ATS ATS Corporation

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 20-F

o		REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) or (g) OF THE SECURITIES EXCHANGE ACT OF 1934, or

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2007

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934, or

o		SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934

Date of event requiring this shell company report                     

Commission file number 001-14564

APT SATELLITE HOLDINGS LIMITED

(Exact Name of the Registrant Specified in its Charter)

APT SATELLITE HOLDINGS LIMITED

(Translation of Registrant’s Name into English)

Bermuda

(Jurisdiction of Incorporation or Organization)

22 Dai Kwai Street, Tai Po Industrial Estate, Tai Po, New Territories, Hong Kong

(Address of Principal Executive Offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title		Name of Each Exchange on Which Quoted
Ordinary Shares American Depositary Shares		The Stock Exchange of Hong Kong Limited New York Stock Exchange

Securities registered or to be registered pursuant to Section 12(g) of the Act:

NONE

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

NONE

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

413,265,000 Ordinary Shares as of December 31, 2007.

Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.

YES o                       NO  þ  

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

YES  o                       NO  þ  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES  þ                       NO  o  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

Large Accelerated Filer  o                      Accelerated Filer  o                       Non-accelerated filer þ

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing.

U.S. GAAP o

International Financial Reporting Standards as issued by the International Accounting Standards Board þ

Other o

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17  o                       Item 18  o  

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o                        NO  þ  

 

 

TABLE OF CONTENTS

		Page
GLOSSARY OF CERTAIN TERMS			iii
Special Note on Our Financial Information and Certain Statistical Information Presented in This Annual Report			8
Item 1. Identity of Directors, Senior Management, and Advisers			9
Item 2. Offer Statistics and Expected Timetable			9
Item 3. Key Information			9
Selected Consolidated Financial Information			9
Risk Factors			11
Item 4. Information on the Company			19
History and Development of the Company			19
Business Overview			19
Industry and Market Overview			21
Broadcasting and Telecommunications Markets in Asia			22
Customers and Services			23
Operation of the APSTAR System			26
Competition			32
Regulation			34
Organizational Structure			36
Property, Plant and Equipment			37
Item 4A. Unresolved Staff Comments			37
Item 5. Operating and Financial Review and Prospects			37
Overview			37
Application of Critical Accounting Policies			40
Changes in accounting policies			42
Commitments and Contingencies			42
Off-Balance Sheet Arrangements			43
Results of Operations			43
Liquidity and Capital Resources			45
Forward Looking Statements			46
Other			47

		Page
Item 6. Directors, Senior Management and Employees			48
Compensation			54
Board Practices			56
Service Agreements			57
Employees			59
Share Option Schemes			59
Share Ownership			59
Item 7. Major Shareholders and Related Party Transactions			60
Major Shareholders			60
Related Party Transactions			62
Item 8. Financial Information			63
Item 9. The Offer and Listing			64
Item 10. Additional Information			65
Material Contracts			70
Exchange Controls and Other Limitations Affecting Security Holders			70
Taxation			71
Item 11. Quantitative and Qualitative Disclosures about Market Risk			76
Interest Rate Risk			76
Exchange Rate Sensitivity			76
Limitations			76
Item 12. Description of Securities Other Than Equity Securities			76
Item 13. Defaults, Dividend Arrearages, and Delinquencies			77
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds			77
Item 15. Controls and Procedures			77
Item 16A. Audit Committee Financial Expert			77
Item 16B. Code of Ethics			78
Item 16C. Principal Accountant Fees and Services			78
Item 16D. Exemption from the Listing Standards for Audit Committees			78
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers			78
Item 17. Financial Statements			79
Item 18. Financial Statements			79
Item 19. Exhibits			79

GLOSSARY OF CERTAIN TERMS

In this Form 20-F, unless the context otherwise requires, the following expressions have the following meanings:

ADS		An American Depositary Share representing ownership of eight shares of the Company’s Ordinary Shares, evidenced by American Depositary Receipts.
analog		A method of storing, processing or transmitting information through a continuously varied (rather than pulsed) signal.
APCN2		Asia Pacific Cable Network 2, a submarine cable project under a consortium of telecommunication companies. The project provides additional telecom capacity for designated Asian cities.
APSTAR System		The Company’s current and future satellites, including APSTAR I, APSTAR IA, APSTAR IIR, APSTAR V, APSTAR VI , and any other satellites to be launched by the Company in the future.
APT/APT HK		APT Satellite Company Limited, a company incorporated in the HKSAR and a wholly-owned indirect subsidiary of the Company.
APT BVI		APT Satellite Investment Company Limited, a company incorporated in the British Virgin Islands with limited liability and a wholly-owned subsidiary of the Company.
APT Group		The Company and its subsidiaries and affiliates.
APT International		APT Satellite International Company Limited, a company incorporated in the British Virgin Islands with limited liability and a shareholder of the Company.
APT’s Leases		The Lease Agreement as supplemented and modified by the Cancelled Agreement for Lease, the Deed of Cancellation, the Second Supplemental Agreement, the Fifth Modification of Lease and the Fifth Modification Proposal.
APT Telecom		APT Satellite Telecommunications Limited, a jointly controlled entity of the Company which is incorporated in the HKSAR.
APT Telecom Lease		The agreement for lease dated March 12, 2001 made between APT Telecom and Science and Technology Parks Corporation in respect of the Remaining Portion of Section E of Tai Po Town Lot No. 13 and Extension Thereto, Hong Kong, as modified by the Modification of Agreement for Lease and Modification of Proposal Form.
APT TS		APT Telecom Services Limited, a company incorporated in the HKSAR and a wholly-owned subsidiary of APT.
bandwidth		A range of frequencies occupied by a modulated carrier or the range of frequencies which can be transmitted through a communications system. Bandwidth is one measure of the information carrying capacity of a transponder. The wider the bandwidth, the more information can be transmitted.
Bank loan		On December 16, 2002, APT Satellite Company Limited entered into a secured term facility of US$240 million. It was amended by a Deed of Amendment and Restatement on October 27, 2004 and a Second Deed of Amendment and Restatement on May 18, 2005.
Basic Law		The Basic Law of the Hong Kong Special Administrative Region (HKSAR) of the People’s Republic of China, effective as of July 1, 1997, is the constitutional document for the HKSAR.
beam		The directed electromagnetic rays emanating from a spacecraft or ground station. With respect to satellites, it typically refers to aggregates of these rays such as a China (coverage) beam or global (coverage) beam.
Cancelled Agreement for Lease		The agreement for lease dated June 19, 2000 made between APT and the Science and Technology Parks Corporation in respect of the original Remaining Portion of Section E of Tai Po Town Lot No. 13 and Extensions Thereto.
C2C		C2C Pte. Ltd., a cable network provider under a consortium of telecommunication companies led by Singapore Telecommunications Ltd.

CCTV		China Central Television, a PRC state-owned enterprise under the supervision and control of the SARFT.
CITV		China International Television Corporation, a PRC state-owned enterprise under the supervision and control of the SARFT.
CLTC		China Satellite Launch and Tracking Control General, a PRC state-owned enterprise subject to the supervision and control of the Defense Commission.
C-band		In satellite communications (FSS) used to refer to downlink frequencies between 3.4 GHz and 4.2 GHz and uplink frequencies between 5.85 GHz and 7.075 GHz. It is often referred to as 4/6 GHz.
cellular		Domestic public cellular radio telecommunications service. Cellular systems are based on multiple base stations, or ‘‘cells,’’ that permit efficient frequency reuse and on software that permits the system to band mobile calls from cell to cell as subscribers move through the cellular service area.
China Aerospace		China Aerospace Science & Technology Corporation (formerly China Aerospace Corporation or the PRC Ministry of Aerospace Industry), a PRC state-owned enterprise engaged in the research, design, testing and manufacturing of launch vehicles and satellites.
ChinaSat		China Telecommunications Broadcast Satellite Corporation, a PRC state-owned enterprise under the supervision of the SASAC
DBS		Direct broadcast satellite, a satellite capable of transmitting direct-to-home television programming.
dBW		Decibel relative to one watt, a measure of a satellite’s power (e.g., 50 dBW is 10 times more powerful than 40 dBW).
Deed of Cancellation		The deed of cancellation and surrender dated March 12, 2001 in respect of cancellation of the Cancelled Agreement for Lease made between APT and Science and Technology Parks Corporation.
digital		Referring to a method of storing, processing, or transmitting information through a pulsed (rather than continuously varied) signal.
downlink		The receiving portion of a satellite circuit extending from the satellite to the earth.
Director(s)		Director(s) of the Company, including all executive director(s), all non-executive director(s) and independent non-executive directors.
earth station		The antennae, receivers, transmitters and other equipment needed on the ground to transmit and receive satellite communications signals.
EBITDA		Net income before taking into account: (i) interest expenses; tax; any share of the profit of any associated company or undertaking, except for dividends received in cash by any member of the Company; any share of the non-cash loss of any investment company of other associated company or undertakings; and extraordinary and exceptional items; and (ii) without double-counting, after adding back all amounts provided for as depreciation, amortization, impairment assets value or other provision not involving an outflow of cash.
EIRP		Equivalent isotropic radiated power, the product of the power supplied to the antenna and the antenna gain in a given direction relative to an isotropic antenna (absolute or isotropic gain).
Eligible Employee(s)		Employee(s) (whether full time or part time employee(s), including any executive director but not any non-executive director) of the Company or its subsidiaries.
Eligible Grantee(s)		Persons who are eligible to accept the offer of the grant of an Option in accordance with the Scheme 2001 or Scheme 2002, as the context requires.
FCL		Fixed Carrier Licence issued by OFTA for the provision of Facility-based External Telecommunication Services.

Fifth Modification of Lease		The fifth modification of agreement for lease dated May 31, 2002 made between APT and Science and Technology Parks Corporation in respect of modification of purpose of the lease contained in the Lease Agreement.
Fifth Modification Proposal		The fifth modification to proposal form dated May 31, 2002 made between APT and Science and Technology Parks Corporation in respect of modification of purpose in the proposal form in relation to the Lease Agreement.
footprint		The geographic area covered by a satellite’s downlink or uplink beams, the outer edge of which is generally defined as that area where the quality of communication degrades below an acceptable commercial level due to the spacecraft antenna pattern, power of the signal or curvature of the earth.
4 th G		an abbreviation for Fourth-Generation Communications System, is a term used to describe the next step in wireless communications. A 4G system will be able to provide a comprehensive IP solution where voice, data and streamed multimedia can be given to users on an “Anytime, Anywhere” basis, and at higher data rates than previous generations.
frequency		Number of repetitions in a given time. Typically it refers to the rate of variation per second of the carrier wave or modulating signal. Communications satellite RF signals are typically in the GHz frequency range. See C-band and Ku-band.
FTNS/Fixed Carrier Licence		Fixed telecommunications network services, presently known as Fixed Carrier Licence.
GEO		Geostationary orbit.
geostationary orbit		A geosynchronous orbit in which the orbital inclination and eccentricity of a satellite are zero such that the satellite appears to hover over a fixed position on the earth’s equator.
Global Offering		The Company’s initial world-wide public offering of Ordinary Shares and American Depositary Shares, each representing eight shares of the Company’s Ordinary Shares dated December 13, 1996.
HDTV		High definition television.
HKFRS		Hong Kong Financial Reporting Standards, which collectively includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations issued by the Hong Kong Institute of Certified Public Accountants, and Hong Kong GAAP.
HKSAR		Hong Kong Special Administrative Region of the PRC.
Hong Kong GAAP		Accounting principles generally accepted in Hong Kong.
IAS		International Accounting Standards.
IASB		International Accounting Standards Board.
IFRS		International Financial Reporting Standards.
Interpretations		Interpretations issued by the Hong Kong Institute of Certified Public Accountants.
ISDN		Integrated services data network.
ITU or International Telecommunication Union		The International Telecommunication Union, the telecommunications agency of the United Nations, established to provide standardized communications procedures and practices, including frequency allocation and radio regulations, on a world-wide basis.
Joint Declaration		The Joint Declaration of the Government of the United Kingdom and the Government of the PRC on the Question of Hong Kong with Annexes signed on 19 December 1984.
Ku-band		In satellite communications (FSS), it is used to refer to downlink frequencies between 10.7 GHz and 12.75 GHz and uplink frequencies between 13.75 GHz and 14.8 GHz. Often it is referred to as 11/14 or 12/14 GHz.

Lease Agreements		The agreement for lease dated February 26, 1993, made between APT and the Science and Technology Parks Corporation in respect of Subsection 1 of Section E of Tai Po Town Lot No. 13 and Extension Thereto, Hong Kong on which APT’s satellite control center is developed.
LEO		Low-earth orbit of up to 1,500 miles above the earth.
Master Registry		The Master International Frequency Register of the ITU, which lists frequency assignments of orbital slots upon notification.
MEO		Mid-earth orbit of up to 18,000 miles above the earth.
megahertz (MHz)		A measure of frequency, 1 million cycles per second.
microwave		Radio frequency carrier waves with wavelengths of less than one meter- frequencies above 300 MHz.
MII		formerly the Ministry of Information Industry of the PRC.
mobile satellite services		Services transmitted via satellites to provide mobile telephone, paging, messaging, facsimile, data, and position location services directly to users.
OFTA		The Office of the Telecommunications Authority of Hong Kong or, where the context requires, the Telecommunications Authority of Hong Kong.
operational life		The time for which a satellite is capable of operating in its allotted position. The expected end of a satellite’s in-orbit operational life is mainly based on the period during which the satellite’s on-board fuel permits proper station-keeping maneuvers for the satellite.
Option(s)		Options granted to the Eligible Grantees under the Scheme 2001 or to the Participants under the Scheme 2002, as the context requires.
paging		A service designed to deliver a message to a person whose location is unknown; messages may be received via an alphanumeric or character display or small speaker.
Participant(s)		Any person belonging to any of the following classes of persons: (a) any Eligible Employee; and (b) any non-executive directors (including independent non-executive directors) of the Company or any of its Subsidiaries, in accordance with the Scheme 2002.
PRC		The People’s Republic of China.
PSTN		Public switched telephone networks which comprise the network infrastructure necessary for providing basic telephone services.
radio frequency		A frequency that is higher than the audio frequencies but below the infrared frequencies, usually above 20 KHz.
Radio Regulations		Radio Regulations of the ITU.
Radio Regulatory Department		Radio Regulatory Department of the MII.
Radiocommunication Bureau		Radiocommunication Bureau of the ITU.
SARFT		China State Administration of Radio Film and Television, a government office responsible for the management of the provision of Radio, Film and Television in the PRC.
SASAC		State-owned Assets Supervision and Administration Commission of the State Council of the PRC.
Satellite Control Center		The earth station of the APT Group for the TT&C of APSTAR Systems and the provision of broadcasting transmission and telecommunication services. It is located in Tai Po, New Territories, Hong Kong.

Science and Technology Parks Corporation		Hong Kong Science and Technology Parks Corporation (formerly known as Hong Kong Industrial Science and Technology Parks Corporation), the lessor of certain Lease Agreements with the Company.
scrambled programming		Programming signals which require a decoder for purposes of viewing.
Second Supplemental Agreement		The second supplemental agreement for lease and grant of second extension area dated March 12, 2001 made between APT and the Science and Technology Parks Corporation in respect of Subsection 3 of Section E of Tai Po Town Lot No. 13 and Extensions Thereto.
signal		A physical, time-dependent energy value used for the purpose of conveying information through a transmission line.
switch		A device that opens or closes circuits or selects the paths or circuits to be used for transmission of information; switching is the process of interconnecting circuits to form a transmission path between users.
teledensity		Telephone access lines per 100 persons.
telemetry		Radio transmission of coded or analog data from a satellite to a ground station.
telephony		Science of construction and operation of telephones and telephonic systems.
transponder		A microwave repeater which provides a discrete path to receive communications signals, translate and amplify such signals and retransmit them to earth or another satellite.
TT&C		Telemetry, tracking and command.
TT&C Station		Telemetry, tracking and command station, a land-based facility that monitors and controls the positioning, altitude and status of a satellite in orbit.
uplink		In satellite communications, the signal from the earth station to the space station (satellite).
U.S. GAAP		Accounting principles generally accepted in the United States.
VSAT		Very small aperture terminal.
WiMax		The Worldwide Interoperability for Microwave Access, is a telecommunications technology aimed at providing wireless data over long distances in a variety of ways, from point-to-point links to full mobile cellular type access.

Special Note on Our Financial Information and

Certain Statistical Information Presented in This Annual Report

Our consolidated financial statements as of and for the years ended December 31, 2006 and 2007 included in this annual report on Form 20-F have been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board, or the IASB. These financial statements also comply with Hong Kong Financial Reporting Standards, or HKFRS, which collective term includes all applicable individual Hong Kong Financial Reporting Standards, Hong Kong Accounting Standards and Interpretations issued by the Hong Kong Institute of Certified Public Accountants and accounting principles generally accepted in Hong Kong, or Hong Kong GAAP. HKFRS is consistent with IFRS in all material respects. Pursuant to the requirement under IFRS 1: First-Time Adoption of International Financial Reporting Standards, or IFRS 1, the date of our transition to IFRS was determined to be January 1, 2006, which is the beginning of the earliest period for which we present full comparative information in our consolidated financial statements. With due regard to our accounting policies in previous periods and the requirements of IFRS 1, we have concluded that no adjustments were required to the amounts reported under HKFRS as at January 1, 2006 or in respect of the year ended December 31, 2006. As such, we make an explicit and unreserved statement of compliance with IFRS, as issued by the IASB, with respect to our consolidated financial statements as of and for the years ended December 31, 2006 and 2007 included in this annual report on Form 20-F.

In accordance with rule amendments adopted by the U.S. Securities and Exchange Commission, or the SEC, which became effective on March 4, 2008, we are not required to provide a reconciliation to generally accepted accounting principles in the United States, or U.S. GAAP. Furthermore, pursuant to the transitional relief granted by the SEC in respect of the first-time application of IFRS, we have omitted in this annual report on Form 20-F financial statements and financial information prepared under IFRS for the year ended December 31, 2005.

The consolidated financial statements included in our annual reports on Form 20-F previously filed with the SEC in respect of the year ended December 31, 2005 were prepared in accordance with HKFRS. The consolidated financial statements included in our annual reports on Form 20-F previously filed with the SEC in respect of the years ended December 31, 2004 and before were prepared in accordance with Hong Kong GAAP.

PART I

Item 1. Identity of Directors, Senior Management, and Advisers

Not applicable.

Item 2. Offer Statistics and Expected Timetable

Not applicable.

Item 3. Key Information

Selected Consolidated Financial Information

The following tables present selected consolidated historical financial information for APT Satellite Holdings Limited (the “Company” or “APT Holding”) as of and for each of the years in the two-year period ended December 31, 2007. The selected consolidated historical statement of operations data for the years ended December 31, 2006 and 2007 and the selected consolidated historical balance sheet data as of December 31, 2006 and 2007 set forth below are derived from, and should be read in conjunction with, and are qualified in their entirety by reference to, the Company’s Audited Consolidated Financial Statements (the “Consolidated Financial Statements”) and with “Item 5. Operating and Financial Review and Prospects”, included elsewhere in this annual report on Form 20-F. The financial information in the Consolidated Financial Statements as of and for the years ended December 31, 2006 and 2007 has been prepared in accordance with the International Financial Reporting Standards (“IFRSs”), International Accounting Standards (“IASs”) and Interpretations issued by the International Accounting Standards Board (“IASB”), which were adopted by the Company in 2007. In this annual report on Form 20-F, we have translated certain Hong Kong dollar amounts into U.S. dollars at the rate of HK$7.80 = US$ 1.00, which approximates the noon buying rate in New York City for cable transfer in Hong Kong Dollars as certified for customs purposes by the Federal Reserve Bank of New York on December 31, 2007. We translate these amounts solely for your convenience, and these translations should not be construed as representations that, on such or any other date, Hong Kong dollar amounts could actually be converted into U.S. dollars at such rates or at all.

		2006				2007				2007
		HK$				HK$				US$
Consolidated Statement of Operations Data:
(in millions, except per share data)
Turnover			427.0				451.6				57.9
Gross profit			88.7				136.8				17.5
Profit from operations			37.5				81.4				10.4
Finance costs			(64.1	)			(55.3	)			(7.1	)
Profit/(loss) before taxation			(24.5	)			25.2				3.2
Profit/(loss) for the year			(80.6	)			4.7				0.6
Attributable to:
Equity shareholders of the Company			(79.5	)			5.6				0.7
Minority interests			(1.1	)			(0.9	)			(0.1	)
Basic earnings/(loss) per share (cents)(1)			(19	)			1				0
Basic earnings/(loss) per ADS (cents)(1)			(152	)			11				2
Diluted earnings/(loss) per share (cents) (1)			(19	)			1				0
Diluted earnings/(loss) per ADS (cents)(1)			(152	)			11				2
Weighted average number of shares outstanding(1) – Basic			413.3				413.3				413.3
Weighted average number of shares outstanding(1) – Diluted			413.3				413.3				413.3
Dividend per share (cents)			—				—				—
Consolidated Balance Sheet Data:
(in millions)
Working capital (2)			206.8				114.1				14.6
Property, plant and equipment, net			2,721.6				2,508.3				321.6
Total assets			3,407.6				3,135.6				402.0
Non-current liabilities (less current portion)			1,080.0				755.9				96.9
Total liabilities			1,425.3				1,146.9				147.0
Total shareholders’ equity			1,980.4				1,987.8				254.8

The Hong Kong Dollar is freely convertible into other currencies (including the US Dollar). Since October 17, 1983, the Hong Kong Dollar has been linked to the US Dollar at the rate of approximately HK$7.80 to US$1.00. The central element in the arrangements which give effect to the link is an agreement between the government of Hong Kong and the three Hong Kong banknote-issuing banks, The Hongkong and Shanghai Banking Corporation Limited, Standard Chartered Bank and Bank of China (Hong Kong) Limited. Under this agreement, the Government of the Hong Kong SAR Exchange Fund issues certificates of its indebtedness to the banknote-issuing banks against payment in US Dollars at the fixed exchange rate of HK$7.80 to US$1.00. The banknote-issuing banks hold the certificates of indebtedness to cover the issuances of banknotes. When the banknotes are withdrawn from circulation, the banknote-issuing banks surrender the certificates of indebtedness to the Government of the Hong Kong SAR Exchange Fund and are paid the equivalent US Dollars at the fixed rate.

 The consolidated financial statements of the APT Group are expressed in Hong Kong dollars (“HK$”). The translations of amounts from Hong Kong dollars into United States dollars for convenience of the reader in this annual report have been made at the rate on December 31, 2006 and 2007 of HK$7.80 = US$1.00. No representation is made that the Hong Kong dollar amounts could have been, or could be, converted into United States dollars at that rate or at any other certain rate on December 31, 2006 and 2007, or any other date.

The market exchange rate of the Hong Kong Dollar against the US Dollar continues to be influenced by the forces of supply and demand in the foreign exchange market. Exchange rates between the Hong Kong Dollar and other currencies are influenced by the rate between the US Dollar and the Hong Kong Dollar.

The exchange rates of the Hong Kong Dollar to the United States Dollar as of and during the years ended December 31, 2003, 2004, 2005, 2006 and 2007 were as follows:

		2003				2004				2005				2006				2007
Average (1)			7.7875				7.7891				7.7774				7.7684				7.8020
High			7.8001				7.8010				7.8000				7.7933				7.8299
Low			7.7085				7.7632				7.7519				7.7509				7.7501
End of Period			7.7640				7.7723				7.7545				7.7778				7.7994

The exchange rates of the Hong Kong Dollar to the United States Dollar for each month during the previous six months were as follows:

		December 2007				January 2008				February 2008				March 2008				April 2008				May 2008
High			7.8068				7.8142				7.8027				7.7906				7.7945				7.8066
Low			7.7898				7.7964				7.7815				7.7640				7.7868				7.7927

Risk Factors

Prior to making an investment decision, prospective investors should carefully consider all of the information set forth in this annual report, including the following risk factors. If any of the following risks actually occur, the Company’s business, financial condition and operating results could be adversely affected. As a result, the trading price of the Company’s ordinary shares and ADSs could decline and all or part of a prospective investor’s investment could be lost.

Technical Risks of satellite systems

Satellite programs involve inherent technical risks. Given the intense competitiveness of Asian satellite markets, any launch or in-orbit failure affecting any of the Company’s present or future satellites would have a material adverse effect on the Company’s results of operations and financial condition.

Risk of Satellite Defects or Failure

Satellite defects as well as possible damage from electrostatic storms or collisions with space debris or other external causes may result in a partial or total loss of a satellite’s communication capacity. APSTAR IIR and APSTAR V are FS-1300 models, and APSTAR VI is a SB-4100 C1 model, which is a new general satellite platform with heritage from previous SB series satellite model. Although these models were chosen based on a number of factors, including risk management, there can be no assurance that the Company’s satellites will perform as designed and as manufactured. Significant defects in or damage to any of the Company’s satellites would adversely affect the Company’s results of operations and financial condition.

Limited Life of Satellites

All satellites have limited operational lives. A number of factors affect the operational lives of satellites, including construction quality, component durability, fuel usage, the launch vehicle used and the skill with which the satellite is monitored and operated. There can be no assurance as to the actual operational life of APSTAR I, APSTAR IA, APSTAR IIR, APSTAR V or APSTAR VI. The Company’s results of operations and financial condition would be adversely affected if the operational lives of satellites in the APSTAR System or any other satellites it may operate are significantly shorter than expected.

TT&C Systems and Earth Station

All satellites in the APSTAR System, except APSTAR V, are controlled with respective TT&C systems, which are operated by the technical staff of the Company. All TT&C systems are installed in the Satellite Control Center of the Company. The reliability and performance of the Satellite Control Center has been good and comparable to that of the industry. However, there can be no assurance that there will not be technical problems, accidents or disasters in the future in respect of the operation of the TT&C systems or the Satellite Control Center. The Company’s results would be adversely affected in the event of the occurrence of any such technical problem, accident or disaster.

Risk of Interruption or harmful interference of APSTAR V

APSTAR V is operated by Telesat’s Ottawa Satellite Control Centre starting from April 25, 2008 through the satellite antenna facility of the Company. Telesat is an experienced satellite operator particularly in the operation of satellites such as APSTAR V. However, there can be no assurance that the operation of APSTAR V will be free from interruption or harmful interference in the future. The Company’s operating results could be adversely affected by the occurrence of such defect or problem.

Changes in Technology and Industry

Technology in the broadcasting and telecommunications industry is in a rapid and continuing state of change, with new technological developments and innovations constantly emerging. If such developments and innovations were to decrease general commercial demand for the use of satellites of the type operated by the Company, the Company’s results of operations and financial condition could be materially adversely affected. Further, while the Company designs its satellites to incorporate state-of-the-art technology, there can be no assurance that the technology used in the Company’s satellites will continue to be the most advanced throughout the entire operational life of each satellite. Any technological lag which develops could result in lower rental fees after the initial rental term for any given transponder, and could therefore have a material adverse effect on the Company’s results of operations and financial condition.

Regulatory Risks

Regulatory Regime for Satellite Operations

The business prospects of the Company (including the launch and the timing of the launch of new satellites) could be adversely affected by laws, policies or regulations that modify the present regulatory regime in HKSAR or elsewhere applicable to APT Group or the launch, operation and commercial usage of its satellites.

Satellite services are subject to international space law. A country that is a party to the International Outer Space Treaty or other treaties or conventions regulating outer space activities is responsible for fulfilling its own obligations under such treaties or conventions. This often results in the adoption by a member country of domestic laws to regulate the activities of their own citizens or corporations in order to enable the country concerned to comply with its international obligations. APT’s satellite operations are principally regulated by the Outer Space Ordinance 1997 (the “Outer Space Ordinance”). The Outer Space Ordinance prohibits any person from launching or procuring the launch of a satellite, or operating a satellite, without obtaining the appropriate license. The ultimate authority to grant licenses and otherwise to administer the Outer Space Ordinance is vested in the Chief Executive of HKSAR acting in consultation with the Executive Council of Hong Kong (“Chief Executive in Council”). In practice, all relevant matters are dealt with on a regular basis by and through the OFTA.

Since July 1, 1997, HKSAR and its government and regulatory bodies have been subject to its Basic Law and the principle of “One country, two systems”. However, the Outer Space Ordinance states that where the Central People’s Government of the PRC issues an instruction to the Chief Executive in relation to any licence to be issued or revoked under the Outer Space Ordinance on the ground that if the instruction were not complied with the national security or the international obligations of the PRC would be significantly affected, the Chief Executive shall comply with such instruction.

On November 1, 2003 and April 4, 2005, OFTA granted the Space Station Carrier Licence for the TT&C operations of APSTAR V and APSTAR VI, respectively, to APT. In addition, on April 4, 2005 OFTA also granted to APT the Outer Space Licence in relation to the launch and operation of APSTAR VI. The Company currently has licenses for the operation of APSTAR I, APSTAR IA, APSTAR IIR, APSTAR V and APSTAR VI. Owing to the fact that APSTAR V is under the leasehold arrangement and is operated by Telesat instead of the Company, there is no need for the Company to obtain the Outer Space Licence for APSTAR V. However, there can be no assurance that existing laws and regulations affecting the Company will remain applicable in the future, or whether any such applicable laws and regulations are likely to be amended.

Priority for Orbital Slots

Satellites are entitled to protection from radio frequency interference by other satellites and earth stations only upon the registration of the location, frequency and use of such satellites with the Radiocommunication Bureau.  Registration requires the successful completion of a coordination process with other existing and potential users of locations and frequencies who have commented on the application for registration.  The coordination process is carried out in part at the government-to-government level, which is beyond the control of the Company.  The coordination process has become increasingly complex and time-consuming in the Asia Pacific region because a large number of operators have registered new systems operating at high power levels with very broad coverage.  The coordination process may result in modifications of proposed coverage areas or satellite design to eliminate or minimize interference with other potential users.

Under the Radio Regulations, during the coordination process a country may request the Radiocommunication Bureau to assist it in resolving disputes in connection with existing or proposed uses of frequencies and orbital locations.  However, should any such disputes remain unresolved, and the coordination process therefore not be successfully completed, there is no formal dispute resolution mechanism.  Any country that nonetheless places a satellite or any earth station into operation without coordination and notification may not be entitled to seek the assistance of the Radiocommunication Bureau to resolve complaints relating to interference.

APT, through the PRC government, has requested the Radio Regulatory Department of the PRC via OFTA of Hong Kong to file and coordinate applications by APT for orbital slots with the Radiocommunication Bureau and for resolving interference concerns.  The Radio Regulatory Department has notified the Radiocommunication Bureau of the proposed use of several orbital slots, namely 76.5 degrees East, 89.5 degrees East, 92.2 degrees East, 96 degrees East, 102.8 degrees East, 131 degrees East, 131.8 degrees East, 134 degrees East, 138 degrees East and 140 degrees East. APT also filed for the orbital slot at 142 degrees East but such filing has also been, for administration purposes, transferred to ChinaSat in 2004 after liaising with OFTA. Pursuant to such transfer, APSTAR I can be positioned at 142 degrees East under the existing licenses from OFTA. Under ITU regulations, no assurance can be given as to whether substantial modifications to satellite coverage or services may be required with respect to 142 degrees East, and no assurance can be given whether the coordination process with the ITU, with respect to the orbital slot at 76.5 degrees East, where APSTAR IIR is currently positioned, or any other orbital slot to be used by the Company’s satellites will be completed or whether the Company will have any priority for any such orbital slot.

Possible Disputes Relating to Orbital Slots

APSTAR V replaced APSTAR I on August 13, 2004. APSTAR V is utilizing certain designated C-band, extended C-band frequencies and Ku-band frequencies in the orbital slot at 138 degrees East. APSTAR VI replaced APSTAR IA on July 7, 2005. APSTAR VI is utilizing certain designated C-band and extended C-band frequencies in the orbital slot at 134 degrees East. The right to use these frequencies at such orbital slots has been licensed to the Company by the Kingdom of Tonga (“Tonga”), which, through its agent namely Friendly Islands Satellite Communications Limited (“TongaSat”), has responsibility for the ITU coordination process with respect to such orbital slots and the frequencies covered by the Company’s license.

APT and TongaSat entered into a license agreement on July 8, 2003, under which APT can utilize certain designated C-band, extended C-band and Ku-band frequencies in the orbital slot at 138 degrees East for APSTAR V. APT and TongaSat also entered into an operator agreement on December 19, 2003 for the utilization of certain Ku-band frequencies in the same orbital slot for APSTAR V, which operator agreement was approved by the corresponding administrations of both HKSAR and Tonga on March 15, 2004.

APT and TongaSat also entered into a license agreement on April 15, 2005, under which APT can utilize certain designated C-band, extended C-band and Ku-band frequencies in the orbital slot at 134 degrees East for APSTAR VI.

Tonga has confirmed to the Company that it has not granted rights to any third party that would affect the Company’s license or the Company’s entitlement to use the frequencies at such orbital slot covered by the license. Disputes may arise with respect to these and other orbital slots used by or contemplated for the Company’s satellites. Any such disputes or interference may have a material adverse effect on the Company’s business.

APSTAR I has been relocated to 142 degrees East and APSTAR IA is in the process of being relocated to another orbital slot. APT is authorized by customers to locate and operate these two satellites under inclined angle modes. Third parties liabilities insurance policies have been taken out in respect of the relocation of APSTAR IA. No assurance can be given by the Company that these two satellites will not cause any interferences or damages to any third parties leading to damages of any third party, nor the insurance policy will be sufficient for any damage payments.

Regulatory Constraints on End-users

Many of the Company’s existing and potential customers who may wish to use the APSTAR System to broadcast into or provide telecommunications services for countries in Asia are subject to government licensing. The applicable regulatory schemes in these countries vary considerably. While the Company does not believe these regulatory schemes will prevent it from pursuing its business, there can be no assurance that its customers’ licenses and approvals are or will remain sufficient in the view of foreign regulatory authorities or that these authorities will not discourage or prevent existing or potential customers from utilizing transponders on the APSTAR System.

Many of the Company’s customers must also have authorization from the countries in which they are located in order to uplink to and communicate by means of the Company’s satellites. While obtaining such authorizations on behalf of its customers is not the Company’s responsibility, the Company’s success may depend on the ability of its potential customers to obtain required authorizations. The potential risk from regulatory constraints due to latest applications in radiofrequencies such as WiMax or 4 ^th G may have an adverse effect on our Extended C band transponder business.

Export Restrictions

The United States government has imposed certain restrictions on technology transfers to certain countries including the PRC. Export licenses for the deliveries of TT&C systems and satellites are required to be obtained by the manufacturers of other satellites that the Company may launch in the future in connection with launches in any country subject to restrictions on technology transfers.

Under the APT-Loral Term Sheet dated September 23, 2002 and the agreements signed between Loral Orion and APT HK in December 2003, Loral Orion agreed to participate in the development of APSTAR V by investing up to 50% of the capital necessary for the APSTAR V project on a pro rata basis in order to obtain rights to 27 transponders at a value of approximately US$115.0 million. In March 2003, the parties agreed to lower the number of transponders to be purchased by Loral Orion to 25, but Loral Orion’s capital commitment remains unchanged.

Because of the failure of Space Systems/Loral Inc., a subsidiary of Loral Space & Communications (“SS/Loral”), to obtain the export license for the transfer of the title of APSTAR V in time for launching, APT entered into a Satellite Procurement Amendment Agreement, a Satellite Transponder Agreement and a Satellite Agreement (collectively the “Definitive Agreements”) with SS/Loral and Loral Orion Inc. (“Loral Orion”) on August 26, 2003 for the purpose of minimizing any further delay in the launch of the satellite. Under the Definitive Agreements, the title of APSTAR V was transferred to Loral Orion upon intentional ignition of APSTAR V and simultaneously therewith APT was granted an irrevocable lease of forty-one and one-half (41 ¹ / 2 ) transponders for the lease term commencing upon transfer of title from SS/Loral to Loral Orion until the end of operational life of APSTAR V. Under the Satellite Agreement, APT will release the leasehold interest of twelve and one-half (12 ¹ / 2 ) transponders to Loral Orion in stages over a five years period from the in-service date of APSTAR V subject to payment of installments by Loral Orion to APT. This will result in APT having 29 transponders. Pursuant to the Settlement Agreement dated November 16, 2003 entered into between Loral Orion and APT, Loral Orion took up four and one-half (4 ¹ / 2 ) transponders, leaving eight transponders to be released by APT to Loral Orion at the anniversary of the fourth and fifth year after the commencement of APSTAR V. Under the leasehold arrangement, Loral Orion has committed to continue pursuing the necessary export license for title transfer of APSTAR V. The Definitive Agreements were approved by the United States Bankruptcy Court on October 28, 2003. The Company believes that entering into the Definitive Agreements facilitated the timely replacement of APSTAR I so that satellite transponder services of the APT Group can be enhanced. The Definitive Agreements will not adversely impact the business and future plans of the APT Group because the leasehold interests under the Definitive Agreements will allow APT to carry on its business in a normal commercial practice of leasing its transponders capacities to any third parties. Loral Skynet has exercised the acceleration option and has taken up one standard C band transponder and one extended C-band transponder on September 28, 2006.

Owing to the absence of export license for the delivery of the TT&C system of APSTAR V, the satellite is currently controlled by Loral Skynet through the Satellite Control Centre of the APT Group until the export license for the delivery of the TT&C system of APSTAR V is obtained by Loral Skynet. Loral Orion has committed to continue pursuing the necessary export license for title transfer of APSTAR V. However, there can be no assurance that the relevant vendor of any satellite of the Company will be able to obtain all the necessary licenses or that such other licenses will not be revoked by the relevant government or that the relevant government will not impose additional restrictions or trade sanctions against the PRC or other countries that would significantly delay the planned launch of the satellite in question or other satellites that the Company or any of its subsidiary or associated company may launch in the future.

Business Risks

Insurance

The Company has in-orbit insurance coverage in respect of APSTAR V and APSTAR VI until July 6, 2009. The in-orbit insurance for the only transponder in APSTAR IIR was renewed up to April 30, 2006 and no renewal of in-orbit insurance was arranged for APSTAR IIR thereafter. No in-orbit insurance is maintained in respect of APSTAR I and APSTAR IA as their design lives were already expired. On April 30, 2004, OFTA granted the Company a waiver whereby the requirement of third party liability insurance in respect of APSTAR I, IA and IIR, respectively, for in-orbit operation is waived. There can be no assurance that the Company will not be subject to claims for third-party liability in respect of satellites under the APSTAR System. As the title of APSTAR V has transferred to Loral Skynet upon launch, there is no need for the Company to obtain an Outer Space Ordinance Licence for APSTAR V and the Company is not required to secure third-party liability insurance for APSTAR V. No assurance can be given with respect to the change of policy of OFTA. Because of the drifting of APSTAR IA from its original geostationary orbital slots to new orbital slots for the provision of services to customers under inclined modes, APSTAR IA was covered under third-party liability insurance over drifting and operation through November 1, 2007. Similar insurance will be arranged if new developments as to APSTAR IA’s designated orbital slot are agreed and drifting takes place.

After the World Trade Center event happened on September 11, 2001, the insurance industry imposed unfavorable terms on satellite insurance with respect to both the launch insurance and in-orbit insurance. Such impositions include a higher premium rate and additional exclusion clauses. The Company’s in-orbit insurance must be renewed annually. There can be no assurance that the Company will be able to obtain future insurance on terms satisfactory to the Company, or at all. The failure to secure adequate insurance coverage may result in the Company not being in compliance with its Outer Space Ordinance License, and could adversely affect the Company’s financial condition if an event were to occur for which the Company was not adequately insured. Due to Export License restrictions, there is no guarantee that in the event of an anomalous condition, the satellite vendors will provide to the Company, in a timely manner, the necessary and complete information by which the Company can satisfy its disclosure obligation under the insurance policy.

The Company’s launch insurance is unlikely to fully reimburse the Company for its expenditures with respect to launching a replacement satellite, with uninsured expenses comprising legal and other professional fees, interest and certain other expenses. It is the Company’s policy to secure in-orbit insurances to cover only the book value, rather than the replacement cost, of a satellite, however, the Company may take into account the obligations under the Bank loan conditions and the general industrial practice on a case by case basis. There is no assurance that the Company will take in-orbit insurance to fully cover the book value of its satellites. Further, the Company’s insurance coverage does not compensate the Company for business interruption and similar losses (including, among other things, loss of market share, loss of revenue and incidental and consequential damages). In addition, the Company’s insurance policies include customary exclusions including, among other things, exclusions from losses resulting from (i) war or similar hostile actions, (ii) anti-satellite, nuclear or laser or directed energy devices, (iii) insurrection and similar acts or governmental action to prevent such acts, (iv) governmental confiscation, (v) nuclear reaction or radiation contamination, (vi) electromagnetic or radio frequency interference, except for damage directly caused by such interference, or (vii) willful or intentional acts of the Company or its contractors except for the acts of the range safety officer acting within the limit of his authority.

Competitive Nature of the Industry

The international satellite communications industry is highly competitive. The Company faces competition from numerous international, regional and domestic satellite companies and from other communications companies which offer competing services using satellites or land-based facilities in the Asia Pacific region. Many of these competitors have substantially greater financial resources than the Company. The Company expects that new satellites will be launched covering all or part of the Asia Pacific region in the future. Assuming announced plans for such launches are successfully implemented, there would be an increase of transponder capacity serving the region and the increased supply of international telecommunications facilities, including those of the Company, would likely exceed the demand for such services. Such overcapacity could have a negative impact on the Company’s results of operations and financial condition. Technological developments, such as the use of digital video compression technology, and the proliferation of fiber optic cables in the form of land cables and submarine cables at comparatively lower cost for point-to-point telecommunication services may also result in reduced demand for transponder capacity as such advancements become commercially viable.

The laws of certain countries require domestic television broadcasters and domestic satellite telecommunications operators providing services in their home countries generally to use state-owned or locally-owned satellites to the extent capacity is available. These legal requirements may prevent the Company and other satellite companies from competing in the provision of transponder capacity to these potential customers. There can be no assurance that those countries in the Asia Pacific region, including those countries within the footprints of APSTAR System satellites and in which the Company’s customers currently provide programming or telecommunications services, such as PRC and Indonesia, will not impose similar requirements to use state-owned or locally-owned satellites in the future on domestic broadcasters or operators. The imposition of such requirements could adversely affect the Company’s results of operations and financial condition.

Additional Financing Requirements

On December 16, 2002, APT entered into a Bank loan which is secured by the assignment of the construction, launching, and related equipment contracts relating to APSTAR V and APSTAR VI and their related insurance claim proceeds, assignment of all present and fixed charges over certain bank accounts which will hold receipts of transponder utilization income and termination payments under construction, launching and related equipment contracts. As of December 31, 2006 and 2007, the aggregate outstanding borrowing amount under the Bank loan was US$120.0 million and US$87.6 million, respectively.

The Bank loan contains financial covenants, including maintenance of collateral coverage ratio, minimum net worth and minimum EBITDA. The Bank loan also contains customary limitations, including those on dividends, investments, capital expenditures, changes of controlling shareholders, creating liens and transactions with affiliates. No assurance can be given that APT will be able to meet any financial and operating covenant. These covenants and limitations may limit the Company’s ability to raise additional funds when required and could significantly restrict the Company’s business expansion.

Dependence on Key Customers

Revenues from the Company’s five largest customers for the years ended December 31, 2006, and 2007 were HK$127.9 million, and HK$148.8 million (US$19.1 million), respectively, which represented 30.0% and 32.9%, respectively, of total revenues. Revenues from the Company’s largest customer represented 8.4% and 8.8%, respectively, of total revenues during such periods. The Company’s results of operations could be materially and adversely affected by the loss of one or more of its key customers. There can be no assurance that the key customers will renew the existing satellite capacity utilization agreements on similar commercial terms, including price levels and for similar capacity. In addition, to the extent the credit quality of key customers deteriorates or these customers seek bankruptcy protection, we may not be able to collect our receivables from these customers, which may adversely affect our operating results.

Interference

Adjacent satellites may use the same band of frequencies as the Company’s satellites and the transmission made by other satellites or other legal or illegal source of transmission which may interfere with the transmissions of the Company’s satellites. Such interference could lead to the loss of revenues if customers migrate to competitors who operate satellites without such interference. Further, there can be no assurance that the Company can avoid the material interference with other satellites which may result in restriction of frequency bandwidth or loss of revenues. The Company may also be in violation of the Outer Space Ordinance Licence, and the affected parties may submit a complaint in the ITU.

Political and Economic Risks

Substantially all of the Company’s revenues are derived from its operations conducted in the Asia Pacific region, including the PRC and Hong Kong. As a result, the Company’s results of operations and financial condition may be influenced by the political situation in the PRC, Hong Kong and elsewhere in the Asia Pacific region and by the general state of the various Asian economies. For the years ended December 31, 2006, and 2007, approximately 48.6% and 37.8%, respectively, of the Company’s revenues were derived from customers based in the PRC, excluding Hong Kong. In addition, due to the geographic coverage of the Company’s satellites, the most significant market for the Company’s customers (whether or not such customers are based in the PRC) has been, and is expected to continue to be, the PRC.

The economy of the PRC differs from the economies of most countries belonging to the Organization for Economic Co-operation and Development in such respects as structure, government involvement, level of development, growth rate, capital reinvestment, allocation of resources, rate of inflation and balance of payments position. For over 50 years, the economy of the PRC has been a planned economy subject to five-year state plans adopted by central PRC government authorities and implemented, to a large extent, by provincial and local authorities, which set production and development targets. Although the majority of productive assets in the PRC are still owned by the government, in the past several years emphasis has been placed on decentralization and the utilization of market mechanisms in the development of the PRC economy.

Since the late 1970s, the PRC government has been reforming its economic systems. Many of the reforms are unprecedented or experimental, and are expected to be refined and improved. Other political, economic and social factors could also lead to further readjustment of the reform measures. This refining and readjustment process may not always have a positive effect on the operations of the Company and its PRC customers. The Company and its PRC customers may be adversely affected by changes in the PRC’s political, economic and social conditions and by changes in policies of the PRC government, such as changes in laws and regulations (or the interpretation thereof), measures which may be introduced to control inflation or imposition of additional restrictions on currency conversion.

Subsequent to the accession of the PRC into the World Trade Organization in November 2001, there has been no immediate adverse impact on the satellite industry in the PRC market. However, its long-term implications are uncertain.

The PRC government has mandated that international satellite channels must distribute their channels in the PRC using a unified satellite platform different from the APSTAR System. The implications of this requirement are not yet certain. There can be no assurance that the PRC government will not further mandate part or all Chinese satellite channels to be distributed in certain satellite platforms other than APSTAR System. Since nearly half of the Company’s revenue is derived from the PRC, there may be an adverse impact on the Company’s business.

Most of the payments under the Company’s transponder utilization agreements are required to be made in US Dollars. The PRC currently has extensive foreign exchange controls. The ability of the Company’s PRC customers to convert Renminbi (the currency of the PRC) into foreign currency and to purchase foreign currency is subject to various PRC laws and regulations. There can be no assurance that in the future the PRC’s foreign exchange controls will not adversely affect the ability of the Company’s PRC customers to make payments to the Company in US Dollars.

The Outbreak of Infectious Diseases

The past outbreak of a highly infectious deadly flu-like disease known as Severe Acute Respiratory Syndrome (“SARS”) in the Asia Pacific region severely affected the economic environment of most of Asia. In addition, there had been occasional incidences of avian flu reported in the Asia Pacific region, including Indonesia, Vietnam, Thailand and the PRC, and deadly H5N1 was proved in certain cases. Effective treatments and vaccination for such diseases are not yet available, and therefore further outbreaks of SARS, avian flu or other similar diseases could adversely affect the economies of the region.

Catastrophic Events

In early 2008, parts of Mainland China, experienced severe winter weather which resulted in extensive damages to factories, electricity supplies, water suppliers, farmlands, transportation and communications. On May 4, 2008, a tropical cyclone battered the Irrawaddy region of Burma killing hundreds of people and leaving tens of thousands people homeless. On May 12, 2008, a catastrophic earthquake reportedly at 8.0 on Richter scale struck Sichuan Province of China. The earthquake has devastated a very wide region in Sichuan Province, killing tens of thousands of people and causing widespread damage to houses, facilities, transportation and communications with serious hazards of quake lakes bursting. Though a lot of terrestrial communication networks including land cables and base stations were handicapped or destroyed by such catastrophic events, the satellite telecommunication facilities of APT Group have remained fully operational and unaffected. It is unable, at this stage, to have a clear assessment on the consequence and impact, if any, on the APT Group’s business. However, such catastrophic events may upset the economic activities in those affected areas, which may in turn have material effect on the transponder market over the coming years.

Item 4. Information on the Company

History and Development of the Company

The Company is a Bermuda company incorporated on October 17, 1996 with its principal place of business originally at Rooms 3111-3112, 31 ^st Floor, One Pacific Place, 88 Queensway, Hong Kong (Telephone: 852 2526-2281) and subsequently moved to 22 Dai Kwai Street, Tai Po Industrial Estate, Tai Po, New Territories, Hong Kong on December 8, 2003 (Telephone: 852 2600-2100). The Company’s registered office is at Clarendon House, 2 Church Street, Hamilton, HM 11, Bermuda. APT is a Hong Kong company and a wholly-owned indirect subsidiary of the Company. References herein to the Company include APT Holdings and its subsidiaries, except where the context otherwise requires.

Business Overview

The Company, through its subsidiary, APT, is a leading provider of high quality satellite services throughout the PRC and elsewhere in the Asia Pacific region. APSTAR System broadcasts satellite TV channels of many prominent international broadcasters, and PRC, Taiwan and Hong Kong broadcasters including CCTV, CETV-1, CBSAT, D-Sky and CableTV. The Company’s strategy is to serve as a preferred operator for these and other international and PRC, Taiwan, and Hong Kong broadcasters. The Company also provides transponder service to telecommunications operators, among others, Singapore Telecommunications Limited (“SingTel”), PCCW Global, China Telecom Corp. and China Mobile. In addition, the Company also provides transponder service to certain major telecommunication operators in newly emerging markets including Vietnam and Indonesia. Such well-known customers include Viettel, PT Telkom, and PSN.

The Company comprised two main business segments, namely provision of satellite transponder capacity and related services, and provision of satellite-based broadcasting and telecommunications services. In order to reflect the segments of business affected by similar economic conditions, the satellite control services income have been aggregated to the segment of provision of satellite transponder capacity and related services. A summary of the Company’s business segments is provided below (in HK$ millions):

Business segments:		2006				2007
Revenue from external customers:
Provision of satellite transponder capacity and related services			363.1				395.0
Provision of satellite-based broadcasting and telecommunications services			63.8				56.5
Service income			0.1				0.1
Total			427.0				451.6

Provision of satellite transponder capacity and related services

The Company’s income from provision of satellite transponder capacity and related services is derived from its operating satellites.

The Company’s first satellite, APSTAR I, was launched in July 1994 and commenced commercial service on September 15, 1994. APSTAR I was replaced by APSTAR V on August 13, 2004 at 138 degrees East. APSTAR I currently has sufficient fuel to operate in an inclined mode no later than 2010. APT has entered into a utilization agreement with a customer to utilize APSTAR I at 142 degree East through the end of its useful life. APSTAR I was drifted from 138 degrees East to 142 degrees East in September 2004.

The Company’s second satellite, APSTAR IA, was launched in July 1996 and commenced commercial service on September 1, 1996. APSTAR IA was replaced by APSTAR VI on June 7, 2005 at 134 degree East. APSTAR IA currently has sufficient fuel to operate at inclined mode no later than April 2013. On May 30, 2005, APT entered into an agreement with NAOC to utilize APSTAR IA through its remaining useful life. The agreement was terminated in January 2007 due to the default of payment. Subsequent to agreement on a term sheet agreed in January 2007, APT had entered into a utilization agreement with PSN on June 8, 2007 to utilize APSTAR IA through the end of its useful life, and APSTAR IA will be drifted from its current orbital slot to an orbital slot designated by PSN.

The Company launched a third satellite, APSTAR IIR, in October 1997, and it commenced commercial service on January 1, 1998 for the provision of high quality and high power transponder capacity in the Asia Pacific region. APSTAR IIR is located at 76.5 degrees East.

In order to take advantage of the demand in the PRC and elsewhere in the Asia Pacific region for varied television programming with superior picture and sound quality, the Company launched high power satellites, APSTAR V and APSTAR VI, on June 29, 2004 and April 12, 2005, respectively, as replacement satellites of APSTAR I and APSTAR IA, respectively. APSTAR V commenced its commercial service on August 13, 2004 while APSTAR VI commenced its commercial operation on June 7, 2005.

As at December 31, 2007, the utilization rates of APSTAR V and APSTAR VI were 72% and 59%, respectively.

APSTAR V is intended to satisfy demand in both Asia and Australia for transponder capacity. The Company has focused its marketing efforts on developing a customer base of international and PRC broadcasters and telecommunications providers. The Company has established close relationships with its existing customers and believes that it is well-positioned to continue to provide capacity on future satellites to its existing customers as well as to expand its customer base to include other prominent broadcasting and telecommunications customers.

APSTAR VI provides broad Asia Pacific footprints. The Company mainly provides broadcasting service to broadcasters in China, as well as provides telecommunication services to telecom operators in other Asia Pacific regions. We believe that it will become one of the most popular multilingual, multicultural and multi-application satellite platforms in the Asia Pacific region.

Satellite-based Broadcasting and Telecommunications Services

In order to fully tap the business potential arising from the telecommunications field in the Asia Pacific region, including the PRC, APT Telecom Services Limited (“APT TS”) provides telecommunication services with its FCL (formerly known as external satellite-based fixed telecommunication network services), which was issued by the OFTA and transferred from APT Satellite Telecommunications Limited (“APTT”) pursuant to the reorganization in 2003. Services under the FCL include VSAT, wholesale voice and Internet POP gateway services.

APT Satellite TV Development Limited (“APT TV”) established a satellite TV broadcasting platform based on the Satellite Television Uplink and Downlink License first granted by the Government of HKSAR in 1999 and was further broadened in March and June 2005 to include APSTAR V and APSTAR VI. To accommodate the future demand for satellite TV program services, enhance the encoding capability of APT TV and further develop the Company’s satellite broadcasting business, APT increased investments in uplinks and downlinks and TV-program transmission and broadcasting facilities. At December 31, 2007, there were 72 channels uplinked through APT TV’s broadcasting service.

CTIA VSAT Network Limited (“CTIA”) directly owns 60% of Beijing Asia Pacific East Communication Network Limited which provides data broadcasting services for the PRC market. Pursuant to a disposal agreement dated April 2, 2008, CTIA agreed to dispose of its entire equity interest in Beijing Asia Pacific East Communication Network Limited to an independent third party at a total consideration of RMB4,800,000. Beijing Asia Pacific East Communication Network Limited holds a 35% equity interest in Beijing Zhong Guang Xin Da Data Broadcast Technology Co, Ltd. which is a jointly controlled entity of the Company.

The revenue generated from provision of satellite-based broadcasting and telecommunications services were approximately HK$63.8 million and HK$56.5 million (US$7.2 million) for the years ended December 31, 2006 and 2007, respectively, which represented 15.0% and 12.5%, respectively, of total revenues for such years.

Industry and Market Overview

Satellites

The global communications market for video, data and voice transmissions is served primarily through terrestrial and submarine optical fiber and coaxial cable, microwave systems and satellites.

Ground-based microwave systems disseminate signals in the form of radio waves from an antenna on top of a building or a transmission tower. Microwave systems are well suited for use by local television stations and cellular telephone systems because the reach of the transmission signal typically is limited to one discrete area. Microwave systems are not suitable for long distance communication or broadcasting, since transmission over long distances requires the construction of a number of microwave relay stations to relay a signal, and repeated transmission can distort a signal. Satellite systems require only two stations to cover long distances, one uplink station and one downlink station. Most importantly, satellites can provide point to multipoint transmissions while simultaneously transmitting signals over the entire region covered within the satellite’s footprint.

Satellite systems generally operate in three main orbits — low-earth orbit (“LEO”), mid-earth orbit (“MEO”) and geostationary orbit (“GEO”). LEO systems operate in orbits at distances of between a few hundred miles up to 1,000 miles from earth, whereas MEO systems operate from 1,000 up to 20,000 miles from earth, although they will typically be in the range of 6,000 to 15,000 miles high. Satellites in these systems are not geostationary, that is, they do not constantly overlook the same area on earth. The inability to cover the same area on earth continuously makes these systems impractical for broadcasting and traditional telecommunications usage. In general, LEO and MEO systems comprise of a series of satellites that are used commercially primarily for mobile satellite services. By contrast, GEO satellites are located in orbit approximately 22,300 miles above earth and can blanket large geographic areas with signal coverage.

GEO satellites can be accessed through an uplink station virtually anywhere within the satellite’s footprint. With broad coverage capability, GEO satellites have commonly been used for (i) television broadcasting, principally to cable operators for redistribution and also to households equipped with direct reception antennae as well as for supplementary terrestrial transmission networks in remote areas, (ii) international and domestic trunk telephony complementing optical fiber and coaxial cable and microwave backbone networks and (iii) business services, principally for voice, data and video transmissions to private networks such as VSAT networks and program exchanges between television broadcasters, including satellite news gathering.

Communications satellites typically are evaluated on (i) their coverage area or “footprint”, (ii) the quality of the signal transmitted to the coverage area and (iii) the availability of the transponders. Footprint is a measurement of the breadth of a satellite’s coverage. A key measurement of signal quality is the intensity of transmission power in the coverage area. Higher power signal enables a customer to use smaller, lower-cost antennae on the ground. Availability is determined by considering a satellite’s operational “lifetime” as well as the number of transponders capable of providing service. The Company considers all three factors in determining whether a particular satellite is appropriate for its needs.

Commercial telecommunications and broadcast satellites typically transmit signals using either C-band or Ku-band. C-band is used worldwide for satellite communications to transmit signals with less interference from atmospheric conditions. C-band frequencies are also used by ground-based microwave systems. In certain parts of the world, C-band satellite transmission antennae must be located far from centers of population to avoid interference with ground-based systems. Since there are fewer Ku-band systems in existence than C-band systems, more powerful Ku-band transponders can be used in urban areas without similar interference concerns. Because of higher available transmission power, Ku-band frequencies can be used in conjunction with antennae that are smaller than antennae that are used in conjunction with C-band frequencies. Ku-band is generally used for the same purposes as C-band as well as for satellite news-gathering (transportable antennae) and in some VSAT applications.

The combination of high power transmitters and small antennae also makes Ku-band suitable for direct-to-home television.

Direct-to-home television did not become commercially viable until recently because available satellite technology did not have the power to transmit to receivers and digital compression technology had not been adequately developed. Today, DBS provides an efficient point-to-multipoint delivery of video and audio transmissions. The advent of high-powered satellites allows for dishes as small as 18 inches and digital compression technology permits the broadcast of up to 10 channels of programming per transponder. In the United States, Europe and Japan, DBS operators have had success in penetrating their respective markets.

APT provides one-stop solution to customers. For television programming distribution, these services may consist of arranging satellite capacity and providing teleport transmission facilities and other value-added services. Services for other broadcasting applications, such as live news and sports reporting, may include the arrangement of satellite capacity, the provision of trucks equipped for live news and sports broadcasts, transmission scheduling and signal monitoring. Services for business communications networks are generally more extensive and may include arranging satellite capacity, procurement and installation of on-site antennae and network design, integration, management, operation and maintenance. The Company has chosen to focus on the provision of satellite transponder service, based on the APSTAR System and new enhancement of value-added services, in order to maximize the efficient use of its resources so as to provide the highest quality service.

Broadcasting and Telecommunications Markets in Asia

Increased Distribution of Television Programming

The television market in Asia had been experiencing significant growth, both in terms of the number of broadcasters creating programming and the number of channels available to viewers. International television programmers have been seeking to provide entertainment in Asia. Satellites are ideally suited for broadcasting to international, regional, and national audiences and for delivering television programming to cable operators or microwave transmission stations for local redistribution.

The television markets in Asia are not uniform, and among the nations of Asia, there are numerous regional differences in language, culture, and ideology as well as in income levels and income distribution. Programmers who wish to take full advantage of the entire Asian television market must tailor their programming to be responsive to these regional differences. Access to satellite transponder capacity from satellite operators provides opportunities to television broadcasters to tailor programming for particular audiences. The Company believes that this will stimulate demand for transponder capacity on its satellites.

Liberalization of the Television and Telecommunications Industries

Liberalization of the television industry in a number of countries in Asia has increased the portion of programming on satellites that is broadcast by private television networks and programmers which complement or compete with state-owned or state-sponsored broadcasters.

Most countries in Asia have been liberalizing their telecommunications markets to some degree or another in order to permit private service providers, in addition to the traditional state-sponsored telephone monopolies, to provide facilities and services. The PRC has begun to liberalize its telecommunications markets by breaking the monopoly status of China Telecom as the country’s sole telecommunications services provider and by allowing limited numbers of domestic service providers in various service areas (such as mobile services, internet telephony and other services). New telecommunications service providers stimulate demand for satellite capacity such as that offered by the Company.

Continuing Technological Advancements

The Company believes that technological advances will increase information carrying capacity and reduce transmission and equipment costs which may, in turn, stimulate demand for satellite communications services. Such advances include the following:

High-powered Satellites. New satellites, which are of higher power, can deliver improved quality signals to antennae that are generally smaller and less expensive (and are therefore more convenient for private and commercial use) and can cover a larger area than those used with earlier-generation satellites. The increasing use of these smaller, less expensive antennae is expanding the markets for public and private communications networks and video distribution services.

Digital Communications. Analog telephone systems carry relatively low volumes of information. Globally, telephone companies are rebuilding their infrastructure to carry high-speed digital communications, which permit new and enhanced business communications and consumer services. Examples include video phones, video conferencing, video-on-demand, wide-area networks, telecommuting and interactive TV. Many of these services use satellite transponder capacity within their transmission circuits and, because of their high transmission rates, will require significant transponder capacity. Furthermore, developments in digital technology for VSATs, which reduce terminal size and increase transmission throughput, are encouraging the development of new, cost-effective business and rural communications applications.

Compressed Digital Video. Digital video compression technology is designed to compress multiple high-quality video channels into the same transponder capacity that previously carried one analog channel. This technology facilitates a significant increase in the number of available video channels with improved transmission quality and allows satellite operators to provide satellite transmission services using less bandwidth. Digital video compression technology is expected to lower the costs of delivering programming via satellite and cable television systems, thereby permitting more programming options to be provided to niche markets. Digital video compression technology may also permit broadcasters, by lowering per channel costs, to offer local broadcasting platforms including programming designed for particular national audiences and particular cultures and languages. The Company believes that digital video compression technology may facilitate the efforts of broadcasters to distribute their programming regionally to multiple audiences.

Digital video compression technology may also in the future facilitate the introduction of HDTV. Digital video compression technology is expected to permit HDTV signals with superior picture quality to use an amount of bandwidth comparable to that used by a current analog channel with a far inferior image since analog form typically consumes large amounts of bandwidth.

Increased Spending on Telecommunications Projects

A number of countries in Asia lack basic telephone services as well as the sophisticated optical fiber and digital switching infrastructure required for large bandwidth, high speed data applications for businesses. The governments of many of the developing countries in Asia have recognized the effect of shortages of telecommunications services in their countries and are responding by setting goals aimed at significantly increasing teledensity (measured in main telephone lines per 100 inhabitants) in their countries. The Company believes that government organizations in such countries and other less developed regions in Asia will depend significantly on wireless communications, including satellites, to serve their communications needs because the development of land-based infrastructure is more costly and time-consuming.

Growth of Information Services Markets

The Company believes that the market in Asia for information services still has the potential to grow, both in terms of the numbers of providers and users of such services and the types of services available. Satellite distribution is ideally suited for the provision of information services supplied by global service providers.

Customers and Services

The Company provides satellite transponder capacity primarily to the broadcasting and telecommunications markets. For the years ended December 31, 2006 and 2007, the Company’s revenues were derived from the following customer bases:

		Years Ended December 31,
		2006				2007
Broadcasting			33.4	%			37.0	%
Telecommunications			61.7	%			58.5	%
Other service			4.9	%			4.5	%

Revenues from the Company’s five largest customers for the years ended December 31, 2006 and 2007 were HK$127.9 million and HK$148.8 million (US$19.1 million), respectively, which represented 30.0% and 32.9%, respectively, of total revenues. Revenues from the Company’s largest customer represented 8.4% and 8.8%, respectively, of total revenues during such periods.

Broadcasting Customers

Local, national and international broadcasters use satellite transponder capacity for (i) television programming distribution, (ii) contribution or “backhaul” operations (the transmission of video feeds from one location to another) and (iii) ad hoc or “spot” services such as the transmission of special events and live news reports from the scene of the event. At present, most of APT’s broadcasting customers utilize transponder capacity for distributing programming to television stations, local cable operators and master antenna systems.

On July 6, 1999, the Company was first granted the Satellite Television Uplink and Downlink License by the HKSAR government. According to this license, the Company is able to use the newly acquired uplink platform and downlink system, together with certain encryption and digital compression technologies, to provide satellite television uplink and downlink services through the Company’s APSTAR IIR (C & Ku-band), and APSTAR V (Ku-band only) and APSTAR VI (C & Ku-band) and other approved satellite.

Television Programming Distribution. The Company’s strategy is to position the APSTAR System as a preferred provider of satellite capacity covering the PRC and the Asia Pacific region. This strategy has been implemented by targeting both international and domestic broadcasters as customers for services on the APSTAR System.

More and more local cable television operators and over-the-air local broadcasters install and position their downlink antennae to receive programming from programmers using a satellite in the APSTAR System. Once such antennae have been installed and positioned to receive signals from a particular programming provider on the relevant APSTAR System satellite, cable operators and local broadcasters can receive programming using the same antenna from other providers using such satellite. As a result, new programmers may seek to utilize transponder capacity on a satellite with an established audience rather than utilising transponder capacity on a satellite with a less-established audience.

The APSTAR System also offers a number of other benefits for domestic broadcasters. By using one of the satellites in the APSTAR System, domestic broadcasters may, for example, purchase certain segments of an international programmer’s feed using the same satellite for broadcast as part of their own programming, without incurring the cost of adding a separate earth station to receive the international programmer’s segments. In addition, domestic broadcasters can sell their own programming regionally or internationally because the APSTAR System allows them to use the same transmission antennae to relay their programming internationally as well as domestically to others using the same satellite. Local cable and television station operators also benefit from using the APSTAR System for television programming distribution because they need only one earth station pointed at an APSTAR satellite to receive programming from both domestic and regional broadcasters using the same satellite.

The following chart lists APT’s typical broadcasting customers and the nature of their programming:

Customer		Programming
China Central Television (“CCTV”)		10 channels, such as CCTV-1, 2, 5
China Education Television (“CETV”)		3 CETV TV channels, and Educational distance learning programs and digital broadcasting businesses
China Broadcasting Film Television Satellite Co., Ltd. (“CBSAT”)		Television in provinces of the PRC, including Chong Qing, Yunnan, Sichuan and Hunan, totaling around 10 provinces and around 44 channels

Backhaul Services. Broadcasters can use satellite capacity for “backhaul” operations, such as transporting programming from a broadcaster’s foreign news bureau to its broadcast center for simultaneous or later transmission.

Ad Hoc/Occasional Services. Broadcasters can also use satellites to transmit coverage of live scheduled special events to programmers on a short-term ad hoc basis as well as to relay live news coverage, short duration video feeds and syndicated programming for broadcasters on a scheduled or ad hoc basis.

Telecommunications Customers

The Company’s telecommunications services include the provision of transponder capacity, VSAT services, Teleport services for private communications networks for data and voice communications and the provision of PSTN carrier services including the wholesale voice to telecom network operators and other communications service providers in Asia. Owing to fierce market competition and low profit margin, the APT Group terminated the wholesale voice services in late 2007.

Private Networks. Many businesses and organizations utilize satellites rather than ground-based transmission media for a variety of reasons, including (i) cost savings for large, geographically dispersed networks, (ii) independence from telephone companies, (iii) predictability of costs over a long period, (iv) flexibility in changing and adding remote locations to a network, (v) integrated network management and control of remote locations and (vi) increased network availability and lower transmission error rates.

For example, offshore communications use satellite business communications networks for point-to-point and point-to-multipoint data transmission. Banks use satellite networks to connect automatic teller machines to processing computers. News agencies use satellite networks to distribute information to numerous locations and paging operators use satellite networks to distribute paging information from a central switch to multiple remote transmitters for retransmission to pagers. The Company believes that there will continue to be opportunities in Asia to market transponder capacity to certain end users which, due to inadequate telecommunications infrastructure or high costs of local public networks, desire to operate their own private networks for data and voice transmission.

The Company offers satellite services for private business communications networks, including VSAT networks. VSAT networks consist of small rooftop antennae and are utilized by customers that need to send short bursts of data over a network for relatively short periods of time. Through the use of VSAT technology and sophisticated software, these networks can be served with a relatively small amount of satellite capacity. Networks using VSATs have been growing rapidly to meet the specialized data requirements of particular industries.

Carrier services. A portion of the Company’s revenues in the telecommunications market is derived from the provision of satellite capacity to domestic and regional communications carriers in Asia, including telecom network operators in the PRC that use the capacity as part of their communications network on a national or international basis.

Other Service Customers

Under the satellite services agreement, APT provides the necessary satellite control services for APSTAR IIR to Loral Asia. This agreement will continue throughout the useful life of APSTAR IIR unless terminated by Loral Asia with at least 120 days’ prior written notice. In consideration of the services provided, APT receives a payment of approximately US$1 million per year from Loral Asia.

On April 11, 2003, APT and SingTel entered into a new agreement (the “New Agreement”) superseding the old agreement, which was entered on January 8, 2001 pursuant to which SingTel was to use 15 C-band transponder services of APSTAR V. Pursuant to the New Agreement, APT agreed, subject to certain conditions, to provide 6 C-band transponders services of APSTAR V to SingTel, and upon SingTel’s written request within three years from the date on which APSTAR V commences operation, to also make available 5 more C-band transponders services of APSTAR V to SingTel. SingTel has not exercised its right to request additional C-band transponders. APT is obligated to provide operational and maintenance services to SingTel through APSTAR V’s useful life, which is expected to be not less than 13 years, in exchange for an annual management fee which will cover all costs associated with operations and management of the transponders as well as tracking, telemetry and command services, and all necessary maintenance. The fixed aggregate value of the management fees for the 6 transponder capacity amounts to US$16.3 million (approximately HK$127.1 million), and the annual amounts of the management fees will range from US$0.8 million (approximately HK$6.6 million) to US$1.4 million (approximately HK$11.0 million). If SingTel exercises its rights to utilize additional transponder capacity, the fixed aggregate amount of the management fees for the additional transponder capacity will be US$13.6 million (approximately HK$105.9 million).

On September 1, 2004, APT and SingTel entered into an agreement to amend certain terminology and to modify the New Agreement into the form of utilization agreement for clarification purpose. The terms and conditions contained in the New Agreement remain unchanged.

On October 22, 2004, APT entered an agreement with National Astronomical Observatories of the Chinese Academy of Sciences ( ”NAOC”) to utilize APSTAR I through the end of its useful life. Under the agreement with NAOC, APT provides the necessary satellite control services for APSTAR I to NAOC. In consideration of the services provided, APT receives a payment of approximately US$300 thousand per year from NAOC.

On May 30, 2005, APT entered an agreement with NAOC to utilize APSTAR IA through the end of its useful life. Under the agreement with NAOC, APT provided the necessary satellite control services for APSTAR IA to NAOC. In consideration of the services provided, APT received a payment of approximately US$300 thousand per year from NAOC. The agreement with NAOC was terminated in January 2007 due to the default of payment by NAOC. On June 8, 2007, APT, subsequent to a term sheet agreed in January 2007, entered into utilization agreement with another customer PSN, among other things, APSTAR IA will be drifted from its current orbital slot to an orbital slot designated by PSN.

Transponder Utilization Agreements

The Company’s typical transponder utilization agreement allows for utilization of the capacity of a transponder, either in whole or in part, on the APSTAR System. Most of these agreements require service fees to be paid in advance and provide for renewal options, while some of them require payment of a deposit. All of APT’s transponder utilization agreements require payment of all amounts due in US Dollars. Generally, upon a fixed number of months’ notice, a customer may terminate its transponder utilization agreement without cause. In such a case, however, the customer is obligated to pay to APT specified liquidated damages based on the terms of the transponder utilization agreement. In addition, the transponder utilization agreements, in general, provide for a specified reduction in the service fees if transponder service is interrupted for reasons not caused by the customer or beyond the control of APT (such as mechanical transponder failure). If such service interruptions continue without correction (within an acceptable period of time) and APT is unable to provide suitable alternative capacity within an agreed period thereafter, the customer is entitled to terminate the transponder utilization agreement without further obligation to APT. Under the terms of the transponder utilization agreements, APT is not liable for the lost profits or other indirect or consequential damages of its customers.

Sales and Marketing

Marketing activities include customer visits, trade shows, advertisements, customer training, event sponsorships, joint marketing programs and presentations at industry conferences. APT’s current sales and marketing efforts are focused on new business development so as to solicit customers for unused or underutilized transponder capacity on APSTAR satellites. In addition, APT’s sales and marketing also focus on the creation of awareness resulting in lead generation of APSTAR V and APSTAR VI. APT’s sales and marketing staff maintain regular contact with customers even after they have decided to utilize transponder capacity in order to ensure continuing customer satisfaction.

Operation of the APSTAR System

The APSTAR System is an integrated satellite system that covers more than 100 countries from Japan to South Africa and from Germany to Australia, encompassing approximately 75% of the world’s population.

The APSTAR System is the product of an extensive strategic planning process. This planning has been both internal to APT, such as the analysis and evaluation of satellite make-up, platform choice and launch vehicle choice, and external, in the sense of designing the APSTAR System to meet the practical and strategic needs of its customers.

The APSTAR System offers its customers the ability to relocate from one satellite to another for strategic reasons of their own. The compatibility of the satellites in the APSTAR System also permits APT to move customers’ programming from one transponder to another, intra-satellite, or from one satellite to another, for technical reasons or to ensure continuity of service in the event of any difficulties.

The APSTAR System is structured to provide flexibility for customers, which is a benefit that the Company believes, is attractive to customers and provides APT with a competitive advantage. Intra-satellite back-up capacity is manifested by the preemptible transponders located on each satellite. These transponders are intended, in the ordinary course, to be provided to customers on a preemptible basis (at reduced cost), under the understanding that the customers’ use will be pre-empted if the transponder is needed by another customer as a result of a technical problem.

Additional back-up capacity will also be available to APSTAR System customers on an inter-satellite basis. Preemptible transponder capacity on APSTAR satellites enables customers to be “re-routed” on an as-needed basis to another satellite in APSTAR System. Similar back-up capacity is available not only from satellite to satellite, but also from use to use.

The Company’s TT&C facility, which enables the Company to monitor the status of its satellites and respond to the technical demands of its customers, is an important part of the APSTAR System. See “Satellite Control Center.”

SUMMARY OF SATELLITE DATA

APSTAR I

APSTAR 1A

APSTAR IIR

APSTAR V

APSTAR VI

Region covered

North and Southeast Asia

North and Southeast Asia

Europe, Asia, Middle East, Africa

Most of Asia, Australia, New Zealand, Pacific region, Hawaii

Most of Asia, Australia, New Zealand, Pacific region, Hawaii

Status

Operational (inclined mode)

Operational (inclined mode)

Operational

Operational

Operational

Model

HS 376

HS 376

FS 1300

FS1300

SB4100C1

Manufacturers

Hughes

Hughes

SS/Loral

SS/Loral

Alcatel

Transponders

Ku-band

—

—

16

16*

12

C-band

24

24

28

38*

38

Expected end of operational life

not applicable**

not applicable**

2012#

2019

2021

APSTAR Satellites

APSTAR I

APSTAR I, a Hughes HS-376 model satellite, was launched in July 1994 by a Long March 3 launch vehicle from Xichang in the PRC. APSTAR I was placed into a geostationary orbit at 138 degrees East and has a footprint that covers the PRC, Japan and Southeast Asia, reaching as far south as Papua New Guinea and Indonesia. The total cost for the construction and launch of APSTAR I, including launch insurance, ground facilities, related expenses and capitalized interest, was approximately US$132.4 million, which was financed through a combination of shareholders’ loans and a syndicated term loan. On May 31, 2001, the Company fully repaid the amount outstanding under the syndicated term loan.

APSTAR I carries 24 C-band transponders, 20 of which have a bandwidth of 36 MHz (suitable for television broadcasting and telecommunications purposes) and four of which have a bandwidth of 72 MHz (suitable for telecommunications purposes). The transponders have a maximum EIRP value of 38.5 dBW.

APSTAR I started commercial operations on September 15, 1994 and was replaced by APSTAR V on August 13, 2004. APSTAR I currently has sufficient fuel to work in an inclined orbital mode no later than 2010. APT has entered into a utilization agreement with a customer to utilize APSTAR I at 142 degree East through the end of its life.

APSTAR IA

APSTAR IA, a Hughes HS-376 satellite, was launched in July 1996 on a Long March 3 launch vehicle from Xichang into a geostationary orbit at 134 degrees East. The cost for the construction and launch of APSTAR IA, including launch insurance, ground facilities, related expenses and capitalized interest, was approximately US$128.6 million, which was financed through a combination of shareholders’ loans, a syndicated term loan and internally generated funds. As of December 23, 1996, the total amount due under the syndicated term loan was fully repaid using the proceeds from the Global Offering.

The specifications of APSTAR IA are virtually identical to those of APSTAR I, except that APSTAR IA provides enhanced coverage of India. As with APSTAR I, APSTAR IA carries 24 C-band transponders with a maximum EIRP value of 39 dBW.

APSTAR IA started commercial operations on September 1, 1996. After successful launch and completion of In-Orbit Testing of APSTAR VI, APSTAR IA was replaced on June 7, 2005. APSTAR IA currently has sufficient fuel to work in an inclined orbital mode no later than April 2013. Following the termination of the utilization agreement with NAOC to utilize APSTAR IA at 163 degrees East through the end of its life in January 2007, APT had entered into utilization agreement subsequent to a term sheet with another customer, PSN, on June 8, 2007 to utilize APSTAR IA and APSTAR IA will be drifted to an orbital slot designated by such customer.

APSTAR IIR

APSTAR IIR, an SS/Loral FS-1300 satellite, was successfully launched into its designated orbital slot at 76.5 degrees East on October 17, 1997 and its expected operational life is adjusted to 2012 after review carried out in January 2007. The total cost for construction and launch of APSTAR IIR, including launch insurance, ground facilities, related expenses and capitalized interest, was approximately US$233.5 million. APSTAR IIR commenced commercial operation on January 1, 1998.

On August 18, 1999, APT entered into a lease agreement with Loral Asia for the provision of 43 out of the 44 transponders of APSTAR IIR. According to the agreement, Loral Asia is entitled to use the capacities of these transponders until their service span expires. The price was approximately US$298 million, payable by eighteen installments in US Dollars within four years. Loral Asia later proposed to advance the date of payment and, as a result, the price was revised to approximately US$273 million, payable in three installments, with the last installment of approximately US$181 million paid on March 27, 2000. According to the agreement and all relevant operating licenses, APT continues to be the legal owner of APSTAR IIR and is responsible for the operational control of the satellite under the satellite service agreement with Loral Asia.

APSTAR V

APT together with SS/Loral and China Great Wall Industry Corporation, respectively, signed the Procurement Agreement and the Launch Agreements of APSTAR V satellite on January 8, 2001, to confirm the commissioning of the satellite. On October 23, 2002, the launch services to be provided by China Great Wall Industry Corporation originally for APSTAR V were transferred to APSTAR VI. In March 2003, APT selected Sea Launch for the launch of APSTAR V.

On September 20, 2002, APT entered into the APT-Loral Term Sheet and subsequently entered into certain other agreements. Under the APT-Loral Term Sheet and the agreements, Loral Orion agreed to jointly participate in the development of APSTAR V by investing up to 50% of the capital necessary for the APSTAR V project on a pro rata basis in order to obtain rights to 27 transponders at a value of approximately US$115 million, which is 50% of the initial projected costs of approximately US$230 million for the construction, insuring and launch of APSTAR V. This amount was adjusted to reflect 50% of the actual costs of construction, insuring and launch of APSTAR V, exclusive of the costs of certain function modifications required by Loral Orion, which was borne solely by Loral Orion. Loral Orion paid 25% of the project costs prior to launch of the satellite. The other 25% of the project costs was paid to APT in four installments over a period of five years from the in-service date of APSTAR V. The amount of the installments making up the remaining balance range between US$10.7 million and US$17.1 million and no interest is payable on such amounts. Title to the transponders attributable to Loral Orion and 25% of the common portions of the satellite will pass to Loral Orion in installments corresponding to and subject to the payments made by it under the term sheet and the agreements. As a result of discussions regarding a matter related to the launch vehicle, the parties agreed to reduce the number of transponders attributable to Loral Orion from 27 to 25 in March 2003 with no adjustment to consideration payable by APT and Loral Orion.

Because of the failure of SS/Loral to obtain the export license for the transfer of the title of APSTAR V in time for launching, APT entered into a Satellite Procurement Amendment Agreement, a Satellite Transponder Agreement and a Satellite Agreement (collectively the “Definitive Agreements”) with SS/Loral and Loral Orion on August 26, 2003 for the purpose of minimizing any further delay in the launch of the satellite. Under the Definitive Agreements, the title of APSTAR V was transferred to Loral Orion upon intentional ignition rather and simultaneously therewith. APT has entered into an irrevocable lease with Loral Orion for forty-one and one-half (41 ¹ / 2 ) transponders for the lease term commencing upon transfer of title from SS/Loral to Loral Orion until the end of operational life of APSTAR V. Therefore, the joint development of APSTAR V was converted to a lease. Under the Satellite Agreement, APT will release the leasehold interest of twelve and one-half (12 ¹ / 2 ) transponders to Loral Orion in stages over a five years period from the in-service date of APSTAR V subject to payment of installments by Loral Orion to APT. This will result in APT and Loral Orion having 29 and 25 transponders, respectively, at the end of the five years period from the in-service date. Under the leasehold arrangement, Loral Orion has committed to continue pursuing the necessary export license for title transfer of APSTAR V.

The delay in obtaining the Export License caused the postponement of the launch of APSTAR V. To cope with the delay, APT entered into a Settlement Agreement with Loral Orion Inc. and the Amended Launch Agreement with SS/Loral and Sea Launch Limited Partnership on November 16, 2003. The Settlement Agreement made certain amendments to the Satellite Procurement Amendment Agreement, the Satellite Transponder Agreement and the Satellite Agreement and the Launch Agreement to allow for (i) a postponement of the date of launch of APSTAR V to April 28, 2004 (later on, due to the partial failure of deployment of north solar array of EdS, a SS/L-made satellite that was launched by Sea Launch in January 2004, the launch date of APSTAR V was further postponed to June 26, 2004); and (ii) for Loral Orion to take an additional 4.5 transponders as Initial Loral Orion Transponders, which are in aggregate 17 transponders to be taken up upon the completion of in-orbit test of APSTAR V, resulting in Loral Orion assuming the payment of US$20.4 million that would otherwise to be paid by APT HK for the construction, launch and insurance of APSTAR V. Such payment significantly reduced the cash-flow pressure of APT HK. The total number of 25 transponders of APSTAR V to be taken up by Loral Orion will remain unchanged.

The Settlement Agreement and the Amended Launch Agreement were approved by the United States Bankruptcy Court on December 4, 2003 and the Export License of APSTAR V was issued by United States government on November 25, 2003.

APSTAR V was launched by Sea Launch Limited Partnership on June 29, 2004. APSTAR V, a high powered satellite based on an FS 1300 model satellite manufactured by SS/Loral, is comprised of 38 C-band and 16 Ku-band transponders. The satellite is located at the geostationary orbital slot of 138 degrees East, and the footprints of C-band transponders will cover a majority of the Asian countries in the Asia Pacific region, including China, India, South East Asia, Australia, New Zealand, and the Hawaiian Islands in the United States for provision of high quality and reliable broadcasting and telecommunications services. The footprints of Ku-band transponders are spanning across China (Beam One), and China and India (Beam Two). In-Orbit Test (IOT) was completed on August 13, 2004 and the result showed that all satellite specifications are in line with design and satellite useful life time is estimated to be 15.3 years. APSTAR V started commercial operations upon completion of IOT. All customer carriers on APSTAR I have been successfully migrated to APSTAR V on 138 degrees East. Based on the arrangements entered into by the Company and Loral Orion, title of the APSTAR V remained with Loral Orion. The Company assumed risks and rewards of 37 transponders (“APT Transponders”) for the entire operational life of APSTAR V under finance leases while the risks and rewards relating to the other 17 transponders remained with Loral Orion. The total cost for the communication satellites held under finance leases in connection with the APT Transponders of APSTAR V amounted to US$148.4 million, which has been funded by internal resources and the Bank loan. On September 28, 2006, Loral Orion acquired two additional C-band transponders and therefore APT Transponders in APSTAR V have been reduced to 35 transponders.

APSTAR VI (formerly APSTAR VB)

On December 11, 2001, APT entered into a Satellite Procurement Agreement with Alcatel for the design, construction, testing and delivery of APSTAR VI. APT had secured the Satellite Launch Service Agreement with CGWIC to launch APSTAR VI on board the Long March 3B (“LM-3B”) launch vehicle on October 23, 2002 by amending the Satellite Launch Service Agreement of APSTAR V. APSTAR VI is a high powered satellite and is based on a SB-4100 C 1 model satellite of Alcatel with 38 C-band and 12 Ku-band transponders. The footprints of its C-band will cover substantially all of the Asian countries in the Asia Pacific region including China, India, Southeast Asia, Australia, Hawaii, Guam, and the South Pacific Islands, whereas its Ku-band will cover China including Hong Kong, Macau and Taiwan and provide effective and reliable broadcasting and telecommunications services.

APSTAR VI was launched successfully on April 12, 2005 on a LM-3B launch vehicle and has been located at geostationary orbital slot at 134 degrees East. Its commercial operation started on June 7, 2005 and is expected to have an operation mission life over 15 years. The customers of APSTAR IA have been migrated to APSTAR VI successfully. Total capital expenditures for the design, construction and launch of APSTAR VI amounted to US$227 million, which has been funded by internal resources and Bank loans.

Existing Orbital Slots

APSTAR V and APSTAR VI are utilizing certain designated C-band and Ku-band frequencies in the orbital slots at 138 degrees East and 134 degrees East, respectively. The right to use these frequencies at such orbital slots has been licensed to the Company by the Kingdom of Tonga (“Tonga”), through TongaSat, which has responsibility for the ITU coordination process for the orbital slots at 138 degrees East and 134 degrees East with respect to such orbital slots and the frequencies covered by the Company’s license. The license agreements for the orbital slots at 138 degrees East and 134 degrees East each cover a period of 15 years (approximately coterminous with the expected operational life of the satellites).

APSTAR I is currently located at 142 degrees East under PRC’s filing as approved by OFTA. APSTAR IA is currently located at 130 degrees East under PRC’s filing as approved by OFTA.

APT has obtained a priority position in the ITU filing process for the use of the orbital slot located at 76.5 degrees East where APSTAR IIR is currently positioned.  The coordination of the satellite network have been completed and notified in accordance with ITU regulations, and the frequency assignment has been recorded in the Master International Frequency Register and published by ITU.

Future Satellites

APSTAR VIB

In view of the risk of satellite launch, it was necessary for APT to have a contingency plan safeguarding the replacement arrangement of APSTAR IA and to lock a launching slot in case of failure of the launching of APSTAR VI. APT therefore entered into an agreement with CGWIC on November 10, 2004 (the “Option Agreement”) pursuant to which APT was granted a right to require CGWIC to provide for the design, construction, delivery and launch of APSTAR VIB to a designated orbit.

In view of the successful launch of APSTAR VI on April 12, 2005, APT did not exercise the option before the expiry date of September 30, 2005. According to the terms of the Option Agreement, the option has expired and the Option Agreement is deemed to be terminated. APT was responsible for all reasonable costs and expenses incurred up to the date of termination in respect of the preparation works for the design, construction, delivery and launch of APSTAR VIB. The balance of option price (net of all reasonable costs and expenses incurred) could be transferred to such other satellite project as may be designated by the Company or the contractor within two years after the expiry date of the option. In the event that the balance of option price would be transferred to a satellite project for another customer as designated by the contractor, the balance of the option price would be refunded to the Company. Up to and including the date hereof, the Company has no plan for the procurement and launch of a new satellite in the coming years due to the fact that the transponder market has remained highly competitive and the current supply of transponders exceeds demand in the Asia Pacific region, the possibility of transferring the preparation works of APSTAR VIB to another satellite project of another customer as designated either by the Company or the contractor in the coming years is expected to be remote. Accordingly, as the Company does not currently expect the option price to be applied towards any future satellite project within the required time restriction or that the contractor will refund the balance of option price to the Company, an impairment loss of HK$59.9 million has been recognised in 2005 in respect of the prepayment for construction of a satellite.

Insurance

APT maintains in-orbit insurance for APSTAR V (for thirty-five transponders) and APSTAR VI. The Company is not aware of any reason why it will not be able to renew the existing insurance for APSTAR V and APSTAR VI. The Company’s insurance policies have standard provisions and customary exclusions. For 2006 and 2007, the Company spent HK$54.7 million and HK$45.4 million (US$5.8 million), respectively, on in-orbit insurance.

In-orbit Insurance. Satellite in-orbit insurance is purchased on an annual basis. Such insurance provides protection only against the total loss, destruction or failure of the satellite. Total loss is defined as the loss of more than 75% of the satellite’s communications capacity for insured satellites. The in orbit insurance of APSTAR V (thirty-five transponders only) and APSTAR VI has already been renewed until July 6, 2009.

Third-Party Liability Insurance. Third-party liability insurance offers protection against liability to third parties for damage arising out of a particular launch and the operation of the satellite. On April 30, 2004, OFTA granted the Company a waiver exempting the Company from complying with the requirement of maintaining third-party liability insurance with respect to APSTAR I, APSTAR IA and APSTAR IIR for in-orbit operation. The launch service provider of APSTAR VI has taken the third party liability insurance until June 7, 2006, which covers, among others, the Company, the governments of Hong Kong and PRC as additional insured. There is no need to take third party liability insurance for APSTAR V as the title of APSTAR V is with Loral Orion. Because of the drifting of APSTAR IA from its original geostationary orbital slot to a new orbital slot for the provision of services to customer under inclined mode, APSTAR IA was covered by third-party liability insurance over last drifting and operation until November 1, 2007. Similar insurance will be arranged if new developments as to APSTAR IA’s designated orbital slot are agreed and drifting takes place.

Satellite and Ground Operation Facility

APT operates its ground facility of approximately 77,000 square feet consisting of the Satellite Control Center, Network Operation Center and TV uplink Center on a property of approximately 85,000 square feet erected at the Tai Po Industrial Estate, Tai Po, Hong Kong. For details of the property, please refer to on the section entitled “Property, plants and equipment” under Item 4. APT employs approximately 45 experienced satellite and communications specialists and engineers to continuously control and monitor APT’s satellites in geostationary orbit, as well as to operate ground teleport and satellite TV uplink services.

To better support the operation of APSTAR V and APSTAR VI as well as the satellite television uplink services, the Company has expanded its operating facilities since 2000 by purchasing antennae, radio frequency and baseband equipment. The Company currently operates a number of antennae ranging from 3 meter to 13 meter in diameter and transmission facilities, as well as the related equipment and facilities, such as radio frequency equipment, baseband units, ground monitoring systems, data processing systems and communication traffic monitoring systems. Each antenna is capable of controlling any of the Company’s satellites and is designed to withstand winds of up to 150 miles per hour. The Company maintains its own power generator and uninterrupted power supply to provide continuous electricity supply in case of a power outage.

Satellite TT&C operations with the APT satellites are carried out at our Satellite Control Center. Once a satellite is placed at its orbital location, it is controlled by the TT&C facility on a 24-hour basis until the end of its in-orbit life. The Company’s engineers at the Satellite Control Center periodically correct each satellite’s attitude and conduct east-west and north-south station keeping maneuvers, thus ensuring that the Company’s satellites maintain their proper orientation and orbital position. In addition, commands from the Satellite Control Center can switch transponders in and out of service, control the charging and discharging of the batteries, activate back-up equipment and engage other control functions.

APT has leased data and voice link in order to provide a direct data and voice communications link between the Satellite Control Center and the satellite manufacturers.

The customer carrier monitoring and teleport services are carried out at our Network Operation Center, which provides 24-hour support to customers via the Carrier Monitoring System. The Company also provides external satellite-based FTNS such as VSAT, Wholesale Telecom Services, and Internet POP Gateway under the external satellite-based FTNS license issued by OFTA on June 19, 2000.

The Company has completed the installation of satellite broadcasting facilities in the Satellite TV Uplink Center, under the Satellite Television Uplink and Downlink License issued on July 6, 1999. The Satellite TV Uplink Center provides “one stop solution” service to customers such as playout, digital video broadcasting compression, turn around and radio frequency uplink transmission service. As of December 31, 2007, there were up to 72 satellite TV channels being uplink and broadcast for the region.

Customer Technical Qualifications and Support

Before uplink communication by a customer’s equipment with a satellite is permitted, the Company ensures that each customer can meet the Company’s strict performance and operations specifications so that the customer’s equipment does not interfere with other customers on the same satellite or users of neighboring satellites. The Company’s engineers advise customers on any adjustments required to the customer’s equipment in order to minimize interference.

The Company provides extensive technical support to its customers. It helps customers determine and evaluate their equipment configurations, carrier modulations, bandwidths and power requirements, design their networks and calculate link budgets.

Additional Orbital Slots

OFTA, on behalf of the PRC government, is responsible for the coordination of a number of orbital slots for APT including the orbital slot at 76.5 degrees East in which APSTAR IIR is located. The Company has filed an application for the orbital slot at 131 degrees East, 89.5 East, 92.2 degrees East, 96 degrees East, 102.8 degrees East, 131.8 degrees East, 134 degrees East, 138 degrees East and 140 degrees East. Those orbital slots could be used by future satellites.

Competition

APT currently serves the satellite communications market in Asia. A number of international and domestic satellite operators also compete in this market. The Company’s primary focus is Asian intra-regional broadcasting, TV uplink and downlink, IP broadband and telecommunications, with special emphasis on the PRC. The Company has not attempted to enter the international PSTN trunk route market, which is dominated by the International Telecommunications Satellite Organization (“Intelsat”).

In providing satellite capacity, the Company competes with major established companies and organizations. The Company’s competitors include government-owned and privately-owned international, regional and domestic satellite companies. Many of these competitors have long-standing customer relationships and are substantially larger and have financial resources that are substantially greater than those of the Company. The Company believes that its ability to compete with these organizations depends on its existing customer relationships and the quality of its customer service, its reputation as a reliable operator of commercial satellites, flexible and value pricing policy, and the technical advantages of its advance and powerful satellites.

The Company faces competition in all its markets from one or more satellite systems. Other than domestic satellite companies, the Company is currently aware of certain other international or regional satellite companies with similar coverage in Asia: Intelsat, Asia Satellite Telecommunications Holdings Limited (“AsiaSat”), PanAmSat Corporation (“PanAmSat”), Shin Satellite (“ShinSat”), Sino Satellite Communications Company Limited (“SinoSat”), Measat Satellite System (“Measat”), Jsat Corporation (“JSAT”) and Asia Broadcast Satellite (“ABS-I”). Due to the economic slowdown in many Asian countries, many satellite-related projects have been delayed or cancelled and the current supply of transponders is still greater than the demand. For such reasons, APT has faced fierce market competition resulting in price-cutting and pressure on utilization rates.

Digital video compression technology may have the effect of increasing the overall supply of transponder capacity in the satellite industry. Such technology permits programmers to use less transponder capacity than is currently required to transmit the same amount of programming. At present, however, digital integrated receivers-decoders which are necessary to unscramble digitally compressed transmissions are not generally available outside the more developed markets, and the Company believes that it may be some time before they are commonplace in the developing markets of Asia. Customers who make significant financial commitments to the use of satellites for broadcasting and telecommunications applications often seek to secure back-up transponder capacity in order to protect their investment. The Company believes that potential customers in Asia may, at some future point, prefer to use those satellites that can provide backup capacity to help reduce customer risk.

International Satellites

The market for international satellite communications capacity has been dominated by Intelsat for 30 years, and Intelsat can be expected to continue to dominate it for the foreseeable future. Intelsat, established by international treaty in 1964, owns and operates the largest fleet of commercial geosynchronous satellites in the world. On July 3, 2006, Intelsat announced the completion of its merger with PanAmSat Holding Corporation. With the addition of PanAmSat’s video market expertise, advanced satellite fleet and blue-chip media customer base to Intelsat’s portfolio, Intelsat is now the largest provider of fixed satellite services (FSS) worldwide to each of the media, network services/telecom and government customer sectors. The new Intelsat brings the most extensive satellite communications network, integrating 51 satellites with the GXS infrastructure of more than 20,000 miles of fiber optic, 8 teleports and more than 50 PoPs, the global network enables clients to meet the communications requirements widely. Intelsat is the largest provider of fixed satellite services worldwide and a leading provider of these services to each of the media, network services and telecom and government customer sectors. It has a global fleet of 51 satellites and eight teleports and terrestrial facilities. It supplies video, data and voice connectivity in over 200 countries and territories. The television distribution and VSAT operations of Intelsat could potentially compete directly with the Company.

Regional Satellites

Coverage, service and target customers of AsiaSat are very similar to those of APT. AsiaSat 2’s footprint is smaller than that of APSTAR IIR, but AsiaSat 3S, which was successfully launched in March 1999, has a footprint very similar to APSTAR IIR’s footprint. AsiaSat 4 was also successfully launched in April 2003 and provides footprints coverage across Asia and Australia. AsiaSat 5, the replacement satellite of AsiaSat 2, is expected to be launched in early 2009. The Company believes AsiaSat is and will continue to be a major competitor of APT in the Asia Pacific market, including the PRC market.

The ST-1 satellite system, which is partly owned and operated by Singapore Telecom, was successfully launched in September 1998. Its C-band coverage stretches from the Middle East to Japan and Southeast Asia. Its Ku-band coverage focuses on the Indian subcontinent and Southeast Asia. Due to the satellite design and coverage area, the ST-1 satellite system only has the ability to compete with the Company in C-band segment of the Asia Pacific market.

SinoSat, which was established in May 1994, is a state-owned telecommunications satellite operator and has three major shareholders including China Aerospace Science & Technology Corporation, CITIC Group and China Financial Computerization Company.  Its first satellite, SinoSat-1, was launched on July 18, 1998 carrying 24 C-band and 14 Ku-band transponders with footprints including China and Asia Pacific regions for providing telecommunication, data transmission and TV broadcasting whereas its future satellite is still in the planning and development stage.  In addition to SinoSat-1, a new communications satellite for radio and television broadcasting, SinoSat-3, was launched on June 1, 2007 carrying 10 C-band transponders with footprints including all of China and some of the neighboring countries and regions. Because of their coverage and transponder capacity, SinoSat-1 and SinoSat-3 are the competing satellites in the Asia Pacific region. 

A number of companies located in various countries in the region have launched or are planning to launch domestic satellites. These include ChinaSat, which is also a Principal Shareholder (which term is defined below), Chinastar (merged with ChinaSat) and SinoSat of the PRC, INSAT of India, JSAT and NSTAR of Japan, Koreasat of Korea, Measat of Malaysia, Optus of Australia, Thaicom of Thailand, Mabuhay of the Philippines, and Telkom, IndoSat from Indonesia, GE-21 from Singapore, VINASAT and ABS. In 2007, a new company named China DBSAT is formed by ChinaSat and SinoSat on 50-50 joint venture, China DBSAT will operate all existing ChinaSat and SinoSat satellites including the new satellite ChinaSat-9 launched on 9 June 2008. Although these satellites may be focused on their respective domestic markets, such companies may have the ability, due to satellite design and coverage areas, to compete with the Company in segments of the Asia Pacific market. In certain of these countries, domestic television broadcasters and domestic satellite telecommunication operators providing services in their home countries are generally required to use a state-owned or locally-owned satellite systems to the extent capacity is available and therefore may not use APT’s satellites. In addition, many of the domestic systems are planning to add at least some regional transponders with substantial beam coverage to their next generation of satellites, and therefore may in the future become competitors of APT in the regional markets.

Optical Fiber Systems

Optical fiber systems have been widely installed for point-to-point trans-oceanic communications. In addition, point-to-point optical fiber connections between major cities in Asia are common. Optical fiber is being used in more developed markets for cable TV networks, telephony services and more recently in broadband and internet users. Owing to the telecom-boom era legacy of huge overcapacity in the market, prices for leasing wholesale cable have plummeted over the past five years as supply has still outstripped overall demand. The abundant supply of cable capacities and rock-bottom prices have led to the situations that satellite capacities are difficult to compete with cable in point-to-point communications.

Regulation

The international telecommunications industry is highly regulated. Satellite services are subject to international space law, and the principal body of international law relating to the use of outer space is the Outer Space Treaty. Countries which are party to the Outer Space Treaty or to other treaties or conventions regulating outer space activities are responsible for fulfilling their own obligations under such treaties or conventions. This often results in the adoption by such member countries of domestic laws to regulate the activities of their own subjects in order to enable the country concerned to comply with its international obligations.

As an operator of privately-owned satellites in Hong Kong, APT is subject to the regulatory authority of APT’s principal regulator, OFTA.

Many of the Company’s existing and potential customers who may wish to use the APSTAR System to broadcast into or provide telecommunications services for countries in Asia are subject to government licensing. The applicable regulatory schemes in these countries vary considerably. While the Company does not believe these regulatory schemes will prevent it from pursuing its business, there can be no assurance that its customers’ licenses and approvals are or will remain sufficient in the view of foreign regulatory authorities and that these authorities will not discourage or prevent existing or potential customers from utilizing transponders on the APSTAR System.

Many of APT’s customers must have authorization from the countries in which they are located in order to uplink to and communicate by means of APT’s satellites. While obtaining such authorizations on behalf of its customers is not the Company’s responsibility, the Company’s success may depend on the ability of its customers to obtain the required authorizations.

International Telecommunication Union

Member nations are required by treaty to give notice of, coordinate and register radio frequency assignments and any associated orbital locations in the geosynchronous satellite orbit with the Radiocommunication Bureau. The purpose of such notice, coordination and registration is to eliminate harmful interference between earth and space-based stations of different countries, to improve the use of the radio frequency spectrum and the geosynchronous satellite orbit and to accommodate, to the extent possible, a country’s needs. Pursuant to the Radio Regulations, after a country gives notice to the Radiocommunication Bureau of its intent to use given frequencies in connection with given orbital locations and for a particular type of service, the “advance publication” stage commences during which other countries are afforded the opportunity to apprise the Radiocommunication Bureau of any conflicts with any existing or intended satellite systems. When a present or potential conflict is noted, countries are then obligated to negotiate (during the “coordination” process) in an effort to coordinate the proposed uses and resolve any interference concerns.

An orbital slot is a function of intended use, orbital location and frequency band. As international coordinations vary in complexity, the time for their completion is uncertain and depends on the number of countries involved and the extent to which there are competing uses for the frequency bands that are the subject of the coordination. The coordination process may result in modification of proposed coverage areas or satellite design to eliminate or minimize interference with other potential users.

When coordination is completed and conflicts are resolved, the proposed users achieve “notification” status with the Radiocommunication Bureau. The frequency assignments are then recorded in the Master Registry, and such users are thereafter entitled under international law to protection from interference from subsequent or nonconforming uses from other countries. The failure to use an orbital slot within six years of advance publication (extendable for a further three years) could result in loss of priority in the coordination process.

Under the Radio Regulations, during the coordination process, a country may request the Radiocommunication Bureau to assist it in resolving disputes in connection with existing or proposed uses of frequencies and orbital locations. However, should any such disputes remain unresolved, and the coordination process therefore not be successfully completed, there is no formal dispute resolution mechanism and any country that nonetheless places a satellite or any earth station into operation may not be entitled to seek the assistance of the Radiocommunication Bureau to resolve complaints relating to any interference.

Export Regulation

The United States government has imposed certain restrictions on transfers of US technology to the PRC and certain other countries, such as Russia. The launch site for each of the existing APSTAR satellites, other than APSTAR V, was located in the PRC and the launch provider was an entity licensed by the PRC government. The launch sites for other satellites that the Company may launch in the future may also be located in the PRC or other countries subject to such restrictions. As a result, export licenses are required to be obtained by manufacturers of satellites that the Company may launch in the future which contain US technology in connection with launches in any country subject to such restrictions on technology transfers. The export of US-origin commercial communications satellite equipment also requires a Presidential waiver of the restrictions contained in the US Foreign Relations Authorization Act relating to such exports to the PRC and of any sanctions that are then in effect under the US Arms Export Control Act or other US laws and regulations.

Hong Kong Regulation

The Company’s satellite operations are principally regulated by the Outer Space Ordinance. The Outer Space Ordinance prohibits any person from launching or procuring the launch of a satellite, or operating a satellite, without obtaining an appropriate license. The Outer Space Ordinance further stipulates that any such license shall describe the activities authorized by it and also provides that licenses may be granted subject to conditions specified therein. The conditions may include basic orbital parameters and requirements to avoid interference with the activities of other users of outer space. Breach of any such conditions can give rise to a right of revocation of the relevant license.

The ultimate authority to grant licenses and otherwise to administer the Outer Space Ordinance is vested in the Chief Executive. In practice, all relevant matters are dealt with on a regular basis by OFTA. Effective July 1, 1997, the regulation of satellite launch and operation by Hong Kong companies has remained under the authority of OFTA. APT had previously been granted licenses under the Outer Space Act 1986 (Hong Kong) Order 1990 (the “Outer Space Order”) by the Chief Executive covering current and future operation of each of APSTAR I, APSTAR IA, APSTAR IIR and APSTAR VI, subject to the conditions of the respective licenses and under the Outer Space Ordinance, such licenses are valid and effective as if granted, maintained or made under the Outer Space Ordinance. Each of these licenses requires the approval of the Hong Kong government for any transfer of a beneficial interest in the satellite.

The Company’s earth station operations involve the operation and use of telecommunications apparatus at and from its earth station at Tai Po, Hong Kong. Establishment, possession and use of such telecommunication apparatus in Hong Kong is regulated by the Telecommunication Ordinance and the orders and regulations thereunder. APT has the benefit of licenses granted under the Telecommunication Ordinance for each of APSTAR I, APSTAR IA, APSTAR IIR, APSTAR V and APSTAR VI covering all of its TT&C operations, as well as monitoring and testing functions, subject to the terms and conditions of the respective licenses. Such licenses have terms of 20 years, commencing on July 19, 1994, June 11, 1996, October 13, 1997, November 1, 2003 and April 4, 2005, respectively. The licenses require APT (among other things) to avoid harmful interference with other telecommunication apparatus operating within or outside Hong Kong and to ensure compliance with all relevant requirements of the International Telecommunication Convention, a complementary document to the ITU’s constitution document, and any other international telecommunication agreements which may from time to time be acceded to by or on behalf of, or applied to, Hong Kong. These licenses were formally granted with the grant of the licenses under the Outer Space Order referred to above.

The Telecommunication Ordinance also contains provisions for (i) the taking of possession by the Hong Kong government of telecommunications stations where the Chief Executive in Council is of the opinion that an emergency has arisen in which it is expedient for the public service that the Hong Kong government should have control over telecommunications stations and (ii) the payment of compensation should such taking of possession occur.

Overseas National Telecommunications Authorities

The laws and regulatory requirements regulating access to satellite systems vary from country to country. Some countries have substantially deregulated satellite communications, making customer access to the Company’s satellites a relatively simple procedure, while other countries have maintained strict monopoly regimes. The application procedure for access to satellite systems can be time-consuming and costly, and the terms of the licenses vary among different countries.

Direct reception of satellite television is currently illegal in a number of countries in Asia and the Middle East, and is subject to stringent restrictions in certain other countries in those regions. Private ownership of dishes is currently prohibited in the PRC, although certain tourist-grade hotels and apartments and other specified entities are permitted to operate dishes upon application to the relevant authorities. In addition, regulations regarding content of advertisements and advertising vary from country to country, making it difficult for broadcasters to address advertisements to Asia and the Middle East as a whole.

Organizational Structure

The parent company of the APT Group is APT Satellite International Company Limited (“APT International”), which directly controls approximately 51.83 % of the interest of the Company. APT International is in turn jointly 100% owned by five principal shareholders. More information on major shareholders is set forth in “Item 7. Major Shareholders and Related Party Transactions.”

The Company, through APT BVI, indirectly owns 100% of APT. The full list of subsidiaries of APT Group is set forth in Note 15 to the Consolidated Financial Statements.

Property, Plant and Equipment

The Company’s executive offices are located in the Satellite Control Center in Tai Po Industrial Estate, Hong Kong. Upon the removal of the Company’s business office to its Satellite Control Center in Tai Po on December 8, 2003, the lease of the Company’s business office space originally in Room 3107-3109 and 3111-3112, 31/F One Pacific Place, 88 Queensway, Hong Kong was terminated on February 29, 2004.

The TT&C operations of APSTAR Systems are conducted through the Company’s Satellite Control Center. The 45,192 square foot site (Site 1) where the TT&C facility is located and the adjacent 39,902 square foot site (Site 2) where Phase II of the Satellite Control Center is located, are held by the Company pursuant to a lease between APT and the Science and Technology Parks Corporation. In early 2000, APT had leased from the Science and Technology Parks Corporation property originally designated as The Remaining Portion of Section E of Tai Po Town Lot No. 13 and Extensions Thereto with approximately 8,919.29 square meters (equivalent to 95,972 square feet) adjacent to its Tai Po Satellite Control Center site for a term expiring June 30, 2047. On March 21, 2001, APT with the Science and Technology Parks Corporation entered into the Cancelled Agreement, which divided the interest of the property originally designated as The Remaining Portion of Section E of Tai Po Town Lot No. 13 and Extensions Thereto between APT and APT Telecom. On March 21, 2001, the Science and Technology Parks Corporation leased the majority portion of that piece of property, totaling 6,903.29 square meters (approximately 74,279 square feet) (Site 3A) (newly designated as the Remaining Portion of Section E of Tai Po Town Lot No. 13 and Extension thereto), to APT Telecom for telecommunications services, and granted a lease of the remaining portion of the property, totaling 2,016 square meters (approximately 21,692 square feet) (Site 3B) (newly designated as Subsection 3 of Section E of Tai Po Town Lot No. 13 and Extensions thereto) to APT by the Second Supplemental Agreement and this piece of property was merged with the property originally leased, Site 1 and Site 2. In order to expand the Company’s satellite operations and control capabilities in preparation for the launch of APSTAR V and APSTAR VI, as well as expand its capabilities with respect to broadcasting and telecommunication services, APT Group completed the construction of Phase II of the Satellite Control Center (“Phase II”) for APSTAR V and APSTAR VI on Site 3B and Site 2. The Company commenced operation of Phase II in February 2002. Phase II, which has a total floor area of approximately 55,540 square feet, is specially designed for providing satellite TV broadcasting platform. Phase II also includes a new data center (approximately 14,700 square feet) for the telecommunications services.

Under the satellite TV broadcasting license granted by the Government of HKSAR, the Company’s wholly-owned subsidiary, APT Satellite TV Development Limited, has developed a satellite television broadcasting platform as part of Phase II. As at December 31, 2007, the Company has invested HK$30.9 million (US$4.0 million) in the facilities. As a result, the Company’s program transmission capacity is increased, strengthening its capacity to meet future demand for satellite TV services.

Item 4A. Unresolved Staff Comments

The Company currently has no unresolved SEC Staff comments.

Item 5. Operating and Financial Review and Prospects

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements of the Company. The Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

Overview

The Company’s existing satellites provide commercial service to broadcasting and telecommunications customers in the Asia Pacific region. APT’s transponder utilization agreements typically require the payment of a deposit of one calendar quarter’s utilization fee upon signing of the contract, provide for an escalation of utilization fees during the agreement term according to an agreed upon schedule, require utilization fees to be paid in advance and provide for renewal options.

Certain aspects of the business of the Company are subject to governmental regulation, including the coordination of orbital slots under the regulations of the ITU and the licensing of the Company’s satellite-related activities in Hong Kong by the HKSAR under the Outer Space Ordinance. Licenses from the HKSAR must be obtained to launch or operate a satellite. APT has obtained licenses covering current and future operation of each of APSTAR I, APSTAR IA, APSTAR IIR, APSTAR V and APSTAR VI. The licenses each require the approval of the HKSAR for any transfer of a beneficial interest in the satellite. Fees with respect to each of these licenses are payable annually at fixed rates. The Company paid aggregate license fees with respect to its satellites of HK$466 thousand (US$60 thousand) to the HKSAR in 2007. Although neither the Joint Declaration nor the Basic Law makes express provision with respect to the Outer Space Ordinance or the regulation of satellite launch and operation or other outer space activities, the Basic Law provides that the laws previously in force in Hong Kong shall be maintained, except for any laws that contravene the Basic Law, and subject to any amendment by the legislature of the HKSAR.

The Company believes that the market for satellite communications will not improve significantly in the coming year due to the uncertain economic outlook of the Asia Pacific region and increased competition in the transponder services market, which the Company believes will grow increasingly intense. At the same time, the Company plans to develop new satellite broadcasting and telecommunications businesses, with a view to maintaining business growth. The Company is currently focusing its sales and marketing efforts on:

	•		providing transponder capacity to broadcast customers for the distribution of programming to television audiences in the PRC and Asia Pacific region;
	•		providing telecommunications networks for data and voice communications; and
	•		providing satellite television uplink and downlink service through the APSTAR System.

The Company’s future revenues will depend upon the success of the above business strategies, and it cannot provide any assurances that it will be successful in implementing its strategies or meeting its projections.

The APSTAR System, together with their corresponding telemetry, tracking and control systems, have been operating under normal conditions. The Company’s core business remains the provision of satellite transponder capacity and broadcasting services in the Asia Pacific region. In the years of 2006 and 2007, the transponder service market remained highly competitive. The market for satellite communications in the Asia Pacific region remained highly competitive because of the following reasons: (i) there was the increase in new satellite supplies in the region particularly in the China market; and (ii) there was an over-supply in submarine cable capacities, particularly with respect to telecommunication services. The APT Group has achieved significant growth in utilization rates for APSTAR VI, despite the fierce market competition. As of December 31, 2007, the utilization rates of APSTAR V and APSTAR VI were 72% and 59%, respectively.

The Company intends to continue focusing on its core-business of providing satellite transponder capacity and satellite-based telecommunications services in the Asia Pacific region in the near term. While there is no current indication that the over-supply in transponder capacities and submarine cable capacities in the region will be reduced in the near term, the transponder markets as well as the broadcasting and telecommunication services market began a limited recovery at the end of 2007. APT continues to aggressively market the services of its new, state-of-the-art satellites, APSTAR V and APSTAR VI, which were launched on June 29, 2004 and April 12, 2005, respectively, in an attempt to gain market share as the economy improves. The Company believes that the advantages of these two satellites include (i) higher power; (ii) broadened footprints; (iii) smooth customer migration; (iv) linking northern and southern hemispheres and bridging major cities between North America and Asia; (v) anti-jamming features (APSTAR VI only); and (vi) the potential for strong neighborhood effects with such customers as CCTV and other renowned broadcasters, which enjoy over 300 million TV-households.

APT Satellite TV Development Limited (“APT TV”) has established its satellite TV uplink and broadcasting services platform (the “Satellite TV Platform”) for the provision of broadcasting services under a Satellite TV Broadcasting Licence granted by HKSAR. The Company believes that the Satellite TV Platform will help establish a neighborhood effect, whereby the APSTAR System will stimulate more demand for transponder capacities for the APSTAR System. As at December 31, 2007, APT TV has carried up to 72 satellite TV channels for the broadcasters in the region. APT Telecom was re-organized on September 10, 2003 in response to the continued downturn in the market for telecommunication services and the oversupply of submarine cable capacities. After the reorganization, APT Telecom Services Limited continued to provide telecommunication services under the Fixed Carrier License approved by OFTA in October 2003. The Company believes that the provision of broadcasting service and telecommunication service offerings to its customers provides an important competitive advantage with respect to customers who desire a “one-stop” shop in communications services.

The Company projects that the broadcasting and telecommunication businesses in the Asia Pacific region will see steady growth during 2008. The transponder service market will likely still be highly competitive due to excess capacity in the transponder market in the region particularly China market. As a result of the economic growth in the Asia Pacific region and the continued rapid economic growth in the China, the Company anticipates that the demand for transponders will grow steadily in 2008. The Company believes that there will be increases in customers and transponder utilizations, and the increase in telecommunications or broadcasting services. However, the market competition will still be fierce due to supply over demand with keen price pressure. The APT Group will endeavour to secure our foothold in the China market and expand in the overseas market so as to further increased the satellite utilization and improve the APT Group’s performance.

An analysis of the sources of the Company’s revenues by business segment for the two years ended December 31, 2007 is shown in Item 4 “Information on the Company — Business Overview”. The following table sets forth, for the periods indicated, the percentage of revenues from continuing operations represented by certain revenue and expense items in the Company’s statements of operations.

		2006				2007
Statement of Operations Data:
Turnover			100.0	%			100	%
Costs and expenses:
Cost of services			79.2	%			69.7	%
Administrative expenses			20.9	%			18.1	%
Total costs and expenses			100.1	%			87.8	%
			(0.1	%)			12.2	%
Profit/(Loss) before taxation			(5.7	%)			5.6	%
Profit/(Loss) for the year			(18.9	%)			1.0	%

An analysis of the source of the Company’s turnover by geographical area for the years ended December 31, 2006 and 2007 is as follows:

		2006								2007
		Amount				% of				Amount				% of
		(HK$ in				Total				(HK$ in				Total
		millions)				Revenues				millions)				Revenues
The People’s Republic of China:
Hong Kong			60.3				14.1	%			65.1				14.4	%
Other regions			207.4				48.6	%			170.7				37.8	%
Singapore			49.8				11.7	%			61.5				13.6	%
USA			0.4				0.1	%			0.4				0.1	%
Indonesia			50.4				11.8	%			90.5				20.1	%
Others			58.7				13.7	%			63.4				14.0	%
			427.0				100	%			451.6				100	%

The Company has not incurred any research and development expenditure for the years ended December 31, 2006 or 2007.

Application of Critical Accounting Policies

The financial statements are based on the selection and application of significant accounting policies, which require management to make significant estimates and assumptions that affect the reported amount of assets and liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities at the date of the financial statements. Actual results may differ from these estimates under different assumptions or conditions. The following are some of the more critical judgment areas in the application of the Company’s accounting policies that currently affect the Company’s financial condition and results of operations.

Depreciation

Depreciation of satellite assets is provided for on the straight-line method over the estimated useful life of the satellite, which is determined by engineering analysis performed at the in-services date and re-evaluated periodically, to residual value. A number of factors affect the operational lives of satellites, including construction quality, component durability, fuel usage, the launch vehicle used and the skill with which the satellite is monitored and operated. As the telecommunication industry is subject to rapid technological change and the Company’s satellites have been subjected to certain operational lives, the Company may be required to revise the estimated useful lives of its satellites and communication equipment or to adjust their carrying amounts periodically. Accordingly, the estimated useful lives of the Company’s satellites are reviewed using current engineering data. If a significant change in the estimated useful lives of our satellites is identified, the Company accounts for the effects of such change as depreciation expenses on a prospective basis.

Following a review undertaken by the APT Group during the year, the expected useful life of APSTAR IIR was revised with effect from February 1, 2007. The change in estimated useful life of APSTAR IIR has increased the depreciation charges for the year by approximately HK$587 thousand and decreased the profit for the year by approximately HK$484 thousand. This change will also increase the annual depreciation charge by approximately HK$640 thousand and decreased the profit after tax by approximately HK$528 thousand throughout the remaining useful life of APSTAR IIR.

Trade receivables and other receivables

The management of the Company estimates the provision of allowances required for the potential non-collectability of receivables at each balance sheet date based on the aging of its customer accounts and its historical write-off experience, net of recoveries. The Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customers’ current credit worthiness. The Company does not make a general provision on its trade receivables and other receivables, but instead, makes a specific provision on its accounts receivables and other receivables. Hence, the Company continuously monitors collections and payments from customers and maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the customers of the Company were to deteriorate, actual write-offs would be higher than estimated.

As disclosed in Note 18(b) to the Consolidated Financial Statements for the years ended December 31, 2006 and 2007, the Company has written off trade receivable at the amount of nil and HK$5.2 million (US$0.7 million) respectively. For the years ended December 31, 2006 and 2007, the Company made allowance for doubtful receivables in the amounts of HK$7.9 million and HK$80 thousand (US$10.3 thousand), respectively. If the financial condition of the Company’s customers were to deteriorate, additional allowances may be required.

The Company periodically reviews the carrying amounts of provision for doubtful debts to determine whether there is any indication that the provision needs to be written off. If the Company becomes aware of a situation where a customer will not be able to meet its financial obligations due to change of contact information by the customer without notification or after seeking professional advice from lawyers or debt collection agent that the probability of recovery is remote, the Company would write off the account receivable.

Impairment of property, plant and equipment

The Company periodically reviews the carrying amount of the assets to determine whether there is any indication that those assets have suffered an impairment loss. If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. In assessing the recoverable amount of these assets, the Company is required to make assumptions regarding estimated future cash flows and other factors to determine the net realizable value. If these estimates or their related assumptions change in the future, the Company may be required to adjust the impairment charges previously recorded. Under IFRS, the estimated future cash flows are discounted using a pre-tax risk adjusted rate when assessing the recoverable amount of the assets.

The Company applies the foregoing analysis in determining the timing of the impairment test, the estimated useful lives of the individual assets, the discount rate, future cash flows used to assess impairments and the fair value of impaired assets. It is difficult to precisely estimate the price of the transponder capacities and related satellite services and residual values because the market prices for our assets are not readily available. The estimates of future cash flows are based on the terms of existing transponder capacity and service agreements. The dynamic economic environment in which the Company operates and the resulting assumptions used in setting depreciable lives on assets and judgment relating to the utilization rate of the assets, price and amount of operating costs to estimate future cash flows impact the outcome of all of these impairment tests. If these estimates or their related assumptions change in the future, the Company may be required to record impairment loss for these assets not previously recorded.

The Company periodically reviews the carrying amounts of its property, plant and equipment through reference to its use value and fair market value as assessed both by the Company and by an independent professional property appraiser. If the use value or fair market value of the property, plant and equipment are lower than their carrying amount, the Company may be required to record additional impairment loss not previously recognized.

During the years ended December 31, 2006 and 2007, the Company conducted a review of the Company’s property, plant and equipment and determined that certain assets were impaired as the recoverable amount of these assets is estimated to be less than their carrying amount. For the year ended December 31, 2006, the APT Group conducted an impairment review on those equipment and concluded that no further impairment was required. For the year ended December 31, 2007, impairment loss of HK$98 thousand in respect of communication satellite equipment had been recognised and charged to the statement of operations.

Contingencies and provisions

Contingencies, representing an obligation that are neither probable nor certain at the date of the financial statements, or a probable obligation for which the cash outflow is not probable, are not recorded.

Provisions are recorded when, at the end of period, there is an obligation of the Company to a third party which is probable or certain to create an outflow of resources to the third party, without at least an equivalent return expected from the third party. This obligation may be legal, regulatory or contractual in nature.

To estimate the expenditure that the Company is likely to bear in order to settle an obligation, the management of the Company takes into consideration all of the available information at the closing date for its consolidated financial statements. If no reliable estimate of the amount can be made, no provision is recorded.

For details, please refer to Note 29 of “Consolidated Financial Statements” of the Company.

Change in accounting policies

The IASB has issued a number of new and revised IFRSs and Interpretations that are first effective for the current accounting period commencing January 1, 2007 or available for early adoption.

These developments have not resulted in any significant changes to the accounting policies applied in these financial statements compared to those applied in the APT Group’s financial statements for the year ended December 31, 2006. However, as a result of the adoption of IFRS 7, Financial instruments: Disclosures and the amendments to IAS 1, Presentation of financial statements: Capital disclosures, these financial statements include certain additional disclosures which are explained as follows.

As a result of the adoption of IFRS 7, the financial statements include expanded disclosure about the significance of the APT Group’s financial instruments and the nature and extent of risks arising from those instruments, compared with the information previously required to be disclosed by IAS 32, Financial instruments: Disclosure and presentation. Please refer to Note 27 of “Consolidated Financial Statements”.

The amendment to IAS 1 introduces additional disclosure requirements to provide information about the level of capital and the APT Group’s and the Company’s objectives, policies and processes for managing capital. These new disclosures are set out in Note 24(b) of Item 18. Both IFRS 7 and the amendments to IAS 1 do not have any impact on the classification, recognition and measurement of the amounts recognised in the financial statements. The APT Group has not applied any new standard or interpretation that is not yet effective for the current accounting period (see Note 37 of “Consolidated Financial Statements”).

Commitments and Contingencies

In the ordinary course of its business, the Company enters into commercial commitments for various aspects of operations, such as repair and maintenance. However, the Company believes that those commitments will not have a material effect on the Company’s financial condition, results of operations or cash flows.

The following tables aggregate the contractual obligations and other commercial commitments of the Company as of December 31, 2007 (HK$ in millions):

Contractual Obligations:

		Payments due by period
						Less
						than 1				1—3				4—5				After 5
		Total				year				years				years				years
US$240 million term Bank loan (1)			683.1				219.7				458.8				4.6				—
Interest payment obligations (2)			57.8				32.7				24.9				0.2				—
Purchase obligations of the Company (3)			3.4				3.4				—				—				—
Operating leases (4)			3.3				3.0				0.3				—				—
Total contractual obligations			747.6				258.8				484.0				4.8				—

Other Commercial Commitments:

		Amount of commitment expiration per period
		Total				Less
		amounts				than 1				1—3				4—5				After 5
		committed				year				years				years				years
Deposit received			19.6				—				19.6				—				—
Rental received in advance			33.7				33.7				—				—				—
Deferred income			207.8				—				59.1				45.1				103.6
Total commercial commitments			261.1				33.7				78.7				45.1				103.6

Certain potential losses of a satellite or the satellite’s functionality may not be fully covered by the Company’s launch or in-orbit insurance policies. For example, APT Group’s insurance coverage would not compensate it for business interruption and similar losses (including, among other things, loss of market share, loss of revenue and incidental and consequential damages). In the event that the insurance proceeds exceed the carrying amount of the satellites, the excess of the proceeds over the carrying value of the satellite would be recognized as income. Any shortfall between the insurance proceeds and the carrying amount of the satellites would be recognized in the statements of operations as expense.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements other than its operating leases. The Company does not believe that such operating leases have or are reasonably likely to have a current or future effect on the Company’s financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that would be material to investors.

Results of Operations

Year Ended December 31, 2007 Compared to Year Ended December 31, 2006

Total Turnover. Total turnover for the year ended December 31, 2007 were HK$451.6 million (US$57.9 million), an increase of HK$24.6 million, or 5.8%, as compared to total revenues of HK$427.0 million for the same period in 2006. The increase of revenues in 2007 was due to higher income generating from the new customers for the provision of Satellite Transponder Capacity Services during the year.

Cost of Services. The major components of cost of services include depreciation and amortization, orbital slot management fees, in-orbit insurance and satellite operations services charges. The cost of services, including depreciation and amortization for the year ended December 31, 2007 was HK$314.8 million (US$40.4 million), a decrease of HK$23.5 million or 7.0% when compared to the cost of HK$338.3 million for the year ended December 31, 2006. The decreased cost of services is mainly due to a reduction of premium cost in satellite in-orbit insurance. Also, depreciation and amortization for the year ended December 31, 2007 was HK$222.7 million (US$28.6 million), a decrease of HK$8.8 million or 3.8% as compared to depreciation and amortization of HK$231.5 million for the year ended December 31, 2006. This decrease was mainly due to the disposal of the two transponders in 2006. No such depreciation has been provided in 2007 and therefore, the depreciation and cost of services have decreased for the year.

Gross Profit. Gross profit for the year ended December 31, 2007 were HK$136.8 million (US$17.5 million), an increase of HK$48.1 million, or 54.2%, as compared to gross profit of HK$88.73 million for the same period in 2006. The increase of gross profit in 2007 was due to all of the factors discussed above.

Other net Income. The major components of other operating income consist of interest income and gain on disposal of property, plant and equipment. The other income for the year ended December 31, 2007 was HK$26.3 million (US$3.4 million), a decrease of HK$11.2 million as compared to the revenues of HK$37.5 million for the year ended December 31, 2006. This decrease was mainly due to the net effect of the increase in interest income and decrease in gain on disposal of property, plant and equipment. The interest income was HK$22.2 million (US$2.8 million) in the year ended December 31, 2007, an increase of HK$4.6 million, or 26.1%, as compared to the interest income of HK$17.6 million for the year ended December 31, 2006, which was largely as a result of increase in interest rates on bank deposits and bank balance for the first half year of 2007. Gain on disposal of property, plant and equipment was HK$261 thousand (US$33 thousand) in the year ended December 31, 2007, a decrease of HK$17.3 million, or 98.5%, as compared to the gain on disposal of property, plant and equipment of HK$17.6 million for the year ended December 31, 2006, which was due to the sale of two transponders to a vendor in 2006. There was no such income in 2007.

Administrative Expenses. The major components of administrative expenses include staff costs, office rental expenses, office general expenses, provision for bad and doubtful receivables, marketing and promotion expenses and professional fee. Administrative expenses for the year ended December 31, 2007 were HK$81.9 million (US$10.5 million), a decrease of HK$7.1 million, or 8.0%, as compared to administrative expenses of HK$89.0 million for the year ended December 31, 2006. The decrease of administrative expense was mainly due to an impairment loss for trade and other receivables provided for in the prior year.

Impairment Loss Recognized for Property, Plant and Equipment. Impairment loss for communication satellite equipment of HK$98 thousand was recognized for the year ended December 31, 2007 as the Company re-assessed the discounted expected future revenues of the telecommunication business, which the Company expects to be lower than originally projected. In 2006, the Company conducted an impairment review on those equipment and concluded that no impairment was required.

Finance Costs. For the year ended December 31, 2007, the Company incurred finance costs of HK$55.3 million (US$7.1 million) representing interest expenses of HK$52.2 million incurred under the Bank loan and other related finance costs of HK$3.1 million. For the year ended December 31, 2006, the Company incurred finance costs of HK$64.1 million representing interest expenses of HK$60.5 million incurred under the Bank loan and other related finance costs of HK$3.6 million. The decrease of finance costs was due to a decrease in borrowing after repayment of the bank loan during 2007.

Share of Results of Jointly Controlled Entities. Share of losses of jointly controlled entities was HK$0.9 million (US$0.1 million) for the year ended December 31, 2007, a decrease of HK$3.1 million as compared to the share of incomes of jointly controlled entities of HK$2.2 million for the year ended December 31, 2006. In 2006, a revaluation gain of HK$6.1 million caused by cost adjustment on investment property held by a jointly controlled entity was recognised.

Income Tax. Income tax expense was HK$20.4 million (US$2.6 million) for the year ended December 31, 2007, a decrease of HK$35.7 million as compared to the income expense of HK$56.1 million for the year ended December 31, 2006. The decrease in income tax expenses was mainly due to a net deferred tax liability of HK$42.8 million recognized as a result of settlement of tax dispute with Hong Kong’s Inland Revenue Department (the “IRD”) in 2006 in relation to APSTAR IIR. Please refer to note 6a of the consolidated financial statements for details. The effective tax rate for the year ended December 31, 2007 was 81.3% because foreign withholding tax (charged on certain income from the foreign customers) of HK$18.6 million was included in income tax expenses. Excluding this, the effective tax rate for the year ended December 31, 2007 was 7.2% which was lower than the Hong Kong statutory rate of 17.5% because certain profits were earned by foreign subsidiaries of the Company which were not subject to Hong Kong profits tax.

Pursuant to the PRC enterprise income tax law passed by the Tenth National People’s Congress on 16 March 2007, the new enterprise income tax rates for domestic and foreign enterprises are unified at 25% and will be effective from 1 January 2008. Accordingly, the deferred tax of the Group is recognised based on the tax rate that are expected to apply to the period when the asset is realized or the liability is settled. The subsidiaries of the Company in the PRC are loss making and incurred tax losses. The realization of these tax losses were considered not probable and accordingly no deferred tax assets in respect of tax losses were recognised as at December 31, 2007.

Profit/(Loss) for the year. Profit for the year ended December 31, 2007 was HK$4.7 million (US$0.6 million), an increase of HK$85.3 million as compared to the net loss of HK$80.6 million for the year ended December 31, 2006. This increase of profit for the year was due to all of the factors discussed above.

Liquidity and Capital Resources

Sources of Cash and Credit Available

Since the Company’s initial public offering, it has financed its operations primarily through cash flows from operations. As of December 31, 2007, the Company had HK$312.0 million (US$40.0 million) of available cash, and HK$83.7 million (US$10.7 million) of restricted cash. It is expected that the operations of the Company for the foreseeable future will be funded through cash flows from operation. As of December 2007, no further amounts are available under our credit facility.

Capital Expenditures

APT’s principal use of capital in the last several years has been (and will for the foreseeable future be) capital expenditures related to the construction and launch of its satellites, construction of Phase II of the Satellite Control Centre and investment in its satellite TV broadcasting platform. The Company’s business is capital-intensive, requiring substantial capital outlays before any given satellite is commissioned for commercial service and can begin providing a return on capital.

The Company makes periodic satellite project progress payments relating to construction of satellites, launching and related services, insurance costs and finance costs on amounts borrowed to finance such expenses. Upon the commencement of commercial service of an APT satellite, satellite project progress payments relating to the satellite are transferred in full to property, plant and equipment.

In addition, if the Company was to consummate any strategic transactions or undertake any other project requiring significant capital expenditures, it may be required to seek additional financing. There can be no assurance that additional funds will be available at all or that, if available, will be obtained at terms favorable to the Company.

Contractual Obligations and Other Commercial Commitments

For capital commitments in respect of capital expenditures, see “Item 5. Contractual Obligations and Commercial Commitments.”

Cash Flow Items

Net Cash Provided by Operating Activities

Net cash provided by operating activities amounted to HK$269.0 million (US$34.5 million) for the year ended December 31, 2007, an increase of HK$54.1 million, or 25.2%, compared to net cash provided by operating activities of HK$214.9 million for the year ended December 31, 2006. The increase in net cash provided by operating activities over the period was partly due to the settlement of the trade receivables for 2007 is faster than that in 2006 as a result of tightening internal control of the trade receivables in 2007.

Net Cash Generated from Investing Activities

Net cash generated from investing activities was HK$16.5 million (US$2.1 million) for the year ended December 31, 2007, a decrease of HK$36.2 million (US$4.6 million), compared to net cash used in investing activities of HK$52.7 million for the year ended December 31, 2006. Proceeds of HK$70.9 million were received from the disposal of two C-band transponders to a vendor in 2006 with no similar receipt in 2007.

Net Cash Used in Financing Activities

Net cash used in financing activities was HK$317.3 million (US$40.7 million) for the year ended December 31, 2007, an increase of HK$62.6 million (US$8.0 million), compared to net cash provided by financing activities of HK$254.7 million for the year ended December 31, 2006. The increase in net cash used in financing activities over the period was primarily the result of increased repayment of bank borrowings of HK$61.8 million (US$7.9 million) in 2007.

Financing

On December 16, 2002, APT entered into a US$240 million secured term bank loan with Industrial and Commercial Bank of China and Bank of China (Hong Kong) Limited. The Bank loan was amended by a Deed of Amendment and Restatement on October 27, 2004 and Second Deed of Amendment and Restatement on May 18, 2005. The first amendment amended certain terms of the Bank loan for the purpose of adjusting for the cancellation of the unutilized portion relating APSTAR V satellite and APSTAR VI backup satellite. Accordingly, the maximum aggregate amount under the Bank loan was reduced to US$165 million and certain financial covenants were amended. The second amendment extended the availability period of drawing under the Bank loan with respect to APSTAR VI to June 30, 2005 and amended the financial covenants. The Company was in compliance with these covenants as of December 31, 2007. For detail of the restrictive financial covenants, please refer to Note 24(b) of the “Consolidated Financial Statements” of the Company. The availability period for draw down expired on June 30, 2005. As at December 31, 2006 and 2007, the aggregate borrowings under the Bank loan were HK$936.1 million and HK$683.1 million (US$87.6 million), respectively. At December 31, 2007, APSTAR V and APSTAR VI with a net book value of approximately HK$2,317.2 million (US$297.1 million) were pledged as security for the Bank loan and bank deposits of approximately HK$83.7 million (US$10.7 million) were also pledged as security for the loan.

The Bank loan is secured by the assignment of the construction, launching and related equipment contracts relating to APSTAR V, APSTAR VI and their related insurance claim proceeds, assignment of all present and future utilization agreements of the transponders of satellites under construction, assignment of all present and fixed charges over certain bank accounts which will hold receipts of the transponder income and the termination payment under construction, launching and related equipment contracts. Pursuant to the Bank loan, any insurance claim proceeds and contract termination payments must be deposited in a designated account and withdrawal of any amount from this designated account may only occur in accordance with the terms of the Bank loan.

The Bank loan limits the amount of annual dividends that the Company may pay its shareholders which limit is tied to certain EBITDA and cash to debt service ratios contained therein. The Bank loan includes covenants customary for agreements of this type, including restrictions on the Company’s and its subsidiaries’ ability to incur indebtedness, certain ownership restrictions, certain restrictions on the Company’s ability to pay dividends, restrictions on affiliated transactions, certain financial covenants, covenants with respect of compliance with laws, maintenance of licenses and permits required for APT’s business and a requirement that all future transponder utilization agreements be entered into on an arms-length basis. Among others, APT must notify the lenders if its ultimate holding company, APT Satellite International Company, directly owns less than 50.01% of the voting rights in the APT Group. The Bank loan also contains financial covenants, including maintenance of collateral coverage ratio, minimum net worth and minimum EBITDA. The Bank loan also contains customary limitations, including those on dividend, investments, capital expenditures, change of controlling shareholders, creating liens and transactions with affiliates. No assurance can be given that APT will continue to meet any of the financial performance covenants contained in the Bank loan.

Forward Looking Statements

This report contains statements and other information made by or on behalf of the Company that constitute “forward-looking” statements within the meaning of Private Securities Litigation Reform Act of 1995. Statements that are not historical facts are forward-looking statements. By their nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and actual results could be materially different from those expressed or implied by forward-looking statements.

Words such as “believes,” “anticipates,” “expects,” “intends” and “plans” and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. Forward statements herein may include, without limitation, statements relating to the Company’s expectations, plans, objectives or goals relating to (i) its operations and financial results; (ii) launch schedules and anticipated transponder utilization; (iii) the technical capabilities of the APSTAR System; (iv) customer demand for the Company’s system; (v) strategic relationships that impact its operations; (vi) its funding needs and sources; (vii) satellite communications regulatory matters; (viii) the pricing of its services; (ix) its competitors and their services; and (x) actions of the Company’s suppliers, vendors and service providers.

The Company cautions you that a number of important factors could cause the Company’s results of operations to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to: (i) technological risks related to the development, operation and maintenance of various components of the APSTAR System; (ii) delays and cost overruns related to the construction, deployment and maintenance of the Company’s APSTAR System; (iii) risks related to the operation and maintenance of the Company’s newer satellites, APSTAR V and APSTAR VI; (iv) competition from other satellite operators and a number of existing satellite systems that provide similar services in various markets; (v) actions taken by regulators with respect to the Company’s business and practices in one or more of the countries in which the Company conducts its operations; (vi) the Company’s capital structure and its ability to maintain sufficient liquidity and access capital markets; (vii) customer demand for the services of the Company’s satellite transponders and the perceived overall value of these services by customers; (viii) the ability to increase market share and control expenses; (ix) the ability of counterparties to meet their obligations to the Company; (x) the possibility of foreign exchange controls, expropriation, nationalization or confiscation of assets in countries in which the Company conducts its operations; (xi) the effects of changes in laws, regulations or accounting policies or practices; (xii) the ability to retain and recruit qualified personnel; (xiii) the strength of the global economy in general and the strength of the economies of the countries in which the Company conducts its operations in particular; (xiv) political and social developments, including war, civil unrest or terrorist activity; and (xv) the Company’s success at managing the risks involved in the foregoing.

The Company cautions you that the foregoing list of important factors is not exclusive. When evaluating forward-looking statements, you should carefully consider the foregoing factors as well as the risks identified herein and the Company’s reports on Form 6-K furnished to the US Securities and Exchange Commission. These and other factors could result in the forward-looking statements proving to be inaccurate and may materially affect the Company’s operations. The Company does not undertake any obligation to publicly release any revisions to the forward-looking statements contained in this report, or to update them to reflect events or circumstances occurring after the date of this report, or to reflect the occurrence of unanticipated events.

Other

Exchange Rates

Substantially all of APT’s historical revenues from transponder capacity utilization, premiums for satellite launch and in-orbit insurance coverage, debt service and capital expenditures have been denominated in US Dollars. The remaining revenues and expenses have been primarily denominated in Hong Kong Dollars, which are fully convertible into US Dollars, and the exchange rates for that currency against the US Dollar have been pegged since 1983. As the exchange rate between the Hong Kong Dollar and the US Dollar has been pegged, the Company does not engage in or plan to engage in hedging activities to offset risks of exchange rate fluctuations. There can be no assurance that the exchange rates will remain stabilized in the future. See “Exchange Rate Information.” On December 31, 2007, all of the Company’s material contracts and obligations were denominated in US Dollars.

Inflation

Inflation has not materially affected the Company’s operations during its operating history.

Taxation

The Company’s loss for the year ended December 31, 2006 and profit for the year ended December 31, 2007, which are deemed to be Hong Kong-sourced and subject to Hong Kong profits tax, was levied at the rate of 17.5% and 17.5%, respectively. Offshore interest income and capital gains derived by the Company are not subject to Hong Kong profits tax.

The overseas withholding tax is currently charged at the rate of 3.75% to 20% on transponder utilization income during 2006 and 2007, respectively.

Subsidiaries of the Company in the PRC are currently subject to PRC income tax and charged at the rates of 15% and 33% in Shenzhen and Beijing, respectively during 2006 and 2007. Pursuant to the PRC enterprise income tax law passed by the Tenth National People’s Congress on March 16, 2007, the new enterprise income tax rates for domestic and foreign enterprises are unified at 25% and will be effective from January 1, 2008. Accordingly, the deferred tax of the APT Group is recognised based on the tax rate that are expected to apply to the period when the asset is realized or the liability is settled. The subsidiaries of the Company in the PRC are loss making and incurred tax losses. The realization of these tax losses were considered not probable and accordingly no deferred tax assets in respect of tax losses were recognised as at December 31, 2007.

Item 6. Directors, Senior Management and Employees

A majority of the Company’s current executive officers were originally seconded from affiliates of the Principal Shareholders, principally affiliates of ChinaSat, SingaSat and China Aerospace. A majority of APT’s technical and engineering staff employed at the Satellite Control Center in Tai Po were seconded from affiliates of ChinaSat, and China Aerospace and became employees of the Company.

The directors and executive officers of APT Holdings as at June 24, 2008 are set forth below.

						Date First
						Elected or
Name		Age		Position		Appointed
Executive Directors
Cheng Guangren		45		Director and President (appointed June 20, 2008)		2008
Tong Xudong		44		Director and Vice President		2004
Qi Liang		46		Director and Vice President (appointed June 20, 2008)		2008
Non-executive Directors
Rui Xiaowu		49		Chairman		2006
Lim Toon		65		Director		1993
Yin Yen-liang		57		Director		2003
Wu Zhen Mu		62		Director		1998
Yong Foo Chong		41		Director		2007
Tseng Ta-mon		50		Alternate Director to Yin Yen-liang		2003
Independent Non-executive directors
Huan Guocang		58		Director		2002
Lui King Man		53		Director		2004
Lam Sek Kong		48		Director (appointed July 1, 2007)		2007
Cui Liguo		38		Director (appointed July 1, 2007)		2007
Executive Officers
Dong Gang		54		Vice President		2005
Lo Kin Hang, Brian		51		Vice President & Company Secretary		2002/1996
Chen Xun		37		Vice President		2004
Yang Qing		44		Vice President		2004

Executive Directors

Mr. CHENG Guangren , aged 45, was appointed as the Executive Director and President; and the authorized representative of the Company on 20 June 2008. He is responsible for the overall management of the Company. Mr. Cheng was also appointed as the Director of APT Satellite Company Limited, APT Satellite Investment Company Limited, Acme Star Investment Limited, APT Satellite Telewell Limited, APT Satellite Vision Limited, APT Satellite TV Development Limited, Skywork Corporation, APT Telecom Services Limited, Ying Fai Realty (China) Limited, APT Satellite Global Company Limited, APT Satellite Enterprise Limited, APT Satellite Link Limited and Middle East Ventures Limited, subsidiaries of the Company. He is also the Chairman of the board of directors of APT Satellite Telecommunications Limited, a jointly controlled entity between a wholly-owned subsidiary of the Company and one of the shareholders of APT Satellite International Company Limited (“APT International”), the substantial shareholder of the Company. Mr. Cheng was also appointed as the Director of APT International. Mr. Cheng graduated from the Harbin Institute of Technology in the Department of Management Science and Engineering in 1984 and accredited as Master of Management and Senior Engineer. He is the Board Chairman of China Direct Broadcast Satellite Company Limited and concurrently the Deputy Chief Economist of China Aerospace Science & Technology Corporation. China Aerospace Science & Technology Corporation is one of the shareholders of APT International, the substantial shareholder of the Company. China Direct Broadcast Satellite Company Limited is an enterprise in China jointly established by China Satellite Communications Corporation and Sino Satellite Communications Company Limited (“Sinosat”). Mr. Cheng had been working for the former Ministry of Space Industry of PRC in respect of legal affairs and legal consultant for the enterprises and institutions during the period from 1984 to 1988; he had been working for China Great Wall Industry Corporation in respect of business and project management for the launching of the Long March launch vehicle and satellite during the period from 1988 to 1993; he had been the management for Sinosat from 1994 to April 2008 and had also been its Director of Board and Executive Vice President since 1994 and had also been its Director of Board and President since 1999. He is one of the founders of Sinosat. He has been working in the field of space industry for over 20 years and has professional skills and rich experience in the management of satellite operation. In 2004, he won the 2nd session Excellent Young Entrepreneurs Award of Beijing.

Mr. TONG Xudong , aged 44, was appointed as the Executive Director and Vice President of the Company in March and April 2004, respectively. Mr. Tong is also the member of the Nomination Committee and the Remuneration Committee of the Company. Mr. Tong is also the Director of APT Satellite Company Limited, APT Satellite Investment Company Limited, APT Satellite Vision Limited, APT Satellite TV Development Limited, APT Satellite Global Company Limited, APT Satellite Enterprise Limited, APT Satellite Link Limited, Middle East Ventures Limited, APT Communication Technology Development (Shenzhen) Company Limited and CTIA Vsat Network Limited, subsidiaries of the Company. He is also the Director of APT Satellite International Company Limited, the substantial shareholder of the Company. Mr. Tong graduated from Nanjing Aeronautic Institute in 1985 and obtained a master degree from Beijing Institute of Space Mechanics and Electricity, Chinese Academy of Space Technology in 1988. Immediately after his graduation, he served for the Beijing Institute of Space Mechanics and Electricity. In 1993, he further pursued his studies in Samara University of Aeronautics and Astronautics, Russia. From May 1995 to June 2000, he served as the Vice-Director of Beijing Institute of Space Mechanics and Electricity and was appointed as professor in 1998. From June 2000 to December 2003, he was the Director of the same Institute. In 2003, he was appointed as the Vice-President of Chinese Academy of Space Technology. Mr. Tong is a standing committee member of Chinese Society of Space Research and Chairman of the Committee of Recovery and Reentry, Chinese Society of Astronautics.

Mr. QI Liang , aged 46, was appointed as the Executive Director and Vice President of the Company on 20 June 2008. He was also appointed as the Member of each Nomination Committee and Remuneration Committee of the Company. Mr. Qi was also appointed as the Director of APT Satellite Company Limited, APT Satellite Investment Company Limited, Acme Star Investment Limited, APT Satellite Telewell Limited, APT Satellite Vision Limited, APT Satellite TV Development Limited, Skywork Corporation, APT Telecom Services Limited, APT Satellite Global Company Limited, APT Satellite Enterprise Limited and APT Satellite Link Limited, Middle East Ventures Limited and Haslett Investments Limited, subsidiaries of the Company. He was also appointed as the Director of APT Satellite Telecommunications Limited, a jointly controlled entity between a wholly-owned subsidiary of the Company and one of the shareholders of APT Satellite International Company Limited (“APT International”), the substantial shareholder of the Company. Mr. Qi was also appointed as the Director of APT International. Mr. Qi graduated from the Beijing College of Finance and Commerce in Finance major in 1986. He has been the Post-graduate of Monetary and Banking, Finance Department from the Chinese Academy of Social Sciences since 1998 and accredited as Senior Economist. Currently, he is the Deputy Chief Accountant for China Satellite Communications Corporation (“ChinaSat”) and the Director of CASIL Clearing Limited.

ChinaSat and CASIL Clearing Limited are the holding company of one of the shareholders of APT International and the affiliated company of one of the shareholder of APT International, the substantial shareholder of the Company, respectively. Mr. Qi had been working for the Official of the Finance Department of Beijing Planning Committee during the period from 1986 to 1988; he had been the Assistant Economist of the Finance Department of National Agriculture Investment Co., the Economist of the Finance and Equipment Planning Bureau of the Supreme Court, the Economist of the Beijing Stocks Department of China Rural Development Trust & Investment Co. during the period from 1988 to 1994; he had been the assistant to the director, deputy director, vice manager of the Administration Department, vice president of the Chang’an Avenue Division and Wanshou Road Division, president, and senior economist of the China Merchants Bank Beijing Branch during the period from 1994 to 2004; he had been the Assistant to the President, and concurrently the General Manager of the Finance Department of China Aerospace International Holdings Limited.

Non-Executive Directors

Mr. RUI Xiaowu , aged 49, was appointed as the Non-Executive Director and Chairman of the Company in December 2006. Mr. Rui is also the Director of APT Satellite Company Limited and APT Satellite Investment Company Limited, subsidiaries of the Company. He is also the Chairman of the board of directors of APT Satellite International Company Limited (“APT International”), the substantial shareholder of the Company. Mr. Rui is a Master’s Postgraduate. He was accredited as a Research Fellow in 1999 and was awarded by the State Council of China as the Winner of “Government Special Allowance” in 1996. Currently, Mr. Rui is the General Manager of China Satellite Communications Corporation, the holding company of one of the shareholders of APT International, the substantial shareholder of the Company. In 1982 Mr. Rui graduated from the Science & Technology University for National Defense of China in Computer Software Major and had been studying Master’s Degree in Computer Aided Engineering at the 710 Research Institute of the former Ministry of Aerospace Industry of China during the period from 1982 to 1985, and participated works at the 710 Research Institute in the same year. Thereafter, he had been the Engineer, Division Director of the Business Marketing Division, Vice President, President of the 710 Research Institute; he had been the Business Assistant to General Manager and Director General of the Business Planning & Marketing Department, Business Assistant to General Manager and Director General of the Marketing Department of China Aerospace Science & Technology Corporation since 2000; he had also been appointed as the Vice Chairman of Sino Satellite Communications Company Limited since 2001; he had been appointed as the Assistant to General Manager of China Aerospace Science & Technology Corporation since 2002; he had also been appointed as the Chairman of China Spacesat Company Limited (a corporation listed on the Shanghai Securities Exchange in China) during the period from 2002 to 2005; he had been appointed as the Chairman & President and Chairman of China Aerospace International Holdings Limited and CASIL Telecommunications Holdings Limited, respectively (both of them are corporations listed on the Stock Exchange of Hong Kong) during the period from 2002 to 2006; and he had been appointed as the Deputy General Manager of China Aerospace Science & Technology Corporation during the period from 2005 to 2006.

Mr. LIM Toon , aged 65, has been a Director of APT Satellite Company Limited since February 1993 and was appointed as the Non-Executive Director of the Company in October 1996. Mr. Lim is also the Director of APT Satellite Company Limited and APT Satellite Investment Company Limited, subsidiaries of the Company. He is also the Director of APT Satellite Telecommunications Limited, a jointly controlled entity between a wholly-owned subsidiary of the Company and one of the shareholders of APT Satellite International Company Limited, the substantial shareholder of the Company. Mr. Lim is also the Director of APT Satellite International Company Limited. In 1966, Mr. Lim graduated from the University of Canterbury in New Zealand, with a first class honours degree in Engineering. In 1975, Mr. Lim obtained a Postgraduate Diploma in Business Administration from the University of Singapore. He attended the Advanced Management Programme at Harvard Business School in 1992. He has been the Chief Operating Officer of SingTel, the holding company of one of the shareholders of APT Satellite International Company Limited, since April 1999 and has worked for Singapore Telecom since 1970, serving in various appointments of engineering, radio services, traffic operations, personnel & training and information systems departments. He was appointed Executive Vice President of Network Services in April 1989 and Executive Vice President of International Services in April 1994. He was awarded the Efficiency Medal in 1978 and the Public Administration Medal (Gold) in 1991 by the Singapore government. He is presently a Director of a number of overseas companies. Mr. Lim has retired from SingTel on 26 February 2006.

Dr. YIN Yen-liang , aged 57, was appointed as the Non-Executive Director of the Company in January 2003. Dr. Yin is also the Director of APT Satellite Company Limited and APT Satellite Investment Company Limited, subsidiaries of the Company. Dr. Yin is also the Director of APT Satellite International Company Limited, the substantial shareholder of the Company. Dr. Yin graduated with an MBA Degree from National Taiwan University in 1983 and received the PhD Degree in Business Administration from National Chengchi University in 1987. He has been President of the Ruentex Group, the holding company of one of the shareholders of APT Satellite International Company Limited, since 1994 and concurrently holding the position of Executive Director of SinoPac Holdings Co., Ltd., Executive Director of Bank SinoPac, Director of Acer Incorporate, Chairman of Aetna SinoPac Credit Card Company Limited.

Mr. WU Zhen Mu , aged 62, was appointed as the Non-Executive Director of the Company in June 1998. Mr. Wu is also the Director of APT Satellite Company Limited and APT Satellite Investment Company Limited, subsidiaries of the Company. Mr. Wu is also the Director of APT Satellite International Company Limited, the substantial shareholder of the Company. Mr. Wu graduated in Manufacturing Engineering of the Beijing Institute of Aeronautics in 1969 and obtained a Master’s degree in Electro-Mechanical Automation in the same institute in 1981. He was a lecturer in Zhengzhou Institute of Aeronautics from 1970 and 1979 and had been a lecturer, associate Professor and Professor in Beijing University of Aeronautics and Aerospace from 1982 to 1993. Since then, he has been appointed as a Professor of the Commission of Science and Technology of China Aerospace Corporation.

Mr. YONG Foo Chong , aged 41, was appointed as the Non-Executive Director of the Company on 8 March 2007. Mr. Yong is also the Director of APT Satellite Company Limited and APT Satellite Investment Company Limited, subsidiaries of the Company. He is also the Director of APT Satellite Telecommunications Limited, a jointly controlled entity between a wholly owned subsidiary of the Company and a shareholder of APT Satellite International Company Limited (“APT International”), the substantial shareholder of the Company. Mr. Yong is also the Director of APT International. Mr. Yong holds an Honours Degree in Electrical & Electronic Engineering from the National University of Singapore, specializing in communication technology. Mr. Yong has worked for Singapore Telecommunications Limited (“SingTel”), the holding company of one of the shareholders of APT International which is the substantial shareholder of the Company since 1998, serving in various appointments. Currently, Mr. Yong is the Head of Satellite for SingTel overseeing the fixed and mobile satellite business and infrastructure and also the director of Singasat Private Limited, a wholly owned subsidiary of SingTel, which is one of the shareholders of APT International. Prior to the current appointment in 2006, he was the Senior Director of Corporate Business Marketing and was responsible for the global marketing of B2B solutions. Mr. Yong had a 2-year stint as the Director of SingTel’s Optus Business Marketing and Product Management based out of Sydney, Australia, whose responsibility was to revamp the entire marketing and product strategy, which included steering the B2B business towards new strategic directions such as IP convergence and SME solutions investment. He was also responsible for strategic bid management which secured many key government and Australian MNC contracts. In 2001, Mr. Yong also helped the Corporate Business Group implement various strategic initiatives such as building a pan-Asian network of managed hosting data centers and was later appointed as Chief Operation Officer of the managed hosting business unit of SingTel. Before joining SingTel, Mr. Yong spent more than seven years in the ICT industry and held specialist and management positions in leading MNCs gaining significant successes and experiences in the area of Telecom Network Management. Apart from holding the current appointment with SingTel, Mr. Yong is also a board member of Asia Pacific Satellite Communications Council starting January 2007.

Mr. TSENG Ta-mon , aged 50, was appointed as an Alternate Director to Dr. Yin Yen-liang, the Non-Executive Director of the Company, in September 2004. He had been the Non-Executive Director of the Company from July 2003 to September 2004. Mr. Tseng is also the Alternate Director to Dr. Yin Yen-liang, the director of APT Satellite Company Limited and APT Satellite Investment Company Limited, subsidiaries of the Company. Mr. Tseng is also the Alternate Director to Dr. Yin Yen-liang, the director of APT Satellite International Company Limited, a substantial shareholder of the Company. Mr. Tseng graduated with an LL.B. Degree from National Chengchi University in 1980 and subsequently received the LL.M. Degree from University College London in 1982 and the LL.B. Degree from B.A. at University of Cambridge in 1984 respectively. He also graduated from the Inns of Court School of Law of Middle Temple in 1985 and became Barrister-at-Law in the same year. He was the Specialist of the Board of International Trade from 1985 to 1987. He was also the Partner of Dong & Lee from 1987 to 1992. He has been the Counsel of the Ruentex Group, the holding company of one of the shareholders of APT Satellite International Company Limited, since 1992.

Independent Non-Executive Directors

Dr. HUAN Guocang , aged 58, was appointed as an Independent Non-executive Director of the Company in August 2002. Dr. Huan is the member of the Audit Committee and the Remuneration Committee of the Company. Dr. Huan was also re-designated from acting as the member of the Nomination Committee of the Company to act as the Chairman of it on 1 July 2007. He is the Managing Partner of Primus Pacific Partners Limited (“Primus”). Before joining Primus, he was the Head of Investment Banking, Asia Pacific of The Hongkong and Shanghai Banking Corporation Limited and was the Managing Director and Co-Head of Investment Banking, Asia Pacific of Salomon Smith Barney. Dr. Huan has been joining investment banking sector since 1987 and has held senior positions at the Brookings Institution, the Atlantic Council of the U.S., J.P. Morgan & Co., BZW Asia Limited, and Columbia University. Dr. Huan holds a Ph.D. degree from Princeton University, Master of Arts from Columbia University and Master of Arts from the University of Denver.

Dr. LUI King Man , aged 53, was appointed as an Independent Non-Executive Director of the Company in August 2004. Dr. Lui is the Chairman of the Remuneration Committee of the Company and also is the member of the Nomination Committee of the Company. Dr. Lui was also re-designated from acting as the member of the Audit Committee of the Company to act as the Chairman of it on 1 July 2007. Dr. Lui has been a practising Certified Public Accountant in Hong Kong since 1989, and established his accounting firm K.M. LUI & CO in the same year. Before commencing his own practising, Dr. Lui had worked with an international accounting firm and a listed commercial bank. Dr. Lui received the accountancy education in United Kingdom in 1980 and attained professional accountant qualification in 1985. He is a Fellow of The Chartered Association Of Certified Accountants and Associate member of The Hong Kong Institute Of Certified Public Accountants. Dr. Lui obtained an MBA Degree from Heriot-Watt University in 1997 and received a Doctoral Degree in Business Administration from The University of Hull in 2004. Dr. Lui has over 27 years experience in accounting, finance, business acquisition and auditing fields. He has been a consultant of a number of commercial and non-commercial organizations.

Dr. LAM Sek Kong , aged 48, was appointed as the Independent Non-Executive Director of the Company on 1 July 2007. Dr. Lam is also the Member of each of the Audit Committee, Nomination Committee and Remuneration Committee of the Company. Dr. Lam graduated from the University of Hong Kong in 1984. He is a partner of Messrs. S.K. Lam, Alfred Chan & Co. He has been practicing law in Hong Kong since 1987. Dr. Lam is a member of the Hong Kong Society of Notary Public, a member of the China Appointed Attesting Officers Association in Hong Kong and a member of the Chartered Institute of Arbitrators (UK). Dr. Lam is also admitted as advocate and solicitor of the High Court of Singapore, barrister and solicitor of the Supreme Court of Australian Capital Territory, legal practitioner of the Supreme Court of New South Wales and barrister in federal court of Australia. Dr. Lam holds a bachelor degree and a master degree in laws from the University of Hong Kong, a master degree in laws from the University of Peking and a Ph.D. degree in laws from the Tsinghua University.

Mr. CUI Liguo , aged 38, was appointed as the Independent Non-Executive Director of the Company on 1 July 2007. Mr. Cui is also the Member of each of the Audit Committee, Nomination Committee and Remuneration Committee of the Company. Mr. Cui graduated from the faculty of economic law of the China University of Political Science and Law in 1991, and commenced his legal practice in PRC in 1993. He founded the Guantao Law Firm in 1994, and is acting a Founding Partner and the officer of its Management Committee. Mr. Cui has over 14 years of experience in legal sector, and holds independent directorships in the board of directors of several companies, such as UBS SDIC Fund Management Co., Ltd., China Spacesat Technology Co., Ltd and SDIC Xinji Energy Co., Ltd (corporations listed on the Shanghai Securities Exchange in China), SUFA Technology Industry Co. Ltd, CNNC (a corporation listed on the Shenzhen Securities Exchange in China). He is also a member of the Finance & Securities Committee of All China Lawyers Association; a director of Capital Market and the Securities Committee of Beijing Bar Association; an executive director and vice general secretary of the Chamber of Financial Street; and the legal counselor in internal control group of security issuing of Guodu Securities Limited and Bohai Securities Co., Ltd.

Senior Management

Mr. DONG Gang , aged 54, has been the Vice President of the Company since July 2005. He is also the Director of Acme Star Investment Limited, APT Satellite Telewell Limited, Skywork Corporation, Haslett Investments Limited, APT Telecom Services Limited and APT Communication Technology Development (Shenzhen) Company Limited (“APT Shenzhen”), subsidiaries of the Company. He is also the chairman and the general manager of APT Shenzhen. He is also the Director of APT Satellite Telecommunications Limited, a jointly controlled entity between a wholly-owned subsidiary of the Company and one of the shareholders of APT Satellite International Company Limited, the substantial shareholder of the Company. Mr. Dong graduated with a Bachelor’s degree in Beijing Post and Telecommunications Institute (presently known as Beijing University of Post and Telecommunications). He is accredited as Senior Engineer. He held the posts as Deputy Director of Microwave Station, Deputy Director of Technical Department, Vice Chief Engineer, and Chief Engineer of Beijing Wireless communication Bureau. He has been appointed as Vice President of China Space Mobile Satellite Telecommunications Company Limited since May 1995. He has plentiful experience in telecommunication operation and management.

Dr. LO Kin Hang, Brian , aged 51, has been the Vice President of the APT Group since April 2002 and Company Secretary (since October 1996) of the Company. Dr. Lo joined the Company in September 1996 and had been the Assistant to the President from December 1997 to April 2002. Dr. Lo is also the Director of Acme Star Investment Limited, APT Satellite Telewell Limited and Ying Fai Realty (China) Limited, subsidiaries of the Company. He is also the Chief Executive Officer of APT Satellite Telecommunications Limited, a jointly controlled entity between a wholly-owned subsidiary of the Company and one of the shareholders of APT Satellite International Company Limited, the substantial shareholder of the Company. He graduated with an Associateship in Production and Industrial Engineering and an M.Sc. Degree in Information Technology from Hong Kong Polytechnic University, and a MBA Degree from the University of Wales, UK and a Doctorate Degree in Business Administration in University of Hull, UK. He has attained several professional qualifications including Chartered Engineer, Member of the Institute of Electrical Engineers and is a Fellow of the Institute of Chartered Secretaries and Administrators in the United Kingdom and a Fellow of the Hong Kong Institute of Company Secretaries. Prior to joining the APT Group, he was a Director and senior management executive responsible for financial and investment management and the company secretary of a publicly listed company in Hong Kong. Dr. Lo has about 18 years of experience in corporate and project management.

Mr. CHEN Xun , aged 37, has been appointed as the Vice President since 1 June 2007 and had been the Assistant President of the Company since July 2004. He joined the Company in 2000 and had worked as the Director of Engineering and Technical Operations Department and the Deputy Chief Engineer of the APT Group. Mr. Chen graduated from the Department of Computer and Telecommunications of Chongqing Institute of Post & Telecommunications and holds a MBA degree from the University of South Australia. He had been working for China Telecommunications Broadcast Satellite Corporation, one of the shareholders of APT Satellite International Company Limited, the substantial shareholder of the Company, from 1992 to 1999 before joining the APT Group.

Mr. YANG Qing , aged 44, has been appointed as the Vice President since 1 June 2007 and had been the Assistant President of the Company since July 2004. He joined the Company in 2000. He had worked as the Deputy Director of the Engineering and Technical Operations Department of the APT Group. Mr. Yang graduated from the Department of Flight Vehicle Engineering of Beijing Institute of Technology in June 1985. During the period from July 1985 to December 1999, he had been working for CALT (China Academy of Launch Vehicle Technology) and was designated as Senior Engineer and the Deputy Director of systems designer of LM-2C launch vehicle by CALT before joining the APT Group.

Compensation

None of the Company’s directors and officers or affiliates of such persons is or has been indebted to the Company or any of its subsidiaries at any time since the beginning of the last completed fiscal year.

Directors’ remuneration is as follows (in HK$ thousand):

						Salaries,				Retirement
		Directors’				allowances and				scheme				2006
		fees				benefits in kind				contributions				Total
		HK$				HK$				HK$				HK$
Executive directors
Ni Yifeng			50				2,800				165				3,015
Tong Xudong			50				2,263				142				2,455
Non-executive directors
Rui Xiaowu (note a)			3				—				—				3
Liu Ji Yuan			47				—				—				47
Zhao Liqiang			3				—				—				3
Zhang Hainan			47				—				—				47
Lim Toon			50				—				—				50
Ho Siaw Hong			38				—				—				38
Lan Kwai-chu			12				—				—				12
Yin Yen-liang			50				—				—				50
Wu Zhen Mu			50				—				—				50
Tseng Ta-mon (note b)			—				—				—				—
Independent non-executive directors
Yuen Pak Yiu, Philip			100				—				—				100
Huan Guocang			100				—				—				100
Lui King Man			100				—				—				100
			700				5,063				307				6,070

														Performance
						Salaries,				Retirement				related
		Directors’				allowances and				scheme				incentive				2007
		fees				benefits in kind				contributions				payment				Total
		HK$				HK$				HK$				HK$				HK$
Executive directors
Ni Yifeng			50				2,840				165				78				3,133
Tong Xudong			50				2,331				145				68				2,594
Non-executive directors
Rui Xiaowu (note a)			—				—				—				—				—
Zhao Liqiang			50				—				—				—				50
Lim Toon			50				—				—				—				50
Yoo Foo Chong			41				—				—				—				41
Ho Siaw Hong			9				—				—				—				9
Yin Yen-liang			50				—				—				—				50
Wu Zhen Mu			50				—				—				—				50
Tseng Ta-mon (note b)			—				—				—				—				—
Independent non-executive directors
Huan Guocang			200				—				—				—				200
Lui King Man			200				—				—				—				200
Yuen Pak Yiu, Philip			99				—												99
Lam Sek Kong			101				—				—				—				101
Cui Liguo			101				—				—				—				101
			1,051				5,171				310				146				6,678

The details of these benefits in kind are disclosed under the paragraph “Share option schemes” in Note 25 of “Consolidated Financial Statements” of the Company.

Notes:

Alternate directors are not entitled to receive any directors’ fees:

(a)		Mr. Rui Xiaowu, a non-executive director, has waived his director’s fee for 2007.
(b)		Mr. Tseng Ta-mon was re-designated from non-executive director to alternate director on September 8, 2004.

Individuals with highest emoluments(in HK$ thousand)

Of the five highest paid individuals of the APT Group, two are directors (2006: two) whose remuneration is disclosed in Note 7 of “Consolidated Financial Statements” of the Company. The aggregate of emoluments in respect of the other three (2006: three) individuals are as follows:

		2006				2007
Salaries and other emoluments			4,541				4,839
Performance related incentive payments			154				192
Retirement benefits contributions			303				330
			4,998				5,361

The emoluments of the three (2006: three) individuals with the highest emoluments are within the following bands:

		Number of individuals
		2006				2007
$Nil to $1,000			1				—
$1,500 to $2,000			—				1
$2,001 to $2,500			2				2
$2,501 to $3,000			—				—
			3				3

Key management personnel remuneration(in HK$ thousand)

Remuneration for key management personnel is as follows:.

		2006				2007
Short-term employee benefits			10,591				11,057
Other long-term benefits			687				367
Termination benefits			—				706
			11,278				12,130

At December 31, 2007, the total amount accrued by the Company or its subsidiaries in respect of provision for employee pension, retirement or similar benefits was HK$13.2 million (US$1.7 million) (2006: HK$10.0 million).

Board Practices

Term of office

The term of office of all directors except the Chairman of the Board, Mr. Rui Xiaowu, and the President, Mr. Cheng Guangren, is normally not fixed for a specific term but they shall retire from office by rotation once every three years in accordance with Bye-law 87 of the Company’s Bye-laws and shall be eligible for re-election, while the director to whom is appointed to fill a casual vacancy shall hold office until the next following annual general meeting of the Company for re-election at such meeting.

As long as the Chairman of the Board and the President also holds such offices are not subject to retirement by rotation in accordance with Bye-law 87.

Service Agreements

Mr. Tong Xudong, Executive Director & Vice President, have entered into service contracts with the Company for an initial term of three years, commencing April 20, 2004 and continuing thereafter until terminated by either party giving to the other not less than six months’ notice.

Except as disclosed above, as of June 24, 2008 no Director has a service contract with the Company or its subsidiaries, which is not determinable by APT Group within one year without payment of compensation (other than statutory compensation).

Under the service contracts, Mr. Tong (the “Contracted Director”) is entitled to a basic salary payable monthly in arrears by the Company, with such basic salary subject to annual review by the Company’s board of directors having regard to the recommendation from the Company’s Remuneration Committee. The Contracted Director is provided with housing allowance subject to an agreed maximum amount, which maximum amount may be reviewed by the Company’s board of directors having regard to the recommendation from the Company’s Remuneration Committee. The Contracted Directors is also entitled to receive certain other benefits such as the use of a motor car, the provision of recreation club memberships and medical and personal accident insurance, and participation in the Company’s retirement scheme, incentive bonus scheme and eligible to receiving share option under Scheme 2002.

Other than the directors of the Company, the service contracts of senior executives have no definite terms of office, and may be terminated by either party giving not less than 4 months’ to 6 months’ notice or payment in lieu of notice. Under the service contracts, the executive is entitled to a basic salary together with a housing allowance payable monthly in arrears by the Company and one month double pay at the end of the calendar year, with such basic salary subject to annual review by the Company. In addition, the executive is entitled to a discretionary annual bonus based upon the Company’s performance. The executive is also entitled to receive certain other benefits such as the provision of medical and personal accident insurance and participation in the Company’s retirement scheme and eligible to receiving share option.

Audit Committee, Nomination Committee and Remuneration Committee

The Audit Committee was formed by the Company on July 31, 1999. The Audit Committee currently consists of four independent non-executive directors, Dr. Lui King Man (the Chairman of the Audit Committee), Mr. Huan Guocang, Dr. Lam Sek Kong and Mr. Cui Liguo. The Board of Directors has determined that each of the members of the Audit Committee is currently independent under the rules of the New York Stock Exchange.

Under its Charter (also known as terms of reference) as revised on April 11, 2005 and incorporated by reference, the Audit Committee is required to be composed of directors who are independent of the management of the Company and are free of any relationship that, in the opinion of the Company’s Board of Directors, would interfere with their exercise of independent judgment as Committee members. The Audit Committee is authorized by the Board of Directors to investigate any activity within its Charter and to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Audit Committee. It can also obtain support from outside legal or other independent professional advisors and experts. The Audit Committee meets at least twice a year and its duties are summarized as below:

	•		to be primarily responsible for making recommendation to the Board of Directors on the appointment, reappointment and removal of the external auditor, and to approve the remuneration and terms of engagement of the external auditor;
	•		to monitor integrity of and review significant financial reporting judgments of the half-year and annual financial statements;
	•		to discuss problems and reservations arising from the interim and final audits;

	•		to consider the major findings and internal investigations and management’s response;
	•		to review the Company’s statement on financial controls, internal control system and risk management systems (where one is included in the annual report) prior to endorsement by the Board of Directors;
	•		to review and monitor the external auditors’ independence and objectivity and effectiveness of the audit process in accordance with applicable standard, as well as the nature and scope of other professional services provided to the Company by the external auditor;
	•		to review APT Group’s financial and accounting policies and practices;
	•		to review periodically Company policy statements to determine their adherence to the Company’s codes of conduct;
	•		to investigate any matter brought to its attention within the scope of its duties, and to retain outside legal counsel or other professional advice for this purpose if, in its judgment, that is appropriate; and
	•		to consider other topics, as determined by the Board of Directors.

On April 11, 2005, Nomination Committee and Remuneration Committee were formed. Currently, Messrs. Tong Xudong, Qi Liang, Huan Guocang, Lui King Man, Lam Sek Kong and Cui Liguo are the members of these two committees. Dr. Huan Guocang and Dr. Lui King Man, the independent non-executive directors of the Company, are the Chairman of the Nomination Committee and the Remuneration Committee, respectively.

The Nomination Committee, under its Charter (also known as terms of reference) as incorporated by reference and pursuant to the domestic corporate governance requirements, is required to be composed of a majority of members who should be independent non-executive directors and are independent of the management of the Company and are free of any relationship that, in the opinion of the Company’s Board of Directors, would interfere with their exercise of independent judgment as Committee members. The Nomination Committee is authorized by the Board of Directors to provide recommendations in respect of the composition of the Board of Directors, the appointments of Directors and the independence of independent non-executive directors. It shall also be entitled to access external professional advice whenever necessary. The Nomination Committee meets at least once a year and its responsibilities are summarized as below:

	•		to review the structure, size and composition of the Board of Directors;
	•		to identify individuals suitably qualified to become directors;
	•		to assess the independence of Independent Non-executive directors;
	•		to make recommendations to the Board of Directors on matters relating to the appointment or re-appointments of directors and succession planning for directors in particular the Chairman and the President;
	•		to establish the nomination procedures; and
	•		to submit a work report to the Board of Directors yearly.

The Remuneration Committee, under its Charter (also known as terms of reference) as incorporated by reference and pursuant to the domestic corporate governance requirements, the Remuneration Committee is required to be composed of a majority of members who should be independent non-executive directors and are independent of the management of the Company and are free of any relationship that, in the opinion of the Company’s Board of Directors, would interfere with their exercise of independent judgment as Committee members. The Remuneration Committee is authorized by the Board of Directors for providing recommendations in respect of the remuneration of directors and senior management staff and related policies. It shall also be entitled to access external professional advice whenever necessary. The Remuneration Committee meets at least once a year and its responsibilities are summarized as below:

	•		to make recommendations to the Board on policy and structure for all remuneration of directors and senior management and on the establishment of a formal procedure for developing remuneration policy;
	•		to determine the specific remuneration packages of all directors and senior management, including benefits in kind, pension rights and compensation payments;
	•		to review and approve the performance-based remuneration by reference to corporate goals and objectives resolved by the Board of Directors;
	•		to review and approve the compensation payable to directors and senior management;
	•		to review and approve compensation arrangements relating to dismissal or removal of directors;
	•		to ensure that no director or any of his/her associates is involved in deciding his own remuneration;

	•		to formulate and review regularly the policy for the remuneration of directors, assessing directors’ performance and approving the terms of directors’ service contracts; and
	•		to submit a work report to the Board of Directors yearly.