Sinopec Engineering Group Co Ltd. - Annual Report 2007

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Stock Code 股份代號: 1046

ANNUAL REPORT 2 0 0 7 年報

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Corporate Information	��	2
Chairman’s Statement	��	4
Management Discussion and Analysis	��	8
Directors and Senior Management Profile	��	13
Corporate Governance Report	��	16
Report of the Directors	��	25
Independent Auditor’s Report	��	37
Consolidated Balance Sheet	��	39
Balance Sheet	��	41
Consolidated Income Statement	��	42
Consolidated Statement of Changes in Equity	��	43
Consolidated Cash Flow Statement	��	44
Notes to the Consolidated Financial Statements	��	45
Principal Properties Held for Investment Purposes	��	111
Five Year Financial Summary	��	112

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CORPORATE INFORMATION ��

EXECUTIVE DIRECTORS

LAM Shiu Ming, Daneil (Chairman) CHIU Suet Ying YEUNG Kim Piu

INDEPENDENT NON-EXECUTIVE DIRECTORS

NG Kwok Tung CHIU Shin Koi MA Ting Hung

COMPANY SECRETARY

CHAN Hau Chuen

AUTHORIZED REPRESENTATIVES

LAM Shiu Ming, Daneil CHAN Hau Chuen

PRINCIPAL BANKERS

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

AUDITORS

PricewaterhouseCoopers Certified Public Accountants

LEGAL ADVISERS

So Keung Yip & Sin 802-805, 8th Floor Wheelok House 20 Pedder Street Central Hong Kong

SHARE REGISTRAR

Tricor Abacus Limited Level 25, Three Pacific Place 1 Queen’s Road East Hong Kong

AUDIT COMMITTEE

NG Kwok Tung (Chairman) CHIU Shin Koi MA Ting Hung

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UNIVERSE INTERNATIONAL HOLDINGS LIMITED

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CORPORATE INFORMATION ��

REMUNERATION COMMITTEE

MA Ting Hung (Chairman) NG Kwok Tung CHIU Shin Koi LAM Shiu Ming, Daneil CHIU Suet Ying

NOMINATION COMMITTEE

CHIU Shin Koi (Chairman) NG Kwok Tung MA Ting Hung LAM Shiu Ming, Daneil CHIU Suet Ying

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 Hong Kong

WEBSITE

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

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Clarendon House 2 Church Street Hamilton HM 11 Bermuda

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

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Chairman’s Statement ��

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CHAIRMAN’S STATEMENT ��

On behalf of the board of directors (the “Director(s)”) (the “Board”) of Universe International Holdings Limited (the “Company”), I am pleased to present the 2006/2007 annual results of the Company and its subsidiaries (collectively the “Group”).

DIVIDENDS

The Board does not recommend the payment of a final dividend for the year ended 30th June 2007 (2006: HK0.9 cent per ordinary share).

OPERATING RESULTS

For the year ended 30th June 2007, the turnover and gross profit for the Group rose by 45.9% and 18.4% over the same period last year, to HK$136.2 million and HK$31.7 million respectively. Gross profit margin has however decreased to 23.3% from 28.7% in the same period last year.

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�� 136,200,000��31,700,000�� 45.9%�18.4%�� 28.7%��23.3%�

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CHAIRMAN’S STATEMENT ��

Profit attributable to equity holders of the Company declined by HK$15.8 million to HK$11.5 million compared to the previous year mainly due to a lesser increase in fair value of investment properties (after deducting income tax) of HK$1.3 million when compared to that of the previous year of HK$24.7 million. Such significant decrease was partly offset by gains on disposals of the two investment properties amounting to an aggregate of HK$5.4 million and a reversal of taxable temporary differences of HK$5.6 million arising from these two investment properties upon their disposals during the year. Consequently, the Group was able to maintain its profitability despite the various challenges it faced. Earnings per share was HK0.71 cent compared to that of HK1.68 cents during the corresponding period in 2006.

During the year under review, the performance of the video distribution business continued to be hindered by an unfavourable market environment. Nevertheless, the turnover from film exhibition, licensing and sub-licensing of film rights showed an encouraging growth of 99.7% as more films were released during the year. In particularly, the turnover contribution from the market of the People’s Republic of China (the “PRC”) in the year under review was outstanding.

Looking ahead, the management expects the operating environment in the PRC will continue to be conducive to the business of film exhibition, licensing and sub-licensing of film rights as a result of further relaxation of regulations governing the film industry as well as in line with overall economic growth. To capture such growth opportunity, the Group aims to continue with its strategy of investing in the production of high quality films and television series catering to the mass market. Meanwhile, the management will continue to refine its business strategies where necessary to meet with various challenges in the future.

�� 24,700,000�� 1,300,000�� 15,800,000� ��11,500,000�� 5,400,000�� 5,600,000�� 0.71�� 1.68��

�� 99.7%��

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UNIVERSE INTERNATIONAL HOLDINGS LIMITED

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CHAIRMAN’S STATEMENT ��

APPRECIATION

I would like to take this opportunity to express my deepest gratitude and sincere thanks to my fellow directors and our staff for their dedication and contribution to the Group in the past year. I would also like to thank all our customers and our shareholders for their continued support.

By Order of the Board Lam Shiu Ming, Daneil Chairman

Hong Kong, 18th October 2007

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Management Discussion and Analysis ��

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MANAGEMENT DISCUSSION AND ANALYSIS ��

BUSINESS REVIEW

Video distribution

Turnover contribution from the video distribution business segment has been gradually decreasing over the past few years as this business segment remained to be hindered by an adverse operating environment. During the year, it accounted for 25.0% (2006: 41.5%) of the Group’s total turnover, where it recorded a decline of 12.2% to HK$34.1 million compared to the previous year.

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�� 2 5 . 0 %�� 4 1 . 5 %�� 1 2 . 2 % �� 34,100,000��

Despite the pressure of a stagnant market and keen competition in the local video distribution business, the gross profit of this business segment improved from approximately HK$3.4 million to approximately HK$5.1 million, as a result of our stringent cost control measures.

�� 3,400,000��5,100,000 ��

Film exhibition, licensing and sub-licensing of film rights

Turnover contribution from this business segment was HK$96.6 million, representing an increase of 99.7% over the same period last year and contributed 70.9% (2006: 51.8%) of the Group’s total turnover. The significant increase in turnover from this business segment reflects the positive results of the success of the strategy of investing in production of films and television series as well as the Group’s efforts in strengthening its distribution network.

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�� 96,600,000��99.7%� ��70.9%�� 51.8%��

Turnover contribution from film exhibition business was HK$12.8 million, representing an increase of HK$10.5 million, compared to the same period last year. Such increase was mainly driven by more films being produced and released during the year. However, the operating loss widened to HK$3.4 million from HK$1.2 million as a result of the increase in promotional and marketing costs incidental to the film releases and the continual contraction of the local Chinese language film exhibition business.

�� 12,800,000 �� 10,500,000�� 1,200,000�� 3,400,000��

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MANAGEMENT DISCUSSION AND ANALYSIS ��

Turnover contribution from licensing and sub-licensing of film rights rose by 81.8% to HK$83.8 million, representing 61.5% of the Group’s total turnover. Gross profit from licensing and sub-licensing of film rights recorded an encouraging growth of 40.8%, to a level of HK$26.0 million. Such considerable increases in turnover and gross profit contribution was a result of our continual efforts of implementing the strategies of geographical diversification and investing in production of films and television series.

�� 81.8%��83,800,000�� 61.5%�� 40.8%�� 26,000,000��

As we continually expand our marketing channel and distribution network, the Group has been successful in capturing the sales growth across overseas markets. Contribution from these overseas markets to the Group has been growing and is expected to be increasingly important. During the year, sales to overseas market in this business segment increased by HK$33.5 million to HK$60.7 million, representing 44.5% (2006: 29.1%) of the Group’s consolidated turnover.

�� 33,500,000�� 60,700,000�� 44.5%��29.1%��

Leasing of investment properties

On 1st August 2006, the Group completed the disposal transaction of investment properties (which were presented as non-current assets held for sale in the consolidated balance sheet as at 30th June 2006) at a consideration of HK$33.3 million and recorded a profit of HK$1.6 million. On 18th December 2006, the Group completed another disposal transaction of investment properties at a consideration of HK$31.1 million and recorded a profit of HK$3.8 million.

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�� 33,300,000�� 1,600,000 �� 31,100,000�� 3,800,000��

Following the disposals of the aforesaid investment properties during the year, turnover from this business segment decreased correspondingly by 44.7% to HK$2.6 million.

�� 44.7%�� 2,600,000��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

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MANAGEMENT DISCUSSION AND ANALYSIS ��

OUTLOOK

Going forward, the management believes the Group has developed a solid foundation to facilitate its future expansion and is well positioned to leverage on this to meet the potential and increasing demand from different markets, particularly the PRC. The PRC economy is expected to continue to prosper which in turn should benefit the film industry as a whole. In line with this, the management expects that demand for films and television series of high quality will continue to grow.

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To respond to the adverse operating environment of the video distribution business, the Group strives to continually to manage its operating cost and enhance operational efficiency and productivity.

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Leveraging on our experience, we are confident that the Group can overcome the market challenges and bring satisfactory returns to shareholders in the future.

FINANCIAL RESOURCES/LIQUIDITY AND CAPITAL STRUCTURE

As at 30th June 2007, the Group had cash balances of HK$146.9 million and unutilized banking facilities amounted to HK$30.0 million while the corresponding figures in last year were HK$118.4 million and HK$50.0 million respectively.

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�� 146,900,000��30,000,000�� 118,400,000� ��50,000,000��

As at 30th June 2007, the Group had total assets of approximately HK$366.1 million, representing a slight decrease of HK$9.3 million over that of 30th June 2006.

�� 366,100,000�� 9,300,000��

The Group’s gearing ratio as at 30th June 2007 was approximately 0.1% (2006: 0.1%), which was calculated on the basis of the Group’s long term borrowings of approximately HK$106,400 (of which HK$40,400, HK$28,600 and HK$37,400 are repayable within one year, in the second year and in the third to fifth year respectively) and on the total equity of the Company of approximately HK$313.9 million.

�� 0.1%��0.1%�� 106,400 ��40,400�� 28,600�� 37,400�� 313,900,000� ��

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MANAGEMENT DISCUSSION AND ANALYSIS ��

�� 2,000��

There was no finance costs incurred for the year ended 30th June 2007 (2006: HK$2,000).

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

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THE PLEDGE OF GROUP’S ASSETS

As at 30th June 2007, certain assets of the Group with aggregate carrying value of HK$4.0 million (2006: HK$107.5 million) were pledged to secure banking facilities utilized by subsidiaries.

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�� 4,000,000�� 107,500,000��

EMPLOYEES AND REMUNERATION POLICIES

As at 30th June 2007, the Group employed 68 staff (2006: 69). Remuneration is reviewed annually and certain staffs are entitled to commission. In addition to the basic salaries, staff benefits included discretionary bonus, medical insurance scheme and mandatory provident fund.

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SHARE OPTION SCHEME

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 “Scheme”) in compliance with Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the “Stock Exchange”) (the “Listing Rules”).

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There were no share options granted by the Company under the Scheme for the period from 26th November 2003 to 30th June 2007.

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UNIVERSE INTERNATIONAL HOLDINGS LIMITED

Directors and Senior Management Profile ��

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DIRECTORS AND SENIOR MANAGEMENT PROFILE ��

BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT

Executive Directors

Mr LAM Shiu Ming, Daneil, aged 45, is the founder and Chairman of the Group. He is involved in marketing, corporate strategy, business planning and development and overall management of the Group. Mr Lam has 26 years’ experience in the film industry in Hong Kong. He was awarded the “Young Industrialist Awards of Hong Kong” by the Federation of Hong Kong Industries in 2002.

Ms CHIU Suet Ying, aged 45, is responsible for the formulation of sales and marketing strategies. Ms Chiu is the wife of Mr Lam Shiu Ming, Daneil. She joined the Group in 1993.

Mr YEUNG Kim Piu, aged 46, is mainly responsible for overseeing the operation of artiste management division. Mr Yeung joined the Group in 1993 and has over 10 years of experience in the film distribution industry in Hong Kong.

Independent Non-executive Directors

Mr NG Kwok Tung, aged 57, is a practising accountant. He holds a Bachelor of Commerce degree and a licentiate in accountancy from McGill University, Canada and a diploma in Chinese law from the University of East Asia, Macau. Mr Ng is a member of the Hong Kong Institute of Certified Public Accountants, the Institute of Chartered Accountants of British Columbia, the Order of Chartered Accountants of Quebec, the Canadian Institute of Chartered Accountants and the Taxation Institute of Hong Kong. He joined the Group in 1999.

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UNIVERSE INTERNATIONAL HOLDINGS LIMITED

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Mr CHIU Shin Koi, aged 71, is a tax consultant in a certified public accounting firm in Hong Kong. Mr Chiu has worked for the Inland Revenue Department for over 17 years. After retirement from the Hong Kong government, he joined an international accounting firm. From June 1988 to February 1990, Mr Chiu was the financial controller of a large organisation. He later joined the Securities and Futures Commission and served there from March 1991 to March 1993. He is a fellow member of the Hong Kong Institute of Certified Public Accountants and a fellow member of the Taxation Institute of Hong Kong. He joined the Group in 1999.

Mr MA Ting Hung, aged 44, is the non-executive director of CITIC Resources Holdings Limited. He holds a Bachelor of Arts Degree majoring in Economics from the University of Southern California. Mr Ma has over 20 years of experience in the banking, finance and natural resources industries. He joined the Group in 2004.

Senior Management

Mr LAM Siu Keung, Alvin, aged 37, is the Chief Operation Officer of the Group. He is responsible for overseeing the daily operation of the Group. Prior to joining the Group in 2002, he has over eight years experience in finance and internal control consulting for both Hong Kong and US listed companies in Arthur Andersen. He earned his Bachelor of Accountancy at the Hong Kong Polytechnic University. He is a fellow member of both the Association of Chartered Certified Accountants and the Hong Kong Institute of Certified Public Accountants. He is the younger brother of Mr Lam Shiu Ming, Daneil.

Mr CHAN Hau Chuen, aged 37, is the Financial Controller and Company Secretary of the Group. He is responsible for the financial and accounting functions of the Group. Prior to joining the Group in 1998, he has over six years of experience in finance and accounting in an international accounting firm and a publicly listed company in Hong Kong. He is a fellow member of the Association of Chartered Certified Accountants and an associate member of the Hong Kong Institute of Certified Public Accountants.

DIRECTORS AND SENIOR MANAGEMENT PROFILE ��

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CORPORATE GOVERNANCE REPORT ��

CORPORATE GOVERNANCE PRACTICES

The Company is committed to the establishment of a good standard of corporate governance practices by emphasizing transparency, accountability and responsibility to our shareholders.

CODE ON CORPORATE GOVERNANCE PRACTICES

The Company has, throughout the year ended 30th June 2007, complied with the Code Provisions on 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.

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 Group because it can promote the efficient formulation and implementation of the Group’s strategies.

THE BOARD

Duties and composition of the Board

The Board is collectively responsible for the oversight of the management of business, strategic decisions and financial performance of the Group for the best interests of the shareholders. The Board has delegated the day-to-day management power of the Group to the Executive Directors and the senior management of the Company. The Board reviews its arrangement on delegation of responsibilities and authority regularly to ensure that such delegations are appropriate in view of the Company’s prevailing circumstances.

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UNIVERSE INTERNATIONAL HOLDINGS LIMITED

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CORPORATE GOVERNANCE REPORT ��

The following matters (including changes to any such matters) are reserved for the approval by the Board:

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(a) any matter determined by the Board to be material involving any conflict of interest for a substantial shareholder of the Company or a Director;
(a) ��
(b) any matter relating to the formulation of the Company’s strategies and directions including:
(b) ��
(i) policies relating to the overall strategic direction and strategic plans of the Company;
(i) ��
(ii) policies relating to key business and financial objectives of the Company ;
(ii) ��
(iii) policies relating to the declaration of dividend; and
(iii) ��
(iv) the entering into of contracts involving acquisitions, investments, disposal of assets or any significant capital expenditure which are deemed to be material by the Board.
(iv) ��
(c) financial controls, compliance and risk management:
(c) ��
(i) the approval of annual operating and capital expenditure budgets for the Company;
(i) ��
(ii) the approval of the Company’s financial statements and published reports;
(ii) ��
(iii) the establishment and review of the effectiveness of the Company’s systems of internal control and risk management process; and
(iii) ��
(iv) the adoption of, or approval for any significant changes in, accounting policies or procedures of the Company and its subsidiaries.
(iv) ��
(d) changes to the Company’s capital structure, including reductions of share capital, share buy-backs or issue of new securities, other than in accordance with the terms of the share option scheme(s) or other incentive schemes adopted by the Company from time to time;
(d) ��

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CORPORATE GOVERNANCE REPORT ��

(e) major appointments and removal:
(i) appointments to the Board, taking into account any recommendations of the Nomination Committee;
(ii) the appointment of the Chairman;
(iii) recommendation to the shareholders on the appointment or removal of external auditors after taking into consideration the recommendations of the Audit Committee; and
(iv) the appointment or removal of the Company Secretary.
(f) delegation of authority:
(i) changes to terms of reference or membership of any committee of the Board;
(ii) changes to the authority delegated to the Chairman and the senior management; and
(iii) matters which exceed the authority delegated to the Chairman and the senior management.
(g) the adoption, review and approval of changes to the Corporate Governance Practice Manual of the Company, the Code of Ethics and Securities Transactions applicable to the Directors and senior management of the Group.

The Board currently comprises a total of six Directors, with three Executive Directors and three Independent Nonexecutive Directors. The names and biographies of the Directors are set out on pages 14 and 15 of this annual report.

The Independent Non-executive Directors are all experienced individuals, of whom two have accounting professional qualification. Their mix of professional skills and experience is beneficial to the Board to formulate the longterm business strategies and monitor the operational and financial matters of the Group.

(e) ��
(i) ��
(ii) ��
(iii) ��
(iv) ��
(f) ��
(i) ��
(ii) ��
(iii) ��
(g) ��

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UNIVERSE INTERNATIONAL HOLDINGS LIMITED

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CORPORATE GOVERNANCE REPORT ��

The Company has received, from each of the Independent Non-executive Directors, an annual confirmation of his independence pursuant to Rule 3.13 of the Listing Rules. The Company considers all of the Independent Nonexecutive Directors to be independent.

�� 3.13��

The Company has arranged for appropriate liability insurance to cover the liabilities of the Directors that may arise out of the corporate activities. The insurance coverage is reviewed on an annual basis.

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APPOINTMENT AND RE-ELECTION

The appointment of a new Director is made on the recommendation of the Nomination Committee of the Company or by shareholders in general meeting. Any Director who is appointed by the Board shall retire at the next annual general meeting.

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Currently, all Independent Non-executive Directors are appointed for a specific term of three years. All Directors are subject to retirement by rotation at least every three years and re-election in accordance with the provision of the Listing Rules and the bye-laws of the Company (the “Bye-law(s)”). At least one-third of Directors shall retire from office every year at the Company’s annual general meeting.

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Messrs Yeung Kim Piu, Ng Kwok Tung and Chiu Sin Koi will retire by rotation and, being eligible, will offer themselves for re-election at the forthcoming annual general meeting of the Company.

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CORPORATE GOVERNANCE REPORT ��

BOARD MEETINGS

Each year, the Board normally held four regular board meetings at approximately quarterly interval. Eight board meetings were convened during the year ended 30th June 2007 and the attendances of individual Directors at these meetings are set out as follows:

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Attendance

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Executive Directors		��
Mr Lam Shiu Ming, Daneil (Chairman)	8/8	��	8/8
Ms Chiu Suet Ying	8/8	��	8/8
Mr Yeung Kim Piu	8/8	��	8/8
Independent Non-executive Directors		��
Mr Ng Kwok Tung	7/8	��	7/8
Mr Chiu Shin Koi	7/8	��	7/8
Mr Ma Ting Hung	7/8	��	7/8

BOARD COMMITTEES

The Board has established a Remuneration Committee, Nomination Committee and an Audit Committee.

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Remuneration Committee

A Remuneration Committee with specific written terms of reference was established by the Company on 15th July 2005. The Remuneration Committee currently comprises three Independent Non-executive Directors, namely Mr Ma Ting Hung (as Chairman), Mr Ng Kwok Tung and Mr Chiu Shin Koi, and two Executive Directors, namely, Mr Lam Shiu Ming, Daneil and Ms Chiu Suet Ying. The terms of reference of the Remuneration Committee are available on the Company’s website.

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The principal duties of the Remuneration Committee include making recommendations to the Board on the remuneration policy and structure of the Directors and senior management and reviewing the specific remuneration package of all Executive Directors and senior management from time to time.

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UNIVERSE INTERNATIONAL HOLDINGS LIMITED

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CORPORATE GOVERNANCE REPORT ��

The main principles of the Group’s remuneration policies are:

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(a) no Director should be involved in deciding his or her own remuneration;
(a) ��
(b) remuneration should be determined by taking into consideration factors such as salaries paid by comparable companies, time commitment, levels of responsibilities, employment conditions elsewhere in the Group and desirability of performance-based remuneration; and
(b) ��
(c) performance-based remuneration should be reviewed and approved by reference to corporate goal and objectives resolved by the Board from time to time.
(c) ��

Two committee meetings were convened during the year ended 30th June 2007 and the attendances of individual committee member at these meetings are set out as follows:

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Attendance

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Independent Non-executive Directors

Independent Non-executive Directors		��
Mr Ma Ting Hung (Chairman)	2/2	��	2/2
Mr Ng Kwok Tung	2/2	��	2/2
Mr Chiu Shin Koi	2/2	��	2/2
Executive Directors		��
Mr Lam Shiu Ming, Daneil	2/2	��	2/2
Ms Chiu Suet Ying	2/2	��	2/2

Mr Lam Shiu Ming, Daneil 2/2 Ms Chiu Suet Ying 2/2

The Remuneration Committee has reviewed and discussed the remuneration of the Directors and senior management. The Committee has also approved the remuneration and the discretionary bonuses of the Executive Directors by reference to their respective levels of responsibilities and performance, industry benchmarks, prevailing marketing conditions and Group’s financial performance and delegated the Executive Directors to determine and formulate the remuneration policy for the senior management of the Group. No Director is involved in deciding his or her own remuneration.

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CORPORATE GOVERNANCE REPORT ��

Nomination Committee

A Nomination Committee with specific written terms of reference was established by the Company on 15th July 2005. The Nomination Committee currently comprises three Independent Non-executive Directors, namely Mr Chiu Shin Koi (as Chairman), Mr Ng Kwok Tung and Mr Ma Ting Hung, and two Executive Directors, namely, Mr Lam Shiu Ming, Daneil and Ms Chiu Suet Ying. The terms of reference of the Nomination Committee are available on the Company’s website.

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The principal duties of the Nomination Committee include reviewing the structure, size and composition of the Board on a regular basis and making recommendations to the Board regarding any proposed changes.

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The Nomination Committee did not hold any meeting during the year ended 30th June 2007.

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Audit Committee

The Company established an Audit Committee on 11th October 1999. The written terms of reference which describe the authority and duties of the Audit Committee were prepared and adopted with reference to “A Guide for Effective Audit Committee” published by the Hong Kong Institute of Certified Public Accountants and in accordance with the Code. The terms of reference of the Audit Committee are available on the Company’s website.

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The Audit Committee is responsible for the appointment of external auditor, review of the Group’s financial information and oversight of the Group’s financial and accounting practices, internal control and risk management. It is also responsible for reviewing the interim and final results of the Group.

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The audited financial statements for the year ended 30th June 2007 have been reviewed by the Audit Committee.

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Five committee meetings were convened during the year ended 30th June 2007 and the attendances of the individual committee member at these meetings are set out as follows:

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Attendance

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Independent Non-executive Directors		��
Mr Ng Kwok Tung (Chairman)	5/5	��	5/5
Mr Chiu Shin Koi	5/5	��	5/5
Mr Ma Ting Hung	5/5	��	5/5

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

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CORPORATE GOVERNANCE REPORT ��

The Audit Committee has reviewed the terms of engagement of the external auditor, the revised accounting standards, the financial year 2006/2007 interim financial report and annual financial statements. The Audit Committee also reviewed the internal control systems and met with the external auditor to discuss with them the nature and scope of the audit and reporting obligation prior to the commencement of and after the completion of the audit.

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INTERNAL CONTROL

The Directors have the overall responsibility for internal control and sets appropriate policies. The Board, through the Audit Committee, has reviewed the effectiveness of the Group’s system of internal control.

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In compliance with code provision C.2.1 of the Code and to further improve the effectiveness of the internal control, the Company engaged an independent accounting firm (the “Consultant”) to conduct a review of the effectiveness of the system control of the Group for the year ended 30th June 2007 on 5th December 2006. All findings for improvement and recommendations made by the Consultant, which require management’s attention, have been properly addressed and implemented by the Company during the year.

��C.2.1��

The system of internal control aims to help achieving the Group’s business objectives, effective and efficient operations, safeguarding assets and maintaining proper accounting records for provision of reliable financial information. The design of system is to provide reasonable, but not absolute, assurance against material misstatement in the financial statement or loss of assets and to manage rather than eliminate all risks of failure in the Group’s operational systems and in the achievement of the Group’s business objectives. No material suspected frauds and irregularities, internal control deficiencies or infringement of relevant regulations and rules have come to the attention of Board to cause the Board to believe that the system of internal control is inadequate.

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CORPORATE GOVERNANCE REPORT ��

DIRECTORS’ RESPONSIBILITY FOR FINANCIAL REPORTING

The Directors acknowledge their responsibilities for the preparation of the consolidated financial statements of the Group and ensure that the consolidated financial statements of the Group for the year ended 30th June 2007 have been prepared in accordance with Hong Kong Financial Reporting Standards, Hong Kong Accounting Standard and Interpretations issued by the Hong Kong Institute of Certified Public Accountants, accounting principles generally accepted in Hong Kong and disclosure requirements of the Hong Kong Companies Ordinance.

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The statement of external auditor of the Company, PricewaterhouseCoopers, about their repor ting responsibilities on the consolidated financial statements of the Group is set in the Auditor’s Report on pages 37 and 38 of this annual report.

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AUDITOR’S REMUNERATION

PricewaterhouseCoopers was appointed as the external auditor of the Company by the shareholders at the last annual general meeting of the Company. For the year ended 30th June 2007, the remuneration payable to PricewaterhouseCoopers is set out as follows:

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		Fees payable
Services rendered	��	��
		HK$’000
		��
Audit services	��	650
Non-audit services	��	50
		700

MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

During the year ended 30th June 2007, the Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers (the “Model Code”) as set out in Appendix 10 to the Listing Rules as the code for dealing in securities of the Company by the Directors. Having made specific enquiry, all the Directors confirmed that they have complied with the Model Code throughout the year.

��

�� 10��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

REPORT OF THE DIRECTORS ��

The Board submit its report together with the audited consolidated financial statements of Universe International Holdings Limited (the “Company”) and its subsidiaries (the “Group”) for the year ended 30th June 2007.

��

PRINCIPAL ACTIVITIES AND GEOGRAPHICAL ANALYSIS OF OPERATIONS

The principal activity of the Company is investment holding. The activities of the subsidiaries are set out in Note 11 to the consolidated financial statements.

��

�� 11�

An analysis of the Group’s performance for the year by business and geographical segments is set out in Note 5 to the consolidated financial statements.

�� 5�

RESULTS AND APPROPRIATIONS

The results of the Group for the year are set out in the consolidated income statement on page 42.

��

��42��

The directors do not recommend the payment of a final dividend (2006: HK0.9 cent per ordinary share).

�� 0.9��

FIVE YEAR FINANCIAL SUMMARY

A summary of the results and of the assets and liabilities of the Group for the last five financial years is set out on page 112.

��

�� 112��

RESERVES

Movements in the reserves of the Group and the Company during the year are set out in Note 19 to the consolidated financial statements.

��

�� 19�

DONATIONS

No charitable and other donation was made by the Group during the year (2006: HK$nil).

��

��
��

PROPERTY, PLANT AND EQUIPMENT

Details of the movements in property, plant and equipment of the Group are set out in Note 7 to the consolidated financial statements.

��

�� 7�

��

< ANNUAL REPORT 2007 >

REPORT OF THE DIRECTORS ��

PRINCIPAL PROPERTIES

Details of the principal properties held for investment purposes are set out on page 111.

SHARE CAPITAL

Details of the share capital of the Company are set out in Note 18 to the consolidated financial statements.

DISTRIBUTABLE RESERVES

Distributable reserves of the Company as at 30th June 2007 amounted to HK$56,304,000 (2006: HK$70,888,000) including contributed surplus of HK$51,852,000 (2006: HK$51,852,000) which is only distributable subject to conditions as set out in Note 19 to the consolidated financial statements.

PARTICULARS OF BANK LOANS AND OTHER BORROWINGS

Particulars of bank loans and other borrowings as at 30th June 2007 are set out in Note 35 to the consolidated financial statements.

SHARE OPTION SCHEME

Pursuant to an ordinary resolution passed in the annual general meeting held on 26th November 2003, the Company conditionally approved and adopted the Scheme in compliance with the Listing Rules. Details of the Scheme are as follows:

(a) Purpose of the Scheme

The purpose of the Scheme is to enable the Company to grant options to selected Participants (as defined below) as incentive and/or rewards for their contribution and support to the Group and any invested entity.

(b) Participants of the Scheme

The Board may, at its discretion, invite any person belonging to any of the following classes of participants for their contribution and support to the Group and any invested entity (the “Participants” and individually, a “Participant”) to take up options to subscribe for shares of the Company (the “Share(s)”).

��

�� 111��

��

�� 18�

��

�� 56,304,000�� 70,888,000 �� 51,852,000�� 51,852,000�� 19��

��

�� 35�

��

(a) ��

�� /��

(b) ��

��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

REPORT OF THE DIRECTORS ��

(i) any full-time employee of the Company, any of its subsidiary or any invested entity, including (without limitation) any Executive Director of the Company, any of its subsidiary or invested entity (individually, an “Employee”);
(i) ��
(ii) any Non-executive Director (including Independent Non-executive Directors) of the Company, any of its subsidiary or any invested entity;
(ii) ��
(iii) any supplier of goods or services to any member of the Group or any invested entity;
(iii) ��
(iv) any customer of the Group or any invested entity;
(iv) ��
(v) any person or entity that provides research, development or other technical support to the Group or any invested entity;
(v) ��
(vi) any shareholder of any member of the Group or any invested entity or any holder of any securities issued by any member of the Group or any invested entity;
(vi) ��
(vii) any adviser (professional or otherwise) or consultant to any area of business or business development of any member of the Group or any invested entity; and
(vii) ��
(viii) any joint venture partner or counter-party to business operation or business arrangements of the Group, and for the purposes of the Scheme, the options may be granted to any company wholly owned by one or more persons belonging to any of the above classes of the Participants.
(viii) ��

��

< ANNUAL REPORT 2007 >

REPORT OF THE DIRECTORS ��

(c) Maximum number of shares available for issue under the Scheme
(i) The maximum number of shares which may be issued upon exercise of all outstanding option granted and yet to be exercised under the Scheme and any other schemes for the time being of the Company shall not exceed 30% of the shares in issue from time to time. Options lapsed or cancelled for the time being of the Company shall not be counted for the purpose of calculating the said 30% limit; and
(ii) The maximum number of shares available for issue under the Scheme is 143,460,537 shares of the Company, representing 10% of the shares of the Company in issue as at the date the shareholders conditionally approved and adopted the Scheme.

(d) Maximum entitlement of each Participant

The total number of shares issued upon exercise of the options granted and to be granted to each grantee under the Scheme and any other schemes for the time being of the Company (including both exercised and outstanding options) in any 12-month period up to the date of grant to each grantee must not exceed 1% of the aggregate number of shares for the time being in issue.

(e) Remaining life and exercisable period of the options

There is no general requirement that an option must be held for any minimum period before it can be exercised but the Board is empowered to impose at its discretion any such minimum period at the time of grant of any particular option. An option may be exercised in accordance with the terms of the Scheme at any time during a period of 10 years commencing on the date of grant and expiring on the last day of the said 10-year period.

(f) Payment on acceptance of the options offer

A sum of HK$1 is payable by the Participant on acceptance of the option offer.

(c) ��
(i) �� 30%�� 30%��
(ii) �� 143,460,537 �� 10%�

(d) ��

�� 12�� 1%�

(e) ��

�� 10�� 10��

(f) �� 1��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

REPORT OF THE DIRECTORS ��

(g) Basis of determining the subscription price

The subscription price for the shares under the Scheme shall be a price notified by the Board to a Participant to whom any offer of the grant of an option is made and shall be at least the higher of (i) the closing price of the shares as stated in the Stock Exchange’s daily quotations sheet on the date of grant which must be a business day; and (ii) the average closing price of the shares as stated in the Stock Exchange’s daily quotations sheets for the five business days immediately preceding the date of grant, provided that the subscription price shall not be the lower than the nominal value of a share.

(g) ��

�� (i)�� (ii)� ��

There were no share options granted under the Scheme for the period from 26th November 2003 to 30th June 2007.

��

On 21st August 2007, the Company granted 143,460,537 share options, which represented 8.83% of the issued share capital of the Company as at 30th June 2007, to the Employees at the subscription price of HK$0.264 per share option which were vested immediately and exercisable for a two-year period between 21st August 2007 and 20th August 2009 (both days inclusive). Each share option gives the holder the right to subscribe for one ordinary share of the Company. The Directors of the Company individually and other employees of the Group in aggregated had the following personal interests in share option to subscribe for ordinary shares of the Company on 21st August 2007:

�� 0.264��143,460,537� �� 8.83%��

��

< ANNUAL REPORT 2007 >

REPORT OF THE DIRECTORS ��

				Price per		Market value
			Period during	share on		per share
			which	exercise	Number of	on grant
		Date of	share options	of share	share options	of share
		grant	are exercisable	options	granted	options
				��
				��	��	��
Participants	��	��	��	��	��	��
				HK$		HK$
				��		��
Directors	��
Mr Lam Shiu Ming, Daneil	��	21/8/2007	21/8/2007-20/8/2009	0.264	16,245,000	0.243
Ms Chiu Suet Ying	��	21/8/2007	21/8/2007-20/8/2009	0.264	16,245,000	0.243
Mr Yeung Kim Piu	��	21/8/2007	21/8/2007-20/8/2009	0.264	16,245,000	0.243
Eligible employees	��
working under	��
employment	��
contracts	��	21/8/2007	21/8/2007-20/8/2009	0.264	94,725,537	0.243
					143,460,537

DIRECTORS

The Directors during the year and up to the date of this report were:

��

Mr LAM Shiu Ming, Daneil Ms CHIU Suet Ying Mr YEUNG Kim Piu Mr NG Kwok Tung[1] Mr CHIU Shin Koi[1] Mr MA Ting Hung[1]

��

��[1] ��[1] ��[1]

1 Independent Non-executive Directors

1 ��

Messrs Yeung Kim Piu, Ng Kwok Tung and Chiu Shin Koi, retire by rotation in accordance with Articles 87(1) and (2) of the Bye-laws and, being eligible, offer themselves for reelection.

�� 87�1��2��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

REPORT OF THE DIRECTORS ��

All Independent Non-executive Directors have been appointed for a specific term and subject to retirement by rotation as specified by the provision of the Listing Rules and the Bye-laws.

��

The Company has received from each of the above Independent Non-executive Directors a confirmation of his independence pursuant to Rule 3.13 of the Listing Rules and the Company is satisfied that they are independent as such.

��3.13��

DIRECTORS’ SERVICE CONTRACTS

None of the Directors proposed for re-election at the forthcoming annual general meeting has a service contract with the Company which is not determinable within one year without payment of compensation, other than statutory compensation.

��

DIRECTORS’ INTERESTS IN CONTRACTS OF SIGNIFICANCE

Save as disclosed in Note 39 to the consolidated financial statements, no contracts of significance in relation to the Group’s business to which the Company, its holding company, its subsidiaries or its fellow subsidiaries was a party and in which a director of the Company had a material interest, whether directly or indirectly, subsisted at the end of the year or at any time during the year.

��

��39��

DIRECTORS’ INTERESTS IN COMPETING BUSINESS

None of the Directors has an interest in a business which competes or may compete with the business of the Group.

��

< ANNUAL REPORT 2007 >

REPORT OF THE DIRECTORS ��

D I R E C TO R S ’ A N D C H I E F E X E C U T I V E S ’ INTERESTS IN EQUITY OR DEBT SECURITIES

As at 30th June 2007, the interests which are all long position of each of the Directors and chief executives of the Company in the share capital of the Company (within the meaning of the Securities and Futures Ordinance (“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 the 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 the SFO or; (c) notified to the Company and the Stock Exchange pursuant to the Model Code were as follows:

��

�� (a)�� XV��7��8�� (b)��352 ��(c)��

		Number of
		shares of
		the Company	Percentage of
Name of Director	Nature of interest	held	shareholding
		��
��	��	��	��
Mr Lam Shiu Ming, Daneil	Founder of a discretionary trust (Note)	872,406,705	53.70%
��	��

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 872,406,705 shares of the Company.

�� Central Core R e s o u r c e s L i m i t e d �� Globalcrest Enterprises Limited�� Globalcrest Enterprises Limited��872,406,705��

Save as disclosed above, as at 30th June 2007, none of the Directors or chief executives of the Company had any interests or a short position in the share, underlying shares and debentures of the Company or any of 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) notified to the Company and the Stock Exchange pursuant to the Model Code or (c) entered in the register kept by the Company pursuant to Section 352 of the SFO.

�� (a)��XV��7�� 8�� (b)�� (c)�� 352��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

REPORT OF THE DIRECTORS ��

At no time during the year, the Directors (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 of the Company and its associated corporations.

�� 18��

In addition, at no time during the year was the Company, its holding company, its subsidiaries, its associated company or its fellow subsidiaries a party to any arrangement to enable the directors of the Company to hold any interests or short position in the shares or underlying shares in or debentures of, the Company or any other body corporate.

��

SUBSTANTIAL SHAREHOLDERS

As at 30th June 2007, in accordance with the register kept by the Company under Section 336 of the SFO, the following corporations were interested in the issued share capital of the Company (including short positions) representing 5% or more of the issued share capital of the Company:

��

�� 336�� 5%��

	Number of shares of	Percentage of
Name of shareholders	the Company held	shareholding
��	��	��
Globalcrest Enterprises Limited (Note)��	872,406,705	53.70%
Central Core Resources Limited (Note)��	872,406,705	53.70%

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

��

Save as disclosed above, as at 30th June 2007, no other person has any interests or short position in the shares, underlying shares and debentures of the Company as recorded in the register required to be kept by Company under section 336 of the SFO.

�� 336��

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 and Ms Chiu Suet Ying are discretionary objects.

�� Globalcrest Enterprises Limited �� Central Core Resources Limited��Central Core Resources Limited��

��

< ANNUAL REPORT 2007 >

REPORT OF THE DIRECTORS ��

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 year.

��

PRE-EMPTIVE RIGHTS

There are no provision for pre-emptive rights under the Byelaws and there are no restrictions against such rights under the laws in Bermuda.

��

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

The Company has not redeemed any of its shares during the year. Neither the Company nor any of its subsidiaries has purchased or sold any of the Company’s listed securities during the year.

��

MAJOR SUPPLIERS AND CUSTOMERS

The percentage of purchases and sales for the year attributable to the Group’s major suppliers and customers are as follows:

��

Purchases		��
— the largest supplier	15.22%	� ��	15.22%
— five largest suppliers combined	50.01%	� ��	50.01%
Sales		��
— the largest customer	16.09%	� ��	16.09%
— five largest customers combined	42.22%	� ��	42.22%

None of the Directors, their associates or any shareholder (which to the knowledge of the directors owns more than 5% of the Company’s share capital) had an interest in the major suppliers and customers noted above.

�� 5%��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

REPORT OF THE DIRECTORS ��

CONNECTED TRANSACTIONS

As announced on 19th December 2006, Universe Laser & Video Co. Limited (“ULV”), an indirect wholly owned subsidiary of the Company, entered into a transaction which constituted a continuing connected transaction for the Company under Rule 14A.14 of the Listing Rules, the details of which are set out as follows:

��

�� 14A.14��

On 19th December 2006, ULV entered into a tenancy agreement with Rainbow Nice Limited (“RNL”) whereby ULV agreed to lease a premises (the “Premises”) from RNL for a term of 3 years commencing from 1st January 2007 for the use of Mr Lam Shiu Ming, Daneil and Ms Chiu Suet Ying (both are the Directors) for residential purpose. The monthly rental payable by ULV is HK$200,000 which is inclusive of furniture, fixtures and home electronic appliances but excluding government rent, rates, taxes and all other outgoings.

�� 200,000��

The entire issued share capital of RNL, the landlord of the Premises, is beneficially owned by Ms Chiu Suet Ying. By virtue of the interest of Ms Chiu Suet Ying in RNL, the entering into of the tenancy agreement constituted a continuing connected transaction for the Company under Rule 14A.14 of the Listing Rules.

�� 14A.14��

As the continuing connected transaction satisfied the exemption under Rule 14A.32(2) of the Listing Rules, it was only subject to the annual review requirement and reporting and the announcement requirements set out in Rules 14A.37 to 14A.41 and 14A.45 to 14A.47 of the Listing Rules respectively and was exempted from the independent shareholders’ approval requirement under Chapter 14A of the Listing Rules.

�� 14A.32(2)�� 14A.37��14A.41�� 14A.45 �� 14A.47�� 14A��

The Independent Non-executive Directors of the Company have reviewed the continuing connected transaction and confirmed that the transaction has been (i) entered into in the ordinary and usual course of business of the Group; (ii) either on normal commercial terms or terms no less favourable to the Group than terms available to or from independent third parties; and (iii) in accordance with the tenancy agreement governing it on terms that are fair and reasonable and in the interests of the shareholders of the Company as a whole.

�� (i)�� (ii) �� (iii)��

��

< ANNUAL REPORT 2007 >

REPORT OF THE DIRECTORS ��

The auditor of the Company has also confirmed that for the year ended 30th June 2007, the continuing connected transaction (i) has received the approval of the Board; and (ii) has been entered into in accordance with the relevant agreement governing the transaction, and (iii) has not exceeded the cap disclosed in the related announcement.

Apart from the above, there are other related party transactions entered into by the Group during the year ended 30th June 2007, certain of which constituted exempted connected transactions for the Company under the Listing Rules, the details of these are disclosed in Note 39 to the consolidated financial statements.

SUFFICIENCY OF PUBLIC FLOAT

Based on information publicly available to the Company and within the knowledge of the Directors as at the date of this annual report, the Company has maintained the prescribed public float under the Listing Rules.

AUDITOR

The consolidated financial statements have been audited by PricewaterhouseCoopers who retire and, being eligible, offer themselves for re-appointment.

On behalf of the Board

Lam Shiu Ming, Daneil

Chairman Hong Kong, 18th October 2007

�� (i)��(ii)�� (iii)��

�� 39��

��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

INDEPENDENT AUDITOR’S REPORT ��

==> picture [119 x 53] intentionally omitted <==

PricewaterhouseCoopers 33rd Floor Cheung Kong Center 2 Queen’s Road Central Hong Kong

TO THE SHAREHOLDERS OF UNIVERSE INTERNATIONAL HOLDINGS LIMITED

(incorporated in Bermuda with limited liability)

��

We have audited the consolidated financial statements of Universe International Holdings Limited (the “Company”) and its subsidiaries (together, the “Group”) set out on pages 39 to 110, which comprise the consolidated and Company balance sheets as at 30th June 2007, and the consolidated income statement, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes.

��39�110��

DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTS

The directors of the Company are responsible for the preparation and the true and fair presentation of these consolidated financial statements in accordance with Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants and the disclosure requirements of the Hong Kong Companies Ordinance. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

��

AUDITOR’S RESPONSIBILITY

Our responsibility is to express an opinion on these consolidated financial statements based on our audit and to report our opinion solely to you, as a body in accordance with Section 90 of the Companies Act 1981 of Bermuda and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

��

�� 90��

��

< ANNUAL REPORT 2007 >

INDEPENDENT AUDITOR’S REPORT ��

We conducted our audit in accordance with Hong Kong Standards on Auditing issued by the Hong Kong Institute of Certified Public Accountants. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement.

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

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

OPINION

In our opinion, the consolidated financial statements give a true and fair view of the state of affairs of the Company and of the Group as at 30th June 2007 and of the Group’s profit and cash flows for the year then ended in accordance with Hong Kong Financial Reporting Standards and have been properly prepared in accordance with the disclosure requirements of the Hong Kong Companies Ordinance.

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, 18th October 2007

��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

CONSOLIDATED BALANCE SHEET

��

			��	��
				As at 30th June 2007
			��
			2007	2006
			��	��
		Note	HK$’000	HK$’000
		��	��	��
ASSETS	��
Non-current assets	��
Leasehold land	��	6	8,793	9,031
Property, plant	��
and equipment	��	7	16,438	16,016
Investment properties	��	8	26,107	51,845
Film rights and	��
films in progress	��	10	112,654	95,735
Interest in an associated	��
company	��	12	—	—
Deferred income tax assets	��	24	5,762	5,447
Long-term bank deposit	��	14	7,800	7,800
			177,554	185,874
Current assets	��
Film deposits	��		2,947	9,330
Inventories	��	16	8,997	12,004
Accounts receivable	��	15	25,638	16,309
Deposits paid	��
and prepayments	��		11,942	9,660
Pledged bank deposits	��	35	4,000	2,000
Cash and cash equivalents	��	17	135,054	108,623
Non-current assets	��
held for sale	��	9	—	31,650
			188,578	189,576
Total assets	��		366,132	375,450
EQUITY	��
Capital and reserves	��
attributable to	��
the Company’s	��
equity holders	��
Share capital	��	18	32,492	32,492
Share premium	��	19(a)	127,211	127,211
Other reserves	��	19(a)	1,274	2,494
Retained earnings	��
— Proposed final dividend	� ��	33	—	14,621
— Others	� ��		152,886	139,881
Total equity	��		313,863	316,699

��

< ANNUAL REPORT 2007 >

CONSOLIDATED BALANCE SHEET ��

As at 30th June 2007 ��

As at 30th June 2007 ��
			2007	2006
			��	��
		Note	HK$’000	HK$’000
		��	��	��
LIABILITIES	��
Non-current liabilities	��
Other long-term liabilities	��	23	66	99
Deferred income tax	��
liabilities	��	24	3,446	8,892
			3,512	8,991
Current liabilities	��
Accounts payable	��	21	5,142	9,684
Other payables and	��
accrued charges	��		9,639	7,258
Deposits received	��		33,923	32,629
Amount due to the ultimate	��
holding company	��	20	3	86
Obligations under	��
finance leases	��	22	40	95
Taxation payable	��		10	8
			48,757	49,760
Total liabilities	��		52,269	58,751
Total equity and liabilities	��		366,132	375,450
Net current assets	��		139,821	139,816
Total assets less	��
current liabilities	��		317,375	325,690

On behalf of the Board ��

Lam Shiu Ming, Daneil Chiu Suet Ying Director Director ��

The Notes on pages 45 to 110 are an integral part of these consolidated financial statements. ��45��110��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

BALANCE SHEET

��

				��
				As at 30th June 2007
			��
			2007	2006
			��	��
		Note	HK$’000	HK$’000
		��	��	��
ASSETS	��
Non-current assets	��
Investments in subsidiaries	��	11	52,052	52,052
Deferred income tax assets	��	24	302	264
			52,354	52,316
Current assets	��
Amounts due from	��
subsidiaries	��	20	186,645	171,233
Prepayments and	��
other receivables	��		134	170
Cash and cash equivalents	��	17	2,551	7,860
			189,330	179,263
Total assets	��		241,684	231,579
EQUITY	��
Capital and reserves	��
attributable to	��
the Company’s	��
equity holders	��
Share capital	��	18	32,492	32,492
Share premium	��	19(b)	127,211	127,211
Other reserves	��	19(b)	51,852	51,852
Retained earnings	��
— Proposed final dividend	� ��	33	—	14,621
— Others	� ��		4,452	4,415
Total equity	��		216,007	230,591
Current liabilities	��
Amount due to a subsidiary	��	20	24,870	—
Accrued charges	��		807	988
Total liabilities	��		25,677	988
Total equity and liabilities	��		241,684	231,579

On behalf of the Board

��

Lam Shiu Ming, Daneil Chiu Suet Ying Director Director ��

The Notes on pages 45 to 110 are an integral part of these consolidated financial statements. ��45��110��

��

< ANNUAL REPORT 2007 >

CONSOLIDATED INCOME STATEMENT

��

For the year ended 30th June 2007 ��

			2007	2006
			��	��
		Note(s)	HK$’000	HK$’000
		��	��	��
Turnover	��	5	136,240	93,405
Cost of turnover	��	26	(105,017)	(66,634)
Other gains — net	��	25	6,364	5,813
Gain on disposal of	��
investment properties	��	8 & 34	3,776	—
Gain on disposal of	��
non-current assets	��
held for sale	��	9 & 34	1,653	—
Selling expenses	��	26	(2,841)	(1,748)
Administrative expenses	��	26	(27,516)	(22,938)
Other operating expenses	��	26	(8,233)	(5,877)
Finance costs	��	28	—	(2)
Increase in fair value of	��
investment properties	��	8	1,611	29,950
Share of (loss)/profit of	��
an associated company	��/��	12	(3)	20
Profit before income tax	��		6,034	31,989
Income tax credit/(expense)	��/��	29	5,492	(4,684)
Profit for the year	��		11,526	27,305
Attributable to equity	��
holders of the Company	��		11,526	27,305
Earnings per share for profit	��
attributable to the	��
equity holders of	��
the Company	��
during the year
(expressed in HK cents)	��
— basic	� ��	32	0.71	1.68
— diluted	� ��	32	N/A��	N/A��
Dividends	��	33	—	14,621

The Notes on pages 45 to 110 are an integral part of these consolidated financial statements. ��45��110��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

��

For the year ended 30th June 2007 ��

			Attributable to equity	Attributable to equity	holders of the	Company
				��
			Share	Share	Other	Retained
			capital	premium	reserves	earnings	Total
			��	��	��	��	��
		Note	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
		��	��	��	��	��	��
Balance at 1st July 2005	��
	��		32,492	127,211	2,041	127,197	288,941
Fair value adjustments upon	��
transfer from leasehold	��
land and buildings to	��
investment properties	��	19	—	—	549	—	549
Deferred tax effect on	��
fair value adjustment upon	��
transfer from leasehold	��
land and buildings to	��
investment properties	��	19	—	—	(96)	—	(96)
Net income recognized	��
directly in equity	��		—	—	453	—	453
Profit for the year	��		—	—	—	27,305	27,305
Total recognized income	��
for 2006	��		—	—	453	27,305	27,758
Balance at 30th June 2006	��
	��		32,492	127,211	2,494	154,502	316,699
Balance at 1st July 2006,	��
as per above	��		32,492	127,211	2,494	154,502	316,699
Revaluation reserve	��
adjustment upon	��
disposal of	��
investment properties	��	19	—	—	(1,220)	1,220	—
Deferred income tax	��
adjustment upon	��
disposal of	��
investment properties	��	24	—	—	—	259	259
Net income recognized	��
directly in equity	��		—	—	(1,220)	1,479	259
Profit for the year	��		—	—	—	11,526	11,526
Total recognized income	��
for 2007	��		—	—	(1,220)	13,005	11,785
Dividends related to	��
2005/2006 paid	��/
in December 2006	��		—	—	—	(14,621)	(14,621)
Balance at 30th June 2007	��
	��		32,492	127,211	1,274	152,886	313,863

The Notes on pages 45 to 110 are an integral part of these consolidated financial statements. ��45��110��

��

< ANNUAL REPORT 2007 >

CONSOLIDATED CASH FLOW STATEMENT

��

For the year ended 30th June 2007 ��

For the year ended 30th June 2007 ��
			2007	2006
			��	��
		Note	HK$’000	HK$’000
		��	��	��
Cash flows from	��
operating activities	��
Cash generated	��
from operations	��	34	65,889	91,374
Tax paid	��		(8)	—
Interest on bank loans	��		—	(2)
Net cash generated	��
from operating activities	��		65,881	91,372
Cash flows from	��
investing activities	��
Purchase of property,	��
plant and equipment	��	7	(2,076)	(2,180)
Purchase of an	��
investment property	��	8	—	(5,745)
Proceeds from disposal	��
of property, plant	��
and equipment	��	34	—	72
Proceeds from disposal	��
of investment properties	��	34	31,125	—
Proceeds from disposal	��
of non-current assets	��
held for sale	��	34	33,303	—
Purchase of film rights	��
and films in progress	��	10	(93,147)	(61,308)
Interest received	��	25	6,054	4,310
Net cash used in	��
investing activities	��		(24,741)	(64,851)
Cash flows from	��
financing activities	��
Dividend paid	��		(14,621)	—
Inception of	��
finance leases	��		—	93
Capital element of	��
finance leasepayments	��		(88)	(78)
Net cash (used in)/	��
generated from	��/��
financing activities	��		(14,709)	15
Net increase in cash and	��
cash equivalents	��		26,431	26,536
Cash and cash equivalents at	��
beginningof theyear	��		108,623	82,087
Cash and cash equivalents	��
at end of the year	��	17	135,054	108,623

The Notes on pages 45 to 110 are an integral part of these consolidated financial statements. ��45��110��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

1 GENERAL INFORMATION

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

1 ��

��

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.

�� Clarendon House, 2 Church Street, Hamilton HM11, Bermuda�

The Company is listed on The Stock Exchange of Hong Kong Limited.

��

These consolidated financial statements are presented in thousands of units of Hong Kong dollars (HK$’000), unless otherwise stated. These consolidated financial statements have been approved for issue by the Board of Directors on 18th October 2007.

��

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

2 ��

��

2.1 Basis of preparation

The consolidated financial statements of the Group have been prepared in accordance with Hong Kong Financial Reporting Standards (“HKFRSs”), which is a collective term referred to all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (“HKASs”) and Interpretations (“Ints”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”). The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of investment properties, which are carried at fair value.

2.1 ��

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.1 Basis of preparation (Continued)

The preparation of consolidated financial statements in conformity with HKFRSs requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The actual results may differ from these estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 4.

2 ��

2.1 ��

�� 4��

The HKICPA has issued certain new and revised HKFRSs that are first effective for the current accounting period of the Group. The Group has adopted the new HKFRS below, which is relevant to its operations, in the preparation of the consolidated financial statements.

�� /��

—

HKFRS-Int 4 Determining whether an Arrangement contains a Lease
��4 ��

The adoption of this new HKFRS has no material effect on the Group’s results and financial position for the current or prior accounting periods reflected in these consolidated financial statements.

��

The Group has not adopted any new standard or interpretation that is not effective for the current accounting period, details of which are set out in Note 42.

�� 42�

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.2 Consolidation

The consolidated financial statements include the financial statements of the Company and all of its subsidiaries made up to 30th June.

2 ��

2.2 ��

��

(a) Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

(a) ��

��

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

��

Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

��

In the Company’s balance sheet, the investments in subsidiaries are stated at cost less provision for impairment losses. The results of subsidiaries are accounted for the Company on the basis of dividend received and receivable.

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.2 Consolidation (Continued)

(b) Associates

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for by the equity method of accounting and are initially recognized at cost.

2 ��

2.2 ��

(b) ��

�� 20% � 50%��

The Group’s share of its associates’ post-acquisition profits or losses is recognized in the consolidated income statement, and its share of postacquisition movements in reserves is recognized in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognize further losses, unless it has incurred obligations or made payments on behalf of the associate.

��

Unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group.

��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.2 Consolidation (Continued)

(b) Associates (Continued)

In the Company’s balance sheet, the investment in an associated company is stated at cost less provision for impairment losses. The result of an associated company is accounted for by the Company on the basis of dividend received and receivable.

2 ��

2.2 ��

(b) ��

��

(c) Jointly controlled assets

Jointly controlled assets are assets of a joint venture over which the Group has joint control with other venturers in a c c o r d a n c e w i t h c o n t r a c t u a l arrangements and through the joint control of which the Group has control over its share of future economic benefits earned from the assets.

(c) ��

��

The Group’s share of jointly controlled assets and any liabilities incurred jointly with other venturers are recognized in the consolidated balance sheet and classified according to their nature. Liabilities and expenses incurred directly in respect of its interests in jointly controlled assets are accounted for on an accrual basis. Income from the sale or use of the Group’s share of the output of the jointly controlled assets together with its share of any expenses incurred by the joint ventures, are recognized in the consolidated income statement when it is probable that the economic benefits associated with the transactions will flow to or from the Group.

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.3 Segment reporting

A segment is a distinguishable component of the Group that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

2 ��

2.3 ��

��

In accordance with the Group’s internal financial reporting system, the Group has chosen business segment information as the primary reporting format and geographical segment information as the secondary reporting format for the purposes of these consolidated financial statements.

��

Segment revenue, expenses, results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis to that segment. Segment revenue, expenses and segment performance include transactions between segments. Inter-segment pricing is based on similar terms as those available to other external parties for similar services. These transactions are eliminated upon consolidation.

��

Segment capital expenditure is the total cost incurred during the year to acquire segment assets (both tangible and intangible) that are expected to be used for more than one year.

��

Unallocated items mainly comprise financial and corporate assets and liabilities, cash and cash equivalent, deferred income tax assets, deferred income tax liabilities and interest income.

��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.4 Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in HK dollars, which is the Company’s functional and presentation currency.

2 ��

2.4 �� (a) ��

��

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the income statement. Translation differences on non-monetary items are reported as part of the fair value gain or loss.

(b) ��

��

2.5 Property, plant and equipment

The following items of property, plant and equipment are stated in the consolidated balance sheet at cost less accumulated depreciation and impairment losses:

2.5 ��

��
buildings held for own use which are situated on leasehold land, where the fair value of the building could be measured separately from the fair value for the leasehold land at the inception of the lease (Note 2.7(a)); and
�� 2.7(a)��
other items of plant and equipment.
��

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.5 Property, plant and equipment (Continued)

The cost of an item of property, plant and equipment comprises (i) its purchase price, (ii) any directly attributable costs of bringing the asset to its working condition and location for its intended use, and (iii) the initial estimate at the time of installation and during the period of use, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located.

2 ��

2.5 ��

�� (i)��(ii)�� (iii)��

Subsequent costs are included in the carrying amount of an item of property, plant and equipment or recognized as a separate item of proper ty, plant and equipment, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other costs, such as repairs and maintenance and overhaul costs, are recognized in the consolidated income statement as an expense in the period in which they are incurred.

��

Gains or losses arising from the retirement or disposal of an item of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the item and are recognized in the income statement on the date of retirement or disposal.

��

Depreciation of property, plant and equipment is calculated using the straight-line method to allocate cost or revalued amounts to their residual values over their estimated useful lives, as follows:

��

Leasehold land and	Over the unexpired	��	��
buildings	term of land lease	��	��
Leasehold improvements	2 — 5 years	��	2�5�
Machinery and equipment	3 — 5 years	��	3�5�
Others	5 years	��	5�

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.5 Property, plant and equipment (Continued)

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

2 ��

2.5 ��

��

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 2.8).

�� 2.8��

2.6 Investment properties

Property that is held for long-term rental yields or for capital appreciation or both, and that is not occupied by the companies in the consolidated Group, is classified as investment property.

2.6 ��

��

Investment property is measured initially at its cost, including related transaction costs.

��

After initial recognition, investment property is carried at fair value. Fair value is based on active market prices, adjusted, if necessary, for any difference in the nature, location or condition of the specific asset. If this information is not available, the Group uses alternative valuation methods such as recent prices on less active markets or discounted cash flow projections. These valuations of the investment properties are performed in accordance with the guidance issued by the Hong Kong Institute of Surveyors. These valuations are reviewed annually by external valuers.

��

The fair value of investment property reflects, among other things, rental income from current leases and assumptions about rental income from future leases in the light of current market conditions.

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.6 Investment properties (Continued)

The fair value also reflects, on a similar basis, any cash outflows that could be expected in respect of the property. Some of those outflows are recognized as a liability, including finance lease liabilities in respect of land classified as investment property; others, including contingent rent payments, are not recognized in the financial statements.

2 ��

2.6 ��

��

Subsequent expenditure is charged to the asset’s carrying amount only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are expensed in the consolidated income statement during the financial period in which they are incurred.

��

Changes in fair values are recognized in the consolidated income statement.

��

If an investment property becomes owneroccupied, it is reclassified as property, plant and equipment, and its fair value at the date of reclassification becomes its cost for accounting purposes.

��

If an item of property, plant and equipment becomes an investment property because its use has changed, any difference resulting between the carrying amount and the fair value of this item at the date of transfer is recognized in equity as a revaluation of property, plant and equipment under HKAS 16. However, if a fair value gain reverses a previous impairment loss, the gain is recognized in the consolidated income statement. On subsequent disposal of the investment property, the revaluation surplus included in equity may be transferred to retained earnings. The transfer from revaluation surplus to retained earnings is not made through profit and loss.

��16��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.6 Investment properties (Continued)

Investment property held for sale without redevelopment is classified as current assets, under HKFRS 5, because the sale is expected to be completed generally within one year.

2 ��

2.6 ��

��5��

2.7 Leased assets

(a) Operating lease

Where the Group has the use of assets held under operating leases, payment made under the leases are charged to the consolidated income statement over the accounting periods covered by the lease term except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognized in the consolidated income statement as an integral part of the aggregate net lease payments made. Contingent rentals are charged to the consolidated income statement in the accounting period in which they are incurred.

2.7 ��
(a) ��

��

The cost of acquiring land held under an operating lease is stated in the consolidated balance sheet as “Leasehold land” and is amortized to the consolidated income statement on a straight-line basis over the period of the lease term except where the property is classified as an investment property.

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
2.7 Leased assets (Continued)

(b) Finance lease

Leases of assets where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the lease’s commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in current and non-current borrowings. The interest element of the finance cost is recognized in the consolidated income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The investment properties acquired under finance leases are carried at their fair value.

2 ��

2.7 ��

(b) ��

��

2.8 Impairment of assets

Assets that have an indefinite useful life are not subject to amortization, which are at least tested annually for impairment and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Assets that are subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

2.8 ��

��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.9 Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is determined using the weighted average basis. The cost of finished goods comprises raw materials, direct labour and an appropriate proportion of all production overhead. It excludes borrowing costs. Net realizable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.

2 ��

2.9 ��

��

2.10 Film rights and films in progress

(i) Film rights

Film rights comprise fees paid and payable under agreements and direct expenses incurred during the production of films, for the reproduction and/or distribution of films in various videogram formats, film exhibition, licensing and sub-licensing of film titles.

2.10 ��

(i) ��

��

Film rights are stated at cost less accumulated amor tization and accumulated impairment losses.

��

The cost of film rights is amortized over the shorter of the underlying license period and their economic lives, with reference to projected revenues.

��

(ii) Films in progress

Films in progress are stated at cost less any provision for impairment losses. Cost includes all direct costs associated with the production of films. Cost of films is transferred to film rights upon completion.

(ii) ��

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.10 Film rights and films in progress (Continued)

(iii) Impairment

At each balance sheet date, both internal and external market information are considered to assess whether there is any indication that assets included in film rights and films in progress are impaired. If any such indication exists, the carrying amount of such assets is assessed and where relevant, an impairment loss is recognized to reduce the asset to its recoverable amount. Such impairment losses are recognized in the consolidated income statement.

2.11 Film deposits

Film deposits comprise deposits paid for the acquisition of film rights and deposits paid to production houses, artistes and others prior to the production of films. The balance payable under agreements for acquisition of film rights is disclosed as a commitment. Provision for film deposits is made to the extent that they are not expected to generate any future revenue for the Group.

2.12 Accounts and other receivables

Accounts and other receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method, less provision for impairment. A provision for impairment of accounts and other receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the accounts receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognized in the consolidated income statement.

2 ��

2.10 ��
(iii) ��

��

2.11 ��

��

2.12 ��

��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.13 Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held at call with banks.

2 ��

2.13 ��

��

2.14 Share capital

Ordinary shares are classified as equity.

2.14 ��

2.15 Deferred income tax

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realized or the deferred income tax liability is settled.

2.15 ��

��

Deferred income tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

��

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and jointly controlled assets, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.16 Employee benefits

(i) Employee leave entitlements

Employee entitlements to annual leave and long service leave are recognized when they accrue to employees. A provision is made for the estimated liability for annual leave and long service leave as a result of services rendered by employees up to the balance sheet date.

2 ��

2.16 ��

(i) ��

��

Employee entitlements to sick leave and maternity leave are not recognized until the time of leave.

��

(ii) Pension obligations

The Group contributes to Mandatory Provident Fund in Hong Kong, the assets of which are held in separate trustee-administered funds. The pension plan is funded by payments from employees and by the relevant Group companies.

(ii) ��

��

The Group’s contributions to the defined contribution retirement scheme are expensed as incurred and are not reduced by contributions forfeited by those employees who leave the scheme prior to vesting fully in the contributions.

��

2.17 Provisions

Provisions are recognized when: (i) the Group has a present legal or constructive obligation as a result of past events; (ii) it is probable that an outflow of resources will be required to settle the obligation; and (iii) the amount has been reliably estimated. Provisions are not recognized for future operating losses.

2.17 ��

�� (i)�� (ii)�� (iii)��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

2.17 Provisions (Continued)

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognized even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

2 ��

2.17 ��
��

2.18 Revenue recognition

(i) Revenue from the sale of goods is recognized on the transfer of risks and rewards of ownership, which generally coincides with the time when the goods are delivered to customers and the title has passed.

2.18 ��

�i� ��
(ii) Income from the licensing and sublicensing of film rights is recognized upon the delivery of the pre-recorded audio visual products and the materials for video features including the master tapes to the customers, in accordance with the terms of the underlying contracts.
(ii) ��
(iii) Film exhibition income is recognized when the right to receive payment is established.
(iii) ��
(iv) Operating lease and other rental income is recognized on a straight-line basis.
(iv) ��
(v) Interest income is recognized on a time proportion basis, taking into account the principal amounts outstanding and the interest rates applicable.
(v) ��

2.19 Dividend distribution

Dividend distribution to the Company’s shareholders is recognized as a liability in the Group’s consolidated financial statements in the period in which the dividends are approved by the Company’s shareholders.

2.19 ��

��

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

3 FINANCIAL RISK MANAGEMENT

3.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk and credit risk), liquidity risk and cash flow interest-rate risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group’s financial performance. The policies for managing these risks are summarized below.

3 ��

3.1 ��

��

(a) Market risk

(i) Foreign exchange risk

Most of the Group’s transactions are denominated in Hong Kong dollars and United States dollars, the Group is exposed to foreign exchange risk arising from these currency exposures. Hong Kong dollars is pegged to United States dollars and the foreign exchange exposure to fluctuation in exchange rate is considered limited.

(a) ��

(i) ��

(ii) Credit risk

The Group has no significant concentrations of credit risk. It has policies in place to ensure that wholesale sales of products and license of films are made to customers with an appropriate credit history respectively. The Group obtains bank guarantees from certain customers.

(ii) ��

��

(b) Liquidity risk

The Group manages its liquidity risk by maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities and monitoring the liquidity requirements from time to time.

(b) ��

��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

3 FINANCIAL RISK MANAGEMENT (Continued)

3.1 Financial risk factors (Continued)

(c) Cash flow interest rate risk

As the Group has cash balances placed with various reputable banks, which generate interest income for the Group. The Group manages its interest rate risk by placing such balances on various maturities and interest rate terms.

3 ��
3.1 ��
- (c) ��

��

The Group has no interest-bearing borrowings, the exposure to the interestrate risk from borrowing is considered limited, the Group will monitor this risk on a continuous basis where necessary.

��

3.2 Fair value estimation

The nominal value less estimated credit adjustments of accounts receivable and payable are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

3.2 ��

��

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

4 ��

��

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)

(a) Impairment of film rights, films in progress and film deposits

The Group assesses annually whether the film rights, films in progress and film deposits have suffered any impairment, in accordance with the accounting policy stated in Note 2. Such annual assessment is performed at each balance date with reference to current market conditions and each film deposit recipient’s reputation, trade history and current financial position. According to the management’s cash inflow forecast in respect of each film title and realization of each film deposit, an impairment loss of HK$4,640,000 (2006: HK$3,977,000) was recognized in the consolidated income statement to reduce the carrying amounts of certain film rights and film deposits to their recoverable amounts. If projected cash inflow from these films were to deteriorate, additional provision for impairment may be required. As at 30th June 2007, the carrying value of film rights, films in progress and film deposits amounted to approximately HK$115,601,000 (2006: HK$105,065,000).

4 ��

� a � ��

�� 2 �� 4,640,000�� 3,977,000 �� 115,601,000�� 105,065,000��

(b) Provision for impairment of accounts receivable

The provision policy for accounts receivable of the Group is based on the evaluation of recoverability of those receivables and management’s judgment. A considerable judgment is required in assessing the ultimate realization of these receivables, including the current creditworthiness and the past collection history of each customer, and the realization of any repayment pattern promised. During the year, an impairment losses of HK$2,000,000 (2006: HK$395,000) was recognized in the consolidated income statement to reduce the carrying amount of certain receivables of the Group to their recoverable amounts. If the financial conditions of these customers were to deteriorate, additional provision for impairment may be required. As at 30th June 2007, the carrying value of accounts receivable amounted to approximately HK$25,638,000 (2006: HK$16,309,000).

� b � ��

�� 2,000,000�� 395,000�� 25,638,000 �� 16,309,000��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
(c) Useful lives of property, plant and equipment
- In accordance with HKAS 16, the Group estimates the useful lives of property, plant and equipment in order to determine the amount of depreciation expenses to be recorded. The useful lives are estimated at the time the asset is acquired based on historical experience, the expected usage, wear and tear of the assets, as well as technical obsolescence arising from changes in the market demands or service output of the assets. The Group also performs annual reviews on whether the assumptions made on useful lives continue to be valid.

4 ��

c � ��

��16� ��

(d) Amortization of film rights

The Group estimates the projected revenue of the film rights within the shorter of the underlying license period and their economic lives in order to ascertain the amount of amortization charges for each reporting period. The Group performs the reviews to assess the appropriateness of the amortization estimate with reference to prevailing and future market conditions. The Group has revised its amortization estimate of film rights for video distribution business segment for the year to reflect the expected cashflow pattern of the projected revenue within the shorter of the underlying license period and their economic lives of the film rights.

� d � ��

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

5 SEGMENT INFORMATION

Primary reporting format — business segments

The Group is organized into the following main business segments for the current year:

5 ��

� ��

��

Distribution of films in various videogram formats
Film exhibition, licensing and sub-licensing of film rights
Leasing of investment properties
��
��
— ��

The Group’s inter-segment transactions mainly consist of licensing of film rights, which are transferred at cost.

��

Secondary reporting format — geographical segments

Distribution of films in various videogram formats is solely operated in Hong Kong and Macau, while the Group operates its film exhibition, licensing and sublicensing of film rights in five (2006: five) main geographical segments.

� ��

��

There are no sales between geographical segments.

��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

5 SEGMENT INFORMATION (Continued) 5 ��

Primary reporting format — business segments (Continued)

� ��

Film exhibition, licensing and Leasing of Sale of sub-licensing investment goods of film rights properties Others Elimination �� �� �� �� �� �� �� �� 2007 2007 2007 2007 2007 �� �� �� �� �� HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 �� �� �� �� ��	Group �� 2007 �� HK$’000 ��
Turnover �� External sales �� 34,066 96,582 2,639 2,953 — Inter-segment sales �� — 12,143 — 340 (12,483)	136,240 —
34,066 108,725 2,639 3,293 (12,483)	136,240
Results �� Segment results before �� impairment losses �� (2,594) (1,043) 1,394 (174) — Impairment losses of film �� rights and film deposits �� (120) (4,520) — — —	(2,417) (4,640)
Segment results �� (2,714) (5,563) 1,394 (174) — Gain on disposal of investment �� properties �� — — 3,776 — — Gain on disposal of non-current�� assets held for sale �� — — 1,653 — — Increase in fair value of �� investment properties �� — — 1,611 — — Interest income �� Share of loss of an associated �� company �� Profit before income tax �� Income tax credit �� Profit attributable to equity �� holders of the Company �� Assets �� Segment assets �� 27,438 41,478 26,755 5,003 — Unallocated assets �� Total assets �� Liabilities �� Segment liabilities �� 4,280 34,229 385 5,753 — Unallocated liabilities �� Total liabilities ��	(7,057) 3,776 1,653 1,611 6,054 (3)
	6,034 5,492
	11,526
	100,674 265,458
	366,132
	44,647 7,622
	52,269

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

5	SEGMENT INFORMATION(Continued) Primary reporting format — business segments (Continued) Film exhibition, licensing and Leasing of Sale of sub-licensing investment goods of film rights properties Others Group �� �� �� �� �� �� �� �� 2007 2007 2007 2007 2007 �� �� �� �� �� HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 �� �� �� �� �� Other information �� Capital expenditures �� 7,152 762 — 4 7,918 Unallocated capital expenditures �� 87,305 Total capital expenditures �� 95,223 Depreciation and amortization of �� leasehold land �� 1,090 45 20 4 1,159 Unallocated depreciation and �� amortization of leasehold land �� 619 Total depreciation and �� amortization of leasehold land �� 1,778 Amortization charge of film rights �� 16,405 55,810 — — 72,215 5 �� ��
	Other information �� Capital expenditures �� 7,152 762 — 4 Unallocated capital expenditures �� Total capital expenditures �� Depreciation and amortization of �� leasehold land �� 1,090 45 20 4 Unallocated depreciation and �� amortization of leasehold land �� Total depreciation and �� amortization of leasehold land �� Amortization charge of film rights �� 16,405 55,810 — —

SEGMENT INFORMATION(Continued)
Primary reporting format — business segments
(Continued)
Film exhibition,
licensing and
Leasing of
Sale of
sub-licensing
investment
goods
of film rights
properties
Others
Group
��
��
��
��
��
��
��
��
2007
2007
2007
2007
2007
��
��
��
��
��
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
��
��
��
��
��
Other information
��
Capital expenditures
��
7,152
762
—
4
7,918
Unallocated capital expenditures
��
87,305
Total capital expenditures
��
95,223
Depreciation and amortization of
��
leasehold land
��
1,090
45
20
4
1,159
Unallocated depreciation and
��
amortization of leasehold land
��
619
Total depreciation and
��
amortization of leasehold land
��
1,778
Amortization charge of film rights
��
16,405
55,810
—
—
72,215
5
��
��

Other information
��
Capital expenditures
��
7,152
762
—
4
Unallocated capital expenditures
��
Total capital expenditures
��
Depreciation and amortization of
��
leasehold land
��
1,090
45
20
4
Unallocated depreciation and
��
amortization of leasehold land
��
Total depreciation and
��
amortization of leasehold land
��
Amortization charge of film rights
��
16,405
55,810
—
—

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

5 SEGMENT INFORMATION (Continued)

Primary reporting format — business segments (Continued)

5 ��

Primary reporting format — business segments (Continued) ��	��
Film exhibition, licensing and Leasing of Sale of sub-licensing investment goods of film rights properties Others Elimination �� �� �� �� �� �� �� 2006 2006 2006 2006 2006 �� �� �� �� �� HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 �� �� �� �� ��	Group �� 2006 �� HK$’000 ��
Turnover �� External sales �� 38,794 48,359 4,772 1,480 — Inter-segment sales �� — 11,789 — 195 (11,984)	93,405 —
38,794 60,148 4,772 1,675 (11,984)	93,405
Results �� Segment results before �� impairment losses �� (2,541) (103) 3,829 503 — Impairment losses of film �� rights and film deposits �� (2,733) (1,244) — — —	1,688 (3,977)
Segment results �� (5,274) (1,347) 3,829 503 — Increase in fair value of �� investment properties �� — — 29,950 — — Interest income �� Finance costs �� Share of profit of an associated �� company �� Profit before income tax �� Income tax expense �� Profit attributable to equity �� holders of the Company �� Assets �� Segment assets �� 35,864 27,302 83,744 4,362 — Unallocated assets �� Total assets �� Liabilities �� Segment liabilities �� 6,617 27,467 4,701 4,244 — Unallocated liabilities �� Total liabilities ��	(2,289) 29,950 4,310 (2) 20
	31,989 (4,684)
	27,305
	151,272 224,178
	375,450
	43,029 15,722
	58,751

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

5	SEGMENT INFORMATION(Continued) Primary reporting format — business segments (Continued) Film exhibition, licensing and Leasing of Sale of sub-licensing investment goods of film rights properties Others Group �� �� �� �� �� �� �� 2006 2006 2006 2006 2006 �� �� �� �� �� HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 �� �� �� �� �� Other information �� Capital expenditures �� 11,156 3,555 5,745 — 20,456 Unallocated capital expenditures �� 48,777 Total capital expenditures �� 69,233 Depreciation and amortization of �� leasehold land �� 1,128 46 66 4 1,244 Unallocated depreciation and �� amortization of leasehold land �� 640 Total depreciation and �� amortization of leasehold land �� 1,884 Amortization charge of film rights �� 15,818 25,055 — — 40,873 5 �� ��
	Other information �� Capital expenditures �� 11,156 3,555 5,745 — Unallocated capital expenditures �� Total capital expenditures �� Depreciation and amortization of �� leasehold land �� 1,128 46 66 4 Unallocated depreciation and �� amortization of leasehold land �� Total depreciation and �� amortization of leasehold land �� Amortization charge of film rights �� 15,818 25,055 — —

SEGMENT INFORMATION(Continued)
Primary reporting format — business segments
(Continued)
Film exhibition,
licensing and
Leasing of
Sale of
sub-licensing
investment
goods
of film rights
properties
Others
Group
��
��
��
��
��
��
��
2006
2006
2006
2006
2006
��
��
��
��
��
HK$’000
HK$’000
HK$’000
HK$’000
HK$’000
��
��
��
��
��
Other information
��
Capital expenditures
��
11,156
3,555
5,745
—
20,456
Unallocated capital expenditures
��
48,777
Total capital expenditures
��
69,233
Depreciation and amortization of
��
leasehold land
��
1,128
46
66
4
1,244
Unallocated depreciation and
��
amortization of leasehold land
��
640
Total depreciation and
��
amortization of leasehold land
��
1,884
Amortization charge of film rights
��
15,818
25,055
—
—
40,873
5
��
��

Other information
��
Capital expenditures
��
11,156
3,555
5,745
—
Unallocated capital expenditures
��
Total capital expenditures
��
Depreciation and amortization of
��
leasehold land
��
1,128
46
66
4
Unallocated depreciation and
��
amortization of leasehold land
��
Total depreciation and
��
amortization of leasehold land
��
Amortization charge of film rights
��
15,818
25,055
—
—

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

5	SEGMENT INFORMATION(Continued) Secondary reporting format — geographical segments Total Capital Turnover assets expenditures �� �� �� 2007 2007 2007 �� �� �� HK$’000 HK$’000 HK$’000 �� �� �� 5 �� ��
	Hong Kong and Macau �� 72,582 338,166 95,223 Asia (other than Hong Kong and Macau) �� 53,337 25,367 — North America �� 3,886 2,320 — Australia and New Zealand �� 115 — — Europe �� 5,869 241 — Others �� 451 38 —
	136,240 366,132 95,223
	Total Capital Turnover assets expenditures �� �� �� 2006 2006 2006 �� �� �� HK$’000 HK$’000 HK$’000 �� �� ��
	Hong Kong and Macau �� 64,963 360,620 63,488 Asia (other than Hong Kong and Macau) �� 23,016 14,524 5,745 North America �� 260 4 — Australia and New Zealand �� 200 — — Europe �� 4,491 160 — Others �� 475 142 —
	93,405 375,450 69,233

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

6	LEASEHOLD LAND 2007 2006 �� �� HK$’000 HK$’000 Group �� �� �� 6 ��
	Cost �� Beginning of the year �� 10,068 12,941 Revaluation upon transfer to �� investment properties �� (Note 19) ��19� — 164 Transfer to investment �� properties (Note 8) ��8� — (3,037)
	End of the year �� 10,068 10,068 Accumulated amortization �� Beginning of the year �� 1,037 820 Amortization for the year �� 238 254 Transfer to investment �� properties (Note 8) ��8� — (37)
	End of the year �� 1,275 1,037
	Net book value �� End of the year �� 8,793 9,031
	Beginning of the year �� 9,031 12,121
	2007 2006 �� �� HK$’000 HK$’000 �� �� The Group’s interests in leasehold land represents prepaid operating lease payments and their net book value are analyzed as follows: �� �� ��
	Held in Hong Kong on: �� Leases of between 10 to 50 years 10�50�� 8,793 9,031

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

7 PROPERTY, PLANT AND EQUIPMENT 7 ��

				Machinery
			Leasehold	and	Furniture	Motor	Office
		Buildings	improvements	equipment	and fixtures	vehicles	equipment	Total
		��	��	��	��	��	��	��
		HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Group	��	��	��	��	��	��	��	��
Cost or valuation	��
At 1st July 2006	��
	��	14,309	6,573	26,006	1,492	762	6,925	56,067
Additions	��	—	—	529	—	1,411	136	2,076
Disposals (Note 34)	��34�	—	(283)	(22 )	(57 )	—	(46)	(408)
At 30th June 2007	��
	��	14,309	6,290	26,513	1,435	2,173	7,015	57,735
Accumulated depreciation	��
At 1st July 2006	��
	��	1,306	6,171	24,307	1,387	279	6,601	40,051
Charge for the year	��	325	82	599	27	317	190	1,540
Disposals (Note 34)	��34�	—	(212)	(22 )	(17 )	—	(43)	(294)
At 30th June 2007	��
	��	1,631	6,041	24,884	1,397	596	6,748	41,297
Net book value	��
At 30th June 2007	��
	��	12,678	249	1,629	38	1,577	267	16,438
At 30th June 2006	��
	��	13,003	402	1,699	105	483	324	16,016

At 30th June 2007, net book value of machinery and equipment held by the Group under finance leases is HK$97,000 (2006: HK$187,000).

�� 97,000�� 187,000��

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

7 PROPERTY, PLANT AND EQUIPMENT

7 ��

(Continued)

				Machinery
			Leasehold	and	Furniture	Motor	Office
		Buildings	improvements	equipment	and fixtures	vehicles	equipment	Total
		��	��	��	��	��	��	��
		HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
Group	��	��	��	��	��	��	��	��
Cost or valuation	��
At 1st July 2005	��
	��	20,413	6,193	25,275	1,537	450	6,936	60,804
Additions	��	—	380	1,158	16	458	168	2,180
Disposals (Note 34)	��34�	—	—	(427)	(61)	(146)	(179)	(813)
Transfer to investment	��
properties (Note 8)	��8�	(6,489)	—	—	—	—	—	(6,489)
Revaluation upon transfer	��
to investment properties	��
(Note 19)	��19�	385	—	—	—	—	—	385
At 30th June 2006	��
	��	14,309	6,573	26,006	1,492	762	6,925	56,067
Accumulated depreciation	��
At 1st July 2005	��
	��	1,023	6,059	24,052	1,379	222	6,557	39,292
Charge for the year	��	372	112	682	69	174	221	1,630
Disposals (Note 34)	��34�	—	—	(427)	(61)	(117)	(177)	(782)
Transfer to investment	��
properties (Note 8)	��8�	(89)	—	—	—	—	—	(89)
At 30th June 2006	��
	��	1,306	6,171	24,307	1,387	279	6,601	40,051
Net book value	��
At 30th June 2006	��
	��	13,003	402	1,699	105	483	324	16,016

The carrying value amount of buildings of the Group is analyzed as follows:

��

		2007	2006
		��	��
		HK$’000	HK$’000
		��	��
Held in Hong Kong on:	��
Leases of between 10 to 50 years	10�50��	12,678	13,003

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

8	INVESTMENT PROPERTIES 2007 2006 �� �� HK$’000 HK$’000 �� �� 8 ��
	Beginning of the year �� 51,845 38,400 Addition �� — 5,745 Transfer from leasehold land and �� building (Notes 6 and 7) ��6�7� — 9,400 Change in fair value �� 1,611 29,950 Disposals �� (27,349) — Transfer to non-current assets �� held for sale �� — (31,650)
	End of the year �� 26,107 51,845
	2007 2006 �� �� HK$’000 HK$’000 �� �� The carrying value amount of investment properties of the Group is analyzed as follows: �� ��
	Held in Hong Kong: �� On medium-term lease 10�50�� (10 to 50 years) �� 20,030 46,100 Held outside Hong Kong: �� On medium-term lease 10�50�� (10 to 50 years) �� 6,077 5,745
	26,107 51,845

All investment properties were revalued at 30th June �� 2007 by an independent, professionally qualified �� valuer, BMI Appraisals Limited, a member of the Hong �� Kong Institute of Surveyors engaged by the Group. �� Valuations were based on current prices in an active �� market. ��

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

9 NON-CURRENT ASSETS HELD FOR SALE

On 22nd March 2006, Universe Property Investment Limited (“UPI”), an indirect wholly owned subsidiary of the Company entered into a provisional agreement with an independent third party whereby UPI agreed to sell the following investment property. The formal agreement was signed on 4th April 2006. In accordance with HKFRS 5, the investment properties were presented as non-current assets held for sale in the consolidated balance sheet as at 30th June 2006.

9 ��

�� 5��

Property ��

20th Floor and car parking no. P59 on 2nd Floor, Wyler Centre, Phase II, 192-200 Tai Lin Pai Road, Kwai Chung, New Territories, Hong Kong ��192�200� ��20��2��P59�

Consideration Completion date �� HK$33,303,400 1st August 2006 ��33,303,400� ��

On 1st August 2006, the transaction was completed and a gain on disposal of approximately HK$1,653,000 has been credited to the consolidated income statement for the year ended 30th June 2007.

�� 1,653,000� ��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

10	FILM RIGHTS AND FILMS IN PROGRESS Films in Film rights progress Total �� �� �� �� HK$’000 HK$’000 HK$’000 �� �� �� 10 ��
	Group �� Cost �� At 1st July 2006 �� 659,061 62,851 721,912 Additions �� 7,110 86,037 93,147 Transfers �� 81,112 (81,112) — Write-off of expired film rights �� (193,351) — (193,351)
	At 30th June 2007 �� 553,932 67,776 621,708 Accumulated amortization and �� impairment �� At 1st July 2006 �� 626,177 — 626,177 Amortization for the year �� 72,215 — 72,215 Impairment losses �� 4,006 — 4,006 Write-off of expired film rights �� (193,344) — (193,344)
	At 30th June 2007 �� 509,054 — 509,054
	Net book value �� At 30th June 2007 �� 44,878 67,776 112,654
	At 30th June 2006 �� 32,884 62,851 95,735
	Amortization of approximately HK$72,215,000 (2006: HK$40,873,000) is included in the cost of turnover in the consolidated income statement. ��72,215,000�� ��40,873,000�� �� ��

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

10 FILM RIGHTS AND FILMS IN PROGRESS 10 ��

(Continued)

			Films in
	Film rights		progress	Total
			��
		��	��	��
		HK$’000	HK$’000	HK$’000
		��	��	��
Group	��
Cost	��
At 1st July 2005	��	704,941	40,586	745,527
Additions	��	13,382	47,926	61,308
Transfers	��	25,661	(25,661)	—
Write-off of expired film rights	��	(84,923)	—	(84,923)
At 30th June 2006	��	659,061	62,851	721,912
Accumulated amortization and	��
impairment	��
At 1st July 2005	��	668,171	—	668,171
Amortization for the year	��	40,873	—	40,873
Impairment losses	��	1,928	—	1,928
Write-off of expired film rights	��	(84,795)	—	(84,795)
At 30th June 2006	��	626,177	—	626,177
Net book value	��
At 30th June 2006	��	32,884	62,851	95,735

11 INVESTMENTS IN SUBSIDIARIES

11 ��

		Company	Company
			��
		2007	2006
		��	��
		HK$’000	HK$’000
		��	��
Unlisted shares, at cost	��	52,052	52,052

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

11 INVESTMENTS IN SUBSIDIARIES (Continued)

The following is a list of the subsidiaries as at 30th June 2007:

11 ��

��

	Place of	Particulars of
	incorporation and	issued	Percentage of equity			Principal activities
Name	kind of legal entity	share capital	held by the Company			and place of operation
	��	��	��			��
��	��	��	��			��
			Direct	Indirect
			��		��
*Universe Films (Holdings)	British Virgin Islands,	Ordinary US$100	100		—	Investment holding in Hong Kong
Limited	limited liability company
	��	��100��	100		—	��
	��
Universe Laser & Video	Hong Kong,	Ordinary HK$1,000,000	—		100	Distribution of films in various
Co. Limited	limited liability company					videogram formats
						in Hong Kong
��	��	��	—		100	��
		��1,000,000�				��
Universe Films Distribution	Hong Kong,	Ordinary HK$2	—		100	Sub-licensing of film rights and
Company Limited	limited liability company					film exhibition in Hong Kong
��	��	��2�	—		100	��
Universe Interactive Limited	Hong Kong,	Ordinary HK$100	—		100	Operation of a web site
	limited liability company					in Hong Kong
��	��	��100�	—		100	��
Universe Information	Hong Kong,	Ordinary HK$10,000	—		100	Distribution of films in various
Technology Limited	limited liability company	5% deferred				videogram formats
		HK$10,000				in Hong Kong
��	��	��	—		100	��
		��10,000�				��
		5%��
		��10,000�
Universe Management	Hong Kong,	Ordinary HK$10,000	—		100	Provision of management
Services Limited	limited liability company	5% deferred				services for the Group
		HK$10,000				in Hong Kong
��	��	��	—		100	��
		��10,000�
		5%��
		��10,000�

No registered Chinese names for these companies
*��

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

11 INVESTMENTS IN SUBSIDIARIES (Continued) 11 ��

INVESTMENTS IN	SUBSIDIARIES	(Continued)	11	�	��	��
	Place of	Particulars of
	incorporation and	issued	Percentage of equity			Principal activities
Name	kind of legal entity	share capital	held by the Company			and place of operation
	��	��	��			��
��	��	��	��			��
			Direct	Indirect
			��		��
Universe Entertainment	British Virgin Islands,	Ordinary US$2	—		100	Investment in films production
Limited	limited liability company					and licensing of film rights
						in Hong Kong
��	��	��2��	—		100	��
	��	��
*Universe Pictures International	British Virgin Islands,	Ordinary US$2	—		100	Film acquisition agent
Limited	limited liability company					for the Group in Hong Kong
	��	��2��	—		100	��
	��
Universe Property Investment	Hong Kong,	Ordinary HK$2	—		100	Properties holding and rental
Limited	limited liability company					in Hong Kong
��	��	��2�	—		100	��
Universe (China) Development	Hong Kong,	Ordinary HK$2	—		100	Investment holding in Hong Kong
Limited	limited liability company					and investment in television
						series production in the PRC
��	��	��2�	—		100	��
						��
*Globalink Advertising Limited	Hong Kong,	Ordinary HK$2	—		100	Advertising agent for the Group
	limited liability company					in Hong Kong
	��	��2�	—		100	��
Century Creator Company	Hong Kong,	Ordinary HK$2	—		100	Investment in films production
Limited	limited liability company					in Hong Kong
��	��	��2�	—		100	��
Matrix Productions Company	Hong Kong,	Ordinary HK$2	—		100	Investment in films production
Limited	limited liability company					in Hong Kong
��	��	��2�	—		100	��
Digital Programme Production	Hong Kong,	Ordinary HK$2	—		100	Production of infotainment
Limited	limited liability company					programme in Hong Kong
��	��	��2�	—		100	��
Universe International	Hong Kong ,	Ordinary HK$2	—		100	Purchasing agent for the Group
Technology Limited	limited liability company					in Hong Kong
��	��	��2�	—		100	��

No registered Chinese names for these companies

*��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

11 INVESTMENTS IN SUBSIDIARIES (Continued)

11 ��

INVESTMENTS IN	SUBSIDIARIES	(Continued)	11	�	��	��
	Place of	Particulars of
	incorporation and	issued	Percentage of equity			Principal activities
Name	kind of legal entity	share capital	held by the Company			and place of operation
	��	��	��			��
��	��	��	��			��
			Direct	Indirect
			��		��
Universe Artiste Management	Hong Kong,	Ordinary HK$10	—		100	Management of contracted
Limited	limited liability company					artistes in Hong Kong
��	��	��10�	—		100	��
*Films Station Production	Hong Kong,	Ordinary HK$2	—		100	Films production in Hong Kong
Limited	limited liability company
	��	��2�	—		100	��
Universe Music Limited	Hong Kong,	Ordinary HK$2	—		100	Licensing & sublicensing of music
	limited liability company					programmes in Hong Kong
��	��	��2�	—		100	��
Universe Information &	Hong Kong,	Ordinary HK$2	—		100	Inactive
Entertainment Limited	limited liability company
��	��	��2�	—		100	��
Universe Industrial	Hong Kong,	Ordinary HK$2	—		100	Inactive
Development Limited	limited liability company
��	��	��2�	—		100	��
Universe Intellectual Property	Hong Kong,	Ordinary HK$2	—		100	Inactive
Limited	limited liability company
��	��	��2�	—		100	��
Joy Talent Investment Limited	Hong Kong,	Ordinary HK$1	—		100	Property holding and rental
	limited liability company					in the PRC
��	��	��1�	—		100	��
*Universe Films Acquisition	Hong Kong,	Ordinary HK$2	—		100	Sublicensing of film rights
Limited	limited liability company					in Hong Kong
	��	��2�	—		100	��
Mutual Faith Investment Limited	Hong Kong,	Ordinary HK$100	—		100	Property development
	limited liability company					in Hong Kong
��	��	��100�	—		100	��

No registered Chinese names for these companies
*��

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

12 INTEREST IN AN ASSOCIATED COMPANY 12 ��

			Group
			��
			2007	2006
			��	��
		Note	HK$’000	HK$’000
		��	��	��
Share of net liabilities	��	(a)	(715)	(712)
Amount due from an	��
associated company	��	(b)	1,505	1,487
Less: Provision for	��
impairment	��		(790)	(775)
			—	—
Investment at cost:	��
Unlisted shares	��		1	1

The following is the details of the associated company as at 30th June 2007:

��

	Place of
	incorporation		Particulars of	Interest held
Name	and operation	Principal activities	issued shares held	indirectly
	��		��	��
��	��	��	��	��
Elite Master Holdings	Hong Kong	Production of	400 ordinary share of	40%
Limited		television series	HK$1 each
��	��	��	400��1�	40%
			��

The financial position of the associated company was as below:

��

				(Loss)/
	Assets	Liabilities	Revenue	Profit
				��/
	��	��	��	��
	HK$’000	HK$’000	HK$’000	HK$’000
	��	��	��	��
2007	27	1,815	—	(9)
2006	65	1,843	—	47

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

12 INTEREST IN AN ASSOCIATED COMPANY (Continued)

Note:

12 ��

��

(a) The result of this associated company has been equity accounted for based on its audited financial statements for the year ended 30th June 2006 and unaudited financial statements for the year ended 30th June 2007.
(a) ��
(b) The amount due is unsecured, interest-free and repayable on demand.
(b) ��

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

13 INTEREST IN JOINTLY CONTROLLED ASSETS

The Group has entered into three jointly controlled asset arrangements to produce television series and a film (2006: four). The Group has participating interests ranging from 60% to 80% in these joint ventures. As at 30th June 2007, the aggregate amounts of assets and liabilities recognized in the consolidated financial statements relating to the Group’s interests in these jointly controlled asset arrangements are as follows:

13 ��

�� 60%�80%��

		Group
		��
		2007	2006
		��	��
		HK$’000	HK$’000
		��	��
Assets	��
Television series	��
in progess	��	—	28,083
Television series rights	��	3,196	—
Film in progress	��	—	14,426
Accounts receivable	��	4,884	4,765
Prepayments	��	747	512
Cash and bank balances	��	—	39
		8,827	47,825
Liabilities	��
Accounts payable	��	4,579	1,818
Accruals	��	—	393
Deposits received	��	335	10,789
		4,914	13,000
Income	��	41,836	—
Expenses	��	(41,445)	—
Profit after income tax	��	391	—

14 LONG-TERM BANK DEPOSIT

The long-term bank deposit is fixed, denominated in United States Dollars and will be matured on 4th March 2009. Interest is receivable semi-annually and interest rate is linked to the London Inter-Bank Offer Rate. The carrying amount of long term bank deposit approximates to its fair value.

14 ��

��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

15 ACCOUNTS RECEIVABLE

15 ��

		Group
		��
		2007	2006
		��	��
		HK$’000	HK$’000
		��	��
Accounts receivable	��	27,928	16,704
Less: Provision for impairment of	��
accounts receivable	��	(2,290)	(395)
Accounts receivable — net	��	25,638	16,309

The carrying amount of accounts receivable approximates to its fair value.

��

As at 30th June 2007, the ageing analysis of the accounts receivable was as follows:

��

			Group
			��
		2007		2006
		��		��
		HK$’000		HK$’000
		��		��
Current to 90 days	��90�	11,808		10,014
91 days to 180 days	91��180�	10,920		1,028
Over 180 days	180��	2,910		5,267
		25,638		16,309

Sales of videogram products is 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.

��7�� 60��

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.

��

The Group has recognized a loss of HK$2,000,000 (2006: HK$395,000) for the impairment of its accounts receivable during the year ended 30th June 2007. The loss has been included in other operating expenses in the consolidated income statement. The receivables charged to the allowance account of HK$105,000 (2006: HK$nil) are written off as there is no expectation that the amount can be recovered.

�� 2,000,000�� 395,000�� 105,000� ��

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

16	INVENTORIES Group �� 2007 2006 �� �� HK$’000 HK$’000 �� �� 16 ��
	Raw materials �� 1,725 1,732 Finished goods �� 11,721 13,478
	13,446 15,210 Less: Provision for slow-moving �� inventories �� (4,449) (3,206)
	8,997 12,004

The cost of inventories recognized as expenses and �� included in cost of turnover amounted to approximately �� HK$12,577,000 (2006: HK$19,584,000). 12,577,000�� 19,584,000��

17 CASH AND CASH EQUIVALENTS 17 ��

		Group	Group	Company	Company
		��		��
		2007	2006	2007	2006
		��	��	��	��
		HK$’000	HK$’000	HK$’000	HK$’000
		��	��	��	��
Cash at bank and in hand	��	4,635	3,776	78	60
Short-term bank deposits	��	130,419	104,847	2,473	7,800
		135,054	108,623	2,551	7,860

The effective annual interest rate on short-term bank deposits is ranged from 2.65% to 4.65% (2006: ranged from 4.32% to 4.80%); these deposits have an average maturity of 193 days (2006: 178 days).

��2.65 ��4.65��4.32�� 4.80�� 193��178��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

18 SHARE CAPITAL

18 ��

Number of Ordinary ordinary shares shares �� HK$’000 �� At 30th June 2006 and �� 30th June 2007 �� 1,624,605,370 32,492

The total authorized number of ordinary shares is 5,000 million shares (2006: 5,000 million shares) with a par value of HK$0.02 per share (2006: HK$0.02 per share). All shares issued are fully paid.

�� 5,000,000,000�� 5,000,000,000�� 0.02�� 0.02��

Share options

��

There were no share options granted under the Scheme for the period from 26th November 2003 to 30th June 2007.

��

On 21st August 2007, the Company granted 143,460,537 share options to its employees at the subscription price of HK$0.264 per shares option which were vested immediately and exercisable for a two-year period between 21st August 2007 and 20th August 2009 (both days inclusive). Each share option gives the holder the right to subscribe for one ordinary share of the Company.

�� 0.264�� 143,460,537��

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

19 SHARE PREMIUM AND OTHER RESERVES 19 ��

(a) Group

(a) ��

Group			(a) ��	�
			Reserve
		Share	arising on	Revaluation
		premium	consolidation	reserve	Total
			��
		��	��	��	��
		HK$’000	HK$’000	HK$’000	HK$’000
		��	��	��	��
At 1st July 2006	��	127,211	821	1,673	129,705
Revaluation reserve adjustment	��
upon disposal of investment	��
properties	��	—	—	(1,220)	(1,220)
At 30th June 2007	��	127,211	821	453	128,485
At 1st July 2005	��	127,211	821	1,220	129,252
Fair value adjustment upon	��
transfer from leasehold land	��
and buildings to investment	��
properties (Note 7)	��7�	—	—	549	549
Deferred tax effect on fair value	��
adjustment upon transfer from	��
leasehold land and buildings to	��
investment properties (Note 24)	��24�	—	—	(96)	(96)
At 30th June 2006	��	127,211	821	1,673	129,705

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

19 SHARE PREMIUM AND OTHER RESERVES 19 �� (Continued)

Company (b) �� Share Contributed premium surplus Total �� HK$’000 HK$’000 HK$’000 �� At 30th June 2006 and �� 30th June 2007 �� 127,211 51,852 179,063

(b) Company

The contributed surplus of the Company represents the difference between the nominal value of the Company’s shares issued in exchange for the issued shares of Universe Films (Holdings) Limited and the value of net assets of the underlying subsidiaries acquired on 28th June 1999. Under the Companies Act of 1981 of Bermuda (as amended), the contributed surplus shall not be distributed to the shareholders if there are reasonable grounds for believing that:

�� U n i v e r s e F i l m s (Holdings) Limited��

(i) the Company is, or would after the payment be, unable to pay its liabilities as they become due; or
(i) ��
(ii) the realizable value of the Company’s assets would thereby be less than the aggregate of its liabilities and its issued share capital and share premium accounts.
(ii) ��

At Group level, the contributed surplus is reclassified into its components of reserves of the underlying subsidiaries.

��

20 AMOUNTS DUE FROM/(TO) SUBSIDIARIES AND THE ULTIMATE HOLDING COMPANY

The amounts due are unsecured, interest-free and repayable on demand.

20 �� / ��
��

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

21 ACCOUNTS PAYABLE 21 ��

As at 30th June 2007, the ageing analysis of the �� accounts payable was as follows: ��

				Group
				��
			2007	2006
			��	��
			HK$’000	HK$’000
			��	��
Current to 90 days	��90�		1,551	4,335
91 days to 180 days	91��180�		138	296
Over 180 days	180��		3,453	5,053
			5,142	9,684
OBLIGATIONS UNDER	FINANCE LEASES	22	��
As at 30th June 2007, the Group’s obligations under			��
finance leases were repayable as follows:			��
			��

			Group
			��
		2007		2006
		��		��
		HK$’000		HK$’000
		��		��
Within one year	��	40		95
In the second year	��	29		44
In the third to fifthyear	��	37		55
		106		194
Future finance charges on	��
obligations under finance leases	��	—		—
Present value of obligations	��
under finance leases	��	106		194
The present value of obligations	��
under finance leases was	��
as follows:	��
Within one year	��	40		95
In the second year	��	29		44
In the third to fifthyear	��	37		55
		106		194

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

23 OTHER LONG-TERM LIABILITIES

23 ��

Group

			Group
			��
		2007		2006
		��		��
		HK$’000		HK$’000
		��		��
Obligations under finance leases	��
(Note 22)	��22�	66		99

24 DEFERRED INCOME TAX

24 ��

Deferred income tax assets and liabilities are offset �� when there is a legally enforceable right to offset �� current tax assets against current tax liabilities and �� when the deferred income taxes relate to the same �� fiscal authority. The offset amounts are as follows: ��

		Group	Group	Company	Company
		��		��
		2007	2006	2007	2006
		��	��	��	��
		HK$’000	HK$’000	HK$’000	HK$’000
		��	��	��	��
Deferred income tax assets	��	(5,762)	(5,447)	(302)	(264)
Deferred income tax liabilities	��	3,446	8,892	—	—
		(2,316)	3,445	(302)	(264)

The amounts shown in the consolidated balance �� sheet include the following: ��

		2007	2006
		��	��
		HK$’000	HK$’000
		��	��
Deferred tax income assets	��12��
to be recovered after	��
more than 12 months	��	(5,762)	(5,447)
Deferred tax income liabilities	��12��
to be settled after	��
more than 12 months	��	3,446	8,892

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

24 DEFERRED INCOME TAX (Continued)

24 ��

The movement of the deferred income tax (assets)/ ��/�� liabilities during the year is as follows: ��

		Group	Group	Company	Company
		��		��
		2007	2006	2007	2006
		��	��	��	��
		HK$’000	HK$’000	HK$’000	HK$’000
		��	��	��	��
Beginning of the year	��	3,445	(1,335)	(264)	(206)
Deferred income tax	��
(credited)/charged to	��
consolidated income	��/��
statement (Note 29)	��29�	(5,502)	4,684	(38)	(58)
Deferred income tax	��
transferred to retained	��
earnings upon the disposal	��
of investment properties	��	(259)	—	—	—
Deferred income tax arising	��
from surplus on revaluation	��
of investment properties	��
charged to equity	��
(Note 19(a))	��19(a)�	—	96	—	—
End of the year	��	(2,316)	3,445	(302)	(264)

Deferred income tax assets are recognized for tax losses carried forward to the extent that realization of the related tax benefit through the future taxable profit is probable. The Group has unrecognized tax losses of HK$6,073,000 (2006: HK$5,415,000) to carry forward against future taxable income.

�� 6,073,000� ��5,415,000��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

24 DEFERRED INCOME TAX (Continued)

The movement in deferred income tax assets and liabilities (prior to offsetting of balances within the same taxation jurisdiction) during the year is as follows:

24 ��

��

				Group	Group
				��
		Prepayment and others		Accelerated tax depreciation		Total
Deferred income tax liabilities	��	��		��		��
		2007	2006	2007	2006	2007	2006
		��	��	��	��	��	��
		HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
		��	��	��	��	��	��
Beginning of the year	��	—	17	9,317	3,628	9,317	3,645
(Credited)/charged to income	��
statement	��/��	—	(17)	(5,348)	5,593	(5,348)	5,576
Transferred to retained earnings	��	—	—	(259)	—	(259)	—
Charged to revaluation reserve	��
(Note 19(a))	��19(a)�	—	—	—	96	—	96
End of the year	��	—	—	3,710	9,317	3,710	9,317

				Group	Group
				��
		Tax	losses	Provisions		Total
Deferred income tax assets	��	��			��	��
		2007	2006	2007	2006	2007	2006
		��	��	��	��	��	��
		HK$’000	HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
		��	��	��	��	��	��
Beginning of the year	��	(5,872)	(4,970)	—	(10)	(5,872)	(4,980)
(Credited)/charged to income	��
statement	��/��	(154)	(902)	—	10	(154)	(892)
End of the year	��	(6,026)	(5,872)	—	—	(6,026)	(5,872)

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

24 25	DEFERRED INCOME TAX(Continued) Company �� Tax losses and total Deferred income tax assets �� �� 2007 2006 �� �� HK$’000 HK$’000 �� �� 24 ��
	Beginning of the year �� (264) (206) Credited to income statement �� (38) (58)
	End of the year �� (302) (264)
	Group �� 2007 2006 �� �� HK$’000 HK$’000 �� �� OTHER GAINS�NET 25 ��
	Interest income �� 6,054 4,310 Gain on disposal of property, �� plant and equipment �� — 41 Sponsorship income for film �� exhibition �� 76 240 Deposits forfeited �� 153 229 Net exchange gain �� — 169 Bad debt written back �� — 242 Overprovision for long service �� payment �� — 11 Others �� 81 571
	6,364 5,813

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

26 EXPENSES BY NATURE

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

26 ��

��

			Group
			��
		2007		2006
		��		��
		HK$’000		HK$’000
		��		��
Amortization of film rights	��
(Note 10)	��10�	72,215		40,873
Amortization of leasehold land	��
(Note 6)	��6�	238		254
Depreciation of owned assets	��
(Note 7)	��7�	1,450		1,552
Depreciation of leased assets	��
(Note 7)	��7�	90		78
Impairment losses of film rights	��
(Note 10)	��10�	4,006		1,928
Impairment losses of film	��
deposits	��	627		2,049
Impairment losses of	��
accounts receivable	��	2,000		395
Provision for slow-moving	��
inventories	��	1,243		1,342
Provision for investment in	��
an associated company	��	15		—
Loss on disposal of property,	��
plant and equipment	��	114		—
Write-off of expired film rights	��	7		128
Write-off of inventories	��	143		35
Employee benefits expenses	��
(Note 27)	��27�	21,118		17,147
Cost of inventories sold	��	12,577		19,584
Advertising costs	��	1,441		880
Direct operating expenses arising	��
from investment properties that	��
generate rental income	��	445		758
Auditor’s remuneration	��	650		600

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

27 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 MPF contributions are fully and immediately vested in the employees as accrued benefits once they are paid.

27 ��

�� 5%� �� 1,000�� 4,000�� 5,000��

			Group
			��
		2007		2006
		��		��
		HK$’000		HK$’000
		��		��
Wages and salaries	��	18,132		14,380
Unutilized annual leave	��	—		110
Staff welfare	��	2,528		2,217
Pension costs	��
— defined contribution plan	� ��	458		440
Total (including directors’	��
emoluments)	��	21,118		17,147

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

27 EMPLOYEE BENEFITS EXPENSES (Continued) 27 ��

(a) ��
(a) Directors’ and senior management’s emoluments
��

The remuneration of each Director for the year ended 30th June 2007 is set out below:

			Salary,
			housing		Employer’s
			allowances,		contribution
			and benefits	Discretionary	to retirement
		Fees	in kind	bonuses	scheme	Total
			��		��
Name of Directors	��	��	��	��	��	��
		HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
		��	��	��	��	��
Mr Lam Shiu Ming, Daneil	��	—	2,640	2,500	12	5,152
Ms Chiu Suet Ying	��	—	2,640	150	12	2,802
Mr Yeung Kim Piu	��	—	569	44	12	625
Mr Ng Kwok Tung	��	80	—	—	—	80
Mr Chiu Shin Koi	��	80	—	—	—	80
Mr Ma Ting Hung	��	80	—	—	—	80

The remuneration of each Director for the year ended 30th June 2006 is set out below:

��

			Salary,
			housing		Employer’s
			allowances,		contribution
			and benefits	Discretionary	to retirement
		Fees	in kind	bonuses	scheme	Total
			��		��
Name of Directors	��	��	��	��	��	��
		HK$’000	HK$’000	HK$’000	HK$’000	HK$’000
		��	��	��	��	��
Mr Lam Shiu Ming, Daneil	��	—	1,950	125	12	2,087
Ms Chiu Suet Ying	��	—	1,940	150	12	2,102
Mr Yeung Kim Piu	��	—	517	22	12	551
Mr Ng Kwok Tung	��	80	—	—	—	80
Mr Chiu Shin Koi	��	80	—	—	—	80
Mr Ma Ting Hung	��	80	—	—	—	80

Directors’ fees disclosed above include HK$240,000 (2006: HK$240,000) paid to the independent non-executive directors.

No directors waived emoluments in respect of the years ended 30th June 2007 and 2006.

�� 240,000�� 240,000��

��

< ANNUAL REPORT 2007 >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

27 EMPLOYEE BENEFITS EXPENSES (Continued)

(b) Five highest paid individuals

The five individuals whose emoluments were the highest in the Group for the year included three directors (2006: three) whose emoluments are reflected in the analysis presented above. The emoluments payable to the remaining two (2006: two) individuals during the year are as follows:

27 ��

(b) ��

��

				Group
				��
				2007	2006
				��	��
				HK$’000	HK$’000
				��	��
	Basic salaries, housing	��
	allowances, other	��
	allowances and benefits	��
	in kind	��		1,629	1,369
	Contributions to retirement	��
	scheme	��		24	24
				1,653	1,393
	The emoluments of each of these individuals			��	��0
	fall within the emolument band of HK$nil to			��1,000,000��
	HK$1,000,000.			��
28	FINANCE COSTS		28	��

			Group
			��
		2007		2006
		��		��
		HK$’000		HK$’000
		��		��
Interest on bank loans wholly	��
repayable within five years	��	—		2

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

29 INCOME TAX (CREDIT)/EXPENSE

Hong Kong profits tax has been provided at the rate of 17.5% (2006: 17.5%) on the estimated assessable profit for the year.

29 �� / ��

�� 17.5%�� 17.5%��

The amount of income tax (credit)/expense (credited)/ charged to the consolidated income statement represents:

��/�� /��

		Group
		��
		2007	2006
		��	��
		HK$’000	HK$’000
		��	��
Hong Kong profits tax	��	10	—
Deferred income tax (Note 24)	��24�	(5,502)	4,684
		(5,492)	4,684

The tax on the Group’s profit before income tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated subsidiaries as follows:

��

		2007	2006
		��	��
		HK$’000	HK$’000
		��	��
Profit before income tax	��	6,034	31,989
Tax calculated at domestic tax	��
rates applicable to profits in	��
the respective countries	��	1,131	5,598
Income not subject to taxation	��	(1,297)	(864)
Expenses not deductible for	��
taxation purpose		203	11
Reversal of taxable	��
temporary differences	��	(5,644)	—
Unrecognized tax losses	��	115	—
Utilization of previously	��
unrecognized tax loss	��	—	(61)
Income tax (credit)/expense	��/��	(5,492)	4,684

��

< ANNUAL REPORT 2007 >

100

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

30 NET FOREIGN EXCHANGE (LOSSES)/GAINS

The exchange differences recognized in the consolidated income statement are included as follows:

�� / ��

��

		Group
		��
		2007	2006
		��	��
		HK$’000	HK$’000
		��	��
Other gains — net	��	—	169
Other operating expenses	��	(62)	—

31 PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY

The profit attributable to equity holders of the Company is dealt with in the financial statements of the Company to the extent of a profit of approximately HK$37,000 (2006: profit of approximately HK$19,726,000).

31 ��

�� 37,000�� 19,726,000��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

101

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

32 EARNINGS PER SHARE

Basic

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company over the weighted average number of ordinary shares in issue during the year.

32 ��

��

		2007	2006
		��	��
Profit attributable to equity holders	��
of the Company (HK$’000)	��	11,526	27,305
Weighted average number of	��
ordinary shares in issue	��	1,624,605,370	1,624,605,370
Basic earnings per share	��
(HK cent per share)	��	0.71	1.68

The diluted earnings per share is not presented as �� there were no dilutive potential ordinary shares �� outstanding during the years ended 30th June 2007 �� and 2006. ��

33	DIVIDENDS 2007 2006 �� �� HK$’000 HK$’000 �� �� 33 ��
	Proposed final dividend — HK$nil �� (2006: 0.9 HK cent) �� per ordinary share �� 0.9�� — 14,621

��

< ANNUAL REPORT 2007 >

102

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

CASH GENERATED FROM OPERATIONS
2007
2006
��
��
HK$’000
HK$’000
��
��
34
��

Profit for the year
��
11,526
27,305
Adjustment for:
��
— Income tax (credit)/expense
� ��/
(Note 29)
��29�
(5,492)
4,684
— Depreciation of owned assets
� ��
1,450
1,552
— Depreciation of leased assets
� ��
90
78
— Amortization of leasehold land
� ��
238
254
— Amortization of film rights
� ��
72,215
40,873
— Impairment losses of film rights
� ��
4,006
1,928
— Write-off of expired film rights
� ��
7
128
— Increase in fair value of
� ��
investment properties
��
(1,611)
(29,950)
— Write-off of inventories
� ��
143
35
— Loss/(gain) on disposal of
� ��
property, plant and equipment
��/��
114
(41)
— Gain on disposal of investment
� ��
properties
��
(3,776)
—
— Gain on disposal of non-current
� ��
assets held for sale
��
(1,653)
—
— Interest income
� ��
(6,054)
(4,310)
— Interest on bank loans
� ��
—
2
— Provision/(reversal of provision)
� ��
for investment in an associated
��/
company
��
15
(18)
— Share of loss/(profit) of
� ��
an associated company
��/��
3
(20)
— Impairment losses of
� ��
accounts receivable
��
2,000
395
— Impairment losses of
� ��
film deposits
��
627
2,049
— Provision for slow-moving
� ��
inventories
��
1,243
1,342
Changes in working capital:
��
— Film deposits
� ��
5,756
5,639
— Inventories
� ��
1,621
3,977
— Accounts receivable
� ��
(11,329)
15,515
— Deposits paid and prepayments
� ��
(2,282)
(4,595)
— Pledged bank deposits
� ��
(2,000)
2,000
— Accounts payable
� ��
(4,542)
2,139
— Other payable and accrued
� ��
charges
��
2,381
1,550
— Deposits received
� ��
1,294
17,531
— Amount due to the ultimate
� ��
holding company
��
(83)
—
— Amount due from an associated
� ��
company
��
(18)
1,332

Cash generated from operations
��
65,889
91,374

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

103

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

34 CASH GENERATED FROM OPERATIONS 34 �� (Continued)

In the consolidated cash flow statement, proceeds �� from sale of property, plant and equipment, �� investment properties and non-current assets held for �� sale comprise:

		2007	2006
		��	��
		HK$’000	HK$’000
		��	��
Property, plant and equipment	��
Net book amount (Note 7)	��7�	114	31
(Loss)/gain on disposal of	��
property, plant and equipment	��/��	(114)	41
Proceeds from disposal of	��
property, plant and equipment	��	—	72
		2007	2006
		��	��
		HK$’000	HK$’000
		��	��
Investment properties	��
Net book amount (Note 8)	��8�	27,349	—
Gain on disposal of investment	��
properties	��	3,776	—
Proceeds from disposal of	��
investment properties	��	31,125	—
		2007	2006
		��	��
		HK$’000	HK$’000
		��	��
Non-current assets held for sale	��
Net book amount (Note 9)	��9�	31,650	—
Gain on disposal of non-current	��
assets held for sale	��	1,653	—
Proceeds from disposal of	��
non-current assets held for sale	��	33,303	—

��

< ANNUAL REPORT 2007 >

104

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

35 BANKING FACILITIES

At 30th June 2007, banking facilities of approximately HK$30 million (2006: HK$50 million) granted by banks to the Group, of which none (2006: HK$nil) have been utilized by the Group, were secured by the following:

35 ��

�� 30,000,000�� 50,000,000��
(i) charge on the time deposits of a subsidiary of the Company of HK$4 million (2006: HK$2 million); and
(i) �� 4,000,000�� 2,000,000 ��
(ii) corporate guarantees given by the Company.
(ii) ��

36 PENDING LITIGATIONS

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

36 ��

��

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”).

�� 935,871.65�� 7,299,798.84��

Pursuant to an Order (the “Order”) made by High Court on 21st February 2003, the Company was ordered and has 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).

�� 5,495,699.80�� Miramax Films�� 350,905.30�� 935,871.65�� 7,299,798.84�� 1,804,099.04�� 7,299,798.84��5,495,699.80 ��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

105

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

36 PENDING LITIGATIONS (Continued)

On 30th April 2002, UEL issued a Writ of Summons against the 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.

36 ��

��

On 9th September 2002, Universe Laser & Video Co. Limited (“ULV”), an indirect wholly owned 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.

��

Save as disclosed above, as at 30th June 2007, no litigation or claim of material importance is known to the Directors to be pending against either the Company or any of its subsidiaries.

��

37 COMMITMENTS

(a) Operating leases

As at 30th June 2007, the Group had future aggregate minimum lease payments under non-cancellable operating leases as follows:

37 ��

(a) ��

��

			Group
			��
		2007		2006
		��		��
		HK$’000		HK$’000
		��		��
Land and buildings	��
Not later than one year	��	2,400		—

��

< ANNUAL REPORT 2007 >

106

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

37 COMMITMENTS (Continued)

(b) Others

37 ��

(b) ��

As at 30th June 2007, the Group had �� commitments contracted but not provided for �� in these consolidated financial statements as �� follows:

				Group
				��
			2007	2006
			��	��
			HK$’000	HK$’000
			��	��
Purchase of film rights and		��
production of films		��	22,010	39,016
Note:	As at 30th June 2007, the Group had no any		��	��
	commitment in respect of jointly controlled			��
	assets (2006: HK$nil).			��
			��

38 FUTURE OPERATING LEASE 38 �� ARRANGEMENTS

As at 30th June 2007, the Group had future aggregate �� minimum lease receipts under non-cancellable �� operating leases as follows: ��

			Group
			��
		2007		2006
		��		��
		HK$’000		HK$’000
		��		��
Not later than one year	��	1,059		3,594
Later than one year and	��
not later than five years	��	352		1,127
		1,411		4,721

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

107

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

39 RELATED PARTY TRANSACTIONS

(a) On 19th December 2006, ULV entered into a tenancy agreement with Rainbow Nice Limited (“RNL”) whereby ULV agreed to lease a premises (the “Premises”) from RNL for a term of 3 years commencing from 1st January 2007 for the use of Mr Lam Shiu Ming, Daneil and Ms Chiu Suet Ying, the directors of the Company, for residential purpose. The monthly rental payable by ULV is HK$200,000 which is inclusive of furniture, fixtures and home electronic appliances but excluding government rent, rates, taxes and all other outgoings. The entire issued share capital of RNL, the landlord of the Premises, is beneficially owned by Ms Chiu Suet Ying.
39 ��
(a) �� 200,000 ��
��

During the year ended 30th June 2007, ULV had paid rental on apartment leased for directors of HK$1,200,000 (2006: HK$nil) to RNL.

�� 1,200,000��
(b) During the year ended 30th June 2007, ULV had paid rental on motor vehicles and apartment leased for directors of HK$125,000 (2006: HK$300,000) and HK$480,000 (2006: HK$840,000) to Mightlong Investments Limited (a company incorporated under the Hong Kong Companies Ordinance with limited liability) (“MIL”) and Mass Express Development Limited (a company incorporated under the Hong Kong Companies Ordinance with limited liability) (“MEDL”), respectively. The entire issued share capital of MIL is owned by Globalcrest Enterprises Limited (“Globalcrest”), a substantial shareholder of the Company, and the entire issued share capital of MEDL is beneficially owned by Ms Chiu Suet Ying.
(b) �� 125,000�� 3 0 0 , 0 0 0 �� 480,000�� 840,000�� Globalcrest E n t e r p r i s e s L i m i t e d
��Globalcrest�� Globalcrest��

��

< ANNUAL REPORT 2007 >

108

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

39 RELATED PARTY TRANSACTIONS (Continued) 39 ��

			Group
			��
		2007		2006
		��		��
		HK$’000		HK$’000
		��		��
Salaries and other short-term	��
employee benefits	��	10,172		6,073
Employer’s contribution to	��
retirement scheme	��	60		60
		10,232		6,133

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

��

40 EVENTS AFTER THE BALANCE SHEET DATE

Save as disclosed in Note 18, on 21st August 2007, the Company granted new share options to its employees. The Group is in the process of making an assessment of the accounting impact to the consolidated financial statement for the year ended 30th June 2008.

40 ��

��18��

41 ULTIMATE HOLDING COMPANY

The directors regard Globalcrest, a company incorporated in the British Virgin Islands, as being the ultimate holding company of the Company.

41 ��

�� Globalcrest��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

109

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

42 POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE ANNUAL ACCOUNTING PERIOD ENDED 30TH JUNE 2007

Up to the date of approval of these consolidated financial statements, the HKICPA has issued the following amendments, new standards and interpretations which are not yet effective for the accounting period ended 30th June 2007 and which have not been adopted in these consolidated financial statements:

42 ��

��

Effective for accounting periods beginning on or after ��

HKFRS 7 Financial Instruments: Disclosures �� 7 �� Amendment to HKAS 1 Presentation of Financial Statements — Capital Disclosures ��1��1�� — �� HKAS 23(Revised) Borrowing Costs ��23��23�� HK(IFRIC) — Int 10 Interim Financial Reporting and Impairment ��

��1��1�� HKAS 23(Revised) ��23��23�� HK(IFRIC) — Int 10 �� — ��10 HK(IFRIC) — Int 11

HKFRS 2 — Group and Treasury Share Transactions ��2 — ��

�� — ��11 HK(IFRIC) — Int 12 �� — ��12 HK(IFRIC) — Int 13 �� — ��13 HK(IFRIC) — Int 14

Service Concession Arrangements ��

Customer Loyalty Programmes ��

HKAS19 — The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their interaction

�� 19 — �� — ��14 �� HKFRS 8 Operating Segments ��8 ��

1st January 2007 �� 1st January 2007

�� 1st January 2009 �� 1st November 2006 ��

1st March 2007

��

1st January 2008 ��

1st July 2008

��

1st January 2008

��

1st January 2009 ��

��

< ANNUAL REPORT 2007 >

110

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS ��

42 POSSIBLE IMPACT OF AMENDMENTS, NEW STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE FOR THE ANNUAL ACCOUNTING PERIOD ENDED 30TH JUNE 2007 (Continued)

The Group is in the process of making an assessment of what the impact of these amendments, new standards and new interpretations would be in the period of initial application, but not yet in a position to state whether these amendments, new standards and new interpretations would have a significant impact on the Group’s results of operations and financial position.

42 ��

��

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

< �� >

111

PRINCIPAL PROPERTIES HELD FOR INVESTMENT PURPOSES

��

Hong Kong		��
Location	Lot number	Type	Lease term
��	��	��	��
Unit A,17th Floor,	Kwai Chung Town	Industrial	2047
Wyler Centre Phase II,	Lot number 130
192-200 Tai Lin Pai Road,
Kwai Chung,
New Territories
Hong Kong
��	��130�	��	��
192�200�
��
��A�
Unit B,17th Floor,	Kwai Chung Town	Industrial	2047
Wyler Centre Phase II,	Lot number 130
192-200 Tai Lin Pai Road,
Kwai Chung,
New Territories
Hong Kong
��	��130�	��	��
192�200�
��
��B�
The People’s Republic of China		��
Location		Type	Lease term
��		��	��
No. 1501, 15th Floor,		Commercial	2052
Block 24,��(Jianwai) SOHO,
39 Dongsanhuan Zhonglu Road,
Chaoyang District,
Beijing, the PRC
��39�		��	��
��SOHO 24��15�1501�

��

< ANNUAL REPORT 2007 >

112

FIVE YEAR FINANCIAL SUMMARY ��

Results

��

Year ended 30th June

	Year ended 30th June
	�� 2007 2006 2005 2004 2003 �� �� �� �� �� HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 �� �� �� �� ��
Assets and liabilities Turnover �� Profit/(loss) �� before income tax ��/�� Income tax credit/ �� (expense) ��/�� Profit/(loss) attributable �� to the equity holders �� of the Company ��/�� Proposed final dividend ��	136,240 93,405 175,951 227,605 251,246
	6,034 31,989 11,854 (23,644) (34,112) 5,492 (4,684) (2,016) 4,126 5,802
	11,526 27,305 9,838 (19,518) (28,310)
	— 14,621 — — —
	�� As at 30th June �� 2007 2006 2005 2004 2003 �� �� �� �� �� HK$’000 HK$’000 HK$’000 HK$’000 HK$’000 �� �� �� �� ��
Total assets �� Total liabilities ��	366,132 375,450 321,500 347,048 292,043
	(52,269) (58,751) (32,559) (69,165) (71,117)

UNIVERSE INTERNATIONAL HOLDINGS LIMITED

==> picture [112 x 64] intentionally omitted <==

www.uih.com.hk

AI assistant

Sinopec Engineering Group Co Ltd. — Annual Report 2007

14896_rns_2007-10-30_1389a05d-4f6d-4ffd-81d8-2caf27949467.pdf

CONTENTS

��

CORPORATE INFORMATION ����

EXECUTIVE DIRECTORS

INDEPENDENT NON-EXECUTIVE DIRECTORS

COMPANY SECRETARY

AUTHORIZED REPRESENTATIVES

PRINCIPAL BANKERS

AUDITORS

LEGAL ADVISERS

SHARE REGISTRAR

AUDIT COMMITTEE

����

�������

����

����

������

���

����

�����

�����

CORPORATE INFORMATION ����

REMUNERATION COMMITTEE

NOMINATION COMMITTEE

REGISTERED OFFICE

WEBSITE

�����

�����

�����

�����������

��

DIVIDENDS

OPERATING RESULTS

��

����

CHAIRMAN’S STATEMENT ����

CHAIRMAN’S STATEMENT ����

APPRECIATION

��

Video distribution

����

����

Film exhibition, licensing and sub-licensing of film rights

��������������

Leasing of investment properties

������

MANAGEMENT DISCUSSION AND ANALYSIS ��������

��

FINANCIAL RESOURCES/LIQUIDITY AND CAPITAL STRUCTURE

���� / ���������

THE PLEDGE OF GROUP’S ASSETS

������

EMPLOYEES AND REMUNERATION POLICIES

�������

SHARE OPTION SCHEME

�����

DIRECTORS AND SENIOR MANAGEMENT PROFILE �����������

BIOGRAPHICAL DETAILS OF DIRECTORS AND SENIOR MANAGEMENT

Executive Directors

Independent Non-executive Directors

�������������

����

�������

Senior Management

DIRECTORS AND SENIOR MANAGEMENT PROFILE �����������

������

CORPORATE GOVERNANCE REPORT ������

CORPORATE GOVERNANCE PRACTICES

CODE ON CORPORATE GOVERNANCE PRACTICES

THE BOARD

Duties and composition of the Board

������

��������

���

���������

CORPORATE GOVERNANCE REPORT ������

CORPORATE GOVERNANCE REPORT ������

Sinopec Engineering Group Co Ltd. Annual Report 2007

CORPORATE INFORMATION ��

��

��

��

��

��

��

��

��

��

CORPORATE INFORMATION ��

��

��

��

��

��

CHAIRMAN’S STATEMENT ��

CHAIRMAN’S STATEMENT ��

��

��

��

��

MANAGEMENT DISCUSSION AND ANALYSIS ��

�� / ��

��

��

��

DIRECTORS AND SENIOR MANAGEMENT PROFILE ��

��

��

��

DIRECTORS AND SENIOR MANAGEMENT PROFILE ��

��

CORPORATE GOVERNANCE REPORT ��

��

��

��

��

CORPORATE GOVERNANCE REPORT ��

CORPORATE GOVERNANCE REPORT ��

CORPORATE GOVERNANCE REPORT ��

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REPORT OF THE DIRECTORS ��

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REPORT OF THE DIRECTORS ��

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(a) ��

(b) ��

REPORT OF THE DIRECTORS ��

REPORT OF THE DIRECTORS ��

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REPORT OF THE DIRECTORS ��