidated interim financial information.

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Universe International Holdings Limited Interim Report 2011/2012

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME	UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 31st December 2011 2010 Note HK’000 HK’000
Revenue 4 43,297 Cost of revenue 14 (33,451) Selling expenses 14 (1,377) Administrative expenses 14 (13,950) Other income 95 Other gains – net 61 Other operating expenses 14 (1,081) Finance income 528	96,487 (83,765) (1,209) (14,076) 651 1,313 (8,946) 324
Loss before income tax (5,878) Income tax expense 15 (126)	(9,221) (3)
Loss attributable to the equity holders of the Company (6,004)	(9,224)
Other comprehensive income Gain recognized directly in equity 146	–
Total comprehensive loss for the period attributable to the equity holders of the Company (5,858)	(9,224)
Loss per share for loss attributable to the equity holders of the Company during the period (expressed in HK cent) – basic 16 (0.36) – diluted 16 (0.36)	(0.57) (0.57)

The notes on pages 8 to 26 are an integral part of this unaudited condensed consolidated interim financial information.

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Universe International Holdings Limited Interim Report 2011/2012

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Note	Attributable to the equity holders of the Company	Attributable to the equity holders of the Company	Attributable to the equity holders of the Company	Attributable to the equity holders of the Company	Attributable to the equity holders of the Company
		Share capital	Share premium	Reserve arising on consolidation	Property revaluation reserve	Retained earnings	Total
		HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Balance at 1st July 2011
		32,492	127,211	821	–	79,379	239,903
Comprehensive loss Loss for the period Other comprehensive income Fair value adjustment upon transfer from property, plant and equipment to investment properties Deferred tax arising from fair value adjustment upon transfer from property, plant and equipment to investment properties	5
		–	–	–	–	(6,004)	(6,004)
		–	–	–	175	–	175
		–	–	–	(29)	–	(29)
Total other comprehensive income
		–	–	–	146	–	146
Total comprehensive income for the period
		–	–	–	146	(6,004)	(5,858)
Transactions with owners Placement of shares	9(a)
		1,743	8,082	–	–	–	9,825
Total transactions with owners for the period
		1,743	8,082	–	–	–	9,825
Balance at 31st December 2011
		34,235	135,293	821	146	73,375	243,870

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Universe International Holdings Limited Interim Report 2011/2012

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Continued)

	Attributable to the equity holders of the Company Share capital Share premium Reserve arising on consolidation Retained earnings Total HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
Balance at 1st July 2010	32,492 127,211 821 120,407 280,931
Comprehensive loss Loss for the period	– – – (9,224) (9,224)
Total comprehensive loss for the period	– – – (9,224) (9,224)
Balance at 31st December 2010	32,492 127,211 821 111,183 271,707

The notes on pages 8 to 26 are an integral part of this unaudited condensed interim financial information.

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Universe International Holdings Limited Interim Report 2011/2012

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

CASH FLOWS
	Note	For the six months ended 31st December 2011 2010 HK’000 HK’000
		2011
		HK’000
Net cash generated from operating activities			18,142
		46,303
Cash flow from investing activities Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Increase in film deposits Purchase of film rights and investment in films in progress Interest received	5 5		(1,478) 561 (12,316) (33,161) 324
		(643)
		–
		(1,686)
		(42,264)
		528
Net cash used in investing activities			(46,070)
		(44,065)
Cash flow from financing activities Proceeds from placement of shares Transaction costs directly attributable to placement of shares Capital element of finance lease payments	9(a) 9(a)		– – (39)
		10,024
		(199)
		(25)
Net cash generated from/(used in) financing activities			(39)
		9,800
Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 30th June			(27,967) 120,328
		12,038
		79,432
Cash and cash equivalents at 31st December			92,361
		91,470

The notes on pages 8 to 26 are an integral part of this unaudited condensed consolidated interim financial information.

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Universe International Holdings Limited Interim Report 2011/2012

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION

1. GENERAL INFORMATION

Universe International Holdings Limited (the “Company”) and its subsidiaries (collectively, the “Group”) are principally engaged in the business of production of films and television series, distribution of films in various videogram formats, film exhibition, licensing and sub-licensing of film rights and leasing of investment properties.

The Company is a limited liability company incorporated in Bermuda. The address of its registered office is Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda.

The Company is listed on The Stock Exchange of Hong Kong Limited (the “Stock Exchange”).

The unaudited condensed consolidated interim financial information are presented in thousands of units of Hong Kong dollars (HK$’000), unless otherwise stated. The unaudited condensed consolidated interim financial information have been approved for issue by the board of directors of the Company (the “Board”) on 29th February 2012.

2. BASIS OF PREPARATION

The unaudited condensed consolidated interim financial information for the six months ended 31st December 2011 have been prepared in accordance with Hong Kong Accounting Standard (“HKAS”) 34 “Interim Financial Reporting” issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

The unaudited condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 30th June 2011, which have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”) issued by HKICPA.

The preparation of the unaudited condensed consolidated interim financial information in conformity with HKAS 34 requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses on a year to date basis. Actual results may differ from these estimates.

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Universe International Holdings Limited Interim Report 2011/2012

3. ACCOUNTING POLICIES

The accounting policies applied are consistent with those of the annual financial statements for the year ended 30th June 2011, as described in those annual financial statements.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.

The following new standards, amendments to standards and interpretations are mandatory for the financial year ending 30th June 2012.

		Effective for
		accounting periods
		beginning on or after
HKFRSs (Amendments)	Improvements to HKFRSs 2010	1st January 2011
HKAS 24 (Revised)	Related Party Disclosures	1st January 2011
HKFRS 1 (Amendment)	Severe Hyperinflation and Removal	1st July 2011
	of Fixed Dates for First-time
	Adopters
HKFRS 7 (Amendment)	Disclosures – Transfers Financial Assets	1st July 2011
HK(IFRIC)-Int 14	Prepayments of a Minimum Funding	1st January 2011
(Amendment)	Requirement

The adoption of above new standards, amendments to standards and interpretations have no significant impact on the unaudited condensed consolidated interim financial information.

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Universe International Holdings Limited Interim Report 2011/2012

3. ACCOUNTING POLICIES (Continued)

The following new and revised standards, amendments to standards and interpretations to existing standards have been published that are mandatory for the Group’s financial year beginning on or after 1st July 2012 or later periods but which the Group has not early adopted.

Effective for accounting periods beginning on or after

HKAS 1 (Amendment)	Presentation of Items of Other Comprehensive	1st July 2012
	Income
HKAS 12 (Amendment)	Deferred tax: Recovery of Underlying Assets	1st January 2012
HKAS 19 (2011)	Employee Benefits	1st January 2013
HKAS 27 (2011)	Separate Financial Statements	1st January 2013
HKAS 28 (2011)	Investments in Associates and Joint Ventures	1st January 2013
HKFRS 9	Financial Instruments	1st January 2015
HKFRS 10	Consolidated Financial Statements	1st January 2013
HKFRS 11	Joint Arrangements	1st January 2013
HKFRS 12	Disclosure of Interests in Other Entities	1st January 2013
HKFRS 13	Fair Value Measurement	1st January 2013
HK(IFRIC) – Int 20	Stripping Cost in the Production Phase of	1st January 2013
	a Surface Mine
HKAS 32 (Amendment)	Presentation – Offsetting Financial Assets and	1st January 2014
	Financial Liabilities
HKFRS 7 (Amendment)	Disclosures – Offsetting Financial Assets and	1st January 2013
	Financial Liabilities

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Universe International Holdings Limited Interim Report 2011/2012

4. SEGMENT INFORMATION

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker (the “CODM”). The CODM, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chairman of the Group that makes strategic decisions. The CODM has determined the operating segments based on these reports, as below:

• Distribution of films in various videogram formats

• Film exhibition, licensing and sub-licensing of film rights

• Leasing of investment properties

The CODM assesses the performance of the operating segments based on a measure of segment results. This measurement basis excludes the effects of non-recurring expenditure from the operating segments, such as gain on disposal of non-current assets held for sale and increase in fair value of investment properties. Finance income and income tax expense are not included in the result for each operating segment that is reviewed by the CODM. Other information provided, except as noted below, to the CODM is measured in a manner consistent with that in the consolidated financial statements.

Total assets, excluding other intangible assets, available-for-sale financial assets, deferred income tax assets, cash and cash equivalents and other unallocated assets (including leasehold land, property, plant and equipment, film rights and films in progress, film deposits, deposits paid, prepayments and other receivables), are managed on a central basis. These are part of the reconciliation to total balance sheet assets.

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Universe International Holdings Limited Interim Report 2011/2012

4. SEGMENT INFORMATION (Continued)

The Group’s inter-segment transactions mainly consist of licensing of film rights, which are transferred at cost. The revenue from external parties reported to the CODM is measured in a manner consistent with that in the unaudited condensed consolidated statement of comprehensive income.

There are no sales between geographical segments.

	Unaudited
	For the six months ended 31st December 2011
	Film exhibition,
	Sale of goods licensing and sub-licensing of film rights Leasing of investment properties Others Elimination	Group
	HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	HK$’000
Revenue External sales Inter-segment sales Results Segment results Finance income Loss before income tax Income tax expense Loss attributable to the equity holders of the Company Other information Capital expenditures Unallocated capital expenditures Total capital expenditures Depreciation and amortization of leasehold land Unallocated depreciation and amortization of leasehold land Total depreciation and amortization of leasehold land Amortization of film rights
	6,328 34,986 111 1,872 –	43,297
	– 1,355 – 221 (1,576)	–
	6,328 36,341 111 2,093 (1,576)	43,297
	(1,488) (2,098) 55 (2,875) –	(6,406)
		528
		(5,878)
		(126)
		(6,004)
	1,010 228 – 34 –	1,272
		41,635
		42,907
	202 40 – 23 –	265
		301
		566
	2,650 22,454 – – –	25,104

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Universe International Holdings Limited Interim Report 2011/2012

4. SEGMENT INFORMATION (Continued)

	Unaudited For the six months ended 31st December 2010 Sale of goods Film exhibition, licensing and sub-licensing of film rights Leasing of investment properties Others Elimination HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	Group HK$’000
Revenue External sales Inter-segment sales Results Segment results before impairment losses Impairment losses of film rights Segment results Finance income Loss before income tax Income tax expense Loss attributable to the equity holders of the Company Other information Capital expenditures Unallocated capital expenditures Total capital expenditures Depreciation and amortization of leasehold land Unallocated depreciation and amortization of leasehold land Total depreciation and amortization of leasehold land Amortization of film rights	9,054 85,136 – 2,297 – – 1,282 – 14 (1,296)	96,487 –
	9,054 86,418 – 2,311 (1,296)	96,487
	(49) 91 (1) (642) – – (8,944) – – –	(601) (8,944)
	(49) (8,853) (1) (642) – 2,703 276 – 8 – 286 32 – 5 – 4,665 66,618 – – –	(9,545) 324
		(9,221) (3)
		(9,224)
		2,987 31,652
		34,639
		323 388
		711
		71,283

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Universe International Holdings Limited Interim Report 2011/2012

4. SEGMENT INFORMATION (Continued)

Unaudited As at 31st December 2011 Sale of goods Film exhibition, licensing and sub-licensing of film rights Leasing of investment properties Others Elimination HK$’000 HK$’000 HK$’000 HK$’000 HK$’000
	Group
	HK$’000
Assets Segment assets 12,053 46,862 6,502 7,294 – Other intangible assets Deferred income tax assets Available-for-sale financial assets Cash and cash equivalents Other unallocated assets Total assets
	72,711
	1,858
	650
	3,005
	91,470
	117,836
	287,530

Audited As at 30th June 2011 Sale of goods Film exhibition, licensing and sub-licensing of film rights Leasing of investment properties Others Elimination HK$’000 HK$’000 HK$’000 HK$’000 HK$’000	Group HK$’000
Assets Segment assets 14,042 67,420 6,101 4,331 – Other intangible assets Deferred income tax assets Available-for-sale financial assets Cash and cash equivalents Other unallocated assets Total assets	91,894 1,858 625 1,275 79,432 96,974
	272,058

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Universe International Holdings Limited Interim Report 2011/2012

5. CAPITAL EXPENDITURES

	Leasehold land HK$’000	Property, plant and equipment HK$’000	Unaudited Investment properties HK$’000	Other intangible assets HK$’000	Film rights and films in progress HK$’000
Opening net book amount at
1st July 2011	3,277	17,845	6,100	1,858	66,467
Additions Disposals	– –	643 (1)	– –	– –	42,264 –
Transfer Change in fair value	– –	(400) 175	400 –	– –	– –
Depreciation and amortization
(Note 14)	(41)	(525)	–	–	(25,104)
Closing net book amount at
31st December 2011	3,236	17,737	6,500	1,858	83,627
			Unaudited
		Property,		Other	Film rights
	Leasehold	plant and	Investment	intangible	and films
	land	equipment	properties	assets	in progress
	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Opening net book amount at
1st July 2010	3,359	17,941	400	1,408	125,999
Additions	–	1,478	–	–	33,161
Disposals	–	(354)	–	–	–
Depreciation and amortization
(Note 14)	(41)	(670)	–	–	(71,283)
Impairment losses (Note 14)	–	–	–	–	(8,944)
Closing net book amount at
31st December 2010	3,318	18,395	400	1,408	78,933

6. AVAILABLE-FOR-SALE FINANCIAL ASSETS

AVAILABLE-FOR-SALE FINANCIAL ASSETS
Unaudited	Audited
As at	As at
31st December	30th June
2011	2011
HK$’000	HK$’000
Beginning of the period/year 1,275	1,275
Additions 1,730	–
End of the period/year 3,005	1,275
Unlisted investment Equity securities in Hong Kong, at fair value 3,005	1,275

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Universe International Holdings Limited Interim Report 2011/2012

7. INTERESTS IN JOINTLY CONTROLLED ASSETS

The Group has participating interests ranging from 38% to 80% in four jointly controlled asset arrangements to produce television series (30th June 2011: four). As at 31st December 2011, the aggregate amounts of assets, liabilities and profit after income tax recognized in the unaudited condensed consolidated interim financial information relating to the Group’s interests in these jointly controlled asset arrangements were as follows:

	Unaudited Audited
	As at As at
	31st December 30th June
	2011 2011
	HK$’000 HK$’000
Assets
Television	series rights 7,924 5,703
Liabilities
Accounts Deposits	payable 496 495 received 21 21
	517 516

Unaudited For the six months ended 31st December 2011 2010 HK$’000 HK$’000	Unaudited For the six months ended 31st December 2011 2010 HK$’000 HK$’000
Revenue 118 Expenses (19)	8 –
Profit after income tax 99	8

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Universe International Holdings Limited Interim Report 2011/2012

8. ACCOUNTS RECEIVABLE

ACCOUNTS RECEIVABLE
Unaudited	Audited
As at	As at
31st December	30th June
2011	2011
HK$’000	HK$’000
Accounts receivable 35,076	50,518
Less: Provision for impairment of accounts receivable (792)	–
Accounts receivable – net 34,284	50,518

The carrying amount of accounts receivable approximates to their fair values.

As at 31st December 2011, the ageing analysis of the accounts receivable was as follows:

Unaudited	Audited
As at	As at
31st December	30th June
2011	2011
HK$’000	HK$’000
Current to 90 days 21,205	7,475
91 days to 180 days 6,254	7,810
Over 180 days 6,825	35,233
34,284	50,518

Sales of videogram products are with credit terms of 7 days to 60 days. Sales from film exhibition, licensing and sub-licensing of film rights are on open account terms.

There is no concentration of credit risk with respect to accounts receivable, as the Group has a large number of customers, and are internationally dispersed.

Save as a bank’s guarantee of HK$90,000 provided to the Group by a customer, the Group does not hold any collateral as security (As at 30th June 2011: same).

The Group has recognized a loss of approximately HK$792,000 (2010: nil) for the impairment of its accounts receivable during the period.

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Universe International Holdings Limited Interim Report 2011/2012

9. SHARE CAPITAL

	Number of	Ordinary
	ordinary shares	shares
		HK$’000
At 1st July 2011	1,624,605,370	32,492
Placement of shares(Note)	87,165,000	1,743
At 31st December 2011	1,711,770,370	34,235

Note: On 22nd August 2011, a substantial shareholder of the Company placed an aggregate 87,165,000 existing ordinary shares of the Company to certain independent third parties, at a price of HK$0.115 per share, for a total cash consideration of HK$10,023,975 and the substantial shareholder subscribed for 87,165,000 new ordinary shares of the Company at the same price on 24th August 2011. The excess of the proceeds from the placement of shares over the par value of the shares issued, net of transaction costs directly attributable to placement of shares, was credited to the share premium account.

The total authorized number of ordinary shares is 5,000 million shares (As at 30th June 2011: 5,000 million shares) with a par value of HK$0.02 per share (As at 30th June 2011: HK$0.02 per share). All shares issued are fully paid.

10. SHARE OPTIONS

Pursuant to an ordinary resolution passed in the annual general meeting held on 26th November 2003, the Company conditionally approved and adopted a share option scheme (the “Share Option Scheme”) in compliance with the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

Pursuant to an ordinary resolution passed in the annual general meeting held on 29th November 2011 (the “2011 AGM”), the Company approved the refreshment of the scheme mandate limit, which is 10% of the total number of issue shares of the Company as at the date of the 2011 AGM, under the Share Option Scheme. After the refreshment of the scheme mandate limit, the total number of share options available for issue under the Share Option Scheme as at 31st December 2011 was 171,177,037, the full exercise of which in subscribing for shares of the Company would represented 10% of the issued share capital of the Company as at 31st December 2011.

There was no share options outstanding and granted throughout the six months ended 31st December 2011.

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Universe International Holdings Limited Interim Report 2011/2012

11. OBLIGATIONS UNDER FINANCE LEASES

	Unaudited	Audited
	As at	As at
	31st December	30th June
	2011	2011
	HK$’000	HK$’000
Obligations	under finance leases 46	–

As at 31st December 2011, the Group’s obligations under finance leases were repayable as follows:

Unaudited	Audited
As at	As at
31st December	30th June
2011	2011
HK$’000	HK$’000
Within one year 46	71
Future finance charges on obligations under finance leases 46	71
Present value of obligations under finance leases 46	71
The present value of obligations under finance leases was as follows: Within one year 46	71

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Universe International Holdings Limited Interim Report 2011/2012

12. EMPLOYEE BENEFITS EXPENSES

On 1st December 2000, a mandatory provident fund scheme (the “MPF Scheme”) was set up for employees, including executive Directors. Under the MPF Scheme, the Group’s contributions are at 5% of employees’ relevant income as defined in the Hong Kong Mandatory Provident Fund Schemes Ordinance up to a maximum of HK$1,000 per employee per month. The employees also contribute a corresponding amount to the MPF Scheme if their relevant income is more than HK$4,000 per month before 1st February 2003 and HK$5,000 after 1st February 2003. The mandatory provident fund contributions are fully and immediately vested in the employees as accrued benefits once they are paid.

Unaudited
For the six months ended
31st December
2011	2010
HK$’000	HK$’000
Wages and salaries 8,989	8,560
Provision for unutilized annual leave 80	(14)
Provision for long service payment 40	(47)
Staff welfare 685	867
Pension costs – defined contribution plan 186	194
Total including directors’ emoluments 9,980	9,560

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Universe International Holdings Limited Interim Report 2011/2012

13. ACCOUNTS PAYABLE

As at 31st December 2011, the ageing analysis of the accounts payable was as follows:

Unaudited	Audited
As at	As at
31st December	30th June
2011	2011
HK$’000	HK$’000
Current to 90 days 1,931	1,923
91 days to 180 days 429 Over 180 days 2,346	493 2,113
4,706	4,529

14. EXPENSES BY NATURE

Expenses included in cost of revenue, selling expenses, administrative expenses and other operating expenses are analyzed as follows:

Unaudited	Unaudited
For the six months ended
31st December
2011	2010
HK$’000	HK$’000
Amortization of film rights (Note 5) 25,104	71,283
Amortization of leasehold land (Note 5) 41 Depreciation of owned assets (Note 5) 495 Depreciation of leased assets (Note 5) 30 Write-off of inventories 25	41 630 40 2
Impairment losses of film rights (Note 5) –	8,944
Provision for impairment of accounts receivable (Note 8) 792 Employee benefits expenses (Note 12) 9,980	– 9,560
Cost of inventories sold 2,172	2,651

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Universe International Holdings Limited Interim Report 2011/2012

15. INCOME TAX EXPENSE

Hong Kong profits tax has been provided at the rate of 16.5% on the estimated assessable profit for the period (2010: 16.5%).

The amount of income tax expense charged to the unaudited condensed consolidated statement of comprehensive income represents:

Unaudited
For the six months ended
31st December
2011	2010
HK$’000	HK$’000
Hong Kong profits tax 217	(29)
Deferred income tax relating to the origination and reversal of temporary differences (91)	32
126	3

16. LOSS PER SHARE

The calculation of basic loss per share is based on the loss for the period attributable to the equity holders of the Company of HK$6,004,000 (2010: HK$9,224,000) and the weighted average number of ordinary shares in issue during the period of 1,686,189,337 shares (2010: 1,624,605,370 shares).

The basic and diluted loss per share for the six months ended 31st December 2011 is the same as there was no dilutive potential ordinary share outstanding during the period (2010: same).

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Universe International Holdings Limited Interim Report 2011/2012

17. PENDING LITIGATIONS

(a) A court action was commenced in the Court of First Instance of the Hong Kong Special Administrative Region on 17th April 2002 by The Star Overseas Limited (“Star”), an independent third party, against Universe Entertainment Limited (“UEL”), an indirect wholly-owned subsidiary of the Company.

By the above action, Star alleges that a sum of US$935,871.65 (equivalent to HK$7,299,798.84) was payable by UEL to Star as its share of the revenue of the movie entitled “Shaolin Soccer” (the “Movie”).

Pursuant to an Order (the “Order”) made by the High Court on 21st February 2003, the Company was ordered and had paid to Star a sum of HK$5,495,699.80, being part of the licence fee of the Movie received by UEL from Miramax Films (being the licencee of the Movie) and which was also part of the sum claimed by Star. Pursuant to the Order, UEL is also liable to pay Star interest in the sum of HK$350,905.30 and some of the costs of the application leading to the making of the Order, all of which have been settled. As the Order has not disposed of all the claims of US$935,871.65 (equivalent to HK$7,299,798.84) by Star, UEL is entitled to continue to defend the claim by Star for recovering the remaining balance in the sum of approximately HK$1,804,099.04 (HK$7,299,798.84 less HK$5,495,699.80).

On 30th April 2002, UEL issued a Writ of Summons against Star above for the latter’s wrongful exploitation of certain rights in the Movie co-owned by both parties. UEL claimed to recover loss and damages suffered by UEL as a result of the wrongful exploitation.

On 9th September 2002, Universe Laser & Video Co. Limited (“ULV”), an indirect whollyowned subsidiary of the Company issued a Writ of Summons against Star for the latter’s infringement of the licensed rights in the Movie held by ULV. ULV claimed to recover all loss and damages suffered by ULV as a result of the said infringement.

In the opinion of legal counsel, it is premature to predict the outcome of the claim against UEL. The Board is of the opinion that the outcome of the claim against UEL will have no material financial impact to the Group.

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Universe International Holdings Limited Interim Report 2011/2012

17. PENDING LITIGATIONS (Continued)

(b) On 1st September 2008, Koninklijke Philips Electronics N.V. (“KPE”) issued a Writ of Summons against among other persons, the Company, ULV and Mr Lam Shiu Ming, Daneil (one of the Directors), being three of the defendants named therein, in respect of damages arising from alleged infringement of the patents regarding Video Compact Disc owned by KPE.

In the opinion of legal counsel, it is premature to predict the outcome of the said claim made against the Company, ULV and Mr Lam Shiu Ming, Daneil. The Board is of the opinion that the outflow of economic benefits cannot be reliably estimated and accordingly no provision for any liability that may result has been made in the unaudited condensed consolidated interim financial information.

(c) On 8th January 2010, KPE issued a Writ of Summons against among other persons, the Company, ULV and Mr Lam Shiu Ming, Daneil (the Director), being three of the defendants named therein, in respect of damages arising from alleged infringement of the patents regarding Digital Video Disc owned by KPE.

In late September 2011, the claim made against ULV has been agreed with KPE and appropriate provision has been recognized accordingly in the consolidated financial statements for the year ended 30th June 2011. Based on the consultation with legal counsel, no further material outflow of economic benefits will be incurred by ULV.

In the opinion of legal counsel, it is premature to predict the outcome of the said claim made against the Company and Mr Lam Shiu Ming, Daneil. The Board is of the opinion that the outflow of economic benefits of the Company cannot be reliably estimated and accordingly no provision for any liability has been made in the unaudited condensed consolidated interim financial information.

Save as disclosed above, as at 31st December 2011, no litigation or claim of material importance is known to the Directors to be pending against either the Company or any of its subsidiaries.

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Universe International Holdings Limited Interim Report 2011/2012

18. COMMITMENTS

(a) Operating leases

As at 31st December 2011, the Group had future aggregate minimum lease payments under non-cancellable operating leases as follows:

Unaudited	Audited
As at	As at
31st December	30th June
2011	2011
HK$’000	HK$’000
Land and buildings No later than one year 960 Later than one year and no later than five years 1,840	146 –
2,800	146

(b) Others

As at 31st December 2011, the Group had commitments contracted but not provided for in these unaudited condensed consolidated interim financial information as follows:

		Unaudited	Audited
		As at	As at
		31st December	30th June
		2011	2011
		HK$’000	HK$’000
Purchase of film rights	and production	of films 59,392	80,790

Note: As at 31st December 2011, the Group had commitment of HK$815,000 in respect of jointly controlled assets (As at 30th June 2011: HK$7,832,000).

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Universe International Holdings Limited Interim Report 2011/2012

19. FUTURE OPERATING LEASES

As at 31st December 2011, the Group had future aggregate minimum lease receipts under non-cancellable operating leases as follows:

==> picture [300 x 138] intentionally omitted <==

----- Start of picture text -----

||||
|---|---|---|
|Unaudited|Audited|
|As at|As at|
|31st December|30th June|
|2011|2011|
|HK$’000|HK$’000|
|No later than one year|244|216|
|Later than one year and no later than five years|72|180|
|316|396|

----- End of picture text -----

20. RELATED PARTY TRANSACTIONS

Details of key management compensation

==> picture [300 x 135] intentionally omitted <==

----- Start of picture text -----

||||
|---|---|---|
|Unaudited|
|For the six months ended|
|31st December|
|2011|2010|
|HK$’000|HK$’000|
|Salaries and other short-term employee benefits|5,198|4,141|
|Employer’s contribution to retirement scheme|24|26|
|5,222|4,167|

----- End of picture text -----

Save as disclosed above and elsewhere in these unaudited condensed consolidated interim financial information, no other material related party transactions have been entered into by the Group. The Directors are of the opinion that the above transactions were carried out after negotiations between the Group and the related parties in the ordinary course of business.

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Universe International Holdings Limited Interim Report 2011/2012

INTERIM DIVIDEND

The Board did not recommend the payment of an interim dividend in respect of the six months ended 31st December 2011 (2010: same).

MANAGEMENT DISCUSSION AND ANALYSIS

Overall Group results

The Group’s unaudited consolidated revenue for the six months ended 31st December 2011 decreased by 55.1% over the same period last year to HK$43.3 million. Meanwhile, the loss attributable to the equity holders of the Company narrowed by 34.9% to HK$6.0 million. Loss per share for the period under review was HK0.36 cent compared with HK0.57 cent during the corresponding period in 2010. The improvement in the Group’s results was mainly due to no provision for impairment losses of film rights made during the six months ended 31st December 2011. Impairment losses of HK$8.9 million for the film rights were made in the same period last year. Excluding the above effects, loss after income tax for the period ended 31st December 2010 would have been approximately HK$280,000.

The significant decrease in turnover for the period ended 31st December 2011 as compared to the corresponding period in 2010 was mainly due to the fact that (i) certain television series and films were still being produced during the period under review where their distribution, and thus revenue recognition, would occur later; (ii) there is a delay in the release of a film originally scheduled to be release during the period under review; and (iii) the continuing stagnant local video distribution market.

Video distribution

During the period under review, the local video distribution business continued to shrink, recording a decrease in turnover to HK$6.3 million from HK$9.1 million. It accounted for 14.6% (2010: 9.4%) of the Group’s consolidated revenue. The decrease in turnover from video distribution correspond with fewer number of new titles being released during the period under review, as the management continued to adopt a cautious and prudent approach towards film acquisition.

The gross profit of this business segment declined by 13.3% to approximately HK$1.5 million, compared with HK$1.7 million recorded in the same period last year.

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Universe International Holdings Limited Interim Report 2011/2012

MANAGEMENT DISCUSSION AND ANALYSIS (Continued)

Video distribution (Continued)

Responding to such difficult business environment, the Group will continue to improve the cost structure of this business segment and exercise prudence when acquiring new titles for video distribution.

Film exhibition, licensing and sub-licensing of film rights

A decline in the number of new television series and films produced and completed in the first half of the financial year 2011/2012, coupled with the delay in release of a film affected the turnover of this business segment. During the period under review, revenue generated from this business segment was HK$35.0 million, representing a significant decrease of 58.9% over the same period last year. The revenue from this business segment accounted for 80.8% (2010: 88.2%) of the Group’s consolidated revenue.

Revenue from film exhibition was HK$3.7 million, representing a decrease of 46.5% compared with the same period last year. A decline in revenue from film exhibition was mainly attributable to the Group having produced fewer films. Its operating loss rose from HK$0.7 million to HK$1.8 million as the box office of the films released during the period under the review has not been satisfactory.

Meanwhile, revenue and gross profit from licensing and sub-licensing of film rights were HK$31.3 million and HK$8.2 million respectively, representing a decrease of 60.0% and 13.1% over the same period last year. During the period under review, there was only one new film being released, which consequently affected revenue from licensing and sublicensing of film rights business.

In terms of geographical contribution, contribution of overseas markets accounted for 64.2% (2010: 64.7%) of the Group’s total revenue during the period under review.

Leasing of investment properties

During the period under review, revenue from this business segment was HK$111,000 (2010: nil). The Group acquired a residential property in Hong Kong for leasing purpose and leased out a car parking space in April 2011 and December 2011 respectively. The management will continue to explore and consider investment opportunity in properties that would offer stable and satisfactory returns.

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Universe International Holdings Limited Interim Report 2011/2012

OUTLOOK

We expect overall operating environment for the industry to remain challenging and difficult in the coming year. In view of this, the Group will continue to closely monitor the rapidly changing business environment and adopt a pragmatic and prudent approach towards the Group’s business development accordingly.

FINANCIAL RESOURCES/LIQUIDITY AND CAPITAL STRUCTURE

As at 31st December 2011, the Group had cash balances of HK$91.5 million (As at 30th June 2011: HK$79.4 million). As stated in the announcement dated 24th August 2011, the Group raised net proceeds (after expenses) of approximately HK$9.8 million by placing of 87,165,000 ordinary shares of the Company on 22nd August 2011. The Directors considered that such placing could strengthen the financial position of the Group and the net proceeds would be applied as general working capital.

As at 31st December 2011, the Group had total assets of approximately HK$287.5 million, representing an increase of HK$15.5 million over that of 30th June 2011.

The Group’s gearing ratio as at 31st December 2011 fell to almost zero (As at 30th June 2011: 0.03%), which was calculated on the basis of the Group’s long term borrowings including obligations under finance leases of approximately HK$46,000 (fully repayable within one year) and on the total equity of the Company of approximately HK$243.9 million.

There was no financial cost incurred for the period ended 31st December 2011 (2010: same).

In light of the fact that most of the Group’s transactions were denominated in Hong Kong dollars, Renminbi and United States dollars, the management considered that the exposure to fluctuation of currency exchange rates is limited and no financial instruments for hedging purposes was used by the Group.

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Universe International Holdings Limited Interim Report 2011/2012

THE PLEDGE OF GROUP ASSETS

As at 31st December 2011, the Group did not have any pledged assets (As at 30th June 2011: same).

EMPLOYEES AND REMUNERATION POLICIES

As at 31st December 2011, the Group had 46 staff (As at 30th June 2011: 49). Remuneration is reviewed annually and certain staffs are entitled to commission. In addition to basic salaries, staff benefits including discretionary bonus, medical insurance scheme and mandatory provident fund.

DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS IN SHARES, UNDERLYING SHARES AND DEBENTURES

As at 31st December 2011, the interests of each of the Directors and chief executives of the Company in the shares of the Company (within the meaning of the Securities and Futures Ordinance, Chapter 571 of the Laws of Hong Kong (“SFO”)) which were required to be (a) notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of SFO (including interest which any such Director was taken or deemed to have under such provisions of the SFO) or; (b) entered in the register required to be kept by the Company pursuant to Section 352 of Part XV of the SFO or; (c) notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 to the Listing Rules were as follows:

Interests in issued shares of the Company

		Number of
		the Company’s	Percentage of
Name of Director	Nature of interest	shares held	shareholding
Mr Lam Shiu Ming,	Founder of a discretionary	859,131,705	50.19%
Daneil	trust(Note)

Note: The trustee of the discretionary trust is Central Core Resources Limited which owns the entire issued share capital of Globalcrest Enterprises Limited which in turn is interested in 859,131,705 shares of the Company.

All the interests in the shares of the Company were long positions.

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Universe International Holdings Limited Interim Report 2011/2012

DIRECTORS’ AND CHIEF EXECUTIVES’ INTERESTS IN SHARES, UNDERLYING SHARES AND DEBENTURES (Continued)

Interests in issued shares of the Company (Continued)

Save as disclosed above, as at 31st December 2011, none of the Directors or chief executives of the Company had any interests or short positions in the shares, underlying shares and debentures of the Company and its associated corporations which were required to be (a) notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests which they were deemed or taken to have under such provisions of the SFO) or; (b) entered in the register kept by the Company pursuant to Section 352 of Part XV of the SFO or; (c) notified to the Company and the Stock Exchange pursuant to the Model Code.

Save as disclosed above, at no time during the period, the Directors and chief executives of the Company (including their spouse and children under 18 years of age) had any interest in, or had been granted, or exercised, any rights to subscribe for shares (or warrants or debentures, if applicable) of the Company and its associated corporations required to be disclosed pursuant to the SFO.

In addition, at no time during the period was the Company, its holding company, its subsidiaries, its associated company or its fellow subsidiaries a party to any arrangement to enable the Directors and chief executives of the Company (including their spouse and children under 18 years of age) to hold any interests or short position in the shares or underlying shares in or debentures of, the Company or its associated corporation.

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Universe International Holdings Limited Interim Report 2011/2012

SUBSTANTIAL SHAREHOLDERS

So far as is known to any Director or chief executive of the Company, as at 31st December 2011, shareholders (other than Directors or chief executive of the Company disclosed above) who had interests or short positions in shares or underlying shares of the Company which would fall to be disclosed to the Company under the provisions of Division 2 and 3 of Part XV of the SFO, or which were recorded in the register kept by the Company under Section 336 of Part XV of the SFO were as follows:

	Number of
	the Company’s	Percentage of
Name of shareholders	shares held	shareholding
Globalcrest Enterprises Limited(Note)	859,131,705	50.19%
Central Core Resources Limited(Note)	859,131,705	50.19%

Note: The entire issued share capital of Globalcrest Enterprises Limited is held by Central Core Resources Limited, the trustee of a discretionary trust under which certain immediate family members of Mr Lam Shiu Ming, Daneil are discretionary objects.

All the interests disclosed above represent long positions in the shares of the Company.

Save as disclosed above, as at 31st December 2011, no other person has any interests or short positions in the shares, underlying shares and debentures of the Company in the register required to be kept by Company under section 336 of Part XV of the SFO.

MANAGEMENT CONTRACTS

No contracts concerning the management and administration of the whole or any substantial part of the business of the Company were entered into or existed during the period.

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Universe International Holdings Limited Interim Report 2011/2012

CODE ON CORPORATE GOVERNANCE PRACTICES

The Company has, throughout the six months ended 31st December 2011, complied with the code provisions contained in the Code on Corporate Governance Practices (the “Code”) set out in Appendix 14 to the Listing Rules except for the code provision A.2.1 of the Code for the separation of the roles of Chairman and Chief Executive Officer (“CEO”) as described in the following.

Code provision A.2.1 of the Code sets out that the roles of the Chairman and CEO should be separate and should not be performed by the same individual. The Company does not at present have any officer holding the position of CEO. Mr Lam Shiu Ming, Daneil is the founder and Chairman of the Company and has also carried out the responsibilities of CEO. Mr Lam possesses the essential leadership skills to manage the Board and extensive knowledge in the business of the Group. The Board considers the present structure to be more suitable to the Company because it can promote the efficient formulation and implementation of the Group’s strategies.

AUDIT COMMITTEE

The Audit Committee was established on 11th October 1999. Its current members include three Independent Non-executive Directors, namely Mr Ng Kwok Tung (as Chairman), Dr Leung Shiu Ki, Albert and Mr Ma Chun Fung, Horace.

The Audit Committee has reviewed the accounting principles and practices adopted by the Group and discussed internal control and financial reporting matters including a review of the unaudited condensed consolidated interim financial information for the six months ended 31st December 2011 with the management.

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Universe International Holdings Limited Interim Report 2011/2012

PURCHASE, SALE OR REDEMPTION OF THE COMPANY’S LISTED SECURITIES

The Company has not redeemed any of its listed securities during the six months ended 31st December 2011. Neither the Company nor any of its subsidiaries has purchased or sold any of the Company’s listed securities during the period.

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

During the six months ended 31st December 2011, the Company has adopted the Model Code as the code for dealing in securities of the Company by Directors. Having made specific enquiries, all Directors confirmed that they have complied with the required standards set out in the Model Code throughout the period.

By Order of the Board Lam Shiu Ming, Daneil

Chairman

Hong Kong, 29th February 2012

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