Universal Electronics Inc. Annual Report 2008

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FY2008 Annual Report · Universal Electronics Inc.

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N E C TIO

T H E DIGIT A L C

iNsiDe T his issue LEARN ABOUT UNIVERSAL ELECTRONICS’ STRONG 2008

PERFORMANCE, NEW PRODUCT LAUNCHES, ADVANCED TECHNOLOGIES, INDUSTRY

HONORS, FURTHER EXPANSION INTO ASIA, AND ABOVE ALL, ITS BRIGHT FUTURE.

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ISSUE 1 VOLUME 1

04/09

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The DigiTal home
Today’s digital home

is filled with new electronic
devices that need control.

NexT geNeraTioN
ProDucTs aND
TechNology UEI is a world
leader in innovative solu-
tions for wireless control.

global TreND WaTch
UEI continues to
expand opportunities
world-wide in all
business areas.

oems aND subscriPTioN
broaDcasT Continued

advances in technologies
and approaches deliver
simple, powerful products.

Tech KNoWleDge With
over 400 employees

worldwide and decades
of experience, UEI is an
expert at building the right
solutions.

The FuTure is iN Play
UEI embraces the
new technologies and
approaches that will be
tomorrow’s standards.

IN THE WORLD OF WIRELESS CONTROL, UNIVERSAL ELECTRONICS INC. CONTINUES TO MAKE INDUSTRY NEWS. IN 2008, UEI EXPANDED ITS FOOTPRINT IN ASIA AND SUCCESSFULLY LAUNCHED XSIGHT™, ITS NEXT GENERATION UNIVERSAL REMOTE LINE. IN THE CONSUMER SEGMENT, UEI PARTNERED WITH AUDIOVOX ACCESSORIES CORPORATION TO HELP MARKET THE ONE FOR ALL® BRAND IN NORTH AMERICA. IN THE BUSINESS SEGMENT, UEI EXTENDED ITS REACH AND BUSINESS GROWTH WITH CUSTOMERS SUCH AS ONKYO CORPORATION, DENON, DIRECTV® AND OTHERS WHOSE RELIANCE ON UEI’S PRODUCTS AND SOLUTIONS GREW IN 2008. IN ADDITION, UEI INTRODUCED THE NEVOS70—A DUAL RF, CUTTING EDGE ADDITION TO THE AWARD-WINNING NEVO® FAMILY OF UNIVERSAL REMOTES. THESE AND OTHER SIGNIFICANT EVENTS CONTRIBUTED TO UEI’s 11TH STRAIGHT YEAR OF PROFITABILITY. GOOD NEWS, INDEED. 0802

TO THE DIGITAL HOME

2006 2013 Dvr /Pvr
DVR/PVR shipments world-
wide in 2006 totaled 20 million
units. The number is expected
to grow to 94 million by 2013.*

2007 2013 iPT v
Subscribers were estimated
to be 11 million strong in 2007.
Strong growth is forecast to
continue through 2013 and
reach 57 million subscribers
globally. Asia Pacific will
contribute 22.2 million of
global total.**

2008 2012 hDT v
Homes with HDTV totaled
36 million worldwide at the
end of 2008. There will be
nearly 200 million direct to
home pay-TV subscribers
worldwide by 2012.***

millioN
uN iTs

millioN
hDT v homes

millioN
subscribers

94 57 200
20 11
36

2000 2008
of households equipped to
receive digital TV broadcasts
globally has tripled in the period
from 2000 to 2008, arriving at
380 million or 25% of total
TV households.
BROADBAND TV NEWS

The number

The future is already here,
some say. So is the digital
home. According to the
Consumer Electronics
Association, the aver-
age American household
contains as many as 25
digital devices: televisions,
digital recorders, Blu-ray
players, PCs and Macs,
radios, lighting systems,
telephones, automated
blinds, MP3 players, stereo
and audio equipment, Home
Theaters, and game systems
to name a few. In many
instances, these convenient
devices come with a different
hand-held remote control.
Consumers have had to
juggle multiple remotes just
to watch a movie because no
single remote control could
communicate with all of the
digital devices in the home.

Enter Universal
Electronics Inc. (UEI)

UEI is the global leader in
wireless control technology
for the connected home.
UEI designs, develops, and
delivers innovative solutions
that enable consumers to
control their entertainment
devices, digital media, and
home systems. In brief, UEI
enables consumers around
the world to control their
digital surroundings with a
single remote control. UEI
offers simple ways to unify
digital devices and remotes
in a common network, lan-
guage and interface, whether
it’s infrared (IR) or radio fre-
quency (RF). Simply stated,
UEI puts the “connected” in
the digital home.

Welcome To The DigiTal home. WhaT WoulD you liKe
To Do ToDay WiTh oNe simPle remoTe? lisTeN To music,
WaTch hDTv, eNJoy a movie oN blu-ray Disc. coNTrol
your lighTiNg, WiNDoW shaDes, aND hvac. The PoWer To
Do all oF This aND more FiTs comForTablly iN The Palm
oF your haND WiTh oNe oF The maNy uNiversal remoTe
coNTrols From uei.

* ABI RESEARCH, CONSUMER
ELECTRONICS MARkET DATA,

2008

** INFORMA TELECOMS AND MEDIA;

*** IN-STAT, WORLDWIDE HDTV

IPTV: A GLOBAL ANALYSIS

2008

HOUSEHOLDS:36 MILLION AND
GROWING, DEC 2008

UEI ECO InTrODUCIng ThE fIrsT ECO-frIEnDly UnIvErsAl rEmOTE COnTrOl ThAT hElps COnsErvE EnErgy UsAgE In ThE hOmE.
UEI’S NEW “GREEN” REMOTE LETS YOU CONTROL UP TO FOUR DEVICES AND YOUR POWER PLUG AT THE SAME TIME. ONE CLICk TURNS OFF
YOUR ENTIRE HOME THEATER MAkING YOUR HOME SYSTEM MORE ENERGY EFFICIENT.

UEI AIMS NEW REMOTES AT THE COMPETITION

aT uei, We Thrive oN iNNovaTive ThiNKiNg. iT Drives
our busiNess aND helPs us sTay oN The cuTTiNg eDge
oF The iNDusTry. Through our TechNology, ProDucTs
aND DesigNs, uei helD 148 PaTeNTs aT The eND oF 2008.
a leaDer iN uNiversal remoTe coNTrol iNTellecTual
ProPerTy, uei coNTiNues To seeK NeW aND iNNovaTive
soluTioNs iN coNTrol TechNology aND soFTWare.

QuickSet™ application and XMP-
2™ technology, facilitates two-way
infrared communication between
the remote and a digital device,
such as a flat-screen HDTV or
set-top box. The setup informa-
tion and function codes are easily
transferred between the device
and remote, resulting in one of the
world’s simplest setup experiences
developed to date. A few simple
steps and then simply aim the
remote, and UEI’s technology does
the rest.

A new star is born
Introduced in 2008, the NevoS70
has quickly become the flagship of
the Nevo line of advanced control-
lers for the custom electronics
industry. It provides consumers with
a single control point to manage
virtually all of their home entertain-
ment and automation equipment,
providing access to digital content
on a home media server; giving

users online access, and even
showing full motion video from
connected IP cameras.

UEI’s expertise in bidirectional RF
technologies enables the NevoS70
to take full advantage of Z-Wave®
technology, improving range and
increasing reliability of signal trans-
missions. This RF capability allows
the controller, in conjunction with
the base station, to transmit to hid-
den equipment behind walls, inside
cabinets, or even outside.

With the industry’s most renowned
database of IR function codes and
a brilliant 3.5-inch color touch
screen, NevoS70 offers a wider
array of features than any remote in
its class. And thanks to its Z-Wave
bidirectional RF wireless communi-
cation, there are virtually no line-of-
sight issues. What’s more, NevoS70
can interact with web servers via
widely adopted technologies to
provide a richer user experience.

You can program it to interact with
web sites to display web-based
browsing technologies such as
HTML and Flash. And you can view
it all on the NevoS70 hi-resolution
color touch screen.

By connecting NevoS70 to a home
network via Wi-Fi® , users can
check the latest news and sports
on their NevoS70 screen while
watching TV without interruption.
NevoS70 also enhances the Home
Theater experience, with access to
entertainment information, online
TV guides, sports updates, movie
tickets, and much more.

Keeping the pipeline full
Investing in R&D has been key
to UEI’s sustained success in the
marketplace. By leveraging exper-
tise in IR and RF transmission, UEI
maintains a solid product pipeline
for the short term while continuing
to develop and patent products and
technologies for the future.

Advanced Wireless

Control Technology

UEI designs, develops, and deliv-
ers innovative and complete home
solutions that enable consumers
to control all the digital devices in
their home environment. A sig-
nificant reason consumers are
attracted to UEI’s products is the
focus on simplified setup and ease
of use. UEI continues to invest in
research and design to implement
new technology and software to
improve and simplify the process
even further.

Enhancing the user experience
UEI’s advanced technology, aptly
demonstrated by the new tru2way™

aWarD WiNNiNg iNNovaTioN

UEI PRODUCTS AND TECHNOLOGY
HAVE BEEN HONORED WITH
NUMEROUS AWARDS WORLDWIDE.

Xsight can be set up in minutes
with no need for instruction manuals
through the intuitive menu on its
2” color display. It controls up to
18 devices

Dolphin, UEI’s next generation sub-
scription remote, translates all hand
movements into on-screen cursor
movements, making navigation
simply intuitive.

UEI knows its way around the competition. In
2008, we launched two new remotes: Xsight™,
a winning combination of simplicity, advanced
features, and modern design, and EZ-RC™,
an online consumer friendly remote person-
alization software. Both are simple to install
and use. The unique solutions that Xsight and
EZ-RC bring are sure to help UEI build a strong
position in the consumer retail aftermarket.
Xsight is a perfect fit for today’s modern Home
Theater and the EZ-RC application is as easy
to use as browsing the web.

WhaT’s PlayiNg ToNighT? NoT everyThiNg rises aND Falls WiTh The ecoNomy. TaKe DigiTal eNTerTaiNmeNT, For
iNsTaNce. The caTegory coNTiNues iTs sTroNg uPWarD groWTh. aND research iNDicaTes ThaT coNsumers are saviNg
moNey by sTayiNg home more To eNJoy iT—curliNg uP WiTh PoPcorN aND Their remoTe.

over 250 millioN PeoPle Touch our TechNology every WeeK

UEI Office

Market Opportunity

Business Growth

uei exPaNDs iTs FooTPriNT across 6 coNTiNeNTs

uei PeNeTraTes DeePer iNTo global marKeTs

Watching television has become a global
activity. In fact, today, there are more than
1.4 billion* TV households worldwide, which
creates new and expanding opportunities for
UEI. Already, UEI sells universal wireless
control products, software and services, and
audio/visual (A/V) accessories to customers in
30 countries. In 2008, UEI expanded operations
to Hong Kong, Singapore, Taiwan, and Korea
to address the region’s rapid growth. UEI also
added key personnel to advance our footprint

even further into Asia for both the subscription
broadcast and OEM markets.

In 2008, Reliance Communications Ltd., a
pay TV service in India, selected UEI to supply
them with universal remote control devices to
coincide with its rollout of BigTV direct to home
(DTH) service. BigTV acquired 500,000 subscrib-
ers within 60 days of launch. This is the fastest
ramp up ever achieved by any DTH operator in
the world. Other customers, like DirecTV®, Sky,
and Comcast continue to rely on UEI to meet an

ever growing need for universal remote controls
for devices as simple as “digital to analog” con-
verters (DTA) to as advanced as DVR/PVR and
video on demand control.

UEI announced a licensing arrangement with
Audiovox Accessories Corporation to help UEI
market and sell the One For All brand in North
America as well as to bring new innovative
products and technologies such as the new
Xsight™ line of advanced remotes to market.

* INFORMA TELECOMS & MEDIA, GLOBAL TV(8TH EDITION)

UEI maintains a leadership position in wire-
less control software, technology, and prod-
ucts worldwide. Through a heavy emphasis on
research and development, together with the
largest patent portfolio in our product category
and the most respected device code database
in the world, we keep our product pipeline full
of innovative wireless control solutions.

The opportunities in Asia and India are enor-
mous. In 2007, there were roughly 105 mil-
lion homes with televisions in India, up from

88 million in 2000. The number of television
households was about the same as in the
United States, though for India that amounted
to only about half of the country’s households,
compared with 98 percent in the United States.*
It is in these Asian markets that UEI sees the
greatest opportunity for growth in the future.

So far in 2009, the global economy remains
challenging. Despite this, subscription broad-
cast companies are achieving modest sub-
scriber growth worldwide. Research firm

In-Stat, projects the number of global DTH pay
TV subscribers is expected to reach 200 million
by 2012.** As a global leader in both subscrip-
tion broadcast and pay TV universal remotes,
UEI continues to hold market share and
strengthen business relationships in our core
markets—the U.S. and Europe. In addition, UEI
continues to capitalize on opportunities in mar-
kets all over the world, servicing customers in
six continents.

* THE NEW YORk TIMES FEB 11,2007
**IN-STAT,THE WORLDWIDE DIGITAL SATELLITE
PAY-TV MARkET, DEC 2008

UEI sUbscrIpItIOn brOadcast prOvIdErs InclUdE

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AKADO

mEgA CABlE

mTs AllsTrEAm InC

mUlTI mEDIOs

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rOgErs CABlE

sAsKTEl

Set-top Box Manufacturers

and Subscription Broadcasters

shAW
COmmUnICATIOns

are Looking for Easy Solutions

Both are finding them at UEI. Our broad
customer base includes many major
OEM companies as well as subscription
broadcasters. Both use our products
and technology. Both are growing at a
significant pace.

At UEI, the focus is always on making
wireless control technology easier for
the consumer to use. Put another way,
we make connecting to the digital world
simple for customers and consumers.
While we are on the subject of making
things easier, that’s exactly what UEI is
doing for the DTA TV conversion. We are

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working closely with major set-top box
manufacturers and subscription broad-
casters delivering a universal remote
with maximum compatibility and ease
of use, one specifically designed for
DTA converters.

UEI currently sells universal remote
control solutions to almost every major
subscription broadcaster in North
America and Europe with new customers
such as PCCW Limited in Hong Kong,
Reliance in India, and others leading
the way for strong UEI growth in Asia.

UEI Offers OEMs Exactly

What They Need

The original equipment manufacturers
(OEM) market is a substantial one for UEI.
It’s also a rapidly growing one. The total
market for audio and A/V receivers alone
is expected to grow significantly, from
12 million units in 2007 to 25 million units
in 2012.*

What do media and electronics com-
panies—like Sling Media, Inc., Onkyo
Corporation®, Vizio®, and Mitsubishi—
need? More than anything, they need to
stay “in control.” And with help from UEI,
they do. We offer a wide range of cus-
tomizable remote control solutions that
facilitate accurate communication among
devices and provide critical links to digital
media in the networked home.

In 2008, for example, UEI entered a supply
relationship with Onkyo, a global leader in
high-quality home A/V products, to pro-
vide them with universal remote controls.

These units ship with many Onkyo and
Integra® products, including entry level
and custom installed Home Theater
systems and audio receivers.

UEI is an expert in all the areas that an
OEM looks to for support. UEI’s Innovation
and Engineering groups are experts
at designing solutions with the latest
navigation, communications technology,
and physical designs that are right for the
customer. Every OEM application is differ-
ent, with a different set of specifications
that must be met. At UEI, it’s business as
usual. UEI has a broad array of experi-
ence with products, technologies, and
applications needed for control solutions
in multiple markets. The market for OEM
remote controls remains bright well into
the future. OEM shipments of remote
controls is projected to double from 2008
to 2014, reaching 800 million units.*

* ABI RESEARCH,

DIGITAL HOME REMOTE CONTROLS, 2009

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One of the biggest reasons behind UEI’s industry-leading
success is our database of device codes. It’s the most extensive
in the world, containing more than 400,000 unique function codes

for A/v and other electronic devices. Coupled with one of UEI’s
online or on-device setup tools such as Quickset™ or EZ-rC™, the

remote set-up is not only fast, it’s incredibly simple.

Quickset lets you set up a remote control by following a step-by-step

guide on your television screen. This makes the setup process easier
for the consumer and results in fewer setup calls to the service provider,

which in turn, reduces customer service costs.

UEI’s extensive database of codes and easy setup keeps subscribers happy.
The larger and more accurate the code database, the less likely the user will
have problems with the universal remote working with their devices. This adds

to the overall customer experience and reduces service calls to the provider.

UEI OEMs InclUdE

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400,000

350,000

300,000

250,000

200,000

150,000

100,000

50,000

UnIvErsAl CODE lIBrAry UEI HAS COMPILED AN EXTENSIVE IR CODE LIBRARY THAT COVERS OVER 400,000 INDIVIDUAL DEVICE FUNCTIONS AND OVER
3,600 INDIVIDUAL CONSUMER ELECTRONIC EqUIPMENT BRAND NAMES. OUR LIBRARY IS REGULARLY UPDATED WITH IR CODES USED IN NEWLY INTRODUCED A/V
DEVICES. THESE IR CODES ARE CAPTURED DIRECTLY FROM THE REMOTE CONTROL DEVICES OR THE MANUFACTURER’S WRITTEN SPECIFICATIONS TO ENSURE
THE ACCURACY AND INTEGRITY OF THE DATABASE. WE BELIEVE OUR UNIVERSAL REMOTE CONTROL DATABASE IS CAPABLE OF CONTROLLING VIRTUALLY ALL IR
CONTROLLED TVS, VCRS, DVD PLAYERS, CABLE CONVERTERS, CD PLAYERS, AUDIO COMPONENTS AND SATELLITE RECEIVERS, AS WELL AS MOST OTHER IR REMOTE
CONTROLLED HOME ENTERTAINMENT DEVICES AND HOME AUTOMATION CONTROL MODULES WORLDWIDE WHERE UEI HAS A MARkET PRESENCE.

0809433

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UEI hAs grOWn AnD COnTInUEs TO grOW AT DECEMBER 31, 2008, WE HAD 433 EMPLOYEES
OF WHICH 36% WORkED IN ENGINEERING AND RESEARCH AND DEVELOPMENT. 37% WERE IN
SALES, MARkETING, AND CUSTOMER SUPPORT. ON FEBRUARY 18, 2009, UEI ACqUIRED CERTAIN
PATENTS AND INTELLECTUAL PROPERTY AND OTHER ASSETS RELATED TO THE UNIVERSAL REMOTE
CONTROL BUSINESS FROM ZILOG, INC. AS A RESULT OF THIS TRANSACTION, WE HIRED AN
ESTIMATED ADDITIONAL 115 OF ZILOG’S SALES AND ENGINEERING PERSONNEL, INCLUDING ALL
103 OF ZILOG’S PERSONNEL LOCATED IN INDIA.

H
C
E
T
UEI

as The leaDer iN Wireless Devices aND
remoTes, uei is recogNiZeD For iTs
leaDiNg eDge TechNology aND busiNess
PracTices. iN 2008, For The FourTh year
ruNNiNg, uei Was NameD as oNe oF The
oraNge couNTy TechNology FasT 50 by
DeloiTTe. For The ThirD year ruNNiNg,
uei Was NameD oNe oF The 200 besT small
. buT
comPaNies iN america by
iT’s NoT JusT The TechNology ThaT’s
imPorTaNT; iT’s maKiNg ThaT TechNology
simPle—For our cusTomers aND
ulTimaTely The coNsumer aT home.

uei maKes coNNecTiNg WiTh The DigiTal WorlD simPle

UEI has the people, technology,
experience, and expertise to sim-
plify the connection of consumers
to entertainment technology. What
began in 1986 with just a hand-
ful of employees has today grown
into a global technology leader
with over 400 well qualified people
worldwide.

The culture at UEI is one of dedica-
tion and a pursuit of customer
satisfaction. UEI associates are
committed to do what it takes to
get the job done right for custom-
ers throughout the globe.

1011

aT uei, The FuTure is alreaDy iN Play We’re NoT
WaiTiNg For The FuTure To geT here; We’re embraciNg
iT ToDay. our visioN—To be The iNTerFace For The
coNNecTeD home—is beiNg PlayeD ouT NoW iN millioNs
oF householDs across The globe. our ProDucTs
aND TechNologies have become aN iNTegral ParT
oF The exPaNDiNg oem aND aFTermarKeT coNsumer
elecTroNics iNDusTry. The ProliFeraTioN oF coNsumer
elecTroNics For The home has creaTeD a NeeD For
simPle coNTrol soluTioNs ThaT helP The coNsumer
maKe The mosT oF home sysTems. uei is DeDicaTeD To
briNgiNg iT all TogeTher WiTh uNiversal soluTioNs.

UEI’s market continues to grow.
Homes with HDTV totaled 36 mil-
lion worldwide at the end of 2008,
up from 29 million for 2007*. And
there will be nearly 200 million
direct to home pay-TV subscrib-
ers worldwide by 2012.** And net
sales at UEI have grown consis-
tently since 2002. As we move
forward, UEI’s ongoing mission
bears repeating: to make it easy
for users to connect, control, and

interact with entertainment, infor-
mation and other services with
ease. UEI has the knowledge and
tools to fulfill this mission.

Presently, we develop and deliver
the innovative wireless controls
that serve the ever-changing
trends in the industry and com-
plexity of the home. We are the
leader in universal A/V IR control,
with more than 400,000 unique

function codes, professionally
sourced and maintained by dedi-
cated professionals that are the
most respected in the industry. We
are experts at applying a variety of
RF solutions, as well, working with
formats such as RF4CE™, Wi-Fi®,
Bluetooth®, Z-Wave®, ZigBee®, and
others, addressing the user inter-
face needs for the next generation
of content-driven devices. But
our forward momentum doesn’t

end here. UEI maintains a solid
product pipeline and continues to
invest heavily in R&D to develop
the new products and technolo-
gies that will control the homes of
today and tomorrow.

Financially, UEI has maintained a
solid cash position and debt free
operations that place UEI in a
strong position to ride out tough
economic conditions.

* IN-STAT, WORLDWIDE HDTV HOUSEHOLDS: 36 MILLION AND GROWING, DEC 2008

**IN-STAT, THE WORLDWIDE DIGITAL SATELLITE PAY-TV MARkET, 2008, DEC 2008

$287 million

$273 million

$236 million

$181 million

$158 million

$120 million

$104 million 03
02

300

REVENUES in millions

275

250

200

225

175

H
T
W
O
R
G

125

150

100

uNiversal elecTroNics iNc. | 6101 ga TeWay Drive | cyPress, ca 90630

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a

DEAR SHAREHOLDERS: 2008 MARKED
ANOTHER SUCCESSFUL YEAR FOR
UNIVERSAL ELECTRONICS INC. NET SALES
FOR 2008 CLIMBED TO $287.1 MILLION, UP
FROM $272.7 MILLION THE PRIOR YEAR.
LOOKING AHEAD, UEI IS POSITIONED TO
BENEFIT FROM GROWTH OPPORTUNITIES IN
INTERNATIONAL MARKETS. CONSIDER THIS:
TENS OF MILLIONS OF HOUSEHOLDS AROUND
THE WORLD DO NOT HAVE PAY TV SERVICE.
HOWEVER, THAT PICTURE IS CHANGING
RAPIDLY, ESPECIALLY IN EMERGING REGIONS
LIKE CHINA, INDIA, AND MUCH OF SOUTHERN
ASIA. FOR INSTANCE, SINCE 2002 THE
NUMBER OF IPTV SUBSCRIBERS IN CHINA
HAS INCREASED FOUR-FOLD. BY 2012, THERE
ARE PROJECTED TO BE OVER 200 MILLION

2008

2008 HIGHLIGHTS

Strengthening the UEI team
UEI hired Dr. Norman Sheridan,
Zilog’s Executive Vice President
of Technology and Operations and
CTO along with technical teams
from Zilog’s universal remote
control business in the U.S. and
Asia. They will assist in expanding
the breadth and depth of our cus-
tomer base in both subscription
broadcasting and original equip-
ment manufacturing, particularly
in Asia—further strengthening our
leadership position in the market.

A world-class remote
for a world-class brand
Syntax-Brillian Corporation
selected the UEI Taurus
“RC-LRN”, an eight-device uni-
versal learning remote control to
ship with certain models of Olevia
LCD HDTVs. This remote taps into
the world’s largest profession-
ally maintained database of IR
function codes from UEI’s library
of over 400,000 unique function
codes—making device compatibil-
ity virtually a sure thing.

New honors
UEI was named for the fourth
time to the 2008 Deloitte Orange
County Technology Fast 50 and
the third time to Forbes 200 Best
Small Companies in America.
The former is based on per-
centage revenue growth over a
five-year period and ownership of
proprietary intellectual property
or proprietary technology that
contributes to a significant portion
of their operating revenues. The
latter is based on return on equity,
sales growth and profit growth
over the past 12 months and also
over five years.

$181 million

$158 million

$120 million

$104 million 03
02

$287 million

$273 million

$236 million

DIRECT TO HOME PAY TV SUBSCRIBERS
WORLDWIDE.* THIS KIND OF GROWTH IS
PRODUCING ENORMOUS OPPORTUNITIES
FOR UEI, OPPORTUNITIES THAT PLAY
DIRECTLY TO ITS STRENGTHS AS THE
WORLD LEADER IN WIRELESS CONTROL
TECHNOLOGY AND HAND-HELD REMOTE
CONTROLS FOR THE NETWORKED HOME.
*instat, the worldwide digital satellite pay-tv market, 2008

Another Profitable Year
UEI’s record sales performance
for the year 2008, coupled with
strong fourth quarter sales —
our highest quarter to date —
are due in large measure to the
convergence of three unique
elements: an expansive audio/
visual control database, innova-
tive technology, and talented
people. Together, they form the
engine of UEI’s future growth.

Demonstrated Growth
Throughout the years,
growth at UEI has been the
result of the following:

• Winning new customers
Expanding our existing
•
customer relationships
Introducing innovative
products

•

In 2008, we accomplished all
three. We continued to expand
our market share with exist-
ing customers while targeting
new customers that can stra-
tegically enhance our leader-
ship position, especially in new
markets like Asia. Our 2008
customer wins and new prod-
uct launches helped produce
a record sales year for UEI.

Expanding Our Opportunities
For UEI, 2008 was a year of
growth and opportunity. We are
continuing to grow revenues by
expanding into profitable, fast-
growing new markets. Some are
located in North America and
some in Europe, but opportuni-
ties are also emerging in areas
where there is a fast-rising
middle class. For example, in
2008, we signed an agreement
with Reliance Communications
Ltd. in India to supply universal
remotes for the company’s highly
successful BigTV DTH service

rollout. Wins like this are a
significant step toward increas-
ing presence in Asia. In addition,
we have continued to build on
relationships with companies
like PCCW Limited to tap into the
fast-growing Chinese market. In
addition to these strong partners,
we have consistently added new
customers and sites that now
service six continents and over
thirty countries.

The Value of Relationships
Another key component of UEI’s
growth strategy is the commit-
ment to build strong relationships

REVENUES

08 FINANCIAL REVIEW

with both new and existing cus-
tomers. In 2008, we broadened
our market share with a number
of current customers and added
several exciting new custom-
ers. We signed a comprehensive
supply agreement with Audiovox
Accessories Corporation to sup-
ply microcontrollers, and software
for its existing brands, develop
new products and license our
One For All® brand for products
sold in North America. UEI also
secured a supplier relationship
with Onkyo Corporation, a global
leader in high-quality home
audio/video (A/V) products, to
provide universal remote control
units to a wide range of Onkyo
and Integra product lines. The
total market for A/V receivers
is heating up. Future growth is
expected to more than double,
from 12 million units in 2007 to
25 million in 2012*. In addition,
pay TV companies like Top Up
TV in the U.K.; SKY Italia; NowTV
Inc., a PCCW® service in Hong
Kong; YesHD in Israel; and many
others chose UEI to be their
supplier of universal remotes.

The Power of Innovation
At UEI, we believe innovative
ideas drive increased market
share. That is why we keep our
new product pipeline full.

In 2008, we launched a major
upgrade to our popular Nevo®
line of remote controls—the
NevoS70 wireless home control
device. It took center stage at
the 2009 International Consumer
Electronics Show (CES) in Las
Vegas and is intuitive and easy
to use. Feature for feature,
NevoS70 has more to offer than
any other remote in its class.

We continue to push the
envelope with other wire-
less control devices.

In 2008, we introduced Xsight™
at the IFA Consumer Electronics
Unlimited trade show in Berlin.
Xsight is an advanced retail
remote designed to be extremely
simple to setup and easy to use.
The remotes have an intuitive
menu on the 2.2” color display
and a user friendly web-based
application called EZ-RC™, to
personalize the remote for every
member of the household.

Also in 2008, we introduced
the Delta, a universal remote
control that pairs with digital-
to-analog (DTA) converters. It
has shipped to major set-top
box manufacturers for deploy-
ment with subscription broad-
casters in the fall of 2008 and
will continue to ship in 2009.

*abi research, digital home
remote controls, 2009

All of these products embody
UEI’s objective, to make wireless

control technology not only
simple to use, but also simple to
install. Supported by our profes-
sionally maintained infrared (IR)
code database—the industry’s
most respected—consumers
will find it easy to set up and
program their UEI remotes.

Adding More Strength
In early 2009, UEI made a signifi-
cant acquisition to further solidify
our position in the market. In
February 2009, UEI purchased
universal remote control soft-
ware, intellectual property, and
related assets from Zilog Inc.
Adding its patents, software,
and people to ours strengthens
our leadership position in wire-
less control solutions. What’s
more, the acquisition will help
expand the breadth and depth
of our customer base in both
subscription broadcasting and
original equipment manufac-
turing, particularly in Asia.

Driving Vision
We live in a digital world, one
that is not only growing, but also
getting more complex. Worldwide
sales of set-top boxes broke the
100 million mark for the first time
in 2007 and are projected to reach
an astounding 284 million by
2014*. Even so, set-top boxes are
only part of the picture. Today’s
home has an ever-growing array

of digital devices, like media
servers, Home Theater, and DVD/
DVR recorders to mention a few.
The point is the market is robust
and full of opportunities for UEI.

Looking ahead, we will focus our
strategy and energy on expand-
ing into growing markets. We will
continue to build our business for
the long term and invest in our
unique assets: our technology,
our database, and our people.
We will continue to look for ways
to leverage our brands, our solid
financial position, and our keen
ability to stay several steps ahead
of our competitors. At UEI, we
have the technology, experience,
and product lines to provide inno-
vative wireless control solutions
that serve the ever-changing
trends in the industry and the
growing complexity in the home.

We sincerely thank our custom-
ers, board of directors, employ-
ees, and worldwide partners
who continue to help drive our
long-term success. We especially
thank you, our shareholders,
for your trust and support.

Sincerely,

Paul Arling
ChaIrMan anD Ceo

04 Business

10 Risk Factors
17

Selected Consolidated
Financial Data

Management’s Discussion and
Analysis of Financial Condition
and Results of Operations

Quantitative and Qualitative
Disclosures about Market Risk

Financial Statements and
Supplementary Data
31

Report of Independent
Registered Public
Accounting Firm

32 Consolidated Balance Sheets
Consolidated Income
33
Statements

Consolidated Statements
of Stockholders’ Equity

Consolidated Statements
of Cash Flows

Notes to Consolidated
Financial Statements
65 Controls and Procedures

FORWARD-LOOKING STATEMENTS: this annual report, including “Management’s Discussion and analysis of Financial Condition and results of
operations”, contains statements that may constitute forward-looking statements within the meaning of the private Securities litigation
reform act of 1995. these statements involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or
the assumptions prove incorrect, our results may differ materially from those expressed or implied by such forward-looking statements
and assumptions. all statements other than statements of historical fact are statements that could be deemed forward-looking statements,
including but not limited to any projections of revenue, margins, expenses, tax provisions, earnings, cash flows, benefit obligations,
share repurchases or other financial items; any statements of the plans, strategies and objectives of management for future operations;
any statements concerning expected development or relating to products or services; any statements regarding future economic condi-
tions or performance; any statements regarding pending claims or disputes; any statements of expectation or belief; and any statements
of assumptions underlying any of the foregoing. risks, uncertainties and assumptions include macroeconomic and geopolitical trends
and events; the execution and performance of contracts by customers, suppliers and partners; the challenge of managing asset levels,
including inventory; the difficulty of aligning expense levels with revenue changes; the outcome of pending legislation and accounting
pronouncements; and other risks that are described herein, including but not limited to the items discussed in “risk Factors” in Item
1a of this report, and that are otherwise described from time to time in our Securities and exchange Commission reports filed after the
date of filing this report. We assume no obligation and do not intend to update these forward-looking statements.

BUSINESS

Business of Universal Electronics Inc.
Universal Electronics Inc. was incorporated under the laws of Delaware in 1986 and began operations in 1987. The principal executive
offices are located at 6101 Gateway Drive, Cypress, California 90630. As used herein, the terms “we”, “us” and “our” refer to Universal
Electronics Inc. and its subsidiaries unless the context indicates to the contrary.

On February 18, 2009, we acquired certain patents, intellectual property and other assets related to the universal remote control busi-
ness from Zilog Inc. (“Zilog”-NASDAQ: ZILG) for approximately $9.5 million in cash. The purchase included Zilog’s full library and database
of infrared codes, and software tools. We also hired approximately 115 of Zilog’s sales and engineering personnel, including all 103 of
Zilog’s personnel located in India. In a related transaction, Maxim Integrated Products (“Maxim” – NASDAQ: MXIM) acquired two of Zilog’s
product lines, namely, the hardware portion of Zilog’s remote control business and Zilog’s secured transaction product line. We have
cross-licensed the remote control technology and intellectual property with Maxim Integrated Products for purpose of conducting our
respective businesses. For further information about this acquisition see “Management’s Discussion and Analysis of Financial Condition
and Results of Operations – Results of Operations” and “ Notes to Consolidated Financial Statements – Note 24.”

Additional information regarding UEI can be obtained at www.uei.com.

Business Segment
overview Universal Electronics Inc. is a provider of a broad line of products, software, and technologies that are marketed to enhance
home entertainment systems. Our offerings include the following:

•

easy-to-use, pre-programmed universal infrared (“IR”) and radio frequency (“RF”) remote controls that are sold primarily to multiple
systems operators (“MSOs”), consumers, original equipment manufacturers (“OEMs”), and private labels,

• audio-video (“AV”) accessories sold to consumers,

•

integrated circuits, on which our software and universal IR remote control database is embedded, sold primarily to OEMs
and private labels,

intellectual property which we license primarily to OEMs, software development companies, private labels, and MSOs, and

software, firmware and technology solutions that can enable devices such as TVs, set-top boxes, stereos, automotive audio systems,
cell phones and other consumer electronic devices to wirelessly connect and interact with home networks and interactive services to
deliver digital entertainment and information.

Our business is comprised of one reportable segment.

principal products and Markets Our principal markets include MSOs in the cable and satellite subscription broadcasting markets,
as well as OEM, private label, retailer and custom installer companies that operate in the consumer electronics market.

We provide MSOs, namely cable operators and satellite service providers, both domestically and internationally, with our universal
remote control devices and integrated circuits, on which our software and IR code database is embedded, to support the demand associ-
ated with the deployment of digital set-top boxes that contain the latest technology and features. We also sell our universal remote control
devices and integrated circuits, on which our software and IR code database is embedded, to OEMs that manufacture wireless control
devices, cable converters or satellite receivers for resale in their products.

For the years ended December 31, 2008, 2007, and 2006, our sales to Comcast Communications, Inc., represented 13.4%, 13.3% and
12.0% of our net sales, respectively. No other single customer accounted for 10% or more of our net sales in 2008, 2007, or 2006. However,
DirecTV and its subcontractors collectively accounted for 19.3%, 16.9% and 17.7% of our net sales for the years ended December 31, 2008,
2007, and 2006, respectively.

We continue to pursue further penetration of the more traditional OEM consumer electronics markets. Customers in these markets

generally package our wireless control devices for resale with their AV home entertainment products. We also sell customized chips,

UNIVERSAL ELECTRONICS INC. | 2008 ANNUAL REPORT

which include our software and/or customized software packages, to these customers. Growth in this line of business has been driven by
the proliferation and increasing complexity of home entertainment equipment, emerging digital technology, multimedia and interactive
internet applications, and the number of OEMs.

We continue to place significant emphasis on expanding our sales and marketing efforts to subscription broadcasters and OEMs in
Asia, Latin America and Europe. We will continue to add new sales people to support anticipated sales growth in these markets over the
next few years.

In the international retail markets, our One For All® brand name remote control and accessories accounted for 15.6%, 17.9%, and

20.4% of our total net sales for the years ended December 31, 2008, 2007, and 2006, respectively. Throughout 2008, we continued our retail
sales and marketing efforts in Europe, Australia, New Zealand, South Africa, the Middle East, Mexico and selected countries in Asia and
Latin America. Financial information relating to our international operations for the years ended December 31, 2008, 2007, and 2006 is
included in “Notes to Consolidated Financial Statements-Note 19”.

In 2008 we began to lay the ground work to expand our presence in the domestic retail markets. During the second quarter of 2008 we
signed an agreement with Audiovox Accessories Corporation to be the exclusive supplier of embedded microcontrollers and infrared data-
base software for Audiovox’s complete line of RCA universal remote controls sold in the North American retail markets. We also agreed to
develop future remote controls for existing brands in the Audiovox lineup and granted Audiovox an exclusive license to sell and distribute
our One For All® brand remote controls and accessories in North America.

technology We hold a number of patents in the United States and abroad related to our products and technology, and have filed domestic
and foreign applications for other patents that are pending. We had a total of 148 and 175 issued and pending United States patents at the
end of 2008 and 2007, respectively. The reduction in the number of issued and pending patents resulted from the expiration of 1 patent and
our sale of 37 patents, offset by 11 new patent filings. The 37 patents sold were no longer valuable to our core business. Management may
sell patents from time to time if we determine the patents are no longer valuable to our core business or their market value exceeds the
value we are likely to otherwise realize. Our patents have remaining lives ranging from approximately one to eighteen years. We have also
obtained copyright registration and claim copyright protection for certain proprietary software and libraries of IR codes. Additionally, the
names of most of our products are registered, or are being registered, as trademarks in the United States Patent and Trademark Office
and in most of the other countries in which such products are sold. These registrations are valid for a variety of terms ranging up to 20
years and may be renewed as long as the trademarks continue to be used and are deemed by management to be important to our opera-
tions. While we follow the practice of obtaining patent, copyright and trademark registrations on new developments whenever advisable,
in certain cases, we have elected common law trade secret protection in lieu of obtaining such other protection.

Since our beginning in 1986, we have compiled an extensive IR code library that covers over 400,000 individual device functions and

over 3,600 individual consumer electronic equipment brand names. Our library is regularly updated with IR codes used in newly intro-
duced AV devices. These IR codes are captured directly from the remote control devices or the manufacturer’s written specifications to
ensure the accuracy and integrity of the database. We believe that our universal remote control database is capable of controlling virtually
all IR controlled TVs, VCRs, DVD players, cable converters, CD players, audio components and satellite receivers, as well as most other
infrared remote controlled home entertainment devices and home automation control modules worldwide.

Our proprietary software and know-how permit us to compress IR codes before we load them into our products. This provides signifi-

cant cost and space efficiencies that enable us to include more codes and features in the memory space of our wireless control devices
than are included in the similarly priced products of our competitors.

With today’s rapidly changing technology, upgradeability ensures the compatibility of our remote controls with future home enter-
tainment devices. We have developed patented technology that provides users the capability to easily upgrade the memory of our remote
controls with IR codes that were not originally included using their personal computer or telephone. These upgrade options utilize one or
two-way communication to upgrade the remote controls’ IR codes or firmware depending on the requirements.

Each of our wireless control devices is designed to simplify the use of home entertainment and other equipment. To appeal to the mass

market, the number of buttons is minimized to include only the most popular functions. Another patented ease of use feature we offer in
several of our products is our user programmable macro key. This feature allows the user to program a sequence of commands onto a
single key, to be played back each time that key is subsequently pressed.

Our remote controls are also designed for easy set-up. For most of our products, the consumer simply inputs a four-digit code for
each device to be controlled. During 2007, building on our strategy to develop new products and technologies to further simplify remote
control set-up, we created the One For All® X-sight™ product (formerly called Stealth USB) and the EZ-RCTM Web-based remote control
set-up application (formerly called EZ-Web), both released in Europe during the fourth quarter of 2008. The X-sightTM is a remote control
device that utilizes a touch screen LCD display to augment the user experience for both set-up and operation. The X-sight™ has a mini USB
port that can be connected to a personal computer. Once connected to a personal computer, our customers can utilize the EZ-RCTM remote
control set-up application’s graphical interface to fully program their remote control. Each remote control user can create their own per-
sonal profile on the device, with their favorite channels, custom functions, and more.

Another product we developed during 2007 was an automated set-up method that utilizes a set-top box. This product, designed for
subscription broadcasters, will help to simplify the end user’s set-up experience by allowing them to interface with their set-top box, using
their television, to program a remote. The set-top box can memorize the set-up parameters allowing the user to restore the set-up to a
new or existing remote.

Wireless networking is one of today’s fastest growing trends. Combining our connectivity software and patent portfolio with Universal

Plug-n-Play (“UPnP”) standards and the 802.11 wireless networking protocols, we developed our Nevo® product line. NevoSL®, which
began shipping during the second quarter of 2005, is a stand alone universal wireless controller that uses Wi-Fi to control the play back or
viewing of MP3s, photos, and videos stored on a PC, through any UPnP media player attached to a home entertainment system. By utilizing
the touch screen user interface, customers may select play lists, slide shows, or videos to be played via the media player from anywhere
within the networks range. In addition, NevoSL® utilizes infrared technology to control virtually all infrared controlled consumer electronic
devices, and may also be utilized to control wireless household appliances.

Building on the Nevo line, in 2007 we launched three new products for the custom installer market: NevoQ50®; NevoConnect® NC-50
base station; and NevoStudio Pro® programming software. NevoQ50® and NevoConnect include Z-wave™ functionality to enable bi-direc-
tional RF control to take full advantage of the Z-Wave™ “mesh networking” technologies, improving the range and increasing the reliability
of signal transmissions. Voltage sensing and video state detection allows the controller to detect whether AV equipment is on or off for
improved macro execution. NevoStudio Pro was updated with an easy wizard interface, drag and drop programming, and the ability to
generate configuration files for both the remote and base station simultaneously within a single application.

In January 2008, we continued to broaden our line of advanced function remotes for the custom installer market with the release of
NevoS70®. The NevoS70® combines all the technology of the NevoQ50® with access to web-based services to deliver real-time information
such as news, sports and stock quotes; extended battery life; and the ability to view and control any device that has a compatible embed-
ded web server, such as many web-based cameras and media servers.

During the first quarter of 2009 we intend to release a major software update to the NevoS70® and NevoQ50®. This update will enable
two-way Z-Wave™ control and communication for home control systems such as lighting, HVAC, window coverings, and others. Two-way
Z-Wave™ communication gives the user immediate feedback on the remote to indicate the current status of their Z-Wave™ devices. For
example, users may see on the remote’s display what lights are on and their brightness levels (for dimmers), and may also check the ther-
mostat for the current temperature. In addition, this software update enables two-way serial communication, including metadata trans-
mission, with select third-party devices. These devices include digital media servers and AV distribution systems.

The Nevo® product line supports the attainment of our strategic goal to build our presence as a wireless control technology leader,

enabling consumers to wirelessly connect, control, and interact within the ever-increasingly complex home.

Methods of Distribution Our distribution methods for our remote control devices are dependent on the sales channel. We distribute
remote control devices directly to MSOs and OEMs, both domestically and internationally. In the North American retail channel, we license
our One For All® brand name to Audiovox, who in turn sells products directly to certain domestic retailers and third party distributors.
Outside of North America, we sell our wireless control devices and AV accessories under the One For All® and private label brand names
to retailers through our international subsidiaries. We utilize third party distributors for the custom installer channel, and for retail in
countries where we do not have subsidiaries.

UNIVERSAL ELECTRONICS INC. | 2008 ANNUAL REPORT

We have twelve international subsidiaries, Universal Electronics B.V., established in the Netherlands, One For All GmbH, established

in Germany, One for All Iberia S.L., established in Spain, One For All UK Ltd., established in the United Kingdom, One For All Argentina
S.R.L., established in Argentina, One For All France S.A.S., established in France, Universal Electronics Italia S.R.L., established in Italy,
UE Singapore Pte. Ltd., established in Singapore, UEI Hong Kong Pte. Ltd., established in Hong Kong, UEI Electronics Pte. Ltd., established
in India, UEI Cayman Inc., established in the Cayman Islands and Ultra Control Consumer Electronics GmbH, established in Germany.

We have developed a broad portfolio of patented technologies and the industry’s leading database of IR codes. We ship integrated cir-
cuits, on which our software and IR code database is embedded, directly to manufacturers for inclusion in their products. In addition, we
license our software and technology to manufacturers. Licenses are delivered upon the transfer of a product master or on a per unit basis
when the software or technology is used in a customer device.

We provide domestic and international consumer support to our various universal remote control marketers, including manufac-
turers, cable and satellite providers, retail distributors, and audio and video original equipment manufacturers through our automated
“InterVoice” system. Live agent help is available through certain programs. We also make available a free web-based support resource,
www.urcsupport.com, designed specifically for MSOs. This solution offers interactive online demos and tutorials to help users easily
setup their remote and commands, and as a result reduces call volume at customer support centers. Additionally, ActiveSupport®, a call
center, provides customer interaction management services from service and support to retention. Pre-repair calls, post-install surveys,
and inbound calls to customers provide greater bottom-line efficiencies. We continue to review our programs to determine their value in
enhancing and improving the sales of our products. As a result of this continued review, some or all of these programs may be modified
or discontinued in the future and new programs may be added.

Raw Materials and Dependence on Suppliers
We utilize third-party manufacturers and suppliers primarily in Asia to produce our wireless control products. In 2008, Computime, C.G.
Development, Samsung and Samjin each provided more than 10% of our total inventory purchases. They collectively provided 73.1% of
our total inventory purchases for 2008. In 2007, Computime, C.G. Development and Samsung each provided more than 10% of our total
inventory purchases. They collectively provided 63.2% of our total inventory purchases for 2007. In 2006, Computime, C.G. Development,
Freescale and Jetta each provided more than 10% of our total inventory purchases. They collectively provided 60.9% of our total inventory
purchases for 2006.

We continue to evaluate additional contract manufacturers and sources of supply. During 2008, we utilized multiple contract manufac-
turers and maintained duplicate tooling for certain of our products. This diversification lessens our dependence on any one contract man-
ufacturer and allows us to negotiate more favorable terms. Where possible we utilize standard parts and components, which are available
from multiple sources. To reduce our dependence on our integrated circuits suppliers we continually seek additional sources, such as our
new relationship with Maxim. To further manage our integrated circuit supplier dependence, we include flash microcontroller technology
in most of our products. Flash microcontrollers can have shorter lead times than standard microcontrollers and may be reprogrammed
if necessary. This allows us flexibility during any unforeseen shipping delays and has the added benefit of potentially reducing excess and
obsolete inventory exposure.

Seasonality
Historically, our business has been influenced by the retail sales cycle, with increased sales in the last half of the year and the largest pro-
portion of sales occurring in the last quarter. In 2007, our net sales in the first half of the year exceeded our net sales in the second. This
was primarily the result of strong demand from our domestic cable customers in the first and second quarters of 2007. This demand was
driven by their effort to meet the Open Cable Applications Platform (“OCAP”) July 1, 2007 deadline. In 2008, our sales cycle returned to its
historical pattern and we expect this pattern to be repeated in 2009.

See “Notes to the Consolidated Financial Statements – Note 23” for further details regarding our quarterly results.

Competition
Our principal competitor in the domestic MSO market is Philips Consumer Electronics. In the international retail and private label markets
for wireless controls we compete with Philips Consumer Electronics, Thomson and Sony as well as various manufacturers of wireless

controls in Asia. Our primary competitors in the OEM market are the original equipment manufacturers themselves and wireless control
manufacturers in Asia. We compete against Universal Remote Control, Logitech, and Ruwido in the IR database market. Our NevoSL®
product competes in the custom electronics installation market against AMX, RTI, Control4, Universal Remote Control, Philips Consumer
Electronics, Logitech and many others. We compete in our markets on the basis of product quality, features, price, intellectual property
and customer support. We believe that we will need to continue to introduce new and innovative products to remain competitive and to
recruit and retain competent personnel to successfully accomplish our future objectives.

Engineering, Research and Development
During 2008, our engineering efforts focused on the following:

• broadening our product portfolio;

• modifying existing products and technologies to improve features and lower costs;

•

formulating measures to protect our proprietary technology and general know-how;

improving our software so that we may pre-program more codes into our memory chips;

• simplifying the set-up and upgrade process for our wireless control products; and

• updating our library of IR codes to include IR codes for new features and devices introduced worldwide.

Our engineering efforts included developing remote controls that combine consumer friendly interfaces and intuitive setup with
advance functions. The Xsight, which was released in Europe during the fourth quarter of 2008, may be set up in minutes utilizing the
intuitive menu on its color LCD display, without an instruction manual. We also developed the Web based EZ-RC™ application. Users create
a personal account to begin. The application accepts any previously set up devices from the on-remote setup and then is able to add or
change devices as well as personalize more advanced features such as favorites, profiles and activities.

We also developed products aimed at unifying traditional technologies that are encountered within a home, and emerging technolo-
gies. These products allow consumers to deploy our products to situations ranging from a simple IR based audio-visual stack to a modern
digital media management system that allows access to digital content such as music, pictures and videos. Our NevoStudio Pro update
enables two-way Z-Wave™ control and communication for home control systems such as lighting, HVAC, window coverings, and others.
Two-way Z-Wave™ communication gives the user immediate feedback on the remote to indicate the current status of their Z-Wave™ devices.
For example, users may see on the remote’s display what lights are on and their brightness levels (for dimmers), and may also check the
thermostat for the current temperature. In addition, this software update enables two-way serial communication, including metadata
transmission, with select third-party devices. These devices include digital media servers and AV distribution systems.

Our personnel are involved with various industry organizations and bodies, which are in the process of setting standards for infrared,
radio frequency, power line, telephone and cable communications and networking in the home. There can be no assurance that any of our
research and development projects will be successfully completed.

On February 18, 2009, we acquired certain patents, intellectual property and other assets related to the universal remote control busi-
ness from Zilog Inc. for approximately $9.5 million in cash. The purchase included Zilog’s full library and database of infrared codes, and
software tools. We also hired approximately 115 of Zilog’s sales and engineering personnel, including all 103 of Zilog’s personnel located
in India. The engineering personnel acquired from Zilog are focused on the capture of IR codes and the development of software and firm-
ware leading to more complete solutions to customer needs, the conceptual formulation and design of possible alternatives, as well as
the testing of process and product cost improvements. These efforts will enable us to provide customers with reductions in design cycle
times, lower costs, and improvements in integrated circuit design, product quality and overall functional performance. These efforts will
also enable us to further penetrate existing markets, pursue new markets more effectively and expand our business.

UNIVERSAL ELECTRONICS INC. | 2008 ANNUAL REPORT

Our expenditures on engineering, research and development were:

( i n m i l l i o n s ) :

Research and development (1)

Engineering (2)

Total engineering, research and development

2 0 0 8

2 0 0 7

2 0 0 6

8.2

6.9

8.8

3.9

7.4

5.0

15.1

12.7

12.4

(1) Research and development expense for each of the years ended December 31, 2008, 2007, and 2006 includes $0.4 million of stock-based compensation expense.
(2) Engineering costs are included in SG&A.

Environmental Matters
Many of our products are subject to various federal, state, local and international laws governing chemical substances in products, includ-
ing laws regulating the manufacture and distribution of chemical substances and laws restricting the presence of certain substances in
electronics products. We may incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, third-party damages
or personal injury claims, if we were to violate or become liable under environmental laws or if our products become non-compliant with
environmental laws. We also face increasing complexity in our product design and procurement operations as we adjust to new and future
requirements relating to the materials composition of our products.

We also may face significant costs and liabilities in connection with product take-back legislation. The European Union (the “EU”)

enacted the Waste Electrical and Electronic Equipment Directive (“WEEE”), which makes producers of electrical goods, including
computers and printers, financially responsible for specified collection, recycling, treatment and disposal of past and future covered
products. During 2007, the majority of our European subsidiaries became WEEE compliant. Our Italian subsidiary became compliant
in February 2008. Similar legislation has been or may be enacted in other jurisdictions, including in the United States, Canada, Mexico,
China and Japan.

We believe that we have materially complied with all currently existing international and domestic federal, state and local statutes

and regulations regarding environmental standards and occupational safety and health matters to which we are subject. During the
years ended December 31, 2008, 2007 and 2006, the amounts incurred in complying with federal, state and local statutes and regulations
pertaining to environmental standards and occupational safety and health laws and regulations did not materially affect our earnings or
financial condition. However, future events, such as changes in existing laws and regulations or enforcement policies, may give rise to
additional compliance costs that may have a material adverse effect upon our capital expenditures, earnings or financial condition.

Employees
At December 31, 2008, we employed 433 employees, of which 155 worked in engineering and research and development, 69 in sales and
marketing, 93 in consumer service and support, 51 in operations and warehousing and 65 in executive and administrative functions. On
February 18, 2009, we acquired certain patents, intellectual property and other assets related to the universal remote control business
from Zilog Inc. As a result of this transaction, we hired approximately 115 of Zilog’s sales and engineering personnel, including all 103 of
Zilog’s personnel located in India. None of our employees are subject to a collective bargaining agreement or represented by a union.
We consider our employee relations to be good.

International Operations
Financial information relating to our international operations for the years ended December 31, 2008, 2007 and 2006 is incorporated by
reference to “Notes to Consolidated Financial Statements – Note 19”.

Available Information
Our Internet address is www.uei.com. We make available free of charge through the website our annual report on Form 10-K, our
quarterly reports on Form 10-Q, our current reports on Form 8-K and any amendments to these reports as soon as reasonably practical
after we electronically file such reports with the Securities and Exchange Commission. These reports may be found on our website at
www.uei.com under the caption “SEC Filings” on the Investor page. Investors may also obtain copies of our SEC filings from the SEC
website at www.sec.gov.

RISK FACTORS

Forward Looking Statements

We caution that the following important factors, among others (including, but not limited to, factors discussed below in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” as well as those factors discussed elsewhere in this Annual
Report, or in our other reports filed from time to time with the Securities and Exchange Commission), may affect our actual results and
may contribute to or cause our actual consolidated results to differ materially from those expressed in any of our forward-looking state-
ments. The factors included here are not exhaustive. Further, any forward-looking statement speaks only as of the date on which such
statement is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the
date on which such statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it
is not possible for management to predict all such factors, nor can we assess the impact of each such factor on the business or the extent
to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking
statements. Therefore, forward-looking statements should not be relied upon as a prediction of actual future results.

While we believe that the forward-looking statements made in this report are based on reasonable assumptions, the actual outcome
of such statements is subject to a number of risks and uncertainties, including the failure of our markets to continue growing and expand-
ing in the manner we anticipated; the failure of our customers to grow and expand as we anticipated; the effects of natural or other events
beyond our control, including the effects a war or terrorist activities may have on us or the economy; the economic environment’s effect on
us or our customers; the growth of, acceptance of and the demand for our products and technologies in various markets and geographical
regions, including cable, satellite, consumer electronics, retail, digital media/technology, CEDIA, interactive TV, automotive, and cellu-
lar industries not materializing or growing as we believed; our inability to add profitable complementary products which are accepted by
the marketplace; our inability to continue to maintain our operating costs at acceptable levels through our cost containment efforts; our
inability to realize tax benefits from various tax projects initiated from time to time; our inability to continue selling our products or licens-
ing our technologies at higher or profitable margins; our inability to obtain orders or maintain our order volume with new and existing
customers; the possible dilutive effect our stock incentive programs may have on our earnings per share and stock price; our inability to
continue to obtain adequate quantities of component parts or secure adequate factory production capacity on a timely basis; and other
factors listed from time to time in our press releases and filings with the Securities and Exchange Commission.

We face a number of risks related to the recent financial crisis and severe tightening in the global credit markets
General economic conditions, both domestic and international, have an impact on our business and financial results. The ongoing global
financial crisis affecting the banking system and financial markets has resulted in a severe tightening in the credit markets, a low level of
liquidity in many financial markets, and extreme volatility in credit and equity markets. This financial crisis may impact our business in a
number of ways, including:

potential Deferment of purchases and orders by Customers: Uncertainty about current and future global economic conditions may
cause consumers, businesses and governments to defer purchases in response to tighter credit, decreased cash availability and declining
consumer confidence. Accordingly, future demand for our products may differ materially from our current expectations.

Customers’ Inability to obtain Financing to Make purchases from us and/or Maintain their Business: Some of our customers
require substantial financing in order to fund their operations and make purchases from us. The inability of these customers to obtain suf-
ficient credit to finance purchases of our products may adversely impact our financial results. In addition, if the financial crisis results in
insolvencies for our customers, it may adversely impact our financial results.

potential Impact on trade receivables: Credit market conditions may slow our collection efforts as customers experience increased
difficulty in obtaining requisite financing, leading to higher than normal accounts receivable balances and longer DSOs. This may result in
greater expense associated with collection efforts and increased bad debt expense.

negative Impact from Increased Financial pressures on third-party Dealers, Distributors and retailers: We make sales in
certain regions of the world through third-party dealers, distributors and retailers. Although many of these third parties have significant

UNIVERSAL ELECTRONICS INC. | 2008 ANNUAL REPORT

operations and maintain access to available credit, others are smaller and more likely to be impacted by the significant decrease in avail-
able credit that has resulted from the current financial crisis. If credit pressures or other financial difficulties result in insolvency for these
third parties and we are unable to successfully transition our end customers to purchase products from other third parties, or from us
directly, it may adversely impact our financial results.

negative Impact from Increased Financial pressures on Key Suppliers: Our ability to meet customers’ demands depends, in part,
on our ability to obtain timely and adequate delivery of quality materials, parts and components from our suppliers. Certain of our compo-
nents are available only from a single source or limited sources. If certain key suppliers were to become capacity constrained or insolvent
as a result of the financial crisis, it may result in a reduction or interruption in supplies or a significant increase in the price of supplies
and adversely impact our financial results. In addition, credit constraints at key suppliers may result in accelerated payment of accounts
payable by us, impacting our cash flow.

Dependence upon Key Suppliers During 2008, four sources, Computime, C.G. Development, Samsung and Samjin, each provided over
10% of our total inventory purchases. Purchases from these suppliers collectively amounted to $135.5 million, or 73.1%, of total inventory
purchases during 2008. During 2007, Computime, C.G. Development and Samsung, each provided over 10% of our total inventory pur-
chases. Purchases from these suppliers collectively amounted to $100.7 million, representing 63.2% of total inventory purchases in 2007.
During 2006, Computime, C.G. Development, Freescale and Jetta each provided over 10% of our total inventory purchases. Purchases
from these suppliers collectively amounted to $82.6 million or 60.9% of our total inventory purchases in 2006.

Most of the components used in our products are available from multiple sources. However, we have elected to purchase integrated
circuits, used principally in our wireless control products, from two sources, Freescale and Samsung. To reduce our dependence on our
integrated circuits suppliers we continually seek additional sources, such as our new relationship with Maxim. We generally maintain
inventories of our integrated chips, which may be used in part to mitigate, but not eliminate, delays resulting from supply interruptions.

In addition, we have identified alternative sources of supply for our integrated circuit, component parts, and finished goods needs;
however, there can be no assurance that we will be able to continue to obtain these inventory purchases on a timely basis. Any extended
interruption, shortage or termination in the supply of any of the components used in our products, or a reduction in their quality or reliabil-
ity, or a significant increase in prices of components, would have an adverse effect on our business, results of operations and cash flows.

Dependence on Foreign Manufacturing Third-party manufacturers located in Asia manufacture a majority of our products. Our arrange-
ments with our foreign manufacturers are subject to the risks of doing business abroad, such as tariffs, environmental and trade restric-
tions, intellectual property protection and enforcement, export license requirements, work stoppages, political and social instability,
economic and labor conditions, foreign currency exchange rate fluctuations, and other factors, which may have a material adverse effect
on our business, results of operations and cash flows. We believe that the loss of any one or more of our manufacturers would not have
a long-term material adverse effect on our business, results of operations and cash flows, because numerous other manufacturers are
available to fulfill our requirements; however, the loss of any of our major manufacturers may adversely affect our business, operating
results, financial condition and cash flows until alternative manufacturing arrangements are secured.

potential Fluctuations in Quarterly results Historically, our business has been influenced by the retail sales cycle, with increased
sales in the last half of the year and the largest proportion of sales occurring in the last quarter. In 2007, sales in the first half of the year
exceeded our sales in the second half. This was primarily the result of strong demand from our domestic cable customers in the first
and second quarters of 2007. This demand was driven by their effort to meet the July 1, 2007 Open Cable Applications Platform (“OCAP”)
deadline. In 2008, our sales cycle returned to its historical pattern and we expect this pattern to be repeated in 2009, however, factors such
as those we experienced during 2007 may cause our sales cycles to deviate from historical patterns. Such factors, including quarterly
variations in financial results, may have a material adverse affect on the volatility and market price of our common stock.

We may from time to time increase our operating expenses to fund greater levels of research and development, sales and market-
ing activities, development of new distribution channels, improvements in our operational and financial systems and development of our
customer support capabilities, and to support our efforts to comply with various government regulations. To the extent such expenses
precede or are not subsequently followed by increased revenues, our business, operating results, financial condition and cash flows will
be adversely affected.

In addition, we may experience significant fluctuations in future quarterly operating results that may be caused by many other factors,
including demand for our products, introduction or enhancement of products by us and our competitors, the loss or acquisition of any sig-
nificant customers, market acceptance of new products, price reductions by us or our competitors, mix of distribution channels through
which our products are sold, product or supply constraints, level of product returns, mix of customers and products sold, component pric-
ing, mix of international and domestic revenues, foreign currency exchange rate fluctuations and general economic conditions. In addition,
as a strategic response to changes in the competitive environment, we may from time to time make certain pricing or marketing decisions
or acquisitions that may have a material adverse effect on our business, results of operations or financial condition. As a result, we believe
period-to-period comparisons of our results of operations are not necessarily meaningful and should not be relied upon as an indication of
future performance.

Due to all of the foregoing factors, it is possible that in some future quarters our operating results will be below the expectations of

public market analysts and investors. If this happens the price of our common stock may be materially adversely affected.

Dependence on Consumer preference We are susceptible to fluctuations in our business based upon consumer demand for our products.
In addition, we cannot guarantee that increases in demand for our products associated with increases in the deployment of new technol-
ogy will continue. We believe that our success depends on our ability to anticipate, gauge and respond to fluctuations in consumer prefer-
ences. However, it is impossible to predict with complete accuracy the occurrence and effect of fluctuations in consumer demand over a
product’s life cycle. Moreover, we caution that any growth in revenues that we achieve may be transitory and should not be relied upon as
an indication of future performance.

Demand for Consumer Service and Support We have continually provided domestic and international consumer service and support to
our customers to add overall value and to help differentiate us from our competitors. We continually review our service and support group
and are marketing our expertise in this area to other potential customers. There can be no assurance that we will be able to attract new
customers in the future.

In addition, certain of our products have more features and are more complex than others and therefore require more end-user tech-

nical support. In some instances, we rely on distributors or dealers to provide the initial level of technical support to the end-users. We
provide the second level of technical support for bug fixes and other issues at no additional charge. Therefore, as the mix of our products
includes more of these complex product lines, support costs may increase, which would have an adverse effect on our business, operating
results, financial condition and cash flows.

Dependence upon timely product Introduction Our ability to remain competitive in the wireless control and AV accessory products
market will depend considerably upon our ability to successfully identify new product opportunities, as well as develop and introduce
these products and enhancements on a timely and cost effective basis. There can be no assurance that we will be successful at devel-
oping and marketing new products or enhancing our existing products, or that these new or enhanced products will achieve consumer
acceptance and, if achieved, will sustain that acceptance. In addition, there can be no assurance that products developed by others will not
render our products non-competitive or obsolete or that we will be able to obtain or maintain the rights to use proprietary technologies
developed by others which are incorporated in our products. Any failure to anticipate or respond adequately to technological developments
and customer requirements, or any significant delays in product development or introduction, may have a material adverse effect on our
operating results, financial condition and cash flows.

In addition, the introduction of new products may require significant expenditures for research and development, tooling, manufactur-
ing processes, inventory and marketing. In order to achieve high volume production of any new product, we may have to make substantial
investments in inventory and expand our production capabilities.

Dependence on Major Customers The economic strength and weakness of our worldwide customers affect our performance. We sell our
wireless control products, AV accessory products, and proprietary technologies to private label customers, original equipment manufac-
turers, and companies involved in the subscription broadcasting industry. We also supply our products to our wholly owned, non-U.S. sub-
sidiaries and to independent foreign distributors, who in turn distribute our products worldwide, with Europe, Asia, South Africa, Australia,
and Argentina currently representing our principal foreign markets.

UNIVERSAL ELECTRONICS INC. | 2008 ANNUAL REPORT

In each of the years ended December 31, 2008, 2007 and 2006, we had sales to one customer, Comcast Communications Inc., that
amounted to more than 10% of our net sales for the year. In addition, in each of these years, we had sales to DirecTV and its sub-contrac-
tors, that when combined, exceeded 10% of our net sales. The loss of either of these customers or of any other key customer, either in the
United States or abroad or our inability to maintain order volume with these customers, may have an adverse effect on our financial condi-
tion, results of operations and cash flows.

Change in Warranty Claim Costs We rely on third-party companies to service a large portion of our customer warranty claims. If the
cost to service these warranty claims increases unexpectedly, or these outside services cease to be available, we may be required to increase
our estimate of future claim costs, which may have a material adverse effect on our operating results, financial condition and cash flows.

outsourced labor We employ a small number of personnel to develop and market additional products that are part of the Nevo® platform
as well as products that are based on the Zigbee®, Z-Wave® and other radio frequency technology. Even after these hires, we continue to
use outside resources to assist us in the development of these products. While we believe that such outside services should continue to be
available to us, if they cease to be available, the development of these products may be substantially delayed, which may have a material
adverse effect on our operating results, financial condition and cash flows.

Competition The wireless control industry is characterized by intense competition based primarily on product availability, price, speed
of delivery, ability to tailor specific solutions to customer needs, quality, and depth of product lines. Our competition is fragmented across
our products, and, accordingly, we do not compete with any one company across all product lines. We compete with a variety of entities,
some of which have greater financial resources. Our ability to remain competitive in this industry depends in part on our ability to suc-
cessfully identify new product opportunities, develop and introduce new products and enhancements on a timely and cost effective basis,
as well as our ability to successfully identify and enter into strategic alliances with entities doing business within the industries we serve.
There can be no assurance that our product offerings will be, and/or remain, competitive or that strategic alliances, if any, will achieve
the type, extent, and amount of success or business that we expect them to achieve. The sales of our products and technology may not
occur or grow in the manner we expect, and thus we may not recoup costs incurred in the research and development of these products as
quickly as we expect, if at all.

patents, trademarks, and Copyrights The procedures by which we identify, document and file for patent, trademark, and copyright pro-
tection are based solely on engineering and management judgment, with no assurance that a specific filing will be issued, or if issued, will
deliver any lasting value to us. Because of the rapid innovation of products and technologies that is characteristic of our industry, there is
no assurance that rights granted under any patent will provide competitive advantages to us or will be adequate to safeguard and maintain
our proprietary rights. Moreover, the laws of certain countries in which our products are or may be manufactured or sold may not offer
protection on such products and associated intellectual property to the same extent that the U.S. legal system may offer.

In our opinion, our intellectual property holdings as well as our engineering, production, and marketing skills and the experience of
our personnel are of equal importance to our market position. We further believe that none of our businesses are materially dependent
upon any single patent, copyright, trademark, or trade secret.

Some of our products include or use technology and/or components of third parties. While it may be necessary in the future to seek
or renew licenses relating to various aspects of such products, we believe that, based upon past experience and industry practice, such
licenses generally may be obtained on commercially reasonable terms; however, there is no guarantee that such licenses may be obtained
on such terms or at all. Because of technological changes in the wireless and home control industry, current extensive patent coverage,
and the rapid rate of issuance of new patents, it is possible certain components of our products and business methods may unknowingly
infringe upon the patents of others.

potential for litigation As is typical in our industry and for the nature and kind of business in which we are engaged, from time to
time various claims, charges and litigation are asserted or commenced by third parties against us or by us against third parties, arising
from or related to product liability, infringement of patent or other intellectual property rights, breach of warranty, contractual relations
or employee relations. The amounts claimed may be substantial, but they may not bear any reasonable relationship to the merits of the
claims or the extent of any real risk of court awards assessed against us or in our favor.

risks of Conducting Business Internationally Risks of doing business internationally may adversely affect our sales, operations,
earnings and cash flows due to a variety of factors, including, but not limited to:

our valuation allowances against our deferred tax assets resulting in an increase in our effective tax rate and an adverse impact on our
future operating results, financial condition and cash flows.

•

changes in a country or region’s economic or political conditions, including inflation, recession, interest rate fluctuations and actual or
anticipated military conflicts;

currency fluctuations affecting sales, particularly in the Euro and British Pound, which contribute to variations in sales of products and
services in impacted jurisdictions and also affect our reported results expressed in U.S. dollars;

currency fluctuations affecting costs, particularly the Euro, British Pound and the Chinese Yuan, which contribute to variances in costs
in impacted jurisdictions and also affect our reported results expressed in U.S. dollars;

longer accounts receivable cycles and financial instability among customers;

trade regulations and procedures and actions affecting production, pricing and marketing of products;

local labor conditions, customs, and regulations;

• changes in the regulatory or legal environment;

• differing technology standards or customer requirements;

•

import, export or other business licensing requirements or requirements related to making foreign direct investments, which may
affect our ability to obtain favorable terms for components or lead to penalties or restrictions;

• difficulties associated with repatriating cash generated or held abroad in a tax-efficient manner and changes in tax laws; and

• fluctuations in freight costs and disruptions at important geographic points of exit and entry.

effectiveness of our Internal Control over Financial reporting Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are
required to include in our Annual Report on Form 10-K our assessment of the effectiveness of our internal control over financial report-
ing. Furthermore, our independent registered public accounting firm is required to audit our internal control over financial reporting and
separately report on whether it believes we maintain, in all material respects, effective internal control over financial reporting. Although
we believe that we currently have adequate internal control procedures in place, we cannot be certain that future material changes to
our internal control over financial reporting will be effective. If we cannot adequately maintain the effectiveness of our internal control
over financial reporting, we might be subject to sanctions or investigation by regulatory authorities, such as the Securities and Exchange
Commission. Any such action may adversely affect our financial results and the market price of our common stock.

Changes in Generally accepted accounting principles Our financial statements are prepared in accordance with U.S. generally
accepted accounting principles. These principles are subject to revision and interpretation by various governing bodies, including the
FASB and the SEC. A change in current accounting standards or their interpretation may have a significant adverse effect on our operating
results, financial condition and cash flows.

unanticipated Changes in tax provisions or Income tax liabilities We are subject to income taxes in the United States and numer-
ous foreign jurisdictions. Our tax liabilities are affected by the amounts we charge for inventory and other items in intercompany transac-
tions. From time to time, we are subject to tax audits in various jurisdictions. Tax authorities may disagree with our intercompany charges
or other matters and assess additional taxes. We assess the likely outcomes of these audits in order to determine the appropriateness of
the tax provision. However, there can be no assurance that we will accurately predict the outcomes of these audits, and the actual out-
comes of these audits may have a material impact on our financial condition, results of operations and cash flows. In addition, our effective
tax rate in the future may be adversely affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in
the valuation of deferred tax assets and liabilities, changes in tax laws and the discovery of new information in the course of our tax return
preparation process. Furthermore, our tax provisions may be adversely affected as a result of any new interpretative accounting guidance
related to accounting for uncertain tax positions.

Inability to use Deferred tax assets We have deferred tax assets that we may not be able to use under certain circumstances. If we
are unable to generate sufficient future taxable income in certain jurisdictions, or if there is a significant change in the actual effective tax
rates or the time period within which the underlying temporary differences become taxable or deductible, we may be required to increase

UNIVERSAL ELECTRONICS INC. | 2008 ANNUAL REPORT

environmental Matters Many of our products are subject to various federal, state, local and international laws governing chemical sub-
stances in products, including laws regulating the manufacture and distribution of chemical substances and laws restricting the presence
of certain substances in electronics products. With the passage of the European Union’s Restriction of Hazardous Substances Directive,
which makes producers of electrical goods responsible for collection, recycling, treatment and disposal of recovered products, similar
restrictions in China effective March 2007 and the European Union’s Waste Electrical and Electronic Equipment Directive, we may face
significant costs and liabilities in complying with these laws and any future laws and regulations or enforcement policies that may have a
material adverse effect upon our capital expenditures, earnings or financial condition.

leased property We lease all of the properties used in our business. We can give no assurance that we will enter into new or renewal
leases, or that, if entered into, the new lease terms will be similar to the existing terms or that the terms of any such new or renewal
leases will not have a significant and material adverse effect on our operating results, financial condition and cash flows.

technology Changes in Wireless Control We currently derive substantial revenue from the sale of wireless remote controls based on
infrared (“IR”) technology. Other control technologies exist or may be developed that may compete with IR. In addition, we develop and
maintain our own database of IR and RF codes. There are several competing IR and RF libraries offered by companies that we compete
with in the marketplace. The advantage that we may have compared to our competitors is difficult to measure. If other wireless control
technology gains acceptance and starts to be integrated into home electronics devices currently controlled through our IR remote control-
lers, demand for our products may decrease, resulting in decreased revenue, earnings and cash flow.

Failure to recruit, hire, and retain Key personnel Our ability to achieve growth in the future will depend, in part, on our success at
recruiting, hiring, and retaining highly skilled engineering, managerial, operational, sales and marketing personnel. Our corporate office,
including our advance technology engineering group, is based in Southern California. The high cost of living in Southern California makes
it difficult to attract talent from outside the region and may also put pressure on overall employment related expense. Additionally, our
competitors seek to recruit and hire the same key personnel. Therefore, if we fail to stay competitive in salary and benefits within the industry
it may negatively impact our ability to hire and retain key personnel. The inability to recruit, hire, and retain qualified personnel in a timely
manner, or the loss of any key personnel, may make it difficult to meet key objectives, such as timely and effective product introductions.

Credit Facility We amended our Credit Facility in August 2006, extending it for an additional three years until August 2009. We are cur-
rently negotiating another extension. Presently, we have no borrowings under this facility; however, we cannot make any assurances that
we will not need to borrow amounts under this facility or that this facility will continue to be extended and thus available to us if we need to
borrow. If this or any other Credit Facility is not available to us at a time when we need to borrow, we would have to use our cash reserves
which may have a material adverse effect on our operating results, financial condition and cash flows.

Change in Competition and pricing We rely on third-party manufacturers to build our universal wireless control products, based on
our extensive IR code library and patented technology. Price is always an issue in winning and retaining business. If customers become
increasingly price sensitive, new competition may arise from manufacturers who decide to go into direct competition with us or from cur-
rent competitors who perform their own manufacturing. If such a trend develops, we may experience downward pressure on our pricing
or lose sales, which may have a material adverse effect on our operating results, financial condition and cash flows.

transportation Costs; Impact of oil prices We ship products from our foreign manufacturers via ocean and air transport. It is some-
times difficult to forecast swings in demand or delays in production and, as a result, products may be shipped via air which is more costly
than ocean shipments. Often, we typically cannot recover the increased cost of air freight from our customers. Additionally, tariffs and
other export fees may be incurred to ship products from foreign manufacturers to the customer. The inability to predict swings in demand
or delays in production may increase the cost of freight which may have a material adverse effect on our product margins.

In addition, we have an exposure to oil prices in two forms. The first is in the prices of the oil-based materials that we use in our prod-
ucts, which are primarily the plastics and other components that we include in our finished products. The second is in the cost of delivery
and freight, which would be passed on by the carriers that we use in the form of higher rates. We record freight-in as a cost of sales and
freight-out in operating expenses. Rising oil prices may have an adverse effect on cost of sales and operating expenses.

proprietary technologies We produce highly complex products that incorporate leading-edge technology, including hardware, firmware,
and software. Firmware and software may contain bugs that can unexpectedly interfere with product operation. There can be no assur-
ance that our testing programs will detect all defects in individual products or defects that may affect numerous shipments. The presence
of defects may harm customer satisfaction, reduce sales opportunities, or increase returns. An inability to cure or repair such a defect may
result in the failure of a product line, temporary or permanent withdrawal from a product or market, damage to our reputation, increased
inventory costs, or product reengineering expenses, any of which may have a material impact on our revenues, margins and net income.

Strategic Business transactions We may, from time to time, pursue strategic alliances, joint ventures, business acquisitions, products
or technologies (“strategic business transactions”) that complement or expand our existing operations, including those that may be mate-
rial in size and scope. Strategic business transactions, including our recent acquisition of patents, intellectual property and other assets
from Zilog, involve many risks, including the diversion of management’s attention away from day-to-day operations. There is also the risk
that we will not be able to successfully integrate the strategic business transaction with our operations, personnel, customer base, prod-
ucts or technologies. Such strategic business transactions may also have adverse short-term effects on our operating results, and may
result in dilutive issuances of equity securities, the incurrence of debt, and the loss of key employees. In addition, these strategic business
transactions are generally subject to specific accounting guidelines that may adversely affect our financial condition, results of operations
and cash flow. For instance, business acquisitions must be accounted for as purchases and, because most technology-related acquisitions
involve the purchase of significant intangible assets, these acquisitions typically result in substantial amortization charges, which may
have a material adverse effect on our results of operations. There can be no assurance that any such strategic business transactions will
occur or, if such transactions do occur, that the integration will be successful or that the customer bases, products or technologies will
generate sufficient revenue to offset the associated costs or effects.

Growth projections Management has made the projections required for the preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America regarding future events and the financial performance of the
company, including those involving:

SELECTED CONSOLIDATED FINANCIAL DATA

The information set forth below is not necessarily indicative of the results of future operations and should be read in conjunction with
“Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the Consolidated Financial Statements and
notes thereto included in “Financial Statements and Supplementary Data,” of this annual report in order to understand further the factors
that may affect the comparability of the financial data presented below.

( i n t h o u s a n d s , e x c e p t p e r s h a r e d a t a )

2 0 0 8

2 0 0 7

2 0 0 6

2 0 0 5

2 0 0 4

Y e a r e n d e d D e c e m b e r 3 1 ,

Net sales

Operating income

Net income

Earnings per share:

Basic

Diluted

Shares used in calculating earnings per share:

Basic

Diluted

Cash dividend declared per common share

Gross margin

Selling, general, administrative, research and
development expenses as a % of net sales

Operating margin

Net income as a % of net sales

Return on average assets

Working capital

$ 287,100

$ 272,680

$ 235,846

$ 181,349

$ 158,380

20,761

15,806

1.13

1.09

14,015

14,456

—

33.5%

26.3%

7.2%

5.5%

7.3%

26,451

20,230

1.40

1.33

14,410

15,177

—

36.4%

26.7%

9.7%

7.4%

10.2%

18,517

13,520

0.98

0.94

13,818

14,432

—

36.4%

28.5%

7.9%

5.7%

8.3%

11,677

$ 13,540

9,701

9,114

0.72

0.69

0.67

0.65

13,462

13,992

—

37.0%

30.6%

6.4%

5.4%

6.8%

13,567

14,100

—

38.9%

30.3%

8.6%

5.8%

6.8%

$ 122,303

$ 140,330

$ 106,179

77,201

$ 75,081

•

the benefits the company expects as a result of the development and success of products and technologies, including new products
and technologies and the company’s home connectivity line of products and software;

the recently announced new contracts with new and existing customers and new market penetrations;

the growth expected as a result of the digital from analog conversion;

the expected continued growth in digital TVs, PVRs and overall growth in the company’s industry;

Ratio of current assets to current liabilities

3.0

4.0

3.4

2.8

3.1

Total assets

Cash and cash equivalents

Long—term debt

Stockholders’ equity

Book value per share (a)

$ 217,555

$ 217,285

$ 178,608

$ 146,319

$ 140,400

75,238

86,610

66,075

43,641

$ 42,472

—

$ 153,353

$ 168,242

$ 134,217

$ 103,292

$ 103,881

11.24

11.55

9.58

7.63

7.66

the effects the we may experience due to the continued softness in its worldwide markets driven by the current economic environment.

Ratio of liabilities to liabilities and stockholders’ equity

29.5%

22.6%

24.9%

29.4%

26.0%

Actual events or results may be unfavorable to management’s projections, which would have a material adverse effect on our projected
operating results, financial condition and cash flows.

(a) Book value per share is defined as stockholders’ equity divided by common shares issued, less treasury stock.

The comparability of information between 2004 and the other years presented is affected by the acquisition of SimpleDevices Inc. in the

fourth quarter of 2004.

UNIVERSAL ELECTRONICS INC. | 2008 ANNUAL REPORT

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Consolidated Financial Statements and the related notes that appear
elsewhere in this document.

Overview
We have developed a broad line of pre-programmed universal wireless control products and audio-video accessories that are marketed
to enhance home entertainment systems. Our customers operate in the consumer electronics market and include OEMs, MSOs (cable
and satellite service providers), international retailers, CEDIA (Custom Electronic Design and Installation Association), U.S. retailers,
private labels, and companies in the computing industry. We also sell integrated circuits, on which our software and IR code database is
embedded, to OEMs that manufacture wireless control devices, cable converters or satellite receivers for resale in their products. We
believe that our universal remote control database contains device codes that are capable of controlling virtually all infrared remote (“IR”)
controlled TVs, VCRs, DVD players, cable converters, CD players, audio components and satellite receivers, as well as most other infrared
remote controlled devices worldwide.

Beginning in 1986 and continuing today, we have compiled an extensive IR code library that covers over 400,000 individual device func-

tions and over 3,600 individual consumer electronic equipment brand names. Our library is regularly updated with new IR codes used in
newly introduced video and audio devices. All such IR codes are captured from the original manufacturer’s remote control devices or manu-
facturer’s specifications to ensure the accuracy and integrity of the database. We have also developed patented technologies that provide the
capability to easily upgrade the memory of the wireless control device by adding IR codes from the library that were not originally included.

Since the third quarter of 2006, we have been operating as one business segment. We have twelve subsidiaries located in Argentina,

Cayman Islands, France, Germany, Hong Kong, India, Italy, the Netherlands, Singapore, Spain and the United Kingdom.

To recap our results for 2008:

• Our revenue grew 5.3% from $272.7 million in 2007 to $287.1 million in 2008.

•

Our sales growth in 2008 was the result of strong demand from the customers in our business category, due in part to the continua-
tion of the upgrade cycle from analog to digital, consumer demand for advanced-function offerings from subscription broadcasters,
increased share with existing customers, and new customer wins.

Our full year 2008 operating income fell 21.5% to $20.8 million from $26.5 million in 2007. Our operating margin percentage decreased
from 9.7% in 2007 to 7.2% in 2008 due primarily to the decrease in our gross margin percentage from 36.4% in 2007 to 33.5% in 2008.
The decrease in our gross margin rate was due primarily to sales mix, as a higher percentage of our total sales was comprised of our
lower-margin Business category. In addition, sales mix within our sales categories also contributed to the decrease in our gross mar-
gin rate as consumers trended towards value-oriented products. The weakening of the British pound also contributed to the decline in
our gross margin percentage.

•

2008 capped off a successful three-year period, where sales during this period grew at a compounded rate of approximately 17%
and although lower than 2007 earnings per diluted share, 2008 earnings per diluted share represents a compounded growth rate of
approximately 16%.

Our strategic business objectives for 2009 include the following:

•

increase our share with existing customers;

• acquire new customers in historically strong regions;

• continue our expansion into new regions, Asia in particular;

• continue to develop industry-leading technologies and products; and

• continue to evaluate potential acquisition and joint venture opportunities that may enhance our business.

UNIVERSAL ELECTRONICS INC. | 2008 ANNUAL REPORT

We intend for the following discussion of our financial condition and results of operations to provide information that will assist in
understanding our consolidated financial statements, the changes in certain key items in those financial statements from period to period,
and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect our
consolidated financial statements.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On
an on-going basis, we evaluate our estimates and judgments, including those related to revenue recognition, allowance for sales returns
and doubtful accounts, warranties, inventory valuation, business combination purchase price allocations, our review for impairment of
long-lived assets, intangible assets and goodwill, income taxes and stock-based compensation expense. Actual results may differ from
these judgments and estimates, and they may be adjusted as more information becomes available. Any adjustment may be significant.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that

are highly uncertain at the time the estimate is made, if different estimates reasonably may have been used, or if changes in the estimate
that are reasonably likely to occur may materially impact the financial statements. Management believes the following critical accounting
policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

revenue recognition We recognize revenue on the sale of products when delivery has occurred, there is persuasive evidence of an
arrangement, the sales price is fixed or determinable and collectability is reasonably assured.

We record a provision for estimated retail sales returns on retail product sales in the same period as the related revenues are
recorded. These estimates are based on historical sales returns, analysis of credit memo data and other known factors. The provision
recorded for estimated sales returns and allowances is deducted from gross sales to arrive at net sales in the period the related revenue
is recorded. The allowance for sales returns balance at December 31, 2008 and 2007 contained reserves for items returned prior to year-
end, but that were not completely processed, and therefore not yet removed from the allowance for sales returns balance. We estimate
that if these returns had been fully processed the allowance for sales returns balance would have been approximately $0.8 million on
December 31, 2008 and 2007. The value of these returned goods was included in our inventory balance at December 31, 2008 and 2007.

We accrue for discounts and rebates on product sales in the same period as the related revenues are recorded based on historical
experience. Changes in such accruals may be required if future rebates and incentives differ from our estimates. Rebates and incentives
are recognized as a reduction of sales if distributed in cash or customer account credits. Rebates and incentives are recognized as cost of
sales if we provide products or services for payment.

Sales allowances reduce gross accounts receivable to arrive at accounts receivable, net in the same period the related receivable is
recorded. We have no obligations after delivery of our products other than the associated warranties. We maintain an allowance for doubt-
ful accounts for estimated losses resulting from the inability of our customers to make payments for products sold or services rendered.
The allowance for doubtful accounts is based on a variety of factors, including historical experience, length of time receivables are past
due, current economic trends and changes in customer payment behavior. Also, we record specific provisions for individual accounts when
we become aware of a customer’s inability to meet its financial obligations to us, such as in the case of bankruptcy filings or deteriora-
tion in the customer’s operating results or financial position. We increased our allowance for doubtful accounts by $0.4 million in 2008 to
reflect certain customer accounts where collection is highly uncertain in the current economic environment. If circumstances related to a
customer change, our estimates of the recoverability of the receivables would be further adjusted, either upward or downward.

When a sales arrangement contains multiple elements, such as software products, licenses and/or services, we allocate revenue to
each element based on its relative fair value. The fair values for the multiple elements are determined based on vendor specific objective
evidence (“VSOE”), or the price charged when the element is sold separately. The residual method is utilized when VSOE exists for all the
undelivered elements, but not for the delivered element. This is performed by allocating revenue to the undelivered elements (that have
VSOE) and the residual revenue to the delivered elements. When the fair value for an undelivered element cannot be determined, we defer
revenue for the delivered elements until the undelivered element is delivered. We limit the amount of revenue recognition for delivered
elements to the amount that is not contingent on the future delivery of products or services or subject to customer-specified return or
refund privileges.

We have not made any material changes in our methodology for recognizing revenue during the past three fiscal years. We do not
believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to recognize revenue.
However, if actual results are not consistent with our estimates or assumptions, we may be exposed to losses or gains that may be material.

Warranty We warrant our products against defects in materials and workmanship arising during normal use. We service warranty claims
directly through our customer service department or contracted third-party warranty repair facilities. Our warranty period ranges up
to three years. We estimate and recognize product warranty costs, which are included in cost of sales, as we sell the related products.
Warranty costs are forecasted based on the best available information, primarily historical claims experience and the expected cost per
claim. The costs we have incurred to service warranty claims have been minimal. As a result the balance of our reserve for estimated
warranty costs is not significant.

We have not made any material changes in our warranty reserve methodology during the past three fiscal years. We do not believe
there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate the warranty
reserve. However, actual claim costs may differ from the amounts estimated. If a significant product defect were to be discovered on a
high volume product, our financial statements may be materially impacted. Historically, product defects have been less than 0.5% of the
net units sold.

Inventories Our inventories consist of primarily wireless control devices and the related component parts, including integrated circuits,
and are valued at the lower of cost or market. Cost is determined using the first-in, first-out method. We write-down our inventory for the
estimated difference between the inventory’s cost and its estimated market value based upon our best estimates about future demand and
market conditions.

We carry inventory in amounts necessary to satisfy our customers’ inventory requirements on a timely basis. We continually monitor
our inventory status to control inventory levels and write-down any excess or obsolete inventories on hand. Our total excess and obsolete
inventory reserve as of December 31, 2008 and 2007 was $1.5 million and $1.8 million, respectively, or 3.5% and 5.0% of total inventory.
The decrease in our excess and obsolete reserve in 2008 was the result of $2.4 million of additional write-downs, offset by $2.7 million of
scrapping. This compared to additional write-downs of $2.1 million and scrapping of $2.5 million in 2007.

We have not made any material changes in the accounting methodology used to establish our excess and obsolete inventory reserve

during the past three fiscal years. We do not believe there is a reasonable likelihood that there will be a material change in the future
estimates or assumptions we used to calculate our excess and obsolete inventory reserve. If actual market conditions are less favorable
than those projected by management, additional inventory write-downs may be required which may have a material impact on our finan-
cial statements. Such circumstances may include, but are not limited to, the development of new competing technology that impedes the
marketability of our products or the occurrence of significant price decreases in our component parts, such as integrated circuits. Each
percentage point change in the ratio of excess and obsolete inventory reserve to inventory would impact cost of sales by approximately
$0.5 million.

Business Combinations We are required to allocate the purchase price of acquired companies to the tangible and intangible assets
and the liabilities assumed, as well as in-process research and development (“IPR&D”), based upon their estimated fair values. Such
valuations require management to make significant fair value estimates and assumptions, especially with respect to intangible assets.
Management estimates the fair value of certain intangible assets by utilizing the following (but not limited to):

•

future free cash flow from customer contracts, customer lists, distribution agreements, acquired developed technologies, and patents;

• expected costs to develop IPR&D into commercially viable products and cash flows from the products once they are completed;

•

brand awareness and market position, as well as assumptions regarding the period of time the brand will continue to be used in our
product portfolio; and

• discount rates utilized in discounted cash flow models.

Our estimates are based upon assumptions believed to be reasonable; however, unanticipated events or circumstances may occur which

may affect the accuracy of our fair value estimates, including assumptions regarding industry economic factors and business strategies.

UNIVERSAL ELECTRONICS INC. | 2008 ANNUAL REPORT

Valuation of long-lived assets and Intangible assets We assess long-lived and intangible assets for impairment whenever events
or changes in circumstances indicate that their carrying value may not be recoverable. Factors considered important which may trigger an
impairment review if significant include the following:

• underperformance relative to historical or projected future operating results;

• changes in the manner of use of the assets;

• changes in the strategy of our overall business;

• negative industry or economic trends;

• a decline in our stock price for a sustained period; and

• a variance between our market capitalization relative to net book value.

When we determine that the carrying value of a long-lived asset or an intangible asset may not be recoverable based upon the exis-
tence of one or more of the above indicators of impairment we perform an impairment review. If the carrying value of the asset is larger
than the undiscounted cash flows, the asset is impaired. We measure an impairment based on the projected discounted cash flow method
using a discount rate determined by our management to be commensurate with the risk inherent in our current business model. In
assessing the recoverability, we must make assumptions regarding estimated future cash flows and other factors to determine the fair
value of the respective assets.

We have not made any material changes in our impairment loss assessment methodology during the past three fiscal years. We do
not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate the
impairment of long-lived assets and intangible assets. However, if actual results are not consistent with our estimates and assumptions
we may be exposed to material impairment charges.

Capitalized Software Development At each balance sheet date, we compare the unamortized capitalized costs of a software product
to its net realizable value. The amount by which the unamortized capitalized costs of a software product exceed the net realizable value
of that asset is written off. The net realizable value is the estimated future gross revenues attributable to each product reduced by its
estimated future completion costs and disposal. Any remaining amount of capitalized software development costs that have been written
down are considered to be the cost for subsequent accounting purposes, and the amount of the write-down is not subsequently restored.

We do not believe there is a reasonable likelihood that there will be a material change in the future estimates of net realizable value
we use to test for impairment losses on capitalized software development. However, if actual results are not consistent with our estimates
and assumptions we may be exposed to impairment charges.

Goodwill We evaluate the carrying value of goodwill as of December 31 of each year and between annual evaluations if events occur or
circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such cir-
cumstances may include, but are not limited to: (1) a significant adverse change in legal factors or in business climate, (2) unanticipated
competition or (3) an adverse action or assessment by a regulator.

When performing the impairment review, we determine the carrying amount of each reporting unit by assigning assets and liabilities,
including the existing goodwill, to those reporting units. A reporting unit is defined as an operating segment or one level below an operat-
ing segment (referred to as a component). A component of an operating segment is deemed a reporting unit if the component constitutes
a business for which discrete financial information is available, and segment management regularly reviews the operating results of that
component. Our domestic and international operations are components and reporting units of our sole operating segment.

To evaluate whether goodwill is impaired, we compare the estimated fair value of the reporting unit to which the goodwill is assigned

to the reporting unit’s carrying amount, including goodwill. We estimate the fair value of each reporting unit using the present value
of expected future cash flows for that reporting unit. If the carrying amount of a reporting unit exceeds its fair value, the amount of the
impairment loss must be measured.

The impairment loss would be calculated by comparing the implied fair value of goodwill to its carrying amount. In calculating the
implied fair value of the reporting unit goodwill, the present value of the reporting unit’s expected future cash flows is allocated to all of
the other assets and liabilities of that unit based on their fair values. The excess of the present value of the reporting unit’s expected future
cash flows over the amount assigned to its other assets and liabilities is the implied fair value of goodwill. An impairment loss would be
recognized when the carrying amount of goodwill exceeds its implied fair value.

We have not made any material changes in our impairment loss assessment methodology during the past three fiscal years. We con-
tinue to estimate the fair value of our reporting units to be in excess of their carrying value, and therefore have not recorded any impair-
ment. However, we noted a decrease in the amount of excess fair value over the carrying value of our reporting units caused primarily by
the slowing economy and credit market disruptions. We do not believe there is a reasonable likelihood that there will be a material change
in the future estimates or assumptions we use to test for impairment losses on goodwill. However, if actual results are not consistent with
our estimates and assumptions we may be exposed to material impairment charges.

Income taxes We calculate our current and deferred tax provisions based on estimates and assumptions that may differ from the actual
results reflected in our income tax returns filed during the subsequent year. We record adjustments based on filed returns when we have
identified and finalized them, which is generally in the third and fourth quarters of the subsequent year for U.S. federal and state provi-
sions, respectively.

We recognize deferred tax assets and liabilities for the expected tax consequences of temporary differences between the tax basis
of assets and liabilities and their reported amounts using enacted tax rates in effect for the year in which we expect the differences to
reverse. We record a valuation allowance to reduce the deferred tax assets to the amount that we are more likely than not to realize. We
have considered future market growth, forecasted earnings, future taxable income, the mix of earnings in the jurisdictions in which we
operate and prudent and feasible tax planning strategies in determining the need for a valuation allowance. In the event we were to deter-
mine that we would not be able to realize all or part of our net deferred tax assets in the future, we would increase the valuation allowance
and make a corresponding charge to earnings in the period in which we make such determination. Likewise, if we later determine that we
are more likely than not to realize the net deferred tax assets, we would reverse the applicable portion of the previously provided valuation
allowance. In order for us to realize our deferred tax assets we must be able to generate sufficient taxable income in the tax jurisdictions
in which the deferred tax assets are located.

Our effective tax rate includes the impact of certain undistributed foreign earnings for which we have not provided U.S. taxes because
we plan to reinvest such earnings indefinitely outside the United States. The decision to reinvest our foreign earnings indefinitely outside
the United States is based on our projected cash flow needs as well as the working capital and long-term investment requirements of our
foreign subsidiaries and our domestic operations. Material changes in our estimates of cash, working capital and long-term investment
requirements in the various jurisdictions in which we do business may impact our effective tax rate.

We are subject to income taxes in the United States and foreign countries, and we are subject to routine corporate income tax audits

in many of these jurisdictions. We believe that our tax return positions are fully supported, but tax authorities are likely to challenge
certain positions, which may not be fully sustained. However, our income tax expense includes amounts intended to satisfy income tax
assessments that result from these challenges in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No.
48, “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109” (“FIN 48”). Determining the income tax
expense for these potential assessments and recording the related assets and liabilities requires management judgments and estimates.
We evaluate our uncertain tax positions in accordance with FIN 48. We believe that our reserve for uncertain tax positions, including
related interest and penalties, is adequate. We have recorded a liability for uncertain tax positions of $8.7 million at December 31, 2008.
The amounts ultimately paid upon resolution of audits may be materially different from the amounts previously included in our income
tax expense and, therefore, may have a material impact on our tax provision, net income and cash flows. Our reserve for uncertain tax
positions is attributable primarily to uncertainties concerning the tax treatment of our international operations, including the allocation
of income among different jurisdictions, and related interest. We review our reserves quarterly, and we may adjust such reserves due to
proposed assessments by tax authorities, changes in facts and circumstances, issuance of new regulations or new case law, previously
unavailable information obtained during the course of an examination, negotiations between tax authorities of different countries concern-
ing our transfer prices, execution of advanced pricing agreements, resolution with respect to individual audit issues, the resolution of
entire audits, or the expiration of statutes of limitations.

Stock-Based Compensation expense We account for our stock-based compensation plans under SFAS No. 123R, “Share-Based Payment”
(“SFAS 123R”). Stock-based compensation expense for each employee and director is presented in the same income statement caption
as their cash compensation. During the year ended December 31, 2008, 2007 and 2006, we recorded $4.2 million, $3.5 million and

UNIVERSAL ELECTRONICS INC. | 2008 ANNUAL REPORT

$3.1 million, respectively, in pre-tax stock-based compensation expense. The income tax benefit associated with stock-based compensa-
tion expense was $1.5 million, $1.2 million and $1.0 million for the years ended December 31, 2008, 2007 and 2006, respectively.

Stock-based compensation expense by income statement caption for the years ended December 31, 2008, 2007 and 2006 was the following:

( i n t h o u s a n d s )

Cost of sales

Research and development

Selling, general and administrative

Total stock—based compensation expense

2 0 0 8

2 0 0 7

2 0 0 6

356

3,870

418

3,072

4,243

3,521

370

2,721

3,117

During the year ended December 31, 2008, we granted 132,500 stock options to executive employees and board members and 8,000

stock options to non-executive employees.

Based on the non-vested stock options outstanding at December 31, 2008, we expect to recognize $2.8 million in unrecognized pre-tax

stock-based compensation expense over a weighted-average life of 2.21 years.

SG&A includes pre-tax stock-based compensation related to restricted stock awards granted to outside directors of $0.6 million,
$0.7 million and $0.4 million for the years ended December 31, 2008, 2007 and 2006, respectively. We issue restricted stock awards to the
outside directors for services performed. Compensation expense for the restricted stock awards is recognized on a straight-line basis
over the requisite service period of one year.

During the first quarter of 2008, as part of our annual compensation review cycle, the Compensation Committee of the Board of

Directors granted 115,926 shares of restricted stock to our executives under the 2006 Stock Incentive Plan. These awards were granted to
assist us in meeting our performance and retention objectives. Each executive’s grant is subject to a three-year vesting period. The stock-
based compensation expense included in SG&A related to this award was $0.9 million for the year ended December 31, 2008.

In accordance with SFAS 123R, compensation expense related to restricted stock awards is determined based on the fair value of
the shares awarded on the grant date. We determined the fair value of the restricted stock utilizing the average of the high and low trade
prices of our Company’s shares on the grant date. During the years ended December 31, 2008, 2007 and 2006, we granted 141,864, 25,000
and 22,813 shares, respectively.

Based on the non-vested restricted stock awards outstanding at December 31, 2008, we expect to recognize $2.1 million in unrecog-

nized pre-tax stock-based compensation expense over a weighted-average life of 1.8 years.

Determining the appropriate fair value model and calculating the fair value of share-based payment awards requires the utilization of
highly subjective assumptions, including the expected life and forfeiture rate of the share-based payment awards and stock price volatility.
Management determined that historical volatility calculated based on our actively traded common stock is a better indicator of expected
volatility and future stock price trends than implied volatility. The assumptions used in calculating the fair value of share-based payment
awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s
judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense may be materially dif-
ferent in the future.

We do not believe it is reasonably likely that there will be a material change in the future estimates or assumptions used to determine
stock-based compensation expense. However, if actual results are not consistent with our estimates and assumptions we may be exposed
to material stock-based compensation expense. Refer to “Notes to Consolidated Financial Statements – Note 11” for additional disclosure
regarding stock-based compensation expense.

Results of Operations
The following table sets forth our results of operations expressed as a percentage of net sales for the periods indicated.

( i n t h o u s a n d s )

Net sales

Cost of sales

Gross profit

Research and development expenses

Selling, general and administrative expenses

Operating income

Interest income

Other income (expense), net

Income before income taxes

Provision for income taxes

Net income

2 0 0 8

2 0 0 7

2 0 0 6

Y e a r e n d e d D e c e m b e r 3 1 ,

287,100

100.0 %

$ 272,680

100.0 %

$ 235,846

100.0 %

190,910

96,190

8,160

67,269

20,761

3,017

311

24,089

8,283

66.5

33.5

2.8

23.5

7.2

1.1

0.1

8.4

2.9

173,329

99,351

8,820

64,080

26,451

3,104

29,562

9,332

63.6

36.4

3.2

23.5

9.7

1.1

0.0

10.8

3.4

149,970

85,876

7,412

59,947

18,517

1,401

(498)

19,420

5,900

63.6

36.4

3.1

25.4

7.9

0.5

(0.2)

8.2

2.5

•

Sales mix, as a higher percentage of our total sales was comprised of our lower margin Business category. In addition, sales mix
within our sales categories also contributed to the decrease in our gross margin rate as consumers trended towards value-oriented
products. Collectively, the aforementioned resulted in a decrease of 3.2% in the gross margin rate;

• Foreign currency fluctuations caused a decrease of 0.3% in the gross margin rate;

•

A decrease in freight and handling expense (due to a lower percentage of air freight) caused an increase of 0.5% in the gross margin rate.

Research and development expenses decreased 8% from $8.8 million in 2007 to $8.2 million in 2008. The decrease is primarily due to

the completion of the latest development phase for the Nevo platform in late 2007.

Selling, general and administrative expenses increased 5% from $64.1 million in 2007 to $67.3 million in 2008. The strengthening of
the Euro compared to the U.S. dollar resulted in an increase of $2.2 million; payroll and benefits increased by $0.8 million due to new hires
and merit increases; stock-based compensation increased by $0.8 million; depreciation expense in 2008 increased by $0.7 million, pri-
marily due to increased tooling to support a higher volume of sales and an office renovation completed in early 2008; sales commissions
increased by $0.4 million; bad debt expense increased by $0.4 million; and trade show expense increased by $0.4 million. These items
were partially offset by lower long term incentive compensation, which decreased by $1.5 million, and a decline in net outside product
development spending, which decreased by $0.9 million.

15,806

5.5 %

20,230

7.4 %

13,520

5.7 %

In 2008, we recorded $3.0 million of net interest income comparable to $3.1 million for 2007.

Year Ended December 31, 2008 Compared to Year Ended December 31, 2007
Consolidated Net sales for the year ended December 31, 2008 were $287.1 million, an increase of 5% compared to $272.7 million for the
same period last year. Net income for 2008 was $15.8 million or $1.09 per diluted share compared to $20.2 million or $1.33 per diluted
share for 2007.

Net sales:

Business

Consumer

Total net sales

2 0 0 8

2 0 0 7

$ (millions)

% of total

$ (millions) % of total

231.5

55.6

287.1

80.6 %

19.4 %

100.0 %

214.7

58.0

78.7 %

21.3 %

272.7

100.0 %

Net sales in our Business lines (subscription broadcasting, OEM, and computing companies) were approximately 81% of net sales for
2008 compared to approximately 79% for 2007. Net sales in our business lines for 2008 increased by approximately 8% to $231.5 million
from $214.7 million in 2007. This increase in sales resulted primarily from an increase in the volume of remote control sales, which was
partially offset by lower prices. The increase in remote control sales volume was attributable to the continued deployment of advanced
function set-top boxes by the service operators, market share gains with a few key subscription broadcasting customers and new cus-
tomer wins. These advanced functions include digital video recording (“DVR”), video-on-demand (“VOD”), and high definition television
(“HDTV”). We expect that the deployment of the advanced function set-top boxes by the service operators will continue into the foreseeable
future as penetration for each of the functions cited continues to increase.

Net sales in our Consumer lines (One For All® retail, private label, custom installers, and direct import) were approximately 19%

of net sales for 2008 compared to approximately 21% for 2007. Net sales in our consumer lines for 2008 decreased by 4% to $55.6 mil-
lion from $58.0 million in 2007. The sales were negatively impacted by the weakening of the British Pound compared to the U.S. dollar,
which resulted in a decrease in net sales of approximately $2.1 million. The strengthening of the Euro compared to the U.S. dollar posi-
tively impacted sales, which resulted in an increase of $1.0 million. Net of the currency effect, retail sales outside of the United States
were down by $3.1 million, primarily due to lower sales in the UK, Spain and France. Additionally, Private Label sales in the United States
decreased by $1.2 million, or 38%, to $2.0 million in 2008 from $3.2 million in 2007. Partially offsetting these decreases is our expanding
presence in the custom electronic design & installation association (“CEDIA”) market which increased sales by $2.2 million, or 47%, from
2007. In addition, other US Retail increased by $0.8 million, from $1.2 million in 2007 to $2.0 million in 2008, due to customer wins.

Gross profit for 2008 was $96.2 million compared to $99.4 million for 2007. Gross profit as a percent of sales for 2008 was 33.5%, com-

pared to 36.4% for 2007, due primarily to the following reasons:

UNIVERSAL ELECTRONICS INC. | 2008 ANNUAL REPORT

We recorded income tax expense of $8.3 million in 2008 compared to $9.3 million in 2007. Our effective tax rate was 34.4% in 2008
compared to 31.6% in 2007. The increase in our effective tax rate is due primarily to additional income earned in higher tax-rate jurisdic-
tions as well as lower federal research and development credits.

On February 18, 2009, we acquired certain patents, intellectual property and other assets related to the universal remote control busi-
ness from Zilog Inc. (NASDAQ: ZILG) for approximately $9.5 million in cash. The purchase included Zilog’s full library and database of infra-
red codes and software tools. We also hired 115 of Zilog’s sales and engineering personnel, including all 103 of Zilog’s personnel located in
India. In a related transaction, Maxim Integrated Products (NASDAQ: MXIM) acquired two of Zilog’s product lines, namely, the hardware por-
tion of Zilog’s remote control business and Zilog’s secured transaction product line. We have cross-licensed the remote control technology
and intellectual property with Maxim Integrated Products for purpose of conducting our respective businesses.

The arrangement involves an agreement to source silicon chips from Maxim. For the first year we will be the exclusive sales agent
of universal remote control chips for Maxim, selling the Zilog designs to Zilog’s current list of customers. We expect this arrangement
to drive a small increase in our sales and be mildly accretive to our earnings in 2009. Beginning in the second year, we will take over full
sales and distribution rights to the current roster of Zilog customers and we anticipate this position will lead to more significant levels of
revenue and earnings going forward.

The value we received from this acquisition relates primarily to the following:

•

This acquisition will expand the breadth and depth of our customer base in both subscription broadcasting and original equipment
manufacturing, particularly in Asia.

We believe integrating Zilog’s technologies with and into our own technology will reduce design cycle times, lower costs, and lead to
improvements in our integrated circuit design, product quality and overall functional performance.

• The acquisition of former Zilog employees will allow us to leverage their experience to our advantage in the wireless control industry.

Currently, we are performing the cost-allocation process, which requires the cost of an acquisition to be allocated to the individual

assets acquired and liabilities assumed based on their estimated fair values. Although we believe the Zilog transaction will be mildly
accretive in the first year and grow more significantly in the long term, most technology related acquisitions involve the purchase of signifi-
cant intangible assets which typically result in substantial amortization charges. There can be no assurance that the integration will be
successful or that the customer bases, products or technologies will generate sufficient revenue to offset the associated costs or effects.

We expect the total deal cost related to the Zilog transaction to range between $0.8 million and $1.0 million. These costs will be

expensed during the first quarter of 2009 in selling, general and administrative expenses.

Management expects net sales for the year ended December 31, 2009 to grow between zero and five percent from $278.1 million
earned in the year ended December 31, 2008. Earnings per share for the year ended December 31, 2009 is expected to grow between zero
and eight percent over the $1.09 per diluted share earned in the year ended December 31, 2008.

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006
Consolidated Net sales for the year ended December 31, 2007 were $272.7 million, an increase of 16% compared to $235.8 million for the
year ended December 31, 2006. Net income for 2007 was $20.2 million or $1.33 per diluted share compared to $13.5 million or $0.94 per
diluted share for 2006.

Net sales:

Business

Consumer

Total net sales

2 0 0 7

2 0 0 6

$ (millions)

% of total

$ (millions) % of total

214.7

58.0

272.7

78.7 %

21.3 %

178.8

57.0

75.8 %

24.2 %

100.0 %

235.8

100.0 %

Net sales in our Business lines (subscription broadcasting, OEM, and computing companies) were approximately 79% of net sales for

2007 compared to approximately 76% for 2006. Net sales in our business lines for 2007 increased by 20% to $214.7 million from $178.8
million in 2006. This increase in sales resulted primarily from an increase in the volume of remote control sales, which was partially offset
by lower prices. The increase in remote control sales volume was attributable to the continued deployment of advanced function set-top
boxes by the service operators and market share gains with a few key subscription broadcasting customers. These advanced functions
include digital video recording (“DVR”), video-on-demand (“VOD”), and high definition television (“HDTV”).

Net sales in our Consumer lines (One For All® retail, private label, custom installers, and direct import) were approximately 21% of
net sales for 2007 compared to approximately 24% for 2006. Net sales in our consumer lines for 2007 increased by 2% to $58.0 million,
from $57.0 million in 2006. The increase in sales resulted primarily from our expanding presence in the custom electronic design & instal-
lation association (“CEDIA”) market. CEDIA sales increased by $1.5 million, or 47%, from 2006. Additionally, retail sales made outside of
the United States increased by $0.7 million. These sales were positively impacted by the strengthening of both the Euro and the British
Pound compared to the U.S. dollar, which resulted in an increase in net sales of approximately $3.8 million. Net of this positive currency
effect, retail sales outside of the United States were down by $3.1 million, primarily due to lower sales in the UK and Australia. Partially
offsetting these increases were United States direct import licensing and product revenues for 2007, which decreased by $0.9 million, or
44%, to $1.2 million in 2007, down from $2.1 million in 2006. This was due to a decline in royalty revenue and a decline in the volume of
Kameleon sales. Additionally, Private Label sales decreased by $0.3 million, or 9%, to $3.2 million in 2007 from $3.5 million in 2006.
This was due to a decline in the volume of Kameleon sales in the United States.

Gross profit for 2007 was $99.4 million compared to $85.9 million for 2006. Gross profit as a percent of sales for 2007 was 36.4%,

which is comparable to 2006. The gross profit rate was positively impacted by the strengthening of both the Euro and British Pound
compared to the U.S. dollar, which resulted in an increase of approximately $3.6 million in gross profit, or an increase of 0.8% in the gross
profit rate. A decrease in royalty expense of $1.4 million, due to lower sales of SKY-branded retail product in Europe, increased the gross
profit rate by 0.7%. Offsetting the increases in the gross profit rate was an increase in freight and handling expense of $2.7 million in 2007
as compared to 2006, which reduced the gross profit rate by 0.8%. The increase in freight expense is due primarily to an increase in the
percentage of units that were shipped by air; air freight is significantly more costly than ocean freight. Additionally, subscription broadcast
sales, which generally have a lower gross profit rate as compared to our other sales, represented a larger percentage of our total busi-
ness. The impact of this change in mix was a 0.7% reduction in the gross profit rate.

Research and development expenses increased 19% from $7.4 million in 2006 to $8.8 million in 2007. The increase is primarily related

to internal, as well as, third party costs associated with the continued expansion of the Nevo® platform and the development of products
for sale in our subscription broadcasting, retail, and OEM channels.

Selling, general and administrative expenses increased 7% from $59.9 million in 2006 to $64.1 million in 2007. Payroll and benefits
increased by $2.6 million due to new hires and merit increases; the strengthening of both the Euro and British Pound compared to the
U.S. dollar resulted in an increase of $2.4 million; long-term incentive compensation increased by $1.0 million; delivery, freight, and
handling costs increased by $0.7 million; additional travel resulted in an increase of $0.6 million; director’s fees and expenses increased
by $0.4 million; and commission expense increased by $0.2 million. These items were partially offset by lower employee bonus expense,
which decreased by $4.0 million.

UNIVERSAL ELECTRONICS INC. | 2008 ANNUAL REPORT

In 2007, we recorded $3.1 million of net interest income compared to $1.4 million net for 2006. This increase is due to higher money

market rates and a higher average cash balance.

In 2007, we had $0.01 million in other income, net as compared to $0.5 million of other expense, net for 2006. Approximately

$0.5 million of other expense in 2006 resulted from foreign currency losses.

We recorded income tax expense of $9.3 million in 2007 compared to $5.9 million in 2006. Our effective tax rate was 31.6% in 2007 com-

pared to 30.4% in 2006. The increase in our effective tax rate is due primarily to additional income earned in higher tax-rate jurisdictions.

Liquidity and Capital Resources

Sources and uses of Cash

( I n t h o u s a n d s )

Cash provided by operating activities

Cash used for investing activities

Cash (used for) provided by financing activities

Effect of exchange rate changes on cash

Cash and cash equivalents

Working capital

Year Ended
December 31,
2 0 0 8

Increase (Decrease)

Year Ended
December 31,
2 0 0 7

Increase (Decrease)

Year Ended
December 31,
2 0 0 6

30,152

10,215

19,937

2,725

17,212

(7,420)

(25,187)

(8,917)

(1,237)

(26,585)

(14,300)

(6,183)

1,398

5,383

(1,115)

(3,785)

276

(5,068)

5,183

5,107

December 31, 2008

(Decrease)

December 31, 2007

75,238

(11,372)

86,610

122,303

(18,027)

140,330

Net cash provided by operating activities in 2008 was $30.2 million, compared to $19.9 million and $17.2 million during 2007 and 2006,
respectively. The increase in cash flows from operating activities in 2008 compared to 2007 was primarily due to an increase in accounts
payable. Accounts payable increased at a higher rate compared to the prior year due to improved vendor management, including negotiat-
ing better payment terms with certain significant vendors.

Days sales outstanding improved from 82 days for the fourth quarter 2007 to 68 days for the fourth quarter 2008 resulting in a $3.5
million improvement in working capital in 2008 compared to 2007. Partially offsetting the improvement in days sales outstanding is the
decrease in inventory turns from 5.6 during 2007 to 4.9 during 2008. The decrease in inventory turns is a result of our deliberate effort to
reduce costly air shipments by carrying additional safety stock as well as maintain high customer service levels with existing and newly
acquired customers.

Cash provided by operating activities for 2007 was $19.9 million compared to $17.2 million during 2006. The increase in cash flows from

operations in 2007 compared to 2006 was primarily due to the increase in net income of 50% from $13.5 million in 2006 to $20.2 million
in 2007, offset partially by an increase in days sales outstanding and a decrease in inventory turns. Days sales outstanding were approxi-
mately 82 for the fourth quarter 2007 compared to approximately 67 for the fourth quarter 2006. Our days sales outstanding increased due
to certain customers delaying payment beyond their respective payment terms.

Net cash used for investing activities during 2008 was $7.4 million as compared to $6.2 million and $5.1 million during 2007 and 2006,

respectively. The increase in cash used for investing activities in 2008 compared to 2007 was due to increased capital expenditures.
Capital expenditures in 2008, 2007, and 2006 were $5.9 million, $4.8 million and $4.1 million, respectively. During the first quarter of 2008,
we completed our renovation and expansion of our corporate headquarters. The total cost of this renovation was approximately $2.0 mil-
lion, which was financed through our operations and a $0.4 million tenant improvement allowance from our lessor. In 2008, we also began
to make a significant investment to upgrade our information systems, which we expect to cost approximately $1.0 million. We had $0.3
million of capitalized costs related to this system upgrade at December 31, 2008. The strategic planning for the upgrade of our information
systems commenced in the second quarter of 2007 and we expect implementation to be completed in 2009. In addition, in order to support
our sales growth, the annual purchase of tooling equipment has increased throughout the years.

Net cash used for financing activities was $25.2 million during 2008 compared to cash provided by financing activities of $1.4 million
and $5.2 million during 2007 and 2006, respectively. Proceeds from stock option exercises were $1.2 million during 2008, compared to
proceeds of $12.6 million and $7.5 million during 2007 and 2006, respectively. In 2008, gains from stock option exercises resulted in a
$0.3 million excess tax benefit compared to $3.3 million and $0.3 million for 2007 and 2006, respectively. In addition, we purchased

1,118,318 shares of our common stock at a cost of $26.7 million during 2008, compared to 471,300 and 127,326 shares at a cost of $14.5
million and $2.6 million during 2007 and 2006, respectively. We hold these shares as treasury stock, and they are available for reissue.
Presently, except for using a minimal number of these treasury shares to compensate our outside board members, we have no plans to
distribute these shares, although we may change these plans if necessary to fulfill our on-going business objectives.

Effective August 31, 2006, we amended our original Credit Facility with Comerica Bank, extending our line of credit through August 31,

2009. Under the amended Credit Facility, we have the authority to acquire up to an additional 2.0 million shares of our common stock in
the open market. From August 31, 2006 through December 31, 2008, we purchased 1,686,218 shares of our common stock, leaving 313,782
shares available for purchase under the Credit Facility. During 2009, we may continue to purchase shares of our common stock if we
believe conditions are favorable and to offset the dilutive effect of our stock-based compensation.

Presently, we have no borrowings under this Credit Facility, however we cannot make any assurances that we will not need to bor-
row amounts under this facility or that this facility will continue to be extended to us under comparable terms or at all. If this or any other
Credit Facility is not available to us at a time when we need to borrow, we would have to use our cash reserves which may have a material
adverse effect on our earnings, cash flow and financial position.

Subsequent event On February 18, 2009, we acquired certain patents, intellectual property and other assets related to the universal
remote control business from Zilog Inc. (NASDAQ: ZILG) for approximately $9.5 million in cash. We expect the total deal cost related to the
Zilog transaction to range between $0.8 million and $1.0 million. These costs will be expensed during the first quarter of 2009 in selling,
general and administrative expenses. For further information regarding this acquisition see “Management’s Discussion and Analysis of
Financial Condition and Results of Operations – Results of Operations” and “Notes to Consolidated Financial Statements – Note 24”

Contractual obligations The following table summarizes our contractual obligations and the effect these obligations are expected to
have on our liquidity and cash flow in future periods.

( i n t h o u s a n d s )

Contractual obligations:

Operating lease obligations

Purchase obligations(1)

Total contractual obligations

Total

Less than 1 year

1-3 years

4-5 years

After 5 years

p a y m e n t s D u e b y p e r i o d

5,253

60,772

66,025

1,762

8,212

9,974

2,660

831

—

27,040

21,520

4,000

29,700

22,351

4,000

(1) Purchase obligations primarily include contractual payments to purchase minimum quantities of inventory under vendor agreements.

liquidity We have utilized cash provided from operations as our primary source of liquidity, as internally generated cash flows have
been sufficient to support our business operations, capital expenditures, acquisitions and discretionary share repurchases. We are able to
supplement this near term liquidity, if necessary, with our Credit Facility, as discussed below.

Historically, our working capital needs have typically been greatest during the third and fourth quarters when accounts receivable and
inventories increase in connection with the fourth quarter holiday selling season. At December 31, 2008, we had $122.3 million of working
capital as compared to $140.3 million at December 31, 2007.

Our cash and cash equivalent balances are held in the United States, Europe, and Asia. At December 31, 2008, we had approximately
$8.4 million, $6.1 million and $60.7 million of cash and cash equivalents in the United States, Europe and Asia, respectively. We maintain
our cash and cash equivalents with various financial institutions located in many different geographic regions. We attempt to mitigate our
exposure to interest rate, liquidity, credit and other relevant risks by placing our cash and cash equivalents with financial institutions we
believe are high quality.

Effective August 31, 2006, we amended our original Credit Facility with Comerica, extending our line of credit through August 31, 2009.

The amended Credit Facility provides a $15 million unsecured revolving credit agreement with Comerica. Under the Credit Facility, the
interest payable is variable and is based on the bank’s cost of funds or the 12-month LIBOR plus a fixed margin of 1.25%. The interest rate
in effect as of December 31, 2008 using the 12-month LIBOR plus the fixed margin was 3.25%. We pay a commitment fee ranging from zero
to a maximum rate of 0.25% per year on the unused portion of the credit line depending on the amount of cash investment retained with

UNIVERSAL ELECTRONICS INC. | 2008 ANNUAL REPORT

Comerica during each quarter. At December 31, 2008, the commitment fee rate was 0.25%. Under the terms of the Credit Facility, dividend
payments are allowed for up to 100% of the prior fiscal year’s net income, to be paid within 90 days of the current fiscal year end. We are
subject to certain financial covenants related to our net worth, quick ratio, and net income. Amounts available for borrowing under the
Credit Facility are reduced by the outstanding balance of import letters of credit. As of December 31, 2008, we did not have any outstand-
ing import letters of credit and the available balance on the line of credit was $15 million. Furthermore, as of December 31, 2008, we were
in compliance with all financial covenants required by the Credit Facility.

It is our policy to carefully monitor the state of our business, cash requirements and capital structure. As previously mentioned, we
believe that cash generated from our operations and, upon renewal, funds from our Credit Facility will be sufficient to fund current busi-
ness operations as well as anticipated growth at least through the end of 2009; however, there can be no assurance that such funds will be
adequate for that purpose. In addition, our Credit Facility is set to expire on August 31, 2009. We are currently negotiating another exten-
sion, however we cannot make any assurances that our Credit Facility will be extended to us beyond its expiration date of August 31, 2009
under comparable terms or at all. If this or any other Credit Facility is not available to us at any time when we need to borrow, we would
have to use our cash reserves which may have a material adverse effect on our earnings, cash flow and financial position.

Off Balance Sheet Arrangements
We do not participate in any off balance sheet arrangements.

New Accounting Pronouncements
See “Notes to Consolidated Financial Statements – Note 2” for a discussion of new accounting pronouncements.

Outlook
Our focus is to build technology and products that make the consumer’s interaction with devices and content within the home easier and
more enjoyable. The pace of change in the home is increasing. The growth of new devices, such as DVD players, PVR/DVR technologies,
HDTV and home theater solutions, to name only a few, has transformed control of the home entertainment center into a complex challenge
for the consumer. The more recent introduction and projected growth of digital media technologies in the consumers’ life will further
increase this complexity. We have set out to create the interface for the connected home, building a bridge between the home devices
of today and the networked home of the future. We intend to invest in new products and technology, particularly in the connected home
space, which will expand our business beyond the control of devices to the control of and access to content, such as digital media,
to enrich the entertainment experience.

We will continue enhancing our leadership position in our core business by developing custom products for our subscription broad-
casting, OEM, retail and computing customers, growing our capture expertise in infrared technology and radio frequency standards, add-
ing to our portfolio of patented or patent pending technologies and developing new platform products. We are also developing new ways to
enhance remote controls and other accessory products.

We are continuing to seek ways to use our technology to make the set-up and use of control products, and the access to and control
of digital entertainment within the home entertainment network, easier and more affordable. In addition, we are working on product line
extensions to our One For All® branded products which include digital antennas, signal boosters, and other A/V accessories.

We are also seeking ways to increase our customer base worldwide, particularly in the areas of subscription broadcasting, OEM and

One For All® international retail. We will continue to work on strengthening existing relationships by working with customers to under-
stand how to make the consumer interaction with products and services within the home easier and more enjoyable. We intend to invest
in new products and technology to meet our customer needs now and into the future.

We will continue developing software and firmware solutions that can enable devices such as TVs, set-top boxes, stereos, automotive
audio systems and other consumer electronic products to wirelessly connect and interact with home networks and interactive services to
deliver digital entertainment and information. This “smart device” category is emerging, and in the remainder of 2009, we look to continue
to build relationships with our customers in this category.

On February 18, 2009, we acquired certain patents, intellectual property and other assets related to the universal remote con-
trol business from Zilog Inc. (NASDAQ: ZILG) for approximately $9.5 million in cash. For further information about this acquisition
see “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Results of Operations” and “Notes to
Consolidated Financial Statements – Note 24.”

Throughout 2009, we will continue to evaluate acceptable acquisition targets and strategic partnership opportunities in our core busi-
ness lines as well as in the networked home marketplace. We caution, however, that no assurance can be made that any suitable acquisi-
tion target or partnership opportunity will be identified and, if identified, that a transaction can be consummated. Moreover, if consum-
mated, no assurance can be made that any such acquisition or partnership will profitably add to our operations.

QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK

We are exposed to various market risks, including interest rate and foreign currency exchange rate fluctuations. We have established
policies, procedures and internal processes governing our management of these risks and the use of financial instruments to mitigate our
risk exposure.

On August 31, 2006, we amended our Credit Facility to extend for an additional three years, expiring on August 31, 2009. We are cur-
rently negotiating another extension. The interest payable under our revolving Credit Facility with our bank is variable and based on either
(i) the bank’s cost of funds or (ii) the 12-month LIBOR plus a fixed margin of 1.25%. The cost of the Credit Facility is affected by changes in
market interest rates, credit risk spreads and credit availability. The interest rate in effect on the Credit Facility as of December 31, 2008
using the 12-month LIBOR option plus a fixed margin of 1.25% was 3.25%.

At December 31, 2008 we had no borrowings on our Credit Facility, however we cannot make any assurances that we will not need to
borrow amounts under this facility or that this facility will be extended to us beyond its expiration date of August 31, 2009 under compara-
ble terms or at all. If this or any other Credit Facility is not available to us at a time when we need to borrow, we would have to use our cash
reserves which may have a material adverse effect on our earnings, cash flow and financial position.

At December 31, 2008 we had wholly owned subsidiaries in the Argentina, France, Germany, Hong Kong, India, Italy, the Netherlands,

Singapore, Spain, and the United Kingdom. On February 18, 2009, we acquired certain patents, intellectual property and other assets
related to the universal remote control business from Zilog Inc. (“Zilog” – NASDAQ: ZILG) for approximately $9.5 million in cash. In con-
nection with this transaction, we formed a subsidiary in the Cayman Islands. Sales are typically denominated in local currencies, thereby
creating exposure to changes in exchange rates. Changes in local currency exchange rates relative to the U.S. dollar and, in some cases,
to each other, may positively or negatively affect our sales, gross margins, operating expenses and net income. The value of our net bal-
ance sheet positions held in foreign currency may also be impacted by fluctuating exchange rates.

From time to time, we enter into foreign currency exchange agreements to manage our exposure arising from fluctuating exchange
rates that affect cash flows and our reported income. Contract terms for the foreign currency exchange agreements normally last less
than nine months. We do not enter into any derivative transactions for speculative purposes. It is difficult to estimate the impact of fluc-
tuations on reported income, as it depends on the opening and closing rates, the average net balance sheet positions held in a foreign
currency and the amount of income generated in local currency. We routinely forecast what these balance sheet positions and income
generated in local currency may be and we take steps to minimize exposure as we deem appropriate.

Our foreign currency exposures are primarily concentrated in the Euro and British Pound. The sensitivity of earnings and cash flows
to the variability in exchange rates is assessed by applying an approximate range of potential rate fluctuations to our assets, obligations
and projected results of operations denominated in foreign currency. Based on our overall foreign currency rate exposure at December
31, 2008, we believe that movements in foreign currency rates may have a material affect on our financial position. We estimate that if the
exchange rates for the Euro and the British Pound relative to the U.S. dollar fluctuate 10% from December 31, 2008, net income and cash
flows in the first quarter of 2009 would fluctuate by approximately $0.3 million and $8.0 million, respectively.

UNIVERSAL ELECTRONICS INC. | 2008 ANNUAL REPORT

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
Universal Electronics Inc.

We have audited the accompanying consolidated balance sheets of Universal Electronics Inc. (a Delaware corporation) as of December 31,
2008 and 2007, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the
period ended December 31, 2008. Our audits of the basic financial statements included the financial statement schedule listed in the index
to consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
Universal Electronics Inc. as of December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the three years
in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the United States of America. Also
in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.

As discussed in Notes 2 and 16 to the consolidated financial statements, the Company adopted FASB Interpretation No. 48, “Accounting

for Uncertainty in Income Taxes – an Interpretation of Statement No. 109”, effective January 1, 2007.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Universal

Electronics Inc.’s internal control over financial reporting as of December 31, 2008, based on criteria established in Internal Control-
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated
March 3, 2009 expressed an unqualified opinion.

/s/ Grant Thornton LLP

Irvine, California

March 3, 2009

CONSOLIDATED INCOME STATEMENTS

( I n t h o u s a n d s , e x c e p t p e r s h a r e a m o u n t s )

Net sales

Cost of sales

Gross profit

Research and development expenses

Selling, general and administrative expenses

Operating income

Interest income

Other income (expense), net

Income before provision for income taxes

Provision for income taxes

Net income

Earnings per share:

Basic

Diluted

Shares used in computing earnings per share:

Basic

Diluted

The accompanying notes are an integral part of these consolidated financial statements.

Y e a r e n d e d D e c e m b e r 3 1 ,

2 0 0 8

2 0 0 7

2 0 0 6

$ 287,100

$ 272,680

$ 235,846

190,910

96,190

173,329

99,351

149,970

85,876

8,160

67,269

20,761

3,017

311

24,089

8,283

8,820

64,080

26,451

3,104

29,562

9,332

7,412

59,947

18,517

1,401

(498)

19,420

5,900

15,806

20,230

$ 13,520

1.13

1.09

1.40

1.33

0.98

0.94

14,015

14,410

13,818

14,456

15,177

14,432

CONSOLIDATED BALANCE SHEETS

( I n t h o u s a n d s , e x c e p t s h a r e - r e l a t e d d a t a )
Assets

Current assets:

Cash and cash equivalents

Accounts receivable, net

Inventories, net

Prepaid expenses and other current assets

Deferred income taxes

Total current assets

Equipment, furniture and fixtures, net

Goodwill

Intangible assets, net

Other assets

Deferred income taxes

Total assets

Liabilities And Stockholders’ Equity

Current liabilities:

Accounts payable

Accrued sales discounts, rebates and royalties

Accrued income taxes

Accrued compensation

Other accrued expenses

Total current liabilities

Long—term liabilities:

Deferred income taxes

Income tax payable

Other long term liabilities

Total liabilities

Commitments and contingencies

Stockholders’ equity:

Preferred stock, $.01 par value, 5,000,000 shares authorized; none issued or outstanding

Common stock, $.01 par value, 50,000,000 shares authorized; 18,715,833 and 18,547,019

shares issued at December 31, 2008 and 2007, respectively

Paid—in capital

Accumulated other comprehensive income

Retained earnings

Less cost of common stock in treasury, 5,070,319 and 3,975,439 shares at December 31, 2008 and 2007, respectively

Total stockholders’ equity

Total liabilities and stockholders’ equity

The accompanying notes are an integral part of these consolidated financial statements.

UNIVERSAL ELECTRONICS INC. | 2008 ANNUAL REPORT

D e c e m b e r 3 1 ,

2 0 0 8

2 0 0 7

75,238

86,610

59,825

43,675

3,461

2,421

60,146

34,906

1,874

2,871

184,620

186,407

8,686

10,757

5,637

609

7,246

7,558

10,863

5,700

369

6,388

$ 217,555

$ 217,285

44,705

$ 29,382

4,848

2,334

3,617

6,813

4,671

1,720

3,737

6,567

62,317

46,077

130

1,442

313

64,202

—

187

120,551

750

104,314

225,802

(72,449)

153,353

127

1,506

1,333

49,043

—

185

114,441

11,221

88,508

214,355

(46,113)

168,242

$ 217,555

$ 217,285

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

( I n t h o u s a n d s )

Balance at December 31, 2005

Comprehensive income:

Net income

Currency translation adjustment

Total comprehensive income

Shares issued for employee benefit plan

Purchase of treasury shares

Stock options exercised

Shares issued to Directors

Stock-based compensation expense under SFAS 123R

Tax benefit from exercise of non-qualified stock options

Reclassification of deferred stock-based compensation on adoption of SFAS 123(R)

Balance at December 31, 2006

Comprehensive income:

Net income

Currency translation adjustment

Total comprehensive income

Shares issued for employee benefit plan

Purchase of treasury shares

Stock options exercised

Shares issued to Directors

Stock-based compensation expense under SFAS 123R

Adoption of FIN 48 (Note 16)

Tax benefit from exercise of non-qualified stock options

Balance at December 31, 2007

Comprehensive income:

Net income

Currency translation adjustment

Total comprehensive income

Shares issued for employee benefit plan and compensation

Purchase of treasury shares

Stock options exercised

Shares issued to Directors

Stock-based compensation expense under SFAS 123R

Tax benefit from exercise of non-qualified stock options and vested restricted stock

C o m m o n S t o c k I s s u e d

16,964

Amount

$ 169

C o m m o n S t o c k i n t r e a s u r y

(3,421)

Amount

$ (29,663)

Paid-in
Capital

Accumulated
Other Comprehensive
Income (Loss)

Retained
Earnings

Deferred
Stock-Based
Compensation

Totals

Comprehensive
Income

$ 83,220

(5,265)

$ 54,994

(163)

$ 103,292

550

(127)

(2,589)

288

17,543

175

(3,529)

(31,964)

981

(471)

(14,519)

370

13,520

8,024

163

—

2,759

68,514

20,230

8,462

(236)

529

(2,589)

7,497

—

3,117

827

—

134,217

631

(14,519)

12,597

—

3,521

(236)

3,339

528

7,492

(288)

3,117

827

(163)

94,733

630

12,588

(370)

3,521

3,339

18,547

185

(3,975)

(46,113)

114,441

11,221

88,508

—

168,242

114

(1,118)

(26,689)

353

632

1,157

(353)

4,243

431

633

(26,689)

1,158

—

4,243

431

(10,471)

15,806

$ 13,520

8,024

$ 21,544

$ 20,230

8,462

$ 28,692

$ 15,806

(10,471)

$ 5,335

Balance at December 31, 2008

18,716

$ 187

(5,070)

$ (72,449)

$ 120,551

750

$ 104,314

—

$ 153,353

The accompanying notes are an integral part of these consolidated financial statements

UNIVERSAL ELECTRONICS INC. | 2008 ANNUAL REPORT

CONSOLIDATED STATEMENTS OF CASH FLOWS

( I n t h o u s a n d s )

Cash provided by operating activities:

Net income

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Provision for doubtful accounts

Provision for inventory write—downs

Deferred income taxes

Tax benefit from exercise of stock options and vested restricted stock

Excess tax benefit from stock—based compensation

Shares issued for employee benefit plan

Stock—based compensation

Changes in operating assets and liabilities:

Accounts receivable

Inventories

Prepaid expenses and other assets

Accounts payable and accrued expenses

Accrued income and other taxes

Net cash provided by operating activities

Cash used for investing activities:

Acquisition of equipment, furniture and fixtures

Acquisition of intangible assets

Net cash used for investing activities

Cash (used for) provided by financing activities:

Proceeds from stock options exercised

Treasury stock purchased

Excess tax benefit from stock—based compensation

Net cash (used for) provided by financing activities

Effect of exchange rate changes on cash

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Y e a r e n d e d D e c e m b e r 3 1 ,

2 0 0 8

2 0 0 7

2 0 0 6

15,806

20,230

$ 13,520

6,084

442

2,671

(448)

431

(344)

633

4,243

(1,478)

(12,219)

(1,888)

15,557

662

30,152

(5,945)

(1,475)

(7,420)

1,158

(26,689)

344

(25,187)

(8,917)

(11,372)

86,610

4,675

2,146

219

3,339

(3,320)

631

3,521

(5,033)

(9,194)

837

3,982

(2,119)

19,937

(4,802)

(1,381)

(6,183)

12,597

(14,519)

3,320

1,398

5,383

20,535

66,075

4,187

210

1,810

(637)

827

(275)

529

3,117

(7,120)

(280)

1,459

2,546

(2,681)

17,212

(4,057)

(1,011)

(5,068)

7,497

(2,589)

275

5,183

5,107

22,434

43,641

75,238

86,610

$ 66,075

Supplemental Cash Flow Information – Income taxes paid were $8.2 million, $8.1 million and $8.7 million in 2008, 2007, and 2006, respectively.

The accompanying notes are an integral part of these consolidated financial statements

UNIVERSAL ELECTRONICS INC. | 2008 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

note 1 — Description of Business
Universal Electronics Inc., based in Southern California, has developed a broad line of easy-to-use, pre-programmed universal wireless
control products and audio-video accessories that are marketed to enhance home entertainment systems as well as software designed
to enable consumers to wirelessly connect, control and interact with an increasingly complex home environment. Our primary markets
include retail, private label, original equipment manufacturers (“OEMs”), custom installers, cable and satellite service providers, and
companies in the personal computing industry. Over the past 21 years, we have developed a broad portfolio of patented technologies and a
database of home connectivity software that we license to our customers, including many leading Fortune 500 companies. In addition, we
sell our universal wireless control products and other audio/visual accessories through our European headquarters in the Netherlands,
and to distributors and retailers in Europe, Australia, New Zealand, South Africa, the Middle East, Mexico, and selected countries in Asia
and Latin America under the One For All® brand name.

As used herein, the terms “we”, “us” and “our” refer to Universal Electronics Inc. and its subsidiaries unless the context indicates to

the contrary.

note 2 — Summary of Significant Accounting Policies
principles of Consolidation The consolidated financial statements include our accounts and those of our wholly-owned subsidiaries.
All the intercompany accounts and significant transactions have been eliminated in the consolidated financial statements.

Segment realignment In the third quarter of 2006, we integrated the SimpleDevices business segment into our Core Business segment
in order to more closely align our financial reporting with our business structure. The segment integration did not impact previously
reported consolidated net revenue, income from operations, net income or earnings per share.

estimates and assumptions The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclo-
sure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during
the reporting period. On an on-going basis, we evaluate our estimates and judgments, including those related to revenue recognition,
allowance for sales returns and doubtful accounts, warranties, inventory valuation, business combination purchase price allocations, our
review for impairment of long-lived assets, intangible assets and goodwill, income taxes and stock-based compensation expense. Actual
results may differ from these judgments and estimates, and they may be adjusted as more information becomes available. Any adjustment
may be material.

We record a provision for estimated sales returns on retail product sales in the same period as the related revenues are recorded.
These estimates are based on historical sales returns, analysis of credit memo data and other known factors. The provision recorded for
estimated sales returns and allowances is deducted from gross sales to arrive at net sales in the period the related revenue is recorded.

or deterioration in the customer’s operating results or financial position. If circumstances related to a customer change, our estimates of
the recoverability of the receivables would be further adjusted, either upward or downward.

We generate service revenue, which is paid monthly, as a result of providing consumer support programs to some of our customers
through our call centers. These service revenues are recognized when services are performed, persuasive evidence of an arrangement
exists, the sales price is fixed or determinable, and collectability is reasonably assured.

We also license our intellectual property including our patented technologies, trade secrets, trademarks, and database of infrared
codes. We record license revenue when our customers ship a product incorporating our intellectual property, persuasive evidence of an
arrangement exists, the sales price is fixed or determinable, and collectability is reasonably assured.

We may from time to time initiate the sale or license of certain intellectual property, including patented technologies, trademarks, or

a particular database of infrared codes. When a fixed upfront fee is received in exchange for the conveyance of a patent, trademark, or
database delivered that represents the culmination of the earnings process, we record revenue when delivery has occurred, persuasive
evidence of an arrangement exists, the sales price is fixed or determinable and collectibility is reasonably assured.

When a sales arrangement contains multiple elements, such as software products, licenses and/or services, we allocate revenue to
each element based on its relative fair value. The fair values for the multiple elements are determined based on vendor specific objective
evidence (“VSOE”), or the price charged when the element is sold separately. The residual method is utilized when VSOE exists for all the
undelivered elements, but not for the delivered element. This is performed by allocating revenue to the undelivered elements (that have
VSOE) and the residual revenue is allocated to the delivered elements. When the fair value for an undelivered element cannot be deter-
mined, we defer revenue for the delivered elements until the undelivered element is delivered. We limit the amount of revenue recognition
for delivered elements to the amount that is not contingent on the future delivery of products or services or subject to customer-specified
return or refund privileges.

Effective January 1, 2007, we applied the opinion reached by the FASB’s Emerging Issues Task Force on EITF Issue 06-3, “How Taxes
Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus
Net Presentation) (“EITF 06-3”).” The consensus in EITF 06-3 did not require us to reevaluate our existing accounting policies for income
statement presentation. We present all non-income government-assessed taxes (sales, use and value added taxes) collected from our
customers and remitted to governmental agencies on a net basis (excluded from revenue) in our financial statements. The government-
assessed taxes are recorded in other accrued expenses until they are remitted to the government agency.

Foreign Currency translation and Foreign Currency transactions We use the U.S. dollar as our functional currency for financial
reporting purposes. The functional currency for our foreign operations is their local currency. The translation of foreign currencies
into U.S. dollars is performed for balance sheet accounts using exchange rates in effect at the balance sheet dates and for revenue and
expense accounts using the average exchange rate during each period. The gains and losses resulting from the translation are included
in the foreign currency translation adjustment account, a component of accumulated other comprehensive income in stockholders’ equity,
and are excluded from net income. The portions of intercompany accounts receivable and accounts payable that are not intended for
settlement are translated at exchange rates in effect at the balance sheet date. Our intercompany foreign investments and long-term debt
are translated using historical exchange rates.

We recorded a foreign currency translation loss of $10.5 million for the year ended December 31, 2008 and a foreign currency transla-

tion gain of $8.5 million and $8.0 million for the years ended December 31, 2007 and 2006, respectively. The foreign currency translation
loss of $10.5 million for the year ended December 31, 2008 was driven by the strengthening of the U.S. dollar versus the Euro. The U.S.
dollar/Euro spot rate was 1.39 and 1.46 at December 31, 2008 and December 31, 2007, respectively. The foreign currency translation loss
during 2008 was compounded by our transfer of €47.0 million, or $60.2 million, into Hong Kong dollars (which are indexed to the U.S.
dollar) in November 2008. The U.S. dollar/Euro spot rate at the time of transfer was 1.28. This composed approximately $7.2 million of the
foreign currency translation loss for 2008.

The foreign currency translation gain of $8.5 million for the year ended December 31, 2007 was driven by the weakening of the U.S.

dollar versus the Euro. The U.S. dollar/Euro spot rate was 1.46 and 1.32 at December 31, 2007 and December 31, 2006, respectively. The
foreign currency translation gain of $8.0 million for the year ended December 31, 2006 was driven by the weakening of the U.S. dollar ver-
sus the Euro. The U.S. dollar/Euro spot rate was 1.32 and 1.18 at December 31, 2006 and December 31, 2005, respectively.

Transaction gains and losses generated by the effect of changes in foreign currency exchange rates on recorded assets and liabilities
denominated in a currency different than the functional currency of the applicable entity are recorded in other income (expense), net (see
Note 15).

Cash and Cash equivalents Cash and cash equivalents include cash accounts and all investments purchased with initial maturities of
three months or less. We maintain cash and cash equivalents with various financial institutions. We mitigate our exposure to credit risk
by placing our cash and cash equivalents with high quality financial institutions. These financial institutions are located in many different
geographic regions. As part of our cash and risk management processes, we perform periodic evaluations of the relative credit standing
of the financial institutions. We have not sustained credit losses from instruments held at financial institutions.

At December 31, 2008, we had approximately $8.4 million, $6.1 million and $60.7 million of cash and cash equivalents in the United
States, Europe and Asia, respectively. At December 31, 2007, we had approximately $12.2 million, $74.3 million and $0.1 million of cash and
cash equivalents in the United States, Europe, and Asia, respectively.

Inventories Inventories consist of remote controls, audio-video accessories and the related component parts. Inventoriable costs
included materials, labor, freight-in and manufacturing overhead related to the purchase and production of inventories. We value our
inventories at the lower of cost or market. Cost is determined using the first-in, first-out method. We attempt to carry inventories in
amounts necessary to satisfy our customer requirements on a timely basis.

Product innovations and technological advances may shorten a given product’s life cycle. We continually monitor our inventories to
identify any excess or obsolete items on hand. We write-down our inventories for estimated excess and obsolescence in an amount equal
to the difference between the cost of the inventories and its estimated net realizable value. These estimates are based upon manage-
ment’s judgment about future demand and market conditions. Actual results may differ from management’s judgments and additional
write-downs may be required. Our total excess and obsolete inventory reserve as of December 31, 2008 and 2007 was $1.5 million and
$1.8 million, respectively, or 3.5% and 5.0% of our total inventory balance.

equipment, Furniture and Fixtures Equipment, furniture and fixtures are recorded at cost. To qualify for capitalization an asset must
have a useful life greater than one year and a cost greater than $1,000 for individual assets or $5,000 for bulk assets. For financial report-
ing purposes, depreciation is calculated using the straight-line method over the estimated useful lives of the respective assets. When
assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the appropriate accounts and any
gain or loss is included as a component of depreciation expense in operating income.

Estimated useful lives consist of the following:

Tooling and equipment (1)

Computer equipment

Software

Furniture and fixture

Leasehold improvements

2-7 Years

3-5 Years

5-7 Years

Lesser of lease term or useful life (approximately 2 to 6 years)

(1) We purchase tooling equipment for the production of our products. Tooling and equipment is recorded on our balance sheet but is located at our third party manufactures. Tooling and
equipment as of December 31, 2008 and 2007 was $11.6 million and $10.9 million, respectively (see Note 6). We analyze our tooling equipment for impairment annually.

long-lived assets and Intangible assets Intangible assets consist principally of distribution rights, patents, trademarks, trade names,
and developed and core technologies. Capitalized amounts related to patents represent external legal costs for the application and main-
tenance of patents. Intangible assets are amortized using the straight-line method over their estimated period of benefit, ranging from two
to ten years.

We assess the impairment of long-lived assets and intangible assets whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. Factors considered important which may trigger an impairment review include the following: (1)
significant underperformance relative to expected historical or projected future operating results; (2) significant changes in the manner
or use of the assets or strategy for the overall business; (3) significant negative industry or economic trends and (4) a significant decline in
our stock price for a sustained period.

UNIVERSAL ELECTRONICS INC | 2008 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

When we determine that the carrying value may not be recoverable based upon the existence of one or more of the above indicators of
impairment, we conduct an impairment review. The asset is impaired if its carrying value exceeds the sum of the undiscounted cash flows
expected to result from the use and eventual disposition of the asset. In assessing recoverability, we must make assumptions regarding
estimated future cash flows and other factors.

The impairment loss is the amount by which the carrying value of the asset exceeds its fair value. We estimate fair value utilizing the

projected discounted cash flow method and a discount rate determined by our management to be commensurate with the risk inherent
in our current business model. When calculating fair value, we must make assumptions regarding estimated future cash flows, discount
rates and other factors. For the years ended December 31, 2008, 2007 and 2006 we recorded impairment charges of $0.2 million, $0.1
million and $0.1 million, respectively, related to our long-lived assets. The impairment charges are recorded in depreciation expense. We
recorded impairment charges related to our intangible assets of $0.1 million for each of the years ended December 31, 2008, 2007 and
2006. The impairment charges are recorded in amortization expense.

Goodwill We record the excess purchase price of net tangible and intangible assets acquired over their estimated fair value as good-
will. We have adopted the provisions of SFAS 142, “Goodwill and Intangible Assets.” Under SFAS 142, we are required to test goodwill for
impairment at least annually. We evaluate the carrying value of goodwill as of December 31 of each year and between annual evaluations if
events occur or circumstances change that may reduce the fair value of the reporting unit below its carrying amount. Such circumstances
may include, but are not limited to: (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition,
or (3) an adverse action or assessment by a regulator. In performing the impairment review, we determine the carrying amount of each
reporting unit by assigning assets and liabilities, including the existing goodwill, to those reporting units (see Note 3). A reporting unit is
defined as an operating segment or one level below an operating segment (referred to as a component). A component of an operating seg-
ment is deemed a reporting unit if the component constitutes a business for which discrete financial information is available and segment
management regularly reviews the operating results of that component. Our domestic and international components are “reporting units”
within our one operating segment “Core Business.”

To evaluate whether goodwill is impaired, we compare the fair value of the reporting unit to which the goodwill is assigned to the
reporting unit’s carrying amount, including goodwill. We estimate the fair value of each reporting unit using the present value of expected
future cash flows for that reporting unit. If the carrying amount of a reporting unit exceeds its estimated fair value, the amount of the
impairment loss must be measured.

We conducted annual goodwill impairment reviews as of December 31, 2008, 2007 and 2006. Based on the analysis performed, we deter-

mined that the fair values of our reporting units exceeded their carrying amounts, including goodwill, and therefore they were not impaired.

During the fourth quarter of 2004, we purchased SimpleDevices for approximately $12.8 million in cash, including direct acquisition
costs, and a potential performance-based payment of our unregistered common stock, if certain future financial objectives were achieved.
As a result of the performance-based incentive and other factors, our chief operating decision maker (“CODM”) reviewed SimpleDevices’
discrete operating results through the second quarter of 2006, and SimpleDevices was defined as an “operating segment” and a “reporting
unit” as well.

Effective at the end of second quarter 2006, we completed our integration of SimpleDevices’ technologies with our existing technolo-

gies, merged SimpleDevices’ sales, engineering and administrative functions into our “domestic” reporting unit, and the performance-
based payment related to the acquisition expired. Commencing in the third quarter of 2006, our CODM no longer reviews SimpleDevices’
financial statements on a stand alone basis. As a result of these activities, SimpleDevices became part of the “domestic” reporting unit
within our single operating segment.

Income taxes Income tax expense includes U.S. and foreign income taxes. We account for income taxes using the liability method. We
record deferred tax assets and deferred tax liabilities on our balance sheet for expected future tax consequences of events that have been
recognized in different periods for financial statement purposes versus tax return purposes using enacted tax rates that will be in effect
when these differences reverse. We record a valuation allowance to reduce net deferred tax assets if we determine that it is more likely
than not that the deferred tax assets will not be realized. A current tax asset or liability is recognized for the estimated taxes refundable or
payable for the current year.

In accordance with the adoption of FIN 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of Statement No. 109,” if a
tax position does not meet the more likely than not standard, a full reserve is established against the tax asset or a liability is recorded.
Additionally, a tax position that meets the more likely than not recognition threshold is measured to determine the amount of benefit to
recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than fifty percent likely
of being realized upon ultimate settlement.

Capitalized Software Development Costs We account for software development costs in accordance with SFAS No. 86, “Accounting for
the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed.” Costs incurred internally while creating a computer software
product are expensed when incurred as research and development until technological feasibility has been established. We determined
that technological feasibility for our products is established when a working model is complete. Once technological feasibility is estab-
lished, software development costs are capitalized until the product is available for general release to customers and is then amortized
using the greater of (i) the ratio that current gross revenues for a product bear to the total current and anticipated future gross revenues
or (ii) the straight-line method over the remaining estimated economic life of the product. The straight-line amortization periods for
capitalized software development costs range from 1 to 2 years. Software development costs consist primarily of salaries and employee
benefits.

At each balance sheet date, we compare the unamortized cost of a software product to its net realizable value. The amount by which
the unamortized cost of a software product exceeds the net realizable value of that asset is written off. The net realizable value is the esti-
mated future gross revenues attributable to each product reduced by its estimated future completion costs and disposal. Any remaining
amount of capitalized software development costs that have been written down are considered to be the cost for subsequent accounting
purposes, and the amount of the write-down is not subsequently restored.

Capitalized software development costs are stated at cost net of accumulated amortization. Unamortized capitalized software devel-
opment costs were $0.7 million and $0.4 million at December 31, 2008 and 2007, respectively. We capitalized $0.6 million, $0.5 million, and
$0 for the years ended December 31, 2008, 2007 and 2006, respectively. Amortization expense related to capitalized software development
costs was $0.3 million, $0.2 million and $0.3 million for the years ended December 31, 2008, 2007 and 2006, respectively (see Note 3).

research and Development We account for research and development costs in accordance with SFAS No. 2, “Accounting for Research
and Development Costs.” As such, research and development costs are expensed as incurred and consist primarily of salaries, employee
benefits, supplies and materials.

advertising Advertising costs are expensed as incurred. Advertising expense totaled $2.4 million, $2.3 million and $2.2 million for the
years ended December 31, 2008, 2007 and 2006, respectively.

Shipping and handling Fees and Costs In accordance with Emerging Issues Task Force issued EITF 00-10, “Accounting for Shipping and
Handling Fees and Costs,” we include shipping and handling fees billed to customers in net sales. Shipping and handling costs associated
with in-bound freight are recorded in cost of goods sold. Other shipping and handling costs are included in selling, general and adminis-
trative expenses and totaled $8.4 million, $7.9 million and $6.9 million for the years ended December 31, 2008, 2007 and 2006, respectively.

Derivatives Our foreign currency exposures are primarily concentrated in the Euro, British Pound and Hong Kong dollar. We periodically
enter into foreign currency exchange contracts with terms normally lasting less than nine months to protect against the adverse effects
that exchange-rate fluctuations may have on our foreign currency-denominated receivables, payables, cash flows and reported income.
We do not enter into financial instruments for speculation or trading purposes. Such contracts involve the risk of non-performance by the
counterparty, which may result in a material loss.

UNIVERSAL ELECTRONICS INC | 2008 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The derivatives we enter into have not qualified for hedge accounting. The gains and losses on both the derivatives and the foreign cur-

rency-denominated balances are recorded as foreign exchange transaction gains or losses and are classified in other income (expense),
net. Derivatives are recorded on the balance sheet at fair value. The estimated fair value of derivative financial instruments represents the
amount required to enter into similar offsetting contracts with similar remaining maturities based on quoted market prices. Refer to Note
22 for further discussion on derivatives.

Stock-Based Compensation Effective January 1, 2006, we adopted the fair value recognition provisions of SFAS No. 123(R), “Share-Based
Payment” (“SFAS 123R”) using the modified-prospective transition method. Under this transition method, compensation expense recog-
nized for the year ended December 31, 2006 includes: (a) compensation expense for all share-based awards granted prior to, but not yet
vested as of January 1, 2006 based on the grant date fair value estimated in accordance with the original provisions of SFAS 123 and (b)
compensation expense for all share-based awards granted subsequent to December 31, 2005 based on the grant-date fair value estimated
in accordance with the provisions of SFAS 123R.

We recognize stock-based compensation expense, net of estimated forfeitures, on a straight-line basis over the service period of the

award, which is generally the vesting term of three to four years. In March 2005, the Securities and Exchange Commission (the “SEC”)
issued Staff Accounting Bulletin No. 107 (“SAB 107”) regarding the SEC’s interpretation of SFAS 123R and the valuation of share-based
compensation for public companies. We have applied the provisions of SAB 107 to our adoption of SFAS 123R.

We use the Black-Scholes option pricing model to estimate the grant date fair value of stock options. The assumptions utilized in the
Black-Scholes model include the following: weighted average fair value of grant, risk-free interest rate, expected volatility and expected
life in years. Refer to Note 10 and Note 11 for further discussion on stock-based compensation.

new accounting pronouncements In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which
defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles in the
United States of America, and expands disclosures about fair value measurements for assets and liabilities. SFAS 157 applies when other
accounting pronouncements require or permit assets or liabilities to be measured at fair value. Accordingly, SFAS 157 does not require
new fair value measurements. In February 2008, the FASB issued their first Staff Position for SFAS 157 (“FSP FAS 157-1”) to amend SFAS
157 to exclude SFAS 13, “Accounting for Leases”, and other accounting pronouncements that address fair value measurements for pur-
poses of lease classification or measurement under SFAS 13. However, this scope exception does not apply to assets acquired and liabili-
ties assumed in a business combination that are required to be measured at fair value under SFAS 141, “Business Combinations”, or SFAS
141R, “Business Combinations”, regardless of whether those assets and liabilities are related to leases. In addition, in February 2008,
the FASB issued their second Staff Position for SFAS 157 (“FSP FAS 157-2”), which delays the effective date of SFAS 157 for non-financial
assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in an entity’s financial statements on a
recurring basis (at least annually), until fiscal years beginning after November 15, 2008. We adopted the provisions of SFAS 157 in the first
quarter of 2008, except for those items within scope of FSP FAS 157-2, which we will adopt in the first quarter of 2009. The adoption of
SFAS 157 did not have a material effect on our consolidated results of operations and financial condition during the year ended December
31, 2008 (see Note 22 for related disclosure). In addition, we do not believe that the adoption of FSP FAS 157-2 will have a material effect on
our consolidated results of operations and financial condition.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities-Including an

amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 expands the use of fair value accounting but does not affect existing
standards that require assets or liabilities to be carried at fair value. Under SFAS 159, a company may elect to use fair value to measure
accounts and loans receivable, available-for-sale and held-to-maturity securities, equity method investments, accounts payable, guar-
antees and issued debt. Other eligible items include firm commitments for financial instruments that otherwise would not be recognized
at inception and non-cash warranty obligations where a warrantor is permitted to pay a third party to provide the warranty goods or
services. If the use of fair value is elected, any upfront costs and fees related to the item must be recognized in earnings and cannot be
deferred, such as debt issuance costs. The fair value election is irrevocable and generally made on an instrument-by-instrument basis,
even if a company has similar instruments that it elects not to measure based on fair value. At the adoption date, unrealized gains and
losses on existing items for which fair value has been elected are reported as a cumulative adjustment to beginning retained earnings.
Subsequent to the adoption of SFAS 159, changes in fair value are recognized in earnings. SFAS 159 is effective for fiscal years beginning

after November 15, 2007 and was adopted by us in the first quarter of 2008. The adoption of SFAS 159 did not have a material effect on our
consolidated results of operations and financial condition during the year ended December 31, 2008.

In June 2007, the FASB ratified EITF 07-3, “Accounting for Nonrefundable Advance Payments for Goods or Services Received for Use

in Future Research and Development Activities” (“EITF 07-3”). EITF 07-3 requires that nonrefundable advance payments for goods or
services that will be used or rendered for future research and development activities be deferred and recognized as an expense as the
goods are delivered or the related services are performed. EITF 07-3 is effective, on a prospective basis, for fiscal years beginning after
December 15, 2007 and was adopted by us in the first quarter of 2008. We did not have any arrangements with advance payments and
therefore the adoption of EITF 07-3 did not have a material effect on our consolidated financial position, results of operations or cash flows
for the year ended December 31, 2008.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”). SFAS 141R establishes
principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the
liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS 141R also establishes disclosure require-
ments to enable the evaluation of the nature and financial effects of the business combination. SFAS 141R is effective as of the beginning
of an entity’s fiscal year that begins after December 15, 2008, and will be adopted by us in the first quarter of fiscal 2009. The adoption of
Statement 141R will effect the total purchase price of future acquisitions, as acquisition costs will now be expensed, and the allocation of
fair value to specific assets and liabilities will be different. We are continuing to evaluate the impact the adoption of SFAS 141R will have on
our consolidated results of operations and financial condition.

In December 2007, the FASB ratified EITF 07-1, “Accounting for Collaborative Arrangements Related to the Development and
Commercialization of Intellectual Property” (“EITF 07-1”). EITF 07-1 defines collaborative arrangements and establishes disclosure
requirements for transactions between participants in a collaborative arrangement and between participants and third parties in the
arrangement. EITF 07-1 is effective as of the beginning of an entity’s fiscal year that begins after December 15, 2008 and should be applied
retrospectively to all prior periods presented for all collaborative arrangements existing as of the effective date. EITF 07-1 is effective for
us beginning January 1, 2009. Currently, we do not have any collaborative arrangements; therefore, we do not believe that the adoption of
EITF 07-1 will have a material effect on our consolidated results of operations and financial condition.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements: an amendment

of ARB No. 51” (“SFAS 160”). SFAS 160 changes the accounting for, and the financial statement presentation of, noncontrolling equity
interests in a consolidated subsidiary. SFAS 160 replaces the existing minority-interest provisions of Accounting Research Bulletin 51,
“Consolidated Financial Statements,” by defining a new term – noncontrolling interests – to replace what were previously called minority
interests. The new standard establishes noncontrolling interests as a component of the equity of a consolidated entity. The underlying
principle of the new standard is that both the controlling interest and the noncontrolling interests are part of the equity of a single eco-
nomic entity: the consolidated reporting entity. Classifying noncontrolling interests as a component of consolidated equity is a change
from the current practice of treating minority interests as a mezzanine item between liabilities and equity or as a liability. The change
affects both the accounting and financial reporting for noncontrolling interests in a consolidated subsidiary. SFAS 160 includes reporting
requirements intended to clearly identify and differentiate the interests of the parent and the interests of the noncontrolling owners. The
reporting requirements are required to be applied retrospectively. SFAS 160 is effective for fiscal years and interim periods within those
fiscal years beginning on or after December 15, 2008. Early adoption is prohibited. We do not believe that the adoption of SFAS 160 will
have a material effect on our financial statements as we do not have any noncontrolling equity interests of a consolidated subsidiary.

In March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments and Hedging Activities-an amendment

of FASB Statement No. 133” (“SFAS 161”). SFAS 161 amends and expands the disclosure requirements of SFAS 133, “Accounting for
Derivative Instruments and Hedging Activities,” to provide improved transparency into the uses and financial statement impact of deriva-
tive instruments and hedging activities. We will be required to provide enhanced disclosures about how and why we use derivative instru-
ments, how they are accounted for, and how they affect our financial performance. This statement is effective for financial statements
issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. SFAS 161 encourages,
but does not require, comparative disclosures for earlier periods at initial adoption. SFAS 161 is effective for us beginning January 1, 2009.
We are currently assessing the impact that SFAS 161 will have on our consolidated results of operations and financial condition.

UNIVERSAL ELECTRONICS INC | 2008 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In April 2008, the FASB issued Staff Position 142-3 “Determination of the Useful Life of Intangible Assets” (“FSP FAS 142-3”). FSP FAS

142-3 amends the factors that should be considered while developing renewal or extension assumptions to be utilized when determining
the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). The intent of this
FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash
flows used to measure the fair value of the asset under SFAS 141R and other U.S. GAAP. The FSP FAS 142-3 requirements will be applied
prospectively to all intangible assets recognized as of, and subsequent to, the effective date. Early adoption is prohibited. FSP FAS 142-3 is
effective for us beginning January 1, 2009. We are currently assessing the impact that FSP FAS 142-3 will have on our consolidated results
of operations and financial condition.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 iden-

tifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements
of nongovernmental entities that are presented in conformity with accounting principles generally accepted in the United States (the GAAP
hierarchy). SFAS 162 was effective for us during the fourth quarter of 2008. The adoption of SFAS 162 did not have a material effect on our
consolidated results of operations and financial condition.

In June 2008, the FASB issued a Staff Position on EITF 03-6, “Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1 addresses whether instruments granted in share-based
payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in comput-
ing earnings per share under SFAS No. 128, “Earnings per Share”. EITF 03-6-1 is effective for financial statements issued for fiscal years
and interim periods beginning after December 15, 2008 and should be applied retrospectively to all prior periods. Early adoption is pro-
hibited. FSP EITF 03-6-1 is effective for us beginning January 1, 2009. We do not expect the adoption of FSP EITF 03-6-1 to have a material
effect on our consolidated results of operations and financial condition.

In June 2008, the FASB ratified EITF Issue No. 08-3, “Accounting for Lessees for Maintenance Deposits Under Lease Arrangements”
(“EITF 08-3”). EITF 08-3 provides guidance for accounting for nonrefundable maintenance deposits. It also provides revenue recognition
accounting guidance for the lessor. EITF 08-3 is effective for fiscal years beginning after December 15, 2008. The implementation of this
standard is not expected to have a material effect on our consolidated financial position and results of operations.

In September 2008, the FASB issued FSP 133-1 and FIN 45-4, “Disclosures about Credit Derivatives and Certain Guarantees: An
Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No.
161” (FSP 133-1 and FIN 45-4). FSP 133-1 and FIN 45-4 amends and enhances disclosure requirements for sellers of credit derivatives
and financial guarantees. It also clarifies that the disclosure requirements of SFAS 161 are effective for quarterly periods beginning
after November 15, 2008, and fiscal years that include those periods. FSP 133-1 and FIN 45-4 is effective for reporting periods (annual or
interim) ending after November 15, 2008. The implementation of this standard is not expected to have a material effect on our consolidated
financial position and results of operations.

In October 2008, the FASB issued FSP 157-3 “Determining Fair Value of a Financial Asset in a Market That Is Not Active” (“FSP 157-

3”). FSP 157-3 clarifies the application of SFAS 157 in an inactive market and demonstrates how the fair value of a financial asset is
determined when the market for that financial asset is inactive. FSP 157-3 was effective upon issuance, including prior periods for which
financial statements had not been issued. The implementation of this standard did not have a material effect on our consolidated financial
position and results of operations.

In November 2008, the FASB ratified EITF Issue No. 08-7, “Accounting for Defensive Intangible Assets,” (“EITF 08-7”). EITF 08-7 applies

to defensive intangible assets, which are acquired intangible assets that the acquirer does not intend to actively use but intends to hold to
prevent its competitors from obtaining access to them. As these assets are separately identifiable, EITF 08-7 requires an acquiring entity
to account for defensive intangible assets as a separate unit of accounting. Defensive intangible assets must be recognized at fair value
in accordance with SFAS 141R and SFAS 157. EITF 08-7 is effective for defensive intangible assets acquired in fiscal years beginning on or
after December 15, 2008 and will be adopted by us in the first quarter of fiscal 2009. We are currently evaluating the potential impact, if
any, of the adoption of EITF 08-7 on our consolidated financial position and results of operations.

In November 2008, the FASB ratified EITF Issue No. 08-6, “Equity Method Investment Accounting Considerations” (“EITF 08-6”). EITF
08-6 clarifies the accounting and impairment considerations involving equity method investments after the effective date of SFAS 141R and
SFAS 160. EITF 08-6 also provides guidance on how an equity method investor should account for contingent consideration. This issue is
effective in fiscal years beginning on or after December 15, 2008. Early adoption is prohibited. We do not believe that the adoption of EITF
08-6 will have a material effect on our financial statements as we do not have any equity method investments.

note 3 — Goodwill and Intangible Assets
Under the requirements of SFAS 142, “Goodwill and Intangible Assets”, the unit of accounting for goodwill is at a level of reporting referred
to as a “reporting unit.” SFAS 142 defines a reporting unit as either (1) an operating segment – as defined in SFAS 131, “Disclosures about
Segments of an Enterprise and Related Information” or (2) one level below an operating segment – referred to as a component. Our
domestic and international components are “reporting units” within our one operating segment “Core Business.” Goodwill is evaluated for
impairment as of December 31 of each year and between annual evaluations, if events occur or circumstances change indicating that more
than likely than not the fair value of a reporting unit has been reduced below its carrying amount.

Effective at the end of second quarter 2006, we completed our integration of SimpleDevices’ technologies with our existing technolo-

gies, merged SimpleDevices’ sales, engineering and administrative functions into our “domestic” reporting unit, and the performance-
based payment related to the acquisition expired. In addition, our CODM no longer reviews SimpleDevices’ financial statements on a stand
alone basis, commencing in the third quarter of 2006. As a result of these activities, SimpleDevices became part of the “domestic” report-
ing unit within our single operating segment.

Goodwill related to the domestic component was the result of our acquisition of a remote control company in 1998 and the acquisi-
tion of a software company (SimpleDevices Inc.) in 2004. Goodwill related to our international component resulted from the acquisition of
remote control distributors in the UK in 1998, Spain in 1999 and France in 2000.

The goodwill amounts related to our domestic and international components are the following:

( i n t h o u s a n d s )

Goodwill:

United States

International(1)

Total goodwill

D e c e m b e r 3 1 ,

2 0 0 8

2 0 0 7

8,314

2,443

8,314

2,549

10,757

$ 10,863

(1) The difference in international goodwill reported at December 31, 2008, as compared to the goodwill reported at December 31, 2007, was the result of fluctuations in the foreign currency
exchange rates used to translate the balance into U.S. dollars.

Our other intangible assets consist primarily of distribution rights, patents, trademarks, purchased and developed core technologies and
capitalized software development costs. Capitalized amounts related to our patents represent external legal costs incurred for their appli-
cation and maintenance. Intangible assets are amortized utilizing the straight-line method over our estimated period of benefit, ranging
from one to ten years.

UNIVERSAL ELECTRONICS INC | 2008 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Detailed information regarding our other intangible assets is as follows:

Estimated future amortization expense related to our other intangible assets at December 31, 2008, is as follows:

2 0 0 8 ( 1 )

2 0 0 7 ( 1 )

( i n t h o u s a n d s )

Carrying amount:

Distribution rights (10 years)

Patents (10 years)

Trademark and trade names (10 years)

Core technology (5 years)

Capitalized software development (1-2 years)

Other (5 years)

Total carrying amount

Accumulated amortization:

Distribution rights

Patents

Trademark and trade names

Core technology

Capitalized software development

Other

Total accumulated amortization

Net carrying amount:

Distribution rights

Patents

Trademark and trade names

Core technology

Capitalized software development

Other

Total net carrying amount

(1) This table excludes fully amortized intangible assets of $5,928 thousand and $5,457 thousand as of December 31, 2008 and 2007, respectively.

Amortization expense is recorded in selling, general and administrative expenses, except for amortization expense related to capital-

ized software development which is recorded in cost of sales. Amortization expense for the years ended December 31, 2008, 2007, and
2006 was approximately $1.5 million, $1.3 million and $1.5 million, respectively.

In accordance with SFAS 144 “Accounting for the Impairment or Disposal of Long-Lived Assets,” patents with a carrying amount of
$27 thousand, capitalized software development with a carrying value of $46 thousand, and other intangibles with a carrying amount of
$55 thousand, were disposed of in 2008. We disposed of patents with carrying amounts of $73 thousand and $55 thousand in 2007 and
2006, respectively. These assets no longer held any probable future economic benefits and were written-off. Impairment charges are
included in selling, general and administrative expenses. Please see Note 2 under the caption Long-Lived Assets and Intangible Assets
for further information about the valuation methodology utilized.

399

7,115

840

1,630

1,030

419

6,335

840

1,630

499

370

11,014

$ 10,093

3,292

357

1,386

289

—

2,695

273

1,060

241

5,377

4,393

346

363

3,823

3,640

483

244

741

—

567

570

431

129

5,637

5,700

2009

2010

2011

2012

2013

Thereafter

The weighted average amortization period of intangible assets is 5.3 years.

note 4 — Accounts Receivable
Accounts receivable consisted of the following at December 31, 2008 and 2007:

( i n t h o u s a n d s )

Trade receivable, gross

Allowance for doubtful accounts

Allowance for sales returns

Net trade receivable

Other(1)

Accounts receivable, net

1,491

1,042

773

785

5,637

2 0 0 8

2 0 0 7

65,014

$ 63,528

(2,439)

(2,823)

59,752

(2,330)

(1,482)

59,716

430

59,825

60,146

(1) Other receivable as of December 31, 2007, consisted primarily of a tenant improvement allowance provided by our landlord for the renovation and expansion of our corporate headquarters
in Cypress, California. Construction was completed during the first quarter of 2008 and the tenant improvement allowance was substantially collected in the third quarter of 2008.

Sales returns We record a provision for estimated sales returns and allowances on retail product sales in the same period as the related
revenues are recorded. These estimates are based on historical sales returns, analysis of credit memo data and other known factors. The
provision recorded for estimated sales returns and allowances is deducted from gross sales to arrive at net sales in the period the related
revenue is recorded. Sales allowances reduce gross accounts receivable to arrive at accounts receivable, net in the same period the
related receivable is recorded. Our contractual sales return periods range up to six months. We have no other obligations after delivery of
our products other than the associated warranties.

The allowance for sales returns balance at December 31, 2008 and 2007 contained reserves for items returned prior to year-end,
but that were not completely processed, and therefore not yet removed from the allowance for sales returns balance. We estimate that if
these returns had been fully processed, the allowance for sales returns balance would have been approximately $0.8 million on December
31, 2008 and 2007. The value of these returned goods was included in our inventory balance at December 31, 2008 and 2007.

allowance for Doubtful accounts Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Our allow-
ance for doubtful accounts is our best estimate of losses resulting from the inability of our customers to make their required payments.
We maintain a general allowance for doubtful accounts based on a variety of factors, including historical experience, length of time
receivables are past due, and current economic trends. Also, we record specific provisions for individual accounts when we become aware
of a customer’s inability to meet its financial obligations to us, such as in the case of bankruptcy filings or deterioration in the customer’s
operating results or financial position. If circumstances related to a customer change, our estimates of the recoverability of the receiv-
ables would be further adjusted, either upward or downward.

UNIVERSAL ELECTRONICS INC | 2008 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following changes occurred in the allowance for doubtful accounts during the years ended December 31, 2008, 2007 and 2006:

( i n t h o u s a n d s )

Year Ended December 31, 2008

Year Ended December 31, 2007

Year Ended December 31, 2006

note 5 — Inventories
Inventories, net consisted of the following at December 31, 2008 and 2007:

( i n t h o u s a n d s )

Components

Finished goods

Reserve for inventory obsolescence

Inventories, net

Balance at
Beginning
of Period

2,330

2,602

2,296

Additions to
Costs and
Expenses

(Write-offs)/
FX Effects

442

210

(333)

(295)

Balance
at End of
Period

2,439

2,330

2,602

2 0 0 8

2 0 0 7

7,879

6,750

37,331

(1,535)

29,982

(1,826)

43,675

$ 34,906

During the years ended December 31, 2008 and 2007, inventory write-downs totaled $2.4 million and $2.1 million, respectively.
Inventory write-downs are a normal part of our business and result primarily from product life cycle estimation variances and manufac-
turing yield loss.

note 6 — Equipment, Furniture and Fixtures
Equipment, furniture, and fixtures, net consisted of the following at December 31, 2008 and 2007:

( i n t h o u s a n d s )

Tooling

Computer equipment

Software

Furniture and fixtures

Leasehold improvements

Machinery and equipment

Accumulated depreciation

Construction in progress

Total equipment, furniture and fixtures, net

2 0 0 8

2 0 0 7

10,567

9,998

2,588

2,937

1,740

2,824

1,040

21,696

(14,275)

7,421

1,265

8,686

2,581

2,583

1,660

1,056

911

18,789

(13,725)

5,064

2,494

7,558

Depreciation expense including tooling depreciation, which is recorded in cost of goods sold, was $4.6 million, $3.4 million and $2.7

million for the years ended December 31, 2008, 2007 and 2006, respectively.

As of December 31, 2008, construction in progress consisted primarily of $0.7 million in tooling and $0.5 million in software. We expect

that approximately 70% of the construction in progress costs will be placed in service during the first and second quarters of 2009. We
will begin to depreciate those assets at that time. As of December 31, 2007, construction in progress consisted primarily of $1.0 million in
leasehold improvements, $0.8 million in tooling and equipment, $0.3 million in software and $0.3 million in furniture and fixtures.

note 7 — Revolving Credit Line
Effective August 31, 2006, we amended our original Credit Facility with Comerica Bank (“Comerica”), extending our line of credit through
August 31, 2009. The amended Credit Facility provides a $15 million unsecured revolving credit agreement with Comerica. Under the
Credit Facility, the interest payable is variable and is based on the bank’s cost of funds or 12-month LIBOR plus a fixed margin of 1.25%.
The interest rate in effect as of December 31, 2008 using 12-month LIBOR plus the fixed margin was 3.25%. We pay a commitment fee

ranging from zero to a maximum rate of 0.25% per year on the unused portion of the credit line depending on the amount of cash invest-
ment retained with Comerica during each quarter. At December 31, 2008, the commitment fee rate was 0.25%. Under the terms of the
Credit Facility, dividend payments are allowed for up to 100% of the prior fiscal year’s net income, to be paid within 90 days of the current
fiscal year end. We are subject to certain financial covenants related to our net worth, quick ratio, and net income. Amounts available for
borrowing under the Credit Facility are reduced by the outstanding balance of import letters of credit. As of December 31, 2008, we did not
have any outstanding import letters of credit and the available balance on the line of credit was $15 million. Furthermore, as of December
31, 2008, we were in compliance with all financial covenants required by the Credit Facility.

Under the amended Credit Facility, we have the authority to acquire up to an additional 2.0 million shares of our common stock in the

open market. From August 31, 2006 through December 31, 2008, we purchased 1,686,218 shares of our common stock, leaving 313,782
shares available for purchase under the Credit Facility (see Note 10).

Presently, we have no borrowings under this Credit Facility, however we cannot make any assurances that we will not need to borrow

amounts under this facility or that this facility will be extended to us beyond its expiration date of August 31, 2009 under comparable terms
or at all. If this or any other credit facility is not available to us at a time when we need to borrow, we would have to use our cash reserves,
which may have a material adverse effect on our earnings, cash flow and financial position.

note 8 — Other Accrued Expenses
The components of other accrued expenses as of December 31, 2008 and 2007 are listed below:

( i n t h o u s a n d s )

Accrued freight

Accrued professional fees

Accrued advertising and marketing

Deferred income taxes

Accrued third-party commissions

Accrued sales and VAT taxes

Other

Total other accrued expenses

2 0 0 8

2 0 0 7

1,846

1,435

1,245

644

356

262

410

580

735

511

204

499

2,050

2,603

6,813

6,567

note 9 — Financial Instruments
Our financial instruments consist primarily of investments in cash and cash equivalents, accounts receivable, accounts payable and
accrued liabilities. The carrying value of these instruments approximate fair value due to their short maturities.

note 10 — Stockholders’ Equity
Fair price provisions and other anti-takeover Measures Our Restated Certificate of Incorporation, as amended, contains certain pro-
visions restricting business combinations with interested stockholders under certain circumstances and imposing higher voting require-
ments for the approval of certain transactions (“fair price” provisions). Any of these provisions may delay or prevent a change in control.
The “fair price” provisions require that holders of at least two-thirds of the outstanding shares of voting stock approve certain business
combinations and significant transactions with interested stockholders.

treasury Stock During the years ended December 31, 2008, 2007 and 2006, we repurchased 1,118,318, 471,300 and 127,326 shares of our
common stock at a cost of $26.7 million, $14.5 million and $2.6 million, respectively. Repurchased shares are recorded as shares held in
treasury at cost. We generally hold shares for future use as management and the Board of Directors deem appropriate, including com-
pensating our outside directors. During the years ended December 31, 2008, 2007 and 2006, we issued 23,438, 24,688 and 19,375 shares,
respectively, to outside directors for services performed (see Note 11).

Stock awards to outside Directors We issue restricted stock awards to our outside directors as compensation for services performed.
We grant each of our outside directors 5,000 shares of our common stock annually each July 1st. When an additional outside direc-
tor joins our Board of Directors, the director receives an allocated number of shares based on months of service during the initial year.

UNIVERSAL ELECTRONICS INC | 2008 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Total Amortization Expense

$ 649,471

$ 687,338

$ 352,810

$ 262,187

Weighted average fair value of grants

Under SFAS 123R, compensation expense related to restricted stock awards is based on the fair value of the shares awarded as of the
grant date. The fair value of these shares is amortized on a straight-line basis over the requisite service period of one year (see Note 11). The
shares are issued from treasury stock using a first-in-first-out cost basis, which amounted to $0.4 million and $0.4 million in 2008 and 2007,
respectively.

Refer to the table below for shares granted to our outside directors from July 1, 2005 through December 31, 2008, their fair market value
and total amortization expense for the respective year:

Grant Date

July 1, 2005

July 1, 2006

August 14, 2006

October 23, 2006

July 1, 2007

April 24, 2008

July 1, 2008

C o m p e n s a t i o n e x p e n s e

2008

2007

2006

Unvested

Shares
Granted

Fair Market
Value(1)

20,000

$ 325,800

15,000

4,375

3,438

22,500

938

25,000

272,100(1)

79,406

72,679

—

$ 162,900

136,050

45,375

52,850

34,031

19,829

815,512

362,449

453,063

24,834

524,375

262,188

—

262,187

—

(1) The fair market value is based on the average of the high and low trade prices on the date of grant.

The unvested restricted stock compensation cost of $262,187 will be recognized in the first half of 2009. During the fourth quarter of

2007, 2,500 shares were forfeited due to the death of one of our outside directors. The fair market value of the forfeited shares amounted
to $90,613 which has been excluded from the above table.

note 11 — Stock-Based Compensation
Stock-based compensation expense We account for our stock-based compensation plans under SFAS 123R. Stock-based compensation
expense for each employee and director is presented in the same income statement caption as their cash compensation. We recorded
$4.2 million, $3.5 million and $3.1 million (including amounts for restricted stock as described in Note 10) of total pre-tax stock-based
compensation expense during the years ended December 31, 2008, 2007, and 2006, respectively.

During the first quarter of 2008, as part of our annual compensation review cycle, the Compensation Committee of the Board of
Directors granted 115,926 shares of restricted stock to our executives under the 2006 Stock Incentive Plan. These awards were granted
to assist us in meeting our performance and retention objectives. Compensation expense for these restricted stock awards is recognized
on a straight-line basis over the requisite service period of three years. In accordance with SFAS 123R, compensation expense related to
restricted stock awards is determined based on the fair value of the shares awarded on the grant date. We determined the fair value of the
restricted stock utilizing the average of the high and low trade prices of our Company’s shares on the grant date. The stock-based com-
pensation expense included in SG&A related to this award was $0.9 million for the year ended December 31, 2008.

The income tax benefit under SFAS 123R from the recognition of stock-based compensation for the years ended December 31, 2008,

2007, and 2006 was $1.5 million, $1.2 million, and $1.0 million, respectively.

Stock-based compensation expense by income statement caption for the three years ended December 31, 2008, 2007 and 2006 was the
following:

( i n t h o u s a n d s )

Cost of sales

Research and development

Selling, general and administrative

Total stock-based compensation expense

UNIVERSAL ELECTRONICS INC | 2008 ANNUAL REPORT

2 0 0 8

2 0 0 7

2 0 0 6

356

3,870

418

3,072

4,243

3,521

370

2,721

3,117

As of December 31, 2008, we expect to recognize $2.8 million of total unrecognized pre-tax stock-based compensation expense related

to non-vested stock options over a weighted-average life of 2.21 years.

As part of the adoption of SFAS 123R, we evaluated the available option pricing models and the assumptions we may utilize to estimate

the fair value of stock options granted to employees and directors. We elected to utilize the Black-Scholes option pricing model. As part
of our assessment of possible assumptions, management determined that historical volatility calculated based on our actively traded
common stock is a better indicator of expected volatility and future stock price trends than implied volatility. Therefore, we calculate the
expected volatility of our common stock utilizing its historical volatility over a period of time equal to the expected term of the stock option.
In addition, we examined the historical pattern of stock option exercises in an effort to determine if there were any discernible activity pat-
terns based on employee classification. From this analysis, we identified two classifications: (1) Executives and Board of Directors and
(2) Non-Executives. Our estimate of expected life is computed utilizing historical exercise patterns and post-vesting behavior within each
of the two identified classifications. The risk-free interest rate over the expected term is equal to the prevailing U.S. Treasury note rate
over the same period.

The assumptions we utilized in the Black-Scholes option pricing model and the resulting weighted average fair value of stock option grants
were the following:

D e c e m b e r 3 1 , ( 1 )

2 0 0 8

2 0 0 7

9.08

11.77

2.75%

40.85%

4.74

4.56%

39.06%

5.25

2 0 0 6

7.50

4.72%

39.27%

4.89

Risk-free interest rate

Expected volatility

Expected life in years

(1) The weighted average fair value of grants was calculated utilizing the stock options granted during each respective period.

We recognize the compensation expense related to stock option awards net of estimated forfeitures over the service period of the
award, which is generally the option vesting term of three to four years. We estimated the annual forfeiture rate for our executives and
board of directors group to be 2.66%, 2.41%, and 2.41% as of December 31, 2008, 2007, and 2006, respectively, based upon our historical
forfeitures. We estimated the annual forfeiture rate for our non-executive employee group to be 6.31%, 5.95%, and 5.95% as of December
31, 2008, 2007, and 2006, respectively, based on our historical forfeitures.

Stock option activity during the years ended December 31, 2008, 2007 and 2006 was the following:

2 0 0 8

Average

Number of
Options
(in 000’s)

Weighted- Remaining
Average Contractual
Exercise
Price

Term
(in years)

Aggregate
Intrinsic
Value
(in 000’s)

Number
of Options
(in 000’s)

2 0 0 7

Weighted-
Average
Exercise
Price

Average
Remaining
Contractual
Term
(in years)

2 0 0 6

Aggregate
Intrinsic
Value
(in 000’s)

Number
of Options
(in 000’s)

Weighted-
Average
Exercise
Price

Average
Remaining
Contractual
Term
(in years)

Aggregate
Intrinsic
Value
(in 000’s)

Outstanding at

beginning of the year 1,739

$ 16.83

140

23.46

(114)

10.19

$ 1,562

2,480

$ 13.73

329

(981)

27.80

12.83

3,151

$ 13.70

18.15

$ 17,263

(550)

13.58

$ 3,036

(36)

24.70

(89)

14.91

(167)

16.08

1,729

$ 17.64

5.06

$ 3,045

1,739

$ 16.83

5.58

$ 28,884

2,480

$ 13.73

5.51

$ 18,096

Granted

Exercised

Forfeited/cancelled/

expired

Outstanding at
end of year

Vested and expected

to vest at end of year 1,688

$ 17.42

4.98

$ 3,045

1,650

$ 16.43

5.41

$ 28,079

2,411

$ 13.64

5.43

$ 17,783

Exercisable at
end of year

1,267

$ 15.34

3.97

$ 3,044

1,081

$ 13.84

4.05

$ 21,187

1,848

$ 12.91

4.67

$ 14,994

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between our closing stock
price on the last trading day of 2008, 2007 and 2006 and the exercise price, multiplied by the number of in-the-money options) that would
have been received by the option holders had all option holders exercised their options on December 31, 2008, 2007 and 2006. This amount
will change based on the fair market value of our stock. The total intrinsic value of stock options exercised in fiscal 2008, 2007 and 2006
was $1.6 million, $17.3 million and $3.0 million, respectively.

During 2008 and 2007, there were no significant modifications made to outstanding stock options. During 2006, stock options were
modified due to an employee’s death, resulting in 2,875 unvested stock options becoming fully vested. The incremental stock-based com-
pensation expense resulting from the modification was $0.01 million.

Cash received from option exercises for the years ended December 31, 2008, 2007 and 2006 was $1.2 million, $12.6 million and $7.5
million, respectively. The actual tax benefit realized from option exercises of the share-based payment awards was $0.4 million, $3.3 mil-
lion and $0.8 million for the years ended December 31, 2008, 2007 and 2006, respectively.

Non-vested restricted stock award activity during the years ended December 31, 2008, 2007 and 2006 (including restricted stock issued to
directors as described in Note 10) was the following:

Non-vested at December 31, 2005

Granted

Vested

Forfeited

Non-vested at December 31, 2006

Granted

Vested

Forfeited

Non-vested at December 31, 2007

Granted

Vested

Forfeited

Non-vested at December 31, 2008

Shares Granted
(in 000’s)

(20)

—

(25)

(3)

142

(62)

—

Weighted Average
Grant Date
Fair Value

$ 16.29

18.59

17.37

—

$ 18.74

36.25

27.49

36.25

$ 36.25

23.15

25.15

—

$ 23.23

As of December 31, 2008, we expect to recognize $2.1 million of total unrecognized pre-tax stock-based compensation expense related

to non-vested restricted stock awards over a weighted-average life of 1.8 years.

Stock Incentive plans

1993 Stock Incentive plan On January 19, 1993, the 1993 Stock Incentive Plan (“1993 Plan”) was approved. Under the 1993 Plan, 400,000
shares of common stock were reserved for the granting of incentive and other stock options to officers, key employees and directors.
The 1993 Plan provided for the granting of incentive and other stock options through January 18, 2003. All options outstanding at the time
of termination of the 1993 Plan shall continue in full force and effect in accordance with their terms. The option price for incentive stock
options and non-qualified stock options was not less than the fair market value at the date of grant. The Compensation Committee deter-
mined when each option was to expire, but no option was exercisable more than ten years after the date the option was granted. The 1993
Plan also provided for the award of stock appreciation rights subject to terms and conditions specified by the Compensation Committee.
No stock appreciation rights have been awarded under this 1993 Plan. There are no remaining options available for grant under the 1993
Plan. There are 17,400 shares outstanding under this plan as of December 31, 2008.

1995 Stock Incentive plan On May 19, 1995, the 1995 Stock Incentive Plan (“1995 Plan”) was approved. Under the 1995 Plan, 800,000
shares of common stock were available for distribution to our key officers, employees and directors. The 1995 Plan provided for the
issuance of stock options, stock appreciation rights, performance stock units, or any combination thereof through May 18, 2005, unless

otherwise terminated by resolution of our Board of Directors. The option prices for the stock options were equal to the fair market value at
the date of grant. The Compensation Committee determined when each option was to expire, but no option was exercisable more than ten
years after the date the option was granted. No stock appreciation rights or performance stock units have been awarded under this 1995
Plan. There are no remaining options available for grant under the 1995 Plan. There are 50,000 shares outstanding under this plan as of
December 31, 2008.

1996 Stock Incentive plan On December 1, 1996, the 1996 Stock Incentive Plan (“1996 Plan”) was approved. Under the 1996 Plan,
800,000 shares of common stock were available for distribution to our key officers and employees. The 1996 Plan provided for the issu-
ance of stock options, stock appreciation rights, performance stock units, or any combination thereof through November 30, 2007, unless
otherwise terminated by the resolution of our Board of Directors. The option price for the stock options was equal to the fair market value
at the date of grant. The Compensation Committee determined when each option was to expire, but no option was exercisable more than
ten years after the date the option was granted. No stock appreciation rights or performance stock units have been awarded under this
1996 Plan. There are no remaining options available for grant under the 1996 Plan. There are 21,334 shares outstanding under this plan as
of December 31, 2008.

1998 Stock Incentive plan On May 27, 1998, the 1998 Stock Incentive Plan (“1998 Plan”) was approved. Under the 1998 Plan, 630,000
shares of common stock were available for distribution to our key officers, employees, and directors. The 1998 Plan provided for the
issuance of stock options, stock appreciation rights, performance stock units, or any combination thereof through May 26, 2008, unless
otherwise terminated by resolution of our Board of Directors. The option price for the stock options was not less than the fair market value
at the date of grant. The Compensation Committee determined when each option was to expire, but no option was exercisable more than
ten years after the date the option was granted. No stock appreciation rights or performance stock units have been awarded under this
1998 Plan. There are no remaining options available for grant under the 1998 Plan. There are 91,000 shares outstanding under this plan as
of December 31, 2008.

1999 Stock Incentive plan On January 27, 1999, the 1999 Stock Incentive Plan (“1999 Plan”) was approved. Under the 1999 Plan, 630,000
shares of common stock were available for distribution to our key officers and employees. The 1999 Plan provided for the issuance of
stock options, stock appreciation rights, performance stock units, or any combination thereof through January 26, 2009, unless otherwise
terminated by resolution of our Board of Directors. The option price for the stock options was not less than the fair market value at the
date of grant. The Compensation Committee determined when each option was to expire, but no option was exercisable more than ten
years after the date the option was granted. No stock appreciation rights or performance stock units have been awarded under this 1999
Plan. There are 3,125 remaining options available for grant under the 1999 Plan. There are 39,177 shares outstanding under this plan as of
December 31, 2008.

1999a Stock Incentive plan On October 7, 1999, the 1999A Nonqualified Stock Plan (“1999A Plan”) was approved and on February 1,
2000, the 1999A Plan was amended. Under the 1999A Plan, 1,000,000 shares of common stock were available for distribution to our key
officers and employees. The 1999A Plan provided for the issuance of stock options, stock appreciation rights, performance stock units, or
any combination thereof through October 6, 2009, unless otherwise terminated by resolution of our Board of Directors. The option price for
the stock options was not less than the fair market value at the date of grant. The Compensation Committee determined when each option
was to expire, but no option was exercisable more than ten years after the date the option was granted. No stock appreciation rights or
performance stock units have been awarded under this 1999A Plan. There are 3,791 remaining options available for grant under the 1999A
Plan. There are 349,959 shares outstanding under this plan as of December 31, 2008.

2002 Stock Incentive plan On February 5, 2002, the 2002 Stock Incentive Plan (“2002 Plan”) was approved. Under the 2002 Plan,
1,000,000 shares of common stock were available for distribution to our key officers, employees, and directors. The 2002 Plan provided for
the issuance of stock options, stock appreciation rights, performance stock units, or any combination thereof through February 4, 2012,
unless otherwise terminated by resolution of our Board of Directors. The option price for the stock options was not less than the fair mar-
ket value at the date of grant. The Compensation Committee determined when each option was to expire, but no option was exercisable
more than ten years after the date the option was granted. No stock appreciation rights or performance stock units have been awarded
under this 2002 Plan. There are 2,997 remaining options available for grant under the 2002 Plan. There are 421,238 shares outstanding
under this plan as of December 31, 2008.

UNIVERSAL ELECTRONICS INC | 2008 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2003 Stock Incentive plan On June 18, 2003, the 2003 Stock Incentive Plan (“2003 Plan”) was approved. Under the 2003 Plan, 1,000,000
shares of common stock were available for distribution to our key officers, employees, and directors. The 2003 Plan provided for the
issuance of stock options, stock appreciation rights, performance stock units, or any combination thereof through June 17, 2013, unless
otherwise terminated by resolution of our Board of Directors. The option price for the stock options was not less than the fair market value
at the date of grant. The Compensation Committee determined when each option was to expire, but no option was exercisable more than
ten years after the date the option was granted. No stock appreciation rights or performance stock units have been awarded under this
2003 Plan. There are 21,522 remaining options available for grant under the 2003 Plan. There are 618,061 shares outstanding under this
plan as of December 31, 2008.

2006 Stock Incentive plan On June 13, 2006, the 2006 Stock Incentive Plan (“2006 Plan”) was approved. Under the 2006 Plan, 1,000,000
shares of common stock were available for distribution to our key officers, employees, and directors. The 2006 Plan provided for the
issuance of stock options, stock appreciation rights, restricted stock units, performance stock units, or any combination thereof through
June 12, 2016, unless otherwise terminated by resolution of our Board of Directors. The option price for the stock options was not less
than the fair market value at the date of grant. The Compensation Committee determined when each option is to expire, but no option was
exercisable more than ten years after the date the option was granted. No stock appreciation rights or performance stock units have been
awarded under this 2006 Plan. There are 762,824 remaining shares available for grant under the 2006 Plan. There are 86,937 restricted
stock awards and 121,250 stock options outstanding under this plan as of December 31, 2008.

Vesting periods for the above referenced stock incentive plans range from three to four years.

Significant option groups outstanding at December 31, 2008 and the related weighted average exercise price and life information are
listed below:

o p t i o n s o u t s t a n d i n g

o p t i o n s e x e r c i s a b l e

Range of Exercise Prices

$ 7.50 to $ 9.83

10.92 to 13.08

14.85 to 16.88

17.11 to 17.62

18.01 to 21.95

23.66 to 28.08

32.40 to 35.35

$ 7.50 to $ 35.35

Number
Outstanding
At 12/31/08
(in 000’s)

Weighted-
Average Remaining
Years of
Contractual Life

180

377

222

289

327

1,729

3.38

3.28

4.05

6.05

4.39

8.46

8.94

5.06

Weighted-
Average
Exercise
Price

8.65

11.91

16.06

17.58

20.03

27.58

34.51

Number
Exercisable
At 12/31/08
(in 000’s)

180

377

207

201

227

Weighted-
Average
Exercise
Price

8.65

11.91

16.02

17.58

19.50

28.08

35.35

$ 17.64

1,267

$ 15.34

note 12 — Significant Customers and Suppliers
Significant Customers During the years ended December 31, 2008, 2007 and 2006, we had net sales to one significant customer and one
customer that when combined with its subcontractors, amounted to more than 10% of our total net sales.

Net sales to the first significant customer, when combined with its sub-contractors, totaled $55.3 million, $46.0 million and $41.6
million, accounting for 19.3%, 16.9% and 17.7% of our total net sales for the years ended December 31, 2008, 2007 and 2006, respectively.
Trade receivables with this customer and its sub-contractors amounted to $11.7 million and $7.9 million, or 19.5% and 13.3% of our net
trade receivables at December 31, 2008 and 2007, respectively.

Net sales to our second significant customer totaled $38.6 million, $36.4 million, and $28.3 million, accounting for 13.4%, 13.3% and

12.0% of our total net sales for the years ended December 31, 2008, 2007 and 2006, respectively. Trade receivables with this customer
amounted to $9.1 million and $2.3 million, or 15.3% and 3.8% of our net trade receivables at December 31, 2008 and 2007, respectively. The
December 31, 2008 trade receivables balance for this customer increased compared to December 31, 2007 as the result of an increase in
large orders shipped late in the fourth quarter 2008 as compared to fourth quarter 2007.

The loss of these customers or any other customer, either in the United States or abroad, due to their financial weakness or bank-
ruptcy, or our inability to obtain orders or maintain our order volume with them, may have a material effect on our financial condition,
results of operations and cash flows.

Significant Suppliers Most of the components used in our products are available from multiple sources. We have elected to purchase
integrated circuits (“IC”), used principally in our wireless control products, from two main sources. Purchases from these suppliers
amounted to more than 10% of total inventory purchases in 2008. Purchases from these suppliers amounted to $28.2 million and $18.6
million, representing 15.2% and 10.0%, respectively, of total inventory purchases for the year ended December 31, 2008. Accounts payable
with these suppliers amounted to $3.6 million and $5.4 million, representing 8.1% and 12.0% of total accounts payable at December 31,
2008, respectively.

During 2007, purchases from one of these suppliers amounted to more than 10% of total inventory purchases. Purchases from this
supplier amounted to $23.7 million, representing 14.9% of total inventory purchases for the year ended December 31, 2007. Accounts pay-
able with this supplier amounted to $3.2 million, representing 9.7% of total accounts payable at December 31, 2007.

For the year ended December 2006, there was a different IC supplier who provided more than 10% of total inventory purchases.

Purchases from that supplier amounted to $14.2 million or 10.5% of total inventory purchases in 2006.

During the years ended December 31, 2008, 2007 and 2006, purchases from two of our component and finished good suppliers

amounted to more than 10% of total inventory purchases.

Purchases from the first significant component and finished good supplier amounted to $50.6 million, $46.5 million and $40.7 million,

representing 27.3%, 29.2% and 30.0% of total inventory purchases for the years ended December 31, 2008, 2007 and 2006, respectively.
Accounts payable amounted to $11.0 million and $10.8 million, representing 24.7% and 32.6% of total accounts payable at December 31,
2008 and 2007, respectively.

Purchases from the second significant component and finished good supplier amounted to $38.1 million, $30.4 million and $13.8
million, representing 20.6%, 19.1% and 10.2% of total inventory purchases for the years ended December 31, 2008, 2007 and 2006, respec-
tively. Accounts payable amounted to $15.6 million and $6.3 million, representing 35.0% and 19.1% of total accounts payable at December
31, 2008 and 2007, respectively.

For the year ended December 2006, an additional component and finished good supplier provided more than 10% of total inventory

purchases. Purchases from this supplier amounted to $13.9 million or 10.2% of total inventory purchases in 2006.

We have identified alternative sources of supply for these integrated circuits, components, and finished goods; however, there can be
no assurance that we will be able to continue to obtain these inventory purchases on a timely basis. We generally maintain inventories of
our integrated circuits, which may be used in part to mitigate, but not eliminate, delays resulting from supply interruptions. An extended
interruption, shortage or termination in the supply of any of the components used in our products, or a reduction in their quality or reliabil-
ity, or a significant increase in the prices of components, would have an adverse effect on our business, results of operations and cash flows.

As of December 31, 2008 we had contractual obligations to purchase $20.8 million of inventory from various suppliers over the subse-

quent five year period.

note 13 — Leases
We lease office and warehouse space and certain office equipment under operating leases that expire at various dates through September
2013. Some of our leases are subject to rent escalations. For these leases, we recognize rent expense for the total contractual obliga-
tion utilizing the straight-line method over the lease term, ranging from 36 to 73 months. The related liability is recorded in other accrued
expenses (see Note 8). The liability related to rent escalations was $0.1 million at both December 31, 2008 and 2007.

The lease agreement for our corporate headquarters contains an allowance for tenant improvements of $0.4 million, which was paid to
us upon completion of the renovation in 2008. This tenant improvement allowance is being amortized as a credit against rent expense, over
the 73 month term of the lease, beginning January 1, 2006.

UNIVERSAL ELECTRONICS INC | 2008 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The lease agreement for our customer call center contains an allowance for tenant improvements of $0.2 million, which was paid to us

The provision for income taxes charged to operations was as follows:

upon completion of the renovation in 2007. This tenant improvement allowance is being amortized as a credit against rent expense, over
the 48 month term of the lease, beginning June 1, 2007.

Rent expense for our operating leases was $2.6 million, $2.2 million and $1.8 million for the years ended December 31, 2008, 2007 and

2006, respectively.

The following table summarizes future minimum non-cancelable operating lease payments with initial terms greater than one year at
December 31, 2008:
( i n t h o u s a n d s ) Year ending December 31:

2009

2010

2011

2012

2013

Thereafter

Total operating lease commitments

1,762

1,461

1,199

541

290

—

5,253

note 14 — Employee Benefit Plans
We maintain a retirement and profit sharing plan under Section 401(k) of the Internal Revenue Code for all of our domestic employees that
meet certain qualifications. Participants in the plan may elect to contribute up to the maximum allowed by law. We match 50% of the par-
ticipants’ contributions up to 15% of their gross salary in the form of newly issued shares of our common stock. We may also make other
discretionary contributions to the plan. We recorded $0.7 million, $0.6 million, and $0.6 million of expense for company contributions for
the years ended December 31, 2008, 2007 and 2006, respectively.

note 15 — Other Income (Expense), net
Other income (expense), net in the Consolidated Income Statements consisted of the following:

( i n t h o u s a n d s )

Net gain (loss) on foreign currency exchange transactions

Other (expense) income

Other income (expense), net

note 16 — Income Taxes
In 2008, 2007 and 2006, pre-tax income was attributed to the following jurisdictions:

( i n t h o u s a n d s )

Domestic operations

Foreign operations

Total

2 0 0 8

2 0 0 7

2 0 0 6

315

(4)

311

(35)

(508)

(498)

Y e a r e n d e d D e c e m b e r 3 1 ,

2 0 0 8

2 0 0 7

2 0 0 6

16,650

18,332

7,932

7,439

11,230

11,488

24,089

29,562

19,420

( i n t h o u s a n d s )

Current tax expense:

U.S. federal

State and local

Foreign

Total current

Deferred tax expense/(benefit):

U.S. federal

State and local

Foreign

Total deferred

Total provision

Net deferred tax assets were comprised of the following at December 31, 2008 and 2007:

( i n t h o u s a n d s )

Deferred tax assets:

Inventory reserves

Allowance for doubtful accounts

Capitalized research costs

Capitalized inventory costs

Net operating losses

Amortization of intangibles

Accrued liabilities

Income tax credits

Depreciation

Stock-based compensation

Long term incentive compensation

Other

Total deferred tax assets

Deferred tax liability:

Intangible assets

Other

Total deferred tax liabilities

Net deferred tax assets before valuation allowance

Less: Valuation allowance

Net deferred tax assets

Y e a r e n d e d D e c e m b e r 3 1 ,

2 0 0 8

2 0 0 7

2 0 0 6

5,407

5,537

2,934

1,230

2,205

8,842

206

(627)

(138)

(559)

490

3,130

9,157

(60)

151

175

687

2,997

6,618

(297)

(578)

157

(718)

8,283

9,332

5,900

2 0 0 8

2 0 0 7

258

117

757

2,473

686

764

1,476

786

2,270

201

530

10,337

(292)

(675)

(967)

9,370

(189)

9,181

308

184

540

2,974

755

796

1,157

700

1,327

402

466

9,632

(509)

(238)

(747)

8,885

(264)

8,621

UNIVERSAL ELECTRONICS INC | 2008 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2008 and 2007, $0.4 million and $0.5 million, respectively, of current deferred tax liabilities were recorded in other

accrued expenses (see Note 8).

The deferred tax valuation allowance decreased to $0.2 million as of December 31, 2008 compared to $0.3 million as of December 31,

2007. The decrease was primarily due to certain statute of limitations expiring relating to foreign net operating losses.

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income
tax rate to pre-tax income from operations as a result of the following:

( i n t h o u s a n d s )

Tax provision at statutory U.S. rate

Increase (decrease) in tax provision resulting from:

State and local taxes, net

Foreign tax rate differential

Nondeductible items

Federal research and development credits

Change in tax rate related to deferred taxes

Other

Tax provision

Y e a r e n d e d D e c e m b e r 3 1 ,

2 0 0 8

2 0 0 7

2 0 0 6

8,431

10,347

6,603

392

(154)

251

(424)

—

(213)

373

(649)

302

(918)

(147)

110

(391)

207

(872)

—

243

8,283

9,332

5,900

At December 31, 2008, we had state Research and Experimentation (“R&E”) income tax credit carryforwards of approximately $2.2

million. The state R&E income tax credits do not have an expiration date.

At December 31, 2008, we had federal, state and foreign net operating losses of approximately $5.9 million, $5.0 million and $0.5 mil-
lion, respectively. All of the federal and state net operating loss carryforwards were acquired as part of the acquisition of SimpleDevices.
The federal and state net operating loss carryforwards begin to expire in 2020 and 2012, respectively. Approximately $0.3 million of the
foreign net operating losses will begin to expire in 2020 and the remaining $0.2 million have an unlimited carryforward.

Internal Revenue Code Section 382 places certain limitations on the annual amount of net operating loss carryforwards that may
be utilized if certain changes to a company’s ownership occur. Our acquisition of SimpleDevices was a change in ownership pursuant to
Section 382 of the Internal Revenue Code, and the federal and state net operating loss carryforwards of SimpleDevices are limited but
considered realizable in future periods. The annual federal limitation is as follows: approximately $1.2 million for 2009 and approximately
$0.6 million thereafter. California has suspended utilization of net operating losses for 2008 and 2009.

As of December 31, 2008, we believed it was more likely than not that certain deferred tax assets related to the impairment of the
investment in a private company (a capital asset) would not be realized due to uncertainties as to the timing and amounts of future capital
gains. Accordingly, a valuation allowance of approximately $0.1 million was recorded as of December 31, 2008. Additionally, we recorded
$0.1 million of various state and foreign valuation allowances at December 31, 2008.

During the years ended December 31, 2008, 2007 and 2006 we recognized a credit to paid-in capital and a reduction to income taxes

payable of $0.4 million, $3.3 million and $0.8 million, respectively, related to the tax benefit from the exercises of non-qualified stock
options under our stock option plans and vesting of restricted stock.

The undistributed earnings of our foreign subsidiaries are considered to be indefinitely reinvested. Accordingly, no provision for U.S.
federal and state income taxes or foreign withholding taxes has been provided on such undistributed earnings. Determination of the poten-
tial amount of unrecognized deferred U.S. income tax liability and foreign withholding taxes is not practicable because of the complexities
associated with its hypothetical calculation; however, unrecognized foreign tax credits would be available to reduce some portion of the
U.S. liability.

We are currently under audit in the Netherlands by the Dutch tax authorities for fiscal years 2002 through 2004. We do not expect any
material adjustments to our financial statements as a result of this audit. Currently, potential adjustments are within amounts recognized
for uncertain tax positions.

uncertain tax positions On January 1, 2007, we adopted the provisions of FIN 48. As a result of the implementation of FIN 48, we rec-
ognized a $0.2 million increase in the liability for unrecognized tax benefits, which was accounted for as a reduction to the January 1, 2007
balance of retained earnings. We also recognized a decrease of $0.3 million in other comprehensive income related to foreign currency
translation. At December 31, 2008 and 2007, we had unrecognized tax benefits of approximately $8.7 million and $8.8 million, including
interest and penalties, respectively.

UNIVERSAL ELECTRONICS INC | 2008 ANNUAL REPORT

A reconciliation of the total amounts of gross unrecognized tax benefits (excluding interest and penalties) at the beginning and end of the
period is as follows:
( i n t h o u s a n d s )

2 0 0 8

2 0 0 7

Beginning balance

Additions as a result of tax provisions taken during the current year

Foreign currency translation

Lapse in statute of limitations

Other

Ending balance

7,817

6,778

404

(410)

(307)

—

485

609

(54)

(1)

7,504

7,817

Approximately $8.0 million and $8.2 million of the total amount of gross unrecognized tax benefits at December 31, 2008 and 2007,

respectively, would affect the annual effective tax rate, if recognized. Further, we are unaware of any positions for which it is reason-
ably possible that the total amounts of unrecognized tax benefits will significantly increase within the next twelve months. We anticipate
a decrease in gross unrecognized tax benefits of approximately $0.1 million within the next twelve months based on federal, state, and
foreign statute expirations in various jurisdictions.

In accordance with FIN 48, we have elected to classify interest and penalties as components of tax expense. Interest and penalties
were $1.2 million and $1.0 million at December 31, 2008 and 2007, respectively. Interest and penalties were $0.6 million at the date of
adoption. Interest and penalties are included in the unrecognized tax benefits.

We file income tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions. As of December 31, 2008, the
open statutes of limitations for our significant tax jurisdictions are as follows: federal and state for 2004 through 2008 and non-U.S. for 2001
through 2008. Unrecognized tax benefits at December 31, 2008 of $6.0 million are classified as short term as we expect to settle certain
foreign audits during 2009. The remainder of the gross unrecognized tax benefits of $2.7 million are classified as long term as prescribed by
FIN 48 because we do not anticipate payment of cash related to those unrecognized tax benefits within one year of the operating cycle.

note 17 — Earnings Per Share

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of our
common shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average
number of common shares and dilutive potential common shares, which includes the dilutive effect of stock options and restricted stock
grants. Dilutive potential common shares for all periods presented are computed utilizing the treasury stock method. In the computation
of diluted earnings per common share for the years ended December 31, 2008, 2007 and 2006, we have excluded 534,418, 153,705 and
854,265 stock options, respectively, with exercise prices greater than the average market price of the underlying common stock, because
their inclusion would have been antidilutive.

Earnings per share for the years ended December 31, 2008, 2007 and 2006 was calculated as follows:

( i n t h o u s a n d s , e x c e p t p e r - s h a r e a m o u n t s )

2 0 0 8

2 0 0 7

2 0 0 6

Basic

Net income

Weighted-average common shares outstanding

Basic earnings per share

Diluted

Net income

Weighted-average common shares outstanding for basic

Dilutive effect of stock options and restricted stock

Weighted-average common shares outstanding on a diluted basis

Diluted earnings per share

15,806

20,230

$ 13,520

14,015

14,410

13,818

1.13

1.40

0.98

15,806

20,230

$ 13,520

14,015

441

14,456

14,410

767

15,177

13,818

614

14,432

1.09

1.33

0.94

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

note 18 — Business Segment
reportable Segment SFAS 131, “Disclosures about Segments of an Enterprise and Related Information,” defines an operating segment,
in part, as a component of an enterprise whose operating results are regularly reviewed by the chief operating decision maker to make
decisions about resources to be allocated to the segment and assess its performance. Operating segments may be aggregated only to the
limited extent permitted by the standard.

As a result of the performance-based incentive and other factors, management reviewed SimpleDevices’ discrete operating results

through the second quarter of 2006, and as a result, defined SimpleDevices as a reportable segment. Since acquiring SimpleDevices, we
have integrated SimpleDevices’ technologies with and into our own technology. The sales, engineering and administrative functions at
SimpleDevices have been integrated into those that existed prior to the acquisition. As a result of the integration, the performance-based
payment expiring and that our chief operating decision maker is no longer reviewing SimpleDevices’ financial statements on a stand alone
basis, commencing in the third quarter of 2006, we merged SimpleDevices into our Core Business segment, resulting in us operating in a
single reportable segment.

note 19 — Foreign Operations
Geographic Information

Our net sales to external customers by geographic area for years ended December 31, 2008, 2007 and 2006 were the following:

( i n t h o u s a n d s )

Net sales:

United States

International:

Asia

Australia

France

Germany

South Africa

Spain

Switzerland

United Kingdom

All Other

Total international

Total net sales

2 0 0 8

2 0 0 7

2 0 0 6

$ 162,855

$ 151,034

$ 126,522

48,511

31,624

30,285

4,190

5,359

7,771

5,827

7,523

1,099

21,234

22,731

124,245

2,772

4,940

6,228

7,192

8,483

6,473

31,290

22,644

121,646

3,028

4,846

7,014

8,140

7,513

851

29,025

18,622

109,324

$ 287,100

$ 272,680

$ 235,846

Specific identification of the customer location was the basis used for attributing revenues from external customers to individual countries.

Long-lived asset information by our domestic and international components as of December 31, 2008, 2007 and 2006 were as follows:

Long-lived tangible assets:

United States

All other countries

Total

2 0 0 8

2 0 0 7

2 0 0 6

6,292

5,238

3,921

2,770

9,062

2,689

7,927

2,199

6,120

In accordance with SFAS 144 “Accounting for the Impairment or Disposal of Long-Lived Assets,” Long-lived assets held and used with
a carrying amount of $185 thousand were disposed of, resulting in an impairment charge of $185 thousand, which was included in selling,
general and administrative expenses for the year ended December 31, 2008.

note 20 – Related Party Transactions
In April 1999, we provided a non-recourse interest bearing secured loan to our chief executive officer. The loan was in the amount of
$200,000 and bore interest at the rate of 5.28% per annum, with interest payable annually to us on each December 15. The loan was collat-
eralized by the primary residence purchased and the principal was payable on the earlier of (i) December 15, 2007, (ii) within twelve months
following a demand from us but only in the event the chief executive officer ceases being our employee or in the event of a default under the
loan; or (iii) on the closing of a sale or transfer of the property. This note, including accrued interest, was paid in full on December 14, 2007.

note 21 – Contingencies
Indemnities We indemnify our directors and officers to the maximum extent permitted under the laws of the State of Delaware and we
have entered into Indemnification Agreements with each of our directors and executive officers. In addition, we insure our individual direc-
tors and officers against certain claims and attorney’s fees and related expenses incurred in connection with the defense of such claims.
The amounts and types of coverage may vary from period to period as dictated by market conditions. Management is not aware of any
matters that require indemnification of its officers or directors.

product Warranties We warrant our products against defects in materials and workmanship arising during normal use. We service
warranty claims directly through our customer service department or contracted third-party warranty repair facilities. Our warranty
period ranges up to three years. We provide for estimated product warranty expenses, which are included in cost of sales, as we sell
the related products. Warranty expense is a forecast primarily based on historical claims experience. Actual claim costs may differ
from the amounts provided.

Changes in the liability for product warranty claim costs are presented below:

( i n t h o u s a n d s )

Year Ended December 31, 2008

Year Ended December 31, 2007

Year Ended December 31, 2006

Balance
at Beginning
of Period

178

416

414

Accruals for
Warranties
Issued During
the Period

(31)(1)

(146)(1)

202

Settlements
(in Cash or in Kind)
During
the Period

(57)

(92)

(200)

Balance at
End of
Period

178

416

(1) In the second quarter 2007, we renegotiated pricing terms with our third-party warranty repair vendor which resulted in lower warranty costs per unit. As a result, our warranty accrual
was reduced to reflect the lower pricing. An unexpected increase in our pricing for warranty claims, or the discovery of a significant product defect, would result in an increase in our warranty
accrual and our financial statements may be materially impacted.

litigation In 2002, one of our subsidiaries (One For All S.A.S.) brought an action against a former distributor of the subsidiary’s prod-
ucts seeking a recovery of accounts receivable. The distributor filed a counterclaim against our subsidiary seeking payment for amounts
allegedly owed for administrative and other services rendered by the distributor for our subsidiary. In January 2005, the parties agreed
to include in that action all claims between the distributor and two of our other subsidiaries, Universal Electronics BV and One For All
Iberia SL. As a result, the single action covers all claims and counterclaims between the various parties. The parties further agreed that,
before any judgment is paid, all disputes between the various parties would be concluded. These additional claims involve nonpayment for
products and damages resulting from the alleged wrongful termination of agency agreements. On March 15, 2005, the court in one of the
litigation matters brought by the distributor against one of our subsidiaries, rendered judgment against our subsidiary and awarded dam-
ages and costs to the distributor in the amount of approximately $102,000. The amount of this judgment was charged to operations during
the second quarter of 2005 and has been paid. With respect to the remaining matters before the court, we are awaiting the expert to final-
ize and file his pre-trial report with the court and when completed, we will respond. Management is unable to estimate the likelihood of an
unfavorable outcome, and the amount of loss, if any, in the case of an unfavorable outcome.

On February 7, 2008, we filed suit against Gibson Audio, a Division of Gibson Guitar Corp., Gibson Guitar Corp., and Gibson Musical
Instruments, Inc. seeking payment of the remaining balance of a minimum royalty fee due us under a software agreement. On March 10,
2008, the Gibson companies answered our complaint with a general denial of all of our allegations. Also, the Gibson companies counter-
claimed that we breached various aspects of the software agreement and that they are seeking unspecified damages. On January 6, 2009,
we filed a motion for partial summary judgment which remains pending. We disagree vigorously with their denials of liability and with
their counterclaims and will continue to pursue this matter. We are in the early stages of discovery and are unable to estimate the likely
outcome of this matter and the amount of recovery of the balance due us or damages awarded Gibson, if any, at this time.

UNIVERSAL ELECTRONICS INC | 2008 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On February 19, 2009, we filed suit against Warren Communications News, Inc. claiming that through the unauthorized use of

embedded email tracking and intercepting software and code, Warren has violated the Computer Fraud and Abuse Act, the Stored
Communications Act, and various applicable California laws. In addition we are asking for a declaration that we are not infringing Warren’s
copyright to a daily electronic publication. Warren has not yet answered our complaint and as such we are unable to estimate the likely
outcome of this matter and the amount, if any, of recovery to be awarded to either party at this time.

There are no other material pending legal proceedings, other than litigation that is incidental to the ordinary course of our business,
to which we or any of our subsidiaries is a party or of which our respective property is the subject. We do not believe that any of the claims
made against us in any of the pending matters have merit and we intend to vigorously defend ourselves against them.

We maintain directors’ and officers’ liability insurance to insure our individual directors and officers against certain claims and attor-

ney’s fees and related expenses incurred in connection with the defense of such claims.

long-term Incentive plan During the second quarter of 2007, we adopted an Executive Long-Term Incentive Plan (“ELTIP”). The ELTIP
provided a bonus pool for our executive management team contingent on achieving certain performance goals during a two-year perfor-
mance period commencing on January 1, 2007 and ending on December 31, 2008. The performance goals were based on the compound
annual growth rate of net sales and earnings per diluted share during the performance period. The ELTIP had a maximum pay out of
$12 million if the highest performance goals were met. Management did not earn a bonus under the ELTIP based on our results through
December 31, 2008. As a result, we lowered our ELTIP accrual from $1.0 million at December 31, 2007 to $0 at December 31, 2008. This
adjustment resulted in a $1.0 million benefit to pre-tax income for the twelve months ended December 31, 2008.

In light of the ELTIP results, our Compensation Committee decided to award a discretionary bonus of $1.0 million, to be paid out quar-

terly over the next two years (2009 and 2010). The Compensation Committee came to this decision after reviewing the economic environ-
ment and our relative financial and operating performance. The Compensation Committee believes this bonus is in alignment with our
stockholders’ interests as well as our performance, alignment and retention objectives. As a result, on December 31, 2008 we accrued
$0.5 million for this discretionary bonus which is included in accrued compensation. The amount of a participant’s earned award will be
paid in cash, in common shares or in any combination, as determined by the Compensation Committee. A participant’s earned award will
vest in eight equal quarterly installments beginning March 31, 2009 and ending December 31, 2010. In the event a participant terminates
their employment during the service period (January 1, 2009 through December 31, 2010), they will forfeit their right to any remaining
installments where the payment date has not yet occurred.

note 22 — Derivatives
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a
framework for measuring fair value in accordance with generally accepted accounting principles in the United States of America, and
expands disclosures about fair value measurements for assets and liabilities. SFAS 157 applies when other accounting pronouncements
require or permit assets or liabilities to be measured at fair value. Accordingly, SFAS 157 does not require new fair value measurements.
Effective January 1, 2008, we implemented the requirements of SFAS 157.

SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date (exit price). SFAS 157 classifies the inputs used to measure fair value into the fol-
lowing hierarchy:

level 1

level 2

Unadjusted quoted prices in active markets for identical assets or liabilities

Unadjusted quoted prices in active markets for similar assets or liabilities, or
Unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or
Inputs other than quoted prices that are observable for the asset or liability

level 3

Unobservable inputs for the asset or liability

We utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the
lowest level of input that is significant to the fair value measurement.

Financial assets Measured at Fair Value on a recurring Basis We are exposed to market risks from foreign currency exchange
rates, which may adversely affect our operating results and financial position. Our foreign currency exposures are primarily concentrated
in the Euro, British Pound, and Hong Kong dollar. We periodically enter into foreign currency exchange contracts with terms normally
lasting less than nine months to protect against the adverse effects that exchange-rate fluctuations may have on our foreign currency-
denominated receivables, payables, cash flows and reported income. Derivative financial instruments are used to manage risk and are not
used for trading or other speculative purposes. We do not use leveraged derivative financial instruments and these derivatives have not
qualified for hedge accounting.

The gains and losses on both the derivatives and the foreign currency-denominated balances are recorded as foreign exchange trans-

action gains or losses and are classified in other (expense) income, net. Derivatives are recorded on the balance sheet at fair value. The
estimated fair values of our derivative financial instruments represent the amount required to enter into offsetting contracts with similar
remaining maturities based on quoted market prices.

We have determined that the fair value of our financial assets and liabilities are derived from level 2 inputs in the fair value hierarchy.

The following table sets forth our financial assets that were accounted for at fair value on a recurring basis as of December 31, 2008:

i n t h o u s a n d s

Foreign currency exchange futures contract

Foreign currency exchange put option contract

F a i r V a l u e M e a s u r e m e n t u s i n g

Quoted Prices in
Active Markets
for Identical Assets
(Level 1)

Significant
Other Observable
Inputs
(Level 2)

—

833

606

$ 1,439

Significant
Unobservable
Inputs
(Level 3)

—

Year Ended
12/31/08

$ 833

606

$ 1,439

We held foreign currency exchange contracts which resulted in a net pre-tax loss of approximately $0.5 million for the year ended
December 31, 2008, a net pre-tax gain of approximately $0.8 million for the year ended December 31, 2007 and a net pre-tax loss of $0.1
million for the year ended December 31, 2006.

Futures Contracts We held one US dollar/Euro futures contract with a notional value of $9.0 million and a forward rate of $1.277 USD/
Euro at December 31, 2008. We held the Euro position on this contract, which settled on January 7, 2009. The gain on this contract as of
December 31, 2008 was $0.8 million and is included in prepaid expenses and other current assets. This contract was settled at $0.4 mil-
lion resulting in a loss of $0.4 million in January 2009.

At December 31, 2007, we had one foreign currency exchange contract outstanding, a futures contract with a notional value of
$5.0 million, which settled on January 25, 2008. The fair value of this futures contract on December 31, 2007, was $0.01 million, which
is included in prepaid expenses and other current assets.

put option We entered into a USD/GBP put option with a notional value of $5.0 million in August 2008. The strike price of the put is
$1.85 USD/GBP. The contract expired on December 31, 2008 and settled on January 5, 2009. The gain recorded related to this contract was
$0.5 million during the year ended December 31, 2008. The fair value of this put option was approximately $0.6 million at December 31,
2008. This put option is included in prepaid expenses and other current assets.

UNIVERSAL ELECTRONICS INC | 2008 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

note 23 — Quarterly Financial Data (Unaudited)
Summarized quarterly financial data for the years ended December 31, 2008 and 2007 are presented below:

2 0 0 8

( I n t h o u s a n d s , e x c e p t p e r s h a r e a m o u n t s )

March 31,

June 30,

September 30,

December 31,

Net sales

Gross profit

Operating income

Net income

Earnings per share (1):

Basic

Diluted

Shares used in computing earnings per share:

Basic

Diluted

Net sales

Gross profit

Operating income

Net income

Earnings per share (1):

Basic

Diluted

Shares used in computing earnings per share:

Basic

Diluted

61,191

70,684

76,532

$ 78,693

21,735

2,683

2,473

24,212

4,357

3,495

24,928

5,910

4,005

25,315

7,811

5,833

0.17

0.25

0.24

0.29

0.28

0.43

0.42

14,474

14,957

14,033

14,547

13,919

14,420

13,638

13,903

2 0 0 7

March 31,

June 30,

September 30,

December 31,

66,019

71,478

68,961

$ 66,222

24,341

6,186

4,637

24,626

5,972

4,546

25,737

6,274

4,915

24,647

8,019

6,132

0.33

0.31

0.30

0.34

0.32

0.42

0.40

14,130

14,908

14,437

15,262

14,508

15,280

14,565

15,257

(1) The earnings per common share calculations for each of the quarters were based upon the weighted average number of shares outstanding during each period, and the sum of the quarters
may not be equal to the full year earnings per common share amounts.

note 24 — Subsequent Event
On February 18, 2009, we acquired certain patents, intellectual property and other assets related to the universal remote control business
from Zilog Inc. (NASDAQ: ZILG) for approximately $9.5 million in cash. The purchase included Zilog’s full library and database of infrared
codes, and software tools. We also hired 115 of Zilog’s sales and engineering personnel, including all 103 of Zilog’s personnel located
in India. In a related transaction, Maxim Integrated Products (NASDAQ: MXIM) acquired two of Zilog’s product lines, namely, the hard-
ware portion of Zilog’s remote control business and Zilog’s secured transaction product line. We have cross-licensed the remote control
technology and intellectual property with Maxim Integrated Products for purpose of conducting our respective businesses. The arrange-
ment involves an agreement to source silicon chips from Maxim. For the first year we will be the exclusive sales agent of universal remote
control chips for Maxim, selling the Zilog designs to Zilog’s current list of customers.

Currently, we are performing the purchase price allocation analysis, which requires the cost of an acquisition to be allocated to the
individual assets acquired and liabilities assumed based on their estimated fair values. Although we believe the Zilog transaction will be
mildly accretive in the first year and grow more significantly in the long term, most technology related acquisitions involve the purchase of
significant intangible assets which typically result in substantial amortization charges. There can be no assurance that the integration will
be successful or that the customer bases, products or technologies will generate sufficient revenue to offset the associated costs or effects.

We expect the total acquisition related costs related to the Zilog transaction to range between $0.8 million and $1.0 million. These

costs will be expensed during the first quarter of 2009 in selling, general and administrative expenses in accordance of SFAS 141R.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures
Exchange Act Rule 13a-15(d) defines “disclosure controls and procedures” to mean controls and procedures of a company that are
designed to ensure that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act
is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. The definition
further states that disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that the
information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and com-
municated to the company’s management, including its principal executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required disclosure.

An evaluation was performed under the supervision and with the participation of our management, including our principal executive
and principal financial officers, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of
the period covered by this report. Based on that evaluation, our principal executive and principal financial officers have concluded that our
disclosure controls and procedures were effective, as of the end of the period covered by this report, to provide reasonable assurance that
information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in Securities and Exchange Commission rules and forms and is accumulated and communi-
cated to our management to allow timely decisions regarding required disclosures.

Management’s Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in
Exchange Act Rule 13a-15(f). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and preparation of financial statements for external purposes in accordance with accounting principles
generally accepted in the United States of America. Because of inherent limitations, internal control over financial reporting may not pre-
vent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our principal executive and principal financial officers,
we evaluated the effectiveness of our internal control over financial reporting based on the Internal Control-Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control Integrated Framework. Based
on our evaluation under this framework, our management concluded that our internal control over financial reporting was effective as of
December 31, 2008.

The effectiveness of our internal control over financial reporting as of December 31, 2008 has been audited by Grant Thornton LLP, an

independent registered public accounting firm, as stated in its attestation report which is included herein.

Changes in Internal Control Over Financial Reporting
There have been no changes in internal controls or in other factors that may significantly affect our internal controls during the
fourth quarter.

UNIVERSAL ELECTRONICS INC | 2008 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders
Universal Electronics Inc.

We have audited Universal Electronics Inc.’s (a Delaware Corporation) internal control over financial reporting as of December 31, 2008,
based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Universal Electronics Inc.’s management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompany-
ing Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on Universal
Electronics Inc.’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those

standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over finan-
cial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability

of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the mainte-
nance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detec-
tion of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections

of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Universal Electronics Inc. maintained, in all material respects, effective internal control over financial reporting as of

December 31, 2008, based on criteria established in Internal Control-Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consol-
idated balance sheets of Universal Electronics Inc. as of December 31, 2008 and 2007, and the related consolidated statements of income,
stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2008, and our report dated March 3,
2009 expressed an unqualified opinion.

Grant Thornton LLP

Irvine, California

March 3, 2009

Performance Chart (unaudited)
The following graph and table compares the cumulative total stockholder return with respect to our common stock versus the cumulative
total return of our Peer Group Index (the “Peer Group Index”) and the NASDAQ Composite Index (the “NASDAQ Composite Index”) for the
five (5) year period ended December 31, 2008. The comparison assumes that $100 is invested on December 31, 2003 in each of our com-
mon stock, the Peer Group Index and the NASDAQ Composite Index and that all dividends are reinvested. We have not paid any dividends
and, therefore, our cumulative total return calculation is based solely upon stock price appreciation and not upon reinvestment of divi-
dends. The graph and table depicts year-end values based on actual market value increases and decreases relative to the initial invest-
ment of $100, based on information provided for each calendar year by the NASDAQ Stock Market and the New York Stock Exchange.

The comparisons in the graph and table below are based on historical data and are not intended to forecast the possible future perfor-

mance of our common stock.

Comparison of Stockholder Returns Amount Universal Electronics Inc., the Peer Group Index (1), and the NASDAQ Composite Index

$ 3 0 0

$ 2 5 0

$ 2 0 0

$ 1 5 0

$ 1 0 0

$ 5 0

1 2 / 3 1 / 2 0 0 3

1 2 / 3 1 / 2 0 0 4

1 2 / 3 1 / 2 0 0 5

1 2 / 3 1 / 2 0 0 6

1 2 / 3 1 / 2 0 0 7

1 2 / 3 1 / 2 0 0 8







Universal Electronics Inc.

Peer Group Index

NASDAQ Composite Index

1 2 / 3 1 / 2 0 0 3

1 2 / 3 1 / 2 0 0 4

1 2 / 3 1 / 2 0 0 5

1 2 / 3 1 / 2 0 0 6

1 2 / 3 1 / 2 0 0 7

1 2 / 3 1 / 2 0 0 8

100

138

134

109

135

133

110

165

131

121

262

102

132

127

(1) Companies in the Peer Group Index are as follows: Harman International Industries, Inc. and Koss Corporation.

Information presented is as of the end of each calendar year for the period December 31, 2003 through 2008. This information shall not
be deemed to be “solicited material” or to be “filed” with the Securities and Exchange Commission or subject to the liabilities of Section 18
of the Securities Exchange Act of 1934 (the “Exchange Act”) nor shall this information be incorporated by reference into any prior or future
filings under the Securities Act of 1933 or the Exchange Act, except to the extent that we specifically incorporate it by reference into a filing.

UNIVERSAL ELECTRONICS INC. | 2008 ANNUAL REPORT

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

CORPORATE INFORMATION

DIRECTORS

OFFICERS

Dr. Norman Sheridan
Senior Vice President
of Technology

Ramzi S. Ammari
Vice President of
Product Development

Bruce Annis
Vice President of Retail Sales,
North America

Douglas Durrant
Vice President of
Information Technology

WORLDWIDE HEADQUARTERS

CERTIFICATIONS

Universal Electronics Inc.
6101 Gateway Drive
Cypress, California 90630

EUROPEAN HEADQUARTERS

The Netherlands
Universal Electronics BV
Institutenweg 21 7521 PH
Enschede, Netherlands

The Company filed with the
Securities and Exchange
Commission, as Exhibit 31 to
the Company’s Annual Report
on Form 10-K for the 2008
fiscal year, certifications of
its Chief Executive Officer and
Chief Financial Officer
regarding the quality of the
Company’s public disclosure.

INVESTOR INFORMATION

FORM 10-K

Paul D. Arling*
Chairman and
Chief Executive Officer

Paul J. M. Bennett*
Executive Vice President and
Managing Director, Europe

Mark S. Kopaskie*
Executive Vice President
and General Manager, U. S.

Richard A. Firehammer, Jr.*
Senior Vice President,
General Counsel and
Secretary

Steve Gutman
Vice President of Cable Sales

Annual Meeting

4:00 p.m. PT – June 16, 2009

Bryan M. Hackworth*
Senior Vice President and
Chief Financial Officer

Lee Haughawout
Vice President of Program
Management

Universal Electronics Inc.
6101 Gateway Drive
Cypress, California 90630

Independent Registered Public
Accounting Firm
Grant Thornton LLP

Irvine, California

Registrar & Transfer Agent
Computershare Investor
Services, LLC

2 North LaSalle Street

Chicago, Illinois 60602

Phone (312) 588-4991

David Chong
Senior Vice President
OEM Global

Joe Miketo
Senior Vice President
of Global Operations

Olav Pouw
Senior Vice President
Subscription Broadcast EMEA
& Asia

Pam Price
Senior Vice President
Subscription Broadcast
Americas

Patrick H. Hayes
Vice President of
Intellectual Property

Lou Hughes
Vice President of
Corporate Development

Em Klaver
Vice President Custom
Electronics Global

Michael Koch
Vice President of Finance and
Treasurer

Menno Koopmans
Vice President Retail Sales
EMEA/International

Graham Williams
Vice President of Engineering

Any stockholder who desires
a copy of the Company’s 2008
Annual Report on Form 10-K
filed with the Securities and
Exchange Commission may ob-
tain a copy (excluding exhibits)
without charge by addressing
a request to:

Investor Relations
Universal Electronics Inc.
6101 Gateway Drive

Cypress, California 90630

A charge equal to the repro-
duction cost will be made if the
exhibits are requested.
Universal’s Internet address
is www.uei.com. Universal
makes available through its
internet web site its annual
report on Form 10-K. Investors
can also obtain copies of our
SEC filings from the SEC
web site at www.sec.gov

Universal Electronics Inc.
is an equal opportunity employer

Paul D. Arling*
Chairman and
Chief Executive Officer

Universal Electronics Inc.

Cypress, California

Satjiv S. Chahil2, 3

Senior Vice President
of Marketing
Hewlett-Packard
Personal Systems Group

Cupertino, California

William C. Mulligan1, 3
Managing Director

Primus Capital Funds

Cleveland, Ohio

J.C. Sparkman1, 2, 3
Retired Executive
Vice President and
Chief Operating Officer

Telecommunications, Inc. (TCI)

Denver, Colorado

Gregory P. Stapleton
Founder and Owner
Falcon One Enterprises
Camarillo, California

Edward K. Zinser1
Chief Financial Officer

Boingo Wireless Inc.

Los Angeles, California

1 Member, Audit Committee
2

Member, Compensation
Committee
Member, Corporate
Governance & Nominating
Committee

Executive Officer as defined
by the Security Exchange Act
of 1934

UNIVERSAL ELECTRONICS INC. | 2008 ANNUAL REPORT

UEI.COM

UNIVERSAL ELECTRONICS INC. | 6101 GATEWAY DRIVE | CYPRESS, CA 90630