FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of June 2006
Commission File Number: 1-14396
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
--------------------------------------------------
(Translation of registrant's name into English)
17/F, The Lee Gardens, 33 Hysan Avenue, Causeway Bay, Hong Kong
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [_]
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(1). __
Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a
Form 6-K if submitted solely to provide an attached annual report to security
holders.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as
permitted by Regulation S-T Rule 101(b)(7): __
Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a
Form 6-K if submitted to furnish a report or other document that the registrant
foreign private issuer must furnish and make public under the laws of the
jurisdiction in which the registrant is incorporated, domiciled or legally
organized (the registrant's "home country"), or under the rules of the home
country exchange on which the registrant's securities are traded, as long as the
report or other document is not a press release, is not required to be and has
not been distributed to the registrant's security holders, and, if discussing a
material event, has already been the subject of a Form 6-K submission or other
Commission filing on EDGAR.
2
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [_] No [X]
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b):_________.
Information furnished on this form:
Circular, dated June 20, 2006, by the Registrant regarding the Commissioning of
AsiaSat 5
EXHIBIT
EXHIBIT NUMBER PAGE
-------------- ----
1.1 Circular, dated June 20, 2006, by the Registrant regarding 5
the Commissioning of AsiaSat 5
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
(Registrant)
Date: June 22, 2006 By: /s/ Peter Jackson
------------------------
Name: Peter Jackson
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THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION
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IF YOU ARE IN ANY DOUBT as to any aspect of this circular or as to the action
to be taken, you should consult your stockbroker or other registered dealer in
securities, bank manager, solicitor, professional accountant or other
professional adviser.
IF YOU HAVE SOLD all your shares in Asia Satellite Telecommunications Holdings
Limited, you should at once hand this circular to the purchaser or to the bank,
stockbroker or other agent through whom the sale or transfer was effected for
transmission to the purchaser.
The Stock Exchange of Hong Kong Limited takes no responsibility for the
contents of this circular, makes no representation as to its accuracy or
completeness and expressly disclaims any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any part of the
contents of this circular.
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[GRAPHIC OMITTED][LOGO -- ASIASAT]
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
(INCORPORATED IN BERMUDA WITH LIMITED LIABILITY)
(Stock Code: 1135)
MAJOR TRANSACTION
THE COMMISSIONING OF ASIASAT 5
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20 June 2006
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CONTENTS
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PAGE
DEFINITIONS ............................................................. 1
LETTER FROM THE BOARD ................................................... 3
APPENDIX I - FINANCIAL INFORMATION .............................. 9
APPENDIX II - UNAUDITED PRO FORMA FINANCIAL INFORMATION .......... 71
APPENDIX III - GENERAL INFORMATION ................................ 77
i
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DEFINITIONS
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IN THIS CIRCULAR, THE FOLLOWING EXPRESSIONS HAVE THE FOLLOWING MEANINGS
UNLESS THE CONTEXT REQUIRES OTHERWISE:
"Agreements" The Construction Agreement and the Launch
Contract;
"AsiaSat 2" The AsiaSat Satellite launched in 1995 and
located at the orbital position of 100.5
degrees East, which will be replaced by
AsiaSat 5 upon its successful launch;
"AsiaSat 5" The new Space Systems/Loral 1300 satellite
bus, with 26 C-band and 14 Ku-band
transponders, to be constructed and launched
pursuant to the Construction Agreement and
the Launch Contract;
"AsiaSat" Asia Satellite Telecommunications Company
Limited, a wholly owned subsidiary of the
Company incorporated in Hong Kong with its
registered office in Hong Kong;
"Company" Asia Satellite Telecommunications Holdings
Limited incorporated under the laws of
Bermuda, with its principle business being
the provision of satellite services to
broadcasting and telecommunications markets;
"Construction Agreement" The agreement dated 28 April 2006 entered
into by AsiaSat and the Construction
Contractor for the construction of AsiaSat 5,
details of which were published in the
Company's announcement on the same day;
"Construction Contractor" Space Systems/Loral, Inc., a corporation
organised and existing under the law of the
State of Delaware, U.S.A. and headquartered
in California. Its principle business is the
designing, manufacturing and integrating of
communication satellites and satellite
systems;
"Directors" The directors of the Company;
"Group" the Company and its subsidiaries including
but not limited to AsiaSat;
"Hong Kong" the Hong Kong Special Administrative Region
of the People's Republic of China;
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DEFINITIONS
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"Launch Contract" The contract dated 8 May 2006 entered into
between AsiaSat and the Launch Contractor for
the launch of AsiaSat 5, details of which
were published in the Company's announcement
on the same day;
"Launch Contractor" Sea Launch Limited Partnership, an exempt
limited partnership organised under the laws
of Cayman Islands acting through its general
partner, Sea Launch Company, L.L.C, a United
States of America limited liability company
organised under the law of State of Delaware
and having offices in Long Beach, California.
Its principle business is to provide launch
service for the satellites of commercial
customers;
"Latest Practicable Date" 14 June 2006, being the latest practicable
date prior to the printing of this circular
for ascertaining certain information for
inclusion in this circular;
"Listing Rules" The Rules Governing the Listing of Securities
on The Stock Exchange of Hong Kong Limited;
"Satellite Control Equipment" Satellite control equipment, which includes
the ground hardware and software needed to
implement telemetry, tracking, command and
monitoring and the up-link and traffic
monitoring equipment relating to AsiaSat 5;
"SFO" Securities and Futures Ordinance (Chapter 571
of the Law of Hong Kong);
"Stock Exchange" The Stock Exchange of Hong Kong Limited.
FOR THE PURPOSE OF THIS CIRCULAR, THE AMOUNTS IN US$ HAVE BEEN CONVERTED
AT A HK$/US$ EXCHANGE RATE OF 7.80/1.00.
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LETTER FROM THE BOARD
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[GRAPHIC OMITTED][LOGO -- ASIASAT]
ASIA SATELLITE TELECOMMUNICATIONS HOLDINGS LIMITED
(INCORPORATED IN BERMUDA WITH LIMITED LIABILITY)
(Stock Code: 1135)
DIRECTORS: REGISTERED OFFICE:
Romain BAUSCH* CHAIRMAN Canon's Court
MI Zeng Xin* DEPUTY CHAIRMAN 22 Victoria Street
Peter JACKSON Hamilton HM12
William WADE Bermuda
Robert BEDNAREK*
DING Yu Cheng* PRINCIPAL OFFICE IN HONG KONG:
JU Wei Min* 17th Floor, The Lee Gardens,
KO Fai Wong* 33 Hysan Avenue, Causeway Bay,
Mark RIGOLLE* Hong Kong
Cynthia DICKINS*
Edward CHEN**
Robert SZE**
* NON-EXECUTIVE DIRECTOR
** INDEPENDENT NON-EXECUTIVE DIRECTOR
20 June 2006
TO THE SHAREHOLDERS
Dear Sir or Madam,
THE COMMISSIONING OF ASIASAT 5
INTRODUCTION
On 28 April 2006 and 8 May 2006, the Company announced that AsiaSat, a
wholly owned subsidiary of the Company, had entered into the Construction
Agreement and the Launch Contract, respectively, for the commissioning of
AsiaSat 5. AsiaSat 5 is a new satellite of Space Systems/Loral 1300 satellite
bus with 26 C-band and 14 Ku-band transponders to be constructed and launched
pursuant to the Construction Agreement and the Launch Contract. The purpose of
this circular is to provide you with further details of the Agreements and the
commissioning of AsiaSat 5 as set out below.
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LETTER FROM THE BOARD
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THE AGREEMENTS
1. THE CONSTRUCTION AGREEMENT
DATE
28 April 2006
PARTIES
1. The Construction Contractor; and
2. AsiaSat, a wholly owned subsidiary of the Company.
To the best of the knowledge, information and belief of the
Directors, having made all reasonable enquiries, the Construction
Contractor and its ultimate beneficial owner are third parties independent
of the Company and its connected persons.
SUBJECT MATTER
Pursuant to the Construction Agreement, the Construction Contractor
will provide for AsiaSat the design, construction, assembly, testing,
production and delivery of AsiaSat 5, and other professional services and
labour for the construction of AsiaSat 5, including studies, development,
research, design, analysis, manufacture, product assurance, product
integration, transportation and testing. In addition, the Construction
Contractor will provide all necessary technical support to the prospective
launch services provider to permit testing integration and launch.
The Construction Contractor will also provide a royalty-free,
world-wide, non-exclusive, non-transferable, paid-up license for AsiaSat
to use the data and information, including, without limitation to,
technical data and information contained in reports, documents, computer
programs, diagrams, drawings and graphs that AsiaSat requires for the
purpose of the construction and the operation of AsiaSat 5.
The Construction Contractor will further indemnify AsiaSat and
defend on its own expenses third party requests, claims, actions and
proceedings for royalty payments, equitable relief or damages against
AsiaSat based on any infringement of patent, trade mark, or copy right or
trade secret from the manufacturing of the items; and to pay any royalties
and other costs in the settlement of such request and the costs and
damages finally awarded to the third party on the claim.
CONSIDERATION
US$95 million (equivalent to approximately HK$741 million)
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LETTER FROM THE BOARD
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COMPLETION
Under the terms of the Construction Agreement, the Construction
Contractor shall complete the construction of AsiaSat 5 to be available
for shipment to the launch site within 25 months after 28 April 2006.
TITLE
The title to AsiaSat 5 shall pass to AsiaSat at the moment of
launch. In the event AsiaSat 5 is not launched within 3 years after it is
completed by the Construction Contractor, AsiaSat shall pay all monies
payable under the Construction Agreement and have the title to AsiaSat 5
subject to the obtaining of requisite US Government approvals.
OPTION
AsiaSat has an option to order an additional satellite substantially
similar to AsiaSat 5 subject to price adjustment based on an indexation
computed with reference to the aircraft manufacturing price and employment
cost indexes published by the U.S. Department of Labour. AsiaSat intends
to exercise this option in the event of an unsuccessful launch of AsiaSat
5. The Company will comply with the requisite requirements under the
Listing Rules as and when the option is exercised, and a further
announcement will be made if and when required.
2. THE LAUNCH CONTRACT
DATE
8 May 2006
PARTIES
1. The Launch Contractor; and
2. AsiaSat, a wholly owned subsidiary of the Company.
To the best of the knowledge, information and belief of the
Directors, having made all reasonable enquiries, the Launch Contractor and
its ultimate beneficial owner are third parties independent of the Company
and its connected persons.
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LETTER FROM THE BOARD
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SUBJECT MATTER
The Launch Contractor shall provide services associated with the
launch of AsiaSat 5 in the Baikonur Space Centre in Kazakhstan.
CONSIDERATION
US$45 million (equivalent to approximately HK$351 million)
COMPLETION
Under the terms of the Launch Contract, the launch service shall be
completed upon the launch of AsiaSat 5, which is scheduled to take place
between 1 July 2008 and 31 December 2008 and such schedule can be extended
by AsiaSat by written notice in accordance with the terms of the Launch
Contract. It is expected that AsiaSat 5 will be launched in the second
half of 2008.
TOTAL COST FOR THE COMMISSIONING OF ASIASAT 5
The Directors estimate that the total consideration for the commissioning
of AsiaSat 5, including the contract price under the Construction Agreement and
the Launch Contract, and the costs of the launch insurance, ground facilities
for telemetry, tracking and control, related expenses and capitalised interest
under arrangements with various third parties, will be approximately US$180
million (equivalent to approximately HK$1,404 million). This estimation is
subject to a number of factors including timely completion of AsiaSat 5,
certain delays or postponements in launching, the in-orbit performance of
AsiaSat 5 after launching. The estimated cost for commissioning of AsiaSat 5
will be fully funded by internal resources of AsiaSat.
The contract price under the Construction Agreement will be paid in cash
in stages and the final instalment shall be paid upon completion of in-orbit
testing, scheduled to take place 27 months after 28 April 2006, or in the event
AsiaSat 5 is completed but not launched, 3 years after it is completed.
The contract price under the Launch Contract will be paid in cash by
instalments over a period from 8 May 2006 to one month after the launch.
The contract price and the terms of the Agreements were negotiated on an
arm's-length basis having regard to the value of similar assets as quoted by
other constructors and based on a previous similar acquisition of a satellite
by AsiaSat in 2000. Details of this acquisition in 2000 were published in the
Company's announcements and circular dated 7 September 2000, 19 September 2000
and 11 October 2000, respectively.
-6-
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LETTER FROM THE BOARD
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REASONS AND BENEFITS OF THE COMMISSIONING OF ASIASAT 5
AsiaSat 5 will replace AsiaSat 2 at the orbital location of 100.5 degrees
East and allow our market competitiveness, strategic position of satellites and
the offering of our very best services to be sustained for the years ahead. It
will replace all current functions of AsiaSat 2 in C-band coverage, and in
Ku-band, provide additional dedicated coverage for South Asia plus a steerable
beam.
The C-band payload of AsiaSat 5 will be similar to that of AsiaSat 2 save
for some performance upgrades. As for the Ku-band payload, its coverage over
China is significantly upgraded and additional coverage is also provided for in
South Asia covering, inter alia, India, Pakistan and Bangladesh. In addition,
the satellite will carry a steerable antenna that will allow capacity of
Ku-band to be deployed in a consistent manner with the market demand anywhere
in Asia.
The Directors are of the view that the transactions have been conducted in
the ordinary and usual course of business of the Company, on normal commercial
terms and the terms of the transactions are fair and reasonable and in the
interest of the shareholders of the Company as a whole.
FUTURE PROSPECT
As stated in the annual report of the Company ended 31 December 2005, the
Company has reported a creditable result for the year ended 31 December 2005
with an increase of 18% in overall utilisation of satellite transponder
capacity compared to 2004 despite the tough market condition. Looking ahead,
with the continued improvement in demand in many key markets, the new AsiaSat 5
with enhanced functionalities and coverage replacing the retiring satellite
will contribute to the strengthening of the Group's communication platform. As
a market leader in Asia, the Group remains totally committed to providing the
best satellite services to its customers and continuing to seek growth
opportunities.
EFFECT OF TRANSACTION
The acquisition of AsiaSat 5, as disclosed in Appendix II has little
impact on the financial position of the Company if the transactions took place
and completed on 31 December 2005. The only changes to the financial position
were an increase of approximately US$180 million (equivalent to approximately
HK$1,404 million) in property, plant and equipment with a corresponding
decrease in cash and cash equivalents.
According to the schedules of the Construction Agreement and the Launch
Contract, AsiaSat 5 will not be launched until the second half of 2008. Thus,
the acquisition of AsiaSat 5 has little impact on the earnings of the Company
in near term as the satellite will not be in service until probably in the
fourth quarter of 2008 at the earliest.
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LETTER FROM THE BOARD
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INFORMATION TO SHAREHOLDERS
The Stock Exchange has granted a waiver in relation to the delay in
despatch of the circular regarding the commissioning of AsiaSat 5 until 26 June
2006.
SHAREHOLDERS' APPROVAL
The total consideration for commissioning AsiaSat 5, including the
contract price under the Launch Contract, the Construction Agreement and the
cost of the launch insurance, is estimated to be approximately US$180 million
(equivalent to approximately HK$1,404 million) and the Launch Contract, when
taken together with the Construction Agreement and the related insurance, will
constitute a major transaction of the Company and is subject to the approval of
the shareholders of the Company under the Listing Rules. As no shareholder is
required to abstain from voting if the Company were to convene a general
meeting pursuant to Rule 14.44 of the Listing Rules, the Agreements and the
commissioning of AsiaSat 5 will be approved by written shareholders' approval
in accordance with rule 14.44 of the Listing Rules. The Company's controlling
shareholder, Bowenvale Limited, which owns approximately 69 per cent of the
issued share capital of the Company, has given its written approval to the
Company on the Construction Agreement, Launch Contract and the commissioning of
AsiaSat 5. No Shareholders meeting will be convened to consider the Agreements.
GENERAL INFORMATION
Your attention is also drawn to the general information set out in the
Appendices to this circular.
Yours faithfully
For and on behalf of the Board
ROMAIN BAUSCH
CHAIRMAN
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APPENDIX I FINANCIAL INFORMATION
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1. SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION FOR THE THREE YEARS ENDED 31
DECEMBER 2005
The following is a summary of the audited consolidated financial
information of the Company for each of the three years ended 31 December 2003,
2004 and 2005 as extracted from the respective audited annual consolidated
financial statements of the Company.
RESULTS
YEAR ENDED 31 DECEMBER
2005 2004 2003
HK$'000 HK$'000 HK$'000
Sales 879,705 1,004,982 896,233
========= ========= =========
Profit before income tax 416,635 491,616 512,086
Income tax expense (51,270) (60,536) (87,598)
--------- --------- ---------
Profit for the year 365,365 431,080 424,488
========= ========= =========
Attributable to:
Shareholders of the Company 366,184 431,216 424,488
Minority interests (819) (136) -
--------- --------- ---------
365,365 431,080 424,488
========= ========= =========
ASSETS AND LIABILITIES
AS AT 31 DECEMBER
2005 2004 2003
HK$'000 HK$'000 HK$'000
Total assets 4,683,530 4,549,247 4,157,220
Total liabilities (573,805) (668,294) (588,462)
--------- --------- ---------
4,109,725 3,880,953 3,568,758
Minority interests (5,537) (6,356) (492)
--------- --------- ---------
Equity attributable to shareholders of
the Company 4,104,188 3,874,597 3,568,266
========= ========= =========
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APPENDIX I FINANCIAL INFORMATION
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2. AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED
31 DECEMBER 2005
The following audited financial statements of the Group are extracted from
the Company's annual report for the year ended 31 December 2005.
CONSOLIDATED BALANCE SHEET
AS AT 31 DECEMBER
RESTATED
NOTE 2005 2004
HK$'000 HK$'000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 7 2,620,911 2,894,467
Leasehold land and land use rights 6 24,199 24,782
Intangible assets 8 1,339 -
Unbilled receivable 174,563 175,267
Interests in associates 10 14,294 13,397
Amount paid to tax authority 11 93,666 67,023
--------- ---------
2,928,972 3,174,936
--------- ---------
CURRENT ASSETS
Inventories 13 434 416
Trade and other receivables 12 118,598 137,478
Other loan receivable - 2,062
Cash and cash equivalents 14 1,635,526 1,234,355
--------- ---------
1,754,558 1,374,311
--------- ---------
TOTAL ASSETS 4,683,530 4,549,247
========= =========
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APPENDIX I FINANCIAL INFORMATION
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AS AT 31 DECEMBER
RESTATED
NOTE 2005 2004
HK$'000 HK$'000
EQUITY
Capital and reserves attributable to
the Company's equity holders
Share capital 15 39,027 39,027
Share premium 4,614 4,614
Retained earnings
- Proposed final dividend 26 105,372 105,372
- Others 3,955,175 3,725,584
--------- ---------
4,104,188 3,874,597
Minority interests 5,537 6,356
--------- ---------
TOTAL EQUITY 4,109,725 3,880,953
========= =========
LIABILITIES
NON-CURRENT LIABILITIES
Deferred income tax liabilities 17 192,654 205,258
Deferred revenue 16 87,654 111,844
--------- ---------
280,308 317,102
--------- ---------
CURRENT LIABILITIES
Construction payables 3,096 4,989
Other payables and accrued expenses 64,118 65,322
Deferred revenue 16 151,982 175,043
Current income tax liabilities 74,180 105,717
Dividend payable 121 121
--------- ---------
293,497 351,192
--------- ---------
TOTAL LIABILITIES 573,805 668,294
--------- ---------
TOTAL EQUITY AND LIABILITIES 4,683,530 4,549,247
========= =========
NET CURRENT ASSETS 1,461,061 1,023,119
========= =========
TOTAL ASSETS LESS CURRENT LIABILITIES 4,390,033 4,198,055
========= =========
The accompanying footnotes are an integral part of these consolidated
financial statements.
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APPENDIX I FINANCIAL INFORMATION
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CONSOLIDATED INCOME STATEMENT
YEAR ENDED 31 DECEMBER
NOTE 2005 2004
HK$'000 HK$'000
Sales 5 879,705 1,004,982
Cost of services 19 (419,029) (420,490)
------- ---------
GROSS PROFIT 460,676 584,492
Other gains - net 18 43,711 21,982
Administrative expenses 19 (83,880) (102,477)
------- ---------
OPERATING PROFIT 420,507 503,997
Finance costs 21 - (1)
Share of loss of associates (3,872) (12,380)
------- ---------
PROFIT BEFORE INCOME TAX 416,635 491,616
Income tax expense 22 (51,270) (60,536)
------- ---------
PROFIT FOR THE YEAR 365,365 431,080
======= =======
Attributable to:
Equity holders of the Company 24 366,184 431,216
Minority interests (819) (136)
------- ---------
365,365 431,080
======= =======
EARNINGS PER SHARE FOR PROFIT ATTRIBUTABLE
TO THE EQUITY HOLDERS OF THE COMPANY
DURING THE YEAR
(expressed in HK$ per share)
- basic 25 0.94 1.10
======= =======
- diluted 25 0.94 1.10
======= =======
DIVIDENDS 26 136,593 136,593
======= =======
The accompanying footnotes are an integral part of these consolidated
financial statements.
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APPENDIX I FINANCIAL INFORMATION
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
ATTRIBUTABLE TO EQUITY HOLDERS MINORITY
NOTE OF THE COMPANY INTERESTS TOTAL
SHARE SHARE RETAINED
CAPITAL PREMIUM EARNINGS
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
BALANCE AT 1 JANUARY 2004 39,027 4,614 3,524,625 492 3,568,758
Profit/(Loss) for the year - - 431,216 (136) 431,080
Final dividend relating to
2003 - - (93,664) - (93,664)
Interim dividend
relating to 2004 26 - - (31,221) - (31,221)
Minority interests 29 - - - 6,000 6,000
------ ----- --------- ----- ---------
- - 306,331 5,864 312,195
------ ----- --------- ----- ---------
BALANCE AT
31 DECEMBER 2004 39,027 4,614 3,830,956 6,356 3,880,953
====== ===== ========= ===== =========
BALANCE AT 1 JANUARY 2005,
as per above 39,027 4,614 3,830,956 6,356 3,880,953
Profit/(Loss) for the year - - 366,184 (819) 365,365
Final dividend relating to
2004 26 - - (105,372) - (105,372)
Interim dividend
relating to 2005 26 - - (31,221) - (31,221)
------ ----- --------- ----- ---------
- - 229,591 (819) 228,772
------ ----- --------- ----- ---------
BALANCE AT
31 DECEMBER 2005 39,027 4,614 4,060,547 5,537 4,109,725
====== ===== ========= ===== =========
The accompany footnotes are an integral part of these consolidated
financial statements.
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APPENDIX I FINANCIAL INFORMATION
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CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 31 DECEMBER
NOTE 2005 2004
HK$'000 HK$'000
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 27 609,717 779,413
Hong Kong Profits Tax paid (79,186) (10,934)
Overseas tax paid (16,181) (17,667)
--------- ---------
Net cash generated from operating activities 514,350 750,812
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (23,659) (47,672)
Loan to an associate 31 - (1,301)
Loan to an independent third party - (3,778)
Repayment of loan from an associate 31 5,070 3,510
Repayment of loan from an
independent third party 2,062 1,716
Interest received 39,833 20,290
Interest expense - (1)
Proceeds from disposal of property,
plant and equipment 108 257
Purchase of interests in associates - (23,930)
--------- ---------
Net cash from/(used in) investing activities 23,414 (50,909)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid 26 (136,593) (124,885)
--------- ---------
Net cash used in financing activities (136,593) (124,885)
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 401,171 575,018
Cash and cash equivalents at beginning
of the year 1,234,355 659,337
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF THE YEAR,
REPRESENTING BANK BALANCES AND CASH 14 1,635,526 1,234,355
========= =========
The accompany footnotes are an integral part of these consolidated
financial statements.
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APPENDIX I FINANCIAL INFORMATION
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Asia Satellite Telecommunications Holdings Limited (the Company) and its
subsidiaries (together the Group) is engaged in the provision of transponder
capacity.
The Company is a limited liability company incorporated in Bermuda as an
exempted company under the Companies Act 1981 of Bermuda (as amended). The
address of its registered office is 17th Floor, The Lee Gardens, 33 Hysan
Avenue, Causeway Bay, Hong Kong.
The Company's shares are listed on the New York Stock Exchange and The
Stock Exchange of Hong Kong Limited (hereafter collectively referred to as the
"Stock Exchange").
These consolidated financial statements are presented in thousands of
units of HK dollars (HK$'000), unless otherwise stated. These consolidated
financial statements have been approved for issue by the Board of Directors on
16 March 2006 and signed on its behalf by Mr. JU Wei Min (Director) and Mr.
Peter JACKSON (Director).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these
consolidated financial statements are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated.
2.1 BASIS OF PREPARATION
The consolidated financial statements of the Group have been
prepared in accordance with Hong Kong Financial Reporting Standards
(HKFRSs) and have been prepared under the historical cost convention.
The preparation of financial statements in conformity with HKFRSs
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgment in the process of applying
the Group's accounting policies. The areas involving a higher degree of
judgment or complexity, or areas where assumptions and estimates are
significant to the consolidated financial statements, are disclosed in
note 4.
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APPENDIX I FINANCIAL INFORMATION
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THE ADOPTION OF NEW/REVISED HKFRSS
In 2005, the Group adopted the new/revised standards and
interpretations of HKFRS below, which are relevant to its
operations. The 2004 comparatives have been amended as required, in
accordance with the relevant requirements.
HKAS 1 Presentation of Financial Statements
HKAS 2 Inventories
HKAS 7 Cash Flow Statements
HKAS 8 Accounting Policies, Changes in
Accounting Estimates and Errors
HKAS 10 Events after the Balance Sheet Date
HKAS 12 Income Taxes
HKAS 14 Segment Reporting
HKAS 16 Property, Plant and Equipment
HKAS 17 Leases
HKAS 18 Revenue
HKAS 19 Employee Benefits
HKAS 21 The Effects of Changes in Foreign Exchange Rates
HKAS 23 Borrowing Costs
HKAS 24 Related Party Disclosures
HKAS 27 Consolidated and Separate Financial Statements
HKAS 28 Investments in Associates
HKAS 31 Investments in Joint Ventures
HKAS 33 Earnings per Share
HKAS 36 Impairment of Assets
HKAS 37 Provisions, Contingent Liabilities and Contingent
Assets
HKAS 38 Intangible Assets
HKFRS 2 Share-based Payments
HKFRS 3 Business Combinations
The adoption of new/revised HKASs did not result in
substantial changes to the Group's existing accounting policies
under HK GAAP. In summary:
- HKAS 1 has affected the presentation of minority
interests, share of net after-tax results of associates
and other disclosures in the consolidated balance
sheet, consolidated income statements and consolidated
statement of changes in equity;
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- HKASs 2, 8,16, 21, 28 and 36 have affected certain
disclosures in the financial statements;
- HKASs 7, 10, 12, 14, 18, 19, 23, 27, 31, 33 and 37 did
not have any material impact as the Group's existing
accounting policies have already complied with the
standards in all material respects; and
- HKAS 24 has affected the identification of related
parties and the disclosure of related-party
transactions.
The adoption of revised HKAS 17 has resulted in a change in
the accounting policy relating to the reclassification of leasehold
land and land use rights from property, plant and equipment to
operating leases. The up-front prepayments made for the leasehold
land and land use rights are expensed in the income statements on a
straight-line basis over the period of the lease. In prior years,
the leasehold land was accounted for at cost less accumulated
depreciation.
The adoption of HKFRS 2 has resulted in a change in the
accounting policy for share-based payments. Until 31 December 2004,
the provision of share options to employees did not result in an
expense in the income statements. Effective on 1 January 2005, the
Company expenses the cost of share options in the income statement.
As no share option was granted after 7 November 2002, no adjustment
was required in the income statements of the respective years (NOTE
2.15).
The adoption of HKFRS 3, HKASs 36 and 38 results in a change
in the accounting policy for goodwill. Until 31 December 2004,
goodwill was:
- Amortised on a straight line basis over a period of 2
years; and
- Assessed for an indication of impairment at each
balance sheet date.
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In accordance with the provisions of HKFRS 3 (NOTE 2.7):
- The Group ceased amortisation of goodwill from 1
January 2005;
- Accumulated amortisation as at 31 December 2004 has
been eliminated with a corresponding decrease in the
cost of goodwill;
- For the year ended 31 December 2005 and onwards,
goodwill is tested annually for impairment, as well as
when there is indication of impairment.
The Group has reassessed the useful lives of its intangible
assets in accordance with the provisions of HKAS 38. No adjustment
resulted from this reassessment.
All changes in the accounting policies have been made in
accordance with the transition provisions in the respective
standards. All standards adopted by the Group require retrospective
application other than:
- HKAS 16 - the initial measurement of an item of
property, plant and equipment acquired in an exchange
of assets transaction is accounted at fair value
prospectively only to future transactions;
- HKFRS 2 - only retrospective application for all equity
instruments granted after 7 November 2002 and not
vested at 1 January 2005;
- HKFRS 3 - prospectively after the adoption date.
There was no impact on opening retained earnings at 1 January
2004 from the adoption of HKASs 31 and 38, HKFRSs 2 and 3.
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THE ADOPTION OF REVISED HKAS 17
2005 2004
HK$'000 HK$'000
Decrease in property, plant and equipment (24,199) (24,782)
Increase in leasehold land and land use rights 24,199 24,782
No early adoption of the following new Standards or
Interpretations that have been issued but are not yet effective. The
adoption of such Standards or Interpretations will not result in
substantial changes to the Group's accounting policies.
HKFRS-Int 4 Determining whether an Arrangement
contains a Lease
HKFRS 7 Financial Instruments: Disclosures
2.2 CONSOLIDATION
The consolidated financial statements include the financial
statements of the Company and all its subsidiaries made up to 31 December.
(a) SUBSIDIARIES
Subsidiaries are all entities (including special purpose
entities) over which the Group has the power to govern the financial
and operating policies generally accompanying a shareholding of more
than one half of the voting rights. The existence and effect of
potential voting rights that are currently exercisable or
convertible are considered when assessing whether the Group controls
another entity.
Subsidiaries are fully consolidated from the date on which
control is transferred to the Group. They are de-consolidated from
the date that control ceases.
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The purchase method of accounting is used to account for the
acquisition of subsidiaries. The cost of an acquisition is measured
as the fair value of the assets given, equity instruments issued and
liabilities incurred or assumed at the date of exchange, plus costs
directly attributable to the acquisition. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a
business combination are measured initially at their fair values at
the acquisition date, irrespective of the extent of any minority
interest. The excess of the cost of acquisition over the fair value
of the Group's share of the identifiable net assets acquired is
recorded as goodwill. If the cost of acquisition is less than the
fair value of the net assets of the subsidiary acquired, the
difference is recognised directly in the income statements.
Inter-company transactions, balances and unrealised gains on
transactions between group companies are eliminated. Unrealised
losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency
with the policies adopted by the Group.
In the Company's balance sheet the investments in subsidiaries
are stated at cost less provision for impairment losses. The results
of subsidiaries are accounted for by the Company on the basis of
dividend received and receivable.
(b) ASSOCIATES
Associates are all entities over which the Group has
significant influence but not control, generally accompanying a
shareholding of between 20% and 50% of the voting rights.
Investments in associates are accounted for by the equity method of
accounting and are initially recognised at cost. The Group's
investment in associates includes goodwill (net of any accumulated
impairment loss) identified on acquisition.
The Group's share of its associates' post-acquisition profits
or losses is recognised in the income statement, and its share of
post-acquisition movements in reserves is recognised in reserves.
The cumulative post-acquisition movements are adjusted against the
carrying amount of the investment. When the Group's share of losses
in an associate equals or exceeds its interest in the associate,
including any other unsecured receivables, the Group does not
recognise further losses, unless it has incurred obligations or made
payments on behalf of the associate.
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Unrealised gains on transactions between the Group and its
associates are eliminated to the extent of the Group's interest in
the associates. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset
transferred. Accounting policies of associates have been changed
where necessary to ensure consistency with the policies adopted by
the Group.
In the Company's balance sheet the investments in associated
companies are stated at cost less provision for impairment losses.
The results of associated companies are accounted for by the Company
on the basis of dividend received and receivable.
2.3 SEGMENT REPORTING
A business segment is a group of assets and operations engaged in
providing products or services that are subject to risks and returns that
are different from those of other business segments. A geographical
segment is engaged in providing products or services within a particular
economic environment that are subject to risks and returns that are
different from those of segments operating in other economic environments.
2.4 FOREIGN CURRENCY TRANSLATION
(a) FUNCTIONAL AND PRESENTATION CURRENCY
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates ("the functional
currency"). The consolidated financial statements are presented in
HK dollars, which is the Company's functional and presentation
currency.
(b) TRANSACTIONS AND BALANCES
Foreign currency transactions are translated into the
functional currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the income
statement.
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Translation differences on non-monetary items, such as equity
instruments held at fair value through profit or loss, are reported
as part of the fair value gain or loss. Translation difference on
non-monetary items, such as equities classified as
available-for-sale financial assets, are included in the fair value
reserve in equity.
(c) GROUP COMPANIES
The results and financial position of all the group entities
(none of which has the currency of a hyperinflationary economy) that
have a functional currency different from the presentation currency
are translated into the presentation currency as follows:
(i) assets and liabilities for each balance sheet presented
are translated at the closing rate at the date of that
balance sheet;
(ii) income and expenses for each income statement are
translated at average exchange rates (unless this
average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the
transaction dates, in which case income and expenses
are translated at the dates of the transactions); and
(iii) all resulting exchange differences are
recognised as a separate component of equity.
2.5 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less accumulated
depreciation and accumulated impairment losses.
Buildings in the course of development for production, rental or
administrative purposes or for purposes not yet determined, are carried at
cost, less an identified impairment loss. Depreciation of these assets, on
the same basis as other property assets, commences when the assets are
ready for their intended use. Historical cost includes expenditure that is
directly attributable to the acquisition of the items.
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Subsequent costs are included in the asset's carrying amount or
recognised as a separate asset, as appropriate, only when it is probable
that future economic benefits associated with the item will flow to the
Group and the cost of the item can be measured reliably. All other repairs
and maintenance are expensed in the income statements during the financial
year in which they are incurred.
Depreciation of property, plant and equipment is calculated using
the straight-line method to allocate cost or revalued amounts to their
residual values over their estimated useful lives, at the following rates
per annum:
Satellites:
- AsiaSat 2 8%
- AsiaSat 3S 6.25%
- AsiaSat 4 6.67%
Buildings 4%
Tracking facilities 10%-20%
Furniture, fixtures and fittings 20%-33%
Other equipment 25%-33%
Motor vehicles 25%
Plant and machinery 20%
The assets' residual values and useful lives are reviewed, and
adjusted if appropriate, at each balance sheet date.
An asset's carrying amount is written down immediately to its
recoverable amount if the asset's carrying amount is greater than its
estimated recoverable amount.
2.6 INTANGIBLE ASSETS - LICENCE
The licence is shown at historical cost. The licence has a definite
useful life and is carried at cost less accumulated amortisation.
Amortisation is calculated using the straight-line method to allocate the
cost of the licence over its estimated useful life (112 months).
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2.7 IMPAIRMENT OF ASSETS
Assets that have an indefinite useful life are not subject to
amortisation, which are at least tested annually for impairment and are
reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. Assets that are
subject to amortisation are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. An impairment loss is recognised for the amount by which the
asset's carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset's fair value less costs to sell and value
in use. For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash flows
(cash-generating units).
2.8 GOODWILL
Goodwill represents the excess of the cost of an investment over the
fair value of the Group's share of the net identifiable assets of the
acquired associates at the date of investment. Goodwill on investment of
associates is included in interests in associates. Goodwill is tested
annually for impairment and carried at cost less accumulated impairment
losses. Gains and losses on the disposal of an entity include the carrying
amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of
impairment testing.
2.9 INVENTORIES
Inventories are stated at the lower of cost and net realisable
value. Cost is determined using the first-in, first-out (FIFO) method,
comprises all costs of purchase and other costs incurred in bringing the
inventories to their present locations and conditions. Net realisable
value is the estimated selling price in the ordinary course of business,
less applicable variable selling expenses.
2.10 TRADE AND OTHER RECEIVABLES
Trade and other receivables are recognised initially at fair value
less provision for impairment. A provision for impairment of trade and
other receivables is established when there is objective evidence that the
Group will not be able to collect all amounts due according to the
original terms of receivables. The amount of the provision is recognised
in the income statement.
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2.11 CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash in hand, deposits held at
call with banks, other short-term highly liquid investments with original
maturities of three months or less, and bank overdrafts. Bank overdrafts
are shown within borrowings in current liabilities on the balance sheet.
2.12 SHARE CAPITAL
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares
or options are shown in equity as a deduction, net of tax, from the
proceeds.
2.13 BORROWINGS
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Transaction costs are incremental costs that
are directly attributable to the acquisition, issue or disposal of a
financial asset or financial liability, including fees and commissions
paid to agents, advisers, brokers and dealers, levies by regulatory
agencies and securities exchanges, and transfer taxes and duties.
Borrowings are subsequently stated at amortised cost; any difference
between the proceeds (net of transaction costs) and the redemption value
is recognised in the income statement over the period of the borrowings
using the effective interest method.
2.14 DEFERRED INCOME TAX
Deferred income tax is provided in full, using the liability method,
on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the consolidated financial
statements. However, if the deferred income tax arises from initial
recognition of an asset or liability in a transaction other than a
business combination that at the time of the transaction affects neither
accounting nor taxable profit or loss, it is not accounted for. Deferred
income tax is determined using tax rates (and laws) that have been enacted
or substantially enacted by the balance sheet date and are expected to
apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is
probable that future taxable profit will be available against which the
temporary differences can be utilised.
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Deferred income tax is provided on temporary differences arising on
investments in subsidiaries, associates and jointly controlled entities,
except where the timing of the reversal of the temporary difference is
controlled by the Group and it is probable that the temporary difference
will not reverse in the foreseeable future.
2.15 EMPLOYEE BENEFITS
(a) PENSION OBLIGATIONS
The Group participates in defined contribution plans, the
Group pays contributions to publicly or privately administered
pension insurance plans on a mandatory, contractual or voluntary
basis. The pension plans are generally funded by payments from
employees and by the relevant Group companies. The Group has no
further payment obligations once the contributions have been paid.
The contributions are recognised as employee benefit expense when
they are due and are reduced by contributions forfeited by those
employees who leave the scheme prior to vesting fully in the
contributions. Prepaid contributions are recognised as an asset to
the extent that a cash refund or a reduction in the future payments
is available.
(b) SHARE-BASED COMPENSATION
The Group operates an equity-settled, share-based compensation
plan. The fair value of the employee services received in exchange
for the grant of the options is recognised as an expense. The total
amount to be expensed over the vesting period is determined by
reference to the fair value of the options granted, excluding the
impact of any non-market vesting conditions (for example,
profitability and sales growth targets). Non-market vesting
conditions are included in assumptions about the number of options
that are expected to become exercisable. At each balance sheet date,
the entity revises its estimates of the number of options that are
expected to become exercisable. It recognises the impact of the
revision of original estimates, if any, in the income statements,
and a corresponding adjustment to equity over the remaining vesting
period.
(c) PROFIT-SHARING AND BONUS PLANS
The expected cost of profit sharing and bonus payments are
recognised as a liability when the Group has a present legal or
constructive obligation as a result of services rendered by
employees and a reliable estimate of the obligation can be made.
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Liabilities for profit sharing and bonus plans are expected to
be settled within 12 months and are measured at the amounts expected
to be paid when they are settled.
2.16 PROVISIONS
Provisions for environmental restoration, restructuring costs and
legal claims are recognised when: the Group has a present legal or
constructive obligation as a result of past events; it is more likely than
not that an outflow of resources will be required to settle the
obligation; and the amount has been reliably estimated. Restructuring
provisions comprise lease termination penalties and employee termination
payments. Provisions are not recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that
an outflow will be required in settlement is determined by considering the
class of obligations as a whole. A provision is recognised even if the
likelihood of an outflow with respect to any one item included in the same
class of obligations may be small.
2.17 REVENUE RECOGNITION
Revenue from transponder utilisation is recognised on a
straight-line basis over the period of the agreements. The excess of
revenue recognised on a straight-line basis over the amount received and
receivable from customers in accordance with the contract terms is shown
as unbilled receivable.
Revenue from the sale of transponder capacity under transponder
purchase agreements is recognised on a straight-line basis from the date
of delivery of the transponder capacity until the end of the estimated
useful life of the satellite.
Deposits received in advance in connection with the provision of
transponder capacity are deferred and included in other payables.
Services under transponder utilisation agreements are generally
billed quarterly in advance. Such amounts received in advance and amounts
received from the sale of transponder capacity under transponder purchase
agreements in excess of amounts recognised as revenue are recorded as
deferred revenue. Deferred revenue which will be recognised in the
following year is classified under current liabilities and amounts which
will be recognised after one year are classified as non-current.
Interest income is accrued on a time basis, by reference to the
principal amounts outstanding and at the interest rate applicable.
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2.18 OPERATING LEASES (AS THE LESSEE)
Leases in which a significant portion of the risks and rewards of
ownership are retained by the lessor are classified as operating leases.
Payments made under operating leases (net of any incentives received from
the lessor) are expensed in the income statements on a straight-line basis
over the period of the lease.
2.19 DIVIDEND DISTRIBUTION
Dividend distribution to the Company's shareholders is recognised as
a liability in the financial statements in the period in which the
dividends are approved by the Company's shareholders.
3. FINANCIAL RISK MANAGEMENT
3.1 FINANCIAL RISK FACTORS
The Group's activities expose it to a variety of financial risks:
foreign exchange risk, credit risk, and cash flow interest-rate risk. The
Group's overall risk management programma focuses on the unpredictability
of financial markets and seeks to minimise potential adverse effects on
the Group's financial performance.
(a) FOREIGN EXCHANGE RISK
During the year, almost all of the Group's revenues, premiums
for satellite insurance coverage and substantially all capital
expenditure were denominated in U.S. Dollars. The Group's remaining
expenses were primarily denominated in Hong Kong Dollars. At 31
December 2005, almost all the Group's transponder utilisation
agreements, transponder purchase agreement, loan agreements,
obligations to purchase telemetry, tracking and control equipment
were denominated in U.S. Dollars. Hence, the Group does not have any
significant currency exposure and does not need to hedge.
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(b) CREDIT RISK
The Group has no significant concentrations of credit risk.
The Group maintains provision for impairment of receivables and for
estimated losses that result from the inability of its customers to
make the required payments. The Group bases its provision on the
likelihood of recoverability of account receivables based on past
experience and current collection trends that are expected to
continue. The Group's evaluation also includes the length of time
the receivables are past due and the general business environment.
(c) CASH FLOW INTEREST-RATE RISK
As the Group has no significant interest-bearing assets or
liabilities, the Group's income and operating cash flows are
substantially independent of changes in market interest rates.
4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
Estimates and judgments are continually evaluated and are based on
historical experience and other factors, including expectations of future
events that are believed to be reasonable under the circumstances.
4.1 CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
The Group makes estimates and assumptions concerning the future. The
resulting accounting estimates will, by definition, seldom equal the
related actual results. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year are discussed
below.
(a) ESTIMATED IMPAIRMENT OF GOODWILL
The Group tests annually whether goodwill has suffered any
impairment, in accordance with the accounting policy stated in note
2.7. The recoverable amounts of cash-generating units have been
determined based on value-in-use calculations. These calculations
require the use of estimates.
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(b) INCOME TAXES
The Group is subject to income taxes in numerous
jurisdictions. Significant judgment is required in determining the
worldwide provision for income taxes. There are many transactions
and calculations for which the ultimate tax determination is
uncertain during the ordinary course of business. The Group
recognises liabilities for anticipated tax audit issues based on
estimates of whether additional taxes will be due. Where the final
tax outcome of these matters is different from the amounts that were
initially recorded, such differences will impact the income tax and
deferred tax provisions in the period in which such determination is
made.
The issue of Indian tax is covered under Contingencies in note
28 below.
(c) USEFUL LIVES OF IN-ORBIT SATELLITES
The Group's operations are capital intensive and it has
significant investments in satellites. The carrying value of the
Group's in-orbit satellites (AsiaSat 2, AsiaSat 3S and AsiaSat 4)
represented 52% of its total assets as of 31 December 2005 (31
December 2004: 59%). The Group estimates the useful lives of
satellites in order to determine the amount of depreciation expense
to be recorded during the reported period. The useful lives are
estimated at the time satellites are put into orbit and are based on
historical experience with other satellites as well as the
anticipated technological evolution or other environmental changes.
If technological changes were to occur more rapidly than anticipated
or in a different form than anticipated, the useful lives assigned
to these satellites may need to be shortened, resulting in the
recognition of increased depreciation in a future period. Similarly,
if the actual lives of satellites are longer than the Group has
estimated, the Group would have a smaller depreciation expense. As a
result, if the Group's estimations of the useful lives of its
satellites are not accurate or are required to be changed in the
future, the Group's net income in future periods would be affected.
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(d) REALISABILITY OF THE CARRYING AMOUNTS OF LONG-LIVED ASSETS
The Group is required to evaluate at each balance sheet date
whether there is any indication that the carrying amounts of
long-lived assets (primarily its satellites) may be impaired. If any
such indication exists, the Group should estimate the recoverable
amount of the long-lived assets. An impairment loss is recognised
for the excess of the carrying amount of such long-lived assets over
their recoverable amounts. The value in use is the discounted
present value of the cash flows expected to arise from the
continuing use of long-lived assets and cash arising from its
disposal at the end of its useful life. The estimates of the cash
flows are based on the terms and period of existing transponder
utilisation agreements ("Existing Agreements").
Modifications to the terms of the Existing Agreements that
result in shorter utilisation periods than previously agreed and/or
those that result in the reduction in agreed rates will result in a
lower recoverable amount (if the discount rate used is not changed);
which may, in turn, result in a situation wherein the recoverable
amounts are less than the carrying amounts (therefore, an impairment
loss would need to be recognised).
(e) PROVISION FOR IMPAIRMENT OF RECEIVABLES
The issue is covered under credit risk in note 3.1 (b) above.
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5. SALES AND SEGMENT INFORMATION
SALES:
The Group's sales is analysed as follows:
2005 2004
HK$'000 HK$'000
Income from provision of
satellite transponder capacity 850,436 982,464
Sales of satellite transponder capacity 24,491 20,518
Other revenue 4,778 2,000
------- ---------
879,705 1,004,982
======= =========
The Group has only one business segment, namely the operation, maintenance
and provision of satellite telecommunication systems for broadcasting and
telecommunications. The Group's primary reporting format for segment reporting
purposes under HKAS 14 "Segment Reporting" is the geographical basis. For the
purpose of classification, the country where the customer is incorporated is
deemed to be the source of sales. However, the Group's operating assets consist
primarily of its satellites which are used, or are intended for use, for
transmission to multiple geographical areas and therefore cannot be allocated
between geographical segments. Accordingly, no geographical analysis of
expenses, assets and liabilities has been presented.
The following table provides an analysis of the Group's sales by
geographical markets:
2005 2004
HK$'000 HK$'000
Hong Kong 341,698 323,133
Greater China, including Taiwan 202,730 197,936
United States of America 78,205 183,750
United Kingdom 49,401 46,073
British Virgin Islands 9,706 40,897
Others 197,965 213,193
------- ---------
879,705 1,004,982
======= =========
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6. LEASEHOLD LAND AND LAND USE RIGHTS - GROUP
The Group's interests in leasehold land and land use rights represent
prepaid operating lease payments and their net book value are analysed as
follows:
2005 2004
HK$'000 HK$'000
In Hong Kong held on:
Leases of over 50 years - -
Leases of between 10 to 50 years 24,199 24,782
------ ------
24,199 24,782
====== ======
2005 2004
HK$'000 HK$'000
Opening 24,782 25,365
Amortisation of prepaid operating lease payment (583) (583)
------ ------
Closing 24,199 24,782
====== ======
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7. PROPERTY, PLANT AND EQUIPMENT - GROUP
SATELLITES AND TRACKING FACILITIES FURNITURE,
IN UNDER FIXTURE AND OFFICE MOTOR PLANT AND
OPERATION CONSTRUCTION BUILDINGS FITTINGS EQUIPMENT VEHICLES EQUIPMENT TOTAL
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
AT 1 JANUARY 2004
Cost 4,167,029 41,837 117,866 10,558 6,925 3,427 2,524 4,350,166
Accumulated depreciation (1,191,719) - (393) (8,962) (5,335) (2,125) (1,598) (1,210,132)
--------- ------ ------- ------ ----- ----- ----- ---------
Net book amount 2,975,310 41,837 117,473 1,596 1,590 1,302 926 3,140,034
========= ====== ======= ====== ===== ===== ===== =========
YEAR ENDED 31 DECEMBER 2004
Opening net book amount 2,975,310 41,837 117,473 1,596 1,590 1,302 926 3,140,034
--------- ------ ------- ------ ----- ----- ----- ---------
Additions 14,953 22,826 34 1,291 1,055 1,722 22 41,903
Transfer 55,028 (55,028) - - - - - -
Disposals (NOTE 27) - - - (16) (1) (71) - (88)
Depreciation (280,171) - (4,716) (716) (762) (797) (220) (287,382)
--------- ------ ------- ------ ----- ----- ----- ---------
Closing net book amount 2,765,120 9,635 112,791 2,155 1,882 2,156 728 2,894,467
========= ====== ======= ====== ===== ===== ===== =========
AT 31 DECEMBER 2004
Cost 4,232,629 9,635 117,900 10,854 7,646 3,871 2,370 4,384,905
Accumulated depreciation (1,467,509) - (5,109) (8,699) (5,764) (1,715) (1,642) (1,490,438)
--------- ------ ------- ------ ----- ----- ----- ---------
Net book amount 2,765,120 9,635 112,791 2,155 1,882 2,156 728 2,894,467
========= ====== ======= ====== ===== ===== ===== =========
YEAR ENDED 31 DECEMBER 2005
Opening net book amount 2,765,120 9,635 112,791 2,155 1,882 2,156 728 2,894,467
Additions 1,337 10,309 98 7,377 1,584 865 - 21,570
Transfer 19,539 (19,539) - - - - - -
Disposals (NOTE 27) - - - (7) (2) - - (9)
Depreciation (286,032) - (4,716) (2,178) (1,068) (907) (216) (295,117)
--------- ------ ------- ------ ----- ----- ----- ---------
Closing net book amount 2,499,964 405 108,173 7,347 2,396 2,114 512 2,620,911
========= ====== ======= ====== ===== ===== ===== =========
AT 31 DECEMBER 2005
Cost 4,253,504 405 117,998 11,142 8,928 4,137 2,371 4,398,485
Accumulated depreciation (1,753,540) - (9,825) (3,795) (6,532) (2,023) (1,859) (1,777,574)
--------- ------ ------- ------ ----- ----- ----- ---------
Net book amount 2,499,964 405 108,173 7,347 2,396 2,114 512 2,620,911
========= ====== ======= ====== ===== ===== ===== =========
Depreciation expense of HK$295,117,000 (2004: HK$287,382,000) has been
expensed in cost of services.
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APPENDIX I FINANCIAL INFORMATION
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8. INTANGIBLE ASSETS - GROUP
LICENCE
HK$'000
AT 1 JANUARY 2004 AND 31 DECEMBER 2004
Cost -
Accumulated amortisation and impairment -
-------
Net book amount -
=======
YEAR ENDED 31 DECEMBER 2005
Additions 1,500
Amortisation expense (a) (NOTE 19) (161
-------
Closing net book amount 1,339
=======
AT 31 DECEMBER 2005
Cost 1,500
Accumulated amortisation and impairment (161)
-------
Net book amount 1,339
=======
NOTE:
(a) Amortisation expense of HK$161,000 is included in the
administrative expenses in the income statement.
9. INVESTMENTS IN SUBSIDIARIES
(a) INVESTMENTS IN SUBSIDIARIES
COMPANY
2005 2004
HK$'000 HK$'000
Unlisted shares in subsidiaries, at cost 429,054 429,054
======== =======
The cost of the unlisted shares is based on the book value of the
underlying net assets of the subsidiaries attributable to the Group as at
the date on which the Company became the ultimate holding company of the
Group under the Group reorganisation in 1996.
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APPENDIX I FINANCIAL INFORMATION
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The following is a list of the principal subsidiaries and a
controlled partnership at 31 December 2005:
PARTICULARS OF
ISSUED SHARE
PLACE OF PRINCIPAL CAPITAL
INCORPORATION AND ACTIVITIES AND AND DEBT
NAME KIND OF LEGAL ENTITY PLACE OF OPERATION SECURITIES INTEREST HELD
AsiaSat BVI Limited British Virgin Islands, Investment holding 3,000 ordinary shares *100%
limited liability in Hong Kong of US$1 each
company
Asia Satellite Hong Kong, limited Provision of satellite 30,000 ordinary shares 100%
Telecommunications liability company transponder capacity and 20,000 non-voting
Company Limited worldwide shares of HK$10 each deferred
Hanbury British Virgin Islands, Inactive in Hong Kong 1 ordinary share of 100%
International limited liability HK$1 each
Limited company
SAT Limited Republic of Mauritius, Inactive in Republic of 100 ordinary shares of *100%
limited liability Mauritius US$1 each
company
Skywave TV Company Hong Kong, limited Provision of DTH 3,000,002 ordinary shares 80%
Limited (formerly liability company broadcasting services of HK$10 each
known as Auspicious in Hong Kong and
City Limited) Mainland China
Sornico Limited Hong Kong, limited Inactive in Hong Kong 2 ordinary shares of 100%
liability company HK$10 each
The First Asian Hong Kong, limited Inactive in Hong Kong N/A 1%
Satellite liability
Leasing Limited partnership
Partnership
(the "Partnership")
Auspicious Colour Hong Kong, limited Inactive in Hong Kong 1 ordinary share of HK$1 each 100%
Limited liability company
The Company continues to control the Partnership as it is a general
partner and accordingly continues to consolidate it.
* SHARES HELD DIRECTLY BY THE COMPANY.
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APPENDIX I FINANCIAL INFORMATION
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10. INTERESTS IN ASSOCIATES - GROUP
2005 2004
HK$'000 HK$'000
SHARE OF NET ASSETS
Beginning of the year 11,551 24,151
Share of associates' losses (3,872) (12,380)
Amortisation of goodwill - (220)
------- -------
End of the year 7,679 11,551
------- -------
AMOUNT DUE FROM AN ASSOCIATE
Beginning of the year 1,846 -
Additions 4,769 1,846
------- -------
End of the year 6,615 1,846
------- -------
Total 14,294 13,397
======= =======
Interests in associates at 31 December 2005 include goodwill of HK$442,000
(2004: HK$442,000).
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APPENDIX I FINANCIAL INFORMATION
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The Group's interest in its principal associates, all of which are
unlisted, were as follows:
PARTICULARS OF
ISSUED SHARES COUNTRY OF % INTEREST
NAME HELD INCORPORATION ASSETS LIABILITIES REVENUES PROFIT/(LOSS) HELD
HK$'000 HK$'000 HK$'000 HK$'000 %
2004
Beijing Asia Sky N/A China 48,785 25,183 888 (2,289) 49
Telecommunications
Technology Company
Limited
SpeedCast Holdings Ordinary shares of Cayman 35,418 21,740 49,825 (11,339) 47
Limited US$0.0001 each Islands
SpeedCast Limited Ordinary shares of Hong Kong N/A N/A N/A N/A 47
(NOTE 1) HK$0.01 each ------ ------ ------ ------
84,203 46,923 50,713 (13,628)
====== ====== ====== ======
2005
Beijing Asia Sky N/A China 42,011 25,945 2,721 (7,909) 49
Telecommunications
Technology Company
Limited
SpeedCast Holdings Ordinary shares of Cayman 39,392 25,345 82,673 368 47
Limited US$0.0001 each Islands
SpeedCast Limited Ordinary shares of Hong Kong N/A N/A N/A N/A 47
(NOTE 1) HK$0.01 each ------ ------ ------ ------
81,403 51,290 85,394 (7,541)
====== ====== ====== ======
The Group has not recognised profit amounting to HK$174,000 (2004: loss
HK$5,363,000) for SpeedCast Holdings Limited as the Group's share of loss
exceeds its interest in SpeedCast. The accumulated losses not recognised were
HK$12,034,000 (2004: HK$12,208,000).
NOTE:
(1) SpeedCast Limited is the wholly-owned subsidiary of
SpeedCast Holdings Limited. Accordingly, assets,
liabilities, revenues and profit/(loss) are not disclosed
again.
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APPENDIX I FINANCIAL INFORMATION
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11. AMOUNT PAID TO TAX AUTHORITY - GROUP
At the balance sheet date, an amount of approximately HK$93,666,000 (2004:
HK$67,023,000) had been paid to the Government of India. For details, please
refer to note 28.
12. TRADE AND OTHER RECEIVABLES - GROUP
2005 2004
HK$'000 HK$'000
Trade receivables 90,653 91,364
Trade receivables from related parties (NOTE 31) 7,678 4,574
LESS: provision for impairment of receivables (30,930) (23,230)
------- -------
Trade receivables - net 67,401 72,708
Receivables from related parties (NOTE 31) 15,503 14,628
Other receivables 10,831 7,846
Deposits and prepayments 24,863 37,226
Loan receivable from an associate (NOTE 31) - 5,070
------- -------
118,598 137,478
Less non-current portion: loans to related parties - -
------- -------
Current portion 118,598 137,478
======= =======
(a) The Group does not normally provide credit terms to its
trade customers. The Company usually bills its trade
customers quarterly in advance in accordance with its
agreements. The aged analysis of trade receivables is
stated as follows:
2005 2004
HK$'000 HK$'000
0 to 30 days 27,768 34,047
31 to 60 days 8,652 18,318
61 to 90 days 14,315 11,424
91 to 180 days 10,074 3,796
181 days or above 6,592 5,123
------- -------
67,401 72,708
====== ======
There is no concentration of credit risk with respect to trade
receivables, as the Group has a large number of customers, internationally
dispersed.
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APPENDIX I FINANCIAL INFORMATION
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13. INVENTORIES - GROUP
2005 2004
HK$'000 HK$'000
Merchandise 434 416
======= =======
The cost of inventories recognised as expense and included in cost of
services amounted to HK$500,000 (2004: Nil).
14. CASH AND CASH EQUIVALENTS - GROUP
2005 2004
HK$'000 HK$'000
Cash at bank and in hand 13,173 4,036
Short-term bank deposits 1,622,353 1,230,319
-------- ---------
1,635,526 1,234,355
======== =========
The effective interest rate on short-term bank deposits was 3.1% (2004:
2.3%); these deposits have an average maturity of 17 days.
Cash includes the following for the purposes of the cash flow statement:
2005 2004
HK$'000 HK$'000
Cash and cash equivalents 1,635,526 1,234,355
========= =========
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APPENDIX I FINANCIAL INFORMATION
-------------------------------------------------------------------------------
15. SHARE CAPITAL
NUMBER OF ORDINARY SHARE
SHARES SHARES PREMIUM TOTAL
(THOUSANDS) HK$'000 HK$'000 HK$'000
At 31 December 2005 and
31 December 2004 390,266 39,027 4,614 43,641
========== ========= ======== ========
The total authorised number of ordinary shares is 550,000,000 shares
(2004: 550,000,000 shares) with a par value of HK$0.10 per share (2004: HK$0.10
per share). All issued shares are fully paid.
SHARE OPTION SCHEME
A share option scheme is adopted to provide incentives to employees
and directors and to promote the long term financial success of the
Company. The details of the scheme are as follows:
SCHEME ADOPTED ON 3 JUNE 1996
In accordance with the Company's share option scheme (the
"1996 Scheme") adopted pursuant to a resolution passed on 3 June
1996, the Board of Directors of the Company may at their discretion
grant options to all permanent, full-time employees of the Company
and its subsidiaries, to subscribe for shares in the Company. The
primary purpose of the 1996 Scheme was to provide incentives to
eligible employees.
The total number of shares in respect of which options may be
granted under the 1996 Scheme (including options already exercised)
was not permitted to exceed 10% of the issued share capital of the
Company at any point in time. The maximum number of share options
issued to any employee, based on the subscription price of the
options, shall not exceed four times the annual basic salary
(excluding bonuses and allowances) of that employee.
-41-
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APPENDIX I FINANCIAL INFORMATION
-------------------------------------------------------------------------------
Options granted must be taken up within 28 days from the date
of grant upon payment of HK$1 per each grant of share options. An
option may be exercisable up to 50% on or after the third
anniversary of the date of grant, up to 75% on or after the fourth
anniversary and fully on or after the fifth anniversary but before
the tenth anniversary of the date of offer unless the Board of
Directors specifies other periods. The exercise price was determined
by the Board of Directors and was based on the average closing price
of the shares for the five trading days immediately preceding the
date of grant.
The 1996 Scheme was terminated on 25 January 2002 pursuant to
a resolution passed on that date.
SCHEME ADOPTED ON 25 JANUARY 2002
A new share option scheme (the "2002 Scheme") was adopted
pursuant to a resolution passed on 25 January 2002 for the primary
purpose of attracting and retaining the best personnel for the
development of the Company's businesses, and providing incentives to
employees, Directors, consultants, agents, representatives and
advisors, and promoting the long term financial success of the
Company. The 2002 Scheme will expire on 24 January 2012.
Under the 2002 Scheme, the Board of Directors of the Company
may at their discretion grant options to the employees, including
Directors, of the Company or any company that directly, or
indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Company, to
subscribe for shares in the Company. Options granted to a Director,
chief executive or substantial shareholder of the Company or any of
their respective associates must be approved by the Independent
Non-executive Directors of the Company (excluding any Independent
Non-executive Director who is also the grantee).
No options have been granted during the year. At 31 December
2002, the number of shares in respect of which options had been
granted under the 2002 Scheme was 7,149,500 representing 1.83% of
the shares of the Company in issue at that date.
--42-
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APPENDIX I FINANCIAL INFORMATION
-------------------------------------------------------------------------------
The total number of shares in respect of which options may be
granted under the 2002 Scheme and any other schemes is not permitted
to exceed 30% of the issued share capital of the Company from time
to time. In addition, the total number of shares in respect of which
options may be granted under the 2002 Scheme and any other schemes
must not, in aggregate, exceed 10% of the issued share capital of
the Company at the adoption date of the 2002 Scheme, being
39,026,550 shares, without prior approval from the Company's
shareholders.
The number of shares in respect of which options may be
granted to any individual in any one year is not permitted to exceed
1% of the shares of the Company in issue, without prior approval
from the Company's shareholders. Options granted to a substantial
shareholder, or an Independent Non-executive Director of the
Company, or any of their respective associates under the 2002 Scheme
and any other schemes in any one year in excess of 0.1% of the
Company's issued share capital or with a value in excess of HK$5
million must be approved in advance by the Company's shareholders.
Options granted must be taken up within 28 days from the date
of grant upon payment of HK$1 per each grant of share options. The
exercise period of the share options granted under the 2002 Scheme
shall be determined by the Board of Directors when such options are
granted, provided that such period shall not end later than 10 years
from the date of grant. The exercise price is determined by the
Board of Directors and will not be less than the higher of the
closing price of the Company's shares on the date of grant, or the
average closing price of the shares for the five trading days
immediately preceding the date of grant, or the nominal value of a
share of the Company.
No options were granted during the year. Total consideration
received in 2002 from employees for taking up the options granted
amounted to HK$105.
The financial impact of share options granted is not recorded
in the Company's or the Group's balance sheet until such time as the
options are exercised, and no charge is recognised in the income
statements in respect of the value of options granted in the year.
Upon the exercise of the share options, the resulting shares issued
are recorded by the Company as additional share capital at the
nominal value of the shares and the excess of the exercise price per
share over the nominal value of the shares is recorded by the
Company in the share premium account. Options which are lapsed or
are cancelled prior to their exercise dates are deleted from the
register of outstanding options.
-43-
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APPENDIX I FINANCIAL INFORMATION
-------------------------------------------------------------------------------
Movements in the number of share options outstanding and their
related weighted average exercise prices are as follows:
Option A:
2005 2004
AVERAGE AVERAGE
EXERCISE EXERCISE
PRICE IN HK$ PRICE IN HK$
PER SHARE OPTIONS PER SHARE OPTIONS
AT 1 JANUARY 17.48 1,691,500 17.48 1,691,500
Granted - - - -
Forfeited - - - -
Exercised - - - -
Lapsed 17.48 (57,500) - -
--------- ---------
AT 31 DECEMBER 17.48 1,634,000 17.48 1,691,500
========= =========
Option B:
2005 2004
AVERAGE AVERAGE
EXERCISE EXERCISE
PRICE IN HK$ PRICE IN HK$
PER SHARE OPTIONS PER SHARE OPTIONS
AT 1 JANUARY 17.48 1,753,000 17.48 1,768,000
Granted - - - -
Forfeited - - - -
Exercised - - - -
Lapsed 17.48 (98,000) 17.48 (15,000)
--------- ---------
AT 31 DECEMBER 17.48 1,655,000 17.48 1,753,000
========= =========
-44-
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APPENDIX I FINANCIAL INFORMATION
-------------------------------------------------------------------------------
Option C:
2005 2004
AVERAGE AVERAGE
EXERCISE EXERCISE
PRICE IN HK$ PRICE IN HK$
PER SHARE OPTIONS PER SHARE OPTIONS
AT 1 JANUARY 14.35 3,481,500 14.35 3,481,500
Granted - - - -
Forfeited - - - -
Exercised - - - -
Lapsed 14.35 (170,000) - -
--------- ---------
AT 31 DECEMBER 14.35 3,311,500 14.35 3,481,500
========= =========
Out of the 6,600,500 outstanding options (2004: 6,926,000
options), no. of exercisable options are as follows:
2005 2004
AVERAGE AVERAGE
EXERCISE EXERCISE
PRICE IN HK$ PRICE IN HK$
PER SHARE OPTIONS PER SHARE OPTIONS
Option A 17.48 1,634,000 17.48 1,691,500
Option B 17.48 1,655,000 17.48 1,753,000
Option C 14.35 1,655,750 14.35 870,375
--------- ---------
Total 4,944,750 4,314,875
========= =========
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APPENDIX I FINANCIAL INFORMATION
-------------------------------------------------------------------------------
Share options outstanding at the end of the year have the
following expiry date and exercise prices:
EXERCISE PRICE
EXPIRY DATE IN HK$ PER SHARE SHARE OPTIONS
2005 2004
25 November 2006 17.48 1,634,000 1,691,500
30 September 2009 17.48 1,655,000 1,753,000
3 February 2012 14.35 3,311,500 3,481,500
--------- ---------
6,600,500 6,926,000
========= =========
Details of specific categories of options are as follows:
OPTION TYPE DATE OF GRANT VESTING PERIOD EXERCISE PERIOD EXERCISE PRICE
2002 SCHEME HK$
A (NOTE a) 4 February 2002 - 4 February 2002 - 17.48
25 November 2006
B (NOTE a) 4 February 2002 4 February 2002 - 1 October 2002 - 17.48
30 September 2002 30 September 2009
C (NOTE b) 4 February 2002 4 February 2002 - 4 February 2004 - 14.35
3 February 2004 3 February 2012
HK$
1996 SCHEME
D (NOTE a) 26 November 1996 26 November 1996 - 26 November 1999 - 17.48
25 November 1999 25 November 2006
E (NOTE a) 20 September 1999 20 September 1999 - 1 October 2002 - 17.48
30 September 2002 30 September 2009
NOTES:
a. Pursuant to a resolution passed in the special general
meeting of the Company held on 25 January 2002, the
1996 Scheme was terminated and all existing options
under that scheme were cancelled. New options were
issued on 4 February 2002 under the 2002 Scheme with
the same exercise price and exercise periods to replace
the options granted under the 1996 Scheme.
OPTION TYPE A
100% between 4 February 2002 and 25 November 2006
-46-
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APPENDIX I FINANCIAL INFORMATION
-------------------------------------------------------------------------------
The exercise periods of the following option types are
divided into 3 tranches, as detailed below:
OPTION TYPE D
1. Up to 50% between 26 November1999 and 25 November
2006
2. Up to 75% between 26 November 2000 and 25 November
2006
3. Up to 100% between 26 November 2001 and 25
November 2006
OPTION TYPES B AND E
1. Up to 50% between 1 October 2002 and 30 September
2009
2. Up to 75% between 1 October 2003 and 30 September
2009
3. Up to 100% between 1 October 2004 and 30 September
2009
b. Additional share options were issued on 4 February 2002
under the 2002 Scheme.
The exercise period is divided into 3 tranches, as
detailed below:
OPTION TYPE C
1. Up to 25% between 4 February 2004 and 3 February
2012
2. Up to 50% between 4 February 2005 and 3 February
2012
3. Up to 100% between 4 February 2006 and 3 February
2012
16. DEFERRED REVENUE - GROUP
2005 2004
HK$'000 HK$'000
The maturity of deferred revenue is as follows:
Within one year 151,982 175,043
More than one year but not exceeding five years 87,654 111,844
------- -------
239,636 286,887
LESS: amount shown as current (151,982) (175,043)
------- -------
87,654 111,844
======= =======
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APPENDIX I FINANCIAL INFORMATION
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17. DEFERRED INCOME TAX
Deferred income tax assets and liabilities are offset when there is a
legally enforceable right to offset current tax assets against current tax
liabilities and when the deferred income taxes relate to the same fiscal
authority. The offset amounts are as follows:
GROUP COMPANY
2005 2004 2005 2004
HK$'000 HK$'000 HK$'000 HK$'000
Deferred tax assets:
- Deferred tax assets to
be recovered after
more than 12 months - - - -
- Deferred tax assets to
be recovered within
12 months - - - -
------- ------- ------- -------
- - - -
------- ------- ------- -------
Deferred tax liabilities:
- Deferred tax liabilities
to be recovered after
more than 12 months 192,654 205,258 - -
- Deferred tax liabilities
to be recovered within
12 months - - - -
------- ------- ------- -------
192,654 205,258 - -
------- ------- ------- -------
192,654 205,258 - -
======= ======= ======= =======
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APPENDIX I FINANCIAL INFORMATION
-------------------------------------------------------------------------------
The gross movement on the deferred income tax account is as follows:
GROUP COMPANY
2005 2004 2005 2004
HK$'000 HK$'000 HK$'000 HK$'000
Beginning of the year 205,258 213,522 - (76)
Recognised in the
income statements (NOTE 22) (12,604) (8,264) - 76
------- ------- ------- -------
End of the year 192,654 205,258 - -
======= ======= ======= =======
The movement in deferred tax liabilities/(assets) during the year is as
follows:
DEFERRED TAX LIABILITIES/(ASSETS):
GROUP COMPANY
ACCELERATED
TAX
DEPRECIATION OTHERS TAX LOSS TOTAL TAX LOSS
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
AT 1 JANUARY 2004 213,909 (311) (76) 213,522 (76)
Recognised in
the income
statements (6,884) (1,456) 76 (8,264) 76
Charged to equity - - - - -
Exchange differences - - - - -
------- ------ ------- ------- -------
AT 31 DECEMBER
2004 207,025 (1,767) - 205,258 -
Recognised in
the income
statements (13,730) 1,126 - (12,604) -
Charged to equity - - - - -
Acquisition of
subsidiary - - - - -
Exchange differences - - - - -
------- ------ ------- ------- -------
AT 31 DECEMBER
2005 193,295 (641) - 192,654 -
======= ====== ======= ======= =======
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APPENDIX I FINANCIAL INFORMATION
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18. OTHER GAINS - NET
2005 2004
HK$'000 HK$'000
Interest income 43,606 21,813
Gain on disposal of property, plant and equipment
other than transponders 99 169
Others 6 -
------ ------
43,711 21,982
====== ======
19. EXPENSES BY NATURE
Expenses included in cost of services and administrative expenses are
analysed as follows:
2005 2004
HK$'000 HK$'000
Auditors' remuneration 769 697
Impairment of receivables 2,987 -
Provision for impairment of receivables 7,700 17,690
Depreciation, amortisation and impairment expenses
(NOTES 7 AND 8) 295,278 287,382
Employee benefit expense (NOTE 20) 65,092 75,427
Operating leases
- premises 5,872 5,380
- leasehold land & land use rights 583 583
Net exchange loss 547 288
======= =======
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APPENDIX I FINANCIAL INFORMATION
-------------------------------------------------------------------------------
20. EMPLOYEE BENEFIT EXPENSE
2005 2004
HK$'000 HK$'000
Salary and other benefits, including
directors' remuneration 60,748 71,071
Pension costs - defined contribution plans 4,344 4,356
------ ------
Total staff costs 65,092 75,427
====== ======
(a) PENSIONS - DEFINED CONTRIBUTION PLANS
Forfeited contributions totaling HK$292,000 (2004: HK$37,000) were
utilised during the year leaving HK$43,000 available at the year-end to
reduce future contributions.
No contributions (2004: HK$Nil) were payable to the fund at the
year-end.
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APPENDIX I FINANCIAL INFORMATION
-------------------------------------------------------------------------------
(b) DIRECTORS' AND SENIOR MANAGEMENT'S EMOLUMENTS
The remuneration of every Director for the year ended 31 December
2005 is set out below:
COMPENSATION
EMPLOYER'S FOR
CONTRIBUTION LOSS OF
TO OFFICE
DISCRETIONARY INDUCEMENT OTHER PENSION AS
NAME OF DIRECTOR FEES SALARY BONUSES FEES BENEFITS(a) SCHEME DIRECTOR TOTAL
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
Romain BAUSCH (g) 200 - - - - - - 200
Robert BEDNAREK (g) 150 - - - - - - 150
Edward CHEN 225 - - - - - - 225
Cynthia DICKINS 12 - - - - - - 12
(b) & (g)
DING Yu Cheng (h) 100 - - - - - - 100
R. Donald FULLERTON 200 - - - - - - 200
JU Wei Min (h) 100 - - - - - - 100
KO Fai Wong (h) 100 - - - - - - 100
MI Zeng Xin (h) 200 - - - - - - 200
Mark RIGOLLE (g) 100 - - - - - - 100
Robert SZE 250 - - - - - - 250
Peter JACKSON - 2,672 390 - 1,961 401 - 5,424
William WADE - 2,074 302 - 1,485 311 - 4,172
Total 1,637 4,746 692 - 3,446 712 - 11,233
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APPENDIX I FINANCIAL INFORMATION
-------------------------------------------------------------------------------
The remuneration of every Director for the year ended 31 December
2004 is set out below:
COMPENSATION
EMPLOYER'S FOR
CONTRIBUTION LOSS OF
TO OFFICE
DISCRETIONARY INDUCEMENT OTHER PENSION AS
NAME OF DIRECTOR FEES SALARY BONUSES FEES BENEFITS(a) SCHEME DIRECTOR TOTAL
HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000 HK$'000
Romain BAUSCH (g) 200 - - - - - - 200
Robert BEDNAREK (g) 150 - - - - - - 150
Edward CHEN 175 - - - - - - 175
DING Yu Cheng (h) 100 - - - - - - 100
R. Donald FULLERTON 175 - - - - - - 175
JU Wei Min (h) 125 - - - - - - 125
KO Fai Wong (c) 81 - - - - - - 81
& (h)
LI Ting Zhou 19 - - - - - - 19
(d) & (h)
MI Zeng Xin (h) 200 - - - - - - 200
Mark RIGOLLE 15 - - - - - - 15
(e) & (g)
Jurgen SCHULTE 110 - - - - - - 110
(f) & (g)
Robert SZE 175 - - - - - - 175
Peter JACKSON - 2,619 2,619 - 1,817 393 - 7,448
William WADE - 2,033 2,033 - 1,405 305 - 5,776
Total 1,525 4,652 4,652 - 3,222 698 - 14,749
NOTES:
(a) Other benefits include accommodation, car, leave
passage, insurance premium and club membership.
(b) Appointed on 17 November 2005.
(c) Appointed on 11 March 2004.
(d) Resigned on 11 March 2004.
(e) Appointed on 17 November 2004.
(f) Resigned on 17 November 2004.
(g) Paid to SES GLOBAL and its subsidiary.
(h) Paid to a subsidiary of CITIC.
-53-
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APPENDIX I FINANCIAL INFORMATION
-------------------------------------------------------------------------------
(c) FIVE HIGHEST PAID INDIVIDUALS
The five individuals whose emoluments were the highest in the Group
for the year include two (2004: two) directors whose emoluments are
reflected in the analysis presented above. The emoluments payable to the
remaining three (2004: three) individuals during the years presented are
as follows:
2005 2004
HK$'000 HK$'000
Basic salaries, housing allowances, share
options, other allowances and
benefits in kind 8,450 8,313
Contributions to retirement benefits scheme 701 687
Performance related incentive payments 606 3,666
----- -----
9,757 12,666
===== ======
The emoluments fell within the following bands:
NUMBER OF INDIVIDUALS
2005 2004
EMOLUMENT BANDS
HK$2,500,001 - HK$3,000,000 1 -
HK$3,000,001 - HK$3,500,000 1 -
HK$3,500,001 - HK$4,000,000 1 1
HK$4,000,001 - HK$4,500,000 - 1
HK$4,500,001 - HK$5,000,000 - 1
----- -----
3 3
===== ======
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APPENDIX I FINANCIAL INFORMATION
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21. FINANCE COSTS
2005 2004
HK$'000 HK$'000
Interest expense:
- bank borrowings: bank loans and overdrafts - 1
======= =======
22. INCOME TAX EXPENSE
A significant portion of the Group's profit is treated as earned outside
Hong Kong and is not subject to Hong Kong profits tax. Hong Kong profits tax
has been provided at the rate of 17.5% (2004: 17.5%) on the estimated
assessable profit for the year.
Overseas tax, including the Foreign Enterprises Income Tax in the People's
Republic of China, is calculated at 5% to 20% of the gross revenue earned in
certain of the overseas jurisdictions.
Details of deferred taxation are set out in note 17.
The Group currently has a tax case in dispute with the Indian tax
authorities. Details of this area set out in note 28.
2005 2004
HK$'000 HK$'000
CURRENT INCOME TAX
- Hong Kong profits tax 45,056 49,574
- Overseas taxation 18,818 19,226
DEFERRED INCOME TAX (NOTE 17) (12,604) (8,264)
------ ------
51,270 60,536
====== ======
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APPENDIX I FINANCIAL INFORMATION
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The tax on the Group's profit before tax differs from the theoretical
amount that would arise using the weighted average tax rate applicable to
profits of the consolidated companies as follows:
2005 2004
HK$'000 HK$'000
Profit before tax 416,635 491,616
======= =======
Tax calculated at tax rate of 17.5%
(2004: 17.5%) 72,911 86,033
ax effect of income not subject to tax (84,164) (91,475)
Tax effect of expenses not deductible
for tax purposes 43,027 44,585
Tax effect of tax losses of associates not recognised 678 2,167
Effect of income tax rate differential between
Hong Kong and overseas locations 18,818 19,226
------ ------
Tax expense 51,270 60,536
====== ======
23. NET FOREIGN EXCHANGE LOSSES
The exchange differences recognised in the income statements are included
as follows:
2005 2004
HK$'000 HK$'000
Administrative expenses 547 288
======= =======
24. PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY
The profit attributable to equity holders of the Company is dealt with in
the financial statements of the Company to the extent of HK$136,977,000 (2004:
HK$125,358,000).
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APPENDIX I FINANCIAL INFORMATION
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25. EARNINGS PER SHARE
BASIC
Basic earnings per share is calculated by dividing the profit
attributable to equity holders of the Company by the weighted average
number of ordinary shares in issue during the year.
2005 2004
HK$'000 HK$'000
Profit attributable to equity holders
of the Company 366,184 431,216
======= =======
Weighted average number of
ordinary shares in issue (thousands) 390,266 390,266
======= =======
Basic earnings per share (HK$ per share) 0.94 1.10
======= =======
DILUTED
Diluted earnings per share is calculated adjusting the weighted
average number of ordinary shares outstanding to assume conversion of all
dilutive potential ordinary shares. The Company has share options of
dilutive potential ordinary shares. The calculation is done to determine
the number of shares that could have been acquired at fair value
(determined as the average annual market share price of the Company's
shares) based on the monetary value of the subscription rights attached to
outstanding share options. The number of shares calculated as above is
compared with the number of shares that would have been issued assuming
the exercise of the share options.
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APPENDIX I FINANCIAL INFORMATION
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2005 2004
HK$'000 HK$'000
Profit used to determine diluted earnings
per share 366,184 431,216
======= =======
Weighted average number of
ordinary shares in issue (thousands) 390,266 390,266
Adjustments for - share options (thousands) 26 -
------- -------
Weighted average number of
ordinary shares for diluted earnings
per share (thousands) 390,292 390,266
======= =======
Diluted earnings per share (HK$ per share) 0.94 1.10
======= =======
26. DIVIDENDS
The dividends paid during the years ended 2005 and 2004 were
HK$136,593,000 (HK$0.35 per share) and HK$124,885,000 (HK$0.32 per share)
respectively. A dividend in respect of 2005 of HK$0.27 per share, amounting to
a total dividend of HK$105,372,0000 is to be proposed at the Annual General
Meeting on 19 May 2006. These financial statements do not reflect this dividend
payable.
2005 2004
HK$'000 HK$'000
Interim dividend paid of HK$0.08 (2004: HK$0.08)
per ordinary share 31,221 31,221
Proposed final dividend of HK$0.27 (2004: HK$0.27)
per ordinary share 105,372 105,372
------- -------
136,593 136,593
======= =======
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APPENDIX I FINANCIAL INFORMATION
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27. CASH GENERATED FROM OPERATIONS
2005 2004
HK$'000 HK$'000
Profit for the year 365,365 431,080
Adjustments for:
- Tax (NOTE 22) 51,270 60,536
- Bad debt expenses 2,987 -
- Provision for impairment of
receivables (written back) made 7,700 17,690
- Depreciation (NOTE 7) 295,117 287,382
- Amortisation of prepaid operating
lease payment (NOTE 6) 583 583
- Amortisation of licence (NOTE 8) 161 -
- Profit on sale of property, plant and
equipment (see below) (99) (169)
- Interest income (NOTE 18) (43,606) (21,813)
- Finance costs (NOTE 21) - 1
- Share of loss from associates (NOTE 10) 3,872 12,380
Changes in working capital (excluding the
effects of acquisition and exchange differences
on consolidation):
- Unbilled receivable 704 6,357
- Amount paid to tax authority (26,643) (42,535)
- Inventories (18) (416)
- Trade and other receivables 779 (27,136)
- Other payables and accrued expenses (1,204) 47,964
- Deferred revenue (47,251) 7,509
------- -------
Cash generated from operations 609,717 779,413
======= =======
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APPENDIX I FINANCIAL INFORMATION
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In the cash flow statement, proceeds from sale of property, plant and
equipment comprise:
2005 2004
HK$'000 HK$'000
Net book amount (NOTE 7) 9 88
Profit on sale of property, plant and equipment 99 169
------- -------
Proceeds from sale of property, plant and equipment 108 257
======= =======
28. CONTINGENCIES
Under Indian tax regulations, the Group may be subject to Indian income
tax on revenues received by the Group in respect of income from provision of
satellite transponder capacity to the Group's customers for purposes of those
customers carrying on business in India or earning income from any source in
India.
The Indian tax authorities have assessed the Group for income tax as
follows:
ASSESSMENT YEAR AMOUNT HK$ AMOUNT INR
(approximate) (approximate)
1997-98 20 million 115 million
1998-99 23 million 141 million
1999-00 22 million 127 million
2000-01 14 million 84 million
2001-02 29 million 171 million
2002-03 38 million 210 million
----------- -----------
Total 146 million 848 million
=========== ===========
The Group has filed appeals for each of the assessment years 1997-98 to
2002-03.
No assessment has yet been made for the 2003-04 or 2004-05 assessment
years.
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APPENDIX I FINANCIAL INFORMATION
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The Income Tax Appellate Tribunal (the "Tribunal") in an earlier appeal
filed against the original assessment for the assessment year 1997-98 held that
the Group is liable for Indian income tax under certain circumstances. The
Group does not believe that it is liable for the Indian income tax as held by
the Tribunal and has filed an appeal against the Tribunal's decision. The tax
authorities have also filed an appeal against the Tribunal's decision. Both the
appeals have been admitted by the High Court.
In order to obtain a stay of recovery proceedings, the Group has made
payments as follows and has recorded these payments as an asset on the
assumption that the amounts are recoverable:
ASSESSMENT YEAR AMOUNT HK$ AMOUNT INR
(approximate) (approximate)
1997-98 13 million 78 million
1998-99 15 million 88 million
1999-00 10 million 62 million
2000-01 9 million 50 million
2001-02 20 million 119 million
2002-03 27 million 148 million
---------- -----------
Total 94 million 545 million
========== ===========
In addition, based on the general principles set forth by the Tribunal,
the amount of income taxable in India depends on the payments made by the
Group's customers to the Group for the purpose of those customers carrying on
business in India or earning income from any source in India. As such
information is proprietary in nature and has not been provided by the Group's
customers, the Group cannot reasonably estimate the taxable income and
therefore also cannot estimate the amount of income tax to which the Group may
be assessed. Furthermore, as stated above, the Group has filed an appeal
against the Tribunal's decision. The appeal has been admitted by the High Court
and is pending before the Court. Accordingly, no provision has been recognised
for Indian income tax in the Group's financial statements.
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29. MAJOR NON-CASH TRANSACTIONS
On 30 November 2004, the Group decreased its equity interest in Skywave TV
Company Limited ("Skywave") from 100% to 80% when two independent third parties
made a contribution in kind of HK$3 million each in return for 10% stake in the
Skywave. There was no major non-cash transaction during 2005.
30. COMMITMENTS - GROUP
CAPITAL COMMITMENTS
Capital expenditure at the balance sheet date but not yet incurred
is as follows:
2005 2004
HK$'000 HK$'000
A satellite earth station
Contracted but not provided for - 15,561
Other investment projects
Authorised but not contracted for 10,140 5,486
Other assets
Contracted but not provided for 5,750 345
------ ------
15,890 21,392
====== ======
OPERATING LEASE COMMITMENTS - WHERE THE GROUP IS THE LESSEE
The Group leases certain of its office and residential premises
under non-cancellable operating leases. Leases are negotiated for an
average term of two to four years. The lease expenditure expensed in the
income statement during the years presented are disclosed in note 19.
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APPENDIX I FINANCIAL INFORMATION
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The future aggregate minimum lease payments under non-cancellable
operating leases are as follows:
2005 2004
HK$'000 HK$'000
Not later than 1 year 4,376 6,504
Later than 1 year and not later than 5 years 4,773 10,647
Later than 5 years - -
------- -------
9,149 17,151
======= =======
OPERATING LEASE COMMITMENTS - WHERE THE GROUP IS THE LESSOR
The Group leases its office premises under non-cancellable operating
leases. The lease is negotiable for four years. The lease income
recognised in the income statements during the year was HK$552,000 (2004:
HK$368,000).
The Group had contracted with the customer for the following future
minimum lease payments:
2005 2004
HK$'000 HK$'000
Within one year 552 552
One to two years 552 552
Two to three years 184 552
Three to four years - 184
------- -------
1,288 1,840
======= =======
31. RELATED-PARTY TRANSACTIONS
The Group is controlled by Bowenvale Limited (incorporated in British
Virgin Islands), which owns 68.9% of the Company's shares. The remaining 31.1%
of the shares are widely held. The ultimate parents of the Group are CITIC
Group (incorporated in China) and SES GLOBAL S.A. (incorporated in Luxembourg).
-63-
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APPENDIX I FINANCIAL INFORMATION
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The following transactions were carried out with related parties:
i) INCOME FROM PROVISION OF SATELLITE TRANSPONDER CAPACITY
The Group has entered into agreements for the provision of
transponder capacity to a subsidiary of CITIC, CITIC Guoan Information
Industry Company Limited. CITIC is a substantial shareholder of the
Company throughout the year.
During the year, the Group recognised income from provision of
satellite transponder capacity from its associate, SpeedCast.
2005 2004
HK$'000 HK$'000
CITIC Guoan Information Industry
Company Limited 2,461 3,101
SpeedCast Limited (an associate) 32,202 18,793
------- -------
34,663 21,894
======= =======
ii) AGENCY FEE
In addition, the Group has entered into an agreement with CITIC
Technology Company Limited, a subsidiary of CITIC, for collecting money
from China customers on behalf of the Group.
2005 2004
HK$'000 HK$'000
CITIC Technology Company Limited 723 686
======= =======
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APPENDIX I FINANCIAL INFORMATION
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iii) KEY MANAGEMENT COMPENSATION
Information for other management personnel is set out in note 20.
The Group made payments to SES GLOBAL and its subsidiary and a
subsidiary of CITIC for certain Non-executive Directors representing SES
GLOBAL and CITIC.
2005 2004
HK$'000 HK$'000
SES GLOBAL and its subsidiary 462 475
A subsidiary of CITIC 500 525
------- -------
962 1,000
======= =======
iv) LICENCE FEE
2005 2004
HK$'000 HK$'000
SES ASTRA S.A. - 49
======= =======
SES ASTRA S.A. is a wholly-owned subsidiary of SES GLOBAL. SES
GLOBAL was a substantial shareholder of the Company throughout the years
presented.
v) INTEREST INCOME ON LOAN RECEIVABLE FROM AN ASSOCIATE
2005 2004
HK$'000 HK$'000
SpeedCast Limited (an associate) 176 419
======= =======
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APPENDIX I FINANCIAL INFORMATION
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vi) YEAR-END BALANCES ARISING FROM THESE TRANSACTIONS
2005 2004
HK$'000 HK$'000
------- -------
Trade receivables from related parties (NOTE 12):
CITIC Guoan Information Industry
Company Limited 39 1,248
SpeedCast Limited (an associate) 7,639 3,326
------- -------
7,678 4,574
======= =======
Receivables from related parties (NOTE 12):
CITIC Technology Company Limited 15,503 14,628
======= =======
Payables to related parties:
CITIC Technology Company Limited 455 770
======= =======
vii) LOAN RECEIVABLE FROM AN ASSOCIATE
2005 2004
HK$'000 HK$'000
Loan receivable from SpeedCast Limited:
Beginning of the year 5,070 7,279
Loans advanced during the year - 1,301
Loan repayments received (5,070) (3,510)
------- -------
End of the year (NOTE 12) - 5,070
======= =======
The amount was secured, bearing interest at 6% per annum and was
fully repaid as at 31 December 2005.
The above transactions were entered into on commercial terms
determined and agreed by the Group and the relevant parties.
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APPENDIX I FINANCIAL INFORMATION
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SUPPLEMENTARY INFORMATION FOR ADR HOLDERS
The Group's financial statements are prepared in accordance with
accounting principles generally accepted in Hong Kong ("HK GAAP"), which
differ in certain significant respects from those in the United States
("US GAAP"). The significant differences relating principally to the
following items and the adjustments considered necessary to restate
profit for the year (net income) and shareholders' funds (shareholders'
equity) in accordance with US GAAP are shown in the tables set out below.
The following table summarises the effect on profit (net income)
of differences between HK GAAP and US GAAP for the year:
YEAR ENDED 31 DECEMBER
2005 2005 2004
US$'000 HK$'000 HK$'000
(NOTE 1)
Profit for the year (net income) as
reported under HK GAAP 46,947 366,184 431,216
US GAAP adjustments:
Amortisation of interest and
borrowing costs (A) (1,035) (8,072) (8,072)
Amortisation of goodwill (B) - - 221
Tax effect on reconciling items (C) 90 706 706
------- ------- -------
Profit for the year (net income)
under US GAAP 46,002 358,818 424,071
======= ======= =======
Basic earnings per share under
US GAAP US$0.12 HK$0.92 HK$1.09
Diluted earnings per share under
US GAAP US$0.12 HK$0.92 HK$1.09
Basic earnings per American
Depositary Share ("ADS") under
US GAAP (NOTE 2) US$1.18 HK$9.19 HK$10.86
Diluted earnings per American
Depositary Share ("ADS") under
US GAAP (NOTE 2) US$1.18 HK$9.19 HK$10.86
Shares used in computation of
basic earnings per share (in thousands) 390,266 390,266 390,266
Shares used in computation of
diluted earnings per share
(in thousands) 390,292 390,292 390,266
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APPENDIX I FINANCIAL INFORMATION
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The following table summarises the effect on shareholders' equity of
the differences between HK GAAP and US GAAP:
AS AT 31 DECEMBER
2005 2005 2004
US$'000 HK$'000 HK$'000
(NOTE 1)
Shareholders' equity as reported
under HK GAAP 526,178 4,104,188 3,874,597
US GAAP adjustments:
Capitalisation of interest and
borrowing costs (A) 15,767 122,980 122,980
Amortisation of interest and
borrowing costs (A) (10,336) (80,617) (72,545)
Amortisation of goodwill (B) 1,452 11,325 11,325
Impairment loss of goodwill (B) (1,424) (11,104) (11,104)
Tax effect of reconciling items (C) (1,004) (7,831) (8,537)
------- --------- ---------
Shareholders' equity under
US GAAP 530,633 4,138,941 3,916,716
======= ========= =========
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APPENDIX I FINANCIAL INFORMATION
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(a) CAPITALISATION OF INTEREST AND BORROWING COSTS
Under HK GAAP, interest on bank loans and related costs of obtaining
the loans (including costs incurred in connection with loan facilities)
taken out to finance construction of satellites is capitalised during the
period of construction. Under US GAAP, the interest cost incurred during
the period of construction that could have been avoided if the
construction of satellites had not been made, is capitalised. The interest
capitalised is computed by applying an average borrowing rate of
outstanding debt to the total amount of qualifying assets under
construction, not to exceed total interest costs incurred.
In addition, under US GAAP, certain related borrowing costs payable
to lenders are excluded from the amounts capitalised.
(b) AMORTISATION AND IMPAIRMENT LOSS OF GOODWILL
Under HK GAAP, HKFRS 3 requires all business combinations for which
the agreement date is on or after 1 January 2005 to be accounted for using
the purchase method. Goodwill acquired in a business combination will no
longer be amortised but will be subject to impairment tests at least
annually in accordance with HKAS 36. Upon the adoption of HKFRS 3, the net
carrying amount of goodwill carried on the balance sheet is frozen and
will be tested for impairment. Goodwill previously taken directly to
reserves will no longer be subject to impairment testing and will not be
recognised in the income statements when all or part of the business to
which the goodwill relates is disposed of. Accordingly, goodwill
previously taken directly to reserves will not impact the income
statements in the future upon the adoption of HKAS 36.
Under US GAAP, effective from 1 January 2002, goodwill is: (i) no
longer amortised, (ii) assigned to a reporting unit and (iii) tested for
impairment at least annually. Prior to 1 January 2002, goodwill was
amortised over its estimated useful life, not to exceed 40 years under US
GAAP.
(c) The amounts included in the reconciliation show the income tax
effects of the differences between HK GAAP and US GAAP as described
above.
NOTES:
1. The translations of Hong Kong dollar amounts into United
States dollars are for convenience only and have been made at
a rate of HK$7.8 to US$1, the approximate rate of exchange at
31 December 2005. Such translations should not be construed as
representations that the Hong Kong dollar amounts could be
converted into United States dollars at that or any other
rate.
2. One ADS is equivalent to 10 ordinary shares.
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APPENDIX I FINANCIAL INFORMATION
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3. INDEBTEDNESS
As at the close of business on 14 June 2006, being the Latest Practicable
Date for ascertaining information regarding this indebtedness statement prior
to the printing of this circular, the Group had no outstanding borrowings.
Apart from intra-group liabilities and normal trade payables, the Group
did not have outstanding at the close of business on 14 June 2006 any debt
securities issued and outstanding or agreed to be issued, mortgages, charges,
debentures or other loan capital or bank overdrafts, loans or other similar
indebtedness, or finance leases or hire purchase commitments, liabilities under
acceptances or acceptance credits or any guarantees or other material
contingent liabilities.
Since 14 June 2006, there has been no material change in the amount of
indebtedness of the Group. For the purpose of this indebtedness statement,
foreign currency amounts have been translated into Hong Kong dollars at the
approximate rates of exchange in effect at the close of business on the Latest
Practicable Date.
Details of the contingent liabilities of the Group as at 31 December 2005
are set out in Note 28 to the Company's audited consolidated financial
statements for the year ended 31 December 2005 on pages 60 and 61 of this
circular. Subsequently the Group received an assessment from the Indian Tax
Authority for the assessment year 2003/04 amounting to HK$43 million, which
increases the contingent liabilities of the Group from HK$146 million to HK$189
million. Save as disclosed, the Directors are not aware any material change in
the contingent liabilities at the date of this circular.
In addition to the above, as at the Latest Practicable Date, the Group had
no outstanding claims in respect of pending litigation as defined in the
paragraph headed "Litigation" of Appendix III to this circular.
4. WORKING CAPITAL
In the absence of unforeseen circumstances and taking into account the
Group's available funds on hand, the Directors are of the opinion that the
Group has sufficient working capital for its present requirements for at least
12 months from the date of publication of this circular.
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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
-------------------------------------------------------------------------------
1. UNAUDITED PRO FORMA STATEMENT OF THE ASSETS AND LIABILITIES OF THE GROUP
The following is the unaudited pro forma statement of the assets and
liabilities of the Group prepared to illustrate the effect of the acquisition
of AsiaSat 5 on the assets and liabilities of the Group as if the acquisition
had been completed on 31 December 2005. The unaudited pro forma statement of
the assets and liabilities of the Group was prepared based on the Group's
unadjusted statement of assets and liabilities as at 31 December 2005 extracted
from the audited consolidated balance sheet of the Group as at 31 December
2005, as set out in the Annual Report of the Group, after making pro forma
adjustments as set out in note 2 below.
This unaudited pro forma statement of the assets and liabilities of the
Group has been prepared for illustrative purposes only and because of its
hypothetical nature, it may not give a true picture of the financial position
of the Group as at 31 December 2005 or at any future date.
UNADJUSTED
STATEMENT OF
ASSETS AND PRO FORMA
LIABILITIES OF UNAUDITED
THE GROUP STATEMENT OF
AS AT PRO FORMA ASSETS AND
31 DECEMBER 2005 ADJUSTMENT LIABILITIES
HK$'000 HK$'000 HK$'000
(NOTE 1) (NOTE 2)
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 2,620,911 1,404,000 4,024,911
Leasehold land and land use rights 24,199 - 24,199
Intangible assets 1,339 - 1,339
Unbilled receivable 174,563 - 174,563
Interests in associates 14,294 - 14,294
Amount paid to tax authority 93,666 - 93,666
--------- --------- ---------
2,928,972 1,404,000 4,332,972
--------- --------- ---------
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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
-------------------------------------------------------------------------------
UNADJUSTED
STATEMENT OF
ASSETS AND PRO FORMA
LIABILITIES OF UNAUDITED
THE GROUP STATEMENT OF
AS AT PRO FORMA ASSETS AND
31 DECEMBER 2005 ADJUSTMENT LIABILITIES
HK$'000 HK$'000 HK$'000
(NOTE 1) (NOTE 2)
CURRENT ASSETS
Inventories 434 - 434
Trade and other receivables 118,598 - 118,598
Other loan receivable - - -
Cash and cash equivalents 1,635,526 (1,404,000) 231,526
--------- ---------- ---------
1,754,558 (1,404,000) 350,558
--------- ---------- ---------
CURRENT LIABILITIES
Construction payables 3,096 - 3,096
Other payables and accrued expenses 64,118 - 64,118
Deferred revenue 151,982 - 151,982
Current income tax liabilities 74,180 - 74,180
Dividend payable 121 - 121
--------- ---------- ---------
293,497 - 293,497
--------- ---------- ---------
NET CURRENT ASSETS 1,461,061 (1,404,000) 57,061
--------- ---------- ---------
TOTAL ASSETS LESS CURRENT LIABILITIES 4,390,033 - 4,390,033
--------- ---------- ---------
NON-CURRENT LIABILITIES
Deferred income tax liabilities 192,654 - 192,654
Deferred revenue 87,654 - 87,654
--------- ---------- ---------
280,308 - 280,308
--------- ---------- ---------
NET ASSETS 4,109,725 - 4,109,725
========= ========== ===========
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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
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Notes to the unaudited pro forma statement of the assets and liabilities:
1. The unadjusted statement of assets and liabilities of the Group are
extracted from the audited consolidated balance sheet of the Group as at
31 December 2005.
2. The adjustment represents the estimated aggregate cash consideration of
HK$1,404 million for the commissioning of AsiaSat 5, including the
contract price under the Launch Contract and the Construction Agreement
plus other costs directly attributable to the commissioning of AsiaSat 5.
3. For the purpose of the pro forma statement of the assets and liabilities,
the balances stated in United States dollars ("US$") have been translated
to Hong Kong dollars ("HK$") at an exchange rate of US$1 = HK$7.8.
4. No adjustment has been made to reflect any operating results or other
events subsequent to 31 December 2005. Also, no adjustment has been made
to reflect any future capital expenditure.
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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
-------------------------------------------------------------------------------
2. LETTER ON UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE GROUP
The following is the text of a letter, received from the auditors of the
Company, PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, in
respect of the unaudited pro forma financial information for the purpose of its
incorporation in this circular.
[GRAPHIC OMITTED]
[LOGO -- PRICEWATERHOUSECOOPERS]
-------------------------------------------------------------------------------
[CHINESE CHARACTERS] | PricewaterhouseCoopers
| 22/F. Prince's Building
| Central, Hong Kong
The Directors
Asia Satellite Telecommunications Holdings Limited
20 June 2006
Dear Sirs,
We report on the unaudited pro forma financial information of Asia
Satellite Telecommunications Holdings Limited (the "Company") and its
subsidiaries (hereinafter collectively referred to as the "Group") set out on
pages 71 to 73 under the heading of "Unaudited Pro Forma Financial Information"
(the "unaudited pro forma financial information") in Appendix II of the
Company's circular dated 20 June 2006, in connection with the commissioning of
AsiaSat 5 by the Company (the "Circular"). The unaudited pro forma financial
information has been prepared by the Directors of the Company, for illustrative
purposes only, to provide information about how the commissioning of AsiaSat 5
might have affected the relevant financial information of the Group. The basis
of preparation of the unaudited pro forma financial information is set out on
pages 71 to 73 of the Circular.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS OF THE COMPANY AND AUDITORS
It is the responsibility solely of the Directors of the Company to prepare
the unaudited pro forma financial information in accordance with paragraph 4.29
of the Rules Governing the Listing of Securities on The Stock Exchange of Hong
Kong Limited (the "Listing Rules") and Accounting Guideline 7 "Preparation of
Pro Forma Financial Information for Inclusion in Investment Circulars" issued
by the Hong Kong Institute of Certified Public Accountants (the "HKICPA").
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APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
-------------------------------------------------------------------------------
It is our responsibility to form an opinion, as required by paragraph
4.29(7) of the Listing Rules, on the unaudited pro forma financial information
and to report our opinion to you. We do not accept any responsibility for any
reports previously given by us on any financial information used in the
compilation of the unaudited pro forma financial information beyond that owed
to those to whom those reports were addressed by us at the dates of their
issue.
BASIS OF OPINION
We conducted our engagement in accordance with Hong Kong Standard on
Investment Circular Reporting Engagements 300 "Accountants' Reports on Pro
Forma Financial Information in Investment Circulars" issued by the HKICPA. Our
work, which involved no independent examination of any of the underlying
financial information, consisted primarily of comparing the Group's unadjusted
statement of assets and liabilities as at 31 December 2005 with the audited
consolidated balance sheet of the Group as at 31 December 2005, considering the
evidence supporting the adjustments and discussing the unaudited pro forma
financial information with the Directors of the Company.
We planned and performed our work so as to obtain the information and
explanations we considered necessary in order to provide us with sufficient
evidence to give reasonable assurance that the unaudited pro forma financial
information has been properly compiled by the Directors of the Company on the
basis stated, that such basis is consistent with the accounting policies of the
Group and that the adjustments are appropriate for the purposes of the
unaudited pro forma financial information as disclosed pursuant to paragraph
4.29(1) of the Listing Rules.
The unaudited pro forma financial information is for illustrative purposes
only, based on the judgements and assumptions of the Directors of the Company,
and because of its hypothetical nature, it does not provide any assurance or
indication that any event will take place in the future and may not be
indicative of the financial position of the Group as at 31 December 2005 or any
future date.
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OPINION
In our opinion:
(a) the unaudited pro forma financial information has been properly
compiled by the Directors of the Company on the basis stated;
(b) such basis is consistent with the accounting policies of the Group;
and
(c) the adjustments are appropriate for the purposes of the unaudited
pro forma financial information as disclosed pursuant to paragraph
4.29(1) of the Listing Rules.
Yours faithfully,
PRICEWATERHOUSECOOPERS
CERTIFIED PUBLIC ACCOUNTANTS
Hong Kong
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1. RESPONSIBILITY STATEMENT
This circular includes particulars given in compliance with the Listing
Rules for the purpose of giving information with regard to the Company. The
Directors collectively and individually accept full responsibility for the
accuracy of the information contained in this circular and confirm, having made
all reasonable enquiries that to the best of their knowledge and belief there
are no other facts the omission of which would make any statement herein
misleading.
2. DISCLOSURE OF INTERESTS
(a) INTEREST OF DIRECTORS AND CHIEF EXECUTIVES IN SECURITIES
Save as disclosed below, as at the Latest Practicable Date, none of
the Directors and the chief executive of the Company had any interest or
short position in the shares, underlying shares or debentures of the
Company or its associated corporations (within the meaning of the SFO),
which (a) were required to be notified to the Company and the Stock
Exchange pursuant to the Divisions 7 and 8 of Part XV of the SFO
(including interests and short positions which they have taken or deemed
to have taken under such provisions of the SFO), or (b) were required
pursuant to section 352 of the SFO to be entered in the register referred
to therein, or (c) were required pursuant to the Model Code for Securities
Transactions by Directors of Listed Companies to be notified to the
Company and the Stock Exchange.
(i) SHARES IN THE COMPANY
NUMBER OF
LONG OR ORDINARY SHARES PERCENTAGE OF
NAME OF DIRECTOR CAPACITY SHORT POSITION IN THE COMPANY ISSUED CAPITAL
Peter JACKSON Beneficial owner Long position 163,500 0.042%
William WADE Beneficial owner Long position 5,000 0.001%
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(ii) SHARE OPTIONS IN THE COMPANY
NUMBER OF OPTIONS
---------------------------------------------------------
EXERCISED/
CANCELLED/
HELD AT GRANTED LAPSED HELD AT PERCENTAGE
1 JAN DURING DURING 31 DEC OF ISSUED EXERCISE EXERCISABLE EXERCISABLE
DIRECTORS 2005 THE YEAR THE YEAR 2005 CAPITAL PRICE GRANT DATE FROM UNTIL
HK$
Romain BAUSCH 100,000 - - 100,000 0.026% 14.35 4 Feb 2002 4 Feb 2004 3 Feb 2012
Edward CHEN 50,000 - - 50,000 0.013% 14.35 4 Feb 2002 4 Feb 2004 3 Feb 2012
DING Yu Cheng 50,000 - - 50,000 0.013% 14.35 4 Feb 2002 4 Feb 2004 3 Feb 2012
R Donald FULLERTON 75,000 - - 75,000 0.019% 14.35 4 Feb 2002 4 Feb 2004 3 Feb 2012
JU Wei Min 50,000 - - 50,000 0.013% 14.35 4 Feb 2002 4 Feb 2004 3 Feb 2012
MI Zeng Xin 100,000 - - 100,000 0.026% 14.35 4 Feb 2002 4 Feb 2004 3 Feb 2012
Robert SZE 75,000 - - 75,000 0.019% 14.35 4 Feb 2002 4 Feb 2004 3 Feb 2012
LI Tong Zhou 50,000 - (50,000) - Nil 14.35 4 Feb 2002 4 Feb 2004 3 Feb 2012
Jurgen SCHULTE 50,000 - (50,000) - Nil 14.35 4 Feb 2002 4 Feb 2004 3 Feb 2012
Peter JACKSON 335,000 - - 335,000 17.48 4 Feb 2002 4 Feb 2002 25 Nov 2006
150,000 - - 150,000 17.48 4 Feb 2002 1 Oct 2002 30 Sep 2009
430,000 - - 430,000 0.234% 14.35 4 Feb 2002 4 Feb 2004 3 Feb 2012
William WADE 316,000 - - 316,000 17.48 4 Feb 2002 4 Feb 2002 25 Nov 2006
114,000 - - 114,000 17.48 4 Feb 2002 1 Oct 2002 30 Sep 2009
330,000 - - 330,000 0.195% 14.35 4 Feb 2002 4 Feb 2004 3 Feb 2012
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(b) SUBSTANTIAL SHAREHOLDERS
Save as disclosed below, so far as was known to any Director or
chief executive of the Company, no person (other than a Director or chief
executive of the Company or their respective associates), as at the Latest
Practicable Date, had an interest or short position in the shares or
underlying shares of the Company which would fall to be disclosed to the
Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.
SHARES IN THE COMPANY
PERCENTAGE
NUMBER OF LONG OR OF ISSUED
NAME ORDINARY SHARES SHORT POSITION SHARE CAPITAL
Bowenvale Limited 268,905,000 Long position 68.90%
Able Star Associates Limited (1) 268,905,000 Long position 68.90%
CITIC Group (1) 268,905,000 Long position 68.90%
SES GLOBAL Holding AG (2) 268,905,000 Long position 68.90%
SES GLOBAL S.A.(2) 268,905,000 Long position 68.90%
Aberdeen Asset Management
Asia Limited 21,188,000 Long position 5.43%
NOTES:
(1) Able Star Associates Limited ("Able Star") controls 50% of
the voting rights of Bowenvale Limited ("Bowenvale"). Able
Star is wholly owned by CITIC Asia Limited ("CITIC Asia"),
which in turn is wholly owned by CITIC Projects Management
(HK) Limited ("CITIC Projects"), which is a wholly owned
subsidiary of CITIC Group ("CITIC"). Accordingly, Able
Star, CITIC Asia, CITIC Projects and CITIC are deemed to
be interested in the 268,905,000 shares in the Company
held by Bowenvale.
(2) SES GLOBAL Holding AG ("SES GLOBAL Holding") controls 50%
of the voting rights of Bowenvale. SES GLOBAL Holding is
wholly owned by SES GLOBAL ASIA S.A., which in turn is a
wholly owned subsidiary of SES GLOBAL S.A. ("SES GLOBAL").
Accordingly, SES GLOBAL Holding, SES GLOBAL ASIA S.A. and
SES GLOBAL are deemed to be interested in the 268,905,000
shares in the Company by Bowenvale.
As at the Latest Practicable Date, save as disclosed above, none of
the Directors was a director or employee of a company which had an
interest or short position in the shares and underlying shares of the
Company which would fall to be disclosed to the Company under the
provisions of Divisions 2 and 3 of Part XV of the SFO.
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SHARES IN OTHER MEMBERS OF THE GROUP
As at the Latest Practicable Date, so far as was known to any
Director or chief executive of the Company, no person (other than a
Director or chief executive of the Company or their respective
associates) was, directly or indirectly, interested in ten per cent
or more of the nominal value of any class of share capital carrying
rights to vote in all circumstances at general meetings of any other
member of the Group.
(c) DIRECTORS' INTERESTS IN COMPETING BUSINESSES
Romain BAUSCH, Robert BEDNAREK, Mark RIGOLLE and Cynthia DICKINS are
senior executives of SES GLOBAL S.A. ("SES"), a substantial shareholder of
the Company. SES is the world's leading satellite group. SES comprises of
a network of satellite operators located across all continents. SES
competes and is likely to compete either directly or indirectly with the
business of the Company as they provide transponder capacity to certain
Asia Pacific countries and areas that are also served by the Company.
MI Zeng Xin and JU Wei Min are senior executives of CITIC, a
substantial shareholder of the Company. CITIC has a substantial interest
in Sino Satellite Communications Company Limited ("SINOSAT"). It is a
state owned telecommunications satellite operator with its headquarters
stationed in Beijing, China. SINOSAT competes and is likely to compete
either directly or indirectly with the business of the Company as they
provide transponder capacity to certain Asia Pacific countries and areas
particularly in China that are also served by the Company.
(d) SERVICE CONTRACTS
There is no existing or proposed service contracts between any of
the Directors and any member of the Group, other than contracts expiring
or determinable by the employer within one year without payment of
compensation (other than statutory compensation).
(e) SAVE AS DISCLOSED IN THIS CIRCULAR:
(i) none of the Directors has had any direct or indirect interest
in any assets which have since 31 December 2005 (being the
date to which the latest published audited accounts of the
Company were made up) been acquired or disposed of by or
leased to or are proposed to be acquired or disposed of by or
leased to any member of the Group; and
(ii) no Director is materially interested in any contract or
arrangement subsisting at the date of this circular which is
significant in relation to the business of the Group.
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3. MATERIAL ADVERSE CHANGE
The Directors confirm that, as at the Latest Practicable Date, the
Directors are not aware of any material adverse change in the financial or
trading position of the Group since 31 December 2005, being the date to which
the latest published audited accounts of the Company were made up.
4. LITIGATION
As at the Latest Practicable Date, neither the Company nor any of its
subsidiaries is engaged in any litigation or claim of material importance and
the Directors are not aware of any litigation or claim of material importance
pending or threatened against the Company or any of its subsidiaries.
5. MATERIAL CONTRACTS
The following contracts (not being contracts entered into in the ordinary
course of business) have been entered into by members of the Group within the
two years preceding the date of this circular and are or may be material:-
(a) the Construction Agreement dated 28 April 2006 entered into by
AsiaSat and the Construction Contractor for the construction of
AsiaSat 5, details of which are set out in the section headed
"Letter from the Board" of this circular; and
(b) the Launch Contract dated 8 May 2006 entered into between AsiaSat
and the Launch Contractor for the launch of AsiaSat 5, details of
which are set out in the section headed "Letter from the Board" of
this circular.
6. EXPERTS AND CONSENT
(a) The qualifications of the expert who has given its report contained
in this circular are set out as follows:
NAME QUALIFICATION
PricewaterhouseCoopers Certified Public Accountants
(b) PricewaterhouseCoopers has confirmed that it has no shareholding in
any member of the Group or the right (whether legally enforceable or
not) to subscribe for or to nominate persons to subscribe for
securities in any member of the Group.
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(c) PricewaterhouseCoopers has confirmed that it does not have any
interest, direct or indirect, in any assets which have been acquired
or disposed of by or leased to any member of the Group, or which are
proposed to be acquired or disposed of by or leased to any member of
the Group since 31 December 2005, being the date to which the latest
published audited accounts of the Company were made up.
(d) PricewaterhouseCoopers has given and has not withdrawn its written
consent to the issue of this circular with the inclusion of its
letter and references to its name in the form and context in which
it appears.
7. DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents will be available for inspection of the
offices at 17th Floor, The Lee Gardens, 33 Hysan Avenue, Causeway Bay, Hong
Kong during normal business hours up to and including 4 July 2006:
(a) the Bye-laws of the Company;
(b) the audited consolidated financial statements of the Company and its
subsidiaries for the two financial years ended 31 December 2004 and
2005;
(c) the letter from PricewaterhouseCoopers on the unaudited pro forma
financial information set out in Appendix II to this circular,
(d) each of the material contracts referred to in the paragraph headed
"Material Contracts" of this Appendix; and
(e) this circular.
8. MISCELLANEOUS
(a) The company secretary, and the qualified accountant, of the Company
is Denis Lau, who is a fellow member of the Association of Chartered
Certified Accountants in the United Kingdom and the Hong Kong
Institute of Certified Public Accountants. He is also an associate
member of the Institute of Chartered Secretaries and Administrators
in the United Kingdom.
(b) The registered office of the Company is Canon's Court, 22 Victoria
Street, Hamilton HM12, Bermuda.
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(c) The head office of the Company is 17th Floor, The Lee Gardens, 33
Hysan Avenue, Causeway Bay, Hong Kong.
(d) The principal share registrars of the Company are Butterfield Fund
Services (Bermuda) Limited, whose registered office is at Rosebank
Centre, 11 Bermudiana Road, Hamilton, Bermuda and the Hong Kong
branch registrars and transfer office of the Company are
Computershare Hong Kong Investor Services Limited, whose registered
office is at Hopewell Centre, 46th Floor, 183 Queen's Road East,
Wanchai, Hong Kong.
(e) The English text of this circular shall prevail over the Chinese
text.
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