UniVision Engineering Limited
Annual Report 2009

Plain-text annual report

UniVision Engineering Limited Annual Report Year ended 31 March 2009 UNIVISION ENGINEERING LIMITED Annual Report Year ended 31 March 2009 Contents Page Board of Directors, Officers and Professional Advisers Chairman’s Statement Directors’ and Senior Management’s Biographies Directors’ Report Remuneration Report Report on Corporate Governance Statement of Directors’ Responsibilities Independent Auditor’s Report to the Shareholders of UniVision Engineering Limited Group Income Statement Group Balance Sheet Company Balance Sheet Group Statement of Changes in Shareholders’ Equity Company Statement of Changes in Shareholders’ Equity Group Cash Flow Statement Company Cash Flow Statement Notes to the Financial Statements Notice of Annual General Meeting 2 3 6 8 12 13 15 16 18 19 20 21 22 23 25 26 66 UNIVISION ENGINEERING LIMITED - 1 - ANNUAL REPORT 2009 BOARD OF DIRECTORS, OFFICERS AND PROFESSIONAL ADVISERS Nominated Adviser and Broker Allenby Capital Limited 40 Marsh Wall, Docklands, London E14 9TP, UK Auditors ZYCPA Company Limited Certified Public Accountants 9/F Chinachem Hollywood Centre, 1-13 Hollywood Road, Central, Hong Kong Registrars Computershare Investor Services (Jersey) Limited PO Box 83 Ordnance House, 31 Pier Road, St Helier, Jersey JE4 8PW, Channel Island UK Depositary Computershare Investor Services PLC The Pavilions, Bridgwater Road, Bristol BS13 8AE, UK Board of Directors Stephen Sin Mo KOO, Executive Chairman Chun Hung WONG, Chief Executive Office Chun Pan WONG, Technical Director Danny Kwok Fai YIP, Finance Director Andrew Ping Sum TANG, Non-Executive Director Senior Management Mike Chiu Wah CHAN, Director of Operations Peter Yip Tak CHAN, Director of Sales and Marketing Audit Committee Andrew Ping Sum TANG, Chairman Stephen Sin Mo KOO Remuneration Committee Andrew Ping Sum TANG, Chairman Stephen Sin Mo KOO Company Secretary Danny Kwok Fai YIP Registered Office 8/F Lever Tech Centre, 69-71 King Yip Street, Kwun Tong, Kowloon, Hong Kong Tel: (852) 2389 3256 Fax: (852) 2797 8053 E-mail: uvel@hk.uvel.com Website: www.uvel.com AIM Stock Code: UVEL UNIVISION ENGINEERING LIMITED - 2 - ANNUAL REPORT 2009 CHAIRMAN’S STATEMENT INTRODUCTION I am pleased to report Group results for the financial year ended 31 March 2009. Last year was a challenging year. Investment and projects are pending or have been delayed due to unfavourable market conditions. The turnover of the Security and Surveillance Systems business declined during the year. Efforts have been focussed on maintenance services, which have enabled constant cash flow for the operation of the Group. Given that infrastructure projects are to be implemented in the coming years in Hong Kong, as well as the expected growing demand for Security and Surveillance in the Greater China Region, we expect an improved trading performance in the short to medium term. Our Electrical and Mechanical (“E&M”) business, which is operated through Leader Smart ; a wholly owned subsidiary, based in Shanghai, is improving. We now have a successful operation in the Zhongshan shopping mall in the People’s Republic of China (the “PRC”). We have also secured a hotel project in Huangshan, a famous tourist destination in the PRC. Investment has slowed due to the financial crisis, and subsequently the progress of our E&M business has been delayed. We see market conditions improving and once additional funding is available, the above mentioned project will be implemented immediately. FINANCIAL REVIEW During the period under review the relative strengthening in the HK$ against sterling has led to a 14.2% appreciation in the GBP reporting amount in the Income Statement and a 28.8% in the Balance Sheet. All figures in the Financial Statement need to be adjusted for comparative purposes. Turnover decreased by 37% to £9.2m (2008: £14.5m). This reduction was main ly due to the delayed progress of our E&M projects in the PRC. As a result of this and adjustments relating to the reversal of prior recognition of deferred tax assets on the Group's balance sheet and goodwill impairment in the Group's Taiwan subsidiary, the Company recorded an after tax loss £0.5m for the year. Nevertheless, our Security and Surveillance business remain ed stable for which the major customers are public organi sations and government departments. With the expected contribution from the E&M p rojects in the PRC in the coming year, I believe that the turnover decline and the reported loss in this year to improve in the current financial year. Gross profit margin improved to 33.4% (2008: 30%) due to the effective cost control on the resources o f enterprise. The "resources of enterprise" represent our human resources , i.e Project and Maintenance teams, sub-contractors, logistics, and inventory . Administration expenses increased by 6.2% from last year to £2m (2008: £1.9m). Finance costs increas ed 207% to £0.7m (2008: £0.2m) due to the provision for interest payable to our Holding Company for the US$6m loan. No significant capital investment occurred in the current year. Earnings before Interest and Tax (EBIT) are £0.4m (2008: £1.9m). Net (loss)/profit before income tax is (£- 0.3m) (2008: £1.7m). Basic earnings per share decreased from 0.36p to (0.14p) as the Company recorded a loss after income tax in this year. UNIVISION ENGINEERING LIMITED - 3 - ANNUAL REPORT 2009 CHAIRMAN’S STATEMENT (continued) BUSINESS REVIEW Markets Although the financial crisis of the last year has slowed down the investment in technology and the growth of the economy, IMS Research’s latest report, “The world Market for CCTV and Video Surveillance Equipment – 2009 Edition” forecasts that the world market for vi deo surveillance equipment will still have growth of 3% in 2009. There is continuing strong demand for IP Video, such as Digital Video Servers (DVS), Network Video Recorders (NVRs) and Internet Protocol (IP) cameras. There is growing demand of applying these network based solutions to protect valuable assets and provide a safe environment in transportation, city surveillance, school s and universities. The Group is looking into several different solutions, including Video compression technology , MPEG-4 and H.264, Digital Encoder and Decoder (Codec) with built-in video analysis algorithms. These systems are particularly prevalent in the Homeland Security field , where new areas of focus will be centred on intruder detection, loitering detection, left behind objects and trip wire. The Board expects the network video market to show strong growth in the coming years and considers that the Company is well placed to reap the benefits of this growth. The E&M business in the PRC has made a good start, where we hav e a successful shopping mall project in Zhongshan, the PRC and the coming project in Huangshan. However, progress will depend on the economic environment and the funding available. Technologies, Solutions and Products As technologies become more sophisticated and intelligent, and converge with IT industries, the capacity to provide total solutions, as well as integrated systems , becomes vital. On the products side, the embedded DVR, which is sold under the UniVision brand, has been used in several projects in Hong Kong. The newly developed Video Amplifier with an on -screen display function has also been used in one of our projects. We are also currently working on some video analysis algorithms and a new application which we expect to launch in the coming year. Acquisitions and Investments The Group is not currently anticipating any imminent new acquisitions or investments. However, we are always assessing possible opportunities with a view to making further strategic investments. Contract Wins During the reporting period, we have entered into a contract with MTR Corporation Limited (“MTR”), the sole owner and operator of the mass transit railway in Hong Kong, to provide maintenance services to MTR’s network of CCTV systems, public address systems and passenger information display systems on six railway lines as well as their related depots and ancillary buildings. The contract has a fixed value of approximately £2.15m over a three year period, commencing on 1 January 2009. Apart from that, we have entered into a contract for £4.8m with Huang Shan Shi Yi Xian Tian Chen Property Development Company Limited and Huang Shan Shi Xiangxigu Holiday Village Limited (“the Developers“), the property developer and hotel operator in the PRC for the hotel project - Huang Shan (Xidi) Xiangxigu Holiday Village in Huangshan, a famous travel city in the PRC. UNIVISION ENGINEERING LIMITED - 4 - ANNUAL REPORT 2009 CHAIRMAN’S STATEMENT (continued) MTR & Maintenance Our maintenance contracts are particularly important to the business by providing strong visibility in our revenue and I am delighted that we have substantial growth of the business. We have extended our maintenance services with MTR for another three years. In particular, our relationship with the MTR has proved to be positive. We will have good potential in othe r confirmed and planned railway line developments in the coming five years. PROSPECTS Our Security and Surveillance business remains stable, although it declined in the reporting period . As a result of the infrastructure projects to be implemented in th e coming years here in Hong Kong, as well as the expected growing demand on Security and Surveillance in the Greater China Region, we are expecting good prospects in the coming years. The E&M business in the PRC is still one of our growth targets. We are secured as we take property right as collateral to minimize the credit risk. We have a shopping mall project in Zhongshan, the PRC which is now in the final stage. Also, another hotel project in Huangshan, the PRC is underway. Additional funding is required for this project, as well as other potential projects. Our growth will depend on access to funds. Finally, on behalf of the Board, I would like to thank our customers, suppliers and shareholders for their continued support of UniVision. I would also lik e to acknowledge the hard work of the management and all the staff for their contribution and dedication to the Group. MR. STEPHEN SIN MO KOO EXECUTIVE CHAIRMAN 29 September 2009 UNIVISION ENGINEERING LIMITED - 5 - ANNUAL REPORT 2009 DIRECTORS’ AND SENIOR MANAGEMENT’S BIOGRAPHIES DIRECTORS’ BIOGRAPHIES Andrew Ping Sum TANG – Non-executive Director (aged 52) Mr. Tang was appointed as a Non-executive Director on 1 December 2005. Mr. Tang holds a Bachelor of Commerce Degree from the University of Western Australia and a Masters Degree in Appli ed Finance from Macquarie University. He is a member of the Hong Kong Institute of Certified Public Accountants, a member of the Institute of Certified Public Accountants of Australia and the Hong Kong Securities Institute, a director of the Institute of Securities Dealers and a member of the advisory board of the Society of Registered Financial Planners of Hong Kong. Mr. Tang was a Manager of the Licensing Department of Securities and Futures Commission. He monitored the registrants under Securities Ord inance and participated in the development of licensing systems and procedures. Mr. Tang has over 10 years experience in the financial services industry. He was the Deputy Chairman and General Manager of Hantec Investment Holdings Limited, a financial se rvices group listed on the main board of the Stock Exchange of Hong Kong. At present, Mr. Tang is the Director-China Business of Tai Fook Securities Group, a leading securities group which listed on the main board of the Stock Exchange of Hong Kong. Stephen Sin Mo KOO – Executive Chairman (aged 52) Mr. Koo joined UniVision in 1998 and was appointed as a Director on 3 March 2003. He holds both a Bachelor Degree from the University of Technology, Sydney, and a Masters Degree in Business from the Royal Melbourne Institute of Technology in Australia. He was a director of MultiVision Holdings Limited in 2001, prior to being appointed to the Board of UniVision. He is a Fellow of the Institute of Certified Public Accountants of Australia. Chun Hung WONG – Chief Executive Officer (aged 50) Mr. Wong joined UniVision in 1998 and was appointed as CEO on 1 January 2008. Before the appointment, he was the Director of Operations who was responsible for the management of the Project and Maintenance Divisions. Mr. Wong holds a Master of Business Administration degree from The Open University of Hong Kong. He has over 20 years’ experience in project management. Mr. Wong is responsible for formulating and overseeing the implementation of UniVision ’s business development strategies and for the management of the Company’s operations. Chun Pan WONG – Technical Director (aged 49) Mr. Wong joined UniVision in 1991 and was appointed as a Director on 25 March 1992. He has a degree in Computer Science from the University of E dinburgh, Scotland, and over 16 years ’ experience in the surveillance industry. He is responsible for the development of UniVision ’s state of the art CCTV control and monitoring systems and smart card access systems. Danny Kwok Fai YIP –Finance Director (aged 45) Mr. Yip was appointed as Finance Director on 18 September 2007. He was the Financial Controller for the Group before the appointment. Mr. Yip obtained a Bachelor of Commerce (Accounting) degree from The Curtin University of Technology. Before jo ining the Group, Mr. Yip was the Accounting Manager of Nissin Food Group, the leading inst ant noodle manufacturing MNC. Mr. Yip has over 20 years’ experience in finance and accounting in different industries. He is a fellow member of the Association of Cha rtered Certified Accountants and a member of Hong Kong Institute of Certified Public Accountants. He also acts as Company Secretary for the Corporate. UNIVISION ENGINEERING LIMITED - 6 - ANNUAL REPORT 2009 DIRECTORS’ AND SENIOR MANAGEMENT’S BIOGRAPHIES (Continued) SENIOR MANAGEMENT’S BRIEF BIOGRAPHIES Mike, Chiu Wah CHAN – Director of Operations (aged 35) Mr. Chan joined UniVision as Assistant Engineer in December 1996, and was promoted to a number of increasingly senior positions in maintenance and project department, prior to being appointed to his pres ent position on 2 January 2008. He is now responsible for the management of UniVision ’s Project and Maintenance Division. Mr. Chan holds a Bachelor of Engineering degree in Industrial and Manufacturing System Engineering from the University of Hong Kong. Peter, Yip Tak CHAN – Director of Sales and Marketing (aged 45) Mr. Chan joined UniVision in 1995. He holds a Degree in Computing from the University of Northwest Missouri and has over 10 years ’ experience in sales and project management. He is responsi ble for UniVision’s Sales and Marketing Division. UNIVISION ENGINEERING LIMITED - 7 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMI TED DIRECTORS’ REPORT The Directors have pleasure in presenting their annual report together with the audited financial statements of the Group and the Company for the year ended 31 March 2009. Principal Activities The principal activities of the Company are the supply, design, consultation, installation and maintenance of closed circuit television and surveillance systems, and the sale of security related products. The Group is involved in similar activities as well as electrical and mechanical services. Review of the Business A review of the Group and its future development is included in the Chairman’s Statement. Financial Position The Group’s loss for the year ended 31 March 2009 and the state of affairs of the Group at that date are set out in the income statement on page 18 and in the balance sheet on page 19 respectively. The Group’s and the Company’s changes in shareholders’ equity for the year ended 31 March 2009 are set out in the statement of changes in shareholders’ equity on pages 21 and 22. The Group’s and the Company’s cash flow for the year ended 31 March 2009 is set out in the cash flow statement on pages 23 to 25. Key Performance Indicators (KPI) Current Ratio: Current Asset / Current Liabilities Average Collection Period : Account receivable / Sales per Day Inventory Turnover : Cost of goods sold / Inventory Gross profit Margin : Gross profit / Sales Net Profit Margin : Profit attributable to equity holders of the Company / Sales Profit /Equity : Profit attributable to equity holders of the Company / Equity Share Capital and Reserves Details of the movements in share capital are set out in note 2 6 on page 64. 2009 2008 1.7 1.8 74 days 43 days 5.9 33% -6% 10.4 30% 9% -6% 20% : : : : : : The movements in reserves during the year are set out in the statement of changes in shareholders’ equity on page 21. UNIVISION ENGINEERING LIMITED - 8 - ANNUAL REPORT 2009 DIRECTORS’ REPORT (Continued) Dividends The Directors do not propose the payment of a dividend for the year ended 31 March 200 9. Plant and Equipment Details of the movements in plant and equipment are set out in n ote 16 on pages 56 to 57. Directors The directors who held office during the year and to the date of this report were as follows: Stephen Sin Mo KOO Chun Hung WONG Andrew Ping Sum TANG Chun Pan WONG Richard FERNIE Danny Kwok Fai YIP (resigned on 28 February 2009) Mr. Andrew Ping Sum TANG and Mr. Chun Pan WONG retire by rotation at the forthcoming annual general meeting in accordance with the Company ’s Articles of Association and, being eligible, the current directors offer themselves for re-election. Directors’ Interests in Contracts No director had a material interest in any contract of significance to the business of the Company to which the Company was a party at the end of the year or at any time during the year. Directors’ Interests in Shares According to the register of Directors ’ Shareholdings kept by the Company, particulars of interests of the Directors (or their immediate families) who held office at the end of the financial year in the ordinary shares of the Company are as set out in the table below: Ordinary Shares held as at 31 March 200 9 Stephen Sin Mo KOO Chun Hung WONG Andrew Ping Sum TANG Chun Pan WONG Danny Kwok Fai YIP 88,367,700* - - - - * 78,744,000 ordinary shares are registered under the name of Up Sky Investments Limited which is an investment holding company incorporated under the laws of the British Virgin Islands and is wholly -owned by Mr. Stephen Sin Mo KOO. Mr. Stephen Sin Mo KOO, is deemed to be interested in all the ordinary shares registered in the name of Up Sky Investments Limited. Save as disclosed in this report, none of the Directors (or their immediate families) who held office at the end of the financial year had interests in the share capital of the Company during the financial year. UNIVISION ENGINEERING LIMITED - 9 - ANNUAL REPORT 2009 DIRECTORS’ REPORT (Continued) Directors’ Rights to Acquire Shares or Debentures At no time during the year were rights to acquire benefits by means of the acquisition of shares in or debentures of the Company granted to any director or their respective spouse or minor children, or were any such rights exercised by them; o r was the Company a party to any arrangement to enable the directors of the Company to acquire by means of the acquisition of shares in, or debentures of any other body corporate. Substantial Shareholdings As at 23 September 2009 the Directors had been informed of the following companies that held in 3% or more of the Company’s issued ordinary share capital Number of ordinary shares % of total issued share capital UniVision Holdings Limited (1) Up Sky Investments Limited (2) Raven Nominees Limited Pershing Nominees Limited W B Nominees Limited LR Nominees Limited 183,736,000 78,744,000 21,176,180 16,350,439 15,481,800 12,411,573 47.9 20.5 5.5 4.3 4.0 3.2 (1) UniVision Holdings Limited is an investment holding company incorporated under t he laws of the British Virgin Islands and is wholly-owned by Mayne Management Limited. Mayne Management Limited is a wholly-owned subsidiary of Cameo Management Group Limited which, in turn, is a trustee of a trust set up for the benefit of members of the Chen family, a Hong Kong based family with widespread investments. (2) Up Sky Investments Limited is an investment holding company incorporated under the laws of the British Virgin Islands and is wholly-owned by Mr. Stephen Sin Mo KOO. Payments to Creditors The Group does not follow any code or standard on payment practice but instead the Group policy is to pay all creditors in accordance with agreed terms of business. Political and Charitable Donations During the year the Company made no political or charitable contributions (200 8: Nil). Employees The Group values staff involvement at all levels of operations, and uses various means to train, inform and consult the employees. The Group encourages the management to discuss regularly with the employee s on both corporate and individual matters and discloses information to them that will increase their awareness of the financial and economic factors affecting the Group. The Group recognises its obligations to provide a fair consideration on all vacancies towards people with disability and to ensure that such persons are not discriminated against on the grounds of their disability. For those employees who become disabled during their employment period, the Group will give every effort to ensure that their employment will continue and that sufficient training is arranged. Annual General Meeting The Annual General Meeting of the Company will be held a t UniVision Engineering Limited, 8/F Lever Tech Centre, 69-71 King Yip Street, Kwun Tong, Kowloon, Hong K ong, on 28 October 2009 at 5:00p.m. The Notice of Meeting appears on page 66. UNIVISION ENGINEERING LIMITED - 10 - ANNUAL REPORT 2009 DIRECTORS’ REPORT (Continued) Annual Report The annual report for the year ended 31 March 2009 will be sent to shareholders and will be available, free of charge, from the offices of the Company’s nominated adviser, Allenby Capital Limited at 40 Marsh Wall, Docklands, London E14 9TP, UK and the Company’s registrar, Computershare Investor Services (Channel Islands) Limited at PO Box 83 Ordnance House, 31 Pier Road, St Helier , Jersey JE4 8PW, Channel Island from 7 October 2009. Auditors During the year, Littlejohn, Chartered Accountants and Registered Auditors resigned as auditors of the Company and ZYCPA Company Limited, Certified Public Accountants, was appointed by the dir ectors to fill the casual vacancy so arising. A resolution to re-appoint ZYCPA Company Limited, Certified Public Accountants as auditor of the Company will be put to the forthcoming Annual General Meeting. By Order of the Board Mr. Stephen Sin Mo KOO Executive Chairman Hong Kong 29 September 2009 UNIVISION ENGINEERING LIMITED - 11 - ANNUAL REPORT 2009 REMUNERATION REPORT The Remuneration Committee presents this report to shareh olders on behalf of the Board. Membership of Remuneration Committee The Remuneration Committee comprises Mr. Andrew Pi ng Sum TANG (our Non-executive Director) and Mr. Stephen Sin Mo KOO (our Executive Chairman) and is chaired by Mr. Andrew Ping Sum TANG. Policy Statement The Remuneration Committee sets the remuneration and all other terms of employment of the executive Directors with a vision to provide a package which is suitable for the responsibilities involved. The remuneration of the executive directors is determined by the remuneration committee having regard to the performance and experience of individuals, the overall performance of the Group and market trends. Directors’ Remuneration Details of individual Directors ’ remuneration for the year are set out in the table below: Salary and fees £ Pension scheme contribution £ Bonus £ 2009 Total £ 2008 Total £ Executive Directors Stephen Pui Ming CHAN Stephen Sin Mo KOO Chun Pan WONG Chun Hung WONG Danny Kwok Fai YIP Ronald Kwok Wai SIN Non-executive Directors Andrew Ping Sum TANG Johnny Ka Siu TANG Richard FERNIE - 60,696 34,320 38,828 28,317 - 8,926 - 8,182 - - 893 893 893 - - - - - 5,058 2,135 3,124 1,755 - - 65,754 37,348 42,845 30,965 - 40,222 56,427 31,762 8,234 13,720 8,105 - - - 8,926 - 8,182 7,660 4,468 7,660 Directors’ Interests in Contracts and Interes ts in Shares Details of Directors’ Interests in Contracts and Interests in Shares are given in the Directors ’ Report. UNIVISION ENGINEERING LIMITED - 12 - ANNUAL REPORT 2009 REPORT ON CORPORATE GOVERNANCE Introduction The Directors believe that their foremost function is to generate continuous profits for the Company’s investors, and that this should be achieved by a policy of high standards of corporate governance, integrity and ethics. As the Company is listed on AIM and not subject to the Listing Rules of the UK Listing Authority, it is not officially required to comply with the provisions detailed in the Combined Code on Corporate Governance. However, it is the intention of the Board to manage the Company’s and Group’s affairs in accordance with this Code, in so far as is practical and appropriate for a public company of this size and complexity. The following are a few examples on how the Directors have applied the principles of good corporate governance to manage the Company throughout the year. Board of Directors The Board directs and controls th e Company and is responsible for strategy and operating performance. It meets regularly throughout the year and has adopted a schedule of matters specifically reserved for its decision. All Directors are elected by shareholders at the first opportunity a fter their initial appointment to the Board and to be re-elected thereafter at intervals of not more than three years. Biographical information on all the Directors is listed in the Directors’ and Senior Management’s Biographies section to the annual repo rt, which may help the shareholders to make a decision a t the time of re-election. Upon their appointments, the Directors are offered an opportunity to request information and training relevant to their legal and other duties. They are also given written guidelines and rules defining their responsibilities within an AIM listed company. The Board considers that all non -executive directors are independent of management and day to day operation, and free from any commercial relationship with the Company. T hese non-executive directors do not participate in any of the Company ’s pension schemes or bonus es. The Chairman of the Audit and Remuneration Committee is a non-executive director. Nomination Committee As the Board of Directors of the Company is small, nominations to the Board are considered by all of the directors. there is no separate Nomination Committee. All Audit Committee Our Audit Committee comprises Mr. Andrew Ping Sum TANG (our Non -executive Director) and Mr. Stephen Sin Mo KOO (our Executive C hairman) and is chaired by Mr. Andrew Ping Sum TANG. The Chairman of the Audit Committee has full discretion to invite any Executive Directors to attend its meetings. The Audit Committee meets not less than twice per annum. The responsibilities of the Committee are to: - monitor the quality of the overall internal control system of all financial matters; - - - - - - review the Company’s Accounting Policies and ensure compliance with accounting standards; ensure that the financial performance of the Company is properly measured and reported on; consider the appointment/re-appointment of the external auditor; review the conduct of the audit and discuss the audit fees; review reports from the Auditors relating to the Company ’s accounting and internal controls; to ensure the Company complies with the AIM Rules. UNIVISION ENGINEERING LIMITED - 13 - ANNUAL REPORT 2009 REPORT ON CORPORATE GOVERNANCE (Continued) Remuneration Committee Our Remuneration Committee comprises Mr. Andrew Ping Sum TANG (our Non-executive Director) and Mr. Stephen Sin Mo KOO (our Executive Chairman) and is chaired by Mr. Andrew Ping Sum TANG. The Remuneration Committee meets as required. The responsibilities of the Committee are to: - determine the specific remuneration package for each Director including Director ’s fees, salaries, allowances, bonuses, options, benefits-in-kind; and seek professional advice, including comparison with similar businesses, in order to correctly fulfil its duties, as the Committee deems appropriate . - In discharging its functions, the Committee may obtain independent external l egal and other professional advices as it deems necessary. The expense of such advice shall be borne by the Company. Internal Control The Board of Directors is responsible for ensuring that the Company maintains an internal financial control system with appropriate monitoring procedures for all Group companies. The purpose of this system is to safeguard Company assets, maintain proper accounting records, and ensure that reliable financial information is used within the Group and for publication purposes. However, the system is designed to manage rather than completely eliminate risk and can only provide reasonable but not absolute assurance against material misstatement. In order to achieve the above responsibilities, the Board meets regularly and moni tors the Company’s internal financial control by reviewing the overall process and the performance of the systems, setting annual budgets and periodic forecasts, and seeking any prior approval for all significant expenditure. The Group currently does not have an internal audit department and after extensive review and consideration, the Board has concluded that the existing control mechanisms are sufficient for the size of the Group. This decision will be kept under review. Going Concern After making appropriate enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in pre paring the Company’s and Group’s financial statements. Investor Relations The Company realizes that effective communication can increase the transparency and accountability to its shareholders; as such, the Company discloses its information to its share holders through RNS (i.e. the news distribution service operated by the London Stock Exchange plc). The same information can also be found on the Company’s website (www.uvel.com). The Company will make every effort to ensure that all price - sensitive information is released publicly and immediately. If an immediate announcement is not possible, the Company will try to publicize the information at the earliest time possible to ensure that the shareholders and the public will have a fair access to it. The Company will send the Annual Report and the notice of the Annual General Meeting (AGM) to all its shareholders. This notice is also made available on RNS. The Company recognizes the importance of the shareholders’ views and encourages them to attend the AGMs where they can share their opinions and direct their queries and concerns towards the Directors, including the chairperson of each of the Board Committees. The shareholders are also welcomed to discuss any issues on an informal basis at the conclusi on of the AGMs. UNIVISION ENGINEERING LIMITED - 14 - ANNUAL REPORT 2009 STATEMENT OF DIRECTORS ’ RESPONSIBILITIES The Directors are responsible for preparing the Directors ’ Report and the financial statements in accordance with applicable law and regulations. The Directors are responsible to prepare financ ial statements for each financial year which give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss for that year. In preparing those financial statements, the Directors are required to:     select suitable accounting policies and then apply them consistently; make judgements and estimates that are reasonable and prudent; state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financ ial statements; prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the Company will continue in business. The Directors are responsible for keeping proper accounting records that disclose w ith reasonable accuracy at any time the financial position of the Company. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and the Company to prevent and detect fraud and other irregularities. UNIVISION ENGINEERING LIMITED - 15 - ANNUAL REPORT 2009 INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF UNIVISION ENGINEERING LIMITED Report on the financial statements We have audited the accompanying financial statements (the “financial statements”) of UniVision Engineering Limited (the “Company”) and its subsidiaries (collectively referred to as the “Group”) for the year ended 31 March 2009 which comprise the Group Income Statement, the Group and the Company Balance Sheet, the Group and the Company Statement of Changes in Shareholders’ Equity, the Group and the Company Cash Flow Statement, a summary of significant accounting policies and other explanatory notes, as set out therein. This report is made solely to the Company’s shareholders, as a body, in compliance with the AIM Rules for Companies as published by the London Stock Exchange ( “AIM Rules”). Our work has been undertaken so that we might state to the Company’s shareholders those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s shareholders as a body for this report or for the opinions we have formed. Management’s responsibilities for the financial state ments As described in the Statement of Directors ’ Responsibilities, the directors of the Company are responsible for the preparation of financial statements in accordance with applicable law and International Financial Reporting Standards. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation and the true and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying ap propriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditor’s responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgments, including the assessment of the risks of material misstatement of the financi al statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appro priate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting esti mates made by management, as well as evaluating the overall presentation of the financial statements. UNIVISION ENGINEERING LIMITED - 16 - ANNUAL REPORT 2009 INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF UNIVISION ENGINEERING LIMITED Auditor’s responsibility (continued) We read other information cont ained in the annual report and consider whether it is consistent with the audited financial statements. The other information comprises only the Chairman’s Statement, Directors’ Report, Remuneration Report , Report on Corporate Governance and Statement of Directors’ Responsibilities. We consider the implications for our report if we become aware of any apparent misstatement or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements give a true and fair view of the state of affairs of the Group and the Company as at 31 March 2009 and of its loss and cash flows for the year then ended in accordance with International Financial Reporting Standards and the information given in the Directors’ Report is consistent with the financial statements. ZYCPA Company Limited Certified Public Accountants Hong Kong, China 29 September 2009 UNIVISION ENGINEERING LIMITED - 17 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED GROUP INCOME STATEMENT For the year ended 31 March 2009 Note 2009 £ 2008 £ 9,228,523 14,523,529 (6,143,040) (10,160,841) 3,085,483 4,362,688 127,920 (86,875) (2,081,104) (607,382) 438,042 (735,955) 323,806 (71,826) (1,959,772) (716,914) 1,937,982 (239,952) (297,913) 1,698,030 7 8 9 12 (226,951) (435,712) (524,864) 1,262,318 (554,580) 29,716 1,400,331 (138,013) (524,864) 1,262,318 13 13 (0.14p) N/A 0.36p N/A Revenue Cost of sales Gross profit Other income Selling and distribution expenses Administrative expenses Other operating expenses Profit from operations Finance costs (Loss)/profit before income tax Income tax expense (Loss)/profit for the year Attributable to equity holders of the parent Attributable to minority interest Earnings per ordinary share Basic Diluted All operations are continuing. The notes numbered 1 to 29 form an integral part of these financial statements. UNIVISION ENGINEERING LIMITED - 18 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED GROUP BALANCE SHEET As at 31 March 2009 Note 2009 £ 2008 £ 15 16 18 20 24 21 21 22 23 24 25 25 26 692,830 285,513 961,845 352,175 978,343 1,314,020 1,050,046 18,923,799 8,933 117,762 973,400 11,861,304 - 440,955 20,100,540 13,275,659 21,078,883 14,589,679 219,934 5,552,204 5,160,493 921,984 4,293 2,457 3,881,788 2,905,668 495,810 3,055 11,858,908 7,288,778 9,659 9,929 11,868,567 7,298,707 8,977,979 232,337 7,136,220 154,752 9,210,316 7,290,972 21,078,883 14,589,679 ASSETS Non-current assets Goodwill Plant and equipment Total non-current assets Current assets Inventories Trade and other receivables Tax recoverable Cash and bank balances Total current assets Total assets LIABILITIES AND EQUITY Current liabilities Bank overdrafts Interest-bearing borrowings Trade and other payables Tax payable Obligation under finance lease Total current liabilities Non-current liabilities Obligation under finance lease Total liabilities Capital and reserves Capital and reserves Minority interest Total shareholders’ equity Total liabilities and equity These financial statements were approved by the Board on Directors on 29 September 2009 and authorised for issue. On behalf of the Board of Directors Stephen Sin Mo KOO Director Chun Hung WONG Director The notes numbered 1 to 29 form an integral part of these financial statements. UNIVISION ENGINEERING LIMITED - 19 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED COMPANY BALANCE SHEET As at 31 March 2009 Note 2009 £ 2008 £ 16 17 18 20 21 22 23 25 25 20,441 3,235,438 24,503 6,046,793 3,255,879 6,071,296 825,743 3,854,121 23,467 723,026 3,092,062 245,135 4,703,331 4,060,223 7,959,210 10,131,519 219,934 4,510,870 2,195,127 4,293 2,457 2,642,945 1,848,035 3,055 6,930,224 4,496,492 9,659 9,929 6,939,883 4,506,421 26 1,019,327 5,625,098 1,019,327 5,625,098 7,959,210 10,131,519 ASSETS Non-current assets Plant and equipment Investment in subsidiary undertakings Total non-current assets Current assets Inventories Trade and other receivables Cash and bank balances Total current assets Total assets LIABILITIES AND EQUITY Current liabilities Bank overdrafts Interest-bearing borrowings Trade and other payables Obligation under finance lease Total current liabilities Non-current liabilities Obligation under finance lease Total liabilities Capital and reserves Capital and reserves Total shareholders’ equity Total liabilities and equity These financial statements were approved by the Board on Directors on 29 September 2009 and authorised for issue. On behalf of the Board of Directors Stephen Sin Mo KOO Director Chun Hung WONG Director The notes numbered 1 to 29 form an integral part of these financial statements. UNIVISION ENGINEERING LIMITED - 20 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED GROUP STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY For the year ended 31 March 2009 Share premium £ Retained earnings £ Special capital reserve “A” £ Special capital reserve “B” £ Exchange reserve £ Sub-total £ Minority interest £ Total equity £ Share capital £ (Note 26) Balance at 1 April 2007 1,697,617 2,192,640 1,769,924 155,876 143,439 (369,680) 5,589,816 285,641 5,875,457 Profit for the year Effect on translation - - - - 1,400,331 - - - - - - 1,400,331 (138,013) 1,262,318 146,073 146,073 7,124 153,197 Balance at 31 March 2008 1,697,617 2,192,640 3,170,255 155,876 143,439 (223,607) 7,136,220 154,752 7,290,972 Loss for the year Effect on translation - - - - (554,580) - - - - - - (554,580) 29,716 (524,864) 2,396,339 2,396,339 47,869 2,444,208 Balance at 31 March 2009 1,697,617 2,192,640 2,615,675 155,876 143,439 2,172,732 8,977,979 232,337 9,210,316 The currency translation from Hong Kong dollars to the presentational currency of pound sterling used in these financial statements has no impact on the available distributable reserves of the Company at 31 March 2009. Nature of purposes of the reserves i) Share premium The Company may by resolution reduce the share premium account in any manner authorised and subject to any conditions prescribed by law. ii) Special capital reserve “A” Pursuant to the Order of the High Court dated 20 November 2004, any future recoveries of the Company’s accumulated provision for obsolete inventories and provision for bad debts amounting to HK$1,935,002 and HK$3,592,540 respectively will be credited to non-distributable special capital reserve “A” account. iii) Special capital reserve “B” By a special resolution passed on 30 July 2004 and Order of the High Court dated 20 November 2004, the authorised and issued capital of the Company was reduced from to HK$159,245,000 divided HK$16,405,000 divided into 3,281 ordinary shares of HK$5,000 each. The reduction of capital was effected by cancella tion of 28,568 ordinary shares of HK$5,000 each in the issued and paid up share capital of the Company. The Company established a non - distributable special capital reserve “B” account into which HK$2,071,307 was credited as a result of the capital reductio n. into 31,849 ordinary shares of HK$5,000 each The notes numbered 1 to 29 form an integral part of these financial statements. UNIVISION ENGINEERING LIMITED - 21 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED COMPANY STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY For the year ended 31 March 200 9 Share capital £ (Note 26) Share premium £ Retained earnings/ (accumulated losses) £ Special capital reserve “A” £ Special capital reserve “B” £ Exchange reserve £ Total equity £ Balance at 1 April 2007 1,697,617 2,192,640 1,675,594 155,876 143,439 (395,682) 5,469,484 Profit for the year Effect on translation - - - - 201,402 - - - - - - 201,402 (45,788) (45,788) Balance at 31 March 200 8 1,697,617 2,192,640 1,876,996 155,876 143,439 (441,470) 5,625,098 Loss for the year Effect on translation - - - - (5,497,465) - - - - - - (5,497,465) 891,694 891,694 Balance at 31 March 200 9 1,697,617 2,192,640 (3,620,469) 155,876 143,439 450,224 1,019,327 The notes numbered 1 to 29 form an integral part of these financial statements. UNIVISION ENGINEERING LIMITED - 22 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED GROUP CASH FLOW STATEMENT For the year ended 31 March 2009 Note 2009 £ 2008 £ Cash flows from operating activities (Loss)/profit before income tax from continuing operations (297,913) 1,698,030 Adjustments for: Interest income Interest expense Depreciation Write down of obsolete inventories Written back on trade and other payables Unrealised loss on investment account carried at fair value Impairment losses on trade receivables Impairment losses on other receivables Impairment loss on goodwill Loss/(gain) on disposal of plant and equipment Operating cash generated before working capital changes Decrease in inventories Increase in trade and other receivables Increase in tax recoverable Increase in trade and other payables Increase in tax payable Net cash used in operations Income tax paid – The PRC Income tax paid – Taiwan Net cash used in operating activities Cash flows from investing activities Interest received Purchase of plant and equipment Increase in pledged bank deposits Proceeds from disposal of plant and equipment Net cash used in investing activities 7 8 16 18 7 9 9 9 15 9 7 (8,521) 735,955 191,933 89,435 (85,660) - 290,801 23,632 309,325 398 1,249,385 215,513 (2,642,094) (53,416) 1,099,440 1,505 (129,667) - (18,669) (21,172) 239,952 172,193 11,978 (30,848) 7,480 165,228 357,935 - (681) 2,600,095 22,056 (6,791,047) - 766,872 - (3,402,024) (711) - (148,336) (3,402,735) 8,521 (46,865) (7,168) 735 21,172 (146,392) (340,754) 1,880 (44,777) (464,094) The notes numbered 1 to 29 form an integral part of these financial statements. UNIVISION ENGINEERING LIMITED - 23 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED GROUP CASH FLOW STATEMENT (Continued) For the year ended 31 March 200 9 Note 2009 £ 2008 £ Cash flows from financing activities Interest paid Capital element of finance lease rentals paid Interest element of finance lease rentals paid (Repayment of)/proceeds from interest-bearing borrowings (87,391) (4,293) (691) (608,862) (73,839) (764) (148) 2,639,883 Net cash (used in)/generated from financing activities (701,237) 2,565,132 Net decrease in cash and cash equivalents (894,350) (1,301,697) Effect of change in foreign exchange rates 353,680 136,263 Cash and cash equivalents at beginning of year 438,498 1,603,932 Cash and cash equivalents at end of year 21 (102,172) 438,498 Major non-cash transactions: There was no major non-cash transaction during the year ended 31 March 2009. The notes numbered 1 to 29 form an integral part of these financial statements. UNIVISION ENGINEERING LIMITED - 24 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED COMPANY CASH FLOW STATEMENT For the year ended 31 March 2009 Note 2009 £ 2008 £ Cash flows from operating activities (Loss)/profit before income tax from continuing operations (5,497,465) 201,402 Adjustments for: Interest income Interest expense Depreciation Written back on trade and other payables Unrealised loss on investment account carried at fair value Impairment losses on investment in subsidiary undertakings Impairment losses on trade receivables Impairment losses on other receivables Loss/(gain) on disposal of plant and equipment Operating cash generated before working capital changes Decrease in inventories Increase in trade and other receivables Increase in amounts due from subsidiaries (Decrease)/increase in trade and other payables 16 17 (7,567) 673,069 10,891 (85,660) - 4,717,031 419,625 14,295 915 245,134 190,225 (41,876) (673,183) (379,780) (19,085) 179,264 7,640 (28,803) 7,480 - 9,808 7,768 (543) 364,931 87,109 (301,519) (3,971,484) 327,151 Net cash used in operating activities (659,480) (3,493,812) Cash flows from investing activities Interest received Purchase of plant and equipment Increase in pledged bank deposits Proceeds from disposal of plant and equipment 7,567 (393) (7,168) 74 19,085 (18,286) (338,500) 1,723 Net cash generated from/(used in) investing activities 80 (335,978) Cash flows from financing activities Interest paid Inception of finance lease Capital element of finance lease rentals paid Interest element of finance lease rentals paid Proceeds from interest-bearing borrowings (24,504) - (4,293) (691) 90,579 (13,151) 13,613 (756) (148) 2,617,133 Net cash generated from financing activities 61,091 2,616,691 Net decrease in cash and cash equivalents (598,309) (1,213,099) Effect of change in foreign excha nge rates 159,164 (32,518) Cash and cash equivalents at beginning of year 242,678 1,488,295 Cash and cash equivalents at end of year (196,467) 242,678 UNIVISION ENGINEERING LIMITED - 25 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 1. GENERAL INFORMATION UniVision Engineering Limited (the “Company”) is incorpo rated in Hong Kong as a limited company. The address of its registered office is 8/F Lever Tech Centre, 69 -71 King Yip Street, Kwun Tong, Kowloon, Hong Kong. The Company has its primary public listing on the Alternative Investment Market of the London Sto ck Exchange (“AIM”). The Company is engaged in the supply, design, installation and maintenance of closed circuit television and surveillance systems, the sale of security system related products and provision for electronic and mechanical services. The principal activities of the subsidiaries are set out in note 1 7 to the financial statements. 2. BASIS OF PREPARATION The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards (“IFRSs”) . The financial statements have been prepared under the historical cost convention as modified for certain financial assets and liabilities (including derivative instruments) are measured at fair value through profit and loss. The Company’s operations are principally conducted in Hong Kong. The financial statements of the Company and the Group have been presented in Sterling Pound (“£”) which is the Company’s presentation currency as the directors consider this presentation to be more useful for its current and potential investors. The preparation of financial statements in conformity with IFRS s requires the use of certain critical accounting estimates. It also requires management to access its judgment in the access of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity or areas where assumptions and estimates are significant to t he financial statements, are disclosed in note 5. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Adoption of new and revised International Financial Reporting Standards In the current year, the Group adopted the new and revised International Financial Reporting Standards (“IFRSs”) which includes all applicable International Reporting Standard, International Accounting Standards and Interpretation issued by the International Accounting Standards Board that are relevant to it operation an defective for accounting periods beginning on or after 1 January 2009. The adoptions of the new and revised IFRSs are not relevant to the Group and did not result in any substantial changes to the Group’s accounting policies. The accounting policies have been consistently applied by the Group and the Company and are consistent with those used in the previous period presented in these finan cial statements. UNIVISION ENGINEERING LIMITED - 26 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (a) Adoption of new and revised International Financial Reporting Standards (cont’d) The Group has not applied the following new IFRSs that have been issued and effective from accounting periods beginning on or after 1 January 2009: IAS 1 IAS 23 IAS 27 IAS 36 IAS 39 IFRS 2 IFRS 8 (Revised) (Revised) (Revised) (Amendment) (Amendment) Financial Instruments: Recognition and Measurement Presentation of Financial Statements Borrowing costs Consolidated and Separate Financial Statements Impairment of Assets Share-based Payment – Vesting conditions and cancellations Operating Segments The Group’s assessment of the impact of adopting those standards, revised or amendments that are relevant to the Group is set out below: (i) IAS 1 (Revised) Presentation of Financial Statements The revised standard requires: • All changes in equity arising from transactions with owners in their capacity as owners to be presented separately from co mponents of comprehensive income; • Components of comprehensive income not to be included in statement of changes in equity; • Items of income and expenses and components of other comprehensive income to be presented either in a single statement of compr ehensive income with subtotals, or in two separate statements (a separate statement of profit and loss followed by a statement of comprehensive income); • Presentation of restated balance sheet as at the beginning of the comparative period when entities make restatements or reclassifications of comparative information. The revisions also include changes in the titles of some of the financial statements primary statements. The Group will apply the revised standard from 1 January 2009 and provide comparati ve information that conforms to the requirements of the revised standard. The key impact of the application of the revised standard is the presentation of an additional primary statement, that is, the statement of comprehensive income. (ii) IFRS 8 Operating Segments IFRS 8 supersedes IAS 14 Segment Reporting and requires the Group to report the financial performance of its operating segments based on the information used internally by management for evaluating segment performance and deciding on allocatio n of resources. Such information may be different from the information included in the financial statements, and the basis of its preparation and reconciliation to the amounts recognised in the financial statements shall be disclosed. UNIVISION ENGINEERING LIMITED - 27 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (a) Adoption of new and revised International Financial Reporting Standards (cont’d) (ii) IFRS 8 Operating Segments (cont’d) The Group will apply IFRS 8 from 1 January 2009 and provide comparative information that conforms to the requirements of IFRS 8. The Group expects the new operating segments to be significantly different from business segments currently disclosed and expects more information to be disclosed under IFRS 8. (iii) Revised IAS 23 Borrowing Costs The revised standard removes the option to recognise immediately as an expense borrowing costs that are attributable to qualifying assets, except for those borrowing costs on qualifying assets that are measured at fair value or inventories that are manufactur ed or produced in large quantities on a repetitive basis. The Group will apply the revised I AS 23 from 1 January 2009. As the Group has been capitalising the relevant borrowing costs, the revised standard is not expected to have any impact to the Group. (b) Group accounting Subsidiaries Subsidiaries are entities (including special purpose entities) over which the Group has power to govern the financial and operating policies, generally accompanied by a shareholding giving rise to a majority of the votin g rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the dates of exchange, plus costs directly attributable to the acquisition. Identifiable assets a cquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value on the date of acquisition, irrespective of the extent of minority interest. Subsidiaries are consolidated from the date on wh ich control is transferred to the Group. They are de-consolidated from the date on which control ceases. In preparing the consolidated financial statements, transactions, balances and unrealised gains on transactions between group entities are eliminated. Unrealised losses are also eliminated but are considered an impairment indicator of the assets transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. UNIVISION ENGINEERING LIMITED - 28 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (c) Investment in subsidiaries Investment in subsidiaries are carried at cost less accumulated impairment losses in the Company’s balance sheet. On disposal of investment in subsidiaries, the difference between disposal proceeds and the carrying amounts of the investments are recognised in the income statement. (d) Intangible assets (i) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in ‘intangible assets’. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash -generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash -generating units that are expected to benefit from the business combination in which the goodwill arose identified according to operating segment. (ii) Research and development cost Expenditure on research activities, undertaken with the prospect of gaining new technical knowledge and understanding, is recognised in the income statement as an expense as incurred. Expenditure on development activities is capitalised when the Group can demonstrate al l of the following: i) the technical feasibility of completing the product or process so that it will be available for use or sale; ii) its intention to complete the product or process and use or sell it; iii) its ability to use or sell the product or process; iv) v) vi) the Group can demonstrate the existence of a market for the output of the product or process; if it is to be used internally, the usefulness of the product or process; the availability of adequate technical, financial and other resources to complete the development and to use or sell the product or process; and its ability to measure reliably the expenditure attributable to the product or process during its development. UNIVISION ENGINEERING LIMITED - 29 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (d) Intangible assets (cont’d) (ii) Research and development cost (cont ’d) The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Other development expenditure is recognised in the income statement as an expense as incur red. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. Amortisation is charged to the income statement on a straight -line basis over the estimated useful lives of the capitalised development costs. (e) Plant and equipment (i) Measurement 1) Other plant and equipment All other items of plant and equipment are initially recognised at cost and subsequently carried at cost less accumulated depreciation and accumulated impairment losses. 2) Components of cost The cost of an item of plant and equipment are initially recognised includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the man ner intended by management. Cost also includes borrowing costs capitalised in accordance with the Group’s accounting policy. (ii) Depreciation Depreciation on other items of plant and equipment is calculated using the straight -line method to allocate their depreciable amounts over their estimated useful lives as follows: Furniture and fixtures Computer equipment Motor vehicles Leasehold improvements Research assets 5 years 3 years 3 years 5 years 5 years The residual values, estimated useful lives and depreciation method of property, plant and equipment are reviewed, and adjusted as appropriate, at each balance sheet date. UNIVISION ENGINEERING LIMITED - 30 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (e) Plant and equipment (cont’d) (iii) Subsequent expenditure Subsequent expenditure relating to plant and equipment that has already been recognised is added to the carrying amount of the asset only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item c an be measured reliably. All other repair and maintenance expenses are recognised in the income statement when incurred. (iv) Disposal On disposal of an item of plant and equipment, the difference between the disposal proceeds and its carrying amount is recognised in the income statement. (f) Impairment of non-financial assets Plant and equipment and investments in subsidiaries are tested for impairment whenever there is any objective evidence or indication that these assets may be impaired. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value -in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those f rom other assets. If this is the case, the recoverable amount is determined for the Cash Generating Unit (“CGU”) to which the asset belongs. If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount. The difference between the carrying amount and recoverable amount is recognised as an impairment loss in the income statement, unless the asset is carried at revalued amount, in which case, such impairment loss is treated as a revaluation decrease. An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying amount of this asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is recognised in the income statement, unless the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase. However, to the extent that an impairment loss on the same revalued asset was previously recognised in the income statement, a reversal of that impairment is also recognised in the income statement. UNIVISION ENGINEERING LIMITED - 31 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 3. SUMMARY OF SIGNIFICANT AC COUNTING POLICIES (CONT’D) (g) Financial assets The principal financial assets are cash, trade receivables, other receivables and other investments. (i) Cash and cash equivalents Cash and cash equivalents represent cash at bank and on hand, demand depo sits with banks and other financial institutions, and short -term, highly liquid investments which are readily convertible into known amounts of cash and subject to an insignificant risk of change in value, having been within three months of maturity at acq uisition. For the purpose of the Group cash flow statement, bank overdrafts which are repayable on demand and form an integral part of the Group’s cash management are also included as a component of cash and cash equivalents. (ii) Trade and other receivables Trade and other receivables are initially recognised at fair value and thereafter stated at amortised cost less allowance for impairment losses for bad and doubtful debts, except where the receivables are interest -free loans made to related parties w ithout any fixed repayment terms or the effect of discounting would be immaterial. In such cases, the receivables are stated at cost less allowance for impairment losses for bad and doubtful debts. (iii) Construction contracts The accounting policy for contract revenue is set out in note 3(n)(i). When the outcome of a construction contract can be estimated reliably, contract costs are recognised as an expense by reference to the stage of completion of the contract at the balance sheet date. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. When the outcome of a construction contract cannot be estimated reliably, contract costs are recognised as an expense in the period in which they are incurred. Construction contracts in progress at the balance sheet date are recorded in the balance sheet at the net amount of costs incurred plus recognised profit less recognised losses and progress billings, and are presented in th e balance sheet as the “Amounts due from construction contract customers” (as an asset) or the “Amounts due to construction contract customers” (as a liability), as applicable. Progress billings not yet paid by the customer are included in the balance shee t. Amounts received before the related work is performed are included in the balance sheet, as a liability, as “Advances received”. UNIVISION ENGINEERING LIMITED - 32 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (h) Impairment of financial assets The Group assesses at each bala nce sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired and recognises an allowance for impairment when such evidence exists. Significant financial difficulties of the debtor, probability that t he debtor will enter bankruptcy, and default or significant delay in payments are objective evidence that the financial assets are impaired. The carrying amount of these assets is reduced through the use of an impairment allowance account which is calculated as the difference between the carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. When the asset becomes uncollectible, it is written off against the allowance account. Subsequent re coveries of amounts previously written off are recognised against the same line item in the income statement. The allowance for impairment loss account is reduced through the income statement in a subsequent period when the amount of impairment loss decre ases and the related decrease can be objectively measured. The carrying amount of the asset previously impaired is increased to the extent that the new carrying amount does not exceed the amortised cost, had no impairment been recognised in prior periods. (i) Financial liabilities and equity Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. Significant financial liabilities include interest -bearing borrowings, trade and oth er payables. (i) Interest-bearing borrowings Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest -bearing borrowings are stated at amortised cost with any dif ference between the amount initially recognised and redemption value being recognised in the income statement over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the Group has an u nconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. (ii) Trade and other payables Trade and other payables are initially recognised at fair value and thereafter stated at amortised cost unless the effect of discounting would be immaterial, in which case they are stated at cost. UNIVISION ENGINEERING LIMITED - 33 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (i) Financial liabilities and equity (cont’d) (iii) Equity instrument An equity instrument is a contract that evide nces a residual interest in the assets of the Group after deducting all of its liabilities. The Group’s financial liabilities are generally classified into financial liabilities at fair value through profit or loss and financial liabilities at amortised costs. (j) Financial guarantee contracts A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of debt instrument. A financial guarantee contract issued by the Group and not designed as at fair value through profit or loss is recognised initially at its fair value less transaction cost that are directly attributa ble to the issue of the financial guarantee contract. Subsequent to initial recognition, the Group measures the financial guarantee contract at the higher of: (i) the amount determined in accordance with IAS 37 Provisions, Contingent Liabilities and Conti ngent Assets; and (ii) the amount initially recognised less, where appropriate, cumulative amortisation recognised in accordance with IAS 18 Revenue. (k) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average cost formula and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordi nary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue i s recognised. The amount of any write -down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any write -down of inventories is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs. (l) Fair value estimation of financial assets and liabilities The fair values of financial instruments traded in active markets (such as exchange traded and over-the-counter securities and derivatives) are based on quoted market prices at the balance sheet date. The quoted market prices used for financial assets are the current bid prices; the appropriate quoted market prices for financial liabilities are the current asking prices. The fair values of financial instruments that are not traded in an active market are determined by using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Where appropriate, quoted market prices or dealer quotes for similar instruments , are used. Valuation techniques, such as discounted cash flow analyses, are also used to determine the fair values of the financ ial instruments. UNIVISION ENGINEERING LIMITED - 34 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (l) Fair value estimation of financial assets and liabilities (cont’d) The fair values of currency forwards are determined using actively quoted forward exchange rates. The fair values of interest rate swaps are calculated as the present value of the estimated future cash flows discounted at actively quoted interest rates. The fair values of current financial assets and liabilities carried at amortised cost approximate their carrying amounts. (m) Borrowing costs Borrowing costs are expensed in the income statement in the period in which they are incurred, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to get ready for its intended use or sale. The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or completed. (n) Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and rendering of services in the ordinary course of the Group’s a ctivities. Revenue is shown net of business tax, value-added tax, rebates and discounts, and after eliminating sales within the Group. The Group recognises revenue when the amount of revenue and related cost can be reliably measured, it is probable that f uture economic will flow to the entity and when specific criteria have been made met for each of the Group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement. (i) Construction contracts Revenue from construction contracts is recognised wh en the outcome of a construction contract can be estimated reliably: - - revenue from a fixed price contract is recognised using the percentage of completion method, measured by reference to the percentage of contract costs incurred to date to estimated tot al contract costs for the contract; and revenue from a cost plus contract is recognised by reference to the recoverable costs incurred during the period plus an appropriate proportion of the total fee, measured by reference to the proportion that costs incurred to date bear to the estimated total costs of the contract. UNIVISION ENGINEERING LIMITED - 35 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (n) Revenue recognition (cont’d) (i) Construction contracts (cont’d) When the outcome of a construction contract cannot be estimated reliably, revenue is recognised only to the extent of contract costs incurred that it is probable will be recoverable. (ii) Maintenance contracts Revenue from maintenance contracts is recognised on a straight line basis over the maintenance periods thereof. (iii) Product sales Revenue from product sales is recognised on the transfer of risks and rewards of ownership, which generally coincides with the delivery of goods to customers and the passing of title to customers. (iv) Solution sales Revenue from solution sales is recognised when the solution services are rendered. (v) Management fee Revenue from management service is recognised when the management services are rendered. (vi) Interest income Interest income is recognised as it accrues using the effective interest m ethod. (o) Income taxes Income tax comprises current and deferred tax. Income tax is recognised in the income statement, or in equity if it relates to items that are recognised in the same or a different period directly in equity. Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences: - where the deferred tax liability arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and UNIVISION ENGINEERING LIMITED - 36 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (o) Income taxes (cont’d) - in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future. Deferred tax assets are recognised for all deductible temporary differences, carryforward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilised, except: - - where the deferred tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be availab le to allow all or part of the deferred tax asset to be utilised. Conversely, previously unrecognised deferred tax asset to be utilised. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date. Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists t o set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority. (p) Provisions and contingent liabilities Provisions are recognised for liabilities of uncertain timing or amount when the Group or the Company has a legal or constructive obligation arising as a result of a past event, it is probable that an outflow of economic benefits will be required to settle the obligation and a reliable estimate can be made. Where the time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation. Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be reliably estimated , the obligation is disclosed as a contingent liability, unless the probability of outflow is remote. Possible obligations, whose existence will only be confirmed by the occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote. UNIVISION ENGINEERING LIMITED - 37 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (q) Employee benefit – pension obligations These comprise short term employee benefits and contributions to defin ed contribution retirement plan. Salaries, annual bonuses, paid annual leave, contributions to defined contribution retirement plans and the cost of non -monetary benefits are accrued in the year in which the associated services are rendered by employees. Where payment or settlement is deferred and the effect would be material, these amounts are stated at their present values. (r) Finance expense Finance expense comprises interest expense on borrowings which is recogni sed in the income statement. All borrowing costs are recognised in the income statement using the effective interest method, except to the extent that they are capitali sed as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a subst antial period of time to be prepared for its intended use or sale. (s) Leased assets An arrangement comprising a transaction or a series of transactions is or contains, a lease if the Group determines that the arrangement conveys a right to use a specifi c asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a l ease. i) Assets acquired under finance leases Where the Group acquires the use of assets under finance leases, the amounts representing the fair value of the leased asset or, if lower, the present value of the minimum lease payments of such assets, are included in fixed assets and the corresponding liabilities, net of finance charges, are recorded as obligations under finance leases. Depreciation is provided at rates which write off the cost of the assets over the term of the relevant lease or, where it is likely the Group will obtain ownership of the asset, the life of the asset, as set out in note 3(e)(ii). Impairment losses are accounted for in accordance with the accounting policy as set out in note 3(f). Finance charges implicit in the lease payments are charged to the income statement over the period of the leases so as to produce an approximately constant periodic rate of charge on the remaining balance of the obligations for each accounting period. ii) Operating lease charges Where the Group has the use of assets held under operating leases, payments made under the leases are charged to the income statement in equal instalments over the accounting periods covered by the lease term, except where an alternative basis is more representative of the pattern of benefits to be derived from the leased asset. Lease incentives received are recognised in the income statement as an integral part of the aggregate net lease payments made. Contingent rentals are charged to the income statement in the accounting pe riod in which they are incurred. UNIVISION ENGINEERING LIMITED - 38 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (t) Foreign currency translation Foreign currency transactions during the year are translated at the foreign exchange rates ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the foreign exchange rates ruling at the balance sheet date. Exchange gains and losses are recognised in the income statement. Non-monetary assets and liabilities that are measure d in terms of historical cost in a foreign currency are translated using the foreign exchange rates ruling at the transaction dates. Non - monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated using the foreign exchange rates ruling at the dates the fair value was determined. The results of foreign operations are translated into Hong Kong dollars at the exchange rates approximating the foreign exchange rates ruling at the dates of the transactions. Bal ance sheet items are translated into Hong Kong dollars at the foreign exchange rates ruling at the balance sheet date. The resulting exchange differences are recognised directly in a separate component of equity. On disposal of a foreign operation, the cu mulative amount of the exchange differences recognised in equity which relates to that foreign operation is included in the calculation of the profit or loss on disposal. (u) Related party transactions For the purpose of these financial statements, a par ty is considered to be related to the Group if: i) the party has the ability, directly or indirectly through one or more intermediaries, to control the Group or exercise significant influence over the Group in making financial and operating policy decisions, or has joint control over the Group; ii) the Group and the party are subject to common control; iii) the party is an associate of the Group or a joint venture in which the Group is a venturer; iv) v) vi) the party is a member of key management personnel o f the Group or the Group’s parent or a close family member of such an individual, or is an entity under the control, joint control or significant influence of such individuals; the party is a close family member of a party referred to in (i) or is an e quity under the control, joint control or significant influence of such individuals; or the party is a post-employment benefit plan which is for the benefit of employees of the Group or of any entity that is a related party of the Group. Close family members of an individual are those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity. UNIVISION ENGINEERING LIMITED - 39 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D) (v) Segment reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and returns that are different from those of segments operating in other economic environment that are subject to risks and returns that are different from those of segments operating in other economic environments. Inter-segment pricing is based on similar terms as those available to other external parties. Segment revenue, expenses, results, assets and liabilities include items directly attributable to a segment and those that can be allocated on a reasonable basis to that segment. Segment revenue, expenses, assets and liabilities are determined before intra -group balances and intra- group transactions are eliminated as part of the consolidation process, except to the extent that such intra-group balances and transactions are between group enterprises within a single segment. Segment capital expenditure is the total cost incurred during the year to acquire segment assets (both tangible and intangible) that are expected to be used for more than one ye ar. Unallocated items mainly comprise financial and corporate assets, borrowings, corporate and financial expenses. (w) Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are deducted against the share capital account. 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLIC IES The Group’s major financial instruments include borrowings, trade receivables and trade payables. Details of these financial instruments are disclosed in the respective notes. The risk s associated with these financial instruments include credit risk, liquidity risk, currency risk and interest rate risk. The policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented in a timely and effective manner. a) Credit risk i) As at 31 March 2009, the maximum exposure to credit risk is represented by the carrying amount of each financial asset in the Group and the Company balance sheet after deducting any impairment allowance. UNIVISION ENGINEERING LIMITED - 40 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLIC IES (CONT’D) a) Credit risk (cont’d) ii) iii) In respect of trade and other receivables, in order to minimise risk, management has a credit policy in place and the exposures to these credit risks are monitored on an ongoing basis. Credit evaluations of its customers’ financial position and condition are performed on each and every major customer periodically. These evaluations focus on the customer’s past history of making payments when due and current ability to pay, and take into account information specific to the customer as well as pertaining to the economic environment in which the customer operates. Debts are usually due within 90 days from the date of billing. In respect of trade receivables, the Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The default risk of the industry and country in which customers operate also has an infl uence on credit risk. At the balance sheet date, the Group had no significant concentrations of credit risk where individual trade and other receivables balance exceed 10% of the total trade and other receivables at the balance sheet date. iv) The credit risk on liquid funds is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies. Further quantitative disclosures in respect of the Group’s and the Company’s exposure to credit risk arising from trade and other receivables are set out in note 20. b) Liquidity risk In managing the liquidity risk, the Group’s policy is to regularly monitor and maintain an adequate level of cash and cash equivalents determined by management to finance the Group’ s operations. Management also needs to ensure the continuity of funding for both the short and long terms, and to mitigate the effects of cash flow fluctuation. The following table details the remaining contractual maturities at the balance sheet date of the Group’s and the Company’s financial liabilities which are based on the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floa ting, based on rates current at the balance sheet date) and the earliest date the Group and the Company can be required to pay: UNIVISION ENGINEERING LIMITED - 41 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLIC IES (CONT’D) b) Liquidity risk (cont’d) Group Within 1 year or on demand £ 219,934 5,902,246 5,160,493 921,984 2009 More than More than 2 years but 1 year but less than less than 5 years 2 years £ £ Total contractual undiscounted cash flow £ Carrying amount £ - - - - - - - - 219,934 219,934 5,902,246 5,160,493 921,984 5,552,204 5,160,493 921,984 5,135 5,135 6,418 16,688 13,952 12,209,792 5,135 6,418 12,221,345 11,868,567 Within 1 year or on demand £ 2,457 4,415,308 2,905,668 495,810 2008 More than More than 2 years but 1 year but less than less than 5 years 2 years £ £ Total contractual undiscounted cash flow £ Carrying amount £ - - - - - - - - 2,457 2,457 4,415,308 2,905,668 495,810 3,881,788 2,905,668 495,810 3,654 3,654 8,222 15,530 12,984 7,822,897 3,654 8,222 7,834,773 7,298,707 Bank overdrafts Interest-bearing borrowings Trade and other payables Tax payable Obligation under finance lease Bank overdrafts Interest-bearing borrowings Trade and other payables Tax payable Obligation under finance lease UNIVISION ENGINEERING LIMITED - 42 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLIC IES (CONT’D) b) Liquidity risk (cont’d) Company Bank overdrafts Interest-bearing borrowings Trade and other payables Obligation under finance lease Bank overdrafts Interest-bearing borrowings Trade and other payables Obligation under finance lease c) Foreign currency risk Within 1 year or on demand £ 219,934 4,831,527 2,195,127 5,135 7,251,723 Within 1 year or on demand £ 2,457 3,146,371 1,848,035 3,654 5,000,517 2009 More than More than 2 years but 1 year but less than less than 5 years 2 years £ £ - - - 5,135 5,135 - - - 6,418 6,418 2008 More than More than 2 years but 1 year but less than less than 5 years 2 years £ £ - - - 3,654 3,654 - - - 8,222 8,222 Total contractual undiscounted cash flow £ 219,934 4,831,527 2,195,127 Carrying amount £ 219,934 4,510,870 2,195,127 16,688 13,952 7,263,276 6,939,883 Total contractual undiscounted cash flow £ 2,457 3,146,371 1,848,035 Carrying amount £ 2,457 2,642,945 1,848,035 15,530 12,984 5,012,393 4,506,421 The Group operates mostly in Hong Kong, Taiwan and the People’s Republic of China (the “PRC”) and revenue and expenditure are mainly denominated in Hong Kong Dollars (“HKD”), New Taiwan Dollars (“NTD”) and Renminbi Yuan (“RMB”). The Group is also exposed to foreign currency risks as it engages in projects that were billed in United States dollars (“USD”). The Group currently does not have any policy on hedges of foreign currency risk. However, management monitors the foreign currency risk exposure and will consider hedging significant foreign currency risk should the need arise. The following table details the Group’s and the Company’s exposure at the balance sheet date to currency risk arising from recognised assets or liabilities denominated in a currency other than the functional currency of the entity to which they related. UNIVISION ENGINEERING LIMITED - 43 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLIC IES (CONT’D) c) Foreign currency risk (cont’d) Group NTD RMB USD HKD 2009 Trade and other receivables Cash and bank balances Interest-bearing borrowings Trade and other payables 95,854,981 3,648,137 (46,500,000) (32,734,535) 131,407,851 44,799 - (24,686,512) 13,086 25,367 (6,116,716) (309,820) 38,088,132 199,370 (3,000,000) (21,175,432) Overall net exposure 20,268,583 106,766,138 (6,388,083) 14,112,070 NTD RMB USD HKD 2008 Trade and other receivables Cash and bank balances Interest-bearing borrowings Trade and other payables 135,172,017 6,535,647 (74,950,869) (61,372,707) 101,599,900 534,160 - (6,533,774) 15,216 141,771 (5,000,000) (553,973) 40,705,543 2,140,648 (2,000,000) (19,659,463) Overall net exposure 5,384,088 95,600,286 (5,396,986) 21,186,728 Company Trade and other receivables Cash and bank balances Interest-bearing borrowings Trade and other payables Overall net exposure Trade and other receivables Cash and bank balances Interest-bearing borrowings Trade and other payables Overall net exposure Sensitivity analysis NTD RMB USD HKD 2009 - - - - - - - - - - 7,272,227 - - (172,076) 13,086 8,023 (6,000,000) (264,365) 34,138,645 173,801 (3,000,000) (21,131,636) 7,100,151 (6,243,256) 10,180,810 2008 RMB USD HKD 9,168,706 - - (2,787,741) 15,216 141,417 (5,000,000) (553,973) 36,261,019 2,118,739 (2,000,000) (19,615,667) 6,380,965 (5,397,340) 16,764,091 NTD An analysis of the estimated change in the Group’s profit after tax (and the retained earnings) in response to reasonably possible changes in the foreign exchange rates to which the Group has significant exposure at the balance sheet date is presented in the fol lowing table. UNIVISION ENGINEERING LIMITED - 44 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLIC IES (CONT’D) c) Foreign currency risk (cont’d) Group NTD RMB USD HKD 2009 2008 Increase/ (decrease) in foreign exchange rates Effect on profit after tax and retained earnings Increase/ (decrease) in foreign exchange rates Effect on profit after tax and retained earnings 5% (5%) 5% (5%) 5% (5%) 5% (5%) 21,961 (21,961) 576,942 (576,942) 237,543 (237,543) 67,277 (67,277) 5% (5%) 5% (5%) 5% (5%) 5% (5%) 4,201 (4,201) 325,189 (325,189) (136,323) 136,323 4,429 (4,429) The sensitivity analysis has been determined assuming that the change in foreign exchange rates had occurred at the balance sheet date and had be en applied to each of the Group entities’ exposure to currency risk for both derivative and non -derivative financial instruments in existence at that date while all other variables remain constant. The stated changes also represent management’s assessment of reasonably possible change in foreign exchange rates until the next annual balance sheet date. In this respect, it is assumed that the pegged rate between HKD and USD would be materially unaffected by any changes in movement in value of USD against other currencies. Results of the analysis as presented in the above table represent an aggregation of the effects on each of the Group entities’ profit after tax and equity measured in the respective functional currencies, translated into Pound at the excha nge rate ruling at the balance sheet date for presentation purposes. The analysis is performed on the same basis for 2008. d) Interest rate risk The Group’s interest rate risk arises primarily from interest -bearing borrowings. Borrowings issued at variable rates and at fixed rates expose the Group to interest rate risk and fair value interest rate risk respectively. The Group’s interest rate profile as monitored by management is set out below. The following table details the interest rate profile of the Group’s and the Company’s interest - bearing financial liabilities less interest -bearing investments (excluding cash held for short -term working capital purposes) (i.e. net borrowings) at the balance sheet date. UNIVISION ENGINEERING LIMITED - 45 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONT’D) d) Interest rate risk (cont’d) Group 2009 Effective interest rate 2008 Effective interest rate £ £ Net fixed rate borrowings: Interest-bearing borrowings Variable rate borrowings: Bank loans 20.30% 4,239,130 26.67% 2,514,021 4.83% 1,313,074 5% 1,367,767 Total net borrowings 5,552,204 3,881,788 Net fixed rate borrowings as a percentage of total net borrowings Company 76% 65% 2009 Effective interest rate 2008 Effective interest rate £ £ Net fixed rate borrowings: Interest-bearing borrowings Variable rate borrowings: Bank loans 20.30% 4,239,130 26.67% 2,514,021 4.92% 271,740 5% 128,924 Total net borrowings 4,510,870 2,642,945 Net fixed rate borrowings as a percentage of total net borrowings Sensitivity analysis 94% 95% At 31 March 2009, it is estimated that a general incre ase/decrease of 25 (2008: 25) basis points in interest rate, with all other variables held constant, would decrease/increase the Group’s profit before tax by approximately £3,283 (2008: £3,419). The sensitivity analysis above has been determined assuming that the change in interest rates had occurred at the balance sheet date and had been applied to the exposure to interest rate risk for the non-derivative financial liabilities in existence at that date. The 25 basis points increase or decrease represents management’s assessment of a reasonably possible change in interest rates over the period until the next annual balance sheet date. The analysis is performed on the same basis for 2008. UNIVISION ENGINEERING LIMITED - 46 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLIC IES (CONT’D) e) Fair value estimation The fair values of cash and cash equivalents, bank deposits, trade and other receivables, trade and other payables are not materially different from their carrying amounts because of the immediate or short term maturity of these finan cial instruments. The carrying amounts of bank loans and loans from a shareholder approximate their fair values. f) Capital risk management The Group’s primary objectives when managing capital are to safeguard the Group’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Group actively and regularly reviews and manages its capital structure to maintain a balance between the higher shareholder returns that might be possible with a higher level of borrowings and the advantages and security afforded by a sound capital position, and makes adjustments to the capital structure in light of changes in economic conditions. The Group monitors its capital structure on the basis of a net debt -to-adjusted capital ratio. For this purpose the Group defines net debt as total debt (which includes bank borrowings and other financial liabilities) less bank de posits and cash. Adjusted capital comprises all components of equity less unaccrued proposed dividends. During 2009, the Group’s strategy, which was unchanged from 200 8, was to maintain the net debt-to-adjusted capital ratio as low as feasible. In orde r to maintain or adjust the ratio, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. Neither the Company nor any of its subsidiary undertakings are subject capital requirements. to externally imposed UNIVISION ENGINEERING LIMITED - 47 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 4. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLIC IES (CONT’D) f) Capital risk management (cont’d) The net debt-to-adjusted capital ratio at 31 March 200 9 and 2008 was as follows: Group Company 2009 £ 2008 £ 2009 £ 2008 £ Current liabilities Trade and other payables Bank overdrafts Interest-bearing borrowings Tax payable Obligations under finance lease 5,160,493 219,934 5,552,204 921,984 4,293 2,905,668 2,457 3,881,788 495,810 3,055 2,195,127 219,934 4,510,870 - 4,293 1,848,035 2,457 2,642,945 - 3,055 Non-current liabilities 11,858,908 7,288,778 6,930,224 4,496,492 Obligation under finance lease 9,659 9,929 9,659 9,929 Total debt 11,868,567 7,298,707 6,939,883 4,506,421 Less: Cash and bank balances 117,762 440,955 23,467 245,135 Net debt Total equity 11,750,805 6,857,752 6,916,416 4,261,286 9,210,316 7,290,972 1,019,327 5,625,098 Net debt-to-adjusted capital ratio 128% 94% 679% 76% 5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS Estimates and judgements are continually evaluated and are based on historical experience and other factors. These include expectations of future events that are believed to be reasonable under the circumstances. Although these estimates are based on management’s best knowledge of current events and actions, the actual results will, by definition, seldom equal th ose estimates. The estimates and assumptions that involve a high degree of judgements are discussed below: (a) Estimation of contract costs Estimated costs to complete contracts are judged by management through the application of their experience and knowledge of the industry in which the Group operates. However, contract performance can be difficult to predict accurately. Management believes that contract budgets do not deviate materially from actual costs incurred due to a strong cost control system with regular review of budgets which highlight any incidences that could affect estimated costs to completion. UNIVISION ENGINEERING LIMITED - 48 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 5. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (CONT’D) (b) Estimation of write down of inventories The identification of any write down of inventories of the Group requires the use of judgement and estimates by management. Management estimates the net realisable value of inventories with reference to the latest invoice prices and the value in use. Operational procedures are in place to monitor the condition and usefulness of inventories. Management regularly reviews the age of inventories to identify slow moving items and a physical inventory count is carried out on a regular basis to identify obsolete or defective items. Write down will be e stablished for inventories where a drop in net realisable value has been identified. At 31 March 200 9, there was £89,435 (2008: £11,978) write down of obsolete inventories recognised as expense in the income statement. (c) Estimation of impairment for tr ade and other receivables The estimation of impairment for trade and other receivables includes an assessment of recoverability of individual account balances and a review of ageing analysis of trade and other receivables by management. Management will al so review the credit history of customers in assessing the recoverability of trade and other receivables. When any indication comes to their attention that a trade and other receivables might not be recovered in full, impairment will be made and recognised as an expense in the income statement. (d) Estimation of fair value of goodwill The fair value is calculated as based on projections of the future profitability and cash flows for each cash generating unit. Future cash flows are then discounted at an appropriate rate. Management exercises its judgement in a number of forward looking areas. Since these judgements relate to the future, actual results are likely to be different because events and circumstances frequently do not occur as expected both du e to error in estimation and external events, and the differences may be material. (e) Deferred taxation Deferred tax assets are recognised for tax losses not yet used and temporary deductible differences. As those deferred tax assets can only be recogn ised to the extent that it is probable that future taxation profits will be available against which the unused tax credits can be utilised, management’s judgement is required to assess the probability of future taxation profits. Management’s assessment is constantly reviewed and deferred tax assets are recognised if it becomes probable that future taxable profits will allow the deferred tax asset to be recovered. UNIVISION ENGINEERING LIMITED - 49 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 6. SEGMENT INFORMATION Segment information is presented by way of two segment formats: (a) by business segment as a primary segment reporting basis; and (b) by geographical segment as a secondary segment reporting basis. (a) Business segments The Group is organised into the following business segments: - Construction contracts - Maintenance contracts - Product sales - Solution sales - Management fee Results by business segment for the year ended 31 March 200 9 are as follows: Construction contracts £ Maintenance contracts £ Product sales £ Solution sales £ Management fee £ Total £ Income statement information: External sales Inter-segment sales Less: elimination Revenue 6,417,135 - - 6,417,135 2,073,129 - - 2,073,129 382,837 139,507 (139,507) 382,837 351,259 - - 351,259 4,163 - - 4,163 9,228,523 139,507 (139,507) 9,228,523 Profit/(loss) from operations Balance sheet information: Assets 279,563 109,464 (1,444) 49,868 591 438,042 14,657,389 4,735,237 874,438 802,311 9,508 21,078,883 Liabilities 8,252,914 2,666,199 492,356 451,745 5,353 11,868,567 Other segment information: Depreciation Capital expenditure 133,463 39,684 43,117 12,821 7,962 2,367 7,305 2,172 86 26 191,933 57,070 Results by business segment for the year ended 31 March 2008 are as follows: Income statement information: Revenue Profit from operations Balance sheet information: Assets Construction contracts £ Maintenance contracts £ Product sales £ Solution sales £ Total £ 11,208,860 1,441,595 997,459 114,570 1,611,025 146,712 706,185 235,105 14,523,529 1,937,982 11,206,297 1,018,136 1,644,422 720,824 14,589,679 Liabilities 5,662,132 492,483 795,422 348,670 7,298,707 Other segment information: Depreciation Capital expenditure 132,894 109,843 11,826 10,998 19,100 17,764 8,373 7,787 172,193 146,392 UNIVISION ENGINEERING LIMITED - 50 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 6. SEGMENT INFORMATION (CONT’D) (b) Geographical segments (cont’d) In determining the Group’s geographical segments, revenues are attributed to the segments based on the location of the customers and assets are attributed to the segments based on the location of the assets. No further geographical segment information is presented as the Group’s revenue is materially derived from customers based in one geographic segment comprising Hong Kong, Macau, Taiwan and the PRC, and all of the Group’s assets are located in the same geographic seg ment. 7. OTHER INCOME Exchange gain Gain on disposal of plant and equipment Realised gain on investment securities Interest income * Written back on trade and other payab les Sundry income 2009 £ 2008 £ 31,152 - 1,105 8,521 85,660 1,482 270,746 681 - 21,172 30,848 359 127,920 323,806 * The amount represents interest income on financial assets not at fair value through profit or loss. UNIVISION ENGINEERING LIMITED - 51 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 8. FINANCE COSTS Interest on bank loans and other borrowings wholly repayable within five years Finance charge on obligation under finance lease Total interest expenses on financial liabilities not at fair value through profit or loss 9. (LOSS)/PROFIT BEFORE INCOME TAX (Loss)/profit before income tax is stated after charging/(crediting): Cost of inventories recognised as expenses * Unrealised loss on investment account carried at fair value Impairment losses on trade receivables Impairment losses on other receivables Impairment loss on goodwill Write down of obsolete inventories Auditors’ remuneration - audit services (parent company) - other services Depreciation – leased plant and equipment Depreciation – owned plant and equipment Research and development costs Operating lease charges – minimum lease payments Loss/(gain) on disposal of plant and equipment 2009 £ 2008 £ 735,264 691 239,804 148 735,955 239,952 2009 £ 2,871,041 - 290,801 23,632 309,325 89,435 66,477 - 5,391 186,542 41,783 125,375 398 2008 £ 3,561,470 7,480 165,228 357,935 - 11,978 87,192 597 1,557 170,636 41,292 99,548 (681) * Cost of inventories recognised as expenses included a write down of obsolete inventories of £89,435 (2008: £11,978) and written back on trade and other payables of £85,660 (2008: £30,848). 10. DIRECTORS’ REMUNERATION Directors’ remuneration for the year is disclosed as follows: Directors’ fees Other emoluments: Salaries, bonuses and allowances Pension scheme contributions 2009 £ 82,862 108,480 2,678 2008 £ 76,215 99,810 2,233 194,020 178,258 UNIVISION ENGINEERING LIMITED - 52 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 11. STAFF COSTS (including directors’ remuneration) Wages and salaries Pension scheme contributions 12. INCOME TAX IN THE GROUP INCOME STATEMENT a) Income tax in the group income statement represents: Current tax Hong Kong profits tax The PRC enterprise income tax Other jurisdictions 2009 £ 2008 £ 1,493,222 72,963 1,209,323 60,569 1,566,185 1,269,892 2009 £ 2008 £ 4,609 215,462 6,880 - 426,815 8,897 226,951 435,712 No Hong Kong profits tax has been provided for in the financial statements as the Company has accumulated tax losses brought forward which exceed the estimated assessable profits for both financial years. Taxes for subsidiary undertakings are calculated by the rates prevailing in the local jurisdictions. On 16 March 2007, the Fifth Plenary Session of the Tenth National People’s Congress passed the Corporate Income Tax Law (“New Tax Law”) of the PRC which took effect on 1 January 2008. The PRC income tax rate is unified to 25% for all enterprises. The enactment of the New Tax Law is not expected to have any financial effect on the amounts accrued in the group balance sheet in respect of current tax payable. UNIVISION ENGINEERING LIMITED - 53 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 12. INCOME TAX IN THE GROUP INCOME STATEMENT (CONT’D) (b) Reconciliation between income tax expense and accounting (loss)/profit at the applicable tax rates: 2009 £ 2008 £ (Loss)/profit before income tax (297,913) 1,698,030 Notional tax on (loss)/profit before income tax, calculated at the rates applicable to (loss)/profit in the tax jurisdictions concerned Tax effect of non-taxable income Tax effect of non-deductible expenses Tax effect of temporary differences not recognised Tax effect of utilisation of tax losses not recognised in prior years Tax effect of tax losses not recognised Over provision in prior year (704,590) (44) 898,349 31,667 (1,214) 8,870 (6,087) 314,591 (3,442) 98,044 67,898 (41,379) - - Income tax expense 226,951 435,712 13. EARNINGS PER ORDINARY SHARE The calculation of basic earnings per ordinary share is based on the (loss)/profit attributable to equity holders of the parent for the year of (£554,580) (2008: £1,400,331), and the weighted average of 383,677,323 (2008: 383,677,323) ordinary shares in issue during the year. There were no potential dilutive instruments at either financial year end. 14. DIVIDEND No dividend has been declared or paid for the year ended 31 March 200 9 (2008: £Nil). UNIVISION ENGINEERING LIMITED - 54 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 15. GOODWILL Group Cost At 1 April 2007, 31 March 2008 and 31 March 2009 Accumulated impairment loss At 1 April 2007 and 31 March 2008 Impairment losses recognised in the year Exchange realignment At 31 March 2009 Carrying amount At 31 March 2009 At 31 March 2008 £ 961,845 - 309,325 (40,310) 269,015 692,830 961,845 Impairment test for cash-generating unit containing goodwill Goodwill is allocated to the Group’s cash -generating unit (“CGU”) identified according to business segment as follows: Construction contracts 2009 £ 2008 £ 692,830 961,845 The recoverable amount of the CGU is determined based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management covering a twelve month period. A discount rate of 15% has been used for the value -in-use calculations. Key assumptions used for value-in-use calculations: Gross margin Growth rate 2009 2008 15%-38% 15% 15%-30% 15% Management determined the budgets based on their experience and knowledge in the construction contracts operations. The discount rate used is pre -tax and reflects specific risks relating to the relevant segment. Based on the impairment test performed, impairment loss of £309,325 is recognised for the year (2008: £Nil). UNIVISION ENGINEERING LIMITED - 55 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 16. PLANT AND EQUIPMENT Group Cost Furniture and fixtures £ Computer equipment £ Motor vehicles £ Leasehold improvements £ Research assets £ Total £ At 1 April 2007 Additions Disposals Exchange realignment 135,136 19,811 - 5,416 208,220 3,165 - 7,098 66,929 42,950 (11,461) 3,835 50,448 - - 5,172 624,474 94,214 (1,488) 46,727 1,085,207 160,140 (12,949) 68,248 At 31 March 2008 160,363 218,483 102,253 55,620 763,927 1,300,646 At 1 April 2008 Additions Disposals Exchange realignment 160,363 3,089 (91,887) 88,930 218,483 47,702 (124,323) 20,971 102,253 6,279 (16,988) 29,131 55,620 - (79,670) 24,050 763,927 - - 203,244 1,300,646 57,070 (312,868) 366,326 At 31 March 2009 160,495 162,833 120,675 - 967,171 1,411,174 Accumulated depreciation At 1 April 2007 Charge for the year Written back on disposals Exchange realignment 99,535 21,413 - 2,772 182,451 12,865 - 5,601 43,896 12,933 (10,269) 2,438 21,799 16,690 - 1,832 396,966 108,292 (446) 29,703 744,647 172,193 (10,715) 42,346 At 31 March 2008 123,720 200,917 48,998 40,321 534,515 948,471 At 1 April 2008 Charge for the year Written back on disposals Exchange realignment 123,720 12,576 (91,887) 92,419 200,917 20,381 (124,108) 16,522 48,998 20,213 (15,783) 13,030 40,321 17,999 (79,670) 21,350 534,515 120,764 - 153,384 948,471 191,933 (311,448) 296,705 At 31 March 2009 136,828 113,712 66,458 Net book value At 31 March 2009 23,667 49,121 54,217 - - 808,663 1,125,661 158,508 285,513 At 31 March 2008 36,643 17,566 53,255 15,299 229,412 352,175 During the year, additions to motor vehicles of the Group financed by new finance leases were £ Nil (2008: £13,748). At the balance sheet date, the net book value of motor vehicles held under finance leases of the Group and the Compan y was £13,132 (2008: £14,017). UNIVISION ENGINEERING LIMITED - 56 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 16. PLANT AND EQUIPMENT (CONT’D) Furniture and fixtures £ Computer equipment £ Motor vehicles £ Leasehold improvements £ Total £ 14,033 18,347 (11,461) (122) 20,797 20,797 - (3,442) 8,425 25,780 10,125 2,908 (10,269) (88) 2,676 2,676 7,057 (1,837) 2,221 5,600 - - (49) 5,551 5,551 - (7,800) 2,249 204,600 18,467 (11,461) (62) 211,544 211,544 479 (226,206) 85,708 - 71,525 5,600 - - (49) 5,551 5,551 - (6,405) 854 - - - 189,525 7,715 (10,269) 70 187,041 187,041 10,891 (184,767) 37,919 51,084 20,441 24,503 Company Cost At 1 April 2007 Additions Disposals Exchange realignment At 31 March 2008 At 1 April 2008 Additions Disposals Exchange realignment 73,362 120 - 240 73,722 73,722 80 (90,931) 29,868 111,605 - - (131) 111,474 111,474 399 (124,033) 45,166 At 31 March 2009 12,739 33,006 Accumulated depreciation At 1 April 2007 Charge for the year Written back on disposals Exchange realignment At 31 March 2008 At 1 April 2008 Charge for the year Written back on disposals Exchange realignment 67,338 1,792 - 292 69,422 69,422 2,081 (74,671) 12,319 106,462 3,015 - (85) 109,392 109,392 1,753 (101,854) 22,525 At 31 March 2009 9,151 31,816 10,117 Net book value At 31 March 2009 At 31 March 2008 3,588 4,300 1,190 2,082 15,663 18,121 UNIVISION ENGINEERING LIMITED - 57 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 17. INVESTMENT IN SUBSIDIARY UNDERTAKINGS Shares in subsidiary undertakings Less: impairment loss Exchange realignment 2009 £ 2008 £ 1,053,475 1,053,475 (658,272) 51,352 - - 446,555 1,053,475 Amounts due from subsidiary undertakings 7,731,452 4,993,318 Less: impairment loss Exchange realignment Total (4,058,759) (883,810) - - 2,788,883 4,993,318 3,235,438 6,046,793 The amounts due from subsidiary undertakings are unsecured, interest -free and not expected to be recovered within one year. Particulars of the Group’s subsidiary undertakings at 31 March 200 9 are set out below: Name Place of incorporation and operations Issued and fully paid up share capital/ registered capital Percentage of equity attributable to the Group Directly Indirectly Principal activities T-Com Technology Co Taiwan Limited NT$80,000,000 Ordinary share 52.25% Leader Smart Engineering Limited Hong Kong HK$10,000 Ordinary shares 100% - - Supply, design, installation and maintenance of closed circuit television and surveillance systems and the sale of security system related products Investment holding and engineering contractor Leader Smart Engineering (Shanghai) Limited The PRC US$1,000,000 Registered capital - 100% Supply, design, installation and maintenance of electrical and mechanical systems, construction decorations and provision of engineering consultancy services Note: Leader Smart Engineering (Shanghai) Limited is a wholly -foreign owned enterprise established in the PRC to operate for 20 years up to 2025. UNIVISION ENGINEERING LIMITED - 58 - ANNUAL REPORT 2009 18. INVENTORIES UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 2009 2008 Group £ Company £ Group £ Company £ Raw materials Work in progress Finished goods 418,555 30,143 601,348 418,555 23 407,165 317,136 634 655,630 317,136 634 405,256 1,050,046 825,743 973,400 723,026 The analysis of the amount of inventories recognised as an expense is as follows: Carrying amount of inventories sold Write down of obsolete inventories 19. CONSTRUCTION CONTRACTS IN PROGRESS 2009 £ 2008 £ 2,781,606 89,435 3,549,492 11,978 2,871,041 3,561,470 Contract costs incurred plus attributable profits less foreseeable losses Progress billings to date Represented by: Amounts due from construction contract customers (note 20) Amounts due to construction contract customers (note 23) 2009 2008 Group £ Company £ Group £ Company £ 24,320,035 (12,012,943) 7,844,911 (7,962,964) 16,039,782 (8,535,623) 5,730,929 (5,493,196) 12,307,092 (118,053) 7,504,159 237,733 13,695,491 1,085,082 8,333,620 1,021,233 (1,388,399) (1,203,135) (829,461) (783,500) 12,307,092 (118,053) 7,504,159 237,733 At 31 March 2009, the amount of retention receivables from customers recorded within “trade and other receivables” is £66,344 (2008: £10,164). Within amounts due from construction contracts customers is the amount of £11,353,545 for which the original land use rights certificate and the developing property are pledged as security. UNIVISION ENGINEERING LIMITED - 59 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 20. TRADE AND OTHER RECEIVABLES 2009 2008 Group £ Company £ Group £ Company £ Trade receivables Less: allowance for doubtful debt s 2,430,301 (569,057) 1,986,310 (508,293) 1,912,168 (189,183) 1,291,039 (22,170) 1,861,244 1,478,017 1,722,985 1,268,869 Bills receivable Other receivables Retention receivables Loan and receivables Deposits and prepayments Amounts due from construction contract customers (note 19) Pledged bank balances 331,593 2,186,029 - 4,378,866 189,009 13,695,491 660,433 - 534,181 - 2,012,198 96,408 1,085,082 660,433 362,615 324,484 10,164 2,420,248 642,533 8,333,620 464,903 - 283,131 10,164 1,562,164 43,762 1,021,233 464,903 18,923,799 3,854,121 11,861,304 3,092,062 All of the trade and other receivables are expected to be recovered within one year. At 31 March 2009, the Group has pledged bank deposits of £ 191,076 (2008: £464,903) to banks for performance bonds in respect of construction contracts undertaken by the Group and the Company. a) Impairment of trade receivables Impairment losses in respect of trade receivables are recorded using an allowance account unless the Group is satisfied that recovery of the amount is remote, in which case the impairment loss is written off against trade receivables directly. Movements in the allowance for doubtful debts : 2009 2008 Group £ Company £ Group £ Company £ At 1 April Impairment loss recognised Exchange realignment 189,183 262,997 116,877 22,170 391,820 94,303 12,373 165,228 11,582 12,373 9,808 (11) At 31 March 569,057 508,293 189,183 22,170 UNIVISION ENGINEERING LIMITED - 60 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 20. TRADE AND OTHER RECEIVABLES (CONT’D) a) Impairment of trade receivables (cont’d) Note: As at 31 March 2009, trade receivables of the Group and the Company amounting to £262,997 (2008: £165,228) and £391,820 (2008: £9,808) respectively were individually determined to be impaired and full impairment had been made. These individually impaired receivables were outstanding for over 1 year as at the balance sheet date or were due from companies with financial difficulties. b) Trade receivables that are not impaired The following is an ageing analysis of trade receivables at the balance sheet date that were past due but not impaired: 2009 2008 Group £ Company £ Group £ 0 to 90 days 91 to 365 days Over 365 days 822,042 498,961 540,241 501,380 496,934 479,703 1,375,786 287,151 60,048 Company £ 1,017,121 216,681 35,067 1,861,244 1,478,017 1,722,985 1,268,869 Receivables that were past due but not impaired relate to a number of independent customers that have a good track record with the Group. Based on past experience, management believes that no impairment allowance is necessary in respect of these balances a s there has not been a significant change in credit quality and the balances are still considered fully recoverable. The Company does not hold any collateral over these balances. 21. CASH AND CASH EQUIVALENTS 2009 2008 Group £ Company £ Group £ Company £ Cash and bank balances 117,762 23,467 440,955 245,135 Bank overdrafts Cash and cash equivalents in the group cash flow statement (219,934) (102,172) (2,457) 438,498 UNIVISION ENGINEERING LIMITED - 61 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 22. INTEREST-BEARING BORROWINGS Within 1 year or on demand Bank loans - Secured (note a) - Unsecured (note b) Loan from related company (note c) 2009 2008 Group £ Company £ Group £ Company £ 1,313,074 - 271,740 - 1,238,843 128,924 - 128,924 4,239,130 4,239,130 2,514,021 2,514,021 5,552,204 4,510,870 3,881,788 2,642,945 Notes: a) b) c) The secured bank loan carried interest at rates ranging from 3.73% to 5.11% per annum (2008: 4.20% to 5.00%) and were secured by:- (i) (ii) (iii) Sales contracts from Formosa Plastics Group. Pledged bank deposits. Personal guarantee by the Chairman, Mr. Stephen Sin Mo KOO. The unsecured bank loans carried interest at prime rate minus 0% per annum (2008: 0.5%). The prime rate as at 31 March 2009 is 5.25% per annum (2008: 5.25%). A loan of US$5,000,000 was provided on 31 December 2007 by Mayne Management Limited, the holding company of UniVision Holdings Limited which has a 47.9% equity interest of the Company. The loan facility is used exclusively to finance a major construction project in the PRC. The loan carries interest at the rate of 15% per annum (2008: 26.67%) and is payable on the maturity date of 31 March 2010. Security over 40% of the Group’s interest in a shopping mal l contract within the PRC has been provided. 23. TRADE AND OTHER PAYABLES 2009 2008 Group £ Company £ Group £ Company £ Trade payables Bills payable Due to a related party Accruals and other payables 1,994,803 233,152 41,265 1,502,874 64,678 - - 927,314 296,553 600,904 27,169 1,151,581 131,923 - - 932,612 Financial liabilities measured at amortised cost Amounts due to construction contract customers (note 19) 3,772,094 991,992 2,076,207 1,064,535 1,388,399 1,203,135 829,461 783,500 5,160,493 2,195,127 2,905,668 1,848,035 UNIVISION ENGINEERING LIMITED - 62 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 24. INCOME TAX IN THE BALANCE SHEET a) Current taxation in the balance sheet represents: 2009 2008 Group £ Company £ Group £ Company £ 5,612 916,372 921,984 8,933 - - - - - 495,810 495,810 - - - - - Provision for the year Hong Kong profits tax PRC enterprise income tax Over payment for the year Overseas income tax b) Unrecognised deferred tax assets At the balance sheet date, the Company has unused tax losses of £ 5,509,897 (2008: £4,213,736) that are available for offset against future taxable profits of the Company. No deferred tax asset has been recognised due to the unpredictabili ty of the future profit streams. Such unused tax losses are available to be carried forward indefinitely. No provision for deferred tax liabilities has been made in the financial statements as the tax effect of temporary differences is immaterial to the Group and the Company. 25. OBLIGATION UNDER FINANCE LEASE At 31 March 2009 and 2008, the Group and the Company had obligations under finance leases repayable as follows: 2009 2008 Present value of the minimum lease payment £ Total minimum payment £ Present value of the minimum lease payment £ Total minimum payment £ 4,293 4,293 5,366 9,659 13,952 5,135 5,135 6,418 11,553 16,688 2,736 13,952 3,055 3,055 6,874 9,929 12,984 3,654 3,654 8,222 11,876 15,530 2,546 12,984 Within 1 year After 1 year but within 2 years After 2 years but within 5 years Less: total future interest expense Present value of lease obligation UNIVISION ENGINEERING LIMITED - 63 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 26. SHARE CAPITAL Authorised : 800,000,000 ordinary shares of HK$0.0625 each 2009 £ 2008 £ 3,669,470 3,669,470 Issued and fully paid: 383,677,323 ordinary shares (2008: 383,677,323 ordinary shares) of HK$0.0625 each 1,697,617 1,697,617 The Company has one class of ordinary shares. 27. OPERATING LEASE COMMITMENTS At the balance sheet date, the total future minimum lease payments under non -cancellable operating leases for the office and warehouse premises are payable as follows : 2009 2008 Group £ Company £ Group £ Company £ Within one year In the second to fifth years inclusive 91,342 149,302 240,644 15,913 11,478 27,391 94,974 18,592 113,566 49,259 2,816 52,075 28. RELATED PARTY TRANSACTIONS Compensation of key management personnel The remuneration of the key management of the Group during the year was as follows: - 2009 £ 2008 £ Salaries, bonus and allowances 251,272 247,181 The remuneration of key management personnel comprise s the remuneration of executive directors and key executives. Executive directors include the executive chairman, the chief executive officer and the technical director and the finance director of the Company. The remunerati on of the executive directors is determined by the Remuneration Committee having regard to the performance of individuals, the overall performance of the Group and market trends. Further information about the remuneration committee and the directors’ remu neration is provided in the Remuneration Report and the Report on Corporate Governance to the Annual Report and note 1 0 to the financial statements. UNIVISION ENGINEERING LIMITED - 64 - ANNUAL REPORT 2009 UNIVISION ENGINEERING LIMITED NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 March 200 9 28. RELATED PARTY TRANSACTIONS (CONT’D) Compensation of key management personnel (cont’d) Key executives include the director of operations and director of sales and marketing of the Company. The remuneration of the key executives is determined by the executive directors annually having regard to the performance of individuals and market trends. Biographical information on key management personnel is disclosed in the Directors’ and Senior Management’s Biographies section of the Annual Report. Transactions with related parties (a) A loan of US$5,000,000 was provided on 31 December 2007 by Mayne Management Limited, the holding company of UniVision Holdings Limited which has a 47.9% equity interest in the Company. Effective from 1 October 2008 , the principal amount was revised to US$6,000,000 (including the accrued interest of US$1,000,000) and renewed with maturity date due on 31 March 2010. (b) At 31 March 2009, there is a receivable balance of £ 6,629 (2008: £6,095) in respect of legal fees which were paid by the Group on behalf of UT Vision PTE, a company of which Mr. Stephen Sin Mo KOO is a director. (c) For the year ended 31 March 2009, the Chairman of the Company, Mr. Stephen Sin Mo KOO, purchased an additional 7,657,700 ordinary shares of 1p each in UniVision at a price of 0.55p per share. 29. COMPARATIVE FIGURES The financial statements for last year were reported on by auditor s other than ZYCPA Company Limited whose report dated 30 September 2008 expressed an unqualified opinion on those financial statements. UNIVISION ENGINEERING LIMITED - 65 - ANNUAL REPORT 2009 NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN THAT the 2009 Annual General Meeting of UniVision Engineering Limited will be held at UniVision Engineering Limited, 8/F Lever Tech Centre, 69 -71 King Yip Street, Kwun Tong, Kowloon, Hong Kong, on 28 October 2009 at 5:00P.M.. The following businesses will be transacted the n: 1. To receive and adopt the Company ’s audited financial statements for the financial year ended 31 March 2009 together with the Directors’ report and the Independent Auditor’s report; 2. To re-elect Mr. Chun Pan WONG who retired by rotation, as a Director o f the Company; 3. To re-elect Mr. Andrew Ping Sum TANG who retired by rotation, as a Non -executive Director of the Company; 4. To reappoint auditor ZYCPA Company Limited, Certified Public Accountants as auditors of the Company, to hold office from the conclusi on of the meeting to the conclusion of the next meeting, during which accounts will be laid before the Company and to authorize the Directors to adjust their remuneration packages; 5. To consider and, if considered appropriate, pass the following resolution as an ordinary resolution that the directors of the Company be and are hereby generally and unconditionally authorized to exercise all powers of the Company to allot ordinary shares of HK$0.0625 each in the capital of the Company (the ‘Ordinary Shares’). Such authority (unless and to the extent previously revoked, varied or renewed by the Company during the general meeting) to expire 15 months after the date of the passing of such resolution or on the conclusion of the Company ’s next Annual General Meeting to be held, following the date of passing such resolution, whichever occurs first, save that the Company may before such expiry make any offer or agreement which would or might require Ordinary Shares to be allotted after such expiry, and that the Directors may allot Ordinary Shares in pursuance of such an offer or an agreement as if such authority had not expired. This authority substitutes all subsisting authorities to the extent unused. By Order of the Board Mr. Stephen Sin Mo KOO Executive Chairman 29 September 2009 Registered office: 8/F Lever Tech Centre, 69-71 King Yip Street, Kwun Tong, Kowloon, Hong Kong UNIVISION ENGINEERING LIMITED - 66 - ANNUAL REPORT 2009 NOTES: 1. Only holders of Ordinary Shares, or their duly appointed representatives, are entitled to attend and vote at the Annual General Meeting. A member so entitled may appoint one or more proxies (whether they are members or not) to attend and, on a poll, to vote in place of the member. 2. A form of proxy is enclosed with this notice. To be valid, the form of proxy and any p ower of attorney or other authority (if any) under which it is signed, or a notarized and certified copy of that power of authority, must be lodged with the Company’s registrars, Computershare Investor Services ( Jersey) Limited at PO Box 83, Ordnance House, 31 Pier Road, St Helier, Jersey JE4 8PW, Channel Island , not less than 48 hours before the Annual General Meeting takes place. 3. Completion and return of a proxy does not preclude a member from attending and voting at the Annual General Meeting. 4. The Company pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001 specifies that only those shareholders registered in the Register of Members of the Company as of 29 September 2009 are entitled to attend or vote at the Annual General Meetin g in respect to the number of shares registered in their name at that time. Changes to entries on the Register after that time will be disregarded when determining the rights of any person to attend or vote in the Annual General Meeting. UNIVISION ENGINEERING LIMITED - 67 - ANNUAL REPORT 2009 

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