##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
 o
    
    REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or 12(g) OF THE SECURITIES EXCHANGE ACT OF
1934, or
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2005
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934.
 or
 o
    
    SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Date
of event requiring this shell company report _________
 Commission file number 001-14564
 APT SATELLITE HOLDINGS LIMITED
 
  Bermuda
 
  22 Dai Kwai Street, Tai Po Industrial Estate, Tai Po, New Territories, Hong Kong
 
     Title
    
    Name of Each Exchange on Which QuotedOrdinary Shares
American Depositary Shares
    
    The Stock Exchange of Hong Kong Limited
New York Stock Exchange
      o þ
  o þ
  þ o
  o o þ
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##### Table of Contents



PageGLOSSARY OF CERTAIN TERMS
    
    
    iiiItem 1. Identity of Directors, Senior Management, and Advisers
    
    
    1Item 2. Offer Statistics and Expected Timetable
    
    
    1Item 3. Key Information
    
    
    1Selected Consolidated Financial Information
    
    
    1Risk Factors
    
    
    4The SARS Outbreak
    
    
    10Item 4. Information on the Company
    
    
    11History and Development of the Company
    
    
    11Business Overview
    
    
    11Industry and Market Overview
    
    
    13Broadcasting and Telecommunications Markets in Asia
    
    
    14Customers and Services
    
    
    16Competition
    
    
    26Regulation
    
    
    28Organizational Structure
    
    
    30Property, Plant and Equipment
    
    
    31Item 4A. Unresolved Staff Comments
    
    
    31Item 5. Operating and Financial Review and Prospects
    
    
    32Overview
    
    
    32Application
of Critical Accounting Matters
    
    
    34Contractual
Obligations and Commercial Commitments
    
    
    37Off-Balance Sheet Arrangements
    
    
    38Results of Operations
    
    
    39Liquidity and Capital Resources
    
    
    43Forward Looking Statements
    
    
    45Other
    
    
    46Item 6. Directors, Senior Management and Employees
    
    
    47Compensation
    
    
    53Board Practices
    
    
    57Employees
    
    
    59Share Option Schemes
    
    
    59Share Ownership
    
    
    59Service Agreements
    
    
    60Item 7. Major Shareholders and Related Party Transactions
    
    
    60Major Shareholders
    
    
    60Related Party Transactions
    
    
    62Item 8. Financial Information
    
    
    65Item 9. The Offer and Listing
    
    
    65Item 10. Additional Information
    
    
    67Exchange Controls and Other Limitations Affecting Security Holders
    
    
    72Taxation
    
    
    73Item 11. Quantitative and Qualitative Disclosures about Market Risk
    
    
    78Interest Rate Risk
    
    
    78Exchange Rate Sensitivity
    
    
    78Limitations
    
    
    79Item 12. Description of Securities Other Than Equity Securities
    
    
    79
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PageItem 13. Defaults, Dividend Arrearages, and Delinquencies
    
    
    79Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
    
    
    79Item 15. Controls and Procedures
    
    
    79Item 16A. Audit Committee Financial Expert
    
    
    79Item 16B. Code of Ethics
    
    
    79Item 16C. Principal Accountant Fees and Services
    
    
    80Item 16D. Exemption from the Listing Standards for Audit Committees
    
    
    80Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
    
    
    80Item 17. Financial Statements
    
    
    80Item 18. Financial Statements
    
    
    80Item 19. Exhibits
    
    
    81EX-8.2 FINANCIAL STATEMENTS OF APT SATELLITE TELECOMMUNICATIONS LIMITEDEX-99.1 CERTIFICATION OF CEOEX-99.2 CERTIFICATION OF CFOEX-99.3 CERTIFICATION OF CEO PURSUANT TO 18 U.S.C. SECTION 1350EX-99.4 CERTIFICATION OF CFO PURSUANT TO 18 U.S.C. SECTION 1350EX-99.5 UPDATED SIGNIFICANT DIFFERENCES IN CORPORATE GOVERNANCE PRACTICES
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GLOSSARY OF CERTAIN TERMS
  ADS
    
    An American Depositary Share representing
ownership of eight shares of the Companys Ordinary
Shares, evidenced by American Depositary Receipts.analog
    
    A method of storing, processing or transmitting
information through a continuously varied (rather
than pulsed) signal.APCN2
    
    Asia Pacific Cable Network 2, a submarine cable
project under a consortium of telecommunication
companies. The project provides additional telecom
capacity for designated Asian cities.APSTAR System
    
    The Companys current and future satellites,
including APSTAR I, APSTAR IA, APSTAR IIR, APSTAR V,
APSTAR VI (formerly APSTAR VB), and any other
satellites to be launched by the Company in the
future.APT/APT HK
    
    APT Satellite Company Limited, a company
incorporated in the HKSAR and a wholly-owned indirect
subsidiary of the Company.APT BVI
    
    APT Satellite Investment Company Limited, a
company incorporated in the British Virgin Islands
with limited liability and a wholly-owned subsidiary
of the Company.APT Group
    
    The Company and its subsidiaries and affiliates.APT International
    
    APT Satellite International Company Limited, a
company incorporated in the British Virgin Islands
with limited liability and a shareholder of the
Company.APT Telecom
    
    APT Satellite Telecommunications Limited, a
jointly controlled entity of the Company which is
incorporated in the HKSAR that had been engaging in
the provision of telecommunication services.APT Telecom Lease
    
    The agreement for lease dated March 12, 2001 made
between APT Telecom and Science and Technology Parks
Corporation in respect of the Remaining Portion of
Section E of Tai Po Town Lot No. 13 and Extension
Thereto, Hong Kong, as modified by the Modification
of Agreement for Lease and Modification of Proposal
Form.APTs Leases
    
    The Lease Agreement as supplemented and modified
by the Cancelled Agreement for Lease, the Deed of
Cancellation, the Second Supplemental Agreement, the
Fifth Modification of Lease and the Fifth
Modification Proposal.bandwidth
    
    A range of frequencies occupied by a modulated
carrier or the range of frequencies which can be
transmitted through a communications system.
Bandwidth is one measure of the information carrying
capacity of a transponder. The wider the bandwidth,
the more information can be transmitted.Bank loan
    
    On December 16, 2002, APT Satellite Company
Limited entered into a secured term facility of
US$240 million, It was amended by a Deed of Amendment
and Restatement on October 27, 2004 and a Second Deed
of Amendment and Restatement on May 18, 2005.Basic Law
    
    The Basic Law of the Hong Kong Special
Administrative Region (HKSAR) of the Peoples
Republic of China, effective as of July 1, 1997, is
the constitutional document for the HKSAR.beam
    
    The directed electromagnetic rays emanating from a
spacecraft or ground station. With respect to
satellites, it typically refers to aggregates of
these rays such as a China (coverage) beam or global
(coverage) beam.
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Cancelled Agreement
for Lease
    
    The agreement for lease dated June 19, 2000 made
between APT and the Science and Technology Parks Corporation in respect of the
original Remaining Portion of Section E of Tai Po Town Lot No. 13 and
Extensions Thereto.C2C
    
    C2C Pte. Ltd., a cable network provider under a
consortium of telecommunication companies led by
Singapore Telecommunications Ltd.CCTV
    
    China Central Television, a PRC state-owned
enterprise under the supervision and control of the
SARFT.CITV
    
    China International Television Corporation, a PRC
state-owned enterprise under the supervision and
control of the SARFT.CLTC
    
    China Satellite Launch and Tracking Control
General, a PRC state-owned enterprise subject to the
supervision and control of the Defense Commission.C-band
    
    In satellite communications (FSS) used to refer to
downlink frequencies between 3.4 GHz and 4.2 GHz and
uplink frequencies between 5.85 GHz and 7.075 GHz.
It is often referred to as 4/6 GHz.cellular
    
    Domestic public cellular radio telecommunications
service. Cellular systems are based on multiple base
stations, or cells, that permit efficient
frequency reuse and on software that permits the
system to band mobile calls from cell to cell as
subscribers move through the cellular service area.China Aerospace
    
    China Aerospace Science & Technology Corporation
(formerly China Aerospace Corporation or the PRC
Ministry of Aerospace Industry), a PRC state-owned
enterprise engaged in the research, design, testing
and manufacturing of launch vehicles and satellites.ChinaSat
    
    China Telecommunications Broadcast Satellite
Corporation, a PRC state-owned enterprise under the
supervision of the MII and which is the satellite
operation arm of the MII.DBS
    
    Direct broadcast satellite, a satellite capable of
transmitting direct-to-home television programming.dBW
    
    Decibel relative to one watt, a measure of a
satellites power (e.g., 50 dBW is 10 times more
powerful than 40 dBW).Deed of Cancellation
    
    The deed of cancellation and surrender dated March
12, 2001 in respect of cancellation of the Cancelled
Agreement for Lease made between APT and Science and
Technology Parks Corporation.digital
    
    Referring to a method of storing, processing, or
transmitting information through a pulsed (rather
than continuously varied) signal.downlink
    
    The receiving portion of a satellite circuit
extending from the satellite to the earth.Director(s)
    
    Director(s) of the Company, including all
executive director(s), all non-executive director(s)
and independent non-executive directors.earth station
    
    The antennae, receivers, transmitters and other
equipment needed on the ground to transmit and
receive satellite communications signals.EBITDA
    
    Net income before taking into account: (i) interest
expenses; tax; any share of the profit of any
associated company or undertaking, except for
dividends received in cash by any member of the
Company; any share of the non-cash loss
of any investment company of other associated company or undertakings; and extraordinary and exceptional items; and (ii) without
double-counting, after adding back all amounts provided for as depreciation, amortization, impairment assets value or other
provision not involving an outflow of cash.
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EIRP
    
    Equivalent isotropic radiated power, the product of the power supplied to the antenna and the
antenna gain in a given direction relative to an isotropic antenna (absolute or isotropic gain).Eligible Employee(s)
    
    Employee(s) (whether full time or part time employee(s), including any executive director but not
any non-executive director) of the Company or its subsidiaries.Eligible Grantee(s)
    
    Persons who are eligible to accept the offer of the grant of an Option in accordance with the
Scheme 2001 or Scheme 2002, as the context requires.FCL
    
    Fixed Carrier Licence issued by OFTA for the provision of Facility-based External
Telecommunication Services.Fifth Modification of Lease
    
    The fifth modification of agreement for lease dated May 31, 2002 made between APT and Science and
Technology Parks Corporation in respect of modification of purpose of the lease contained in the
Lease Agreement.Fifth Modification Proposal
    
    The fifth modification to proposal form dated May 31, 2002 made between APT and Science and
Technology Parks Corporation in respect of modification of purpose in the proposal form in
relation to the Lease Agreement.footprint
    
    The geographic area covered by a satellites downlink or uplink beams, the outer edge of which is
generally defined as that area where the quality of communication degrades below an acceptable
commercial level due to the spacecraft antenna pattern, power of the signal or curvature of the
earth.frequency
    
    Number of repetitions in a given time. Typically it refers to the rate of variation per second
of the carrier wave or modulating signal. Communications satellite RF signals are typically in
the GHz frequency range. See C-band and Ku-band.FTNS
    
    Fixed telecommunications network services, presently known as Fixed Carrier Licence.GEO
    
    Geostationary orbit.geostationary orbit
    
    A geosynchronous orbit in which the orbital inclination and eccentricity of a satellite are zero
such that the satellite appears to hover over a fixed position on the earths equator.Global Offering
    
    The Companys initial world-wide public offering of Ordinary Shares and American Depositary
Shares, each representing eight shares of the Companys Ordinary Shares dated December 13, 1996.HDTV
    
    High definition television.HKSAR
    
    Hong Kong Special Administrative Region of the PRC.ISDN
    
    Integrated services data network.ITU or International
Telecommunication Union
    
    The International Telecommunication Union, the telecommunications agency of the United Nations,
established to provide standardized communications procedures and practices, including frequency
allocation and radio regulations, on a world-wide basis.Joint Declaration
    
    The Joint Declaration of the Government of the United Kingdom and the Government of the PRC on
the Question of Hong Kong with Annexes signed on December 19, 1984.Ku-band
    
    In satellite communications (FSS), it is used to refer to downlink frequencies between 10.7 GHz
and 12.75 GHz and uplink frequencies between 13.75 GHz and 14.8 GHz. Often it is referred to as
11/14 or 12/14 GHz.Lease Agreements
    
    The agreement for lease dated February 26, 1993, made between APT and the Science and Technology
Parks Corporation in respect of Subsection 1 of Section E of Tai Po Town Lot No. 13 and Extension
Thereto, Hong Kong on which APTs satellite control center is developed.
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LEO
    
    Low-earth orbit of up to 1,500 miles above the earth.Master Registry
    
    The Master International Frequency Register of the ITU, which lists frequency assignments of
orbital slots upon notification.MEO
    
    Mid-earth orbit of up to 18,000 miles above the earth.megahertz (MHz)
    
    A measure of frequency, 1 million cycles per second.microwave
    
    Radio frequency carrier waves with wavelengths of less than one meter- frequencies above 300 MHz.MII
    
    Ministry of Information Industry of the PRC.mobile satellite services
    
    Services transmitted via satellites to provide mobile telephone, paging, messaging, facsimile,
data, and position location services directly to users.OFTA
    
    The Office of the Telecommunications Authority of Hong Kong or, where the context requires, the
Telecommunications Authority of Hong Kong.operational life
    
    The time for which a satellite is capable of operating in its allotted position. The expected
end of a satellites in-orbit operational life is mainly based on the period during which the
satellites on-board fuel permits proper station-keeping maneuvers for the satellite.Option(s)
    
    Options granted to the Eligible Grantees under the Scheme 2001 or to the Participants under the
Scheme 2002, as the context requires.paging
    
    A service designed to deliver a message to a person whose location is unknown; messages may be
received via an alphanumeric or character display or small speaker.Participant(s)
    
    Any person belonging to any of the following classes of persons: (a) any Eligible Employee; and
(b) any non-executive directors (including independent non-executive directors) of the Company or
any of its Subsidiaries, in accordance with the Scheme 2002.PRC
    
    The Peoples Republic of China, other than HKSAR.PSTN
    
    Public switched telephone networks which comprise the network infrastructure necessary for
providing basic telephone services.radio frequency
    
    A frequency that is higher than the audio frequencies but below the infrared frequencies, usually
above 20 KHz.Radio Regulations
    
    Radio Regulations of the ITU.Radio Regulatory Department
    
    Radio Regulatory Department of the MII.Radiocommunication Bureau
    
    Radiocommunication Bureau of the ITU.SARFT
    
    China State Administration of Radio Film and Television, a government office responsible for the
management of the provision of Radio, Film and Television in the PRC.Satellite Control Center
    
    The earth station of the APT Group for the TT&C of APSTAR Systems and the provision of
broadcasting transmission and telecommunication services. It is located in Tai Po, New
Territories, Hong Kong.Science and Technology
Parks Corporation
    
    Hong Kong Science and Technology Parks Corporation (formerly known as Hong Kong Industrial
Science and Technology Parks Corporation), the lessor of certain Lease Agreements with the
Company.scrambled programming
    
    Programming signals which require a decoder for purposes of viewing.
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Second Supplemental Agreement
    
    The second supplemental agreement for lease and grant of second extension area dated March 12,
2001 made between APT and the Science and Technology Parks Corporation in respect of Subsection 3
of Section E of Tai Po Town Lot No. 13 and Extensions Thereto.signal
    
    A physical, time-dependent energy value used for the purpose of conveying information through a
transmission line.switch
    
    A device that opens or closes circuits or selects the paths or circuits to be used for
transmission of information; switching is the process of interconnecting circuits to form a
transmission path between users.teledensity
    
    Telephone access lines per 100 persons.telemetry
    
    Radio transmission of coded or analog data from a satellite to a ground station.telephony
    
    Science of construction and operation of telephones and telephonic systems.transponder
    
    A microwave repeater which provides a discrete path to receive communications signals, translate
and amplify such signals and retransmit them to earth or another satellite.TT&C
    
    Telemetry, tracking and command.TT&C Station
    
    Telemetry, tracking and command station, a land-based facility that monitors and controls the
positioning, altitude and status of a satellite in orbit.uplink
    
    In satellite communications, the signal from the earth station to the space station (satellite).VSAT
    
    Very small aperture terminal.
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##### Table of Contents



PART I
 
 Item 1. Identity of Directors, Senior Management, and Advisers
  
 Item 2. Offer Statistics and Expected Timetable
  
 Item 3. Key Information
 
 Selected Consolidated Financial Information
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2001
    
    2002
    
    2003
    
    2004
    
    2005
    
    2005HK$
    
    HK$
    
    HK$
    
    HK$
    
    HK$
    
    US$(restated)
    
    (restated)
    
    (restated)
    
    (restated)Statement
of Operations Data:(in millions, except per share data)Hong Kong GAAP:Total revenues
    
    
    374.2
    
    
    
    351.4
    
    
    
    302.2
    
    
    
    277.3
    
    
    
    336.5
    
    
    
    43.1Total costs and expenses
    
    
    (348.6
    )
    
    
    (365.4
    )
    
    
    (354.3
    )
    
    
    (323.4
    )
    
    
    (378.4
    )
    
    
    (48.5
    )Income/(loss) from operations
    
    
    104.0
    
    
    
    49.7
    
    
    
    (148.2
    )
    
    
    (38.6
    )
    
    
    (78.5
    )
    
    
    (10.1
    )Share of losses of jointly controlled
entities
    
    
    (5.1
    )
    
    
    (10.6
    )
    
    
    (57.1
    )
    
    
    (2.7
    )
    
    
    (8.0
    )
    
    
    (1.0
    )Income/(loss) before income taxes
    
    
    93.3
    
    
    
    39.1
    
    
    
    (205.3
    )
    
    
    (45.4
    )
    
    
    (123.4
    )
    
    
    (15.8
    )Net income/(loss)
    
    
    67.3
    
    
    
    2.3
    
    
    
    (217.0
    )
    
    
    (62.0
    )
    
    
    (136.6
    )
    
    
    (17.5
    )Attributable to:Minority interests
    
    
    
    
    
    
    (2.3
    )
    
    
    (0.9
    )
    
    
    (2.0
    )
    
    
    (1.0
    )
    
    
    (0.1
    )Equity shareholders of the Company
    
    
    67.3
    
    
    
    4.6
    
    
    
    (216.1
    )
    
    
    (60.0
    )
    
    
    (135.6
    )
    
    
    (17.4
    )Basic earnings/(loss) per share
(cents)(1)
    
    
    16
    
    
    
    1
    
    
    
    (52
    )
    
    
    (15
    )
    
    
    (33
    )
    
    
    (4
    )Basic earnings/(loss) per ADS
(cents)(1)
    
    
    128
    
    
    
    8
    
    
    
    (416
    )
    
    
    (120
    )
    
    
    (264
    )
    
    
    (32
    )Diluted earnings/(loss) per share
(cents) (1)
    
    
    16
    
    
    
    1
    
    
    
    (52
    )
    
    
    (15
    )
    
    
    (33
    )
    
    
    (4
    )Diluted earnings/(loss) per ADS
(cents)(1)
    
    
    128
    
    
    
    8
    
    
    
    (416
    )
    
    
    (120
    )
    
    
    (264
    )
    
    
    (32
    )Weighted average number of shares
outstanding(1)
 Basic
    
    
    413
    
    
    
    413
    
    
    
    413
    
    
    
    413
    
    
    
    413
    
    
    
    413Weighted average number of shares
outstanding(1)
 Diluted
    
    
    414
    
    
    
    413
    
    
    
    413
    
    
    
    413
    
    
    
    413
    
    
    
    413Dividend per share (cents)
    
    
    5.0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    US GAAP:Total revenues
    
    
    373.0
    
    
    
    347.8
    
    
    
    316.3
    
    
    
    277.3
    
    
    
    336.5
    
    
    
    43.1Total costs and expenses
    
    
    (342.1
    )
    
    
    (314.6
    )
    
    
    (484.0
    )
    
    
    (323.6
    )
    
    
    (445.9
    )
    
    
    (57.2
    )Income/(loss) from operations
    
    
    30.9
    
    
    
    33.2
    
    
    
    (167.7
    )
    
    
    (46.3
    )
    
    
    (109.4
    )
    
    
    (14.1
    )Share of losses of jointly controlled
entities
    
    
    (5.1
    )
    
    
    (10.6
    )
    
    
    (65.7
    )
    
    
    (2.3
    )
    
    
    (2.6
    )
    
    
    (0.3
    )Income/(loss) before income taxes and
minority interests
    
    
    98.3
    
    
    
    47.6
    
    
    
    (214.5
    )
    
    
    (43.3
    )
    
    
    (118.1
    )
    
    
    (15.1
    )Net income/(loss)
    
    
    72.6
    
    
    
    13.8
    
    
    
    (225.3
    )
    
    
    (58.6
    )
    
    
    (130.2
    )
    
    
    (16.7
    )Basic earnings/(loss) per share
(cents)(1)
    
    
    18
    
    
    
    3
    
    
    
    (55
    )
    
    
    (14
    )
    
    
    (32
    )
    
    
    (4
    )Basic earnings/(loss) per ADS
(cents)(1)
    
    
    144
    
    
    
    24
    
    
    
    (440
    )
    
    
    (112
    )
    
    
    (256
    )
    
    
    (32
    )Diluted earnings/(loss) per share
(cents)(1)
    
    
    18
    
    
    
    3
    
    
    
    (55
    )
    
    
    (14
    )
    
    
    (32
    )
    
    
    (4
    )Diluted earnings/(loss) per ADS
(cents)(1)
    
    
    144
    
    
    
    24
    
    
    
    (440
    )
    
    
    (112
    )
    
    
    (256
    )
    
    
    (32
    )Weighted average number of shares
outstanding(1)
 Basic
    
    
    413
    
    
    
    413
    
    
    
    413
    
    
    
    413
    
    
    
    413
    
    
    
    413Weighted average number of shares
outstanding(1)   Diluted
    
    
    414
    
    
    
    413
    
    
    
    413
    
    
    
    413
    
    
    
    413
    
    
    
    413Balance Sheet Data:(in millions)Hong Kong GAAP:Working capital
    
    
    1,478.9
    
    
    
    739.5
    
    
    
    482.8
    
    
    
    533.7
    
    
    
    188.4
    
    
    
    24.2Property, plant and equipment, net
    
    
    1,132.9
    
    
    
    2,002.0
    
    
    
    2,429.0
    
    
    
    2,680.3
    
    
    
    2,999.4
    
    
    
    386.5Total assets
    
    
    3,308.2
    
    
    
    3,347.0
    
    
    
    3,305.6
    
    
    
    3,621.0
    
    
    
    3,614.3
    
    
    
    463.4Long-term liabilities (less current
portion)
    
    
    542.9
    
    
    
    377.7
    
    
    
    769.6
    
    
    
    1,191.0
    
    
    
    1,255.3
    
    
    
    160.9Total liabilities
    
    
    816.1
    
    
    
    864.2
    
    
    
    1,046.6
    
    
    
    1,423.8
    
    
    
    1,552.7
    
    
    
    199.1Minority interests
    
    
    
    
    
    
    6.8
    
    
    
    5.9
    
    
    
    3.9
    
    
    
    2.9
    
    
    
    0.4Capital stock-common stock
    
    
    41.3
    
    
    
    41.3
    
    
    
    41.3
    
    
    
    41.3
    
    
    
    41.3
    
    
    
    41.3Total shareholders equity
    
    
    2,492.1
    
    
    
    2,482.7
    
    
    
    2,253.1
    
    
    
    2,193.1
    
    
    
    2,058.6
    
    
    
    263.9US GAAP:Working capital
    
    
    1,454.5
    
    
    
    739.5
    
    
    
    482.8
    
    
    
    533.7
    
    
    
    194.0
    
    
    
    24.2Total assets
    
    
    3,284.8
    
    
    
    3,339.7
    
    
    
    3,297.3
    
    
    
    3,613.9
    
    
    
    3,615.4
    
    
    
    463.2Total liabilities
    
    
    816.7
    
    
    
    864.2
    
    
    
    1,046.6
    
    
    
    1,423.8
    
    
    
    1,554.7
    
    
    
    199.1Minority interests
    
    
    
    
    
    
    6.8
    
    
    
    5.9
    
    
    
    4.6
    
    
    
    3.6
    
    
    
    0.5Total shareholders equity
    
    
    2,468.1
    
    
    
    2,468.7
    
    
    
    2,244.8
    
    
    
    2,186.3
    
    
    
    2,057.1
    
    
    
    263.7
 -2-




---



##### Table of Contents



(1)
    
    Per share and per ADS data is derived from the weighted average number of shares
outstanding during the applicable period. Diluted earnings per share was the same as the
basic earnings per share as there were no dilutive potential ordinary share in existence for
five fiscal years ended December 31, 2005.(2)
    
    The Hong Kong Institute of Certified Public Accountants (HKICPA) has issued a number of new
and revised Hong Kong Financial Reporting Standards (HKFRSs) that are effective for accounting
periods beginning on or after January 1, 2005. Information on the changes in accounting policies resulting from initial
application of these new and revised HKFRSs is provided in note 4 of the Notes to the
Audited Consolidated Financial Statements of the Company. Certain amounts for the years
before 2005 have been restated to the extent that the new accounting policies are adopted
retrospectively as disclosed in note 4.     2001
    
    2002
    
    2003
    
    2004
    
    2005Average (1)
    
    
    7.7994
    
    
    
    7.7997
    
    
    
    7.7875
    
    
    
    7.7891
    
    
    
    7.7774High
    
    
    7.8001
    
    
    
    7.8000
    
    
    
    7.8001
    
    
    
    7.8010
    
    
    
    7.8000Low
    
    
    7.7969
    
    
    
    7.7936
    
    
    
    7.7085
    
    
    
    7.7632
    
    
    
    7.7519End of Period
    
    
    7.7978
    
    
    
    7.7981
    
    
    
    7.7640
    
    
    
    7.7723
    
    
    
    7.7545
 
 (1)
    
    The rate of exchange means the noon buying rate in New York City for cable transfer in
foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York.
The average rate means the average of the exchange rates on the last day of each month during
the period.  December 2005
    
    January 2006
    
    February 2006
    
    March 2006
    
    April 2006
    
    May 2006High
    
    
    7.7552
    
    
    
    7.7573
    
    
    
    7.7617
    
    
    
    7.7621
    
    
    
    7.7600
    
    
    
    7.7584Low
    
    
    7.7522
    
    
    
    7.7509
    
    
    
    7.7565
    
    
    
    7.7572
    
    
    
    7.7534
    
    
    
    7.7513
 -3-




---



##### Table of Contents



Risk Factors
 Prior to making an investment decision, prospective investors should carefully consider all of
the information set forth in this annual report, including the following risk factors. If any of
the following risks actually occur, the Companys business, financial condition and operating
results could be adversely affected. As a result, the trading price of the Companys ordinary
shares and ADSs could decline and all or part of a prospective investors investment could be lost.
 Technical Risks of satellite systems
  Risk of Satellite Defects or Failure
  Limited Life of Satellites
  TT&C Systems and Earth Station
  Risk of Interruption or harmful interference of APSTAR V
  Changes in Technology and Industry
  -4-




---



##### Table of Contents



Regulatory Risks
 Regulatory Regime for Satellite Operations
     Priority for Orbital Slots
  -5-




---



##### Table of Contents



Possible Disputes Relating to Orbital Slots
      -6-




---



##### Table of Contents



Regulatory Constraints on End-users
   Export Restrictions
     -7-




---



##### Table of Contents



Business Risks
 Insurance
    Competitive Nature of the Industry
  -8-




---



##### Table of Contents



Additional Financing Requirements
   Dependence on Key Customers
  Interference
  Political and Economic Risks
  -9-




---



##### Table of Contents



The Outbreak of Infectious Diseases
   -10-




---



##### Table of Contents



Item 4. Information on the Company
 
 History and Development of the Company
 st
 
 Business Overview
   Business segments:
    
    2003
    
    2004
    
    2005(restated)
    
    (restated)Revenue from external customers:Provision of satellite transponder capacity and related
services
    
    
    282.4
    
    
    
    238.4
    
    
    
    290.7Provision of satellite-based broadcasting and
telecommunications services
    
    
    16.4
    
    
    
    38.7
    
    
    
    45.5Service income
    
    
    3.4
    
    
    
    0.2
    
    
    
    0.3Total
    
    
    302.2
    
    
    
    277.3
    
    
    
    336.5
 Provision of satellite transponder capacity and related services
    -11-




---



##### Table of Contents



Satellite-based Broadcasting and Telecommunications Services
    -12-




---



##### Table of Contents



Industry and Market Overview
 Satellites
     -13-




---



##### Table of Contents



Broadcasting and Telecommunications Markets in Asia
 Increased Distribution of Television Programming
  -14-




---



##### Table of Contents



Liberalization of the Television and Telecommunications Industries
   Continuing Technological Advancements
  High-powered Satellites.
 Digital Communications.
 Compressed Digital Video.
  -15-




---



##### Table of Contents



Increased Spending on Telecommunications Projects
  Growth of Information Services Markets
  
 Customers and Services
  Years Ended December 31,2003
    
    2004
    
    2005Broadcasting
    
    
    49.5
    %
    
    
    51.2
    %
    
    
    41.5
    %Telecommunications
    
    
    46.8
    %
    
    
    44.6
    %
    
    
    49.8
    %Other service
    
    
    3.7
    %
    
    
    4.2
    %
    
    
    8.7
    %
  Broadcasting Customers
   Television Programming Distribution.
 -16-




---



##### Table of Contents



Customer
    
    ProgrammingChina Central Television (CCTV)
    
    National television in the PRC
including CCTV-1 to 12, CCTV New,
CCTV Cartoons except CCTV-4 and
CCTV-9China Education Television (CETV-1)
    
    Educational television in the PRCChina Broadcasting Film Television
Satellite Co., Ltd. (CBSAT)
    
    Provisional television in the PRC,
including Yunnan, Xinjiang, Tibet
and Hainan, totally around 16
provinces and around 25 channels
 Backhaul Services.
 Ad Hoc Services.
 Telecommunications Customers
  -17-




---



##### Table of Contents



Private Networks.
   Carrier services.
 Other Service Customers
     -18-




---



##### Table of Contents



Transponder Utilization Agreements
  , ,
 Sales and Marketing
  Operation of the APSTAR System
   -19-




---



##### Table of Contents



SUMMARY OF SATELLITE DATA
 APSTAR I
    
    APSTAR 1A
    
    APSTAR IIR
    
    APSTAR V
    
    APSTAR VIRegion covered
    
    North and
    
    North and
    
    Europe, Asia,
    
    Most of Asia,
    
    Most of Asia,Southeast Asia
    
    Southeast Asia
    
    Middle East,
    
    Australia, New
    
    Australia, NewAfrica
    
    Zealand, Pacific
    
    Zealand,region, Hawaii
    
    Pacific region,HawaiiStatus
    
    Operational
    
    Operational
    
    Operational
    
    Operational
    
    Operational(inclined mode)
    
    (inclined mode)Model
    
    HS 376
    
    HS 376
    
    FS 1300
    
    
    FS1300
    
    
    
    SB4100C1Manufacturers
    
    Hughes
    
    Hughes
    
    SS/Loral
    
    SS/Loral
    
    AlcatelTranspondersKu-band
    
    
    
    
    
    
    
    
    
    
    16
    
    
    
    16
    *
    
    
    12C-band
    
    
    24
    
    
    
    24
    
    
    
    28
    
    
    
    38
    *
    
    
    38Expected end of
    
    
    **
    
    
    
    ***
    
    
    
    2013
    
    
    
    2019
    
    
    
    2021operational life
 
 *
    
    As at August 13, 2004, APT has taken up 25 C-band and 12 Ku-band transponders of APSTAR V.**
    
    It is expected that APSTAR I will be operating for at least 3 years at an inclined mode from
October 2004.***
    
    It is expected that APSTAR IA will be operating for at least 4.57 years at an inclined mode
from December 2005. APSTAR Satellites
 APSTAR I
  -20-




---



##### Table of Contents



APSTAR IA
    APSTAR IIR
   APSTAR V
  -21-




---



##### Table of Contents



-22-




---



##### Table of Contents



APSTAR VI (formerly APSTAR VB)
   Existing Orbital Slots
    -23-




---



##### Table of Contents



Future Satellites
 APSTAR VIB
   Insurance
  In-orbit Insurance.
 Third-Party Liability Insurance.
 Satellite and Ground Operation Facility
  -24-




---



##### Table of Contents



Customer Technical Qualifications and Support
   Additional Orbital Slots
  -25-




---



##### Table of Contents



Employees
   Share Option Scheme
  
 Competition
     -26-




---



##### Table of Contents



International Satellites
   Regional Satellites
     -27-




---



##### Table of Contents



Domestic Satellites
  Other Satellites
  Optical Fiber Systems
  
 Regulation
     -28-




---



##### Table of Contents



International Telecommunication Union
     Export Regulation
  Hong Kong Regulation
  -29-




---



##### Table of Contents



Overseas National Telecommunications Authorities
   
 Organizational Structure
  -30-




---



##### Table of Contents



Property, Plant and Equipment
     
 Item 4A. Unresolved Staff Comments
  -31-




---



##### Table of Contents



Item 5. Operating and Financial Review and Prospects
  
 Overview
     
    
    providing transponder capacity to broadcast customers for the distribution of
programming to television audiences in the PRC and Asia Pacific region;
    
    providing telecommunications networks for data and voice communications; and
    
    providing satellite television uplink and downlink service through the APSTAR System.
   -32-




---



##### Table of Contents



-33-




---



##### Table of Contents



2003
    
    2004
    
    2005(restated)
    
    (restated)Statement of Operations Data:Revenues
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Costs and expenses:Cost of services (excluding depreciation
and amortization)
    
    
    14.6
    %
    
    
    24.1
    %
    
    
    30.7
    %Depreciation and amortization
    
    
    78.1
    %
    
    
    64.2
    %
    
    
    58.9
    %Selling, general and administrative
(excluding depreciation and amortization)
    
    
    24.8
    %
    
    
    28.4
    %
    
    
    22.9
    %Total costs and expenses
    
    
    117.5
    %
    
    
    116.7
    %
    
    
    112.5
    %(17.5
    %)
    
    
    (16.7
    %)
    
    
    (12.5
    %)Loss before income taxes
    
    
    (67.9
    %)
    
    
    (16.4
    %)
    
    
    (36.7
    %)Loss for the year
    
    
    (71.8
    %)
    
    
    (22.4
    %)
    
    
    (40.6
    %)
  Years Ended December 31,2003
    
    2004
    
    2005(HK$ in millions)% of Total
    
    
    
    
    
    % of Total
    
    
    
    
    
    % of TotalAmount
    
    Revenues
    
    Amount
    
    Revenues
    
    Amount
    
    RevenuesThe Peoples
Republic of China:Hong Kong
    
    
    25.1
    
    
    
    8.3
    %
    
    
    21.3
    
    
    
    7.7
    %
    
    
    38.5
    
    
    
    11.5
    %Other regions
    
    
    225.8
    
    
    
    74.7
    %
    
    
    195.2
    
    
    
    70.4
    %
    
    
    201.9
    
    
    
    60.0
    %Singapore
    
    
    18.4
    
    
    
    6.1
    %
    
    
    23.3
    
    
    
    8.4
    %
    
    
    30.7
    
    
    
    9.1
    %USA
    
    
    18.9
    
    
    
    6.3
    %
    
    
    8.4
    
    
    
    3.0
    %
    
    
    0.4
    
    
    
    0.1
    %Indonesia
    
    
    0.5
    
    
    
    0.2
    %
    
    
    6.0
    
    
    
    2.2
    %
    
    
    32.3
    
    
    
    9.6
    %Others
    
    
    13.5
    
    
    
    4.4
    %
    
    
    23.1
    
    
    
    8.3
    %
    
    
    32.7
    
    
    
    9.7
    %302.2
    
    
    
    100.0
    %
    
    
    277.3
    
    
    
    100.0
    %
    
    
    336.5
    
    
    
    100.0
    %
  
 Application of Critical Accounting Policies
  -34-




---



##### Table of Contents



Depreciation
   Accounts receivables and other receivables
    Impairment of property, plant and equipment
  -35-




---



##### Table of Contents



Contingencies and provisions
    Change in accounting policies
  Recent US GAAP pronouncements
  -36-




---



##### Table of Contents



Commitments and Contingencies
   
 Contractual Obligations:
 Payments due by periodLess than
    
    
    13
    
    
    45
    
    
    After 5Total
    
    
    1 year
    
    
    years
    
    
    years
    
    
    YearsUS$240 million term Bank
loan(1)
    
    
    1,127.2
    
    
    
    120.5
    
    
    
    379.1
    
    
    
    529.4
    
    
    
    98.2Interest payment obligations (2)
    
    
    245.7
    
    
    
    62.7
    
    
    
    120.3
    
    
    
    59.3
    
    
    
    3.4Purchase obligations
the Company (3)
    
    
    2.3
    
    
    
    2.3
    
    
    
    
    
    
    
    
    
    
    
    Operating leases (4)
    
    
    2.2
    
    
    
    2.2
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    
    1,377.4
    
    
    
    187.7
    
    
    
    499.4
    
    
    
    588.7
    
    
    
    101.6
 Other Commercial Commitments:
 Amount of commitment expiration per periodTotalamounts
    
    
    Less than
    
    
    1  3
    
    
    4  5
    
    
    After 5committed
    
    
    1 year
    
    
    years
    
    
    years
    
    
    yearsOther commercial
commitments
 the Company
(5)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deposit received
    
    
    16.0
    
    
    
    9.2
    
    
    
    5.5
    
    
    
    1.3
    
    
    
    Deferred income
    
    
    239.0
    
    
    
    
    
    
    
    67.8
    
    
    
    45.1
    
    
    
    126.1Total commercial
commitments
    
    
    255.0
    
    
    
    9.2
    
    
    
    73.3
    
    
    
    46.4
    
    
    
    126.1
 
 (1)
    
    This line item represents the cash obligations for principal payments of the
Bank loan. The Bank loan was secured by the assignment of the construction, launching
and related equipment contracts relating to satellites under construction and their
related insurance claim proceeds, assignment of all present and future utilization
agreements of their transponders of satellites under construction, launching and
related equipment contracts. The above Bank loan does not include the borrowing cost
amounting to HK$9.2 million (US$1.2 million).(2)
    
    This line item represents the contractual interest payable for the Bank loan.
The interest payable is calculated by using average interest rate since the actual
interest payment depends on future LIBOR.(3)
    
    This line item represents various purchase commitments entered into with the
Companys suppliers due to the long lead times required before the satellites become
operational.(4)
    
    This line item represents future minimum payments under operating leases with
remaining terms of one year or more.(5)
    
    This line item represents various purchase commitments authorized by the
Company with its suppliers but not contracted at the balance sheet date. -37-




---



##### Table of Contents



Contingencies:
      
 Off-Balance Sheet Arrangements
  -38-




---



##### Table of Contents



Results of Operations
 Year Ended December 31, 2005 Compared to Year Ended December 31, 2004
 Total Revenues.
 Total Costs and Expenses.
 Cost of Services, including Depreciation and Amortization
 Cost of Services, excluding Depreciation and Amortization
 Depreciation and Amortization.
 Selling, General and Administrative Expenses.
 Other Operating Revenues.
 Interest Income  Net.
 -39-




---



##### Table of Contents



Other Income.
 Impairment Loss Recognized In Respect to Property, Plant and Equipment.
 Impairment Loss Recognized In Respect of prepayment for construction of a satellite
  Borrowing Costs.
 Share of Losses of Jointly Controlled Entities.
  -40-




---



##### Table of Contents



Provision for Income Taxes.
 Net Loss.
 Year Ended December 31, 2004 Compared to Year Ended December 31, 2003
 Total Revenues.
 Total Costs and Expenses.
 Cost of Services, including Depreciation and Amortization
 Cost of Services, excluding Depreciation and Amortization
 -41-




---



##### Table of Contents



Depreciation and Amortization.
 Selling, General and Administrative Expenses.
 Other Operating Revenues.
 Interest Income  Net.
 Other Income.
 Impairment Loss Recognized In Respect to Property, Plant and Equipment.
 Borrowing Costs.
 -42-




---



##### Table of Contents



Share of Losses of Jointly Controlled Entities.
  Provision for Income Taxes.
 Net Loss.
 
 Liquidity and Capital Resources
 Sources of Cash and Credit Available
  -43-




---



##### Table of Contents



Capital Expenditures
     Contractual Obligations and Other Commercial Commitments
  Cash Flow Items
 Net Cash Provided by Operating Activities
  Net Cash Used in Investing Activities
  Net Cash Provided by Financing Activities
  -44-




---



##### Table of Contents



Financing
     
 Forward Looking Statements
   -45-




---



##### Table of Contents



Other
 Exchange Rates
  Inflation
  Taxation
   -46-




---



##### Table of Contents



US GAAP Reconciliation
  
 Item 6. Directors, Senior Management and Employees
   Date FirstElected orName
    
    Age
    
    Position
    
    AppointedExecutive DirectorsNi Yifeng
    
    
    58
    
    
    Director and President (appointed on July 16,
2005)
    
    
    2005Tong Xudong
    
    
    42
    
    
    Director and Vice President (appointed on March
29, 2004 and April 20, 2004 respectively)
    
    
    2004Chen Zhaobin
    
    
    50
    
    
    Director and President (Resigned on July 16, 2005)
    
    
    2001Non-executive DirectorsLiu Ji Yuan
    
    
    72
    
    
    Chairman
    
    
    1998Zhang Hainan
    
    
    61
    
    
    Deputy Chairman
    
    
    2004Lim Toon
    
    
    63
    
    
    Director
    
    
    1993Wu Zhen Mu
    
    
    60
    
    
    Director
    
    
    1998Yin Yen-liang
    
    
    55
    
    
    Director
    
    
    2003Ho Siaw Hong
    
    
    57
    
    
    Director (appointed on March 27, 2006)
    
    
    2006Tseng Ta-mon
    
    
    48
    
    
    Alternate Director to Yin Yen-liang (appointed
September 8, 2004)
    
    
    2003Kwok Kah Wai Victor
    
    
    50
    
    
    Alternate Director to Lim Toon and Lim Wee Seng
(resigned on March 27, 2006)
    
    
    2004Lim Wee Seng
    
    
    52
    
    
    Director (resigned on August 16, 2005)
    
    
    2004Lan Kwai-chu
    
    
    42
    
    
    Director (appointed in August 2005 and resigned
on March 27, 2006)
    
    
    2005
 -47-




---



##### Table of Contents



Date FirstElected orName
    
    Age
    
    Position
    
    AppointedIndependent
Non-executive directorsYuen Pak Yiu, Philip
    
    
    70
    
    
    Director
    
    
    1996Huan Guocang
    
    
    56
    
    
    Director
    
    
    2002Lui King Man
    
    
    51
    
    
    Director
    
    
    2004Executive OfficersDong Gang
    
    
    52
    
    
    Vice President (appointed in July 2005)
    
    
    2005Lo Kin Hang, Brian
    
    
    49
    
    
    Vice President & Company Secretary
    
    
    2002/1996Chen Xun
    
    
    35
    
    
    Assistant President
    
    
    2004Yang Qing
    
    
    42
    
    
    Assistant President
    
    
    2004Cui Xinzheng
    
    
    52
    
    
    Vice President (resigned on July 31, 2005)
    
    
    2001
 Executive Directors
 Mr. NI Yifeng
 Mr. TONG Xudong
 -48-




---



##### Table of Contents



Mr. CHEN Zhaobin
 Non-Executive Directors
 Mr. LIU Ji Yuan
 Mr. ZHANG Hainan
 Mr. LIM Toon
 -49-




---



##### Table of Contents



Mr. WU Zhen Mu
 Dr. YIN Yen-liang
 Mr. HO Siaw Hong
 Mr. TSENG Ta-mon
 -50-




---



##### Table of Contents



Mr. LIM Wee Seng
 Ms. LAN Kwai-chu
 Mr. KWOK Kah Wai Victor
 Independent Non-Executive Directors
 Mr. YUEN Pak Yiu, Philip
 -51-




---



##### Table of Contents



Dr. HUAN Guocang
 Dr. LUI King Man
 Senior Management
 Mr. Dong Gang
 Dr. LO Kin Hang, Brian
 -52-




---



##### Table of Contents



Mr. CHEN Xun
 Mr. YANG Qing
 Mr. CUI Xinzheng
 
 Compensation
   -53-




---



##### Table of Contents



Options grantedon June 19, 2001
    
    
    
    
    
    Options remainand remain
    
    
    
    
    
    outstanding as atName of director and
    
    outstanding as at
    
    Options cancelled
    
    Options exercised
    
    December 31,chief executive
    
    January 1, 2005
    
    during the year
    
    during the year
    
    2005Chen Zhaobin
(Executive Director
and President) *
    
    2,200,000
    
    2,200,000
    
    
    
    Cui Xinzheng
(Vice President)**
    
    1,200,000
    
    1,200,000
    
    
    
    Lo Kin Hang, Brian
(Vice President and
Company Secretary
    
    800,000
    
    
    
    
    
    800,000
 
 *
    
    resigned on July 16, 2005,**
    
    resigned on July 31, 2005   -54-




---



##### Table of Contents



Salaries,allowances
    
    
    RetirementDirectors
    
    
    and benefits
    
    
    scheme
    
    
    2005fees
    
    
    in kind
    
    
    contributions
    
    
    TotalHK$000
    
    
    HK$000
    
    
    HK$000
    
    
    HK$000Executive directorsNi Yifeng
    
    
    23
    
    
    
    1,427
    
    
    
    76
    
    
    
    1,526Tong Xudong
    
    
    50
    
    
    
    2,316
    
    
    
    142
    
    
    
    2,508Chen Zhaobin
    
    
    27
    
    
    
    2,595
    
    
    
    49
    
    
    
    2,671Non-executive directorsLiu Ji Yuan
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    50Zhang Hainan
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    50Lim Toon
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    50Lan Kwai-chu
    
    
    19
    
    
    
    
    
    
    
    
    
    
    
    19Yin Yen-liang
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    50Wu Zhen Mu
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    50Lim Wee Seng (note b)
    
    
    31
    
    
    
    
    
    
    
    
    
    
    
    31Tseng Ta-mon (note c)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Kwok Kah Wai Victor (note a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Independent non-executive directorsYuen Pak Yiu, Philip
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    100Huan Guocang
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    100Lui King Man
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    100700
    
    
    
    6,338
    
    
    
    267
    
    
    
    7,305
 Salaries,allowances
    
    
    RetirementDirectors
    
    
    and benefits
    
    
    scheme
    
    
    2004Fees
    
    
    in kind
    
    
    contributions
    
    
    TotalHK$000
    
    
    HK$000
    
    
    HK$000
    
    
    HK$000Executive directorsChen Zhaobin
    
    
    50
    
    
    
    2,909
    
    
    
    93
    
    
    
    3,052Tong Xudong
    
    
    38
    
    
    
    1,629
    
    
    
    51
    
    
    
    1,718He Dongfeng
    
    
    12
    
    
    
    633
    
    
    
    20
    
    
    
    665Cui Xinzheng
    
    
    35
    
    
    
    1,618
    
    
    
    51
    
    
    
    1,704Non-executive directorsLiu Ji Yuan
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    50Zhang Hainan
    
    
    38
    
    
    
    
    
    
    
    
    
    
    
    38Zhou Ze He
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    12Lim Toon
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    50Yin Yen-liang
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    50
 -55-




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##### Table of Contents



Salaries,allowances
    
    
    RetirementDirectors
    
    
    and benefits
    
    
    scheme
    
    
    2004Fees
    
    
    in kind
    
    
    contributions
    
    
    TotalHK$000
    
    
    HK$000
    
    
    HK$000
    
    
    HK$000Wu Zhen Mu
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    50Wu Hongju
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Wu Jinfeng
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    34Wong Hung Khim
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    34Lim Shyong
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    34Tseng Ta-mon (note c)
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    34Lim Wee Seng (note b)
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    2Tay Chek Khoon
    
    
    48
    
    
    
    
    
    
    
    
    
    
    
    48Chen Chi-chuan (note a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Kwok Kah Wai Victor (note a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Independent non-executive directorsYuen Pak Yiu, Philip
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    100Huan Guocang
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Lui King Man
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    37708
    
    
    
    6,789
    
    
    
    215
    
    
    
    7,712
  -56-




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##### Table of Contents



(a)
    
    Mr. Chen Chi-chuan and Mr. Kwok Kah Wai Victor were alternate directors.(b)
    
    Mr. Lim Wee Seng was re-designated from alternate director to non-executive director
on December 20, 2004.(c)
    
    Mr. Tseng Ta-mon was re-designated from non-executive director to alternate director
on September 8, 2004.
   2004
    
    
    2005HK$ million
    
    
    HK$ millionShort-term employee benefits
    
    
    11.3
    
    
    
    13.3Other long-term benefits
    
    
    0.5
    
    
    
    0.7Termination benefits
    
    
    1.7
    
    
    
    13.5
    
    
    
    14.0
  
 Board Practices
      -57-




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
    
    to be primarily responsible for making recommendation to the Board of Directors on
the appointment, reappointment and removal of the external auditor, and to approve the
remuneration and terms of engagement of the external auditor;
    
    to monitor integrity of and review significant financial reporting judgments of
the half-year and annual financial statements;
    
    to discuss problems and reservations arising from the interim and final audits;
    
    to consider the major findings and internal investigations and managements
response;
    
    to review the Companys statement on financial controls, internal control system
and risk management systems (where one is included in the annual report) prior to
endorsement by the Board of Directors;
    
    to review and monitor the external auditors independence and objectivity and
effectiveness of the audit process in accordance with applicable standard, as well as
the nature and scope of other professional services provided to the Company by the
external auditor;
    
    to review APT Groups financial and accounting policies and practices;
    
    to review periodically Company policy statements to determine their adherence to
the Companys codes of conduct;
    
    to investigate any matter brought to its attention within the scope of its duties,
and to retain outside legal counsel or other professional advice for this purpose if,
in its judgment, that is appropriate; and
    
    to consider other topics, as determined by the Board of Directors.
   
    
    to review the structure, size and composition of the Board of Directors;
    
    to identify individuals suitably qualified to become directors;
    
    to assess the independence of Independent Non-executive directors;
    
    to make recommendations to the Board of Directors on matters relating to the
appointment or re-appointments of directors and succession planning for directors in
particular the Chairman and the President;
    
    to establish the nomination procedures; and
    
    to submit a work report to the Board of Directors yearly.
  -58-




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##### Table of Contents




    
    to make recommendations to the Board on policy and structure for all
remuneration of directors and senior management and on the establishment of a formal
procedure for developing remuneration policy;
    
    to determine the specific remuneration packages of all directors and senior
management, including benefits in kind, pension rights and compensation payments;
    
    to review and approve the performance-based remuneration by reference to
corporate goals and objectives resolved by the Board of Directors;
    
    to review and approve the compensation payable to directors and senior management;
    
    to review and approve compensation arrangements relating to dismissal or removal of directors;
    
    to ensure that no director or any of his/her associates is involved in deciding his own remuneration;
    
    to formulate and review regularly the policy for the remuneration of directors,
assessing directors performance and approving the terms of directors service
contracts; and
    
    to submit a work report to the Board of Directors yearly.
 
 Employees
   
 Share Option Schemes
  
 Share Ownership
     -59-




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Service Agreements
    
 Item 7. Major Shareholders and Related Party Transactions
 
 Major Shareholders
  -60-




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##### Table of Contents



Number of
    
    Percent ofIdentity of Person or Groups
    
    Shares
    
    Class (1)China
Telecommunications Broadcast Satellite Corporation (2) (3)
    
    
    67,200,000
    
    
    
    16.26
    %China
Aerospace Science & Technology Corporation (2) (4)
    
    
    36,600,000
    
    
    
    8.86
    %CASIL Satellite Holdings Limited (2)
(5)
    
    
    45,000,000
    
    
    
    10.89
    %SingaSat PTE Ltd. (2) (6)
    
    
    84,000,000
    
    
    
    20.33
    %Kwang Hua Development and Investment
Limited (2) (7)
    
    
    30,600,000
    
    
    
    7.40
    %Sinolike Investments Limited (5)
    
    
    16,800,000
    
    
    
    4.07
    %APT Satellite International Company
Limited (2)
    
    
    214,200,000
    
    
    
    51.83
    %All Directors and Officers as a Group (17
persons)
    
    
    5,000
    
    
    
    *
 
 *
    
    Less than 1%(1)
    
    As of March 31, 2006, the total number of issued Ordinary Shares is 413,265,000.(2)
    
    The Principal Shareholders collectively hold in aggregate underlying ownership interests of
51.83% indirectly through APT Satellite International Company Limited (APT International),
which holds 214,200,000 Ordinary Shares. The interest of each Principal Shareholder in APT
International as of December 31, 2004 is: ChinaSat
    
    200 shares
    
    
    28.57
    %China Aerospace Science & Technology Corporation
    
    100 shares
    
    
    14.28
    %CASIL Satellite Holdings Ltd.
    
    100 shares
    
    
    14.28
    %SingaSat Pte. Ltd.
    
    200 shares
    
    
    28.57
    %Kwang Hua Development and Investment Ltd.
    
    100 shares
    
    
    14.28
    %
 (3)
    
    China Telecommunications Broadcast Satellite Corporation (ChinaSat) is a PRC state-owned
enterprise under the supervision of the MII. ChinaSat is the satellite operation arm of the
MII. ChinaSat directly owns 6,000,000 Shares and indirectly owns, through its shareholdings
in APT International, 61,200,000 Shares.(4)
    
    China Aerospace Science & Technology Corporation (China Aerospace), formerly China
Aerospace Corporation or the PRC Ministry of Aerospace Industry, is a PRC state-owned
enterprise. China Aerospace is engaged in the research, design, testing and manufacturing of
launch vehicles and satellites. China Aerospace also supervises and controls China Great Wall
Industry Corporation, which is responsible for the sale to foreign customers of commercial
launch services effected by Long March launch vehicles. China Aerospace directly owns
6,000,000 Shares and indirectly owns, through its shareholdings in APT International,
30,600,000 Shares.(5)
    
    Chia Tai International Telecommunication Company Limited (Chia Tai) was wholly-owned by
Telecom Holding Company Limited (Telecom Holding), which managed the investment in the
Company of Telecom Asia Corporation Public Company Limited (TelecomAsia), a publicly listed
company in Thailand. Telecom Holding disposed of its Chai Tai holdings in the Company to
Sinolike Investment Limited (Sinolike) through a share transaction agreement on October 16,
1997. Chia Tai was renamed as CASIL Satellite Holdings Limited (CASIL Satellite) on May 6,
1998. Sinolike is a wholly owned subsidiary of China Aerospace International Holdings Limited
(CASIL), which is a conglomerate listed in Hong Kong and is a 41.86% owned subsidiary of
China Aerospace. CASIL Satellite directly owns 14,400,000 Shares and indirectly owns, through
its shareholdings in APT International, 30,600,000 Shares. Sinolike also directly owns
16,800,000 Shares.(6)
    
    SingaSat PTE Ltd. (SingaSat) is wholly-owned by Singapore Telecommunications Limited
(SingTel). SingTel is a telecommunications operating company and a holding company for over
forty subsidiaries which
 -61-




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##### Table of Contents



provide a wide range of domestic, international and mobile
telecommunications as well as postal services. SingTel is a publicly listed company in
Singapore. SingaSat directly owns 22,800,000 Shares and indirectly owns, through its
shareholdings in APT International, 61,200,000 Shares.(7)
    
    Kwang Hua Development and Investment Limited (Kwang Hua) is a Hong Kong incorporated
venture capital company owned jointly by the Ruentex Group, one of the largest Taiwanese
conglomerates, and China Development, a prominent financial and investment company in Taiwan.
China Development is also an affiliate of the Ruentex Group. Kwang Hua indirectly owns,
through its shareholdings in APT International, 30,600,000 Shares.
   
 Related Party Transactions
     -62-




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-63-




---



##### Table of Contents



Years ended December 31,Note
    
    2003
    
    2004
    
    2005HK$
    
    HK$
    
    HK$Income from provision of satellite
transponder capacity to certain
shareholders and its subsidiary of the
Company
    
    
    (i
    )
    
    
    35,921
    
    
    
    38,259
    
    
    
    36,339Income from provision of satellite
transponder capacity, provision of
satellite-based telecommunications services
and service income to a holding company
and its subsidiaries of a shareholder of the
Company
    
    
    (i
    )
    
    
    19,741
    
    
    
    24,163
    
    
    
    31,335Income from provision of satellite
transponder capacity to a jointly controlled
entity
    
    
    (i
    )
    
    
    6,160
    
    
    
    
    
    
    
    Management fee income from a jointly
controlled entity
    
    (ii)
    
    
    1,121
    
    
    
    480
    
    
    
    480Management fee income from an
associate
    
    (iii)
    
    
    65
    
    
    
    
    
    
    
    Facilities management services
income from a jointly controlled entity
    
    (iv)
    
    
    3,386
    
    
    
    
    
    
    
    Technical support services expenses
to a shareholder of the Company
    
    
    (v
    )
    
    
    75
    
    
    
    
    
    
    
    Management fee expenses to a holding
company of a shareholder of the Company
    
    (vi)
    
    
    2,280
    
    
    
    1,135
    
    
    
    Payments of service fee in connection
with the satellite project to a fellow
subsidiary of a shareholder of the Company
    
    (vii)
    
    
    87,604
    
    
    
    151,895
    
    
    
    138,727Compensation income from a jointly
controlled entity in connection with the
early termination of services and facilities
lease
    
    (viii)
    
    
    13,500
    
    
    
    
    
    
    
    Purchase of certain fixed assets from a
jointly controlled entity
    
    (ix)
    
    
    6,800
    
    
    
    
    
    
    
    
 
 Notes :(i)
    
    The terms and conditions of these transponder capacity utilization agreements are
similar to those contracted with other customers of APT Group.(ii)
    
    Management fee income arose from a reimbursement of cost of service provided to
a jointly controlled entity under the agreement.(iii)
    
    Management fee income from an associate arose from the reimbursement of
expenses paid on behalf of an associate. -64-




---



##### Table of Contents



(iv)
    
    The Directors consider that the facilities management service income is charged
according to the terms and conditions similar to those offered to other customers.(v)
    
    The Directors consider that the technical support services expenses were
charged according to prices and conditions similar to those offered to other customers
by the service provider.(vi)
    
    Management fee expenses arose from a reimbursement of cost of services provided
from the holding company of a shareholder of the Company.(vii)
    
    The Directors consider that the service fee is charged according to prices and
conditions similar to those offered to other customers by the launch service provider.(viii)
    
    As a result of the reorganization of a jointly controlled entity, the jointly
controlled entity early terminated the services and facilities lease agreement and APT
Group received a compensation for the early termination of the agreement. The Directors
consider that the compensation is charged according to prices and conditions similar to
those offered to other customers by the termination.(ix)
    
    As a result of the reorganization of a jointly controlled entity, certain fixed
assets were purchased from the jointly controlled entity. The Directors consider that
the purchase consideration was arrived at after arms length negotiation with reference
to the valuation conducted by an independent valuation company.
  Deposits,
    
    
    
    
    
    
    
    
    
    Rentals received inInterest in jointly
    
    
    
    
    
    
    
    
    
    prepayments and
    
    Payables and
    
    advance andPrepayment
    
    controlled entities
    
    Trade receivables
    
    other receivables
    
    accrued charges
    
    deferred income2004
    
    2005
    
    2004
    
    2005
    
    2004
    
    2005
    
    2004
    
    2005
    
    2004
    
    2005
    
    2004
    
    2005HK$
    
    HK$
    
    HK$
    
    HK$
    
    HK$
    
    HK$
    
    HK$
    
    HK$
    
    HK$
    
    HK$
    
    HK$
    
    HK$Jointly controlled
entities
    
    
    
    
    
    
    
    
    
    
    70,614
    
    
    
    72,576
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Certain shareholders
and its subsidiary
of the Company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,237
    
    
    
    22,992
    
    
    
    
    
    
    
    
    
    
    
    24
    
    
    
    528
    
    
    
    
    
    
    
    Holding company and
its subsidiaries of a
shareholder of the
Company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,226
    
    
    
    390
    
    
    
    
    
    
    
    
    
    
    
    6
    
    
    
    325
    
    
    
    255,105
    
    
    
    236,425A fellow subsidiary
of a
shareholder of the
Company
    
    
    38,454
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 Item 8. Financial Information
  
 Item 9. The Offer and Listing
  -65-




---



##### Table of Contents



High (HK$)
    
    Low (HK$)2001
    
    
    
    4.60
    
    2.202002
    
    
    
    3.60
    
    1.392003
    
    
    
    3.93
    
    1.022004Quarter ended March 31
    
    2.83
    
    2.00Quarter ended June 30
    
    2.30
    
    1.65Quarter ended September 30
    
    1.80
    
    1.39Quarter ended December 31
    
    1.52
    
    1.302005Quarter ended March 31
    
    1.50
    
    1.20Quarter ended June 30
    
    1.60
    
    1.28Quarter ended September 30
    
    1.39
    
    1.22Quarter ended December 31
    
    1.49
    
    1.10December
    
    1.49
    
    1.362006January
    
    1.80
    
    1.39February
    
    1.69
    
    1.60March
    
    1.80
    
    1.69April
    
    1.73
    
    1.52May
    
    1.72
    
    1.55
  High (US$)
    
    Low (US$)2001
    
    
    
    4.35
    
    2.152002
    
    
    
    3.60
    
    1.152003
    
    
    
    4.60
    
    1.102004Quarter ended March 31
    
    3.50
    
    1.93Quarter ended June 30
    
    2.15
    
    1.59Quarter ended September 30
    
    1.99
    
    1.32Quarter ended December 31
    
    1.68
    
    1.322005Quarter ended March 31
    
    1.61
    
    1.25Quarter ended June 30
    
    1.42
    
    1.25Quarter ended September 30
    
    1.29
    
    1.18Quarter ended December 31
    
    1.46
    
    1.14December
    
    1.46
    
    1.292006January
    
    1.90
    
    1.32February
    
    1.93
    
    1.60March
    
    1.90
    
    1.73April
    
    1.76
    
    1.56May
    
    1.69
    
    1.51
 -66-




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##### Table of Contents



Item 10. Additional Information
 Memorandum of Association and Bylaws
  Incorporation and Registration Number
  Objects and Purposes
  1)
    
    to act and to perform all the functions of a holding company in all its
branches and to co-ordinate the policy and administration of any subsidiary company or
companies wherever incorporated or carrying on business or of any group of companies of
which the Company or any subsidiary company is a member or which are in any manner
controlled directly or indirectly by the Company;2)
    
    to act as an investment company and for that purpose to acquire and hold upon
any terms and, either in the name of the Company or that of any nominee, shares, stock,
debentures, debenture stock, annuities, notes, mortgages, bonds, obligations and
securities, foreign exchange, foreign currency deposits and commodities, issued or
guaranteed by any company wherever incorporated or carrying on business, or by any
government, sovereign, ruler, commissioners, public body or authority, supreme,
municipal, local or otherwise, by original subscription, tender, purchase, exchange,
underwriting, participation in syndicates or in any other manner and whether or not
fully paid up, and to make payments thereon as called up or in advance of calls or
otherwise and to subscribe for the same, whether conditionally or absolutely, and to
hold the same with a view to investment, but with the power to vary any investments,
and to exercise and enforce all rights and powers conferred by or incident to the
ownership thereof, and to invest and deal with the moneys of the Company not
immediately required upon such securities and in such manner as may be from time to
time determined;3)
    
    as set out in paragraphs (b) to (n) and (p) to (u) inclusive of the Second
Schedule to The Companies Act 1981.
 Directors
  (i)
    
    any contract or arrangement for the giving by the Company or any of its
subsidiaries of any security or indemnity to the Director or his associate(s) in
respect of money lent by him or any of
 -67-




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##### Table of Contents



his associates or obligations incurred or
undertaken by him or any of them at the request of or for the benefit of the Company or
any of its subsidiaries;(ii)
    
    any contract or arrangement for the giving by the Company or any of its
subsidiaries of any security or indemnity to a third party in respect of a debt or
obligation of the Company or any of its subsidiaries for which the Director or his
associate(s) has/have himself/themselves assumed responsibility in whole or in part whether alone or jointly under a guarantee or
indemnity or by the giving of security;(iii)
    
    any contract or arrangement by a Director or his associate(s) to subscribe for
 shares or debentures or other securities of the Company or any of its subsidiaries to
be issued pursuant to any offer or invitation to the members or debenture holders or to
the public which does not provide the Director or his associate(s) any privilege not
accorded to any other members or debenture holders or to the public;(iv)
    
    any contract, arrangement or proposal concerning an offer of the shares or
debentures or other securities of or by the Company or any other company which the
Company may promote or be interested in for subscription or purchase where the Director
or his associate(s) is/are or is/are to be interested as a participant in the
underwriting or sub-underwriting of the offer;(v)
    
    any contract or arrangement in which the Director or his associate(s) is/are
interested in the same manner as other holders of shares or debentures or other
securities of the Company by virtue only of his/their interest in shares or debentures
or other securities of the Company;(vi)
    
    any contract, arrangement or proposal concerning any company in which the
Director or his associate(s) is/are interested only, whether directly or indirectly,
as an officer or executive or a shareholder or in which the Director and any of his
associate(s) are not in aggregate beneficially interested in five (5) per cent or more
of the issued shares or of the voting rights of any class of shares of such company (or
of any third company through which his interest or that of any of his associates is
derived);(vii)
    
    any proposal or arrangement for the benefit of employees of the Company or its
subsidiaries including the adoption, modification or operation of a pension fund or
retirement, death or disability benefit scheme which relates both to directors, his
associates and employees of the Company or of any of its subsidiaries and does not give
the Director, or his associate(s), as such any privilege or advantage not accorded
generally to the class of persons to whom such scheme or fund relates; or(viii)
    
    any proposal concerning the adoption, modification or operation of any share scheme
involving the issue or grant of options over shares or other securities by the Company
to, or for the benefit of the employees of the Company or its subsidiaries under which
the Director or his associate(s) may benefit.
  -68-




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##### Table of Contents



Shareholders Rights
   -69-




---



##### Table of Contents



Actions Necessary to Change Shareholders Rights
  (a)
    
    the necessary quorum (other than at an adjourned meeting) shall be at least two
persons holding or representing by proxy or authorized representative not less than
one-third in nominal value of the issued shares of that class and at any adjourned
meeting of such holders, two holders present in person or by proxy (whatever the number
of shares held by them) shall be a quorum;(b)
    
    every holder of shares of the class shall be entitled on a poll to one vote for
every such share held by him/her; and(c)
    
    any holder of shares of the class present in person or by proxy or authorized
representative may demand a poll.
  -70-




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##### Table of Contents



General Meetings of Shareholders
   Limitation on Foreign Ownership
  Change in Control
  (a)
    
    the instrument of transfer is lodged at the Registration Office or such other
place in Bermuda at which the Register is kept in accordance with the Companies Act or
the Registration Office (as the case may be) accompanied by the relevant share
certificate(s) and such other evidence as the Board may reasonably require to show the
right of the transferor to make the transfer; and(b)
    
    if applicable, the instrument of transfer is duly and properly stamped.
 Ownership Threshold Disclosure
  Significant Differences in Applicable Law
  -71-




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##### Table of Contents



Changes in Capital
  Material Contracts
   
 Exchange Controls and Other Limitations Affecting Security Holders
       -72-




---



##### Table of Contents



Taxation
 .
 Bermuda Taxation
  Hong Kong Taxation
 Tax on Dividends
  Profits Tax
  -73-




---



##### Table of Contents



United States Federal Income Taxation
    The Company
   Taxation of Investor-United States Holders
   -74-




---



##### Table of Contents



Ownership of ADSs and Shares
  Taxation of Dividends
    Taxation of Dispositions of Shares or ADSs
  -75-




---



##### Table of Contents



Passive Foreign Investment Company Rules
      -76-




---



##### Table of Contents



Taxation of Investors-Non-United States Holders
  United States Backup Withholding Tax and Information Reporting
   -77-




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##### Table of Contents



Item 11. Quantitative and Qualitative Disclosures about Market Risk
  
 Interest Rate Risk
   Expected Maturity Date2006
    
    2007
    
    2008
    
    2009
    
    2010
    
    Thereafter(HK$ in million, except interest rates)Variable rate Bank loan
    
    
    121
    
    
    
    159
    
    
    
    220
    
    
    
    256
    
    
    
    273
    
    
    
    98Average interest rate (1)
    
    
    5.965
    %
    
    
    5.935
    %
    
    
    5.98
    %
    
    
    6.00
    %
    
    
    6.02
    %
    
    
    6.02
    %
 
 (1)
    
    The interest rates are the implied future LIBOR rates calculated from US swap as proxy.  
 Exchange Rate Sensitivity
   -78-




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##### Table of Contents



Limitations
  
 Item 12. Description of Securities Other Than Equity Securities
  PART II
 
 Item 13. Defaults, Dividend Arrearages, and Delinquencies
  
 Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
  
 Item 15. Controls and Procedures
 Disclosure Controls and Procedures.
 Internal Control Over Financial Reporting.
 
 Item 16A. Audit Committee Financial Expert
  
 Item 16B. Code of Ethics
  -79-




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##### Table of Contents



Item 16C. Principal Accountant Fees and Services
  Years ended December 31,(in US$ thousands)
    
    2004
    
    
    2005Audit fees
    
    
    103
    
    
    
    111All other fees
    
    
    1
    
    
    
    Total
    
    
    104
    
    
    
    111
   
 Item 16D. Exemption from the Listing Standards for Audit Committees
  
 Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  PART III
 
 Item 17. Financial Statements
  
 Item 18. Financial Statements
   -80-




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##### Table of Contents



Item 19. Exhibits.
 Exhibit No.
    
    Description of Exhibit3.2
    
    The amended Memorandum of Association and Bye-Laws of APT Satellite Holdings Limited which
was adopted at the Companys annual general meeting on May 20, 2004.4.1
    
    Satellite Procurement Agreement by and between APT Satellite Company Limited, a wholly owned
subsidiary of the Company, and Contractor, an independent third party not associated with the
Directors, chief executive officer and major shareholders of the Company or any of its
subsidiaries, dated January 8, 2001 (incorporated by reference to the Companys 6-K filed with
the Commission on January 9, 2001).4.2
    
    Launch Agreement by and between APT Satellite Company Limited, a wholly owned subsidiary of
the Company, and the Launch Contractor, a subsidiary of China Aerospace Science & Technology
Corporation, dated January 8, 2001 (incorporated by reference to the Companys 6-K filed with
the Commission on January 9, 2001).4.3
    
    Satellite Procurement Agreement by and between APT Satellite Company Limited, a wholly owned
subsidiary of the Company, and Contractor, an independent third party not associated with the
Directors, chief executive officer and major shareholders of the Company or any of its
subsidiaries, dated December 11, 2001 (incorporated by reference to the Companys 6-K filed
with the Commission on December 18, 2001).4.4
    
    Term Sheet executed by and between APT Satellite Company Limited, a wholly owned subsidiary
of the Company, Contractor and Loral Orion, Inc., both of which are independent third party
not associated with the Directors, chief executive officer and major shareholders of the
Company or any of its subsidiaries, dated September 20, 2002 (incorporated by reference to the
Companys 6-K filed with the Commission on September 30, 2002).4.5
    
    Transponder Utilization Agreement by and between APT Satellite Company Limited, a wholly
owned subsidiary of the Company, and Lessee, a connected person under the rules governing the
listing of securities on The Stock Exchange of Hong Kong Limited, dated April 11, 2003
(incorporated by reference to the Companys 6-K filed with the Commission on April 16, 2003).4.6
    
    Change of Auditors of the Company KPMG with effect from July 15, 2003 (incorporated by
reference to the Companys 6-K filed with the Commission on July 17, 2003).4.7
    
    Satellite Procurement Amendment Agreement by and between APT Satellite Company Limited, a
wholly owned subsidiary of the Company, and the Contractor, a party independent of the
Director, chief executive officer and substantial shareholder of the Company and its
subsidiaries and their respective associates, dated August 26, 2003. The Satellite
Transponder Agreement and Satellite Agreement by and between APT Satellite Company Limited, a
wholly owned subsidiary of the Company, and the lessor, a party independent of the Director,
chief executive officer and substantial shareholder of the Company and its subsidiaries and
their respective associates, dated August 26, 2003 (incorporated by reference to the
Companys 6-K filed with the Commission on September 2, 2003).4.8
    
    Various on-going transactions in their ordinary course of business had entered into between
the APT Group of the Company and APT Telecom, a non-wholly owned subsidiary of the Company,
and the contracting party, a connected person under the rules governing the listing of
securities on The Stock Exchange of Hong Kong Limited, as announced August 28, 2003
(incorporated by reference to the Companys 6-K filed with the Commission on September 2,
2003).4.9
    
    Master Agreement by and between APT Satellite Telecommunications Limited, a non-wholly owned
subsidiary of the Company, Skywork Corporation, a wholly owned subsidiary of the Company, APT
Telecom Services Limited, a wholly owned subsidiary of the Company, and a connected person
under the rules governing the listing of securities on The Stock Exchange of Hong Kong
Limited, dated September 10, 2003 whereby the business of APT Satellite
 -81-




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##### Table of Contents



Exhibit No.
    
    Description of ExhibitTelecommunications Limited was being reorganized (incorporated by reference to the
Companys 6-K filed with the Commission on September 15, 2003).4.10
    
    The Agreement and the Amended Launch Agreement by and between APT Satellite Company Limited,
a wholly owned subsidiary of the Company, and the Contractor of APSTAR V, dated November 16,
2003 (incorporated by reference to the Companys 6-K filed with the Commission on September
17, 2003).4.11
    
    An utilization agreement for the remaining life of APSTAR I by and between APT Satellite
Company Limited, a wholly owned subsidiary of the Company, and the customer, dated October 22,
2004 (incorporated by reference to the Companys 6-K filed with the Commission on October 29,
2004).4.12
    
    An agreement by and between APT Satellite Company Limited, a wholly owned subsidiary of the
Company, and the grantor and contractor of APSTAR VIB dated November 10, 2004 (incorporated by
reference to the Companys 6-K filed with the Commission on November 15, 2004).4.13
    
    Two Master Agreements by and between the Company and Singapore Telecommunications Limited;
and the Company and C2C Pte Limited dated December 1, 2004 (incorporated by reference to the
Companys 6-K filed with the Commission on December 3, 2004).8.1
    
    List of subsidiaries and the jurisdictions under which each does business (contained in Note
1 to the Consolidated Financial Statements in Item 18 herein).8.2**
    
    Financial statements of APT Satellite Telecommunications Limited14.1*
    
    Amended Charter of the Audit Committee.14.2*
    
    Charter of the Nomination Committee14.3*
    
    Charter of the Remuneration Committee99.1**
    
    Certification of CEO99.2**
    
    Certification of CFO99.3**
    
    Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.99.4**
    
    Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.99.5**
    
    Updated significant Differences in Corporate Governance Practices.
 
 *
    
    Exhibit is incorporated by reference to the exhibit of the
same number in the Companys 20-F filed with the Commission on June 29, 2005.**
    
    Filed herewith. -82-




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##### Table of Contents



SIGNATURES
  APT SATELLITE HOLDINGS LIMITED
 /s/
Ni
Yifeng
  -83-




---



##### Table of Contents



APT SATELLITE HOLDINGS LIMITED AND SUBSIDIARIES




---



##### Table of Contents



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Report of Independent Registered Public Accounting Firm
    
    
    F - 2Consolidated Balance Sheets as of December 31, 2004 and 2005
    
    
    F - 3 & 4Consolidated Statements of Operations for the years ended December 31, 2003, 2004 and 2005
    
    
    F - 5Consolidated Statements of Changes in Equity for the years ended December 31, 2003, 2004 and 2005
    
    
    F - 6Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2004 and 2005
    
    
    F - 7 & 8Notes to the Consolidated Financial Statements
    
    
    F - 9  65




---



##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 
 
 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
       
 F- 2




---



##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 
 CONSOLIDATED BALANCE SHEETS
 AS OF DECEMBER 31, 2004 AND 2005
  December 31,Note
    
    2004
    
    2005
    
    2005(restated)HK$
    
    HK$
    
    US$ASSETSCurrent assetsCash and cash equivalents
    
    
    
    
    
    
    673,763
    
    
    
    326,440
    
    
    
    41,852Pledged bank deposits
    
    
    10
    
    
    
    21,140
    
    
    
    68,699
    
    
    
    8,807Trade receivables, less allowance of HK$9,874
in 2004 and HK$10,291 in 2005
    
    
    
    
    
    
    45,753
    
    
    
    49,730
    
    
    
    6,375Amount due from a jointly controlled entitiy
    
    
    
    
    
    
    2,700
    
    
    
    5,100
    
    
    
    654Deposits, prepayments and other receivables, less
allowance of HK$10,219 in 2004 and
HK$10,219 in 2005
    
    
    
    
    
    
    23,191
    
    
    
    35,918
    
    
    
    4,605Total current assets
    
    
    
    
    
    
    766,547
    
    
    
    485,887
    
    
    
    62,293Property, plant and equipment, net
    
    
    5
    
    
    
    2,680,330
    
    
    
    2,999,402
    
    
    
    384,539Interest in leasehold land held forOwn use under an operating lease
    
    
    6
    
    
    
    15,945
    
    
    
    15,570
    
    
    
    1,996Investment property
    
    
    7
    
    
    
    2,340
    
    
    
    2,340
    
    
    
    300Interest in jointly controlled entities
    
    
    8Share of net assets
    
    
    
    
    
    
    10,226
    
    
    
    2,241
    
    
    
    288Amounts due from a jointly controlled entity
    
    
    
    
    
    
    67,914
    
    
    
    67,476
    
    
    
    8,651Prepayment for construction of a satellite
    
    
    9
    
    
    
    38,454
    
    
    
    
    
    
    
    Other assets
    
    
    
    
    
    
    28,902
    
    
    
    37,764
    
    
    
    4,842Deferred tax assets
    
    
    19
    
    
    
    10,134
    
    
    
    3,609
    
    
    
    461TOTAL ASSETS
    
    
    
    
    
    
    3,620,792
    
    
    
    3,614,289
    
    
    
    463,370
  F- 3




---



##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 CONSOLIDATED BALANCE SHEETS (continued)
AS OF DECEMBER 31, 2004 AND 2005
 December 31,Note
    
    2004
    
    2005
    
    2005(restated)HK$
    
    HK$
    
    US$LIABILITIES AND EQUITYCurrent liabilitiesPayables and accrued charges
    
    
    13
    
    
    
    45,139
    
    
    
    51,593
    
    
    
    6,614Rentals received in advance
    
    
    
    
    
    
    30,652
    
    
    
    31,414
    
    
    
    4,027Loan from a minority shareholder
    
    
    
    
    
    
    7,488
    
    
    
    7,488
    
    
    
    960Income taxes payable
    
    
    19
    
    
    
    84,768
    
    
    
    89,186
    
    
    
    11,434Bank loans  current portion
    
    
    10
    
    
    
    64,778
    
    
    
    117,757
    
    
    
    15,098Total current liabilities
    
    
    
    
    
    
    232,825
    
    
    
    297,438
    
    
    
    38,133Deposits received
    
    
    11
    
    
    
    12,607
    
    
    
    15,986
    
    
    
    2,049Bank loans  non-current portion
    
    
    10
    
    
    
    904,762
    
    
    
    1,000,302
    
    
    
    128,244Deferred income
    
    
    12
    
    
    
    261,380
    
    
    
    239,011
    
    
    
    30,643Deferred tax liabilities
    
    
    19
    
    
    
    12,209
    
    
    
    
    
    
    
    TOTAL LIABILITIES
    
    
    
    
    
    
    1,423,783
    
    
    
    1,552,737
    
    
    
    199,069Contingencies and commitments
    
    
    14Shareholders equityCapital stock  Common stock
    
    
    15
    
    
    
    41,327
    
    
    
    41,327
    
    
    
    5,299Additional paid-in capital
    
    
    16
    
    
    
    1,798,536
    
    
    
    1,798,536
    
    
    
    230,581Capital reserve
    
    
    
    
    
    
    23,964
    
    
    
    11,996
    
    
    
    1,538Translation reserve
    
    
    
    
    
    
    (20
    )
    
    
    1,347
    
    
    
    173Other reserves
    
    
    16
    
    
    
    102
    
    
    
    104
    
    
    
    13Retained earnings
    
    
    
    
    
    
    329,244
    
    
    
    205,315
    
    
    
    26,3222,193,153
    
    
    
    2,058,625
    
    
    
    263,926Minority interests
    
    
    
    
    
    
    3,856
    
    
    
    2,927
    
    
    
    375TOTAL LIABILITIES AND
EQUITY
    
    
    
    
    
    
    3,620,792
    
    
    
    3,614,289
    
    
    
    463,370
  F- 4




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
  Years ended December 31,Note
    
    2003
    
    2004
    
    2005
    
    2005(restated)
    
    (restated)HK$
    
    HK$
    
    HK$
    
    US$Operating revenuesProvision of satellite transponder capacity to:Unaffiliated customers
    
    
    
    
    
    
    212,830
    
    
    
    168,611
    
    
    
    243,228
    
    
    
    31,183Related parties
    
    
    20
    
    
    
    61,822
    
    
    
    58,267
    
    
    
    47,455
    
    
    
    6,084Provision of satellite-based telecommunications services to:Unaffiliated customers
    
    
    
    
    
    
    16,403
    
    
    
    37,665
    
    
    
    25,333
    
    
    
    3,248Related parties
    
    
    20
    
    
    
    
    
    
    
    1,018
    
    
    
    20,219
    
    
    
    2,592Service income received from:Unaffiliated customers
    
    
    
    
    
    
    6,614
    
    
    
    8,562
    
    
    
    277
    
    
    
    36Related parties
    
    
    20
    

    
    
    4,572
    
    
    
    3,137
    
    
    
    Total revenues
    
    
    
    
    
    
    302,241
    
    
    
    277,260
    
    
    
    336,512
    
    
    
    43,143Costs and expensesCost of service including depreciation
and amortization of 2003: HK$236,027,
2004: HK$177,692 and 2005: HK$197,880
    
    
    
    
    
    
    (280,319
    )
    
    
    (244,755
    )
    
    
    (301,193
    )
    
    
    (38,615
    )Selling, general and administrative including
depreciation and amortization of 2003: HK$295,
2004: HK$300 and 2005: HK$301
    
    
    
    
    
    
    (73,994
    )
    
    
    (78,680
    )
    
    
    (77,199
    )
    
    
    (9,897
    )Total costs and expenses
    
    
    
    
    
    
    (354,313
    )
    
    
    (323,435
    )
    
    
    (378,392
    )
    
    
    (48,512
    )(52,072
    )
    
    
    (46,175
    )
    
    
    (41,880
    )
    
    
    (5,369
    )Other operating revenuesInterest income  net
    
    
    
    
    
    
    7,111
    
    
    
    7,312
    
    
    
    12,916
    
    
    
    1,656Compensation income for late delivery
of the satellite
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,600
    
    
    
    2,000Other income
    
    
    
    
    
    
    25,928
    
    
    
    2,020
    
    
    
    2,315
    
    
    
    297(Deficit)/surplus arising on revaluation of
investment property
    
    
    7
    
    
    
    (70
    )
    
    
    78
    
    
    
    
    
    
    
    Impairment loss recognized in respect
of property, plant and equipment
    
    
    5
    
    
    
    (129,098
    )
    
    
    (1,800
    )
    
    
    (7,512
    )
    
    
    (963
    )Impairment
loss recognized in respect of prepayment for construction of a satellite
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59,904
    )
    
    
    (7,680
    )Gain on partial disposal of an associate
    
    
    
    
    
    
    12
    
    
    
    
    
    
    
    Loss from operations
    
    
    21
    (d)
    
    
    (148,189
    )
    
    
    (38,565
    )
    
    
    (78,465
    )
    
    
    (10,059
    )Borrowing costs
    
    
    21
    (b)
    
    
    
    
    
    
    (4,117
    )
    
    
    (36,942
    )
    
    
    (4,736
    )Share of losses of jointly controlled entities
    
    
    
    
    
    
    (57,133
    )
    
    
    (2,709
    )
    
    
    (7,995
    )
    
    
    (1,025
    )Loss before income taxes
    
    
    
    
    
    
    (205,322
    )
    
    
    (45,391
    )
    
    
    (123,402
    )
    
    
    (15,820
    )Provision for income taxes
    
    
    18
    
    
    
    (11,721
    )
    
    
    (16,625
    )
    
    
    (13,172
    )
    
    
    (1,689
    )Loss for the year
    
    
    
    
    
    
    (217,043
    )
    
    
    (62,016
    )
    
    
    (136,574
    )
    
    
    (17,509
    )Attributable to:Equity shareholders of the Company
    
    
    
    
    
    
    (216,120
    )
    
    
    (59,957
    )
    
    
    (135,564
    )
    
    
    (17,380
    )Minority interests
    
    
    
    
    
    
    (923
    )
    
    
    (2,059
    )
    
    
    (1,010
    )
    
    
    (129
    )Loss for the year
    
    
    
    
    
    
    (217,043
    )
    
    
    (62,016
    )
    
    
    (136,574
    )
    
    
    (17,509
    )Loss per share- Basic
    
    
    
    
    
    (52 cents)
    
    (15 cents)
    
    (33 cents)
    
    (4 cents)- Diluted
    
    
    
    
    
    (52 cents)
    
    (15 cents)
    
    (33 cents)
    
    (4 cents)
  F- 5




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 
 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
 FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
  AdditionalCapital
    
    
    paid -in
    
    
    Capital
    
    
    Revaluation
    
    
    Translation
    
    
    Other
    
    
    Retained
    
    
    
    
    
    
    Minoritystock
    
    
    capital
    
    
    reserve
    
    
    reserve
    
    
    reserve
    
    
    reserves
    
    
    earnings
    
    
    Total
    
    
    interests
    
    
    Total equityNote
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$Balance as
at January 1, 2003
    
    
    
    
    
    
    41,254
    
    
    
    1,794,520
    
    
    
    
    
    
    
    
    
    
    
    182
    
    
    
    94
    
    
    
    632,261
    
    
    
    2,468,311
    
    
    
    
    
    
    
    2,468,311Minority interests (as
previously presented
separately from liabilities
and equity at 31 December)
    
    
    4
    (d)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,838
    
    
    
    6,838Prior period adjustments
arising from changes in
accounting policies under:- HKFRS 2 share-based payment
    
    
    4
    (a)
    
    
    
    
    
    
    
    
    
    
    38,031
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,392
    )
    
    
    7,639
    
    
    
    
    
    
    
    7,639At 1 January 2003 (Restated)
    
    
    
    
    
    
    41,254
    
    
    
    1,794,520
    
    
    
    38,031
    
    
    
    
    
    
    
    182
    
    
    
    94
    
    
    
    601,869
    
    
    
    2,475,950
    
    
    
    6,838
    
    
    
    2,482,788Shares issued under the share
option scheme
    
    
    
    
    
    
    73
    
    
    
    4,016
    
    
    
    (10,607
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,518
    )
    
    
    
    
    
    
    (6,518
    )Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (282
    )
    
    
    
    
    
    
    
    
    
    
    (282
    )
    
    
    
    
    
    
    (282
    )Transfer to other reserves
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    (8
    )
    
    
    
    
    
    
    
    
    
    
    Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (216,120
    )
    
    
    (216,120
    )
    
    
    (923
    )
    
    
    (217,043
    )Balance at 31 December 2003
(Restated)
    
    
    
    
    
    
    41,327
    
    
    
    1,798,536
    
    
    
    27,424
    
    
    
    
    
    
    
    (100
    )
    
    
    102
    
    
    
    385,741
    
    
    
    2,253,030
    
    
    
    5,915
    
    
    
    2,258,945At 1 January 2004 as
previously reported
    
    
    
    
    
    
    41,327
    
    
    
    1,796,466
    
    
    
    
    
    
    
    7,700
    
    
    
    (100
    )
    
    
    102
    
    
    
    407,535
    
    
    
    2,253,030
    
    
    
    
    
    
    
    2,253,030Minority interests (as
previously presented
separately from liabilities
and equity at 31 December)
    
    
    4
    (d)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,915
    
    
    
    5,915Prior period adjustments
arising from changes in
accounting policies under:- HKAS 40 investment properties
    
    
    4
    (b)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,700
    )
    
    
    
    
    
    
    
    
    
    
    7,700
    
    
    
    
    
    
    
    
    
    
    
    - HKFRS 2 share-based payment
    
    
    4
    (a)
    
    
    
    
    
    
    2,070
    
    
    
    27,424
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,494
    )
    
    
    
    
    
    
    
    
    
    
    At 1 January 2004 (Restated)
    
    
    
    
    
    
    41,327
    
    
    
    1,798,536
    
    
    
    27,424
    
    
    
    
    
    
    
    (100
    )
    
    
    102
    
    
    
    385,741
    
    
    
    2,253,030
    
    
    
    5,915
    
    
    
    2,258,945Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    
    
    
    
    80Cancellation of share options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,460
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,460
    
    
    
    
    
    
    
    
    
    
    
    Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59,957
    )
    
    
    (59,957
    )
    
    
    (2,059
    )
    
    
    (62,016
    )Balance at 31 December 2004
(Restated)
    
    
    
    
    
    
    41,327
    
    
    
    1,798,536
    
    
    
    23,964
    
    
    
    
    
    
    
    (20
    )
    
    
    102
    
    
    
    329,244
    
    
    
    2,193,153
    
    
    
    3,856
    
    
    
    2,197,009At 1 January 2005 as
previously reported
    
    
    
    
    
    
    41,327
    
    
    
    1,796,466
    
    
    
    
    
    
    
    5,500
    
    
    
    (20
    )
    
    
    102
    
    
    
    349,778
    
    
    
    2,193,153
    
    
    
    
    
    
    
    2,193,153Minority interests (as
previously presented
separately from liabilities
and equity at 31 December)
    
    
    4
    (d)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,856
    
    
    
    3,856Prior period adjustments
arising from changes in
accounting policies under:- HKSA 39 financial instruments
    
    
    4
    (e)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (333
    )
    
    
    (333
    )
    
    
    
    
    
    
    (333
    )- HKAS 40 investment properties
    
    
    4
    (b)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,500
    )
    
    
    
    
    
    
    
    
    
    
    5,500
    
    
    
    
    
    
    
    
    
    
    
    - HKFRS 2 share-based payment
    
    
    4
    (a)
    
    
    
    
    
    
    2,070
    
    
    
    23,964
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,034
    )
    
    
    
    
    
    
    
    
    
    
    At 1 January 2005 (Restated)
    
    
    
    
    
    
    41,327
    
    
    
    1,798,536
    
    
    
    23,964
    
    
    
    
    
    
    
    (20
    )
    
    
    102
    
    
    
    328,911
    
    
    
    2,192,820
    
    
    
    3,856
    
    
    
    2,196,676Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,367
    
    
    
    2
    
    
    
    
    
    
    
    1,369
    
    
    
    81
    
    
    
    1,450Cancellation of share options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,968
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,968
    
    
    
    
    
    
    
    
    
    
    
    Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (135,564
    )
    
    
    (135,564
    )
    
    
    (1,010
    )
    
    
    (136,574
    )Balance at 31 December 2005
    
    
    
    
    
    
    41,327
    
    
    
    1,798,536
    
    
    
    11,996
    
    
    
    
    
    
    
    1,347
    
    
    
    104
    
    
    
    205,315
    
    
    
    2,058,625
    
    
    
    2,927
    
    
    
    2,061,552
  F- 6




---



##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
  Years ended December 31,2003
    
    2004
    
    2005
    
    2005(restated)
    
    (restated)HK$
    
    HK$
    
    HK$
    
    US$Operating activitiesLoss before income taxes
    
    
    (205,322
    )
    
    
    (45,391
    )
    
    
    (123,402
    )
    
    
    (15,820
    )Adjustments for:Depreciation
    
    
    235,947
    
    
    
    177,617
    
    
    
    197,806
    
    
    
    25,360Amortisation of leasehold land held for own use
    
    
    375
    
    
    
    375
    
    
    
    375
    
    
    
    48Impairment loss recognized in respect of property,
property, plant and equipment
    
    
    129,098
    
    
    
    1,800
    
    
    
    7,512
    
    
    
    963Impairment loss recognised in respect of prepayment for
construction of a satellite
    
    
    
    
    
    
    
    
    
    
    59,904
    
    
    
    7,680Gain on partial disposal of an associate
    
    
    (12
    )
    
    
    
    
    
    
    
    
    
    
    Interest income
    
    
    (7,111
    )
    
    
    (7,312
    )
    
    
    (12,916
    )
    
    
    (1,656
    )Borrowing cost
    
    
    
    
    
    
    4,117
    
    
    
    36,942
    
    
    
    4,736Loss/(gain) on disposal of property, plant and equipment
    
    
    
    
    
    
    32
    
    
    
    (109
    )
    
    
    (14
    )Deficit/(surplus) arising on revaluation of investment property
    
    
    70

    
    
    
    (78
    )

    
    
    
    

    
    
    Share of losses of jointly controlled entities
    
    
    57,133
    
    
    
    2,709
    
    
    
    7,995
    
    
    
    1,025Share-based payment
    
    
    (898
    )
    
    
    
    
    
    
    
    
    
    
    Allowance for doubtful receivables
    
    
    8,402
    
    
    
    5,654
    
    
    
    350
    
    
    
    45Operating profit before changes in working capital
    
    
    217,682
    
    
    
    139,523
    
    
    
    174,457
    
    
    
    22,367(Increase)/decrease in trade receivables
    
    
    (47,055
    )
    
    
    16,957
    
    
    
    (4,393
    )
    
    
    (563
    )(Increase) in other assets
    
    
    (87
    )
    
    
    (27,604
    )
    
    
    (8,863
    )
    
    
    (1,136
    )(Increase)/decrease in amount due from immediate
holding company
    
    
    (20
    )
    
    
    20
    
    
    
    
    
    
    
    (Increase)/decrease in deposits, prepayments and other
receivables
    
    
    (240
    )
    
    
    16,815
    
    
    
    19,293
    
    
    
    2,472(Decrease)/increase in payables and accrued charges
    
    
    (955
    )
    
    
    (8,939
    )
    
    
    1,400
    
    
    
    178(Decrease)/increase in rentals received in advance
    
    
    (13,789
    )
    
    
    9,691
    
    
    
    762
    
    
    
    98(Increase)/decrease in amounts due from jointly controlled
entities
    
    
    (12,731
    )
    
    
    (768
    )
    
    
    300
    
    
    
    39Decrease in amount due from an associate
    
    
    209
    
    
    
    
    
    
    
    
    
    
    
    (Decrease)/increase in deferred income
    
    
    (22,286
    )
    
    
    233,499
    
    
    
    3,379
    
    
    
    433(Decrease) in deposits received
    
    
    (1,582
    )
    
    
    (25,353
    )
    
    
    (22,369
    )
    
    
    (2,867
    )Cash generated from operations
    
    
    119,146
    
    
    
    353,841
    
    
    
    163,966
    
    
    
    21,021Hong Kong profits tax paid
    
    
    (9,541
    )
    
    
    (108,135
    )
    
    
    
    
    
    
    Overseas tax paid
    
    
    (18,313
    )
    
    
    (12,328
    )
    
    
    (14,438
    )
    
    
    (1,851
    )Net cash from operating activities
    
    
    91,292
    
    
    
    233,378
    
    
    
    149,528
    
    
    
    19,170Investing activitiesPayment for purchase of property, plant and equipment and
construction of satellites
    
    
    (763,454
    )
    
    
    (462,026
    )
    
    
    (581,230
    )
    
    
    (74,517
    )Proceeds from partial disposal of an associate
    
    
    12
    
    
    
    
    
    
    
    
    
    
    
    Proceeds from disposal of property, plant and equipment
    
    
    1
    
    
    
    1
    
    
    
    178
    
    
    
    23Advances/loans to jointly controlled entities
    
    
    (40,920
    )
    
    
    
    
    
    
    (2,261
    )
    
    
    (290
    )Interest received
    
    
    9,279
    
    
    
    6,810
    
    
    
    13,404
    
    
    
    1,718Decrease/(increase) in pledged bank deposits
    
    
    205,823
    
    
    
    90,723
    
    
    
    (47,559
    )
    
    
    (6,097
    )Net cash used in investing activities
    
    
    (589,259
    )
    
    
    (364,492
    )
    
    
    (617,468
    )
    
    
    (79,163
    )
  F- 7




---



##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 CONSOLIDATED STATEMENTS OF CASH FLOWS  continued
FOR THE YEARS ENDED DECEMBER 31, 2003, 2004 AND 2005
 Years ended December 31,2003
    
    2004
    
    2005
    
    2005HK$
    
    HK$
    
    HK$
    
    US$Financing activitiesInterest paid
    
    
    (3,681
    )
    
    
    (15,847
    )
    
    
    (32,582
    )
    
    
    (4,177
    )New bank borrowings
    
    
    538,200
    
    
    
    273,780
    
    
    
    229,320
    
    
    
    29,400Repayment of bank borrowings
    
    
    (317,682
    )
    
    
    
    
    
    
    (77,805
    )
    
    
    (9,975
    )Proceeds from shares issued under the share option scheme
    
    
    2,019
    
    
    
    
    
    
    
    
    
    
    
    Net cash from financing activities
    
    
    218,856
    
    
    
    257,933
    
    
    
    118,933
    
    
    
    15,248Net (decrease)/increase in cash and cash equivalents
    
    
    (279,111
    )
    
    
    126,819
    
    
    
    (349,007
    )
    
    
    (44,745
    )Cash and cash equivalents at January 1,
    
    
    826,257
    
    
    
    546,864
    
    
    
    673,763
    
    
    
    86,380Effect of foreign exchange rate changes
    
    
    (282
    )
    
    
    80
    
    
    
    1,684
    
    
    
    216Cash and cash equivalents at December 31,
    
    
    546,864
    
    
    
    673,763
    
    
    
    326,440
    
    
    
    41,851Analysis of the balance of cash and cash equivalents:Deposits with banks
    
    
    539,916
    
    
    
    661,677
    
    
    
    316,685
    
    
    
    40,601Cash at bank and in hand
    
    
    6,948
    
    
    
    12,086
    
    
    
    9,755
    
    
    
    1,250Cash and cash equivalents at December 31,
    
    
    546,864
    
    
    
    673,763
    
    
    
    326,440
    
    
    
    41,851
  F- 8




---



##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  1.
    
    ORGANIZATION AND PRINCIPAL ACTIVITIESAPT Satellite Holdings Limited (the Company) was incorporated under the laws of Bermuda on
October 17, 1996 with limited liability. The Company owns all the issued shares of APT
Satellite Investment Company Limited, which, in turn, holds all the issued voting shares of
APT Satellite Company Limited.The Company and its subsidiaries (hereafter collectively referred to as the Group)
currently operate five satellites. The Companys first satellite, APSTAR I, was launched in
July 1994 and commenced commercial service in September 1994. After the commencement of
commercial service of APSTAR V, APSTAR I was operated in an inclined orbital mode in October
2004. The Companys second satellite, APSTAR IA, was launched in July 1996 and commenced
commercial service in September 1996. The Companys third satellite, APSTAR IIR, was
launched in October 1997 and commenced commercial service in January 1998. In August 1999, the Company provided substantially all of the transponders of
APSTAR IIR to a third party for the rest of its life. The Companys
fourth satellite, APSTAR V, was launched in June 2004 and commenced commercial service in
August 2004. In April 2005, the Companys fifth
satellite, APSTAR VI, was successfully launched and commenced commercial service in June
2005. Both APSTAR I and APSTAR 1A were operated in an inclined orbital mode.The following list contains only the particulars of subsidiaries which principally affected
the results, assets or liabilities of the Group. The class of shares held is ordinary
unless otherwise stated.All of these are controlled subsidiaries and have been consolidated into the Group financial
statements.
 F- 9




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    ORGANIZATION AND PRINCIPAL ACTIVITIES (continued)
 Proportion of ownership interestPlace of
    
    Particulars of issued and
    
    Groupsincorporation
    
    paid up capital and debt
    
    effective
    
    held by the
    
    held byName of Company
    
    and operation*
    
    securities
    
    interest
    
    Company
    
    subsidiary
    
    Principal activitiesAPT Satellite Investment
Company Limited
    
    British Virgin Islands
    
    US$1,400
    
    
    100
    %
    
    
    100
    %
    
    
    
    
    
    Investment holdingAcme Star Investment Limited
    
    Hong Kong
    
    HK$2
    
    
    100
    %
    
    
    
    
    
    
    100
    %
    
    InactiveAPT Satellite Company Limited
(APT)
    
    Hong Kong
    
    Ordinary Class A
HK$100; Non-voting
Deferred Class B
HK$542,500,000
    
    
    100
    %
    
    
    
    
    
    
    100
    %
    
    Provision of
satellite
transponder
capacityAPT Satellite Enterprise Limited
    
    Cayman Islands
    
    US$2
    
    
    100
    %
    
    
    
    
    
    
    100
    %
    
    Provision of
satellite
transponder
capacityAPT Satellite Global Company
Limited
    
    Cayman Islands
    
    US$2
    
    
    100
    %
    
    
    
    
    
    
    100
    %
    
    Investment holdingAPT Satellite Link Limited
    
    Cayman Islands
    
    US$2
    
    
    100
    %
    
    
    
    
    
    
    100
    %
    
    Provision of
satellite
transponder
capacityAPT Satellite Telewell Limited
    
    Hong Kong
    
    HK$2
    
    
    100
    %
    
    
    
    
    
    
    100
    %
    
    InactiveAPT Satellite TV Development
Limited
    
    Hong Kong
    
    HK$2
    
    
    100
    %
    
    
    
    
    
    
    100
    %
    
    Provision of
satellite
television uplink
and downlink
servicesAPT Satellite Vision Limited
    
    Hong Kong
    
    HK$2
    
    
    100
    %
    
    
    
    
    
    
    100
    %
    
    Satellite leasingAPT Telecom Services Limited
    
    Hong Kong
    
    HK$2
    
    
    100
    %
    
    
    
    
    
    
    100
    %
    
    Provision of
telecommunication
servicesHaslett Investments Limited
    
    British Virgin Islands
    
    US$1
    
    
    100
    %
    
    
    
    
    
    
    100
    %
    
    InactiveSkywork Corporation
    
    British Virgin
Islands
    
    US$1
    
    
    100
    %
    
    
    
    
    
    
    100
    %
    
    Investment holdingThe 138 Leasing Partnership
(Partnership)
    
    Hong Kong
    
    Partners capital
HK$329,128,857
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    InactiveYing Fai Realty (China) Limited
    
    Hong Kong/ Peoples
Republic of China
(PRC)
    
    HK$20
    
    
    100
    %
    
    
    
    
    
    
    100
    %
    
    Property holdingAPT
Communication Technology Development (Shenzhen) Co.,
Ltd.
    
    Wholly-owned foreign enterprises, PRC
    
    Registered capital HK$5,000,000
    
    
    100
    %
    
    
    
    
    
    
    100
    %
    
    Provision of
satellite transponder
capacityCTIA VSAT Network Limited
(CTIA)
    
    Hong Kong
    
    HK$5,000,000
    
    
    60
    %
    
    
    
    
    
    
    60
    %
    
    Investment holdingBeijing
Asia Pacific East Communication Network Limited (BAPE)
    
    Joint venture, PRC
    
    Registered capital US$4,000,000
    
    
    36
    %
    
    
    
    
    
    
    60
    %
    
    Provision of data
transmission
services
 
 *
    
    The place of operation is the place of incorporation/establishment unless
otherwise stated.No loan capital has been issued by any of the subsidiaries. F- 10




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    BASIS OF PRESENTATIONThese financial statements have been prepared in accordance with all applicable Hong
Kong Financial Reporting Standards (HKFRSs), which collective term includes all applicable
individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards (HKASs)
and Interpretations issued by the Hong Kong Institute of Certified Public Accountants
(HKICPA), accounting principles generally accepted in Hong Kong(HK GAAP). Significant
differences between HK GAAP and accounting principles generally accepted in the United
States (US GAAP) are summarised in note 28.The HKICPA has issued a number of new and revised HKFRSs that are effective or available
for early adoption for accounting periods beginning on or after January 1, 2005.
Information on the changes in accounting policies resulting from initial application of
these new and revised HKFRSs for the current and prior accounting periods reflected in
these financial statements is provided in note 4.The measurement basis used in the preparation of the consolidated financial
statements is historical cost modified by the revaluation of investment properties as
explained in the accounting policies set out below.The consolidated financial statements of the Group are expressed in Hong Kong dollars
(HK$). The translations of amounts from Hong Kong dollars into United States dollars for
convenience of the reader have been made at the rate on December 31, 2005 of HK$7.80 =
US$1.00, which approximates the noon buying rate in New York City for cable transfers in
Hong Kong Dollars as certified for customs purposes by the Federal Reserve Bank of New York
on December 31, 2005. No representation is made that the Hong Kong dollar amounts could
have been, or could be, converted into United States dollars at that rate or at any other
certain rate on December 31, 2005, or any other certain date.3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 (a)
    
    Basis of consolidationThe consolidated financial statements include the financial statements of the
Company and its subsidiaries. A subsidiary, is a company in which the Group, directly
or indirectly, holds more than half of the issued share capital or controls more than
half the voting powers or controls the composition of the board of directors.
Subsidiaries are considered to be controlled if the Group has the power, directly or
indirectly, to govern the financial and operating policies, so as to obtain benefits
from their activities.An investment in a controlled subsidiary is consolidated into the consolidated
financial statements from the date that control commences until the date that control
ceases.Intra-group balances and transactions, and any unrealised profits arising from
intra-group transactions, are eliminated in full in preparing the consolidated
financial statements. Unrealised losses resulting from intra-group transactions are
eliminated in the same way as unrealised gains but only to the extent that there is no
evidence of impairment.Minority interests at the balance sheet date, being the portion of the net assets of
subsidiaries attributable to equity interests that are not owned by the Company,
whether directly or indirectly through subsidiaries, are presented in the consolidated
balance sheet and statement of changes in equity, separately from equity attributable
to shareholders of the company. Minority interests in the results of the Group are
presented on the face of the consolidated statement of operations as an allocation of
the total profit or loss for the year between minority interests and the equity
shareholders of the Company.
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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (a)
    
    Basis of consolidation (continued)Where losses attributable to the minority exceed the minority interest in the
equity of a subsidiary, the excess, and any further losses attributable to the
minority, are charged against the Groups interest except to the extent that the
minority has a binding obligation to, and is able to, fund the losses. If the
subsidiary subsequently reports profits, the Groups interest is allocated all such
profits until the minoritys share of losses previously absorbed by the Group has been
recovered.The particulars of the Groups principal subsidiaries are set out in note 1.(b)
    
    Associates and jointly controlled entitiesAn associate is an entity in which the Group or Company has significant influence, but
not control or joint control, over its management, including participation in the
financial and operating policy decisions.A jointly controlled entity is an entity which operates under a contractual
arrangement between the Group or Company and other parties, where the contractual
arrangement establishes that the Group or Company and one or more of the other parties
share joint control over the economic activity of the entity.An investment in an associate or a jointly controlled entity is accounted for in the
consolidated financial statements under the equity method and is initially recorded at
cost and adjusted thereafter for the post acquisition change in the Groups share of
the associates or the jointly controlled entitys net assets, unless it is classified
as held for sale (or included in a disposal group that is classified as held for
sale). The consolidated statement of operations reflects the Groups share of the
post-acquisition results of the associates and jointly controlled entities for the
year, including any impairment loss on goodwill relating to the investment in
associates and jointly controlled entities recognised for the year (see note 3(c)).When the Groups share of losses exceeds its interest in the associate or the jointly
controlled entity, the Groups interest is reduced to nil and recognition of further
losses is discontinued except to the extent that the Group has incurred legal or
constructive obligations or made payments on behalf of the associate or the jointly
controlled entity. For this purpose, the Groups interest in the associate or the
jointly controlled entity is the carrying amount of the investment under the equity
method together with the Groups long-term interests that in substance from part of
the Groups net investment in the associate or the jointly controlled entity.Unrealised profits and losses resulting from transactions between the Group and its
associates and jointly controlled entities are eliminated to the extent of the Groups
interest in the associate or jointly controlled entity, except where unrealised losses
provide evidence of an impairment of the asset transferred, in which case they are
recognised immediately in the statement of operations.
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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (c)
    
    GoodwillGoodwill represents the excess of the cost of a business combination or an investment
in an associate or a jointly controlled entity over the Groups share in the net fair
value of the acquirees identifiable assets, liabilities and contingent liabilities.Goodwill is stated at cost less accumulated impairment losses. Goodwill is allocated
to cash-generating units and is tested annually for impairment. In respect of
associates or jointly controlled entities, the carrying amount of goodwill is included
in the carrying amount of the interest in the associate or jointly controlled entity.Any excess of the Groups interest in the net fair value of the acquirees
identifiable assets, liabilities and contingent liabilities over the cost of a
business combination or an investment in an associate or a jointly controlled entity
is recognised immediately in profit or loss.On disposal of a controlled subsidiary, an associate or a jointly controlled entity
during the year, any attributable amount of purchased goodwill is included in the
calculation of the profit or loss on disposal.(d)
    
    Investment propertyInvestment properties are land and/or buildings which are owned or held under a
leasehold interest (see note 3(f)) to earn rental income and/or for capital
appreciation. These include land held for a currently undetermined future use.Investment properties are stated in the balance sheet at fair value. Any gain or loss
arising from a change in fair value or from the retirement or disposal of an
investment property is recognised in profit or loss. Rental income from investment
properties is accounted for as described in (note 3(o)(iv)).When the Group holds a property interest under an operating lease to earn rental
income and/or for capital appreciation, the interest is classified and accounted for
as an investment property on a property-by-property basis. Any such property interest
which has been classified as an investment property is accounted for as if it were
held under a finance lease (see note 3(f)), and the same accounting policies are
applied to that interest as are applied to other investment properties leased under
finance leases. Lease payments are accounted for as described in note 3(f).(e)
    
    Other property, plant and equipmentThe following items of property, plant and equipment are stated in the balance sheet
at cost less accumulated depreciation and impairment losses:
 -
    
    buildings held for own use which are situated on leasehold land,
where the fair value of the building could be measured separately from the fair
value of the leasehold land at the inception of the lease (see note 3(f)); and-
    
    other items of plant and equipment
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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (e)
    
    Other property, plant and equipment(continued)Depreciation is calculated to write off the cost or valuation of items of property,
plant and equipment, less their estimated residual value, if any, using the straight
line method over their estimated useful lives as follows:
 -
    
    Buildings situated on leasehold land are depreciated over the
shorter of the unexpired term of lease and their estimated useful lives, being no
more than 50 years after the date of completion.
 -
    
    Leasehold improvements
    
    Over the lease term-
    
    Furniture and equipment, motor vehicles,
and computer equipment
    
    5 years-
    
    Communication satellite equipment
    
    5 to 15 years-
    
    Communication stations
    
    5 years-
    
    Communication satellites
    
    9 to 16 years
  (f)
    
    Leased assets
 (i)
    
    Classification of assets leased to the GroupAssets that are held by the Group under leases which transfer to the Group
substantially all the risks and rewards of ownership are classified as being
held under finance leases. Leases which do not transfer substantially all the
risks and rewards of ownership to the Group are classified as operating leases,
with the following exceptions:
 -
    
    property held under operating leases that would
otherwise meet the definition of an investment property is classified as an
investment property on a property-by-property basis and, if classified as
investment property, is accounted for as if held under a finance lease (see
note 3(d)); and-
    
    land held for own use under an operating lease, the
fair value of which cannot be measured separately from the fair value of a
building situated thereon at the inception of the lease, is accounted for
as being held under a finance lease, unless the building is also clearly
held under an operating lease. For these purposes, the inception of the
lease is the time that the lease was first entered into by the Group, or
taken over from the previous lessee, or at the date of construction of
those buildings, if later.
 (ii)
    
    Assets acquired under finance leasesWhere 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 in equal annual amounts, to residual values, over the
term of the relevant lease or, where it is likely the Company or Group will
obtain ownership of the asset, the life of the asset, as set out in note 3(e).
Impairment losses are accounted for in accordance with the accounting policy as
set out in note 3(g). Finance charges implicit in the lease payments are charged
to the statement of operations 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. Contingent rentals are reported as an
expense of the accounting period in which they are incurred.
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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (f)
    
    Leased assets (continued)
 (iii)
    
    Operating lease chargesWhere the Group has the use of assets under operating leases, payments made
under the leases are charged to the statement of operations 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
statement of operations as an integral part of the aggregate net lease payments
made. Contingent rentals are charged to the statement of operations in the
accounting period in which they are incurred.The cost of acquiring land held under an operating lease is amortised on a
straight-line basis over the period of the lease term except where the property
is classified as an investment property.
 (g)
    
    Impairment of other assetsInternal and external sources of information are reviewed at each balance sheet date
to identify indications that the following assets may be impaired or an impairment
loss previously recognised no longer exists or may have decreased:
 -
    
    property, plant and equipment;-
    
    investments in subsidiaries, associates and joint ventures;-
    
    trade and other receivables; and-
    
    goodwill.
  -
    
    Calculation of recoverable amountThe recoverable amount of an asset is the greater of its net selling price
and value in use. In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount rate that reflects
current market assessments of time value of money and the risks specific to the
asset. Where an asset does not generate cash inflows largely independent of those
from other assets, the recoverable amount is determined for the smallest group of
assets that generates cash inflows independently (i.e. a cash-generating unit).-
    
    Recognition of impairment lossesAn impairment loss is recognised in the statement of operations whenever the
carrying amount of an asset, or the cash-generating unit to which it belongs,
exceeds its recoverable amount. Impairment losses recognised in respect of
cash-generating units are allocated first to reduce the carrying amount of any
goodwill allocated to the cash-generating unit (or group of units) and then, to
reduce the carrying amount of the other assets in the unit (or group of units) on
a pro rata basis, except that the carrying value of an asset will not be reduced
below its individual fair value less costs to sell, or value in use, if
determinable.
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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (g)
    
    Impairment of other assets (continued)
 -
    
    Reversals of impairment lossesIn respect of assets other than goodwill, an impairment loss is reversed if there
has been a favourable change in the estimates used to determine the recoverable
amount. An impairment loss in respect of goodwill is not reversed.A reversal of impairment losses is limited to the assets carrying amount that
would have been determined had no impairment loss been recognised in prior years.
Reversals of impairment losses are credited to the statement of operations in the
year in which the reversals are recognised.
 (h)
    
    Trade and other receivablesTrade and other receivables are initially recognised at fair value and thereafter
stated at amortised cost less impairment losses for bad and doubtful debts (see note
3(g)), except where the receivables are interest-free loans made to related parties
without any fixed repayment terms. In such cases, the receivables are stated at cost
less impairment losses for bad and doubtful debts.(i)
    
    Interest-bearing borrowingsInterest-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 difference between cost and redemption value being
recognised in the statement of operations over the period of the borrowings using the
effective interest method.(j)
    
    Trade and other payablesTrade 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.(k)
    
    Cash and cash equivalentsCash and cash equivalents comprise cash at bank and on hand, demand deposits with
banks and other financial institutions, and short-term, highly liquid investments that
are readily convertible into known amounts of cash and which are subject to an
insignificant risk of changes in value, having been within three months of maturity at
acquisition. Bank overdrafts that 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 for the purpose of the consolidated cash flow statement.(l)
    
    Employee benefits
 (i)
    
    Salaries, annual bonuses, paid annual leave, leave passage and
the cost to the Group of non-monetary benefits are accrued in the year in which
the associated services are rendered by employees of the Group. Where payment
or settlement is deferred and the effect would be material, these amounts are
stated at their present values.Contributions to Mandatory Provident Funds as required under the
Hong Kong Mandatory Provident Fund Schemes Ordinance, are
recognised as an expense in the consolidated statement of operations as
incurred.
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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (l)
    
    Employee benefit (continued)
 The employees of the Group participate in retirement plans managed by respective
local governments of the municipalities in which the Group operates in the
Peoples Republic of China (the PRC). The Groups contributions to the plan
are calculated based on fixed rates of the employees salary costs and charged
to the statement of operations when incurred. The Group has no other obligation
for the payment of retirement and other post-retirement benefits of staff other
than the contributions described above.(ii)
    
    Share based paymentsThe fair value of share options granted to employees is recognised as an
employee cost with a corresponding increase in a capital reserve within equity.
The fair value is measured at grant date using the binomial lattice model,
taking into account the terms and conditions upon which the options were
granted. Where the employees have to meet vesting conditions before becoming
unconditionally entitled to the share options, the total estimated fair value of
the share options is spread over the vesting period, taking into account the
probability that the options will vest.During the vesting period, the number of share options that is expected to vest
is reviewed. Any adjustment to the cumulative fair value recognised in prior
years is charged/credited to the statement of operations for the year of the
review, unless the original employee expenses qualify for recognition as an
asset, with a corresponding adjustment to the capital reserve. On vesting date,
the amount recognised as an expense is adjusted to reflect the actual number of
share options that vest (with a corresponding adjustment to the capital reserve)
except where forfeiture is only due to not achieving vesting conditions that
relate to the market price of the Companys shares. The equity amount is
recognised in the capital reserve until either the option is exercised (when it
is transferred to the share premium account) or the option expires (when it is
released directly to retained profits).(iii)
    
    Termination benefitsTermination benefits are recognised when, and only when, the Group demonstrably
commits itself to terminate employment or to provide benefits as a result of
voluntary redundancy by having a detailed formal plan which is without realistic
possibility of withdrawal.
 (m)
    
    Income taxIncome tax for the year comprises current tax and movements in deferred tax assets and
liabilities. Current tax and movements in deferred tax assets and liabilities are
recognised in the statement of operations except to the extent that they relate to
items recognised directly in equity, in which case they are recognised in equity.Current tax is the expected tax payable on the taxable income for the year, using tax
rates enacted or substantively enacted at the balance sheet date, and any adjustment
to tax payable in respect of previous years.Deferred tax assets and liabilities arise from deductible and taxable temporary
differences respectively, being the differences between the carrying amounts of assets
and liabilities for financial reporting purposes and their tax bases. Deferred tax
assets also arise from unused tax losses and unused tax credits.
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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (m)
    
    Income tax (continued)Apart from certain limited exceptions, all deferred tax liabilities, and all deferred
tax assets to the extent that it is probable that future taxable profits will be
available against which the asset can be utilised, are recognised. Future taxable
profits that may support the recognition of deferred tax assets arising from
deductible temporary differences include those that will arise from the reversal of
existing taxable temporary differences, provided those differences relate to the same
taxation authority and the same taxable entity, and are expected to reverse either in
the same period as the expected reversal of the deductible temporary difference or in
periods into which a tax loss arising from the deferred tax asset can be carried back
or forward. The same criteria are adopted when determining whether existing taxable
temporary differences support the recognition of deferred tax assets arising from
unused tax losses and credits, that is, those differences are taken into account if
they relate to the same taxation authority and the same taxable entity, and are
expected to reverse in a period, or periods, in which the tax loss or credit can be
utilised.The limited exceptions to recognition of deferred tax assets and liabilities are those
temporary differences arising from goodwill not deductible for tax purposes, negative
goodwill treated as deferred income, the initial recognition of assets or liabilities
that affect neither accounting nor taxable profit (provided they are not part of a
business combination), and temporary differences relating to investments in
subsidiaries to the extent that, in the case of taxable differences, the Group
controls the timing of the reversal and it is probable that the differences will not
reverse in the foreseeable future, or in the case of deductible differences, unless it
is probable that they will reverse in the future.The amount of deferred tax recognised is measured based on the expected manner of
realisation or settlement of the carrying amount of the assets and liabilities, using
tax rates enacted or substantively enacted at the balance sheet date. Deferred tax
assets and liabilities are not discounted.The carrying amount of a deferred tax asset is reviewed at each balance sheet date and
is reduced to the extent that it is no longer probable that sufficient taxable profit
will be available to allow the related tax benefit to be utilised. Any such reduction
is reversed to the extent that it becomes probable that sufficient taxable profit will
be available.Additional income taxes that arise from the distribution of dividends are recognised
when the liability to pay the related dividends is recognised.Current tax balances and deferred tax balances, and movements therein, are presented
separately from each other and are not offset. Current tax assets are offset against
current tax liabilities, and deferred tax assets against deferred tax liabilities if,
and only if, the Company or the Group has the legally enforceable right to set off
current tax assets against current tax liabilities and the following additional
conditions are met:
 -
    
    in the case of current tax assets and liabilities, the Company or
the Group intends either to settle on a net basis, or to realise the asset and
settle the liability simultaneously; or-
    
    in the case of deferred tax assets and liabilities, if they relate
to income taxes levied by the same taxation authority on either:
 -
    
    the same taxable entity; or-
    
    different taxable entities, which, in each future period in
which significant amounts of deferred tax liabilities or assets are expected
to be settled or recovered, intend to realise the current tax assets and
settle the current tax liabilities on a net basis or realise and settle
simultaneously.
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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (n)
    
    Provisions and contingent liabilitiesProvisions are recognised for liabilities of uncertain timing or amount when the
Company or Group 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 expenditures expected to
settle the obligation.Where it is not probable that an outflow of economic benefits will be required, or the
amount cannot be estimated reliably, the obligation is disclosed as a contingent
liability, unless the probability of outflow of economic benefits 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.(o)
    
    Revenue recognitionProvided it is probable that the economic benefits will flow to the Group and the
revenue and costs, if applicable, can be measured reliably, revenue is recognized in
the statement of operations as follows:
 (i)
    
    Transponder utilization incomeIncome from provision of satellite transponder capacity and related
services is recognised in the statement of operations in equal instalments over
the accounting periods covered by the contract term, except where an alternative
basis is more representative of the pattern of benefits to be derived from the
satellite transponder capacity utilised.(ii)
    
    Service incomeService income in respect of provision of satellite-based broadcasting and
telecommunications services and other service is recognised when services are
provided.(iii)
    
    Interest incomeInterest income from bank deposits is accrued on a time-apportioned basis by
reference to the principal outstanding and the rate applicable.(iv)
    
    Rental income from operating leasesRental income receivable under operating leases is recognised in the statement
of operations in equal instalments over the periods covered by the lease term,
except where an alternative basis is more representative of the pattern of
benefits to be derived from the use of the leased asset.
 (p)
    
    Translation of foreign currenciesForeign 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 statement of operations,
except those arising from foreign currency borrowings used to hedge a net investment
in a foreign operation which are recognised directly in equity.Non-monetary assets and liabilities that are measured 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.
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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (p)
    
    Translation of foreign currencies (continued)The functional currency of the Groups main operations is the United States dollar
which is translated into Hong Kong dollar for reporting of the financial statements.
As the Hong Kong dollar is pegged to the United States dollar, foreign currency
exchange fluctuations have an insignificant impact to the Group.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. Balance 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 cumulative amount of the exchange differences
recognised in equity which relate to that foreign operation is included in the
calculation of the profit or loss on disposal.(q)
    
    Borrowing costsBorrowing costs are expensed in the statement of operations in the period in which
they are incurred, except to the extent that they are capitalised as being directly
attributable to the acquisition or construction 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 expenditures for the asset are 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 complete.(r)
    
    Related partiesFor the purposes of these financial statements, parties are considered to be related
to the Group if the Group has the ability, directly or indirectly, to control the
party or exercise significant influence over the party in making financial and
operating decisions, or vice versa, or where the Group and the party are subject to
common control or common significant influence. Related parties may be individuals
(being members of key management personnel, significant shareholders and/or their
close family members) or other entities and include entities which are under the
significant influence of related parties of the Group where those parties are
individuals, and post-employment benefit plans which are for the benefit of employees
of the Group or of any entity that is a related party of the Group.(s)
    
    Segment reportingA segment is a distinguishable component of the Group that is engaged either in
providing products or services (business segment), or in providing products or
services within a particular economic environment (geographical segment), which is
subject to risks and rewards that are different from those of other segments.In accordance with the Groups internal financial reporting system, the Group has
chosen business segment information as the primary reporting format and geographical
segment information as the secondary reporting format for the purposes of these
financial statements.
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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (s)
    
    Segment reporting (continued)Segment revenue, expenses, results, assets and liabilities include items directly
attributable to a segment as well as those that can be allocated on a reasonable
basis to that segment. Segment assets of the Group include trade receivables and
property, plant and equipment. 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 entities within a single segment.
Inter-segment pricing is based on terms similar to those available to other external
parties.Segment capital expenditure is the total cost incurred during the period to acquire
segment assets (both tangible and intangible) that are expected to be used for more
than one period.(t)
    
    Loss per shareThe calculation of the basic and diluted loss per share is based on the following data:
 2003
    
    2004
    
    2005HK$
    
    HK$
    
    HK$(restated)
    
    (restated)LossLoss for the purposes of calculating
basic and diluted loss per share
(net loss for the year)
    
    
    (216,120
    )
    
    
    (59,957
    )
    
    
    (135,564
    )Number of shares
    
    
    000
    
    
    
    000
    
    
    
    000Weighted average number of ordinary shares for
the purposes of calculating basis and diluted loss
per share
    
    
    412,892
    
    
    
    413,265
    
    
    
    413,265
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APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 (u)
    
    Use of estimatesThe preparation of financial statements in conformity with HKFRSs requires management
judgements, estimates any assumptions that affect the application of policies and
reported amounts of assets, liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and various other factors
that are believed to be reasonable under the circumstances, the results of which form
the basis of making the judgements about carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates.The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognized in the period in which estimate is revised if
the revision affects only that period, or in the period of the revision and future
periods if the revision affects both current and future periods.Judgements made by management in the application of HKFRSs that have significant
effect on the financial statements and estimates are discussed in note 26.
 4.
    
    CHANGES IN ACCOUNTING POLICIESThe HKICPA has issued a number of new and revised HKFRSs that are effective for accounting periods beginning on or
after January 1, 2005.The accounting policies of the Group after the adoption of
these new and revised HKFRSs have been summarised in note 3. The
following sets our information on the significant changes in
accounting policies for the current and prior accounting periods
reflected in these financial statements.The Group has not applied any new standard or interpretation that is not yet effective
for the current accounting period (see note 27).
 (a)
    
    Employee share option scheme (HKFRS 2, Share-based payment)In prior years, no amounts were recognised when employees (which term includes
directors) were granted share options over shares in the Company. If the employees
chose to exercise the options, the nominal amount of share capital and share premium
were credited only to the extent of the options exercise price receivable.With effect from January 1, 2005, in order to comply with HKFRS 2, the Group
recognises the fair value of such share options as an expense in the statement of
operations, or as an asset, if the cost qualifies for recognition as an asset under
the Groups accounting policies. A corresponding increase is recognised in a capital
reserve within equity.Where the employees are required to meet vesting conditions before they become
entitled to the options, the Group recognises the fair value of the options granted
over the vesting period. Otherwise, the Group recognises the fair value in the period
in which the options are granted.If an employee chooses to exercise options, the related capital reserve is
transferred to share capital and share premium, together with the exercise price.
 F-22




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  4.
    
    CHANGES IN ACCOUNTING POLICIES (continued)
 (a)
    
    Employee share option scheme (HKFRS 2, Share-based payment) (continued)The new accounting policy has been applied retrospectively by decreasing the
opening balance of retained earnings as of January 1, 2003, 2004 and 2005 by
HK$30,392, HK$27,424 and HK$23,964 respectively, with the corresponding amount
credited to capital reserve. The Groups loss before taxation for the year ended
December 31, 2003 has decreased by HK$ 898. There is no effect on the Groups loss
before income taxes for the years ended December, 31 2004 and 2005 as a result of
this new accounting policy because no additional options were granted nor did any
options from previous grants vest during these periods.Details of the employee share option scheme are set out in note 23.(b)
    
    Investment properties (HKAS 40, Investment property)Changes in accounting policies relating to investment properties are as follows.Timing of recognition of movements in fair value in the statement of operationsIn prior years, movements in the fair value of the Groups investment properties
were recognised directly in the investment properties revaluation reserve except
when, on a portfolio basis, the reserve was insufficient to cover a decline in the
fair value of the portfolio, when a decline previously recognised in the statement of
operations had reversed, or when an individual investment property was disposed of.
In these limited circumstances movements in the fair value were recognised in the
statement of operations.Upon adoption of HKAS 40 as of January 1, 2005, all changes in the fair value of
investment properties are recognised directly in the statement of operations in
accordance with the fair value model in HKAS 40.These changes in accounting policy have been adopted retrospectively by
increasing the opening balance of retained earnings as of January 1, 2004 and 2005
by HK$7,700 and HK$5,500 respectively, to include all of the Groups previous
investment properties revaluation reserve.As a result of this new policy, the Groups loss before taxation for the years
ended December 31, 2003, 2004 and 2005 has decreased by HK$7,700, increased by
HK$2,200 and HK$7,150 respectively, consisting of the Groups share of the net
increase or decrease in the fair value of the investment property held by the Groups
jointly controlled entity. The decrease is reflected in the share of results of
jointly controlled entities.(c)
    
    Leasehold land and buildings held for own use (HKAS 17, Leases)In prior years, leasehold land held for own use which was presented as part of Land
and buildings in Property, plant and equipment was stated at cost less accumulated
depreciation and accumulated impairment losses. Depreciation was calculated to
write-off the cost of leasehold land on a straight-line basis over their lease term.
 F-23




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 4.
    
    CHANGES IN ACCOUNTING POLICIES (continued)
 With effect from January 1, 2005, in order to comply with HKAS 17, leasehold
land held for own use is accounted for as being held under an operating lease where
the fair value of the interest in any buildings situated on the leasehold land could
be separately identified from the fair value of the leasehold land at the time the
lease was first entered into by the Group, or taken over from the previous lessee, or
at the date of construction of those buildings, if later. Any pre-paid land premiums
for acquiring the leasehold land, or other lease payments, are stated at cost and are
amortized on a straight-line basis over the respective periods of the lease term.Any buildings held for own use which are situated on such land leases continue to be
presented as part of property, plant and equipment.The new accounting policy has been adopted retrospectively, but there is no
impact on the Groups net assets as at the year end and on the Groups loss for the
years presented. An additional line item Interest in leasehold land held for own use
under an operating lease , which was previously included in Property, plant and
equipment has been included on the face of the consolidated balance sheet. The
comparative figure for Property, plant and equipment has been reclassified to
conform with the current years presentation.(d)
    
    Minority interests (HKAS 1, Presentation of financial statements and HKAS 27,
Consolidated and separate financial statements)In prior years, minority interests at the balance sheet date were presented in
the consolidated balance sheet separately from liabilities and as a deduction
from net assets. Minority interests in the results of the Group for the year were
also separately presented in the statement of operations as a deduction before
arriving at the profit attributable to shareholders.With effect from January 1, 2005, in order to comply with HKAS 1 and HKAS 27, minority
interests at the balance sheet date are presented in the consolidated balance sheet within equity, separately from the equity attributable to the equity holders of
the parent. Minority interests in the results of the Group for the year are presented on the
face of the consolidated statement of operations as an allocation of the total profit or loss
for the year between the minority interests and the equity holders of the parent.The presentation of minority interests in the consolidated balance sheet,
consolidated statement of operations and consolidated statement of changes in equity
for the comparative years have been restated accordingly.(e)
    
    Financial instruments (HKAS 32, Financial instruments: Disclosure and
presentation and HKAS 39 Financial instruments: Recognition and measurement)In prior years, loan arrangement fee was included as part of the Deposits,
prepayments and deferred expenses and was amortised on a straight line basis over
the terms of the relevant bank borrowings. With effect from January 1, 2005, in order
to comply with HKAS 39, the unamortised balance of the loan arrangement fee previously included in deposits,
prepayments and other receivables under current assets and other assets of HK$1,561
and HK$4,679 respectively, is now presented as a deduction from the secured bank
borrowings in the consolidated balance sheet and amortised by using the effective
interest method.The new accounting policy has been applied by decreasing the opening balance of
retained earnings as of January 1, 2005 by HK$333, and the Groups loss before
taxation for the year ended December 31, 2005 has increased by HK$504.
 F-24




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 4.
    
    CHANGES IN ACCOUNTING POLICIES (continued)
 (f)
    
    Definition of related parties (HKAS 24, Related party disclosures)As a result of the adoption of HKAS 24, Related party disclosures, the
definition of related parties as disclosed in note 3(r) has been expanded to clarify
that related parties include entities that are under the significant influence of a
related party that is an individual (i.e. key management personnel, significant
shareholders and/or their close family members) and post-employment benefit plans
which are for the benefit of employees of the Group or of any entity that is a
related party of the Group. The clarification of the definition of related parties
has not resulted in any material changes to the previously reported disclosures of
related party transactions nor has it had any material effect on the disclosures made
in the current period, as compared to those that would have been reported had SSAP
20, Related party dislosures, still been in effect.
 5.
    
    PROPERTY, PLANT AND EQUIPMENT
 Furniture andequipment, motor
    
    Commun-vehicles, and
    
    ication
    
    Commun-
    
    Commun-Land and
    
    Leasehold
    
    computer
    
    satellite
    
    ication
    
    ication
    
    Constructionbuildings
    
    improvements
    
    equipment
    
    equipment
    
    stations
    
    satellites
    
    in progress
    
    TotalHK$
    
    HK$
    
    HK$
    
    HK$
    
    HK$
    
    HK$
    
    HK$
    
    HK$Cost:At January 1, 2004 (restated)
    
    
    100,092
    
    
    
    9,251
    
    
    
    41,678
    
    
    
    125,600
    
    
    
    8,425
    
    
    
    2,100,129
    
    
    
    2,020,724
    
    
    
    4,405,899Additions
    
    
    2,414
    
    
    
    474
    
    
    
    1,624
    
    
    
    5,264
    
    
    
    51
    
    
    
    
    
    
    
    420,913
    
    
    
    430,740Disposals
    
    
    
    
    
    
    (2,344
    )
    
    
    (472
    )
    
    
    (2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,818
    )Transfer
    
    
    
    
    
    
    
    
    
    
    75
    
    
    
    24
    
    
    
    529
    
    
    
    1,157,899
    
    
    
    (1,158,527
    )
    
    
    At December 31, 2004
(restated)
    
    
    102,506
    
    
    
    7,381
    
    
    
    42,905
    
    
    
    130,886
    
    
    
    9,005
    
    
    
    3,258,028
    
    
    
    1,283,110
    
    
    
    4,833,821Cost:At January 1, 2005 (restated)
    
    
    102,506
    
    
    
    7,381
    
    
    
    42,905
    
    
    
    130,886
    
    
    
    9,005
    
    
    
    3,258,028
    
    
    
    1,283,110
    
    
    
    4,833,821Exchange adjustments
    
    
    
    
    
    
    21
    
    
    
    58
    
    
    
    152
    
    
    
    187
    
    
    
    
    
    
    
    144
    
    
    
    562Additions
    
    
    200
    
    
    
    229
    
    
    
    685
    
    
    
    2,017
    
    
    
    151
    
    
    
    
    
    
    
    521,182
    
    
    
    524,464Disposals
    
    
    (473
    )
    
    
    (10
    )
    
    
    (368
    )
    
    
    (45
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (896
    )Transfer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,165
    
    
    
    4,561
    
    
    
    1,770,612
    
    
    
    (1,803,338
    )
    
    
    At December 31, 2005
    
    
    102,233
    
    
    
    7,621
    
    
    
    43,280
    
    
    
    161,175
    
    
    
    13,904
    
    
    
    5,028,640
    
    
    
    1,098
    
    
    
    5,357,951Accumulated depeciation:At January 1, 2004 (restated)
    
    
    13,229
    
    
    
    5,503
    
    
    
    18,973
    
    
    
    63,430
    
    
    
    1,443
    
    
    
    1,874,281
    
    
    
    
    
    
    
    1,976,859Charge for the year
    
    
    2,069
    
    
    
    676
    
    
    
    8,167
    
    
    
    13,893
    
    
    
    1,565
    
    
    
    151,247
    
    
    
    
    
    
    
    177,617Impairment loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,800
    
    
    
    1,800Written back on disposal
    
    
    
    
    
    
    (2,344
    )
    
    
    (440
    )
    
    
    (1
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,785
    )At December 31, 2004
(restated)
    
    
    15,298
    
    
    
    3,835
    
    
    
    26,700
    
    
    
    77,322
    
    
    
    3,008
    
    
    
    2,025,528
    
    
    
    1,800
    
    
    
    2,153,491Accumulated depeciation:At January 1, 2005 (restated)
    
    
    15,298
    
    
    
    3,835
    
    
    
    26,700
    
    
    
    77,322
    
    
    
    3,008
    
    
    
    2,025,528
    
    
    
    1,800
    
    
    
    2,153,491Exchange adjustments
    
    
    
    
    
    
    13
    
    
    
    35
    
    
    
    84
    
    
    
    63
    
    
    
    
    
    
    
    37
    
    
    
    232Charge for the year
    
    
    2,096
    
    
    
    439
    
    
    
    7,570
    
    
    
    14,185
    
    
    
    1,663
    
    
    
    171,853
    
    
    
    
    
    
    
    197,806Impairment loss transfer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    680
    
    
    
    1,157
    
    
    
    
    
    
    
    (1,837
    )
    
    
    Impairment loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,512
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,512Written back on disposal
    
    
    (105
    )
    
    
    (10
    )
    
    
    (361
    )
    
    
    (16
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (492
    )At December 31, 2005
    
    
    17,289
    
    
    
    4,277
    
    
    
    33,944
    
    
    
    99,767
    
    
    
    5,891
    
    
    
    2,197,381
    
    
    
    
    
    
    
    2,358,549Net book value:At December 31, 2005
    
    
    84,944
    
    
    
    3,344
    
    
    
    9,336
    
    
    
    61,408
    
    
    
    8,013
    
    
    
    2,831,259
    
    
    
    1,098
    
    
    
    2,999,402At December 31, 2004
(restated)
    
    
    87,208
    
    
    
    3,546
    
    
    
    16,205
    
    
    
    53,564
    
    
    
    5,997
    
    
    
    1,232,500
    
    
    
    1,281,310
    
    
    
    2,680,330




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 5.
    
    PROPERTY, PLANT AND EQUIPMENT (continued)Fixed assets finance leases
 (i)
    
    The fair value of the buildings held for own use, which are situated on
leasehold land as disclosed above cannot be measured separately from the fair value of
the leasehold land at the inception of the lease, and therefore is accounted for as
being held under a finance lease.(ii)
    
    In August 2004, the in-orbit tests of APSTAR V with 54 transponders was
completed and APSTAR V was put into service on August 13, 2004. Based on the
arrangements entered into by the Group and the vendor, Loral Orion, Inc (Loral
Orion), the Group assumed risks and rewards of 37 transponders (APT Transponders)
for the entire operational life of APSTAR V under finance leases, while the risks and
rewards relating to the other 17 transponders remained with Loral Orion. As at December
31, 2004 and 2005, the net book value of communication satellites held under finance
leases in connection with APSTAR V amounted to HK$1,126,576 and HK$1,045,095,
respectively.Pursuant to the various amended agreements with Loral Orion, Loral Orion has an option to
lease 4 APT Transponders from the fourth year and another 4 APT Transponders from the
fifth year after completion of in-orbit tests of APSTAR V to its remaining operational
lives at a total consideration of HK$282,865. The transponders subject to this option had
a net book value of HK$243,584 and HK$225,966 at 31 December 2004 and 2005 respectively.
 Impairment loss
  Communication satellites at an inclined mode operation
  The analysis of net book value of land and buildings held by the Group is as follows :
 2004
    
    
    2005(restated)HK$
    
    
    HK$Medium-term leases outside Hong Kong
    
    
    2,584
    
    
    
    2,150Medium-term leases in Hong Kong
    
    
    84,624
    
    
    
    82,79487,208
    
    
    
    84,944
 F-26




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 6.
    
    INTEREST IN LEASEHOLD LAND HELD FOR OWN USE UNDER
AN OPERATING LEASE
 HK$(restated)Cost:At 1 January 2004 and 31 December 2005
    
    
    18,678Accumulated depreciation:At 1 January 2004
    
    
    2,358Charge for the year
    
    
    375At 31 December 2004
    
    
    2,733At 1 January 2005
    
    
    2,733Charge for the year
    
    
    375At 31 December 2005
    
    
    3,108Net book value:At 31 December 2005
    
    
    15,570At 31 December 2004
    
    
    15,945
 7.
    
    INVESTMENT PROPERTYThe investment property was revalued at December 31, 2004 and 2005 at HK$2,340 by Savills
Valuation and Professional Services Limited (2004: Chesterton Petty Limited), an independent
professional property valuer, on an open market value basis by reference to net rental
income allowing for reversionary income potential. A revaluation deficit of HK$70,
revaluation surplus of HK$78 and no revaluation surplus or deficit, was charged or credited
to the consolidated statements of operations for the years ended December 31, 2003, 2004 and
2005 respectively.The investment property, which is situated in the PRC under a medium-term lease, is rented
out under an operating lease and the rental income earned from the investment property for
the years ended December 31, 2003 and 2004 and 2005 was HK$245, HK$250 and HK$254,
respectively.8.
    
    INTEREST IN JOINTLY CONTROLLED ENTITIES
 2004
    
    2005HK$
    
    HK$Share of net assets
    
    
    10,226
    
    
    
    2,241Amounts due from a jointly controlled entity
    
    
    67,914
    
    
    
    67,47678,140
    
    
    
    69,717
 F-27




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 8.
    
    INTEREST IN JOINTLY CONTROLLED ENTITIES (continued)Details of the jointly controlled entities of the Group as at December 31, 2005 are
set out below:
 Proportion of ownership interestForm of
    
    
    Place of
    
    
    Particulars of
    
    
    Groups
    
    
    held by
    
    
    held bybusiness
    
    
    incorporation
    
    
    issued and paid
    
    
    effective
    
    
    the
    
    
    the
    
    
    PrincipalName of joint venture
    
    structure
    
    
    and operation
    
    
    up capital
    
    
    interest
    
    
    Company
    
    
    subsidiary
    
    
    activityAPT Satellite
Telecommunications
Limited (APT
Telecom)
    
    Incorporated
    
    Hong Kong
    
    HK$153,791,900
    
    
    55
    %
    
    
    
    
    
    
    55
    %
    
    PropertyholdingBeijing Zhong Guang
Xin Da Data Broadcast
Technology Co.
Limited
(Zhong Guang Xin Da)
    
    Joint venture, Incorporated
    
    PRC
    
    Registered capital RMB11,000,000
    
    
    12.6
    %
    
    
    
    
    
    
    35
    %
    
    Provision ofdatatransmissionservices
      2004
    
    
    2005HK$
    
    
    HK$Within one year or on demand
    
    
    2,700
    
    
    
    5,100After one year but within five years
    
    
    10,800
    
    
    
    8,10013,500
    
    
    
    13,200
  F-28




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 9.
    
    PREPAYMENT FOR CONSTRUCTION OF A SATELLITEIn 2004, the Group had entered into an agreement with a contractor on November 10, 2004
pursuant to which the Group is granted a right to require the contractor to provide for the
design, construction, delivery and launch of a new satellite, APSTAR VIB at the total
option price of HK$59,904. If the option was exercised, the total consideration for the
procurement and launch of APSTAR VIB would be HK$936,780 and the option price would be
applied towards the total consideration.
 HK$At January 1, 2004
    
    
    Prepayment
    
    
    38,454At December 31, 2004
    
    
    38,454At January 1, 2005
    
    
    38,454Prepayment
    
    
    21,450Impairment loss
    
    
    (59,904
    )At December 31, 2005
    
    
    
  F-29




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10.
    
    BANK LOANS
 December 31, 2004 (restated)
    
    December 31, 2005Weighted
    
    
    
    
    
    Weightedaverage
    
    
    
    
    
    averageinterest
    
    
    
    
    
    interestNote
    
    Interest rate
    
    rate
    
    
    
    
    
    rateHK$
    
    
    
    
    
    HK$Bank loans denominated
in US Dollars:
    
    
    (a
    )Payable semi-annually from
2005 (secured)
    
    
    
    
    
    LIBOR+0.73%
    
    
    2.27
    %
    
    
    351,000
    
    
    
    4.04
    %
    
    
    315,900Payable semi-annually with
the first instalment falling
due on September 30, 2005 (secured)
    
    
    
    
    
    LIBOR+0.73%
    
    
    2.41
    %
    
    
    624,780
    
    
    
    4.25
    %
    
    
    811,395975,780
    
    
    
    
    
    
    
    1,127,295Less: borrowing cost
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,240
    )
    
    
    
    
    
    
    (9,236
    )969,540
    
    
    
    
    
    
    
    1,118,059Current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (64,778
    )
    
    
    
    
    
    
    (117,757
    )Non-current portion
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    904,762
    
    
    
    
    
    
    
    1,000,302
 
  (a)
    
    In December 2002, the Group entered into a US$240 million secured term loan
facility (the Loan Facility), which is secured by the assignment of the construction,
launching and related equipment contracts relating to APSTAR V, APSTAR VI under
construction and their related insurance claim proceeds, assignment of all present and
future utilisation agreements of their transponders of satellites under construction,
first fixed charge over certain bank accounts which will hold receipts of the
transponder income and the termination payments under construction, launching and
related equipment contracts. In October 2004, the Group entered into a Deed of Amendment
and Restatement to amend certain terms of the Loan Facility for the purpose of adjusting
for the cancellation of the unutilised portion relating to APSTAR V satellite and APSTAR
VI backup satellite. Accordingly, the maximum aggregate amount under the Loan Facility
was reduced to US$165 million and certain financial covenants were amended. In May 2005,
the Company entered into a Second Deed of Amendment and Restatement. The second
amendment extended the availability period of drawing under the facility with respect to
APSTAR VI to June 30, 2005 and amended the financial covenants. The Company was in
compliance with these covenants as of December 31, 2005. At December 31, 2004, APSTAR V
and APSTAR VI were reported as construction-in-progress with an aggregate carrying value
of approximately HK$2,398,169 and at December 31, 2005, APSTAR V and APSTAR VI were
transferred to fixed assets with a net book value of approximately HK$2,752,162. As of
December 31, 2004 and 2005, APSTAR V and APSTAR VI were pledged by the bank deposits of
approximately HK$20,750 and HK$68,699 respectively.This Loan Facility agreement contains the following covenants:Restricted DistributionsThe Loan Facility provides that the Company may make annual dividend payments only
when Projected EBITDA (as defined in the Loan Facility) plus Free Cash (as defined in
the Loan Facility) less capital expenditure for that year is less than (i) 130% of
Project Debt Service (as defined in the Loan Facility) of that year before the
release of certain pledged assets and (ii) 180% of Project Debt Service after the
release of certain pledged assets.
 F-30




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10.
    
    BANK LOANS (continued)
 Financial Covenants
  Block Account/Withdrawal Conditions
  Others
    HK$2006
    
    
    117,7572007
    
    
    156,7772008
    
    
    217,6242009
    
    
    255,3152010
    
    
    272,402Thereafter
    
    
    98,184Total
    
    
    1,118,059
  F- 31




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 11.
    
    DEPOSIT RECEIVEDThe amount represents deposits received in respect of provision of satellite transponder
capacity.12.
    
    DEFERRED INCOMEDeferred income represents unrecognized revenue received in respect of transponder
utilization income under which customers have obtained the right to use the transponder
capacity for future periods. Deferred income is recognised in the statement of operations
according to revenue recognition policy of transponder utilization income as mentioned in
note 3 (o)(i).13.
    
    PAYABLES AND ACCRUED CHARGES
 2004
    
    2005HK$
    
    HK$Provision for employee benefits
    
    
    4,492
    
    
    
    6,349Interest payables
    
    
    4,366
    
    
    
    16,315Accrued expenses for operations
    
    
    20,758
    
    
    
    20,948Other accrued expenses
    
    
    15,523
    
    
    
    7,98145,139
    
    
    
    51,593
 14.
    
    CONTINGENCIES AND COMMITMENTS
 (a)
    
    Capital commitments:At December 31, 2004 and 2005, the Group had the following outstanding capital
commitments not provided for in the Groups financial statements:
 2004
    
    2005HK$
    
    HK$Contracted for
    
    
    286,048
    
    
    
    2,290Authorized but not contracted for
    
    
    340,551
    
    
    
    Total commitments
    
    
    626,599
    
    
    
    2,290
 (b)
    
    Leasing arrangements  operating lease:
 (i)
    
    The Group as lesseeAt the balance sheet date, the Group had commitments for future minimum lease
payments under non-cancellable operating leases which fall due as follows:
 2004
    
    2005HK$
    
    HK$Land and buildings:2005
    
    
    545
    
    
    
    2006
    
    
    31
    
    
    
    109Total
    
    
    576
    
    
    
    109
 F- 32




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14.
    
    CONTINGENCIES AND COMMITMENTS (continued)
 (b)
    
    Leasing arrangements  operating lease: (continued)
 (i)
    
    The Group as lessee (continued)Operating lease rental expenses were HK$3,650, HK$1,010 and HK$486 for the
years ended December 31, 2003, 2004 and 2005, respectively.
 2004
    
    2005HK$
    
    HK$Satellite transponder capacity:2005
    
    
    3,464
    
    
    
    2006
    
    
    
    
    
    
    2,1082007
    
    
    
    
    
    
    14Total
    
    
    3,464
    
    
    
    2,122
  (ii)
    
    The Group as lessorProperty rental income was HK$452, HK$513 and HK$538 for the years ended
December 31, 2003, 2004 and 2005, respectively. At December 31, 2004 and
2005, certain properties with an aggregate carrying value of HK$8,120 and
HK$8,896, respectively, were held for rental purpose. Depreciation charges
relating to these properties were HK$160, HK$138 and HK$160 for the years
ended December 31, 2003, 2004 and 2005, respectively. At the balance sheet
date, the Group had contracted with tenants for the future minimum lease
payments under non-cancellable operating leases in respect of properties which
fall due as follows:
 2004
    
    2005HK$
    
    HK$2005
    
    
    1,294
    
    
    
    2006
    
    
    209
    
    
    
    368Total
    
    
    1,503
    
    
    
    368
 F- 33




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14.
    
    CONTINGENCIES AND COMMITMENTS (continued)
 (ii)
    
    The Group as lessor (continued)Service income earned relating to leasing of facilities equipment was HK$3,680,
HK$1,374 and HK$1,294 for the years ended December 31, 2003, 2004 and 2005,
respectively. At the balance sheet date, the Group had contracted with
customers for the future minimum lease payments under non-cancellable operating
lease which fall due as follows:
 2004
    
    2005HK$
    
    HK$2005
    
    
    886
    
    
    
    2006
    
    
    267
    
    
    
    5422007
    
    
    108
    
    
    
    108Total
    
    
    1,261
    
    
    
    650
 (c)
    
    Contingent liabilities:
 (i)
    
    In the years before 1999, overseas withholding tax was not
charged in respect of the Groups transponder utilization income derived from
the overseas customers. From 1999, overseas withholding tax has been charged
on certain transponder utilization income of the Group and full provision for
such withholding tax for the years from 1999 onwards has been made in the
financial statements. The Directors of the Company are of the opinion that the
new tax rules should take effect from 1999 onwards and, accordingly, no
provision for the withholding tax in respect of the years before 1999 is
necessary. The Groups withholding tax in respect of 1998 and before,
calculated at the applicable rates based on the relevant income earned in
those years, not provided for in the financial statements amounted to
approximately HK$75,864.(ii)
    
    The Company has given guarantees to banks in respect of the
secured term loan facility granted to its subsidiary. The extent of such
facility utilised by the subsidiary at 31 December 2004 and 2005 amounted to
HK$975,780 and HK$1,127,295 respectively.(iii)
    
    The Hong Kong Profits Tax returns of a subsidiary of the
Company for the years of assessment 1999/2000 and 2000/2001 are currently
under dispute with the Hong
Kong Inland Revenue Department (IRD). This subsidiary recognised a
disposal gain of HK$389,744 in 1999 in relation to the transfer of the
entire business of APSTAR IIR and substantially all of the satellite
transponders of APSTAR IIR. This subsidiary has claimed the gain on disposal
as a non-taxable capital gain in it 1999/2000 Profits Tax return. In 2003, IRD has proposed to treat the proceeds received as
taxable income to this subsidiary with a corresponding entitlement to
statutory depreciation allowance in respect of APSTAR IIR. On January 23,
2006, IRD raised a Profits Tax assessment for the year of assessment
2000/2001 to include that portion of the proceeds from sale of the satellite
received during 2000/2001 as taxable income. The tax demanded for the year
of assessment 2000/2001 is HK$212,846.
 F- 34




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 14.
    
    CONTINGENCIES AND COMMITMENTS (continued)
 (c)
    
    Contingent liabilities (continued):
 (iii)
    
    On February 20, 2006, the subsidiary lodged an objection
against the IRDs assessment on the grounds that it is excessive.On February 24, 2006, the subsidiary received a notice from the IRD
confirming that the entire tax in dispute would be held over on condition
that the subsidiary purchases HK$78,385 of Tax Reserve Certificate (TRC)
by March 15, 2006 and the balance of the amount of HK$134,461 would be
held over unconditionally. Should any amount of tax held over on condition
of the purchases of TRC become payable upon the final determination of the
objection, the same amount of TRC would be used for settlement of tax due.
For that part of the TRC not utilized to offset the tax payable, interest
will accrue from the date of issue of the TRC to the date of determination
of the objection and be refunded to the subsidiary. In order to fulfill
the condition of hold over of tax payment, the subsidiary purchased TRC of
HK$78,385 on March 15, 2006.Since the receipt of the above mentioned notices, the Company has
obtainedlexternal legal and tax advice, and the Company continues to believe
that it has a reasonable likelihood of success in defending its position
that the gain derived from the transaction should be treated as non-taxable.
Accordingly, no provision for additional taxation has been made.
 (d)
    
    InsuranceAs of December 31, 2005, the Company did not have fully in-orbit insurance
coverage for its satellites. The in-orbit satellites had a net book value in
aggregate of HK$2,831,259 as of December 31, 2005.
 15.
    
    COMMON STOCK
 Issued andNumber
    
    fully paidof shares
    
    capital stock000
    
    HK$Ordinary shares of HK$0.10 each
Balance at January 1, 2004
    
    
    413,265
    
    
    
    41,327Balance at December 31, 2004 and December 31, 2005
    
    
    413,265
    
    
    
    41,327
  F- 35




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 16.
    
    ADDITIONAL PAID-IN CAPITAL/OTHER RESERVESThe additional paid-in capital of the Group arose as a result of
the Group reorganization in 1996 and represented the excess of
the par value of the shares of the subsidiaries which the Company
acquired over the par value of the Companys shares issued in
consideration thereof.Other reserves represent Enterprise Expansion Fund and General Reserve Fund set aside by a
subsidiary in accordance with the relevant laws and regulations of the PRC, which are not
available for distribution.17.
    
    RETIREMENT BENEFIT SCHEMESThe Group operates a Mandatory Provident Fund Scheme under the Hong
Kong Mandatory Provident Fund Schemes Ordinance for all qualified
employees in Hong Kong under the jurisdiction of the Hong Kong
Employment Ordinance. Under the scheme, the employer and its employees
are each required to make contributions to the scheme at 5% of the
employees relevant income, subject to a cap of monthly relevant
income of HK$20. Contributions to the scheme vest immediately. The
assets of the scheme are held separately from those of the Group, in
funds under the control of trustees.The Group also joins the retirement insurance scheme operated by the
local government under the law of the PRC for all employees in the
PRC. Under the scheme, both the Group and employees are required to
contribute 8% and 5% of the monthly salary, respectively, to the
retirement insurance scheme.The only obligation of the Group with respect to the Mandatory
Provident Fund Scheme and the retirement insurance scheme is to make
the specific contributions.The Groups contributions to retirement benefit schemes during the
years ended December 31, 2003, 2004 and 2005 amounted to HK$1,203,
HK$1,579 and HK$1,857, respectively.
 F- 36




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 18.
    
    INCOME TAXES IN THE CONSOLIDATED STATEMENTS OF OPERATIONS
 (a)
    
    The income taxes charged to the consolidated statements of operations are as follows:
 Years ended December 31,2003
    
    2004
    
    2005HK$
    
    HK$
    
    HK$Current tax  Provision for
Hong Kong Profits TaxTax for the year
    
    
    114,487
    
    
    
    
    
    
    
    Current tax  OverseasTax for the year
    
    
    20,247
    
    
    
    17,000
    
    
    
    18,856134,734
    
    
    
    17,000
    
    
    
    18,856Deferred tax  Hong KongOrigination and reversal of
temporary differences
    
    
    (134,775
    )
    
    
    (375
    )
    
    
    (5,684
    )Effect of increase in tax rate on deferred tax
balance at January 1,
    
    
    11,762
    
    
    
    
    
    
    
    (123,013
    )
    
    
    (375
    )
    
    
    (5,684
    )11,721
    
    
    
    16,625
    
    
    
    13,172
    F- 37




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 18.
    
    INCOME TAXES IN THE CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
 (b)
    
    Reconciliation between tax expense and accounting loss at the applicable tax
rates:
 Years ended December 31,2003
    
    2004
    
    2005HK$
    
    HK$
    
    HK$(restated)
    
    (restated)Loss before income taxes
    
    
    (205,322
    )
    
    
    (45,391
    )
    
    
    (123,402
    )Notional tax on loss before tax, calculated
at the rates applicable to losses in the
countries concerned
    
    
    (35,950
    )
    
    
    (8,681
    )
    
    
    (21,996
    )Overseas withholding tax
    
    
    20,237
    
    
    
    17,000
    
    
    
    18,856Tax effect of non-deductible expenses
    
    
    6,111
    
    
    
    41,106
    
    
    
    27,113Tax effect of non-taxable revenue
    
    
    (3,099
    )
    
    
    (27,852
    )
    
    
    (13,552
    )Tax effect of unused tax losses not recognized
    
    
    12,660
    
    
    
    2,656
    
    
    
    2,808Tax effect of prior years unrecognized tax losses
utilized this year
    
    
    
    
    
    
    (7,604
    )
    
    
    (57
    )Effect on opening deferred tax balances resulting
from an increase in tax rate during the year
    
    
    11,762
    
    
    
    
    
    
    
    Actual tax expenses
    
    
    11,721
    
    
    
    16,625
    
    
    
    13,172
 19.
    
    INCOME TAXES IN THE CONSOLIDATED BALANCE SHEET
 (a)
    
    Income taxes payable in the consolidated balance sheet represents:
 2004
    
    2005HK$
    
    HK$Overseas tax payable
    
    
    4,672
    
    
    
    4,418Balance of overseas tax provision relating to prior years
    
    
    79,997
    
    
    
    84,669Balance of Hong Kong Profits tax provision relating to prior years
    
    
    99
    
    
    
    9984,768
    
    
    
    89,186
 F- 38




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 19.
    
    INCOME TAXES IN THE CONSOLIDATED BALANCE SHEET (continued)
 (b)
    
    The components of deferred tax (assets)/liabilities recognized in the
consolidated balance sheet and the movements during the years ended December 31, 2004
and 2005 are as follows:
 Depreciationallowancesin excess of
    
    
    Otherrelated
    
    
    temporaryDeferred tax arising from:
    
    depreciation
    
    
    differences
    
    
    Losses
    
    
    TotalHK$
    
    
    HK$
    
    
    HK$
    
    
    HK$At January 1, 2004
    
    
    37,586
    
    
    
    (281
    )
    
    
    (34,855
    )
    
    
    2,450Charged/(credited) to consolidated statements of operations
    
    
    96,996
    
    
    
    40
    
    
    
    (97,411
    )
    
    
    (375
    )At December 31, 2004
    
    
    134,582
    
    
    
    (241
    )
    
    
    (132,266
    )
    
    
    2,075At January 1, 2005
    
    
    134,582
    
    
    
    (241
    )
    
    
    (132,266
    )
    
    
    2,075Charged/(credited) to consolidated statements of operations
    
    
    241,840
    
    
    
    (155
    )
    
    
    (247,369
    )
    
    
    (5,684
    )At December 31, 2005
    
    
    376,422
    
    
    
    (396
    )
    
    
    (379,635
    )
    
    
    (3,609
    )
 2004
    
    2005HK$
    
    HK$Net deferred tax assets recognized in the
consolidated balance sheet
    
    
    (10,134
    )
    
    
    (3,609
    )Net deferred tax liabilities recognized in the
consolidated balance sheet
    
    
    12,209
    
    
    
    2,075
    
    
    
    (3,609
    )
 (c)
    
    Deferred tax assets not recognized:The Group has not recognized deferred tax assets in respect of tax losses of HK$30,723
and HK$44,895 and other deductible temporary differences of HK$21,535 and HK$22,667, as
the realization of assets was considered not probable as at December 31, 2004 and 2005,
respectively.The Groups share of unrecognized deferred tax assets in respect of tax losses of
jointly controlled entity amounted HK$31,753 and HK$35,791 and other deductible
temporary differences amounted HK$1,174 and HK$4,654 as at December 31, 2004 and 2005,
respectively.The tax losses do not expire under current tax legislation.
 F- 39




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 20.
    
    MATERIAL RELATED PARTY TRANSACTIONS
 (a)
    
    During the years ended December 31, 2003, 2004 and 2005, the Group entered into
the following transactions with related parties:
 Years ended December 31,Note
    
    
    2003
    
    
    2004
    
    
    2005HK$
    
    
    HK$
    
    
    HK$Income from provision of satellite
transponder capacity and provision of
satellite-based telecommunications
services to certain shareholders and its
subsidiary of the Company
    
    
    (i)
    
    
    
    35,921
    
    
    
    38,259
    
    
    
    36,339Income from provision of satellite
transponder capacity, provision of
satellite-based telecommunications services
to a holding company and its subsidiaries
of a shareholder of the Company
    
    
    (i)
    
    
    
    19,741
    
    
    
    24,163
    
    
    
    31,335Income from provision of satellite
transponder capacity to a jointly controlled
entity
    
    
    (i)
    
    
    
    6,160
    
    
    
    
    
    
    
    Management fee income from a jointly
controlled entity
    
    (ii)
    
    
    1,121
    
    
    
    480
    
    
    
    480Management fee income from an
associate
    
    (iii)
    
    
    65
    
    
    
    
    
    
    
    Facilities management services
income from a jointly controlled entity
    
    (iv)
    
    
    3,386
    
    
    
    
    
    
    
    Technical support services expenses
to a shareholder of the Company
    
    
    (v)
    
    
    
    75
    
    
    
    
    
    
    
    Management fee expenses to a holding
company of a shareholder of the Company
    
    (vi)
    
    
    2,280
    
    
    
    1,135
    
    
    
    Payments of service fee in connection
with the satellite project to a fellow
subsidiary of a shareholder of the Company
    
    (vii)
    
    
    87,604
    
    
    
    151,895
    
    
    
    138,727Compensation income from a jointly
controlled entity in connection with the
early termination of services and facilities
lease
    
    (viii)
    
    
    13,500
    
    
    
    
    
    
    
    Purchase of certain fixed assets from a
jointly controlled entity
    
    (ix)
    
    
    6,800
    
    
    
    
    
    
    
    
 F- 40




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 20.
    
    MATERIAL RELATED PARTY TRANSACTIONS (continued)
 (b)
    
    At December 31, 2004 and 2005, the Group had the following amounts included in the
consolidated balance sheet in respect of amounts owing by and to related parties:
 Interest injointly
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Rentals receivedcontrolled
    
    
    Trade
    
    
    Payables and
    
    
    in advance andPrepayment
    
    
    entities
    
    
    receivables
    
    
    accrued charges
    
    
    deferred income2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$Jointly controlled entities
    
    
    
    
    
    
    
    
    
    
    70,614
    
    
    
    72,576
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Certain shareholders and its subsidiary of the Company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,237
    
    
    
    22,992
    
    
    
    24
    
    
    
    528
    
    
    
    
    
    
    
    Holding company and
its subsidiaries of a
shareholder of the Company (note (i))
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,226
    
    
    
    390
    
    
    
    6
    
    
    
    325
    
    
    
    255,105
    
    
    
    236,425A fellow subsidiary of a shareholder of the Company
    
    
    38,454
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 
 Notes:(i)
    
    The terms and conditions of these transponder capacity utilization agreements
are similar to those contracted with other customers of the Group.(ii)
    
    Management fee income arose from a reimbursement of cost of service provided to
a jointly controlled entity under the agreement.(iii)
    
    Management fee income from an associate arose from the reimbursement of
expenses paid on behalf of an associate.(iv)
    
    The Directors consider that the facilities management service income is charged
according to the terms and conditions similar to those offered to other customers.(v)
    
    The Directors consider that the technical support services expenses were
charged according to prices and conditions similar to those offered to other customers
by the service provider.(vi)
    
    Management fee expenses arose from a reimbursement of cost of services provided
from the holding company of a shareholder of the Company.(vii)
    
    The Directors consider that the service fee is charged according to prices and
conditions similar to those offered to other customers by the launch service provider. F- 41




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 20.
    
    MATERIAL RELATED PARTY TRANSACTIONS (continued)
  (viii)
    
    As a result of the reorganization of a jointly controlled
entity, the jointly controlled entity early terminated the services
and facilities lease agreement and the Group received compensation
for the early termination of the agreement. The Directors consider
that the compensation is charged according to prices and
conditions similar to those offered to unrelated customers.(ix)
    
    As a result of the reorganization of a jointly controlled entity, certain fixed
assets were purchased from the jointly controlled entity. The Directors consider that
the purchase consideration is arrived at arms length negotiation with reference to the
valuation conducted by an independent valuation company.
 21.
    
    SUPPLEMENTAL INFORMATION
 (a)
    
    Other operating revenuesOther operating revenues include the following:
 Years ended December 31,2003
    
    
    2004
    
    
    2005HK$
    
    
    HK$
    
    
    HK$Compensation income for early termination
of utilization agreements in respect of
provision of satellite transponder capacity
    
    
    550
    
    
    
    
    
    
    
    Compensation income from a jointly
controlled entity for early termination of
services and facilities lease
    
    
    13,500
    
    
    
    
    
    
    
    Compensation income for late delivery
of the satellite *
    
    
    
    
    
    
    
    
    
    
    15,600
 
 *
    
    On December 11, 2001, the Group entered into a Satellite Procurement Agreement with
a contractor for the design, construction, tests and delivery of APSTAR VI. APSTAR
VI was originally scheduled to be launched at the end of 2004/early 2005. The delay
in delivery of the satellite by the contractor has caused the postponement of the
launch of APSTAR VI until April 12, 2005. To cope with the delay, the contractor
agreed and paid a lump sum payment to the Group for the liquidated damages due to the
late delivery of APSTAR VI. F- 42




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 21.
    
    SUPPLEMENTAL INFORMATION (continued)
 (b)
    
    Borrowing costs
 Years ended December 31,2003
    
    
    2004
    
    
    2005HK$
    
    
    HK$
    
    
    HK$Interest on bank borrowings wholly
repayable within five years
    
    
    6,553
    
    
    
    17,223
    
    
    
    44,482Other borrowing costs
    
    
    1,162
    
    
    
    3,598
    
    
    
    2,222Less: Amount capitalized into construction
in progress*
    
    
    (7,715
    )
    
    
    (16,704
    )
    
    
    (9,762
    )
    
    
    
    4,117
    
    
    
    36,942
 
 *
    
    The borrowing costs have been capitalized at a rate of 4.04% to 4.25% per annum
(2004 : 2.27% to 2.41%).Borrowing costs capitalized during the years ended December 31, 2004 and 2005 arose on
bank loans borrowed for the purpose of financing the construction and launching
of satellites. (c)
    
    Staff costs
 Years ended December 31,2003
    
    
    2004
    
    
    2005HK$
    
    
    HK$
    
    
    HK$Staff costs (including directors emoluments)Pension contributions
    
    
    1,370
    
    
    
    1,608
    
    
    
    1,878Less: Forfeited contributions
    
    
    (167
    )
    
    
    (29
    )
    
    
    (21
    )Net pension contributions
    
    
    1,203
    
    
    
    1,579
    
    
    
    1,857Salaries, wages and other benefits
    
    
    36,764
    
    
    
    40,258
    
    
    
    44,26437,967
    
    
    
    41,837
    
    
    
    46,121Less: Capitalized into construction in progress
    
    
    (1,326
    )
    
    
    (772
    )
    
    
    36,641
    
    
    
    41,065
    
    
    
    46,121
 F- 43




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 21.
    
    SUPPLEMENTAL INFORMATION (continued)
 (d)
    
    Loss from operations
 Years ended December 31,2003
    
    
    2004
    
    
    2005HK$
    
    

HK$
    
    
    HK$(restated)
    
    
    (restated)Loss from operations has been arrived
at after charging/(crediting):Amortization on leasehold land held for own use
    
    
    375
    
    
    
    375
    
    
    
    375Bad debts written off
    
    
    153
    
    
    
    
    
    
    
    19Depreciation
    
    
    235,947
    
    
    
    177,617
    
    
    
    197,806Exchange loss
    
    
    
    
    
    
    458
    
    
    
    584(Gain)/loss on disposal of property, plant and
equipment
    
    
    
    
    
    
    32
    
    
    
    (109
    )Allowance for doubtful receivables
    
    
    8,402
    
    
    
    5,654
    
    
    
    350
 (e)
    
    Allowance for doubtful receivables
 Years ended December 31,2003
    
    
    2004
    
    
    2005HK$
    
    
    HK$
    
    
    HK$Balance at beginning of the year
    
    
    6,037
    
    
    
    14,439
    
    
    
    20,093Charged to cost and expenses
    
    
    8,402
    
    
    
    5,654
    
    
    
    350Exchange difference
    
    
    
    
    
    
    
    
    
    
    67Balance at end of the year
    
    
    14,439
    
    
    
    20,093
    
    
    
    20,510
 F- 44




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 22.
    
    SEGMENTAL REPORTINGSegment information is presented in respect of the Groups business and geographical
segments. Business information is chosen as the primary reporting format because this is
more relevant to the Groups internal financial reporting.Inter-segment pricing is based on similar terms as those available to other external
parties.Business segmentsThe Group comprises two main business segments, namely provision of satellite transponder
capacity and related services and provision of satellite-based broadcasting and
telecommunications services.
 Provision ofProvision of satellite
    
    
    satellite-basedtransponder capacity and related
    
    
    broadcasting and
    
    
    Inter-segmentservices
    
    
    telecommunications services
    
    
    elimination
    
    
    Consolidated2003
    
    
    2004
    
    
    2005
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2003
    
    
    2004
    
    
    2005(restated)
    
    (restated)$
    000
    
    
    $
    000
    
    
    $
    000
    
    
    $
    000
    
    
    $
    000
    
    
    $
    000
    
    
    $
    000
    
    
    $
    000
    
    
    $
    000
    
    
    $
    000
    
    
    $
    000
    
    
    $
    000Turnover from
external customers
    
    
    282,452
    
    
    
    238,418
    
    
    
    290,683
    
    
    
    16,403
    
    
    
    38,683
    
    
    
    45,552
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    298,855
    
    
    
    277,101
    
    
    
    336,235Inter-segment
turnover
    
    
    897
    
    
    
    5,276
    
    
    
    4,264
    
    
    
    
    
    
    
    6
    
    
    
    720
    
    
    
    (897
    )
    
    
    (5,282
    )
    
    
    (4,984
    )
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    283,349
    
    
    
    243,694
    
    
    
    294,947
    
    
    
    16,403
    
    
    
    38,689
    
    
    
    46,272
    
    
    
    (897
    )
    
    
    (5,282
    )
    
    
    (4,984
    )
    
    
    298,855
    
    
    
    277,101
    
    
    
    336,235Service income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,386
    
    
    
    159
    
    
    
    277302,241
    
    
    
    277,260
    
    
    
    336,512Segment result
    
    
    (113,387
    )
    
    
    28,230
    
    
    
    (29,021
    )
    
    
    (5,577
    )
    
    
    (3,332
    )
    
    
    (3,697
    )
    
    
    
    
    
    
    (6
    )
    
    
    (5
    )
    
    
    (118,964
    )
    
    
    24,892
    
    
    
    (32,723
    )Service income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,386
    
    
    
    159
    
    
    
    277Other
net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,051
    
    
    
    9,410
    
    
    
    30,831Selling and
Administrative
expenses- staff costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (36,641
    )
    
    
    (41,605
    )
    
    
    (45,035
    )- office expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (29,021
    )
    
    
    (31,421
    )
    
    
    (31,815
    )Loss from operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (148,189
    )
    
    
    (38,565
    )
    
    
    (78,465
    )Borrowing costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,117
    )
    
    
    (36,942
    )Share of losses of
jointly controlled
entities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (57,133
    )
    
    
    (2,709
    )
    
    
    (7,995
    )Provision for
income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,721
    )
    
    
    (16,625
    )
    
    
    (13,172
    )Loss for the years
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (217,043
    )
    
    
    (62,016
    )
    
    
    (136,574
    )
 F- 45




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 22.
    
    SEGMENTAL REPORTING (continued)
 Provision of satellite
    
    
    Provision oftransponder capacity and related
    
    
    satellite-based broadcasting and
    
    
    Inter-segmentservices
    
    
    telecommunications services
    
    
    elimination
    
    
    Consolidated2003
    
    
    2004
    
    
    2005
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2003
    
    
    2004
    
    
    2005(restated)$000
    
    
    $000
    
    
    $000
    
    
    $000
    
    
    $000
    
    
    $000
    
    
    $000
    
    
    $000
    
    
    $000
    
    
    $000
    
    
    $000
    
    
    $000Depreciation and
amortisation for the
year
    
    
    228,961
    
    
    
    167,896
    
    
    
    188,342
    
    
    
    7,361
    
    
    
    10,096
    
    
    
    9,839Impairment loss for
the year
    
    
    129,098
    
    
    
    
    
    
    
    59,904
    
    
    
    
    
    
    
    1,800
    
    
    
    7,512Significant non-cash
expenses (other than
depreciation)
    
    
    4,792
    
    
    
    2,883
    
    
    
    
    
    
    
    3,610
    
    
    
    2,771
    
    
    
    349Segment assets
    
    
    
    
    
    
    2,853,269
    
    
    
    3,110,958
    
    
    
    
    
    
    
    52,869
    
    
    
    50,170
    
    
    
    
    
    
    
    (52,284
    )
    
    
    (56,666
    )
    
    
    
    
    
    
    2,853,854
    
    
    
    3,104,462Investment in and
amounts due form
jointly controlled
entities
    
    
    
    
    
    
    80,330
    
    
    
    74,817
    
    
    
    
    
    
    
    510
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80,840
    
    
    
    74,817Corporate assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    686,098
    
    
    
    435,010Total assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,620,792
    
    
    
    3,614,289Segment liabilities
    
    
    
    
    
    
    399,229
    
    
    
    384,044
    
    
    
    
    
    
    
    74,994
    
    
    
    87,043
    
    
    
    
    
    
    
    (52,284
    )
    
    
    (56,666
    )
    
    
    
    
    
    
    421,939
    
    
    
    414,421Corporate liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,001,844
    
    
    
    1,138,316Total liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,423,783
    
    
    
    1,552,737Capital expenditure
incurred during the
year
    
    
    
    
    
    
    417,553
    
    
    
    521,677
    
    
    
    
    
    
    
    13,187
    
    
    
    2,787
  F-46




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 22.
    
    SEGMENTAL REPORTING (continued)Geographical segmentsThe Groups operating assets consist primarily of its satellites which are used, or are
intended for use, for transmission to multiple countries but not located at a specific
geographical area. Accordingly, no segment analysis of the carrying amount of segment assets
by location of assets is presented.In presenting information on the basis of geographical segments, segment revenue, segment
assets and capital expenditure is based on the geographical location of customers.
 Hong Kong
    
    Other regions in the PRC
    
    
    Singapore
    
    
    Indonesia
    
    
    Others
    
    


    Unallocated2003
    
    2004
    
    2005
    
    2003
    
    
    2004
    
    
    2005
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2003
    
    
    2004
    
    
    2005
    
    
    2003
    
    
    2004
    
    
    2005HK$
    
    HK$
    
    HK$
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$
    
    
    HK$Trunover from
external customers
    
    
    25,082
    
    
    21,287
    
    
    38,459
    
    
    225,786
    
    
    
    195,155
    
    
    
    201,851
    
    
    
    18,376
    
    
    
    23,339
    
    
    
    30,657
    
    
    
    535
    
    
    
    6,010
    
    
    
    32,262
    
    
    
    32,462
    
    
    
    31,469
    
    
    
    33,283
    
    
    
    
    
    
    
    
    
    
    
    Segment assets
    
    
    
    
    
    1,666
    
    
    4,009
    
    
    
    
    
    
    55,492
    
    
    
    44,972
    
    
    
    
    
    
    
    2,226
    
    
    
    468
    
    
    
    
    
    
    
    155
    
    
    
    4,061
    
    
    
    
    
    
    
    4,522
    
    
    
    5,453
    
    
    
    
    
    
    
    3,556,731
    
    
    
    3,555,326Capital expenditure
incurred during the
year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,253
    
    
    
    1,416
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    428,487
    
    
    
    523,048
 23.
    
    SHARE OPTION PLANAt the annual general meeting on May 22, 2001, the Company
adopted a share option scheme (Scheme 2001) and granted options
to its employees on June 19, 2001. On May 22, 2002, the Company
adopted a new share option scheme (Scheme 2002) at its 2002
annual general meeting. Thereafter, no further options can be
granted under the Scheme 2001. The options granted on June 19,
2001 shall continue to be valid until their expiry.The total number of shares which may be issued upon exercise of
all options to be granted under Scheme 2001 and Scheme 2002 shall
not in aggregate exceed 10% of the total number of shares of the
Company in issue on the adoption date of the Scheme 2002 (i.e.
412,720 shares). As at the date of this report, 413,265 shares of
the Company were in issue.Under Scheme 2002, the total number of shares to be issued upon
exercise of the options granted to each eligible person
(including both exercised and outstanding options) in any
12-month period shall not exceed 1% of the total number of shares
in issue. The exercise price (subscription price) shall be such
price as determined by the Board of Directors in its absolute
discretion at the time of the making of the offer but in any case
the exercise price shall not be lower than the highest of (i) the
closing price of the shares as stated in The Stock Exchange of
Hong Kong Limiteds (the Exchanges) daily quotations sheet on
the date of the offer of grant, which must be a trading day; (ii)
the average closing price of the shares as stated in the
Exchanges daily quotations sheets for the five trading days
immediately preceding the date of the offer of grant; and (iii)
the nominal value of a share.During the year, no options were granted under the Scheme 2002.
 F-47




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 23.
    
    SHARE OPTION PLAN (continued)Under the Scheme 2001, the maximum entitlement of each eligible person was that the total
number of shares issued or issuable under all options granted to such eligible person
(including both exercised and outstanding options) upon such grant being made shall not
exceed 25% of the total number of the shares for the time being issued and issuable under
the Scheme 2001. In addition, the subscription price was determined by the Board of
Directors on a case-by-case basis and would not be less than the nominal value of the shares
nor at a discount of more than 20% below the average closing price of the shares as stated
in the Exchanges daily quotation sheets on the five dealing days immediately preceding the
date on which the invitation to apply for an option under Scheme 2001.
 (a)
    
    Movements in share optionsThe particulars of the share options granted under the Scheme 2001 outstanding during
the years ended December 31, 2003, 2004 and 2005 are as follows:
 Number ofshare optionsAt January 1, 2003
    
    
    13,410,000Cancelled during the year
    
    
    (3,010,000
    )Exercised
    
    
    (730,000
    )At December 31, 2003
    
    
    9,670,000Cancelled during the year
    
    
    (1,220,000
    )At December 31, 2004
    
    
    8,450,000Cancelled during the year
    
    
    (4,220,000
    )At December 31, 2005
    
    
    4,230,000
 The above granted options have an exercise price of HK$2.765 per share and are
exercisable within the period from May 22, 2003 to May 21, 2011.Fair value of share options and assumptionsThe fair value of services received in return for share options granted
are measured by reference to the fair value of share option granted. The
estimated fair value of the services received is measured based on a binomial
lattice model. The contractual life of the option is used as an input into this
model. Expectations of early exercise are incorporated into the binomial lattice
model.
 2004 & 2005Fair value of share options and assumptions
Fair value at measurement date
    
    HK$2.836Share price at the date of issue
    
    HK$3.850Exercise price
    
    HK$2.765Expected volatility (expressed as weighted average volatility
used in the modeling under binomial lattice model)
    
    
    47.00
    %Option life (expressed as weighted average life used in the
modeling under binomial lattice model)
    
    9.93 yearsExpected dividends
    
    
    NilRisk-free interest rate (based on Exchange Fund Notes)
    
    
    6.13
    %
 F-48




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 23.
    
    SHARE OPTION PLAN (continued)The expected volatility is based on the historic volatility (calculated based on the weighted
average remaining life of the share options), adjusted for any expected changes to future
volatility due to publicly available information. Expected dividends are based on historical
dividends. Changes in the subjective input assumptions could materially affect the fair value
estimate.Share options were granted under a service condition. This condition has not been taken into
account in the grant date fair value measurement of the services received. There were no
market conditions associated with the share option grants.24.
    
    FINANCIAL INSTRUMENTSExposure to credit, liquidity, interest rate and currency risks arises in the normal course
of the Groups business. These risks are limited by the Groups financial management policies
and practices described below.
 (a)
    
    Credit riskThe Groups credit risk is primarily attributable to trade and other receivables and
cash investments. Management has a credit policy in place and the exposures to these
credit risks are monitored on an ongoing basis.In respect of trade and other receivables, periodic credit evaluations are performed
of its customers financial condition. The Group generally does not require
collateral because it usually receives trade deposits which represent a quarter of
utilization fees payable to the Group. The transponder utilization agreements are
subject to termination by the Group if utilization payments are not made on a timely
basis.At the balance sheet date, the Group has a certain concentration of credit risk as 33%
and 31% in 2004 and 2005 respectively of the total trade and other receivables was due
from the Groups largest customer, and as 60% and 65% in 2004 and 2005, respectively,
was due from the Groups five largest customers respectively within the satellite
transponder business segment.(b)
    
    Liquidity riskIndividual operating entities within the Group are responsible for their own cash
management, including the short term investment of cash surpluses and the raising of
loans to cover expected cash demands, subject to approval by the parent companys
board. The Groups policy is to regularly monitor current and expected liquidity
requirements and its compliance with lending covenants, to ensure that it maintains
sufficient reserves of cash and adequate committed lines of funding from major
financial institutions to meet its liquidity requirements in the short and longer
term.
 F-49




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 24.
    
    FINANCIAL INSTRUMENTS (continued)
 (c)
    
    Interest rate riskThe Group is subject to interest rate risk due to fluctuation in interest rates. As of
December 31, 2005, the Groups outstanding bank loans consist of variable interest
rate loans only. From time to time, the Group may enter into interest rate swap
agreements designed to mitigate our exposure to interest rate risks, although the
Group did not consider it necessary to do so in 2005. Upward fluctuations in interest
rates increase the cost of new bank loans and the interest cost of outstanding bank
loans. As a result, a significant increase in interest rates could have a material
adverse effect on the financial position of the Group.The following table contains information about the Groups bank loans that are
sensitive to changes in interest rates, as of December 31, 2005.
 Expected Maturity Date2006
    
    2007
    
    2008
    
    2009
    
    2010
    
    Thereafter(HK$ in million, except interest rates)Variable rate bank loan
    
    
    121
    
    
    
    159
    
    
    
    220
    
    
    
    256
    
    
    
    273
    
    
    
    98Average interest rate(1)
    
    
    5.965
    %
    
    
    5.935
    %
    
    
    5.98
    %
    
    
    6.00
    %
    
    
    6.02
    %
    
    
    6.02
    %
 
 (1)
    
    The interest rates are the implied future LIBOR rates calculated from US swap
as proxy.
 (d)
    
    Foreign currency riskThe Groups reporting currency is the Hong Kong Dollar. The Groups revenues, premiums
for satellite insurance coverage and debt service and substantially all capital
expenditures were denominated in United States Dollars. The Groups remaining expenses
were primarily denominated in Hong Kong Dollars. The Group does not hedge its exposure
to foreign exchange risk. Gains and losses resulting from the effects of changes in
the United States Dollar to Hong Kong Dollar exchange rate are recorded in the
consolidated statement of operations.The Group does not utilize derivative financial instruments to hedge its foreign
currency rate risks.In respect of other trade receivables and payables held in currencies other than the
functional currency of the operations to which they relate, the Group ensures that the
net exposure is kept to an acceptable level, by buying or selling foreign currencies
at spot rates where necessary to address short-term imbalances.The Groups borrowings are denominated in United States Dollars. Given substantially
the Groups revenues are denominated in United States Dollars, management does not
expect that there will be any significant currency risk associated with the Groups
borrowings.(e)
    
    Sensitivity analysisIn managing interest rate and foreign currency risks the Group aims to reduce the
impact of short-term fluctuations on the Groups earnings. Over the longer term,
however, permanent changes in foreign exchange and interest rates would have an impact
on consolidated earnings.At December 31, 2005, it is estimated that a general increase of one percentage point
in interest rates would increase the Groups loss before income taxes by
approximately HK$7,578 and HK$11,076 respectively in 2004 and 2005 so far as the
effect on interest-bearing financial instruments is concerned.
 F-50




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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 24.
    
    FINANCIAL INSTRUMENTS (continued)
 (f)
    
    Fair valuesThe following financial assets and liabilities have their carrying amount
approximately equal to their fair value: trade receivables, other receivables, other
current assets, cash and cash equivalents, payables and accrued charges, and secured
bank borrowings.
 25.
    
    COMPARATIVE FIGURESCertain comparative figures have been adjusted or reclassified as a result of the
changes in accounting policies. Further details are disclosed in note 4.26.
    
    ACCOUNTING ESTIMATES AND JUDGEMENTS
 (a)
    
    Key sources of estimation uncertaintyThe financial statements are based on the selection and application of significant
accounting policies, which require management to make significant estimates and
assumptions that affect the reported amount of assets and liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities at the date of
the financial statements. Actual results may differ from these estimates under
different assumptions or conditions.(b)
    
    Critical accounting judgement in applying the groups accounting policiesThe following are some of the more critical judgment areas in the application of the
Groups accounting policies that currently affect the Groups financial condition and
results of operations.
 (i)
    
    DepreciationDepreciation of communication satellites is provided for on the
straight-line method over the estimated useful life of the satellite, which is
determined by engineering analysis performed at the in-services date and
re-evaluated periodically. A number of factors affect the operational lives of
satellites, including construction quality, component durability, fuel usage,
the launch vehicle used and the skill with which the satellite is monitored and
operated. As the telecommunication industry is subject to rapid technological
change and the Groups satellites have been subjected to certain operational
lives, the Group may be required to revise the estimated useful lives of its
satellites and communication equipment or to adjust their carrying amounts
periodically. Accordingly, the estimated useful lives of the Groups satellites
are reviewed using current engineering data.If a significant change in the estimated useful lives of our satellites is
identified, the Group accounts for the effects of such change as depreciation
expenses on a prospective basis. Details of the depreciation, of communication
satellites are disclosed in notes 3(e) and 5.Depreciation for future satellites will depend on in-orbit testing on their
estimated useful lives after successful launch and, as the cost of the future
satellites is greater than the carrying value of the current satellites, the
depreciation charge is expected to increase in the coming years.
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APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  26.
    
    ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
 (b)
    
    Critical accounting judgement in applying the groups accounting policies
(continued)
 (ii)
    
    Trade receivables and other receivablesThe management of the Group estimates the provision of bad and doubtful debts
required for the potential non-collectability of trade receivables and other
receivables at each balance sheet date based on the ageing of its customer
accounts and its historical write-off experience, net of recoveries. The
Group performs ongoing credit evaluations of its customers and adjusts credit
limits based upon payment history and the customers current credit
worthiness. The Group does not make a general provision on its trade
receivables and other receivables, but instead, makes a specific provision on
its trade receivables and other receivables. Hence, the Group continuously
monitors collections and payments from customers and maintains allowances for
bad and doubtful accounts for estimated losses resulting from the inability
of its customers to make required payments. If the financial condition of the
customers of the Group were to deteriorate, actual write-offs would be higher
than estimated. For the year ended December 31, 2003, 2004 and 2005, the
Group made the provision for bad and doubtful debts in the amount of HK$
8,402, HK$5,654 and HK$350 respectively.The Group periodically reviews the carrying amounts of provision for bad and
doubtful debts to determine whether there is any indication that the
provision needs to be written off. If the Group becomes aware of a situation
where a customer is not be able to meet its financial obligations due to
change of contact information by the customer without notification or after
seeking professional advice from lawyers or debt collection agent that the
probability of recovery is remote, the Group will consider to write off the
debt.(iii)
    
    Impairment of property, plant and equipmentThe Group periodically reviews internal or external resources to identify
indications that the assets may be impaired. If the recoverable amount of an
asset is estimated to be less than its carrying amount, the carrying amount
of the asset is reduced to its recoverable amount. In assessing the
recoverable amount of these assets, the Group is required to make assumptions
regarding estimated future cash flows and other factors to determine the net
realizable value. If these estimates or their related assumptions change in
the future, the Group may be required to adjust the impairment charges
previously recorded.
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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 26.
    
    ACCOUNTING ESTIMATES AND JUDGEMENTS (continued)
 (b)
    
    Critical accounting judgement in applying the groups accounting policies
(continued)
 (iv)
    
    Impairment of property, plant and equipment (continued)The Group applies the foregoing analysis in determining the timing of the
impairment test, the estimated useful lives of the individual assets, the
discount rate, future cash flows used to assess impairments and the fair
value of impaired assets. It is difficult to precisely estimate the price of
the transponder capacities and related satellite services and residual values
because the market prices for our assets are not readily available. The
estimates of future cash flows are based on the terms of existing transponder
capacity and service agreements. The dynamic economic environment in which
the Group operates and the resulting assumptions used in setting depreciable
lives on assets and judgment relating to the utilization rate of the assets,
price and amount of operating costs to estimate future cash flows impact the
outcome of all of these impairment tests. If these estimates or their related
assumptions change in the future, the Group may be required to record
impairment loss for these assets not previously recorded.The Group periodically reviews the carrying amounts of its property, plant
and equipment through reference to its use value and fair market value as
assessed both by the Group and by an independent professional property
appraiser. If the use value or fair market value of the property, plant and
equipment are lower than their carrying amount, the Group may be required to
record additional impairment loss not previously recognised. Details of the
impairment loss of property, plant and equipment are disclosed in note 5.(v)
    
    Contingencies and provisionsContingencies, representing an obligation that are neither probable nor
certain at the date of the financial statements, or a probable obligation for
which the cash outflow is not probable, are not recorded.Provisions are recorded when, at the end of period, there is an obligation of
the Group to a third party which is probable or certain to create an outflow
of resources to the third party, without at least an equivalent return
expected from the third party. This obligation may be legal, regulatory or
contractual in nature.To estimate the expenditure that the Group is likely to bear in order to
settle an obligation, the management of the Group takes into consideration
all of the available information at the closing date for its consolidated
financial statements. If no reliable estimate of the amount can be made, no
provision is recorded. For details, please refer to note 14 of contingent
liabilities.
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APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 27.
    
    Possible impact of amendments, new standards and interpretations issued but not yet
effective for the annual accounting period ended December 31, 2005Up to the date of issue of these financial statements, the HKICPA has issued the
following amendments, new standards and interpretations which are not yet effective for the
accounting period ending December 31, 2005 and which have not been adopted in these
financial statements:
 Effective foraccounting periodsbeginning on orafterHK(IFRIC)4, Determining whether an arrangement contains a lease
    
    January 1, 2006HK(IFRIC)6, Liabilities arising from participating in a specific
market  Waste electrical and electronic equipment
    
    December 1, 2005Amendments to HKAS 19, Employee benefits  Actuarial Gains and
Losses, Group Plans and Disclosures
    
    January 1, 2006Amendments to HKAS 39, Financial instruments: Recognition and
measurement:- Cash flow hedge accounting of forecast intragroup transactions
    
    January 1, 2006- The fair value option
    
    January 1, 2006- Financial guarantee contracts
    
    January 1, 2006Amendments, as a consequence of the Hong Kong Companies
(Amendment) Ordinance 2005, to:- HKAS 1, Presentation of financial statements
    
    January 1, 2006- HKAS 27, Consolidated and separate financial statements
    
    January 1, 2006- HKFRS 3, Business combinations
    
    January 1, 2006HKFRS 7, Financial instruments: disclosures
    
    January 1, 2007Amendment to HKAS 1, Presentation of financial statements:capital disclosures
    
    January 1, 2007
 In addition, the Hong Kong Companies (Amendment) Ordinance 2005 came into effect
on December 1, 2005 and would be first applicable to the Groups financial statements for
the period beginning January 1, 2006.The Group is in the process of making an assessment of what the impact of these
amendments, new standards and new interpretations is expected to be in the period of initial
application. So far it has concluded that the adoption of amendments to HKAS 1, HKAS 27 and
HKFRS 3 made as a result of the Hong Kong Companies (Amendment) Ordinance 2005 are not
applicable to any of the Groups operations and that the adoption of the remaining standards
is unlikely to have a significant impact on the Groups results of operations and financial
position.
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APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 28.
    
    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN HONG KONG AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (US GAAP) AND ADDITIONAL DISCLOSURES REQUIRED UNDER US GAAP
 (a)
    
    Summary of Significant Differences Between HK GAAP and US GAAPThe Groups accounting policies conform with generally accepted accounting
principles in Hong Kong (HK GAAP) which differ in certain material respects from
those applicable generally accepted accounting principles in the United States of
America (US GAAP).As further described in note 4, the Group adopted all applicable HKASs that
required initial adoption in 2005. As a result, certain amounts under HK GAAP for
the years ended December 31, 2003 and 2004 were required to and have been restated
to comply with those 2005 initial adoption requirements. Consequently, the amounts
of certain differences between HK GAAP and US GAAP for the years ended December
31, 2003 and 2004 have been restated as a result of the initial adoption of
certain HKASs in 2005 that required retrospective application as follows:
 Aspreviously
    
    
    Effects of adopting
    
    
    AsReconciliation of net income to US GAAP
    
    reported
    
    
    HKAS 40
    
    
    HKFRS 2
    
    
    restatedHK$
    
    
    HK$
    
    
    HK$
    
    
    HK$2003Loss attributable to the equity shareholders in
accordance with HK GAAP
    
    
    (224,718
    )
    
    
    7,700
    
    
    
    898
    
    
    
    (216,120
    )Adjustments required under US GAAPRevaluation of investment properties
    
    
    70
    
    
    
    (7,700
    )
    
    
    
    
    
    
    (7,630
    )Stock based compensation
    
    
    344
    
    
    
    
    
    
    
    (898
    )
    
    
    (554
    )2004Loss attributable to the equity shareholders in
accordance with HK GAAP
    
    
    (57,757
    )
    
    
    (2,200
    )
    
    
    
    
    
    
    (59,957
    )Adjustments required under US GAAPRevaluation of investment properties
    
    
    (78
    )
    
    
    2,200
    
    
    
    
    
    
    
    2,122Stock based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 With the adoption of new accounting standards, all revaluation gains and
losses of investment properties are recognized in the profit and loss account.
Since revaluations are not permitted under US GAAP, adjustments under HK GAAP are
reversed and differences between HK GAAP and US GAAP for the years ended December
31, 2003 and 2004 are restated. The adoption of new HKFRS 2 has also resulted in a
change in accounting policy for employee share options and other shared-based
payments under HK GAAP. Since the accounting treatment under HK GAAP is different
from US GAAP, adjustment under HK GAAP is reversed under US GAAP.
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APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 28.
    
    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN HONG KONG AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (US GAAP) AND ADDITIONAL DISCLOSURES REQUIRED UNDER US GAAP
(continued)
 (a)
    
    Summary of Significant Differences Between HK GAAP and US GAAP
(continued)The significant differences relate principally to the following items and the
adjustments considered necessary to present the net loss and shareholders equity
in accordance with US GAAP are set out below.
 (i)
    
    Investment properties revaluation and depreciationIn prior years under HKGAAP, movements in the fair value of the
Groups investment properties were recognised directly in the investment
properties revaluation reserve except when, on a portfolio basis, the
reserve was insufficient to cover a deficit on the portfolio, or when a
deficit previously recognised in the statement of operations had reversed,
or when an individual investment property was disposed of. In these limited
circumstances movements in the fair value were recognised in the statement
of operations. Upon adoption of new HK GAAP as from January 1, 2005, all
changes in the fair value of investment properties are recognised directly
in the statement of operations in accordance with the fair value model.Under US GAAP, investment properties are stated at cost and depreciated
over the shorter of the useful life and the land lease terms. Accordingly,
the investment properties of the Group and its jointly controlled entity,
which are stated at open market value, have been restated at historical
cost less accumulated depreciation.Depreciation has been based on the historical cost of the properties held
by the Group and its jointly controlled entity and the useful lives of such
properties range from 44 to 46 years. The gross historical cost of
properties held by the Group and its jointly controlled entity subject to
depreciation under US GAAP which are not depreciated under HK GAAP at
December 31, 2005 amounted to HK$3,821 (2004: HK$3,821) and HK$140,000
(2004: HK$140,000), respectively.In the US GAAP reconciliation of net loss for the year, the adjustments
with respect of investment properties represent: (i) the reversal of
revaluation gain in respect of the Groups properties of HK$nil (2004:
HK$78 and 2003: revaluation loss of HK$70), and the Groups proportionate
share of revaluation loss in respect of the property held by its jointly
controlled entity HK$7,150 (2004: revaluation loss of HK$2,200 and 2003:
revaluation gain of HK$7,700); and (ii) the depreciation in respect of the
properties held by the Group amounting to HK$83 (2004: HK$84 and 2003:
HK$83), and the Groups proportionate share of depreciation in respect of
the property held by jointly controlled entity amounting HK$1,750 (2004:
HK$1,750 and 2003: HK$875) which are not recongized under HK GAAP.
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APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 28.
    
    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN HONG KONG AND UNITED STATES GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) AND ADDITIONAL DISCLOSURES REQUIRED UNDER US GAAP
(continued)
 (a)
    
    Summary of Significant Differences Between HK GAAP and US GAAP
(continued)
 (i)
    
    Investment properties revaluation and depreciation (continued)In the US GAAP reconciliation of shareholders equity at December 31, 2005,
the adjustments represent the reversal of revaluation gain in respect of
the investment properties of the Group of HK$nil (2004: HK$78), and the
Groups proportionate share of revaluation loss in respect of the property
held by its jointly controlled entity HK$1,650 (2004: revaluation gain of
HK$5,500).(ii)
    
    Share optionsThe Group granted share options to directors and employees. Under HK GAAP
and prior to January 1, 2005, the proceeds received are recognised as an
increase to capital upon the exercise of the share options. The Group does
not account for the issuance of stock options until they are exercised.
With effect from January 1, 2005, in order to comply with HKFRS 2, the
Group recognises the fair value of such share options as an expense in the
consolidated statement of operations, or as an asset, if the cost qualifies
for recognition as an asset under the Groups accounting policies. A
corresponding increase is recognised in a capital reserve within equity.Under US GAAP, the compensation expenses are based on the excess, if any,
of the quoted market price of the shares on the date of grant over the
exercise price of the stock options. Such amount is charged to the
consolidated statement of operations over the vesting period of the
options. Any expenses recognised based on the fair value of share options
under HK GAAP is reversed under US GAAP.In the US GAAP reconciliation of net loss for the year ended December 31,
2003, the compensation expense of share options granted represents the
reversal of expense recongnised based on the fair value of the share option
under HK GAAP amounted to HK$898 and the amortization of compensation
expenses in relation to share options under US GAAP amounted to HK$ 344.
There has been no compensation expense of share options granted for the
year ended December 31, 2004 and 2005 as no additional options of the
Group were granted nor did any options from previous grants vest during
2004 and 2005.
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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 28.
    
    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN HONG KONG AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (US GAAP) AND ADDITIONAL DISCLOSURES REQUIRED UNDER US GAAP
(continued)
 (a)
    
    Summary of Significant Differences Between HK GAAP and US GAAP
(continued)
 (iii)
    
    Impairment of long-lived assetsThe Group periodically reviews the carrying amount of the assets to
determine whether there is any indication that those assets have suffered
an impairment loss. If the recoverable amount of an asset is estimated to
be less than its carrying amount, the carrying amount of the asset is
reduced to its recoverable amount. Under HK GAAP, the estimated future cash
flows are discounted at a discount rate when assessing the recoverable
amount of the asset.Under US GAAP, in accordance with SFAS 144 Accounting for the Impairment
or Disposal of Long-Lived Assets, recoverability of the assets is measured
by a comparison of the carrying amount of an asset to future undiscounted
net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognised is measured by
the amount by which the carrying amounts of the assets exceed the fair
value of the assets.Given that the undiscounted cash flows expected to be generated by
certain long-lived assets were below the carrying amount of such assets
and subject to impairment under HK GAAP, the assets are also
considered impaired under US GAAP. Accordingly, the impairment loss
recognised under HK GAAP has not been reversed for US GAAP purpose.(iv)
    
    Minority interestsIn prior years under HK GAAP, minority interests at the balance sheet date
were presented in the consolidated balance sheet separately from
liabilities and as a deduction from net assets. Minority interests in the
results of the Group for the year were also separately presented in the
statement of operations as a deduction before arriving at the profit or
loss attributable to shareholders.With effect from January 1, 2005, under new HK GAAP, minority interests
become part of the total result for the year and total equity of the Group,
whereas under US GAAP, minority interests are excluded from the total
result for the year and shareholders equity of the Group. However, there
is no impact on net income and shareholders equity under US GAAP.
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APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 28.
    
    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN HONG KONG AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (US GAAP) AND ADDITIONAL DISCLOSURES REQUIRED UNDER US GAAP
(continued)
 (a)
    
    Summary of Significant Differences Between HK GAAP and US GAAP
(continued)
 (v)
    
    Segment reportingUnder HK GAAP, the Group has reported business segment information as its
primary reporting segment in accordance with its internal financial reporting.
Segment information under HK GAAP includes data that can be directly
attributable to a segment and those items that can be reasonably allocated.Under US GAAP, segment information is based on the segmental operating results
regularly reviewed by the Groups chief operating decision maker applying
accounting policies consistent with those used in preparation of the Groups
consolidated HK GAAP financial statements.Segment information, including revenues and results for these segments for
each of the three years ended December 31, 2005 is presented in note 22. The
computation of segment results required by HK GAAP approximates measures of
performance used internally by the chief operating decision maker and
materially complies with US GAAP.Please refer to note 22 for the Groups other segment information required by
the provisions of SFAS No. 131 Segment Reporting.
 (b)
    
    Net lossThe effect on net loss of significant differences between HK GAAP and US GAAP is as
follows:
 Years ended December 31,2003
    
    
    2004
    
    
    2005
    
    
    2005HK$
    
    
    HK$
    
    
    HK$
    
    
    US$Net loss attributable to equity shareholders
in accordance with HK GAAP
    
    
    (216,120
    ) (1)
    
    
    (59,957
    ) (1)
    
    
    (135,564
    
    
    
    (17,380
    )Adjustments required under US GAAPRevaluation of investment properties
    
    
    (7,630
    ) (1)
    
    
    2,122
    (1)
    
    
    7,150
    
    
    
    917Depreciation of investment properties
    
    
    (958
    )
    
    
    (1,834
    )
    
    
    (1,833
    )
    
    
    (235
    )Compensation expenses of share
options granted
    
    
    (554
    ) (1)
    
    
    
    
    
    
    
    
    
    
    Impairment of long-lived assets
    
    
    
    
    
    
    1,080
    
    
    
    
    
    
    
    Net loss in accordance with US GAAP
    
    
    (225,262
    )
    
    
    (58,589
    )
    
    
    (130,247
    )
    
    
    (16,698
    )Basic and diluted loss per share under US GAAP
    
    (55 cents
    )
    
    (14 cents
    )
    
    (32 cents
    )
    
    (4 cents
    )
 
 (1)
    
    With effect from January 1, 2005, HK GAAP has been converged in all material
respects with the international Financial Reporting Standards. Accordingly,
certain of the Groups accounting polices have been changed in line with
adoption of the new standards (see note 4 to the consolidated financial
statements). As a result, certain comparative figures for the year ended
December 31, 2003 and 2004 have been restated.
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APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 28.
    
    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN HONG KONG AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (US GAAP) AND ADDITIONAL DISCLOSURES REQUIRED UNDER US GAAP
(continued)
 (b)
    
    Net loss (continued)Options to purchase 8,450,000 shares and 4,230,000 shares of common stock at HK$2.765
per share were outstanding during the years 2004 and 2005, respectively, but were not
included in the computation of diluted EPS because the options exercise price was
greater than the average market price of the common shares for the period. The
options, which expire on May 21, 2011, were still outstanding at the end of year 2005.(c)
    
    Shareholders equityThe effect on shareholders equity of significant differences between HK GAAP and US
GAAP is as follows:
 Years ended December 31,2004
    
    
    
    
    
    
    2005
    
    
    2005HK$
    
    
    
    
    
    
    HK$
    
    
    US$Total equity attributable to equity shareholders
in accordance with HK GAAP
    
    
    2,193,153
    (1)
    
    
    
    
    
    
    2,058,625
    
    
    
    263,926Adjustments required under US GAAPRevaluation of investment properties
    
    
    (5,500
    ) (1)
    
    
    
    
    
    
    1,650
    
    
    
    212Accumulated depreciation of
investment properties
    
    
    (2,432
    )
    
    
    
    
    
    
    (4,265
    )
    
    
    (547
    )Impairment of long-lived assets
    
    
    1,080
    
    
    
    
    
    
    
    1,080
    
    
    
    138Shareholders equity in accordance with US GAAP
    
    
    2,186,301
    
    
    
    
    
    
    
    2,057,090
    
    
    
    263,729
 The changes in shareholders equity in accordance with US GAAP is as follows:
 Capital
    
    
    Additional
    
    
    Other
    
    
    Retainedstock
    
    
    paid-in capital
    
    
    reserves
    
    
    earningsHK$
    
    
    HK$
    
    
    HK$
    
    
    HK$Balance at January 1, 2003
    
    
    41,254
    
    
    
    1,806,147
    
    
    
    276
    
    
    
    621,002New shares issued under the share
option scheme
    
    
    73
    
    
    
    1,946
    
    
    
    
    
    
    
    Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    (282
    )
    
    
    Compensation expense of share
options granted
    
    
    
    
    
    
    (344
    )
    
    
    
    
    
    
    Transfer to other reserves
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    (8
    )Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (225,262
    )Balance at December 31, 2003
    
    
    41,327
    
    
    
    1,807,749
    
    
    
    2
    
    
    
    395,732Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (58,589
    )Balance at December 31, 2004
    
    
    41,327
    
    
    
    1,807,749
    
    
    
    82
    
    
    
    337,143Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    1,369
    
    
    
    Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (130,247
    )Others
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (333
    )Balance at December 31, 2005
    
    
    41,327
    
    
    
    1,807,749
    
    
    
    1,451
    
    
    
    206,563
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APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts stated in thousands, except share data)
 28.
    
    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN HONG KONG AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) AND ADDITIONAL DISCLOSURES REQUIRED UNDER US GAAP (continued)
 (d)
    
    Comprehensive income under US GAAPThe comprehensive loss for the year ended December 31, 2003 was HK$225,544, comprised
of net loss of HK$225,262 and a foreign currency translation loss of HK$282.The comprehensive loss for the year ended December 31, 2004 was HK$58,509, comprised
of net loss of HK$58,589 and a foreign currency translation gain of HK$80.The comprehensive loss for the year ended December 31, 2005 was
HK$128,878, comprised of net loss of HK$130,247 and a foreign currency
translation gain of HK$1,369.(e)
    
    Consolidated statements of operations and consolidated balance sheets under
US GAAPThe compensation received from cancellation of transponder utilization agreements and
from early termination of services and facilities lease are classified as revenues
under US GAAP. In addition, the reversals of the allowance for doubtful receivables
and provision for regulatory matters, and the impairment loss on goodwill and
property, plant and equipment are presented as part of costs and expenses under US
GAAP.Under US GAAP, the interest expense on the loan borrowed by the Partnership and
the related interest income on the deposit by a fellow subsidiary are not offset.The consolidated statements of operations under US GAAP is as follows:
 Years ended December 31,2003
    
    2004
    
    2005
    
    2005HK$
    
    HK$
    
    HK$
    
    US$Total revenues
    
    
    316,291
    
    
    
    277,260
    
    
    
    336,512
    
    
    
    43,142Total costs and expenses
    
    
    (484,036
    )
    
    
    (323,519
    )
    
    
    (445,891
    )
    
    
    (57,166
    )Loss from operations
    
    
    (167,745
    )
    
    
    (46,259
    )
    
    
    (109,379
    )
    
    
    (14,024
    )Other income/(expenses)Borrowing costs
    
    
    (35,771
    )
    
    
    (4,117
    )
    
    
    (36,942
    )
    
    
    (4,736
    )Interest income
    
    
    42,882
    
    
    
    7,312
    
    
    
    12,916
    
    
    
    1,656Others-net
    
    
    11,878
    
    
    
    2,020
    
    
    
    17,915
    
    
    
    2,297Share of losses of jointly controlled
entities
    
    
    (65,708
    )
    
    
    (2,259
    )
    
    
    (2,595
    )
    
    
    (333
    )Loss before income taxes and
minority interests
    
    
    (214,464
    )
    
    
    (43,303
    )
    
    
    (118,085
    )
    
    
    (15,140
    )Provision for income taxes
    
    
    (11,721
    )
    
    
    (16,625
    )
    
    
    (13,172
    )
    
    
    (1,688
    )Minority interests
    
    
    923
    
    
    
    1,339
    
    
    
    1,010
    
    
    
    129Net loss
    
    
    (225,262
    )
    
    
    (58,589
    )
    
    
    (130,247
    )
    
    
    (16,699
    )
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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 28.
    
    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN HONG KONG AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) AND ADDITIONAL
DISCLOSURES REQUIRED UNDER US GAAP (continued)
 (e)
    
    Consolidated statements of operations and consolidated balance
sheets under US GAAP (continued)Under US GAAP, the Companys consolidated current assets were HK$766,547
and HK$491,473 and total assets were HK$3,613,940 and HK$3,615,451 at December
31, 2004 and 2005, respectively, and consolidated current liabilities were
HK$232,825 and HK$297,438 and total liabilities were HK$1,423,783 and
HK$1,554,714 at December 31, 2004 and 2005, respectively.(f)
    
    Consolidated statements of cash flowThe Group applies Hong Kong Statement of Standard Accounting Practice No. 15
(revised 2001) Cash Flow Statements (HK SSAP 15). Its objectives and principles
are similar to those set out in SFAS No. 95, Statement of Cash Flows for US GAAP
purposes. The principal differences between the standards relate to classification.
Interest received is classified under investing activities and interest paid under
financing activities shown under HK SSAP 15. These items are classified under
operating activities under SFAS No. 95.A reconciliation of the major captions in the consolidated statements of cash flow
under HK GAAP and US GAAP is as follows:
 Years ended December 31,2003
    
    2004
    
    2005HK$
    
    HK$
    
    HK$Net cash from operating activities:Amount under HK GAAP
    
    
    91,292
    
    
    
    233,378
    
    
    
    149,528US GAAP adjustment       interest received
    
    
    9,279
    
    
    
    6,810
    
    
    
    13,404 interest paid
    
    
    (3,681
    )
    
    
    (15,847
    )
    
    
    (32,582
    )Amount under US GAAP
    
    
    96,890
    
    
    
    224,341
    
    
    
    130,350Net cash used in investing activities:Amount under HK GAAP
    
    
    (589,259
    )
    
    
    (364,492
    )
    
    
    (617,468
    )US GAAP adjustment  interest received
    
    
    (9,279
    )
    
    
    (6,810
    )
    
    
    (13,404
    )Amount under US GAAP
    
    
    (598,538
    )
    
    
    (371,302
    )
    
    
    (630,872
    )Net cash from financing activities:Amount under HK GAAP
    
    
    218,856
    
    
    
    257,933
    
    
    
    118,933US GAAP adjustment  interest paid
    
    
    3,681
    
    
    
    15,847
    
    
    
    32,582Amount under US GAAP
    
    
    222,537
    
    
    
    273,780
    
    
    
    151,515
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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 28.
    
    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN HONG KONG AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCPLES (US GAAP) AND ADDITIONAL
DISCLOSURES REQUIRED UNDER US GAAP (continued)
 (g)
    
    Income taxesA reconciliation of the expected income tax benefit, using the statutory tax rates of
the applicable countries, with the actual income taxes expense under US GAAP is as
follows:
 Year ended December 31,2003
    
    2004
    
    2005HK$
    
    HK$
    
    HK$Loss before tax and minority interests
    
    
    (214,464
    )
    
    
    (43,303
    )
    
    
    (118,085
    )Expected income tax benefit
    
    
    (37,550
    )
    
    
    (8,072
    )
    
    
    (21,066
    )Overseas withholding tax
    
    
    20,237
    
    
    
    17,000
    
    
    
    18,856Tax effect of non-deductible expenses
    
    
    7,618
    
    
    
    40,497
    
    
    
    26,183Tax effect of non-taxable revenue
    
    
    (3,159
    )
    
    
    (27,852
    )
    
    
    (13,552
    )Tax effect of unused tax losses not recognized
    
    
    12,813
    
    
    
    2,656
    
    
    
    2,808Tax effect of prior years unrecognized tax
losses utilized this year
    
    
    
    
    
    
    (7,604
    )
    
    
    (57
    )Effect on opening deferred tax balances resulting
from an increase in tax rate during the year
    
    
    11,762
    
    
    
    
    
    
    
    Actual tax expenses
    
    
    11,721
    
    
    
    16,625
    
    
    
    13,172
     Years ended December 31,2003
    
    2004
    
    2005HK$
    
    HK$
    
    HK$Current
    
    
    134,734
    
    
    
    17,000
    
    
    
    18,856Deferred
    
    
    (123,013
    )
    
    
    (375
    )
    
    
    (5,684
    )11,721
    
    
    
    16,625
    
    
    
    13,172
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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 28.
    
    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN HONG KONG AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) AND ADDITIONAL
DISCLOSURES REQUIRED UNDER US GAAP (continued)
 (g)
    
    Income taxes (continued)The principal components of the deferred tax liabilities/(assets) under US GAAP are as follows:
 December 31,2004
    
    2005HK$
    
    HK$Deferred tax assets:Tax losses
    
    
    138,252
    
    
    
    388,328Property, plant and equipment
    
    
    4,295
    
    
    
    4,378Trade and other receivables
    
    
    2,537
    
    
    
    2,705Others
    
    
    511
    
    
    
    693Total deferred tax assets
    
    
    145,595
    
    
    
    396,104Valuation allowance
    
    
    (13,088
    )
    
    
    (16,073
    )Net deferred tax assets
    
    
    132,507
    
    
    
    380,031Deferred tax liabilitiesProperty, plant and equipment
    
    
    (134,582
    )
    
    
    (376,422
    )Net deferred tax (liabilities)/assets
    
    
    (2,075
    )
    
    
    3,609
  (h)
    
    Summarized information on APT Telecom, a significant jointly controlled entityUnder US GAAP, APT Telecoms net losses were HK$119,469, HK$4,108 and
HK$3,772 for the years ended December 31, 2003, 2004 and 2005, respectively,
total assets were HK$138,817 and HK$138,223 as at December 31, 2004 and 2005,
respectively, and total liabilities were HK$135,925 and HK$139,103 as at December
31, 2004 and 2005, respectively.During 2003, the directors of APT Telecom conducted a review of the companys fixed
assets and determined that property, plant and equipment, and other assets were
impaired due to the recoverable amount of these assets is estimated to be less
than their carrying amount. Accordingly, impairment loss of HK$89,018 has been
recognized and charged to the statements of operations for the year ended
December 31, 2003. APT Telecom did not have any impairment in 2004 and 2005.
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##### Table of Contents



APT SATELLITE HOLDINGS LIMITED
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 28.
    
    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN HONG KONG AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) AND ADDITIONAL
DISCLOSURES REQUIRED UNDER US GAAP (continued)
 (i)
    
    Recent US accounting pronouncementsStatement of Financial Accounting Standards (SFAS) No. 123 (revised 2004)In December 2004, the Financial Accounting Standards Board (the FASB) issued SFAS
No. 123 (revised 2004), Share-Based Payment (SFAS No. 123R), which requires
companies to measure and recognize compensation expense for all stock-based payments
at fair value. The Company will adopt this Statement on January 1, 2006. The
Group does not believe that the adoption of SFAS 123R will have a significant effect
on its financial statements.SFAS No. 153In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets,
which eliminates an exception in Accounting Principles Board Opinion No. 29,
Accounting for Nonmonetary Transactions, for recognizing nonmonetary exchanges of
similar productive assets at fair value and replaces it with a general exception for
recognizing exchanges of nonmonetary assets at fair value that do not have commercial
substance. This Statement will be effective for the Group for nonmonetary asset
exchanges occurring on or after January 1, 2006. The Group does not believe that the
adoption of SFAS 153 will have a significant effect on its financial statements.SFAS No. 154In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections, which replaces APB 20 and SFAS No. 3, Reporting Changes in Interim
Financial Statements. SFAS No. 154 establishes, unless impracticable, retrospective
application as the required method for reporting a change in accounting principle in
the absence of explicit transition requirements specific to a newly adopted
accounting principle. This statement will be effective for the Group for all
accounting changes and any error corrections occurring after January 1, 2006. The
impact on the consolidated financial statements will depend on new pronouncements
that are subsequently issued.
 F-65