report_UIH_AL2020

Notes to the Consolidated Financial Statements 37 INDIVIDUALS WITH HIGHEST 37 EMOLUMENTS The five individuals whose emoluments were the highest 36 in the Group for the year included two Directors (2019: two) whose emoluments are reflected in the analysis presented in note 36 above. The emoluments payable to the remaining three (2019: three) individuals during the year are as follows: Salaries and other emoluments 2020 2019 Contributions to retirement scheme 二零二零年 HK$’000 The emoluments fell within the following bands: HK$’000 千港元 5,201 The emoluments of the three (2019: three) individuals 54 with the highest emoluments are within the following 15,603 bands: 54 5,255 15,657 HK$500,001 to HK$1,000,000 500,001 2020 2019 HK$1,000,001 to HK$1,500,000 1,000,000 二零二零年 Number of HK$3,000,001 to HK$3,500,000 Number of Individuals HK$13,000,000 to HK$13,500,000 1,000,001 Individuals 1,500,000 1 人數 1 3,000,001 1 3,500,000 1 – 3 13,000,000 1 13,500,000 – 1 3 300 Universe Entertainment and Culture Group Company Limited Annual Report 2020

Notes to the Consolidated Financial Statements 38 OTHER INCOME 38 2020 2019 二零二零年 Continuing Continuing Discontinued Total operations Discontinued Total operations operation operation HK$’000 Sponsorship income 持續 已終止 總計 HK$’000 HK$’000 Rental income HK$’000 5,649 Screening income 經營業務 經營業務 5,649 – 270 Promotion cost markup HK$’000 HK$’000 千港元 270 – 56 Dividend income from financial 56 – 21 千港元 千港元 – 21 – assets at fair value through profit 424 or loss – – 59 Government subsidy 424 – Others 59 – – – 39 OTHER GAINS/(LOSSES) – NET – – – – 1,007 – 1,007 1,509 – 1,509 – –– 16 2,823 886 4 890 2,807 16 9,826 2,878 4 2,882 9,810 – 39 2020 2019 二零二零年 Continuing Continuing Discontinued Total operations Discontinued Total operations operation operation HK$’000 持續 已終止 總計 HK$’000 HK$’000 HK$’000 – 經營業務 經營業務 (320) HK$’000 HK$’000 千港元 – 千港元 千港元 – (4,237) Handling charge for termination of 1,148 – 1,148 – – (1,611) film investment agreement – –– – (250) (70) Loss on disposal of property, 3,432 – 3,432 – – plant and equipment 60 – 60 – – Waiver of other payables (100) (27) (127) (4,215) (22) Written back on provision for advance –– – (1,611) – to artiste 3,977 – 3,977 – – Net foreign exchange loss Written off of property, 5,545 – 5,545 1,636 – 1,636 461 – 461 233 – 233 plant and equipment Sales rebate Amortisation of deferred day one gain in respect of derivative financial instruments Others 14,523 (27) 14,496 (4,207) (92) (4,299) 寰宇娛樂文化集團有限公司 二零二零年年報 301

Notes to the Consolidated Financial Statements 40 FINANCE INCOME 40 Bank interest income 2020 2019 Other interest income 二零二零年 Finance income included Continuing Continuing Discontinued Total operations Discontinued Total operations operation HK$’000 in consolidated statement of operation comprehensive income 持續 已終止 總計 HK$’000 HK$’000 2,392 Loan interest income (included HK$’000 2,392 – in total revenue in consolidated 經營業務 經營業務 – – statement of comprehensive HK$’000 HK$’000 千港元 – income) Total interest income 千港元 千港元 2,133 854 2,133 – 854 – 2,987 – 2,987 2,392 – 2,392 7,889 – 7,889 7,687 – 7,687 10,876 – 10,876 10,079 – 10,079 302 Universe Entertainment and Culture Group Company Limited Annual Report 2020

Notes to the Consolidated Financial Statements 41 TAXATION 41 (a) (a) Income tax in the consolidated statement of comprehensive income 2020 2019 二零二零年 Continuing Discontinued Continuing Discontinued Total operations operation Total operations operation HK$’000 持續 已終止 總計 HK$’000 HK$’000 HK$’000 經營業務 經營業務 HK$’000 HK$’000 千港元 千港元 千港元 Current tax (205) – (205) 294 (20) 274 Hong Kong Profits Tax (Over)/under provision in 64 – 64 (417) – (417) prior year (141) – (141) (123) (20) (143) Deferred tax Origination and reversal of temporary differences Income tax credit The provision of Hong Kong Profits Tax is calculated 16.5% at 16.5% (2019: 16.5%) of the estimated assessable profits for the year. 16.5% No provision for PRC Enterprise Income Tax (the “EIT”) has been made in the consolidated financial statements for the years ended 30th June 2020 and 2019 as the Group has no assessable profits under EIT for both years. No provision for profits tax in Bermuda and the British Virgin Islands has been made as the Group has no income or profit assessable for tax in these jurisdictions for the years ended 30th June 2020 and 2019, respectively. 寰宇娛樂文化集團有限公司 二零二零年年報 303

Notes to the Consolidated Financial Statements 41 TAXATION (Continued) 41 (b) Reconciliation between tax credit and accounting (b) profit/(loss) at the applicable tax rates: Profit/(loss) before income tax – 2020 2019 – from continuing operations – 二零二零年 HK$’000 – from discontinued operation 42 HK$’000 (118,600) (Note 42) 千港元 (3,118) Tax calculated at domestic tax (28,506) (121,718) rates applicable to profits or losses in the respective 795 (20,931) countries (27,711) 274 (Over)/under-provision in respect of (4,535) (2,155) prior years 8,203 (205) 1,101 Income not subject to tax (3,736) Expenses not deductible for (52) 2,510 13,213 tax purpose Tax effect of deductible temporary 843 – – difference not recognised (4,101) 204 Utilisation of previously 11,220 (143) unrecognised tax losses (11) Tax losses not recognised Tax reduction (2,126) Tax reduction from double taxation – relief (141) Others Income tax credit 304 Universe Entertainment and Culture Group Company Limited Annual Report 2020

Notes to the Consolidated Financial Statements 42 DISCONTINUED OPERATION 42 During the year ended 30th June 2018, the Group ceased its business in securities brokerage and margin financing. The analysis of the results of discontinued operation is as follows: Revenue 2020 2019 Cost of revenue 二零二零年 Gross profit HK$’000 Other income HK$’000 Other net losses 千港元 196 Administrative expenses – Change in expected credit loss 33 Profit/(loss) before taxation from – 196 16 discontinued operation 33 (92) Income tax credit 4 Profit/(loss) for the year from (6,738) (27) 3,500 discontinued operation (715) 1,500 (3,118) Attributable to: 20 Owners of the Company 795 – (3,098) Net cash flows from discontinued operations are as follows: 795 (3,098) (3,098) 795 795 Net cash inflows/(outflows) from 2020 2019 operating activities 二零二零年 HK$’000 Net cash outflows from investing HK$’000 (52,460) activities 千港元 – – Net cash outflows from financing 11,153 activities (52,460) – Total net cash inflows/(outflows) – 11,153 寰宇娛樂文化集團有限公司 二零二零年年報 305

Notes to the Consolidated Financial Statements 43 LOSS PER SHARE 43 (a) Basic (a) Basic profit/(loss) per ordinary share is calculated by dividing the profit/(loss) attributable to owners of the Company by the weighted average number of ordinary shares in issue during the year, calculated as follows: 2020 2019 二零二零年 Profit/(loss) attributable to owners of – (27,858) (118,102) the Company (HK$’000) – 795 (3,098) – from continuing operations – – from discontinued (27,063) (121,200) operation – – 906,632,276 906,632,276 – from continuing and – discontinued operations (0.0299) (0.134) (0.0307) (0.131) Weighted average number of ordinary shares in issue 0.0008 (0.003) Basic profit/(loss) per ordinary share (HK$) – from continuing and discontinued operations – from continuing operations – from discontinued operation Weighted average number of ordinary shares (Basic) 2020 2019 二零二零年 Issued ordinary shares at 906,632,276 906,632,276 1st July and 30th June 306 Universe Entertainment and Culture Group Company Limited Annual Report 2020

Notes to the Consolidated Financial Statements 43 LOSS PER SHARE (Continued) 43 (b) Diluted (b) The diluted profit/(loss) per share is the same as the basic loss per share for the year ended 30th June 2020 (2019: same) as there is no potential dilutive share issued during the year. 44 DIVIDENDS 44 (a) (a) Dividends payable to equity shareholders of the Company attributable during the year 2020 2019 2020 2019 二零二零年 二零二零年 HK$’000 HK$ per HK$ per ordinary HK$’000 ordinary share share 每股普通股 千港元 港元 First Special Dividend declared (i) – 0.30 – 271,990 and paid (Note (i)) (ii) – 0.15 – 135,995 Second Special Dividend declared and paid (Note (ii)) – 0.45 – 407,985 寰宇娛樂文化集團有限公司 二零二零年年報 307

Notes to the Consolidated Financial Statements 44 DIVIDENDS (Continued) 44 (a) (a) Dividends payable to equity shareholders of the Company attributable during the year (Continued) Notes: (i) (i) On 17th September 2018, it was proposed by the (i) Board and approved by the shareholders at the 893,345,000 special general meeting that: (i) the amount standing to the credit of the share premium account of the (ii) Company be reduced by HK$893,345,000; (ii) the (iii) credit arising from the share premium reduction be transferred to the contributed surplus account of 271,989,682.80 the Company; and (iii) the Board be authorised to make a distribution of a special dividend of HK$0.3 0.3 per share up to HK$271,989,682.80 (“First Special Dividend”) of the amount standing to the credit of (ii) 0.15 the contributed surplus account of the Company, pro rata to the shareholders of the Company (“the (b) Distribution”). The Distribution became unconditional on 4th October 2018 and was made on 22nd October 2018. (ii) On 15th April 2019, it was further proposed by the Board and approved by the shareholders at the special general meeting that a special dividend of HK$0.15 per share (“Second Special Dividend”) be paid out of the contributed surplus account of the Company. The dividend was paid on 10th May 2019. (b) The Board did not recommend the payment of a final dividend for the year ended 30th June 2020 (2019: Nil). 308 Universe Entertainment and Culture Group Company Limited Annual Report 2020

Notes to the Consolidated Financial Statements 45 OTHER CASH FLOW INFORMATION 45 (a) Reconciliation of loss before tax to cash generated (a) from operations: 2020 2019 HK$’000 二零二零年 HK$’000 (Note) 千港元 (118,600) (3,118) (Loss)/profit before tax for the year – 42 (28,506) From continuing operations – 795 2,895 From discontinued operation – 6 1,747 (Note 42) – 9 14,566 8 44,149 148 Adjustments for: – – Depreciation of property, plant 22 397 (1,636) and equipment (Note 6) – – Amortisation of film rights – 7 (5,545) 3,796 (Note 9) – 6 19,437 – Amortisation of other intangible – (2,100) assets (Note 8) – 11 3,581 – Amortisation of deferred day – 9 – one gain in respect of derivative – – 1,065 financial instruments – 34 – Fair value change on contingent – 19 3,159 165 consideration receivable – – 67 (Note 22) – 8 – Fair value change of other – 39 4,653 23,323 financial assets 11,356 2,679 – Fair value change on investment 19 21,675 – properties (Note 7) 1,611 – Impairment losses of property, 421 (59) plant and equipment 1,165 (including right-of-use assets) (Note 6) – – Impairment losses of interests (406) in associates (Note 11) – Impairment losses of film rights and films in progress (Note 9) – Impairment losses of film related deposits – Change in expected credit loss (Note 34) – Write-down of inventories (Note 19) – Impairment loss of other intangible assets (Note 8) – Write off of property, plant and equipment (Note 39) – Reversal of write-down of inventories (Note 19) 寰宇娛樂文化集團有限公司 二零二零年年報 309

Notes to the Consolidated Financial Statements 45 OTHER CASH FLOW INFORMATION (Continued) 45 (a) (Continued) (a) – Net loss on disposal of – 39 2020 2019 property, plant and 40 二零二零年 equipment (Note 39) – 33(c) HK$’000 – HK$’000 – Finance income (Note 40) – 39 千港元 (Note) – Finance costs (Note 33(c)) – Waiver of other payables – 39 – 320 – (2,987) (2,392) (Note 39) – – Share of losses of associates 542 – – Net foreign exchange loss – – Written back on provision for – (3,432) – – 1,085 725 advance to artists (Note 39) 1,844 225 – Changes in working capital: – (60) – – Inventories – Accounts receivable – (1,761) (3,809) – Amount due to/from an associate (61,510) 23,266 – – Loans receivable – (2,778) 2,814 – Loan to an associate 39,749 (25,100) – – Deposits paid, prepayments – 702 1,636 and other receivables – 67,865 72,817 – Accounts payable – 8,480 2,303 – Other payables and accrued – 87,533 (37,778) charges (29,446) 26,383 – Deposits received (95,259) 187,466 – Contract liabilities – Financial assets at fair value 5,391 40,665 through profit or loss 89 6,288 – Bank balances and cash 87,507 227,249 – trust accounts 2,242 – (346) (3,957) Cash generated from operations Tax refund 45 (45) Tax paid Refund/(purchase) of tax certificate 89,448 223,247 Net cash generated from operating activities 310 Universe Entertainment and Culture Group Company Limited Annual Report 2020

Notes to the Consolidated Financial Statements 45 OTHER CASH FLOW INFORMATION (Continued) 45 (a) (Continued) (a) Note: The Group has initially applied HKFRS 16 using the 16 modified retrospective approach and adjusted the 17 opening balances at 1st July 2019 to recognise right-of-use assets and lease liabilities relating to 13,692,000 leases which were previously classified as operating 16 leases under HKAS 17. Previously, cash payments under operating leases made by the Group as 45(b) a lessee of HK$13,692,000 were classified as operating activities in the consolidated cash flow statement. Under HKFRS 16, except for short-term lease payments, payments for leases of low value assets and variable lease payments not included in the measurement of lease liabilities, all other rentals paid on leases are now split into capital element and interest element (see note 45(b)) and classified as financing cash outflows. Under the modified retrospective approach, the comparative information is not restated. See note 2.1(i). 2.1(i) 2019 HK$’000 2020 二零二零年 HK$’000 千港元 a. Disposal of property, plant and a. 出售物業、機器及設備 – 354 equipment 6 (320) 39 – Carrying amount (Note 6) 34 Net loss on disposal of property, – 7 plant and equipment (Note 39) 15,475 (25) 179 – Proceeds from disposal of 334 property, plant and equipment (25) (8,231) (18) b. Lease liabilities b. 租賃負債 (7) – At the end of the year (19,392) (19,399) Add: Exchange difference – Modification of lease contract (11,642) Less: Increase in lease liabilities from entering into new leases during the year Less: At 30th June 16 Impact on initial application of HKFRS 16 Capital element of finance lease payments Capital element of lease rentals paid 寰宇娛樂文化集團有限公司 二零二零年年報 311

Notes to the Consolidated Financial Statements 45 OTHER CASH FLOW INFORMATION (Continued) 45 (b) (b) Reconciliation of liabilities arising from financing activities: At 1st July 2018 於二零一八年七月一日 Lease Obligation Total Changes from financing cash 融資現金流量變動： liabilities under 總計 租賃負債 flows: 16 finance lease 25 Capital element of finance leases – 融資租賃承擔 (18) payment 25 (18) Total changes from financing cash – (18) 7 flows – (18) 19,392 At 30th June 2019 7 19,399 Impact on initial application of 19,399 (11,642) 19,399 (7) HKFRS 16 (11,642) – (542) – At 1st July 2019 (542) – (12,184) Capital element of lease rentals paid (12,184) – 8,231 Interest element of lease rentals paid (334) 8,231 – 542 Total changes from financing (334) – (179) cash flows 542 – 8,260 (179) – 15,475 Other changes: Increase in lease liabilities from 8,260 – entering into new leases during 15,475 – the year Decrease in lease modification Interest expenses Exchange difference Total other changes At 30th June 2020 312 Universe Entertainment and Culture Group Company Limited Annual Report 2020

Notes to the Consolidated Financial Statements 45 OTHER CASH FLOW INFORMATION (Continued) 45 (c) Total cash outflow for leases (c) Amounts included in the cash flow statement for leases comprise the following: Within operating cash flows 2020 2019 Within financing cash flows 二零二零年 (Note) Note: As explained in the note to note 45(b), the adoption HK$’000 of HKFRS 16 introduces a change in classification 千港元 HK$’000 of cash flows of certain rentals paid on leases. The 3,584 comparative amounts have not been restated. 12,184 13,692 15,768 18 These amounts relate to the following: 13,710 Lease rentals paid 45(b) 16 2020 2019 二零二零年 HK$’000 HK$’000 13,710 千港元 15,768 寰宇娛樂文化集團有限公司 二零二零年年報 313

Notes to the Consolidated Financial Statements 46 PENDING LITIGATIONS 46 (a) A court action was commenced in the Court of First (a) Instance of the Hong Kong Special Administrative Region on 17th April 2002 by The Star Overseas Limited (“Star”), an independent third party, against Universe Entertainment Limited (“UEL”), an indirect wholly-owned subsidiary of the Company. By the above action, Star alleges that a sum of 935,872 US$935,872 (equivalent to HK$7,299,799) was 7,299,799 payable by UEL to Star as its share of the revenue of the movie entitled “Shaolin Soccer” (the “Movie”). Pursuant to an Order (the “Order”) made by the 5,495,700 High Court on 21st February 2003, UEL was ordered Miramax Films and had paid to Star a sum of HK$5,495,700, being part of the license fee of the Movie received by 350,905 UEL from Miramax Films (being the licensee of the Movie) and which was also part of the sum claimed 935,872 by Star. Pursuant to the Order, UEL is also liable 7,299,799 to pay Star interest in the sum of HK$350,905 and some of the costs of the application leading to the 7,299,799 1,804,099 making of the Order, all of which have been settled. 5,495,700 As the Order has not disposed of all the claims of US$935,872 (equivalent to HK$7,299,799) by Star, UEL is entitled to continue to defend the claim by Star for recovering the remaining balance in the sum of approximately HK$1,804,099 (HK$7,299,799 less HK$5,495,700). On 30th April 2002, UEL claimed against Star for the latter’s wrongful exploitation of certain rights in the Movie co-owned by both parties. UEL claimed to recover all losses and damages suffered by UEL as a result of the wrongful exploitation. 314 Universe Entertainment and Culture Group Company Limited Annual Report 2020

Notes to the Consolidated Financial Statements 46 PENDING LITIGATIONS (Continued) 46 (a) (Continued) (a) On 9th September 2002, Universe Laser & Video Co. Limited (“ULV”), an indirect wholly-owned subsidiary of the Company, claimed against Star for the latter’s infringement of the licensed rights in the Movie held by ULV. ULV claimed to recover all losses and damages suffered by ULV as a result of the said infringement. In the opinion of legal counsel, it is premature to predict the outcome of the claim against UEL. The Board is of the opinion that the outcome of the said claim made against UEL will have no material financial impact to the Group for the year ended 30th June 2020. (b) On 1st September 2008, Koninklijke Philips (b) Koninklijke Electronics N.V. (“KPE”) claimed against among Philips Electronics N.V. KPE other persons, the Company, ULV and Mr. Lam Shiu Ming, Daneil (one of the Directors), being three KPE of the defendants named therein, in respect of damages arising from alleged infringement of the patents regarding Video Compact Disc owned by KPE. In the opinion of legal counsel, it is premature to predict the outcome of the said claim made against the Company, ULV and Mr. Lam Shiu Ming, Daneil. The Board is of the opinion that the outflow of economic benefits cannot be reliably estimated and accordingly no provision for any liability that may result has been made in the consolidated financial statements for the year ended 30th June 2020. 寰宇娛樂文化集團有限公司 二零二零年年報 315

Notes to the Consolidated Financial Statements 46 PENDING LITIGATIONS (Continued) 46 (c) On 8th January 2010, KPE claimed against among (c) KPE other persons, the Company, ULV and Mr. Lam Shiu KPE Ming, Daneil (one of the directors of the Company), being three of the defendants named therein, KPE in respect of damages arising from the alleged infringement of the patents regarding Digital Video Disc owned by KPE. On 6th June 2012, the action was discontinued against the Company and Mr. Lam Shiu Ming, Daneil. The claim made against ULV has been agreed with KPE and settled by ULV and appropriate legal costs provision was recognised accordingly in the consolidated financial statements for the year ended 30th June 2012. No additional provision has been made in the consolidated financial statements for the year ended 30th June 2020. Based on the consultation with legal counsel, no further material outflow of economic benefits will be incurred for ULV. (d) Universe Artiste Management Limited (“UAM”), (d) an indirect wholly-owned subsidiary of the Company, commenced Court of First Instance Action against Kwong Ling and Oriental Prosperous Int’l Entertainments Limited (collectively the “Defendants”) on 30th June 2014 claiming inter alia for a declaration that UAM is entitled to extend/renew the term of the Artist Management Contract of the Defendants with UAM (the “Artist Management Contract”) for 5 years as from 3rd May 2014 to 2nd May 2019. 316 Universe Entertainment and Culture Group Company Limited Annual Report 2020

Notes to the Consolidated Financial Statements 46 PENDING LITIGATIONS (Continued) 46 (d) (Continued) (d) The Defendants filed their defence and 10 counterclaimed on 29th September 2014. By such counterclaim, the Defendants claiming against UAM inter alia for a declaration that the Artist Management Contract was void and unenforceable, the Artist Management Contract to be rescinded, damages for breach of the Artist Management Contract and for breach of fiduciary duties, a declaration that UAM is liable to account to the Defendants and an order for payment of all sums found to be due by UAM to the Defendants. The parties have finalized their pleadings and completed discovery and exchange of witness statements. As well as other matters for setting down this action for trial. Pursuant to the application of the parties, the trial of this action has been fixed by the court to take place on 27th September 2021 with 10 days reserved. Given the complexities of the factual and legal issues to be resolved, in the opinion of legal counsel, it is premature to assess the likely outcome of this Action. The Board considers that the amounts of counterclaim by the Defendants against UAM is insignificant to the Group as a whole. 寰宇娛樂文化集團有限公司 二零二零年年報 317

Notes to the Consolidated Financial Statements 46 PENDING LITIGATIONS (Continued) 46 (e) On 16th July 2018, Lucky Famous Limited (“Lucky (e) Lucky Famous”) commenced Court of First Instance Famous Limited Lucky Famous Action claimed against Fragrant River Entertainment Culture (Holdings) Limited (“Fragrant River”), a Lucky Famous wholly-owned subsidiary of the Company, and the Company (“Lucky Famous Action”) for inter alia the Lucky Famous sum of HK$20.4 million as the adjustment to the consideration (the “Adjustment Amount”) alleged 51% to be payable under an agreement dated 13th June 20.4 2016 (the “Disposal Agreement”) pursuant to which Lucky Famous purchased from Fragrant River 51% Lucky Famous of the issued share capital of AP Group Investment Lucky Famous Holdings Limited. Lucky Famous applied to amend the writ and statement of claim to join Chan Sze Lucky Long and Lim Wah Elsa as defendants in the Lucky Famous Actions for certain claims against them. Famous The Court allowed the application of Lucky Famous on 24th September 2019. Up to the date of this report, the parties are still Lucky negotiating for a settlement of the matter. In any event, as the exchange of evidence has not Famous been completed, in the opinion of legal advisor, 20.4 it is not practicable to assess the likely outcome of this Action. Without admitting any liability to Lucky Famous under the Disposal Agreement, the Adjustment Amount of HK$20.4 million was recognised as at contingent consideration payable in the consolidated financial statements for the year ended 30th June 2020. 318 Universe Entertainment and Culture Group Company Limited Annual Report 2020

Notes to the Consolidated Financial Statements 46 PENDING LITIGATIONS (Continued) 46 (f) On 11th March 2020, China Jianxin Credit Services (f) Limited (“China Jianxin”), a wholly owned subsidiary of the Company commenced the Court (a) of First Instance Action of the High Court of Hong Kong against China Wah Yan Healthcare Limited 16,175,304.11 (“China Wah Yan”) for among other things, (a) the outstanding balance of HK$16,175,304.11, being (b) the outstanding principal and the interest accrued up to 11th March 2020 thereon under a loan 15,800,000.00 agreement entered into between China Jianxin and China Wah Yan on 30th April 2019; (b) interest on 8.5% (c) the said outstanding principal of HK$15,800,000.00 at the rate of 8.5% per annum from 12th March (d) 2020 until full payment; (c) costs of the Action; and (d) further and other reliefs (the “Original Action”). China Wah Yan filed their defence and counterclaim Sky Clear Bright Group on 15th September 2020. According to such Limited Sky Bright defence and counterclaim, China Wah Yan and Sky Clear Bright Group Limited (“Sky Bright”), Sky Bright the wholly owned subsidiary of the China Wah Yan counterclaim against China Jianxin, Precise Reach Group Limited, a wholly owned subsidiary of the Company, and Mr. Lam Shiu Ming, Daneil, the director and chairman of the Company for the damages to be assessed, interest, costs and further or other reliefs in relation to the alleged misrepresentation and the alleged set-off by China Wah Yan and Sky Bright in extinction or in diminution of the claim of the Original Action. Up to the date of this report, as the exchange of evidence has not been completed, in the opinion of legal advisor, it is not practicable to assess the likely outcome of this Action. Save as disclosed above, as at 30th June 2020, no litigation or claim of material importance is known to the Directors to be pending against either the Company or any of its subsidiaries. 寰宇娛樂文化集團有限公司 二零二零年年報 319

Notes to the Consolidated Financial Statements 47 COMMITMENTS 47 (a) Operating leases commitments (a) As at 30th June 2019, the Group had future aggregate minimum lease payments under non- cancellable operating leases as follows: 2019 HK$’000 Land and buildings 11,390 Not later than one year Later than one year and not later than 10,668 five years 22,058 Certain department store counters and retail 17 stores include payment obligations with rental varied with gross revenue. The additional rental 16 payable (contingent rents) is determined generally by applying pre-determined percentages to future 2.1(i) revenue less minimum lease payment of the 2.10 respective leases. 28 The Group is the lessee in respect of a number of properties which were previously classified as operating leases under HKAS 17. The Group has initially applied HKFRS 16 using the modified retrospective approach. Under this approach, the Group adjusted the opening balances at 1st July 2019 to recognise lease liabilities relating to these leases (see note 2.1(i)). From 1st July 2019 onwards, future lease payments are recognised as lease liabilities in the statement of financial position in accordance with the policies set out in note 2.10, and the details regarding the Group’s future lease payments are disclosed in note 28. 320 Universe Entertainment and Culture Group Company Limited Annual Report 2020

Notes to the Consolidated Financial Statements 47 COMMITMENTS (Continued) 47 (b) Other commitments (b) As at 30th June 2020, the Group had commitments contracted but not provided for in these consolidated financial statements as follows: 2020 2019 二零二零年 HK$’000 HK$’000 千港元 Purchase of film rights and i 74,112 152,806 production of films (Note i) – 977 Licence agreement Note i: Included in the commitment for the purchase of i film rights and production of films, an amount of approximately HK$6,001,000 is related to the 6,001,000 joint operation arrangements of film production 79,522,000 as at 30th June 2020 (2019: approximately HK$79,522,000). 48 FUTURE OPERATING LEASE 48 ARRANGEMENTS As at 30th June 2020, the Group had future aggregate minimum lease receipts under non-cancellable operating leases as follows: Not later than one year 2020 2019 Later than one year and not later than 二零二零年 HK$’000 five years HK$’000 1,433 千港元 732 675 2,165 – 675 寰宇娛樂文化集團有限公司 二零二零年年報 321

Notes to the Consolidated Financial Statements 49 RELATED PARTY TRANSACTIONS 49 (a) Tenancy Agreements (a) The following transactions related to the tenancy a agreement with Universe Property Investment Limited which is wholly-owned by a director of the 2020 Company (Note a) 二零二零年 i) Rental expenses i) HK$’000 2019 千港元 ii) Repayment of lease liabilities ii) – HK$’000 2,836 iii) Interest on lease liabilities iii) 92 2,928 – a – Note a: Universe Digital Entertainment Limited (“UDE”), an indirect wholly-owned subsidiary of the Company, entered into a tenancy agreement 244,000 (1) with Universe Property Investment Limited (2) 5 (“UPI”), a company owned by Mr. Lam Shiu Ming, Daneil, the executive director of the 16 Company, for renting (1) an industrial unit and 16 (2) 5 carparking spaces in an industrial building for warehouse, ancillary office and carparking 2,847,000 uses in Kwai Chung from 25th February 2018 92,000 to 24th February 2021, at a monthly rental of HK$244,000 (the “Tenancy Agreement”) 2.1(i) which were arrived at following arm’s length negotiation between the Group and UPI with reference to the rental valuation performed by Ravia Global Appraisal Advisory Limited, an independent property valuer, as at 22nd January 2018 which reflected the then market rent. The Group has initially applied HKFRS 16 at 1st July 2019. Under HKFRS16, the Group recognized depreciation of right-of-use assets and interest expenses of HK$2,847,000 and HK$92,000 respectively instead of rental expenses during the year. Further details of the changes in accounting policies are disclosed in notes 2.1(i). 322 Universe Entertainment and Culture Group Company Limited Annual Report 2020

Notes to the Consolidated Financial Statements 49 RELATED PARTY TRANSACTIONS (Continued) 49 (a) Tenancy Agreements (Continued) (a) As at 30th June 2019, the Group had total future minimum lease payments to UPI under non- cancellable operating lease falling due as follows: Not later than one year 17 2019 Later than one year and not later than five years HK$’000 The Group is the lessee in respect of a number of 2,928 properties which were previously classified as operating 1,952 leases under HKAS 17. The Group has initially applied 4,880 HKFRS 16 using the modified retrospective approach. Under this approach, the Group adjusted the opening 16 balances at 1st July 2019 to recognise lease liabilities relating to these leases (see note 2.1(i)). From 1st July 2.1(i) 2019 onwards, future lease payments are recognised 2.10 as lease liabilities in the consolidated balance sheet in accordance with the policies set out in note 2.10, and the 28 details regarding the Group’s future lease payments are disclosed in note 28. 寰宇娛樂文化集團有限公司 二零二零年年報 323

Notes to the Consolidated Financial Statements 49 RELATED PARTY TRANSACTIONS (Continued) 49 (b) Details of key management compensation (b) Key management personnel are those management members with responsibility for planning, directing and controlling the activities of the Group. Salaries and other short-term 2020 2019 employee benefits 二零二零年 HK$’000 Post-employment benefits HK$’000 7,701 千港元 36 17,710 7,737 36 17,746 (c) Transactions with an associate (c) During the year ended 30th June 2020, the 9,086,000 Group purchased optical products from HK 16,825,000 Optical for approximately HK$9,086,000 (2019: HK$16,825,000), sold optical products to HK Optical 5,578,000 for approximately HK$5,578,000 (2019: HK$Nil), and paid licence and management fee to HK Optical for 698,000 approximately HK$698,000 (2019: HK$905,000). The 905,000 Group also received rental income from HK Optical of approximately HK$371,000 (2019: HK$270,000) 371,000 and income for recharge expenses of motor vehicle 270,000 from HK Optical of approximately HK$52,000 (2019: HK$Nil). 52,000 Save as disclosed above and elsewhere in these consolidated financial statements, no other material related party transactions have been entered into by the Group. The transactions were carried out after negotiations between the Group and the related parties in the ordinary course of business. 324 Universe Entertainment and Culture Group Company Limited Annual Report 2020

Notes to the Consolidated Financial Statements 50 COMPANY – LEVEL BALANCE SHEET 50 Notes 2020 2019 二零二零年 ASSETS 資產 HK$’000 Non-current assets 非流動資產 HK$’000 Investments in subsidiaries 千港元 72,096 Property, plant and equipment – 72,096 Current assets 流動資產 – 72,096 Amounts due from subsidiaries Deposits paid 72,096 402,524 Cash and cash equivalents 560 113,088 Total assets 總資產 25 243 3,030 權益 27(b) 406,114 EQUITY 本公司擁有人應佔權益 27(b) 15,061 478,210 Equity attributable to the 27(b) 128,392 總權益 200,488 9,066 owners of the Company 負債 35,013 Share capital 流動負債 9,066 597,789 Share premium 35,013 (423,440) Other reserves 597,789 218,428 Accumulated losses (465,537) 176,331 257,284 Total equity 2,498 21,891 LIABILITIES 2,266 259,782 Current liabilities 259,782 Amounts due to subsidiaries 24,157 478,210 Accrued charges 24,157 146,332 200,488 Total liabilities 總負債 104,235 218,428 Total equity and liabilities 總權益及負債 流動資產淨值 176,331 Net current assets 總資產減流動負債 Total assets less current liabilities 寰宇娛樂文化集團有限公司 二零二零年年報 325

Notes to the Consolidated Financial Statements 50 COMPANY – LEVEL BALANCE SHEET 50 (Continued) Approved and authorised for issue by the board of directors on 29th September 2020. Lam Shiu Ming, Daneil Lam Kit Sun 林小明 林傑新 Director Director 51 COMPARATIVE FIGURES 51 The Group has initially applied HKFRS 16 at 1st July 16 2019 using the modified retrospective approach. Under 2.1(i) this approach, comparative information is not restated. Further details of the changes in accounting policies are disclosed in note 2.1(i). 52 IMMEDIATE AND ULTIMATE CONTROLLING 51 PARTY At 30th June 2020, the directors consider the immediate Pioneer Entertainment Group Limited holding company and ultimate controlling party of the Pioneer Entertainment Group to be Pioneer Entertainment Group Limited and Mr. Lam Shiu Ming, Daneil respectively. Pioneer Group Limited Entertainment Group Limited, which is incorporated in BVI, does not produce financial statements available for public use. 326 Universe Entertainment and Culture Group Company Limited Annual Report 2020

Principal Properties Held for Investment Purposes HONG KONG Location Lot number Type Lease term 地點 地段 種類 租賃年期 Woodland House 1-5, Lot numbers 1510 remaining Residential 2047 Woodlands Villa, part, 1511, 1516, 1518, 1519, 121 Tong Fuk Village, 1522 and 1523 in Demarcation Tong Fuk, Lantau Island, District 328 New Territories, Hong Kong 328 121 15 1510 1511 1516 1518 1519 1522 1523 寰宇娛樂文化集團有限公司 二零二零年年報 327

Five Year Financial Summary RESULTS 2020 Year ended 30th June 2017 2016 二零二零年 截至六月三十日止年度 Revenue from continuing 2019 2018 HK$’000 operations HK$’000 千港元 HK$’000 HK$’000 HK$’000 (restated) Loss before income tax () from continuing operations (restated) () Income tax credit/(expense) from continuing operations 226,767 61,669 86,673 195,717 134,961 Loss attributable to (28,506) (118,600) (79,700) (121,332) (169,547) the equity holders of the Company (including 141 123 3,586 (6,154) 28,959 discontinued operations) (27,063) (121,200) (135,284) (114,328) (140,790) Special dividend – 407,985 – – – Proposed final dividend – – – – – ASSETS AND LIABILITIES 2020 As at 30th June 2017 2016 Total assets 二零二零年 於六月三十日 HK$’000 Total liabilities HK$’000 2019 2018 千港元 HK$’000 HK$’000 HK$’000 683,788 724,694 1,081,443 1,456,934 1,150,731 (328,896) (343,760) (164,470) (443,407) (398,810) 328 Universe Entertainment and Culture Group Company Limited Annual Report 2020