<PAGE>

                                                                     Exhibit 8.2

<PAGE>
                                                                               .
                                                                               .
                                                                               .

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S>                                                                                        <C>
Report of Independent Registered Public Accounting Firm.........................                2

Balance Sheets as of December 31, 2003 and 2004.................................            3 & 4

Statements of Operations for the years ended
  December 31, 2002, 2003 and 2004..............................................                5

Statements of Changes in Shareholders' Equity
  for the years ended December 31, 2002, 2003 and 2004..........................                6

Statements of Cash Flows for the years ended
  December 31, 2002, 2003 and 2004..............................................                7

Notes to Financial Statements...................................................           8 - 24
</TABLE>

                                        1
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

[KPMG LOGO]

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and
Shareholders of
APT Satellite Telecommunications Limited:

We have audited the accompanying balance sheet of APT Satellite
Telecommunications Limited (the "Company") as of December 31, 2003 and the
related statements of operations, changes in shareholders' equity and cash flows
for the year ended December 31, 2003, all expressed in Hong Kong dollars. The
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of December 31,
2003, and the results of its operations and its cash flow for the year ended
December 31, 2003 in conformity with accounting principles generally accepted in
Hong Kong.

Accounting principles generally accepted in Hong Kong vary in certain
significant respects from accounting principles generally accepted in the United
States of America. Information relating to the nature and effect of such
differences is presented in Note 12 to the financial statements.

The accompanying financial statements as of and for the year ended December 31,
2003 have been translated into United States dollars solely for the convenience
of the reader. We have audited the translation, and in our opinion, the
financial statements expressed in Hong Kong dollars have been translated into
United States dollars on the basis set forth in Note 2 to the financial
statements.

KPMG
Hong Kong

April 13, 2004

                                        2
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

                                 BALANCE SHEETS
                        AS OF DECEMBER 31, 2003 AND 2004
                          (Amounts stated in thousands)

<TABLE>
<CAPTION>
                                                                                       December 31,
                                                                            -----------------------------------
                                                                  Note       2003        2004          2004
                                                                            -------   -----------   -----------
                                                                              HK$         HK$           US$
                                                                                      (unaudited)   (unaudited)
<S>                                                               <C>       <C>       <C>           <C>
                                ASSETS

CURRENT ASSETS
  Cash and cash equivalents....................................              13,563         438           56
  Pledged bank deposits .......................................      6(c)     1,426       1,429          183
  Trade receivables............................................               1,670          16            2
  Amounts due from related companies...........................                 947           -            -
  Deposits, prepayments and other receivables..................               1,621       1,707          219
                                                                            -------     -------       ------
    Total current assets......................................               19,227       3,590          460
                                                                            -------     -------       ------

  Investment property..........................................      4      154,000     150,000       19,231
                                                                            -------     -------       ------
    TOTAL ASSETS...............................................             173,227     153,590       19,691
                                                                            =======     =======       ======
</TABLE>

See accompanying notes to the financial statements.

                                        3
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

                           BALANCE SHEETS (CONTINUED)
                        AS OF DECEMBER 31, 2003 AND 2004
                          (Amounts stated in thousands)

<TABLE>
<CAPTION>
                                                                                     December 31,
                                                                         ------------------------------------
                                                                  Note     2003        2004           2004
                                                                         --------   -----------   -----------
                                                                           HK$          HK$           US$
                                                                                    (unaudited)   (unaudited)
<S>                                                               <C>    <C>        <C>           <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
  Trade and other payables ....................................     5      32,283      17,728         2,273
  Amounts due to related companies.............................             1,009       3,553           455
                                                                         --------    --------       -------
    Total current liabilities..................................            33,292      21,281         2,728
                                                                         --------    --------       -------

  Amount due to a related company .............................            13,500      10,800         1,385
  Amounts due to shareholders .................................           103,844     103,844        13,313
                                                                         --------    --------       -------
TOTAL LIABILITIES..............................................           150,636     135,925        17,426
                                                                         --------    --------       -------
Contingencies and commitments .................................     6

SHAREHOLDERS' EQUITY
  Capital stock - Common stock ................................     7     153,792     153,792        19,717
  Revaluation reserve..........................................            14,000      10,000         1,282
  Accumulated losses ..........................................          (145,201)   (146,127)      (18,734)
                                                                         --------    --------       -------
    Total shareholders' equity.................................            22,591      17,665         2,265
                                                                         --------    --------       -------
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.................           173,227     153,590        19,691
                                                                         ========    ========       =======
</TABLE>

See accompanying notes to the financial statements.

                                        4
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

                            STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED DECEMBER 31, 2002, 2003 AND 2004
                          (Amounts stated in thousands)

<TABLE>
<CAPTION>
                                                                          Years ended December 31,
                                                             --------------------------------------------------
                                                     Note       2002         2003        2004          2004
                                                             -----------   --------   -----------   -----------
                                                                 HK$          HK$         HK$           US$
                                                             (unaudited)              (unaudited)   (unaudited)
<S>                                                  <C>     <C>           <C>        <C>           <C>
OPERATING REVENUES
Service income received from:
  Unaffiliated customers.........................               19,179       17,546      1,508          193
  Related parties................................      10       24,311        6,641          -            -
                                                               -------     --------     ------         ----
Total revenues...................................               43,490       24,187      1,508          193
                                                               -------     --------     ------         ----

COSTS AND EXPENSES
  Cost of service including depreciation
    and amortization of 2002: HK$4,109,
    2003: HK$2,852 and
    2004: HK$nil ................................              (50,079)     (32,493)    (1,546)        (198)
  Selling, general and administrative............              (12,511)     (22,418)      (907)        (116)
                                                               -------     --------     ------         ----
Total costs and expenses.........................              (62,590)     (54,911)    (2,453)        (314)
                                                               -------     --------     ------         ----
                                                               (19,100)     (30,724)      (945)        (121)
OTHER OPERATING REVENUES
  Interest income - net..........................                  539          130         16            2
  Other income...................................                  300        1,734          3            -
Impairment loss recognized in respect
  of property, plant and equipment,
  and other assets...............................                    -      (89,018)         -            -
                                                               -------     --------     ------         ----
Loss before income taxes ........................      11(c)   (18,261)    (117,878)      (926)        (119)
Provision for income taxes ......................       8            -            -          -            -
                                                               -------     --------     ------         ----
Net loss.........................................              (18,261)    (117,878)      (926)        (119)
                                                               =======     ========     ======         ====
</TABLE>

See accompanying notes to the financial statements.

                                       5
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

                  STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2002, 2003 AND 2004
                           (Amounts stated in thousands)

<TABLE>
<CAPTION>
                                                       Capital    Revaluation   Accumulated
                                                        stock       reserve       losses       Total
                                                       -------    -----------   -----------   --------
                                                         HK$          HK$           HK$         HK$
<S>                                                    <C>        <C>           <C>           <C>
Balance at December 31, 2001 (unaudited)...........     88,300           -         (9,062)      79,238
Net loss for the year (unaudited)..................          -           -        (18,261)     (18,261)
                                                       -------      ------       --------     --------
Balance at December 31, 2002 (unaudited)...........     88,300           -        (27,323)      60,977
Shares issued .....................................     65,492           -              -       65,492
Surplus on revaluation of investment property......          -      14,000              -       14,000
Net loss for the year..............................          -           -       (117,878)    (117,878)
                                                       -------      ------       --------     --------
Balance at December 31, 2003.......................    153,792      14,000       (145,201)      22,591
Deficit on revaluation of investment
   Property (unaudited)............................          -      (4,000)             -       (4,000)
Net loss for the year (unaudited)..................          -           -           (926)        (926)
                                                       -------      ------       --------     --------
At December 31, 2004 (unaudited)...................    153,792      10,000       (146,127)      17,665
                                                       =======      ======       ========     ========
At December 31, 2004 (unaudited) (in US$)..........     19,717       1,282        (18,734)       2,265
                                                       =======      ======       ========     ========
</TABLE>

See accompanying notes to the financial statements.

                                       6
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

                            STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 2002, 2003 AND 2004
                          (Amounts stated in thousands)

<TABLE>
<CAPTION>
                                                                                  Years ended December 31,
                                                                     --------------------------------------------------
                                                                         2002        2003        2004          2004
                                                                     -----------   --------   ----------    -----------
                                                                         HK$          HK$         HK$           US$
                                                                     (unaudited)              (unaudited)   (unaudited)
<S>                                                                  <C>           <C>        <C>           <C>
OPERATING ACTIVITIES
  Loss before income taxes .......................................     (18,261)    (117,878)       (926)       (119)
  Adjustments for:
  Depreciation and amortization...................................       4,109        2,852           -           -
  Impairment losses recognized ...................................           -       89,018           -           -
  Interest income.................................................        (539)        (130)        (16)         (2)
  Provision for bad debts.........................................           -           64           -           -
  Loss/(gain) on disposal of property, plant and equipment,
    and other assets..............................................           2       (1,377)          -           -
                                                                       -------     --------     -------      ------
OPERATING LOSS BEFORE CHANGES IN WORKING CAPITAL..................     (14,689)     (27,451)       (942)       (121)
  Decrease in trade receivables...................................       1,584        1,303       1,654         212
  (Increase)/decrease in amounts due from related companies.......      (1,040)          93         947         121
  Decrease/(increase) in deposits, prepayments and other
    receivables...................................................       2,053        1,164         (86)        (11)
  (Decrease)/increase in trade and other payables.................      (3,089)      13,559     (14,555)     (1,866)
  (Decrease)/increase in amounts due to related companies.........      (2,335)      14,408        (156)        (20)
                                                                       -------     --------     -------      ------
NET CASH (USED IN)/FROM OPERATING ACTIVITIES......................     (17,516)       3,076     (13,138)     (1,685)
                                                                       -------     --------     -------      ------

INVESTING ACTIVITIES

  Payment for the purchase of property, plant and equipment.......     (60,645)     (90,028)          -           -
  Payment for the purchase of other assets........................     (25,350)           -           -           -
  Proceeds from sale of property, plant and equipment,
    and other assets..............................................           -       12,359           -           -
  Interest received...............................................         520          130          16           2
  Decrease/(increase) in pledged bank deposits....................      17,283        9,139          (3)          -
                                                                       -------     --------     -------      ------
NET CASH (USED IN)/FROM INVESTING ACTIVITIES......................     (68,192)     (68,400)         13           2
                                                                       -------     --------     -------      ------

FINANCING ACTIVITIES
  Advances from shareholders......................................      43,000        8,908           -           -
  Proceeds from shares issued.....................................           -       65,492           -           -
                                                                       -------     --------     -------      ------
NET CASH FROM FINANCING ACTIVITIES................................      43,000       74,400           -           -
                                                                       -------     --------     -------      ------
Net cash and cash equivalents.....................................     (42,708)       9,076     (13,125)     (1,683)

CASH AND CASH EQUIVALENTS AT JANUARY 1,...........................      47,195        4,487      13,563       1,739
                                                                       -------     --------     -------      ------
CASH AND CASH EQUIVALENTS AT DECEMBER 31,.........................       4,487       13,563         438          56
                                                                       =======     ========     =======      ======

 Analysis of the balance of cash and cash equivalents
 Deposits with banks..............................................       2,145        9,352         393          50
 Cash at bank and in hand.........................................       2,342        4,211          45           6
                                                                       -------     --------     -------      ------

Cash and cash equivalents at December 31,.........................       4,487       13,563         438          56
                                                                       =======     ========     =======      ======
</TABLE>

See accompanying notes to the financial statements.

                                       7
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

                          NOTES TO FINANCIAL STATEMENTS
                (Amounts stated in thousands, except share data)

1.    ORGANIZATION AND PRINCIPAL ACTIVITIES

      APT Satellite Telecommunications Limited (the "Company") is a private
      limited company incorporated in Hong Kong.

      The Company completed the reorganization on October 10, 2003, whereby its
      entire cable interests were sold to Singapore Telecommunications Limited,
      the immediate holding company of one of the Company's shareholders at
      HK$5,560; while the Fixed Carrier Licence and all its related business
      were sold to APT Telecom Services Limited, the fellow subsidiary of
      another shareholder of the Company at HK$6,800, respectively. A surrender
      of service and facilities leasing agreement between the Company and APT
      Satellite Company Limited, the holding company of one of the Company's
      shareholders, was executed on the same date in respect of a premises of
      6,850 sq. ft. located at the Tai Po Industrial Estate for a total
      compensation of HK$13,500 by 5 equal instalments with the first payment
      date being February 1, 2005.

      The principal activities of the Company had been engaging in the provision
      of telecommunication services under the Fixed Carrier Licence. After the
      completion of the construction of the building on June 24, 2003 and the
      reorganization, the Company is engaged in property leasing and related
      facilities management services.

2.    BASIS OF PRESENTATION

      The financial statements have been prepared in accordance with all
      applicable Hong Kong Financial Reporting Standards (which includes all
      applicable Statements of Standard Accounting Practice and Interpretations)
      issued by the Hong Kong Institute of Certified Accountants (previously
      named the Hong Kong Society of Accountants), accounting principles
      generally accepted in Hong Kong ("HK GAAP") which differ in certain
      material respects from accounting principles generally accepted in the
      United States of America ("US GAAP"). The significant differences between
      HK GAAP and US GAAP are summarized in note 12.

      The measurement basis used in the preparation of the financial statements
      is historical cost modified by the revaluation of investment properties as
      explained in the accounting policies set out below.

      The preparation of financial statements requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the
      date of financial statements and the reported amounts of revenues and
      expenses during the year. Actual results could differ from those
      estimates.

      The financial statements of the Company 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, 2004 of HK$7.80 = US$1.00. 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, 2004, or any other certain date.

                                       8
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

                          NOTES TO FINANCIAL STATEMENTS
                (Amounts stated in thousands, except share data)

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      (a)   Recently issued accounting standards

            The Hong Kong Institute of Certified Public Accountants has issued a
            number of new and revised Hong Kong Financial Reporting Standards
            and Hong Kong Accounting Standards ("new HKFRSs") which are
            effective for accounting periods beginning on or after January 1,
            2005.

            The Company has not early adopted these new HKFRSs in the financial
            statements for the year ended December 31, 2004. A summary of the
            impact of these new HKFRSs on the Company is set out at note 12 (e).

      (b)   Property, plant and equipment, and investment property

            (i)   Fixed assets are carried in the balance sheets on the
                  following bases:

                  -     investment properties with an unexpired lease term of
                        more than 20 years are stated in the balance sheet at
                        their open market value which is assessed annually by
                        external qualified valuers; and

                  -     construction in progress is stated at specifically
                        identified cost, including aggregate cost of
                        development, materials and supplies, wages and other
                        direct expenses, less impairment losses (see note 3(e));
                        and

                  -     plant, machinery and other fixed assets, are stated in
                        the balance sheet at cost less accumulated depreciation
                        (see note 3(d)) and impairment losses (see note 3(e)).

            (ii)  Changes arising on the revaluation of investment properties
                  are generally dealt with in reserves. The only exceptions are
                  as follows:

                  -     when a deficit arises on revaluation, it will be charged
                        to the statement of operations, if and to the extent
                        that it exceeds the amount held in the reserve in
                        respect of the portfolio of investment properties
                        immediately prior to the revaluation; and

                  -     when a surplus arises on revaluation, it will be
                        credited to the statement of operations, if and to the
                        extent that a deficit on revaluation in respect of the
                        portfolio of investment properties had previously been
                        charged to the statement of operations.

            (iii) Subsequent expenditure relating to a fixed asset that has
                  already been recognized is added to the carrying amount of the
                  asset when it is probable that future economic benefits, in
                  excess of the originally assessed standard of performance of
                  the existing asset, will flow to the enterprise. All other
                  subsequent expenditure is recognized as an expense in the
                  period in which it is incurred.

                                        9
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

                          NOTES TO FINANCIAL STATEMENTS
                (Amounts stated in thousands, except share data)

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      (b)   Property, plant and equipment, and investment property (continued)

            (iv)  Gains or losses arising from the retirement or disposal of a
                  fixed asset are determined as the difference between the
                  estimated net disposal proceeds and the carrying amount of the
                  asset and are recognized in the statement of operations on the
                  date of retirement or disposal. On disposal of an investment
                  property, the related portion of surpluses or deficits
                  previously taken to the investment properties revaluation
                  reserve is also transferred to the statement of operations for
                  the year.

      (c)   Jointly controlled assets

            The Company's share of jointly controlled assets, and its share of
            any liabilities incurred in relation to the jointly controlled
            assets are recognized in the balance sheets and classified according
            to the nature of the relevant item. Liabilities and expenses
            incurred directly in respect of interests in jointly controlled
            assets are accounted for on an accrual basis.

            Income from the sale or use of the Company's share of the output of
            the joint ventures, together with its share of any expenses incurred
            by the joint ventures, or in relation to its interests in the
            jointly controlled assets, are recognized when it is probable that
            economic benefits associated with the transactions will flow to or
            from the Company, as applicable.

      (d)   Amortization and depreciation

            (i)   No depreciation is provided on investment properties with an
                  unexpired lease term of over 20 years or on freehold land.

            (ii)  No depreciation is provided on construction in progress until
                  such time as the relevant assets are completed and ready for
                  its intended use.

            (iii) Depreciation is calculated to write off the cost of property,
                  plant and equipment, and other assets on a straight-line basis
                  over their estimated useful lives as follows:

<TABLE>
<S>                                                               <C>
Leasehold improvements                                            4 to 5 years
Computer equipment                                                2 to 5 years
Furniture and fixtures                                            2 to 5 years
Telecommunication equipment                                       2 to 10 years
Motor vehicle                                                     2 to 5 years
Jointly controlled assets                                         19 to 25 years
</TABLE>

                                       10
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

                          NOTES TO FINANCIAL STATEMENTS
                (Amounts stated in thousands, except share data)

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      (e)   Impairment of assets

            Internal and external sources of information are reviewed at each
            balance sheet date to identify indications that the property, plant
            and equipment may be impaired or an impairment loss previously
            recognized no longer exists or may have decreased.

            If any such indication exists, the asset's recoverable amount is
            estimated. For intangible assets that are not yet available for use,
            or are amortized over more than 20 years from the date when the
            assets is available for use, the recoverable amount is estimated at
            each balance sheet date. An impairment loss is recognized in the
            statement of operations whenever the carrying amount of an asset
            exceeds its recoverable amount.

            (i)   Calculation of recoverable amount

                  The 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).

            (ii)  Reversals of impairment losses

                  In 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.

                  A reversal of impairment losses is limited to the asset's
                  carrying amount that would have been determined had no
                  impairment loss been recognized in prior years. Reversals of
                  impairment losses are credited to the statement of operations
                  in the year in which the reversals are recognized.

      (f)   Cash and cash equivalents

            Cash and cash equivalents comprise cash at bank and on hand, demand
            deposits with banks, 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. None of the
            Company's cash and cash equivalents is restricted as to withdrawal.

      (g)   Employee benefits

            (i)   Salaries, annual bonuses, paid annual leave and the cost to
                  the Company of non-monetary benefits are accrued in the year
                  in which the associated services are rendered by employees of
                  the Company. Where payment or settlement is deferred and the
                  effect would be material, these amounts are stated at their
                  present values.

                                       11
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

                         NOTES TO FINANCIAL STATEMENTS
                (Amounts stated in thousands, except share data)

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      (g)   Employee benefits (continued)

            (ii)  Contributions to Mandatory Provident Funds, as required under
                  the Hong Kong Mandatory Provident Fund Schemes Ordinance, are
                  recognized as an expense in the statement of operations as
                  incurred.

      (h)   Income tax

            (i)   Income 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 recognized in the
                  statements of operations except to the extent that they relate
                  to items recognized directly in equity, in which case they are
                  recognized in equity.

            (ii)  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.

            (iii) 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.

                  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 utilized, are recognized.
                  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
                  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 Company 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.

                                       12
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

                          NOTES TO FINANCIAL STATEMENTS
                (Amounts stated in thousands, except share data)

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      (h)   Income tax (continued)

            (iii) (continued)

                  The amount of deferred tax recognized is measured based on the
                  expected manner of realization 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 utilized. Any
                  such reduction is reversed to the extent that it becomes
                  probable that sufficient taxable profit will be available.

            (iv)  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 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 intends either to settle on a net basis, or to
                        realize 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.

      (i)   Revenue recognition

            Provided it is probable that the economic benefits will flow to the
            Company and the revenue and costs, if applicable, can be measured
            reliably, revenue is recognized in the statement of operations as
            follows:

            (i)   Rental income from operating leases

                  Rental income receivable under operating leases is recognized
                  in 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.

            (ii)  Service income

                  Service income in respect of provision of satellite-based
                  telecommunications and related service is recognized when
                  services are provided.

                                       13
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

                          NOTES TO FINANCIAL STATEMENTS
                (Amounts stated in thousands, except share data)

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      (i)   Revenue recognition (continued)

            (iii) Interest income

                  Interest income from bank deposits is accrued on a
                  time-apportioned basis by reference to the principal
                  outstanding and the rate applicable.

      (j)   Translation of foreign currencies

            Foreign currency transactions during the year are translated into
            Hong Kong dollars at the exchange rates ruling at the transaction
            dates. Monetary assets and liabilities denominated in foreign
            currencies are translated into Hong Kong dollars at the exchange
            rates ruling at the balance sheet date.

      (k)   Related parties

            For the purposes of these financial statements, parties are
            considered to be related to the Company if the Company 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 Company and the
            party are subject to common control or common significant influence.
            Related parties may be individuals or other entities.

      (l)   Use of estimates

            The preparation of financial statements in conformity with HK GAAP
            requires management to make estimates and assumptions that affect
            the amounts reported in the financial statements and accompanying
            notes. Actual results could differ from those assumptions.

4.    INVESTMENT PROPERTY

      The investment property was revalued at December 31, 2003 and 2004 at
      HK$154,000 and HK$150,000, respectively, by American Appraisal China
      Limited, an independent professional property valuer, on an open market
      value basis by reference to net rental income allowing for reversionary
      income potential. The revaluation surplus of HK$14,000 and deficit of
      HK$4,000 has been transferred to the investment property revaluation
      reserve for the years ended December 31, 2003 and 2004, respectively.

      The investment property is located on a medium-term leasehold land in Hong
      Kong.

<TABLE>
<CAPTION>
                                                             Investment property
                                                             -------------------
                                                                     HK$
<S>                                                          <C>
Cost or valuation:
At January 1, 2004..................................               154,000
Deficit on revaluation..............................                (4,000)
                                                                   -------

At December 31, 2004, at valuation (unaudited)......               150,000
                                                                   =======
</TABLE>

                                       14
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

                          NOTES TO FINANCIAL STATEMENTS
                (Amounts stated in thousands, except share data)

5.    TRADE AND OTHER PAYABLES

<TABLE>
<CAPTION>
                                                                2003      2004
                                                               ------  ---------
                                                                 HK$       HK$
                                                                      (unaudited)
<S>                                                            <C>    <C>
Accrued costs for construction of investment property........  27,461    13,990
Trade and other payables.....................................   4,822     3,738
                                                               ------    ------
                                                               32,283    17,728
                                                               ======    ======
</TABLE>

6.    CONTINGENCIES AND COMMITMENTS

      (a)   Capital commitments:

            At December 31, 2003 and 2004, the Company had contracted but not
            provided for capital commitments of HK$37,992 and HK$nil,
            respectively, mainly in respect of acquisition of property, plant
            and equipment.

      (b)   Leasing arrangements - operating lease:

            The Company as lessor

            At December 31, 2003 and 2004, the Company had contracted with a
            third party for future minimum lease payments under non-cancellable
            operating lease in respect of leasing of property which fall due
            within one year amounting to HK$nil and HK$1,638, and after one but
            within five years amounting to HK$nil and HK$137.

      (c)   At December 31, 2003 and 2004, the Company had pledged bank deposits
            amounted to HK$1,426 and HK$1,429, respectively, with a bank to
            secure general banking facilities granted to the Company.

                                       15
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

                          NOTES TO FINANCIAL STATEMENTS
                (Amounts stated in thousands, except share data)

7. COMMON STOCK

<TABLE>
<CAPTION>
                                                              Issued and
                                                  Number      fully paid
                                                 of shares   capital stock
                                                 ---------   -------------
                                                                  HK$
<S>                                              <C>         <C>
Ordinary shares of HK$1 each
  Balance at January 1, 2003 (unaudited)....        88,300        88,300
  New shares issued during the year.........        65,492        65,492
                                                 ---------     ---------
  Balance at December 31, 2003 and
     at December 31, 2004 (unaudited).......       153,792       153,792
                                                 =========     =========
</TABLE>

      The Company's authorized share capital is 1,000,000 shares of HK$1 each.
      There were no changes in the Company's authorized share capital during
      either year.

      By an resolution of shareholders of the Company passed on June 30, 2003,
      the Company's issued share capital was increased to HK$153,792 by the
      allotment of an additional 65,492 ordinary shares of HK$1 each, ranking
      pari passu with the existing shares of the Company.

8.    INCOME TAXES IN THE STATEMENT OF INCOME

      No provision for Hong Kong Profits Tax has been made in the financial
      statements as the Company has no assessable profit for the years ended
      December 31, 2002, 2003 and 2004.

      In March 2003, the Hong Kong government announced an increase in Profits
      Tax rate applicable to the Company's operations in Hong Kong from 16% to
      17.5%. This increase was taken into account in the preparation of the
      Company's 2003 financial statements. Accordingly, the provision for Hong
      Kong Profits Tax for 2003 was calculated at 17.5% of the estimated
      assessable profits for the year.

      Reconciliation between tax expense and accounting loss at the applicable
      tax rates:

<TABLE>
<CAPTION>
                                                                    Years ended December 31,
                                                           ------------------------------------------
                                                              2002            2003           2004
                                                           ----------      ----------      ----------
                                                               HK$             HK$            HK$
                                                           (unaudited)                     (unaudited)
<S>                                                        <C>             <C>             <C>
Loss before tax........................................       (18,261)       (117,878)           (926)
                                                           ==========      ==========      ==========

Notional tax on loss before tax, calculated at the
   rates applicable to losses in Hong Kong.............        (2,922)        (20,629)           (162)
Tax effect of non-deductible expenses..................             -          17,879               5
Tax effect of non-taxable revenue......................           (28)           (203)             (2)
Tax effect of unused tax losses not recognized.........         2,950           2,953             159
                                                           ----------      ----------      ----------

Actual tax expenses....................................             -               -               -
                                                           ==========      ==========      ==========
</TABLE>

                                       16
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

                          NOTES TO FINANCIAL STATEMENTS
                (Amounts stated in thousands, except share data)

9.    INCOME TAXES IN THE BALANCE SHEET

(a)   DEFERRED TAX ASSETS AND LIABILITIES RECOGNIZED:

      The components of deferred tax (assets)/liabilities recognized in the
      balance sheet and the movements during the years ended December 31, 2003
      and 2004 are as follows:

<TABLE>
<CAPTION>
                                                        Depreciation
                                                         allowances
                                                         in excess
                                                         of related
                                                        depreciation       Losses          Total
                                                        ------------       ------          -----
                                                            HK$              HK$            HK$
<S>                                                     <C>                <C>             <C>
Deferred tax arising from:
At 1 January, 2003 (unaudited).....................         980              (980)             -
Charged/(credited) to statement of operations......        (980)              980              -
                                                           ----              ----             --

At 31 December, 2003...............................           -                 -              -
                                                           ====              ====             ==

At 1 January, 2004.................................           -                 -              -
Charged/(credited) to statement of operations......           -                 -              -
                                                           ----              ----             --

At 31 December, 2004 (unaudited)...................           -                 -              -
                                                           ====              ====             ==
</TABLE>

(b)   DEFERRED TAX ASSETS NOT RECOGNIZED:

      The Company has not recognized deferred tax assets in respect of tax
      losses of HK$48,884 and HK$57,734 and other deductible temporary
      differences of HK$6,937 and HK$2,135 as the realization of the assets was
      considered not probable as at December 31, 2003 and 2004, respectively.
      The tax losses do not expire under current tax legislation.

                                       17
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

                          NOTES TO FINANCIAL STATEMENTS
                (Amounts stated in thousands, except share data)

10.   RELATED PARTY TRANSACTIONS

      During the years ended December 31, 2002, 2003 and 2004, the Company
      entered into the following transactions with related parties: Years ended
      December 31,

<TABLE>
<CAPTION>
                                                                  Years ended December 31,
                                                             -----------------------------------
                                                     Note       2002        2003        2004
                                                  ---------  ----------  ----------  -----------
                                                                 HK$         HK$         HK$
                                                             (unaudited)             (unaudited)
<S>                                               <C>        <C>         <C>         <C>
Expenses in connection with the provision
    of satellite transponder capacity and other
    telecommunication network facilities paid
    and payable to group companies of the
    Company's shareholders                           (i)       22,784      11,202          -

Income from provision of satellite transponder
    capacity and other telecommunication
    network facilities received and receivable
    from the group companies of one of the
    Company's shareholders                           (i)       24,311       6,641          -

Management services fee paid and payable
    to the immediate holding companies of
    the Company's shareholders                      (ii)        3,810       2,243        480

Purchase of right of use for a submarine
    cable from a fellow subsidiary of one
    of the Company's shareholders                   (iii)      25,350           -          -

Operating and maintenance charges paid and
    payable to a fellow subsidiary of one of the
    Company's shareholders                          (iv)          671       1,584          -

Compensation payable to the immediate
    holding company of one of the Company's
    shareholder for early termination of
     services and facilities lease                   (v)            -      13,500          -

Sale of plant and equipment, and other assets to
    the immediate holding company of one of
    the Company's shareholders                      (vi)            -       5,560          -

Sale of other assets to the fellow subsidiary of
     another shareholder of the Company             (vi)            -       6,800          -
</TABLE>

                                       18
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

                          NOTES TO FINANCIAL STATEMENTS
                (Amounts stated in thousands, except share data)

10.   RELATED PARTY TRANSACTIONS (CONTINUED)

      Notes:

      (i)   The terms and conditions of these lease agreements were determined
            with reference to comparable market price.

      (ii)  Management services fee paid and payable arose from a reimbursement
            of cost of service provided by the immediate holding companies of
            the Company's shareholders under the management services agreement.

      (iii) The submarine cable was purchased at a mutually agreed price.

      (iv)  Operating and maintenance charges were paid based on mutually agreed
            terms.

      (v)   As a result of the reorganization of the Company, the Company early
            terminated the services and facilities lease agreement and the
            immediate holding company of a Company's shareholder received a
            compensation for the early termination of the agreement.

      (vi)  As a result of the reorganization of the Company, plant and
            equipment, and other assets are sold to the immediate holding
            company of one of the Company's shareholders and the fellow
            subsidiary of another shareholder of the Company. The directors
            consider that the proceeds from sales of plant and equipment, and
            other assets are arrived after arm's length negotiation with
            reference to the valuation conducted by an independent valuation
            company.

                                       19
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

                          NOTES TO FINANCIAL STATEMENTS
                (Amounts stated in thousands, except share data)

11.   SUPPLEMENTAL INFORMATION

      (a)   Other operating revenues

            Other operating revenues include the following:

<TABLE>
<CAPTION>
                                                 Years ended December 31,
                                             -------------------------------
                                                2002       2003     2004
                                             -----------  -----  -----------
                                                 HK$        HK$      HK$
                                             (unaudited)         (unaudited)
<S>                                          <C>          <C>    <C>
Exchange gain..............................      214          6      -
Gain on disposal of property, plant and
    equipment and other assets.............        -      1,377      -
</TABLE>

      (b)   Staff costs

<TABLE>
<CAPTION>
                                                 Years ended December 31,
                                             -------------------------------
                                                2002       2003     2004
                                             -----------  -----  -----------
                                                 HK$        HK$      HK$
                                             (unaudited)         (unaudited)
<S>                                          <C>          <C>    <C>
Contributions to/(refund from) defined
    contribution plan......................       285      (117)      -
Salaries, wages and other benefits.........     6,193     4,412       -
                                                -----     -----      --

                                                6,478     4,295       -
                                                -----     -----      --
</TABLE>

      (c)   Loss before income taxes

<TABLE>
<CAPTION>
                                                  Years ended December 31,
                                             --------------------------------
                                                2002       2003      2004
                                             -----------  -----   -----------
                                                 HK$        HK$       HK$
                                             (unaudited)          (unaudited)
<S>                                          <C>          <C>     <C>
Loss before income taxes has been arrived
     at after charging:

Amortization on other assets (included in
     administrative expenses)..............     1,550        772       -
Provision for bad debts....................         -         64       -
Compensation for early termination of
    services and facilities lease (included
    in administrative expenses)............         -     13,500       -
Depreciation...............................     2,559      2,080       -
Loss on disposal of property, plant and
     equipment.............................         2          -       -
</TABLE>

                                       20
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

                          NOTES TO FINANCIAL STATEMENTS
                (Amounts stated in thousands, except share data)

12.   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 GAAP

            The Company's accounting policies conform with generally accepted
            accounting principles in Hong Kong ("HK GAAP") which differ in
            certain significant respects from those applicable generally
            accepted accounting principles in the United States of America ("US
            GAAP")

            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 depreciation

                  Under HK GAAP, investment properties are stated at appraised
                  values and are not depreciated. Changes in the value of
                  investment properties are dealt with as movements in the
                  investment properties revaluation reserve in the shareholders'
                  equity. If the total of this reserve is insufficient to cover
                  a deficit, on a portfolio basis, the excess of the deficit is
                  charged to the statement of operations. Under US GAAP,
                  investment properties are stated at cost and depreciated over
                  the lease terms. Accordingly, the investment properties of the
                  Company, which are stated at open market value, have been
                  restated at historical cost less accumulated depreciation.

                  Depreciation in respect of investment properties has been
                  based on the historical cost of the property held by the
                  Company and the useful life of such property at 44 years. The
                  gross historical cost of property held by the Company subject
                  to depreciation under US GAAP which were not depreciated under
                  HK GAAP at December 31, 2003 and 2004 amounted to HK$140,000
                  and HK$140,000, respectively.

                  In the US GAAP reconciliation of net loss for the year ended
                  December 31, 2004, the adjustments represent the depreciation
                  in respect of the property held by the Company amounting
                  HK$3,182 (2003: HK$1,591; 2002: HK$nil). In the US GAAP
                  reconciliation of shareholders' equity at December 31, 2004,
                  the adjustments represent the reversal of revaluation gain in
                  respect of the investment property of the Company of HK$10,000
                  (2003: HK$14,000) and the additional accumulated depreciation
                  charged on the Company's property under US GAAP amounting
                  HK$4,773 (2003: HK$1,591).

                                       21
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

                          NOTES TO FINANCIAL STATEMENTS
                (Amounts stated in thousands, except share data)

12.   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

            The effect on net loss of differences between HK GAAP and US GAAP is
            as follows:

<TABLE>
<CAPTION>
                                                      Years ended December 31,
                                          ------------------------------------------------
                                              2002              2003              2004
                                          ------------      ------------      ------------
                                               HK$               HK$               HK$
                                           (unaudited)                         (unaudited)
<S>                                       <C>               <C>               <C>
Net loss as reported under HK GAAP.....        (18,261)         (117,878)             (926)
Adjustment:

Depreciation of investment property....              -            (1,591)           (3,182)
                                               -------          --------            ------

Net loss as reported under US GAAP.....        (18,261)         (119,469)           (4,108)
                                               =======          ========            ======
</TABLE>

      (c)   Shareholders' Equity

            The effect on shareholders' equity of differences between HK GAAP
            and US GAAP is as follows:

<TABLE>
<CAPTION>
                                                     December 31,
                                               ---------------------------
                                                  2003            2004
                                               ---------      ------------
                                                  HK$              HK$
                                                               (unaudited)
<S>                                            <C>            <C>
Shareholders' equity as reported under
  HK GAAP...................................      22,591            17,665
Adjustments:

  Accumulated depreciation on investment
      property..............................      (1,591)           (4,773)
  Revaluation reserve.......................     (14,000)          (10,000)
                                                 -------           -------

Shareholders' equity as reported under
  US GAAP...................................       7,000             2,892
                                                  ======           =======
</TABLE>

                                       22
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

                          NOTES TO FINANCIAL STATEMENTS
                (Amounts stated in thousands, except share data)

12.   SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN HONG KONG AND UNITED STATES
      GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("US GAAP") AND ADDITIONAL
      DISCLOSURES REQUIRED UNDER US GAAP (CONTINUED)

      (c)   Shareholders' Equity (continued)

            The changes in shareholders' equity in accordance with US GAAP is as
            follows:

<TABLE>
<CAPTION>
                                                 Capital     Accumulated
                                                  stock        losses
                                                 --------    -----------
                                                   HK$           HK$
<S>                                              <C>         <C>
Balance at December 31, 2001 (unaudited)....       88,300       (9,062)
Net loss for the year (unaudited)...........            -      (18,261)
                                                 --------     --------

Balance at December 31, 2002 (unaudited)....       88,300      (27,323)
New shares issued during the year...........       65,492            -
Net loss for the year.......................            -     (119,469)
                                                 --------     --------

Balance at December 31, 2003................      153,792     (146,792)
Net loss for the year (unaudited)...........            -       (4,108)
                                                 --------     --------

Balance at December 31, 2004 (unaudited)....      153,792     (150,900)
                                                 ========     ========
</TABLE>

      (d)   Statements of operations and balance sheets under US GAAP

            The impairment loss on property, plant and equipment, and other
            assets is presented as part of costs and expenses under US GAAP.

            The statements of operations under US GAAP is as follows:

<TABLE>
<CAPTION>
                                             Years ended December 31,
                                --------------------------------------------------
                                  2002          2003          2004         2004
                                --------      --------      --------      --------
                                   HK$           HK$           HK$          US$
                               (unaudited)                 (unaudited)  (unaudited)
<S>                            <C>            <C>          <C>          <C>
Total revenues..............      43,562        24,187         1,508           193
Total costs and expenses....      62,590       145,520         5,635           722
                                  ------       -------         -----          ----

Loss from operations........     (19,028)     (121,333)       (4,127)         (529)
Other income
  Interest income...........         539           130            16             2
  Others-net................         228         1,734             3             -
                                  ------      --------         -----          ----

Net loss....................     (18,261)     (119,469)       (4,108)         (527)
                                 =======      ========        ======          ====
</TABLE>

            Under US GAAP, the Company's total assets were HK$157,636 and
            HK$138,817 at December 31, 2003 and 2004, respectively, and total
            liabilities were HK$150,636 and HK$135,925 at December 31, 2003 and
            2004, respectively.

                                       23
<PAGE>

                    APT SATELLITE TELECOMMUNICATIONS LIMITED

                          NOTES TO FINANCIAL STATEMENTS
                (Amounts stated in thousands, except share data)

12.   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)   Recent HK accounting pronouncement

            In December 2004, the HKICPA issued HKAS 40, "Investment Property"
            and superseded the SSAP No. 13, "Accounting for Investment
            Properties (revised in 2000)". The adoption of HKAS 40 has resulted
            in a change in accounting policy for the Company's investment
            property. Changes in valuation of the investment property were
            previously dealt with in an investment property revaluation reserve.
            Following the adoption of HKAS 40, all changes in valuation of the
            investment property would be recognized in the statements of
            operations. The Company must adopt HKAS 40 by January 1, 2005 as it
            is effective for annual periods beginning on or after January 1,
            2005, however, early adoption is permitted. On adoption, the HKAS 40
            required the effect of applying this standard as an adjustment to
            the opening balance of retained earnings of the Company. Pursuant to
            HKAS 40, if the Company early adopts this standard, the Company is
            required to transfer investment property revaluation reserve of
            HK$14,000 to the retained earnings as at January 1, 2004. The
            revaluation deficit of HK$4,000 for the year ended December 31, 2004
            should be recognized in the statements of operations.

            In 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 nonmonetary exchanges of similar productive
            assets and replaces it with a general exception for exchange of
            nonmonetary assets that do not have commercial substance. This
            Statement will be effective for the Company for nonmonetary asset
            exchanges occurring in fiscal periods beginning after June 15, 2005.
            The Company does not believe that the adoption of SFAS No. 153 will
            have a significant effect on its financial statements.

            In March 2005, the FASB issued an Interpretation No. 47, "Accounting
            for Conditional Asset Retirement Obligations". This Interpretation
            clarifies the term conditional asset retirement obligation as used
            in SFAS No. 143, "Accounting for Asset Retirement Obligations" and
            when an entity would have sufficient information to reasonably
            estimate the fair value of an asset retirement obligation. This
            Interpretation will be effective no later than the end of fiscal
            years ending after December 15, 2005. The Company does not believe
            that the adoption of the Interpretation No. 47 will be a significant
            effect on its financial statements.

                                       24