##### 



Exhibit 8.2 APT SATELLITE TELECOMMUNICATIONS LIMITED Financial Statements
                                        Years ended December 31, 2001, 2002 and 2003
                                        and Report of Independent Registered Public Accounting Firm




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APT SATELLITE TELECOMMUNICATIONS LIMITED INDEX TO FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm
    
    
    2Balance Sheets as of December 31, 2002 and 2003
    
    
    3&4Statements of Income for the years ended
December 31, 2001, 2002 and 2003
    
    
    5Statements of Changes in Shareholders Equity
for the years ended December 31, 2001, 2002 and 2003
    
    
    6Statements of Cash Flows for the years ended
December 31, 2001, 2002 and 2003
    
    
    7Notes to Financial Statements
    
    
    8-27
 1




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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 income, 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 generally accepted auditing
standards in the United States of America and 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 15 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




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APT SATELLITE TELECOMMUNICATIONS LIMITED BALANCE SHEETS
AS OF DECEMBER 31, 2002 AND 2003
(Amounts stated in thousands) December 31,Note
    
    2002
    
    2003
    
    2003HK$
    
    HK$
    
    US$(unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    
    
    
    
    
    4,487
    
    
    
    13,563
    
    
    
    1,739Pledged bank deposits
    
    
    8
    (c)
    
    
    10,565
    
    
    
    1,426
    
    
    
    183Trade receivables
    
    
    
    
    
    
    3,037
    
    
    
    1,670
    
    
    
    214Amounts due from related companies
    
    
    
    
    
    
    1,040
    
    
    
    947
    
    
    
    121Deposits, prepayments and other receivables
    
    
    
    
    
    
    2,785
    
    
    
    1,621
    
    
    
    208Total current assets
    
    
    
    
    
    
    21,914
    
    
    
    19,227
    
    
    
    2,465Property, plant and equipment, net
    
    
    4
    
    
    
    129,024
    
    
    
    
    
    
    
    Investment property
    
    
    5
    
    
    
    
    
    
    
    154,000
    
    
    
    19,744Other assets
    
    
    6
    
    
    
    23,800
    
    
    
    
    
    
    
    TOTAL ASSETS
    
    
    
    
    
    
    174,738
    
    
    
    173,227
    
    
    
    22,209
 See accompanying notes to the financial statements. 3




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APT SATELLITE TELECOMMUNICATIONS LIMITED BALANCE SHEETS (continued)
AS OF DECEMBER 31, 2002 AND 2003
(Amounts stated in thousands) December 31,Note
    
    2002
    
    2003
    
    2003HK$
    
    HK$
    
    US$(unaudited)LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesTrade and other payables
    
    
    7
    
    
    
    18,724
    
    
    
    32,283
    
    
    
    4,139Amounts due to related companies
    
    
    
    
    
    
    101
    
    
    
    1,009
    
    
    
    129Total current liabilities
    
    
    
    
    
    
    18,825
    
    
    
    33,292
    
    
    
    4,268Amounts due to a related company
    
    
    
    
    
    
    
    
    

    
    13,500
    
    
    
    1,731Amounts due to shareholders
    
    
    
    
    
    
    94,936
    
    
    
    103,844
    
    
    
    13,314TOTAL LIABILITIES
    
    
    
    
    
    
    113,761
    
    
    
    150,636
    
    
    
    19,313Contingencies and commitments
    
    
    8Shareholders equityCapital
stock - Common stock
    
    
    9
    
    
    
    88,300
    
    
    
    153,792
    
    
    
    19,717Revaluation reserve
    
    
    
    
    
    
    
    
    
    
    14,000
    
    
    
    1,795Accumulated losses
    
    
    
    
    
    
    (27,323
    )
    
    
    (145,201
    )
    
    
    (18,616
    )Total shareholders equity
    
    
    
    
    
    
    60,977
    
    
    
    22,591
    
    
    
    2,896TOTAL LIABILITIES AND SHAREHOLDERS
EQUITY
    
    
    
    
    
    
    174,738
    
    
    
    173,227
    
    
    
    22,209
 See accompanying notes to the financial statements. 4




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APT SATELLITE TELECOMMUNICATIONS LIMITED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003
(Amounts stated in thousands) Years ended December 31,Note
    
    2001
    
    2002
    
    2003
    
    2003HK$
    
    HK$
    
    HK$
    
    US$(unaudited)
    
    (unaudited)Operating revenuesService income received from:Unaffiliated customers
    
    
    
    
    
    
    5,511
    
    
    
    19,179
    
    
    
    17,546
    
    
    
    2,249Related parties
    
    
    12
    
    
    
    18,924
    
    
    
    24,311
    
    
    
    6,641
    
    
    
    852Total revenues
    
    
    
    
    
    
    24,435
    
    
    
    43,490
    
    
    
    24,187
    
    
    
    3,101Costs and expensesCost of service including depreciation
and amortization of 2001: HK$259,
2002: HK$4,109 and
2003: HK$2,852
    
    
    
    
    
    
    (24,705
    )
    
    
    (50,079
    )
    
    
    (32,493
    )
    
    
    (4,166
    )Selling, general and administrative
    
    
    
    
    
    
    (8,740
    )
    
    
    (12,511
    )
    
    
    (22,418
    )
    
    
    (2,874
    )Total costs and expenses
    
    
    
    
    
    
    (33,445
    )
    
    
    (62,590
    )
    
    
    (54,911
    )
    
    
    (7,040
    )(9,010
    )
    
    
    (19,100
    )
    
    
    (30,724
    )
    
    
    (3,939
    )Other operating revenuesInterest
income - net
    
    
    
    
    
    
    1,872
    
    
    
    539
    
    
    
    130
    
    
    
    17Other income
    
    
    
    
    
    
    319
    
    
    
    300
    
    
    
    1,734
    
    
    
    222Impairment loss recognized in respect
of property, plant and equipment,
and other assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (89,018
    )
    
    
    (11,413
    )Loss before income taxes
    
    
    13
    (c)
    
    
    (6,819
    )
    
    
    (18,261
    )
    
    
    (117,878
    )
    
    
    (15,113
    )Provision for income taxes
    
    
    10
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    (6,819
    )
    
    
    (18,261
    )
    
    
    (117,878
    )
    
    
    (15,113
    )
 See accompanying notes to the financial statements. 5




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APT SATELLITE TELECOMMUNICATIONS LIMITED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003
(Amounts stated in thousands) Capital
    
    Revaluation
    
    Accumulatedstock
    
    reserve
    
    losses
    
    TotalHK$
    
    HK$
    
    HK$
    
    HK$Balance at January 1, 2001 (unaudited)
    
    
    
    
    
    
    
    
    
    
    (2,243
    )
    
    
    (2,243
    )Shares issued
    
    
    88,300
    
    
    
    
    
    
    
    
    
    
    
    88,300Net loss for the year
    
    
    
    
    
    
    
    
    
    
    (6,819
    )
    
    
    (6,819
    )Balance at January 1, 2002 (unaudited)
    
    
    88,300
    
    
    
    
    
    
    
    (9,062
    )
    
    
    79,238Net loss for the year
    
    
    
    
    
    
    
    
    
    
    (18,261
    )
    
    
    (18,261
    )Balance at January 1, 2003 (unaudited)
    
    
    88,300
    
    
    
    
    
    
    
    (27,323
    )
    
    
    60,977Shares issued
    
    
    65,492
    
    
    
    
    
    
    
    
    
    
    
    65,492Surplus on revaluation of investment
property
    
    
    
    
    
    
    14,000
    
    
    
    
    
    
    
    14,000Net loss for the year
    
    
    
    
    
    
    
    
    
    
    (117,878
    )
    
    
    (117,878
    )At December 31, 2003
    
    
    153,792
    
    
    
    14,000
    
    
    
    (145,201
    )
    
    
    22,591At December 31, 2003 (in US$)
    
    
    19,717
    
    
    
    1,795
    
    
    
    (18,616
    )
    
    
    2,896
 See accompanying notes to the financial statements. 6




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APT SATELLITE TELECOMMUNICATIONS LIMITED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2002 AND 2003
(Amounts stated in thousands) Years ended December 31,2001
    
    2002
    
    2003
    
    2003HK$
    
    HK$
    
    HK$
    
    US$(unaudited)
    
    (unaudited)Operating activitiesLoss before income taxes
    
    
    (6,819
    )
    
    
    (18,261
    )
    
    
    (117,878
    )
    
    
    (15,113
    )Adjustments for:Depreciation and amortization
    
    
    259
    
    
    
    4,109
    
    
    
    2,852
    
    
    
    366Impairment losses recognized
    
    
    
    
    
    
    
    
    
    
    89,018
    
    
    
    11,413Interest income
    
    
    (1,872
    )
    
    
    (539
    )
    
    
    (130
    )
    
    
    (17
    )Provision for bad debts
    
    
    
    
    
    
    
    
    
    
    64
    
    
    
    8Loss/(gain) on disposal of property, plant and equipment,
and other assets
    
    
    
    
    
    
    2
    
    
    
    (1,377
    )
    
    
    (176
    )Operating loss before changes in working capital
    
    
    (8,432
    )
    
    
    (14,689
    )
    
    
    (27,451
    )
    
    
    (3,519
    )(Increase)/decrease in trade receivables
    
    
    (4,620
    )
    
    
    1,584
    
    
    
    1,303
    
    
    
    167Decrease/(increase) in amounts due from related companies
    
    
    109
    
    
    
    (1,040
    )
    
    
    93
    
    
    
    12(Increase)/decrease in deposits, prepayments and other
receivables
    
    
    (2,787
    )
    
    
    2,053
    
    
    
    1,164
    
    
    
    149Increase/(decrease) in trade and other payables
    
    
    3,369
    
    
    
    (3,089
    )
    
    
    13,559
    
    
    
    1,738Increase/(decrease) in amounts due to related companies
    
    
    2,061
    
    
    
    (2,335
    )
    
    
    14,408
    
    
    
    1,847Net cash (used in)/from operating activities
    
    
    (10,300
    )
    
    
    (17,516
    )
    
    
    3,076
    
    
    
    394Investing activitiesPayment for the purchase of property, plant and equipment
    
    
    (51,846
    )
    
    
    (60,645
    )
    
    
    (90,028
    )
    
    
    (11,542
    )Payment for the purchase of other assets
    
    
    
    
    
    
    (25,350
    )
    
    
    
    
    
    
    Proceeds from sale of property, plant and equipment,
and other assets
    
    
    
    
    
    
    
    
    
    
    12,359
    
    
    
    1,585Interest received
    
    
    1,781
    
    
    
    520
    
    
    
    130
    
    
    
    17(Increase)/decrease in pledged bank deposits
    
    
    (24,797
    )
    
    
    17,283
    
    
    
    9,139
    
    
    
    1,171Net cash used in investing activities
    
    
    (74,862
    )
    
    
    (68,192
    )
    
    
    (68,400
    )
    
    
    (8,769
    )Financing activitiesAdvances from shareholders
    
    
    28,661
    
    
    
    43,000
    
    
    
    8,908
    
    
    
    1,142Proceeds from shares issued
    
    
    88,300
    
    
    
    
    
    
    
    65,492
    
    
    
    8,397Net cash from financing activities
    
    
    116,961
    
    
    
    43,000
    
    
    
    74,400
    
    
    
    9,539Net cash and cash equivalents
    
    
    31,799
    
    
    
    (42,708
    )
    
    
    9,076
    
    
    
    1,164Cash and cash equivalents at January 1,
    
    
    15,396
    
    
    
    47,195
    
    
    
    4,487
    
    
    
    575Cash and cash equivalents at December 31,
    
    
    47,195
    
    
    
    4,487
    
    
    
    13,563
    
    
    
    1,739Analysis of the balance of cash and cash equivalentsDeposits with banks
    
    
    45,622
    
    
    
    2,145
    
    
    
    9,352
    
    
    
    1,199Cash at bank and in hand
    
    
    1,573
    
    
    
    2,342
    
    
    
    4,211
    
    
    
    540Cash and cash equivalents at December 31,
    
    
    47,195
    
    
    
    4,487
    
    
    
    13,563
    
    
    
    1,739
 See accompanying notes to the financial statements. 7




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APT SATELLITE TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS
(Amounts stated in thousands, except share data)  1.
    
    ORGANIZATION AND PRINCIPAL ACTIVITIESAPT 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. For the year ended December 31, 2003, no
rental income was recorded in respect of investment property since the
Company has not contracted with tenants during the year.2.
    
    BASIS OF PRESENTATIONThe 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 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 15.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, 2003 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, 2003, or any other certain date. 8




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APT SATELLITE TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS
(Amounts stated in thousands, except share data)  3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (a)
    
    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(d));
and
    
    plant, machinery and other fixed
assets, are stated in the balance sheet at cost less
accumulated depreciation (see note 3(c)) and impairment
losses (see note 3(d)).  (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 income, 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 income, 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 income.  (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.(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
income 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
income for the year. 9




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APT SATELLITE TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS
(Amounts stated in thousands, except share data)  3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)  (b)
    
    Jointly controlled assetsThe 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.(c)
    
    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: Leasehold improvements
    
    4 to 5 yearsComputer equipment
    
    2 to 5 yearsFurniture and fixtures
    
    2 to 5 yearsTelecommunication equipment
    
    2 to 10 yearsMotor vehicle
    
    2 to 5 yearsJointly controlled assets
    
    19 to 25 years
  (d)
    
    Impairment of assetsInternal 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 income whenever the carrying amount of an asset exceeds
its recoverable amount. 10




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##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS
(Amounts stated in thousands, except share data)  3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)  (d)
    
    Impairment of assets (continued)  (i)
    
    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).(ii)
    
    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.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 income in
the year in which the reversals are recognized.  (e)
    
    Cash and cash equivalentsCash 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.(f)
    
    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.(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
income as incurred. 11




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##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS
(Amounts stated in thousands, except share data)  3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)  (g)
    
    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 income 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 utilised, 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




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS
(Amounts stated in thousands, except share data) 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)  (g)
    
    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.  (h)
    
    Revenue recognitionProvided 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
income as follows:  (i)
    
    Rental income from operating leasesRental income receivable under operating leases is recognized
in the statement of income 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 granted are recognized in the statement of income
as an integral part of the aggregate net lease payments
receivable.(ii)
    
    Interest income from bank deposits is accrued on
a time-apportioned basis by reference to the principal
outstanding and the rate applicable. 13




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS
(Amounts stated in thousands, except share data)  3.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)  (i)
    
    Translation of foreign currenciesForeign 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.(j)
    
    Related partiesFor 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.(k)
    
    Use of estimatesThe 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.
    
    PROPERTY, PLANT AND EQUIPMENT Furniture
    
    Telecom-
    
    
    
    
    
    
    
    
    
    JointlyLeasehold
    
    Computer
    
    and
    
    munication
    
    Motor
    
    Construction
    
    controlledimprovements
    
    equipment
    
    fixtures
    
    equipment
    
    vehicle
    
    in progress
    
    assets
    
    TotalHK$
    
    HK$
    
    HK$
    
    HK$
    
    HK$
    
    HK$
    
    HK$
    
    HK$Cost :At January 1,2003 (unaudited)
    
    
    290
    
    
    
    346
    
    
    
    108
    
    
    
    9,705
    
    
    
    204
    
    
    
    92,802
    
    
    
    28,392
    
    
    
    131,847Additions
    
    
    54
    
    
    
    1
    
    
    
    
    
    
    
    725
    
    
    
    
    
    
    
    90,048
    
    
    
    
    
    
    
    90,828Disposals
    
    
    (344
    )
    
    
    (347
    )
    
    
    (108
    )
    
    
    (10,430
    )
    
    
    (204
    )
    
    
    
    
    
    
    (28,392
    )
    
    
    (39,825
    )Impairment loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42,850
    )
    
    
    
    
    
    
    (42,850
    )Transfer to investment
property
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (140,000
    )
    
    
    
    
    
    
    (140,000
    )At December 31, 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Aggregate amortization
and depreciation :At January 1,2003 (unaudited)
    
    
    53
    
    
    
    104
    
    
    
    25
    
    
    
    1,427
    
    
    
    78
    
    
    
    
    
    
    
    1,136
    
    
    
    2,823Charge for the year
    
    
    32
    
    
    
    38
    
    
    
    16
    
    
    
    1,434
    
    
    
    29
    
    
    
    
    
    
    
    531
    
    
    
    2,080Impairment loss
    
    
    218
    
    
    
    123
    
    
    
    
    
    
    
    1,489
    
    
    
    19
    
    
    
    
    
    
    
    23,797
    
    
    
    25,646Written back on disposal
    
    
    (303
    )
    
    
    (265
    )
    
    
    (41
    )
    
    
    (4,350
    )
    
    
    (126
    )
    
    
    
    
    
    
    (25,464
    )
    
    
    (30,549
    )At December 31, 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net book value:At December 31, 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    At December 31, 2002 (unaudited)
    
    
    237
    
    
    
    242
    
    
    
    83
    
    
    
    8,278
    
    
    
    126
    
    
    
    92,802
    
    
    
    27,256
    
    
    
    129,024
  The jointly controlled assets represented the Companys interest in a
submarine cable network. 14




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS
(Amounts stated in thousands, except share data)  4.
    
    PROPERTY, PLANT AND EQUIPMENT (continued)Impairment lossDuring 2003, the directors of the Company conducted a review of the
Companys fixed assets and determined that certain fixed 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$68,496 has been recognized and charged to the statements of income for
the year ended December 31, 2003. The Company did not have any impairment
in 2002. The Company disposed of all its plant and equipment on October
10, 2003 pursuant to the reorganization (see note 1).5.
    
    INVESTMENT PROPERTYAfter the completion of the building on June 24, 2003, the property was
transferred to fixed assets at its carrying amount. Subsequently,
management changed its intention of holding property from held for its own
use to for rental purposes, the investment property was reclassified from
land and buildings during the year at a carrying value of HK$140,000 and
was revalued at December 31, 2002 and 2003 at HK$nil and HK$154,000,
respectively, by American Appraisal China Limited, an independent
professional property valuer, on an open market value basis by reference
to net rental income allowing for reversionary income potential. The
revaluation surplus of HK$nil and HK$14,000 has been transferred to the
investment property revaluation reserve for the years ended December 31,
2002 and 2003, respectively.The investment property is located on a medium-term leasehold land in Hong Kong. Investment propertyHK$Cost or valuation:At January 1, 2003 (unaudited)
    
    
    Transfer from construction in progress
    
    
    140,000Surplus on revaluation
    
    
    14,000At December 31, 2003, at valuation
    
    
    154,000
 15




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS
(Amounts stated in thousands, except share data)  6.
    
    OTHER ASSETSIn 2002, the Company paid US$3,250 (equivalent to HK$25,350) for acquiring
an exclusive and indefeasible right of use for 15 years of a submarine
cable commencing from February 2002. The amount was capitalized as other
assets and amortized on a straight-line basis over the period of the right
of use. For the years ended December 31, 2002 and 2003, amortization of
HK$1,550 and HK$772 has been charged to the statements of income,
respectively.Impairment lossDuring 2003, the directors of the Company conducted a review of the
Companys other assets and determined that certain 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$20,522
has been recognized and charged to the statement of income for the year
ended December 31, 2003. The Company disposed of all its other assets on
October 10, 2003 pursuant to the reorganization (see note 1).7.
    
    TRADE AND OTHER PAYABLES 2002
    
    2003HK$
    
    HK$(unaudited)Accrued costs for construction in progress
    
    
    11,623
    
    
    
    Accrued costs for construction of investment property
    
    
    
    
    
    
    27,461Trade and other payables
    
    
    7,101
    
    
    
    4,82218,724
    
    
    
    32,283
  8.
    
    CONTINGENCIES AND COMMITMENTS  (a)
    
    Capital commitments:At December 31, 2002 and 2003, the Company had contracted but not
provided for capital commitments of HK$126,194 and HK$37,992,
respectively, mainly in respect of acquisition of property, plant
and equipment.(b)
    
    Leasing arrangements - operating lease:  (i)
    
    The Company as lesseeAt December 31, 2002 and 2003, the Company had commitments for
future minimum lease payments under non-cancellable operating
leases in respect of telecommunication network facilities
which fall due within one year amounting to HK$8,236 and
HK$nil. 16




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS
(Amounts stated in thousands, except share data)  8.
    
    CONTINGENCIES AND COMMITMENTS (continued)  (b)
    
    Leasing arrangements - operating lease: (continued)  (i)
    
    The Company as lessee (continued)In addition, the Company has contracted with the immediate
holding company of one of the Companys shareholders in
respect of rented premises and services and facilities lease
under non-cancellable operating lease. The future minimum
lease payments were calculated based on the terms of the
operating lease agreement which fall due as follows: 2002
    
    2003HK$
    
    HK$(unaudited)Telecommunication network facilities:2003
    
    
    4,330
    
    
    
    2004
    
    
    4,110
    
    
    
    2005
    
    
    4,110
    
    
    
    2006
    
    
    4,110
    
    
    
    2007
    
    
    4,110
    
    
    
    Thereafter
    
    
    16,795
    
    
    
    Total
    
    
    37,565
    
    
    
    
  (ii)
    
    The Company as lessorAt December 31, 2002 and 2003, the Company had contracted with
third parties and the immediate holding company of one of the
Companys shareholders for future minimum lease payments under
non-cancellable operating leases in respect of leasing of
satellite transponders and other telecommunication network
facilities which fall due within one year amounting to
HK$9,143 and HK$nil.  (c)
    
    At December 31, 2002 and 2003, the Company had pledged bank
deposits amounted to HK$10,565 and HK$1,426, respectively, with a
bank to secure general banking facilities granted to the Company. 17




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS
(Amounts stated in thousands, except share data)  9.
    
    COMMON STOCK Issued andNumber
    
    fully paidof shares
    
    capital stockHK$Ordinary shares of HK$1 eachBalance at January 1, 2002 and at January 1, 2003 (unaudited)
    
    
    88,300
    
    
    
    88,300New shares issued during the year
    
    
    65,492
    
    
    
    65,492Balance at December 31, 2003
    
    
    153,792
    
    
    
    153,792
  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.10.
    
    INCOME TAXES IN THE STATEMENT OF INCOMENo 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, 2001, 2002 and 2003.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 is taken into account in the preparation of the
Companys 2003 financial statements. Accordingly, the provision for Hong
Kong Profits Tax for 2003 is calculated at 17.5% of the estimated
assessable profits for the year.Reconciliation between tax expense and accounting loss at the applicable
tax rates: Years ended December 31,2001
    
    2002
    
    2003HK$
    
    HK$
    
    HK$(unaudited)
    
    (unaudited)Loss before tax
    
    
    (6,819
    )
    
    
    (18,261
    )
    
    
    (117,878
    )Notional tax on loss before tax, calculated at the
rates applicable to losses in Hong Kong
    
    
    (1,091
    )
    
    
    (2,922
    )
    
    
    (20,629
    )Tax effect of non-deductible expenses
    
    
    5
    
    
    
    
    
    
    
    17,879Tax effect of non-taxable revenue
    
    
    (249
    )
    
    
    (28
    )
    
    
    (203
    )Tax effect of unused tax losses not recognized
    
    
    1,335
    
    
    
    2,950
    
    
    
    2,953Actual tax expenses
    
    
    
    
    
    
    
    
    
    
    
 18




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##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS
(Amounts stated in thousands, except share data)  11.
    
    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,
2002 and 2003 are as follows: Depreciationallowancesin excessof relateddepreciation
    
    Losses
    
    TotalHK$
    
    HK$
    
    HK$Deferred tax arising from:At 1 January, 2002 (unaudited)
    
    
    213
    
    
    
    (213
    )
    
    
    Charged/(credited) to statement of income
    
    
    767
    
    
    
    (767
    )
    
    
    At 31 December, 2002 (unaudited)
    
    
    980
    
    
    
    (980
    )
    
    
    At 1 January, 2003 (unaudited)
    
    
    980
    
    
    
    (980
    )
    
    
    Charged/(credited) to statement of income
    
    
    (980
    )
    
    
    980
    
    
    
    At 31 December, 2003
    
    
    
    
    
    
    
    
    
    
    
  (b)
    
    Deferred tax assets not recognized:The Company had not recognized deferred tax assets in respect of tax
losses of HK$26,487 and HK$48,884 for the years ended December 31,
2002 and 2003, respectively, due to the unpredictability of future
profit streams. The tax losses do not expire under current tax
legislation.Deferred tax has not been provided on the surplus arising on the
revaluation of the Companys property because gain/loss on the
disposal of this asset would not be subject to taxation. Accordingly,
the surplus arising on revaluation does not institute a timing
difference. 19




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS
(Amounts stated in thousands, except share data)  12.
    
    RELATED PARTY TRANSACTIONSDuring the years ended December 31, 2001, 2002 and 2003, the Company
entered into the following transactions with related parties: Years ended December 31,Note
    
    2001
    
    2002
    
    2003HK$
    
    HK$
    
    HK$(unaudited)
    
    (unaudited)Operating lease rental in respect of leasing
satellite transponders and other
telecommunication network facilities paid
and payable to group companies of the
Companys shareholders
    
    
    (i
    )
    
    
    7,259
    
    
    
    22,784
    
    
    
    11,202Rental income on leasing satellite
transponders and other telecommunication
network facilities received and receivable
from the group companies of one of the
Companys shareholders
    
    
    (i
    )
    
    
    18,924
    
    
    
    24,311
    
    
    
    6,641Management services fee income received
and receivable from group companies of
one of the Companys shareholders
    
    (ii)
    
    
    280
    
    
    
    
    
    
    
    Management services fee paid and payable
to the immediate holding companies of
the Companys shareholders
    
    (iii)
    
    
    3,563
    
    
    
    3,810
    
    
    
    2,243Transfer of leasehold land from the
immediate holding company of one of
the Companys shareholders
    
    (iv)
    
    
    15,300
    
    
    
    
    
    
    
    Purchase of right of use for a submarine
cable from a fellow subsidiary of one
of the Companys shareholders
    
    
    (v
    )
    
    
    
    
    
    
    25,350
    
    
    
    Operating and maintenance charges paid and
payable to a fellow subsidiary of one of the
Companys shareholders
    
    (vi)
    
    
    
    
    
    
    671
    
    
    
    1,584Compensation payable to the immediate
holding company of one of the Companys
shareholder for early termination of
services and facilities lease
    
    (vii)
    
    
    
    
    
    
    
    
    
    
    13,500Sale of plant and equipment, and other assets to
the immediate holding company of one of
the Companys shareholders
    
    (viii)
    
    
    
    
    
    
    
    
    
    
    5,560Sale of other assets to the fellow subsidiary of
another shareholder of the Company
    
    (viii)
    
    
    
    
    
    
    
    
    
    
    6,800
 20




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS
(Amounts stated in thousands, except share data)  12.
    
    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 income arose from a reimbursement of
cost of service provided to group companies of one of the Companys
shareholders under the management services agreement.(iii)
    
    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.(iv)
    
    The leasehold land, which is included in the construction in
progress as at December 31, 2001 was transferred at the relevant
portion of the original cost incurred by the immediate holding
company of one of the Companys shareholders..(v)
    
    The submarine cable was purchased at a mutually agreed price.(vi)
    
    Operating and maintenance charges were paid based on mutually
agreed terms.(vii)
    
    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.(viii)
    
    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. 21




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS
(Amounts stated in thousands, except share data)  13.
    
    SUPPLEMENTAL INFORMATION  (a)
    
    Other operating revenuesOther operating revenues include the following: Years ended December 31,2001
    
    2002
    
    2003HK$
    
    HK$
    
    HK$(unaudited)
    
    (unaudited)Exchange gain
    
    
    7
    
    
    
    214
    
    
    
    6Gain on disposal of property, plant and
equipment and other assets
    
    
    
    
    
    
    
    
    
    
    1,377Management service income
    
    
    280
    
    
    
    
    
    
    
    
  (b)
    
    Staff costs Years ended December 31,2001
    
    2002
    
    2003HK$
    
    HK$
    
    HK$(unaudited)
    
    (unaudited)Contributions to/(refund from) defined
contribution plan
    
    
    162
    
    
    
    285
    
    
    
    (117
    )Salaries, wages and other benefits
    
    
    3,517
    
    
    
    6,193
    
    
    
    4,4123,679
    
    
    
    6,478
    
    
    
    4,295
  (c)
    
    Loss before income taxes Years ended December 31,2001
    
    2002
    
    2003HK$
    
    HK$
    
    HK$(unaudited)
    
    (unaudited)Loss before income taxes has been arrived
at after charging:Amortization on other assets (included in
administrative expenses)
    
    
    
    
    
    
    1,550
    
    
    
    772Provision for bad debts
    
    
    
    
    
    
    
    
    
    
    64Compensation for early termination of
services and facilities lease (included in
administrative expenses)
    
    
    
    
    
    
    
    
    
    
    13,500Depreciation
    
    
    259
    
    
    
    2,559
    
    
    
    2,080Loss on disposal of property, plant and
equipment
    
    
    
    
    
    
    2
    
    
    
    
 22




---



##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS
(Amounts stated in thousands, except share data)  14.
    
    CHANGE IN ACCOUNTING POLICYIn prior years, deferred tax liabilities were provided using the liability
method in respect of the taxation effect arising from all material timing
differences between the accounting and tax treatment of income and
expenditure, which were expected with reasonable probability to
crystallize in the foreseeable future. Deferred tax assets were not
recognized unless their realisation was assured beyond reasonable doubt.
With effect from January 1, 2003, in order to comply with Statement of
Standard Accounting Practice 12 (revised) issued by the Hong Kong Society
of Accountants, the Company adopted a new policy for deferred tax as set
out in note 3(g). The effect of this change in accounting policy is not
material and, therefore, the opening balances have not been restated.15.
    
    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 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 depreciationUnder 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 income. 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, 2002 and 2003 amounted to HK$nil and
HK$140,000, respectively. The adjustments represent the
effects of reversal of revaluation and the depreciation
charged under US GAAP. 23




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##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS
(Amounts stated in thousands, except share data)  15.
    
    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 lossThe effect on net loss of significant differences between HK GAAP
and US GAAP is as follows: Years ended December 31,2001
    
    2002
    
    2003HK$
    
    HK$
    
    HK$(unaudited)
    
    (unaudited)Net loss as reported under HK GAAP
    
    
    (6,819
    )
    
    
    (18,261
    )
    
    
    (117,878
    )Adjustment:Investment property
    
    
    
    
    
    
    
    
    
    
    (1,591
    )Net loss as reported under US GAAP
    
    
    (6,819
    )
    
    
    (18,261
    )
    
    
    (119,469
    )
  (c)
    
    Shareholders EquityThe effect on shareholders equity of significant differences
between HK GAAP and US GAAP is as follows: December 31,2002
    
    2003HK$
    
    HK$(unaudited)Shareholders equity as reported under
HK GAAP
    
    
    60,977
    
    
    
    22,591Adjustments:Accumulated depreciation on investment
property
    
    
    
    
    
    
    (1,591
    )Revaluation reserve
    
    
    
    
    
    
    (14,000
    )Shareholders equity as reported under
US GAAP
    
    
    60,977
    
    
    
    7,000
 24




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##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS
(Amounts stated in thousands, except share data)  15.
    
    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: Capital
    
    Accumulatedstock
    
    lossesHK$
    
    HK$Balance at January 1, 2001 (unaudited)
    
    
    
    
    
    
    (2,243
    )New shares issued during the year
    
    
    88,300
    
    
    
    Net loss for the year
    
    
    
    
    
    
    (6,819
    )Balance at January 1, 2002 (unaudited)
    
    
    88,300
    
    
    
    (9,062
    )Net loss for the year
    
    
    
    
    
    
    (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
    )
  (d)
    
    Statements of income and balance sheets under US GAAPThe impairment loss on property, plant and equipment, and other
assets is presented as part of costs and expenses under US GAAP.The statements of income under US GAAP is as follows: Years ended December 31,2001
    
    2002
    
    2003
    
    2003HK$
    
    HK$
    
    HK$
    
    US$(unaudited)
    
    (unaudited)Total revenues
    
    
    24,435
    
    
    
    43,562
    
    
    
    24,187
    
    
    
    3,101Total costs and expenses
    
    
    33,445
    
    
    
    62,590
    
    
    
    145,520
    
    
    
    18,656Loss from operations
    
    
    (9,010
    )
    
    
    (19,028
    )
    
    
    (121,333
    )
    
    
    (15,555
    )Other incomeInterest income
    
    
    1,872
    
    
    
    539
    
    
    
    130
    
    
    
    17Others-net
    
    
    319
    
    
    
    228
    
    
    
    1,734
    
    
    
    222Net loss
    
    
    (6,819
    )
    
    
    (18,261
    )
    
    
    (119,469
    )
    
    
    (15,316
    )
  Under US GAAP, the Companys total assets were
HK$174,738 and HK$157,636 at December 31, 2002 and 2003,
respectively, and total liabilities were HK$113,761 and
HK$150,636 at December 31, 2002 and 2003, respectively. 25




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##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS
(Amounts stated in thousands, except share data)  15.
    
    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)
    
    Statements of Cash FlowThe Company 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
Statement of Financial Accounting Standards No. 95, Statement of
Cash Flows (SFAS 95). The principal differences between the
standards relate to classification. Under HK SSAP 15, the Company
presents its cash flows for (a) operating activities; (b) investing
activities; and (c) financing activities. Dividend received and
interest received under investing activities and interest paid under
financing activities shown under HK SSAP 15 would be included as
operating activities under SFAS 95, with the exception of
distributions, which under SFAS 95 would be classified as financing
activities. Summarized cash flow data by operating, investing and
financing activities in accordance with SFAS 95 are as follows: Years ended December 31,2001
    
    2002
    
    2003HK$
    
    HK$
    
    HK$(unaudited)
    
    (unaudited)Net cash (used in)/from operating activities:Amount under HK GAAP
    
    
    (10,300
    )
    
    
    (17,516
    )
    
    
    3,075US GAAP adjustment - interest received
    
    
    1,781
    
    
    
    520
    
    
    
    130Amount under US GAAP
    
    
    (8,519
    )
    
    
    (16,996
    )
    
    
    3,205Net cash used in investing activities:Amount under HK GAAP
    
    
    (74,862
    )
    
    
    (68,192
    )
    
    
    (68,399
    )US GAAP adjustment - interest received
    
    
    (1,781
    )
    
    
    (520
    )
    
    
    (130
    )Amount under US GAAP
    
    
    (76,643
    )
    
    
    (68,712
    )
    
    
    (68,529
    )Net cash from financing activities:Amount under HK GAAP and US GAAP
    
    
    116,961
    
    
    
    43,000
    
    
    
    74,400
 26




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##### 



APT SATELLITE TELECOMMUNICATIONS LIMITED NOTES TO FINANCIAL STATEMENTS
(Amounts stated in thousands, except share data)  15.
    
    SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN HONG KONG AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (US GAAP) AND ADDITIONAL
DISCLOSURES REQUIRED UNDER US GAAP (continued)  (f)
    
    New pronouncementsIn December 2003, the FASB issued FASB Interpretation No. 46
(revised December 2003), Consolidation of Variable Interest Entities
(VIEs), which addresses how a business enterprise should evaluate
whether it has a controlling financial interest in an entity through
means other than voting rights and accordingly should consolidate
the entity. FIN 46R replaces FASB Interpretation No. 46,
Consolidation of Variable Interest Entities, which was issued in
January 2003. The Company will adopt FIN 46R to variable interests
in VIEs created after December 31, 2003. For variable interests in
VIEs created before January 1, 2004, the Interpretation will be
applied beginning on January 1, 2005. For any VIEs that must be
consolidated under FIN 46R that were created before January 1, 2004,
the assets, liabilities and noncontrolling interests of the VIE
initially would be measured at their carrying amounts with any
difference between the net amount added to the balance sheet and any
previously recognized interest being recognized as the cumulative
effect of an accounting change. If determining the carrying amounts
is not practicable, fair value at the date FIN 46R first applies may
be used to measure the assets, liabilities and noncontrolling
interest of the VIE. The Company does not believe the adoption of
such interpretation will have a material impact on its results of
operations or financial position.FASB Statement No. 150, Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity,was issued in
May 2003.This Statement establishes standards for the
classification and measurement of certain financial instruments with
characteristics of both liabilities and equity. The Statement also
includes required disclosures for financial instruments within its
scope. The Statement applies for instruments entered into or
modified after May 31, 2003 and otherwise will be effective as of
January 1, 2004, except for mandatorily redeemable financial
instruments. For certain mandatorily redeemable financial
instruments, the Statement will be effective for the Company on
January 1, 2005. The effective date has been deferred indefinitely
for certain other types of mandatorily redeemable financial
instruments. The Company does not believe the adoption of such
statement will have a material impact on its results of operations
or financial position. 27