Inmarsat Ventures plc Our missionis to be the world’s … in Singapore the industry’s first high-speed global Mobile Packet Data service. Inmarsat Ltd Inmarsat Ltd owns and operates

Inmarsat Ventures plcAnnual Report & Accounts 2001

Seamless communicationworldwide

Inmarsat Ventures plc99 City Road London EC1Y 1AX United Kingdom

Tel: +44 (0)20 7728 1000Fax: +44 (0)20 7728 1044www.inmarsatventures.com

Our mission is to be the world’s leading provider of global mobile communicationservices via satellite.

Inmarsat Ventures plc A

nnual Report &

Accounts 2

001







nnual Report &

Accounts 2

001

Inmarsat Ventures is a truly global business, reaching the four corners of the globe providing high speed communications solutions at any latitude, longitude and altitude.

The subsidiary businesses of Inmarsat Ventures plc Inmarsat’s global coverage

Inmarsat Ventures plc Annual Report & Accounts 2001

Pacific Ocean Region• December 2001, Inmarsat

successfully manoeuvred a satellite to a new location of 142 degrees west to provide lease traffic in the region.

• Crew calling – free e-mail for seafarers contacting their families on Father’s Day.

• Inmarsat’s latest high-speed Aero service, Swift64, unveiled at the WAEA, Australia.

Atlantic Ocean Region West• Inmarsat partners granted US

domestic access rights for Inmarsat services.

• Aid agency TSF deploys 12 Inmarsatmini-M phones and a GAN terminalto help survivors of the naturaldisasters in Peru and El Salvador.

• Inmarsat Regional Office opens in Washington.

Atlantic Ocean Region East• Inmarsat announces its new

maritime service – Inmarsat Fleet at Europort, Netherlands.

• New Regional Office for LatinAmerica opens in Miami.

• Inmarsat mini-C launched to fishing and transport communities.

Indian Ocean Region• Heightened media activity in

the region boosts traffic.

• Inmarsat activates spot beam to increase capacity and coverage of mini-M for Volvo round-the-worldOcean Race.

• Inmarsat promoted atCommunicAsia in Singapore theindustry’s first high-speed globalMobile Packet Data service.

Inmarsat LtdInmarsat Ltd owns and operates a global satellite network and delivers its solutions through aworldwide group of service providersin over 150 countries who offer acomprehensive range of mobilecommunications services in the air, on land and at sea to approximately238,000 registered users.

Invsat LtdInvsat Ltd provides integratedtelecommunications systems andservices, including satellite systems,radio systems and VSAT (very smallaperture terminal) satellite solutionsto oil and gas, maritime, governmentand emergency services customers.

Rydex Corporation LtdRydex Corporation Ltd develops andprovides wireless electronic mail,ship/shore messaging and automateddata communications systems to themaritime industry.























Inmarsat Ventures plc Annual Report & Accounts 2001 1

>Revenues up 6 per cent to US$441.8 million

>EBITDA prior to impairments stable at US$279.4 million

>Excluding one-off items, PBT improves 25.9 per cent to US$116.8 million

>Data usage continues to increase

Contents01 Financial highlights

02 Chairman’s statement

04 Chief Executive’s review

06 Operating review

18 Financial review

22 Board of directors

24 Management team

24 Directors and advisors

25 Directors’ Report

28 Statement of Corporate Governance

30 Report of the Board on Directors’ Remuneration

34 Independent auditors’ report to themembers of Inmarsat Ventures plc

35 Consolidated profit and loss accounts

36 Consolidated balance sheets

37 Company balance sheets

38 Reconciliation in movement in groupshareholders’ funds

38 Statement of group total recognisedgains and losses

39 Consolidated statement of cash flows

40 Notes to the consolidated financial statements

67 Five year summary

68 Global contact details

Financial highlights

Revenues US$ millions

1997 1998 1999 2000 2001

378 399

110

291

401417

442

Profit before taxUS$ millions

1997 1998 1999 2000 2001

127 123

(79)

41

(38)93

63

Operating profit before exceptionalsUS$ millions

1997 1998 1999 2000 2001

151 144

42

91

133*

106 107**

Basic earnings per share US$

1.27 1.23

(1.02)

0.4

(0.62) 0.63 0.66

As an internationaltreaty organisation As a limited company

* Before making provision in 1999 for the impairment of an investment of US$150 million.

** Before making provision in 2001 for the impairment of an investment of US$11.7 million.

1997 1998 1999 2000 2001

The above figures have been restated for changes in accounting policies, prior year adjustments and share split as detailed in the financial statements.

Chairman’s statement

Group resultsOur results for the year ended December 31,2001 show group revenue of US$441.8million, an increase of approximately 6 percent over last year’s figures of US$416.9million. This growth has been despite theeffect of the ongoing migration of customersfrom analogue to digital services in the coreInmarsat Ltd business and our mandatoryannual average 4 per cent reduction in pricesunder the agreement with our globaldistribution partners until April 2004.

Profit before tax was US$63.3 million,compared to US$92.8 million in 2000.Factors in this reduction are an increase in net operating costs, as we invest in our B-GAN services; Initial Public Offering (IPO)costs of US$9.8 million incurred during2001 which had to be expensed when theIPO was postponed; and impairments of the value of some of the group companiestotalling US$22.6 million. Before these costs,which are essentially of a one-off nature, theunderlying results are US$116.8 million andshow an improvement of 25.9 per cent overthe 2000 results.

Earnings before interest, tax, depreciationand amortisation (EBITDA), prior toimpairments, were US$279.4 million for 2001, against US$286.5 million for2000, shows a healthy performance,particularly given the current difficultiesexperienced by companies operating in the telecommunications sector. Dilutedearnings per share were US$0.65 for 2001(US$0.62 per share for 2000 – adjusted for the 10:1 share split in March 2001).

“Before these one-off costs, the underlying profit before tax results are US$116.8 million andshow an improvement of 25.9 per cent over the 2000 results.”

Richard Vos ChairmanMarch 1, 2002

2 Inmarsat Ventures plc Annual Report & Accounts

Dear Shareholder 2001 was an unsettled year due touncertainty in world economies and theevents of September 11th. Despite thechallenges that arose, Inmarsat Venturesreported an increase in revenues and madesignificant progress towards implementingits Broadband Global Area Network (B-GAN)initiative. As such, 2001 representedanother significant step towards our goal of being the world’s leading provider ofglobal mobile communications services via satellite.


Group companiesIn September 2001, the board of directorsdecided that no further funding would bemade available to support Setfair.com Ltd, the maritime e-procurement business ofMerasis Ltd. This decision was reported to shareholders at the time and both Setfairand Merasis have now been closed. With thedemise of many “dot.com” companies andthe general economic downturn, the speed of take-up of the e-procurement service wasslower than anticipated and a decision toclose the business was seen as prudent andan appropriate response. The costs for theclosures have been taken into the 2001financial accounts.

Our joint venture company, Airia Ltd, madeprogress during the year with developing thevideo-compression techniques required for its live in-flight entertainment service to theairline industry. However, the events ofSeptember 11th prompted an immediatecritical review by airlines of all their flightschedules and costs, including theirrequirement for in-flight entertainment, andthis has impacted negatively on the timingand the likely demand for Airia’s service.Stringent cost containment measures havealready been implemented. In its 2001financial accounts, Inmarsat Ventures hasrecognised an impairment in the value ofAiria to reflect the changed expectations itnow has for that business.

Business initiativesOur reputation with our distributors, partners,manufacturers and customers is of theutmost importance to us as we look at howwe can improve and refine our services andsolutions to enterprise users. To this end, welaunched a major new service and severalnew business initiatives in 2001 and

announced future ones which will belaunched during 2002.

During the year, a significant amount of time,energy and investment has been committedto the continuing programme for the launchof the next generation Inmarsat-4 satellitesand the B-GAN services which will use thenew network. This remains an excitingproject for the Inmarsat Ltd business buildingupon the company’s strategy to provide highbandwidth mobile data services.

Board of directors and shareholder activitiesA valuable addition to our board inSeptember 2001 was Dr Raymond Ch’ien.He brings public company business andboard experience to the company.

In addition to the annual general meeting in June 2001, we held two regionalshareholders’ meetings during the year inMexico City and Amsterdam; these were wellattended by shareholders from those regions.

Initial Public Offering (IPO)I have provided regular updates toshareholders on the company’s plans tobecome a publicly quoted company. Towardsthe end of last year, the board of directorsformally agreed to follow the advice of itsGlobal Co-ordinator investment bank topostpone the IPO. Our investment bankerscontinue to review the stock marketconditions carefully and we will look toundertake an IPO at the appropriate time.

In light of the poor stock market conditions,Inmarsat Ventures prudently approached theFederal Communications Commission (FCC)in the US to request an extension of theORBIT Act deadline to undertake an IPO by

December 31, 2001. We have been advisedthat this deadline has been extended toDecember 31, 2002 and that the FCC hasthe authority to further extend it to June 30,2003. This extension was welcomed by usand also by several of our partners who weregranted access rights to market Inmarsat Ltdservices in the US, thus opening up thisimportant market to our distribution partners.

DividendsThe board of directors has determined that,after taking into account the current positionof the company and in particular its extensiveinvestment programme in B-GAN, nodividend payment should be made for the2001 financial year.

Annual general meetingThe Notice of this year’s annual generalmeeting is enclosed with this annual report.As always, we look forward to seeing as manyof our shareholders at the meeting as possible.

Future directionInmarsat Ventures has taken decisive stepsduring the year to build upon its reputation for delivering high quality service to itspartners and customers and by responding tobusiness issues as they arise in a forthrightand measured way. Inmarsat’s focus remainsto meet the increasing needs of enterpriseusers for higher bandwidth communicationservices while seeking to fulfil its stated aimto become the celestial extension to theterrestrial networks.

I would like to thank not only our employeesfor their continued excellent work, dedicationand vision for the company, but also ourdistribution partners and manufacturers who remain critical to our business and ourfuture development.

“The Inmarsat-4 satelliteprogramme remains anexciting project for theInmarsat Ltd business.”

4 Inmarsat Ventures plc Annual Report & Accounts 2001

Chief Executive’s review

Michael StoreyPresident and Chief Executive OfficerMarch 1, 2002

The pace of growth and developmentincreased through the year, particularly within Inmarsat Ltd, the core business, andInvsat Ltd, our specialist VSAT operation. It isimportant that this drive and energy continuein order that we deliver enhanced servicesand solutions to our partners and customersaround the world.

Strategically, during 2001, we made somejudicious business decisions regarding theclosure of Setfair.com Ltd and Merasis Ltd.The decision to start up these operations wasright at the time. However, the consequentactions were also timely, necessary andprudent to minimise any adverse impact onthe Inmarsat Ventures group in unpredictable,turbulent economic times. Our joint ventureoperation, Airia Ltd, also implemented costcontainment measures during the year inresponse to changing market needs.

Inmarsat Ltd During 2001, we took positive steps toenhance some of our existing products andofferings and announced the launch of someinnovative new services which will be inoperation during 2002: Inmarsat Fleet toserve the maritime market; Swift64 to serve the aeronautical sector and furtherdevelopment work on Regional B-GAN forthe land mobile market. Our new servicesare in response to customer needs for higherspeed mobile data services continuing thetrend to move away from our traditionalanalogue services to digital data offerings.

We have also seen consolidation in thetraditional mobile satellite distributor marketand we now have five major distributors whoaccount for approximately 80 per cent of the

“Our new services are in response to customer needs for higher speed mobile data services.”

Our strategy remains to maximise our brandand our core competencies in providing high bandwidth data services to our growingcustomer base. We aim to deliver moreadvanced communications capabilities to support their increasing globalrequirements. We have strong operationaldisciplines and a professional managementteam with excellent staff who are committedto the future success of the group.

core revenues. We believe this to bebeneficial to the growth and expansion of the mobile satellite business. Continuation of the successful distribution of the company’sexisting services remains fundamental to ourfuture and we continue to work closely withour distributors to maximise new marketopportunities on a global basis.

During the year, we invested funds and moreimportantly resources to develop specificrevenue enhancing initiatives with ourpartners to increase usage of our existingservices through new market opportunitiesand also to use packaged solutions withInmarsat services at their heart.

The next generation Inmarsat-4 satellitesystem is the largest capital expenditureprogramme ever undertaken by the company.Its successful transition from the planningand manufacturing phase to in-orbit serviceexpected in 2004 is crucially important tothe company’s future. We have manyemployees devoted to this project andworking tirelessly with our manufacturers to ensure that we maintain tight control overthe delivery of the new satellites. Equallyimportant are the Broadband Global AreaNetwork (B-GAN) service which will operate on the new satellites, and thecommencement, expected towards the end of 2002, of the interim Regional B-GANservice. Both the Regional B-GAN and thefull B-GAN services will enable Inmarsat tomeet the expected demand from businessesfor mobile broadband services providing aseamless extension to fixed corporatenetworks. Considerable work has taken placeduring 2001 to specify the user terminals for each service and other key components,

which will allow effective and efficient use ofthe services.

The proposition for the Regional B-GANhigh-speed mobile packet data service isquite different from our other services andhas required focus on the development of theinternal skill set to promote this to ourpartners and consequently for our partners toembrace a different distribution philosophy.Great progress has been made in educatingexisting and potential complementarydistributors about this new service and weare excited about the opportunities it providesfor Inmarsat and our partners. Inmarsat’sexisting distribution channel includes manywell-known distributors with whom we areworking successfully to develop our futuredistribution strategy and to ensure thesuccess of the B-GAN proposition.

Invsat LtdInvsat, which provides integratedcommunications networks and VSATsystems, had strong revenue growth duringthe year of over 60 per cent over theprevious year with revenues of US$24.4million. The performance of the business hasimproved since it was acquired in 2000 andnew systems have been introduced to makeit more efficient at all levels of the business.The strengthened management team andincreased staff morale have contributed tothis improvement.

Rydex Corporation LtdThe shares in Rydex, a marinecommunications software specialist that waspart of the Merasis group of companies, havenow been transferred to Inmarsat Ventures.Serving the maritime market, Rydex develops

communications suites, which are suited to both public and private hub customers. More recently the company has also beenworking on applications solutions for differentInmarsat services as well as providing specificcustomisation of its solutions for customersas appropriate. Rydex contributed US$1.5million in revenues during the year.

Télécoms Sans FrontièresDuring the year, we continued our support for the telecommunications relief aid organisation Télécoms Sans Frontières(TSF) by providing front line satellitetelecommunications services. In wanting todo more for this worthy cause, we are alsovery proud that during the year we wereinstrumental in setting up a UK registeredcharity, the Télécoms Sans FrontièresFoundation, to support the activities of TSF.

Way forwardThese are exciting times as we continue toextend our global mobile communicationsservices to meet increasing demand forgreater high-speed data solutions andrespond to the growing demand for valueadded content applications to support theend user’s business requirements. With theextensive investment in the Inmarsat Ltdbusiness through our leading edgedevelopments for our next generation ofsatellites and our planned faster, dataintensive services, and the contributions from Invsat and Rydex in their own specialistmarkets, we believe Inmarsat Ventures will be able to respond positively to market requirements.


“We continue to work closely with our distributors to maximise new market opportunities on a global basis.”


Seamless Communication >Quality of service Inmarsat achieved overall network availability foran average of 99.99 per cent of the time in2001 and continues to promote its reputation forexcellent reliability and leading edge technology.

Today’s business applications areincreasingly sophisticated and powerful.Sitting at your desk you have significantpower at your fingertips. But what happenswhen you leave your desk and move downthe corridor, or worse still have to drive 30miles to a client meeting? All of those office-based services are currently largelydependent on you connecting to yourcorporate network at the office via a 9.6 kbit/s cellular connection.

Inmarsat provides a flat rate charge,available wherever you are calling from andto, which can be more cost effective thansome cellular roaming equivalent systems or calling from a hotel – particularly if thatconnection is to retrieve e-mail or someother data call.

Increasingly businesses are seeing mobilesatellite communications supplied byInmarsat Ltd as a reputable and secure

option to provide their workforce with a reliable data communications link.

Today’s Inmarsat technology allowsprofessionals to benefit from a two-way 64 kbit/s Mobile ISDN or even Mobile PacketData connection using Global Area Network(GAN) service from virtually anywhere in the world. Other Inmarsat services are beinglaunched in 2002 to give the sameconnectivity at sea and in the air.


Users can connect to both the weband their intranet from virtually anylocation through the Inmarsat GAN Mobile Packet Data service.

Inmarsat GAN provides 64 kbit/sMobile ISDN, ideal for applicationssuch as videoconferencing and image transfer.


Seamless Communication >Unparalleled bandwidthInmarsat is the only company currently offering, viasatellite, both a high-speed global mobile 64 kbit/sISDN service and IP mobile packet data servicethrough its Global Area Network (GAN).

Today the world is hungry for up-to-theminute news and information from aroundthe globe. Web-based news services and 24 hour news broadcasts are feeding thatdemand, but to do so reporters have to getcloser to the action, be fast on their feet and most importantly get their reports outas they happen.

It is no longer acceptable to wait days oreven hours to file a story and increasinglyInmarsat is providing the reliable connection

to allow live footage, store and forwardvideo, radio broadcast and of course text-based reporting from amongst theaction as it happens.

It has almost become the norm that when a news story breaks, Inmarsat’s Global Area Network (GAN) with its 64 kbit/s ISDNconnection is empowering videophone and other video feeds from the field throughthe Inmarsat satellites back to base withinhours of the event happening.

And it is not just the distant places aroundthe world; increasingly media organisationsuse Inmarsat GAN for reliable high-speedconnections via satellite to allow outsideradio broadcasts from radio cars in Europe,or simply so that they can beat their rivalsto the scoop.


Live broadcasts and store-and-forward video via Inmarsat GAN are increasingly popular with global media organisations.

Frontline journalists can transmitbroadcast quality footage and highquality still images from virtuallyanywhere in the world.


Seamless Communication>High reliabilityInmarsat provides the satellite communicationsrequirement of the International MaritimeOrganisation’s Global Maritime Distress and SafetySystem (GMDSS). The company also provides highlyreliable voice and high bandwidth commercialsolutions to merchant fleets and other vessels.

Increasingly the vessel on the high seas isbecoming another node in the fleet operator’scorporate IT network. At sea for months at atime, mariners need to be able to access thelatest shipping data, manifests, even weatherreports and market prices, to ensure that theyoptimise their routes and maximise therevenue potential of their cargoes.

But it is not only keeping up-to-date with e-mails that is required, faxing securedocuments, remote monitoring and

diagnostics of engine equipment, web applications, remote LAN access and even calling family at home, are increasingly thecommunications challenges facing the shipowner and fleet operator. All are possible withthe current generation of Inmarsat maritimeservices and will benefit from the enhancedservices to be offered through the newInmarsat Fleet portfolio.

The sea is one of the harshest environmentsin the world; it is an environment with which

Inmarsat is familiar providing as it does, the satellite communications requirement ofthe International Maritime Organisation for the Global Maritime Distress and Safety System (GMDSS).

Satellite network reliability, coverage andseamless and high-speed communications aretested to the limit in the world’s oceans, and itis the same Inmarsat network which helps tosave mariners’ lives whilst also helping themto maximise their business opportunities.


At sea for months at a time, mariners need to be able to accessthe latest shipping data, manifestsand weather reports.

Inmarsat provides the satellitecommunications requirement of theGlobal Maritime Distress and SafetySystem (GMDSS).


Seamless Communication>Integrated SolutionsInvsat provides integrated telecommunications systems and services solutions to oil and gas, maritime, governmentand emergency services customers.

Most of the major developments indeepwater exploration and production overthe last 25 years have taken place offshoreBrazil. The burgeoning South American oiland gas market produces over one millionbarrels a day, with the Campos Basin areagenerating around three-quarters of the total output.

In such a remote and hazardousenvironment it is essential to have efficient

emergency and safety telecommunicationssystems. Invsat has been operating in Brazilfor a number of years and has played a vitalrole in providing communication networksfor floating production platforms.

During 2001 the company supplied PABX,public address, LAN and entertainmentsystems as well as GMDSS (Global MaritimeDistress and Safety System) to two FloatingProduction Storage and Offloading (FPSO)

vessels located in the Campos Basin.Communications were deployed over a stabilised 2.8 metre VSAT system.

Invsat has also been involved in similarprojects in the North Sea, West Africa and the Far East.


Rydex Corporation develops and provideswireless electronic mail, ship/shore messagingand automated data communications systemsto the maritime industry.

Headquartered in San Francisco, a principal carrier of containerised freight and automobiles chose the Rydex rmx2solution for a variety of reasons. The centraloffice uses the Microsoft suite of products,and as a result was very familiar with the Outlook e-mail, which can be used in conjunction with the Rydex rmx2 product suite.

The company was also concerned with theoperating costs of their communications,and the Rydex software was a cost efficient

solution through use of its optimisedcommunications protocol.

In addition there are a number ofcommercial maritime related featuresprovided with rmx2. Using the Rydexautomated file transfer and taskmanagement tool to interface with thirdparty ship management software onboardeach vessel, the operations group can nowsend and receive vital fleet information,vessel status, re-order, and inventoryinformation on a daily basis.

Using the Rydex reporting module, the company will keep track of all the datacalls made from each vessel and be able to apportion communications costs tovarious internal departments and agents and charterers.

Reliable, fast and cost effective e-mailcommunication is vital to the smoothoperation of their vessels and this isachieved through use of the Rydex coretechnology and extended features.


Operating review

Inmarsat LtdDemand for Inmarsat satellite communicationsapplications in general reached an all-timehigh in 2001, and we increased our focus on markets in the Far East, Africa, and Northand South America. A number of our keypartners have, for the first time, gaineddomestic access to the US market followingthe granting of licences by the US Federal Communications Commission.

As in the previous year, we achieved averageoverall network availability of 99.99 per centof the time in 2001. Inmarsat retains its pre-eminent position as currently the onlycompany offering a high-speed global mobiledata ISDN-compatible service via satellite of64 kbit/s, and providing an IP packet dataservice via its Global Area Network (GAN)service, with the ability to achieve up to 128kbit/s by multiplying channels. In addition,we are still currently the only provider ofglobal communication services to the long-haul aviation industry, which is nowparticularly focused on security, a marketwhich Inmarsat is well positioned to serve.

What’s new?Highlights of the year include the continuedrollout of the GAN service and in June, theannouncement of our newly developedMobile Packet Data Service (MPDS). This is the world’s first high-speed globalmobile satellite packet data service providing enterprise-level customers with IP-based services and adds to our existingMobile ISDN services, both solutionsunderpinning initiatives to stimulate usage of the GAN service.

2001 was an exciting and eventful year for the group, marked by new service launches,product innovations and significant progress on long-term projects. Working towards ourgoal of establishing Inmarsat Ventures as theworld’s leading provider of global mobilecommunication services via satellite, wecontinued to see increased penetration of ourvarious services throughout the year. By way of illustration, there are now approximately238,000 terminals registered to receiveInmarsat’s maritime, land and aeronauticalservices, an increase of approximately 12 percent over last year. We also achieved a numberof milestones in 2001, both commercially and in terms of our long-term development.Here, group companies report on their progress during 2002.

Inmarsat GAN Mobile Packet Dataenables seamless interaction betweenhead office and field operations.

MPDS delivers data in packets optimised foruse over Inmarsat’s network of geostationarysatellites, thus giving the potential of “alwaysconnected” technology. Users are chargedonly for the amount of data that they sendand receive, therefore GAN terminals can be set up and left connected to Inmarsat’ssatellite network.

The advent of MPDS preceded three exciting service announcements in the latter part of the year. At the WAEA (WorldAirline Entertainment Association) show inBrisbane, Australia in October, a press launchwas held for the 64 kbit/s Swift64 platformfor mobile ISDN and packet data services and solutions for the airline industry. We areinitially targeting the business jet market inearly 2002 before we expect it to becomeavailable to commercial airlines later in theyear. Inmarsat Swift64 will give airlines theopportunity to provide e-mail, Internet andinteractive services directly to passengers intheir seats, using existing satcom equipmentand a ground infrastructure based onestablished GAN services.

In October, Inmarsat also announced themini-C service. Mini-C is a low-powered and compact communications solution forthe transport and logistics markets. It is an evolution of our existing Inmarsat Ctechnology and (except for Global MaritimeDistress and Safety System (GMDSS) safety applications) supports all that service’s solutions, but with a level of power consumption low enough to enable,for example, use of solar power.

Then, at the Europort Exhibition 2001 held in the Netherlands in November,Inmarsat unveiled the Fleet family ofservices, which is the company’s mostsignificant communications product launch to the maritime industry for several years.The benefits of developing the dual modeGAN services for the land market have been adopted for the maritime market which we continue to see as an importantpart of Inmarsat’s future. The first service, Fleet F77, offers the choice of mobile ISDNservice and MPDS at speeds of up to 64 kbit/s to allow ships to become analways-on node of their wider corporatenetworks whenever they are at sea. Mariners will be able to access all thestandard desktop and specialist maritimeapplications available in their company, andin turn, management onshore will benefitfrom enhanced reporting and connectivitywith their vessels.

Developing partner relationsInmarsat has invested heavily throughout2001 to develop a comprehensive package of support for its distribution and sales channel. The Connect channelincentive programme offers structured co-operative marketing funds, salesincentives and a wealth of sales andmarketing support resources built up over two decades of supporting ourdistributors. Inmarsat Connect Partners also benefit from dedicated internationalaccount-management support from ourteams in London, Dubai, Singapore,Washington and Miami.

Opportunities also exist through the Connect programme for Partners to workcollaboratively with Inmarsat on a range ofexciting marketing and training opportunities.

Customer careProviding a first-class customer service isvitally important to Inmarsat. We aim topromote our reputation as one which isknown not only for excellent reliability andleading edge technology, but also for ourdesire to serve our customers. As from theend of October 2001, Inmarsat’s CustomerCare Centre provided advice and servicesupport to distributors and end users bytelephone and via the Internet, 24 hours aday, 365 days per year.

Satellite newsOur three Inmarsat-4 satellites, being built by Astrium, are currently on build scheduleand are expected to become operational in2004. They will allow Inmarsat to deliver aBroadband Global Area Network (B-GAN)solution offering voice and integrated datarates of up to 432 kbit/s and with fullUniversal Mobile TelecommunicationsSystem (UMTS) compatibility. Significantdecisions relating to the design and launch of the satellites and user terminals weretaken during the year and the companymade significant contract awards to leadingcompanies such as Ericsson, InternationalLaunch Services and Arianespace.


Swift64 will give airline passengersthe opportunity to access onboard e-mail, Internet and other interactive services.

It is now much easier for mariners tokeep in touch with friends and familywhile at sea.

Inmarsat C, a compactcommunications solution for thetransport and logistics markets.


Operating review continued

Even before B-GAN becomes available in2004, a market stimulating version, RegionalB-GAN, is expected to be available in partsof the world in late 2002 and will offerGeneral Packet Radio Services (GPRS)compatible 144 kbit/s data service. Regional B-GAN is expected to be available in up to99 countries in Europe, the Middle East, theIndian sub-continent and north, central and west Africa.

Our satellite Inmarsat-2 F3 moved from itsgeostationary orbit above the Indian Ocean to a new position above the Pacific Ocean inDecember 2001. The preparations for thismove involved the establishment of new androbust contingency plans to cater for the newconfiguration of our satellite constellation,which were the most complex we have everundertaken. Inmarsat received excellentassistance and co-operation from manyregulatory authorities and land earth stationoperators around the world. The move tookthree months and was completed inDecember. In its new position, over theEquator, south of Hawaii, this satellite nowjoins our leasing network and thus adds toour ability to develop the opportunity forleasing contracts.

A commitment to safety at seaWe work continuously to improve theservices we offer to the maritime communityto achieve safety at sea. In March, in supportof one of our public-service requirements and our work with the International MobileSatellite Organization (IMSO), we launched a new safety database for the maritimecommunity. This is specifically for use byMaritime Rescue Co-ordination Centres(MRCCs) around the world.

The database provides MRCCs withimmediate round-the-clock access to all the information needed to assist vessels indistress (including the ship’s name and callsign, nationality and 24-hour contactnumber), thereby cutting life-saving minutesoff emergency rescue operations. The newdatabase has already been successfully usedby a number of MRCCs around the world.

Promotion and adventureInmarsat Ltd undertook a series ofpromotions during the year to enhance brand awareness across our core enterprisemarkets. For example, we became the first global sponsor of the World RallyChampionship (WRC). As the WRC’sexclusive global partner, we will benefit fromconsiderable branding opportunities duringthe course of the 14 country 2002 event.Association with the WRC gives Inmarsat ahigh profile as well as a highly demandingshowcase for the company’s communicationssolutions including our GAN service. It alsoprovides partners with an opportunity topromote their own brand alongside ours atselected events relevant to their ownmarketing plans.

In January 2001, the Trans-AustralianFootrace was broadcast live via Inmarsatfrom the Australian outback, with theorganisers using Inmarsat C and GANterminals to provide reliable communicationthroughout the race. At the same time, theworld’s fastest yachts were all fitted withInmarsat B high-speed data terminals forvideo linkage and Inmarsat C terminals forcommunications as they participated in “The Race”, a no-holds-barred round-the-world sprint. Yachts participating in the

Volvo Round-the-World Ocean Race 2001-2002 are also equipped for Inmarsat communications.

Inmarsat Ltd’s Father’s Day promotion on17th June, allowing children to send a freee-mail via Inmarsat C to fathers serving onvessels worldwide, saw a 25 per centincrease on e-mail traffic through theInmarsat website. The promotion has nowbeen extended to cover other traditionalfamily times and religious festivals. Inmarsatalso offers seafarers a free e-mail to sendflowers via Interflora for family occasions,and over the Christmas period, offered free e-mail connections to any vessel fitted withan Inmarsat C terminal.

The needs of the maritime communitycontinue to be a priority for Inmarsat and theresults of recent research showed a desire forimproved facilities for crew to make calls inprivate and away from the ship’s bridge. Inresponse, Inmarsat, in collaboration with itspartners, installed mini-M terminals andencouraged its partners in their promotion ofpre-paid calling cards for crews to use. It isnow much easier for mariners to call homeand to keep in touch with friends and familywhile at sea.

Disaster relief and rescueInmarsat supports Télécoms Sans Frontières(TSF), the French non-governmentalorganisation which provides rapid-responsetelecommunication facilities for reliefoperations following sudden disasters. In January 2001, TSF used 17 Inmarsat mini-M phones and a GAN terminal torestore emergency communications in El Salvador after an earthquake and

subsequent mudslides severely damagedterrestrial networks. TSF again used Inmarsatequipment to support international rescueefforts after an earthquake in Gujarat,western India in late January, and after an earthquake in southern Peru in August. In September, TSF provided securecommunications for the emergency servicesfollowing an explosion measuring 3.4 on the Richter scale at the AZF chemical plantin Toulouse, France.

September 11th and AfghanistanInmarsat was able to make a practicalcontribution to rescue efforts on and afterSeptember 11th. In the immediate aftermathof the tragedy at the World Trade Center inNew York, with the terrestrial network largelybreaking down due to the volume of traffic,the Inmarsat satellites became one of the fewtelecommunications systems available to co-ordinate rescue activity. Inmarsat and some ofits partners immediately arranged for Inmarsatmini-M terminals to be donated or put onstandby for the use of rescue workers. Thedays and weeks following the tragedy saw anincreased reliance on satellite communicationsby both government and business.

In the final quarter of the year, the broadcastmedia made extensive use of videophonesstreaming video over Inmarsat GAN units to report events in Afghanistan. Suchvideophones are now often used by manymobile news-broadcast teams working formajor networks. They enable secure fasttransmission from virtually anywhere and allthe reporter needs to do is simply unfold theInmarsat antenna and open the videophonebox, connect the camera and transmit livepictures instantly.

Invsat Ltd2001 was a year of significant businessgrowth for Invsat. In January, Invsat’s on-demand satellite service ESDS (EuropeanSatellite DAMA Service) was launched toprovide a highly effective, seamless extensionfor voice and data networks over anycommercial satellite. In the same month thecompany launched an in-vehicle repeaterproduct at the Motorola Dealer conference in Barcelona. This product typically usesUHF/VHF communication and is ideal for the emergency services market, extendingthe coverage of handheld radios being usedaway from the immediate vicinity of a vehicle.

During the year, the company won integratedtelecommunication services contracts withseveral major oil and gas exploration andproduction companies in the Middle East,Brazil and Algeria. Recognising the needs of the customer for local support, Invsat hasstrategic partnerships with companies in the US, Norway, China and Korea. These partners share Invsat’s commitment to service and support and help to form astrong base from which to offer services to broadband very small aperture terminal (VSAT) users requiring stabilisedcommunication rather than mobile usage.

The year culminated in the relocation of the Invsat Head Office to a new, purpose-built facility outside Aberdeen, encompassinga 24 hours a day Service ManagementCentre and C-band teleport with a Ku-bandteleport being installed early in 2002.

Rydex Corporation LtdIn 2001, Rydex extended its sales presencein Europe and the Far East, and reorganised

its management structure to become moresales-focused. The major product launch ofthe year, in March, was the company’s new32-bit e-mail communication suite. Thiscomprises the entry-level Rydex Express andhigh-end Rydex rmx2 services around acommunications hub.

Both Rydex Express and Rydex rmx2 use the company’s new communications protocol,which provides a fast true full duplex,compressed e-mail and file transfer. The suiteoffers an extensive feature set specificallydeveloped for the maritime industry, includinga crew e-mail facility, packet data protocoland “News from Home” value-added contentservice, offering the end user flexibility, easeof use and simplicity of installation.

Rydex continues to support the legacyapplications RMS Win and Rydex MailManager, although the year also saw the first migration of customers to the newproduct. In July, the Rydex ASP Solution was introduced, which is a managed private hub system.

The company expanded its number of agents by adding four new ones to serve the Japanese, UK, US and Korean markets. The office in Singapore was expanded, andin June, Rydex deployed its second publichub at its Liverpool office. By the end of last year, Rydex became a wholly ownedsubsidiary of Inmarsat Ventures plc followingthe transfer of its shares from Merasis Ltd.


TSF is supported by Inmarsat toprovide rapid-response telecomssolutions via mini-M and GAN.

Invsat’s Service Management Centreprovides full support for its customers’needs 24 hours a day.

The Rydex specialist e-mail softwareenables shipowners and carriers toeasily keep in touch.


Financial review

The results for the 2001 financial yearinclude costs associated with the financialrestructuring of our satellite finance leases,liquidation costs and impairment of theSetfair business of Merasis Ltd, write down ofthe investment in our joint venture companyas well as a full year of losses incurred byour subsidiary companies, Invsat Ltd, RydexCorporation Ltd and the Setfair business ofMerasis Ltd. We have also written-off theexpenses incurred with the postponement ofthe company’s Initial Public Offering (IPO).

Net operating costsNet operating costs have increased byUS$27.2 million between 2000 and 2001to US$154.4 million. The increase is in linewith expectations, particularly within the corebusiness of Inmarsat Ltd, with group staffcosts increasing by US$17.6 million toUS$77.9 million at the year end. Averagegroup headcount increased from 465 to 635between 2000 and 2001 and a breakdownis provided in note 8.

External charges increased by US$25.8million to US$88.2 million for 2001. Thekey drivers for the increase were professionalfees and marketing costs. During 2001 weincurred US$9.8 million of professional feesin preparations for an IPO. Due to adversemarkets the IPO has been postponed, thusnecessitating the expensing of all these costs.The remainder of the increase related to oursubsidiaries Invsat, Rydex and the Setfairbusiness of Merasis Ltd which made a fullyear of losses.

Trading Overview2001 was Inmarsat Ventures’ second full year of operation as a private company.Inmarsat’s profit after tax of US$0.66 pershare for the year ended December 31, 2001compares with similar earnings of US$0.63for the year 2000.

Ramin KhademChief Financial OfficerMarch 1, 2002

US$441.8m>Group revenue increase of approximately 6 per cent.


Capitalised costs increased from US$13.3million in 2000 to US$21.6 million in2001, relating to expenditure on our plannedhigher bandwidth services, the InmarsatFleet services being developed for themaritime market, and our mobile packetdata services to be used on existing andnew services. We expect investment tocontinue in future years for the RegionalBroadband Global Area Network service,planned to be operational by the end of2002, and for the B-GAN service which will become available on our Inmarsat-4satellites, which are expected to beoperational in 2004.

Depreciation and amortisationDepreciation and amortisation amounted toUS$160.2 million for the year 2001compared with US$179.7 million for theyear 2000. The decrease has been causedby the full depreciation of two of the fourInmarsat-2 satellites. Our satellites aredepreciated over 10 years. The Inmarsat-4satellites will be depreciated from the datethey become operational.

Share of operating loss of joint ventureIn 2001 we recorded a US$20.5 millioncharge in respect of our joint venture, AiriaLtd. This includes US$7.8 million, being our 80 per cent share in that company’soperating losses. In light of the economicconditions within the airline industry in theaftermath of the September 11th World TradeCenter tragedy, it was determined inNovember 2001, that a write down ofUS$10.9 million should be made which isreflected in the US$20.5 million loss inrespect of the Airia business.

Losses on termination of subsidiary undertakingsThe board decided in early September thatno further funding would be provided to theSetfair business of Merasis Ltd. Setfair wasan applications services provider of an e-procurement platform to the maritimeindustry. Following a successful pilot for thesystem in late 2000, projected subscribertakeup for the service did not meetexpectations and, despite the significantefforts of Setfair and Inmarsat Ventures’management to find a buyer for thebusiness, Setfair and Merasis were put intomembers’ voluntary liquidation. Group resultsinclude a US$11.7 million provision in 2001to support the winding up of the company.Cumulative losses to November 7, 2001, thedate the companies were put into members’voluntary liquidation, were US$35.1 million.

Net interest expenseNet interest expense for the year 2001increased by US$18.5 million to US$31.7 million.

The increase primarily relates to the costs of restructuring our satellite finance leases ofUS$21.1 million, of which US$14.9 millionrepresents a non cash charge due to thealignment of different accounting treatmentsadopted for the Inmarsat-3 satellites by the lessor company and Inmarsat. The costs included legal and advisory fees and acquisition premium and loss on thetermination of related foreign exchange andinterest rate swaps. With regard to ourInmarsat-2 satellites, we prepaid alloutstanding primary rental payments dueunder the lease; secondary rental payments

of £0.2 million will commence in 2002.With regard to our Inmarsat-3 satellites, we acquired the lessor company (a specialpurpose company of a larger group) and,having assumed the lessor’s rights under the lease, now own the satellites. In order tofinance this restructuring, we initially obtaineda 12-month loan facility of US$400 millionfrom Barclays Capital and ING Bank N.V.This facility was repaid in May 2001 whenthe two banks arranged a 5 year unsecuredrevolving facility of US$610 million to meetour medium term funding needs.

Net profit before taxationProfit on ordinary activities before taxationwas US$63.3 million for the year 2001compared to US$92.8 million for the year2000. The reduction in profits was due to anumber of exceptional expenses such as theaforementioned lease restructuring costs ofUS$21.1 million; the winding up of Setfair’soperations and the resulting US$11.7 millionprovision; the expensing of US$9.8 million of previously capitalised IPO costs as a result of the postponement of the IPO; and the US$10.9 million impairment ofAiria’s assets to account for the significantdownturn in the airline industry. Excludingthese exceptional items our profit beforetaxation for the year 2001 would have beenUS$116.8 million, an increase of 25.9 percent on 2000.

TaxationDuring 2001 we agreed with the UK InlandRevenue on the valuation of our satelliteassets for capital allowances (taxdepreciation) purposes, which had beenunder discussion since transition to a private

*** Restated for change in accounting policy with regard to the treatment of deferred satellite payments.

Operating cash flowUS$ millions***

1997 1998 1999 2000 2001

317

405

296256

245

338

93

Earnings before interest, tax, depreciation and ammortisation (EBITDA) prior to impairmentsUS$ millions

1997 1998 1999 2000 2001

316303 287 279214

309

95

As an internationaltreaty organisation As a limited company

US$255.9m>The business in 2001had healthy cash flows.

Financial review continued

company in April 1999. Recognition of thisrevised value has resulted in a significant nettax credit to offset our tax charge for the year,arising from a reduction in both the taxcharged for previous years and the deferredtax liability that has arisen since transition.The resulting taxation for the year endedDecember 31, 2001 was US$2.2 millionbenefit, whilst for the year ended December31, 2000 we incurred an expense ofUS$30.9 million. Discussions are ongingwith the UK Inland Revenue with regard tothe open market value of certain other assetsand agreement may result in a reduced taxcharge in future years.

Net profit after taxationNet profit after taxation for the year 2001was US$65.6 million and for the year 2000 was US$61.9 million.

Cash flowThe financial year 2001 had healthy cashflows. The group’s net cash flow fromoperating activities was US$255.9 million ascompared to US$295.8 million for the yearended December 31, 2000. Of significanceis the cash outflow for financing the capitalelement of finance lease rental payments,which increased from US$75.3 million forthe year 2000 to US$203.0 million for theyear 2001 due to the restructuring of oursatellite finance leases. Net cash outflow onacquisitions totalled US$10.0 million for theyear 2001 and represents cash provided toAiria during the year.

Capital expenditureCapital expenditure on services, fixtures and fittings and space segment totalledUS$253.3 million in 2001 (2000:US$129.6 million). Of the total expenditurethe majority was in regard to the Inmarsat-4satellites including both Regional B-GAN andB-GAN development.

Capital resourcesIn May 2001, the group arranged aUS$610.0 million medium term facility to finance the investment in the B-GANprogramme. The amount of debt drawndown at the year end was US$60.0 million.

At December 31, 2001 the group had cashand short-term investments of US$11.3million (2000: US$193.4 million). Thesignificant balance of cash and short terminvestments at the beginning of the year wasused to finance the lease restructuring inJanuary 2001.

Treasury managementThe group’s treasury activities are managedby its treasury department under thedirection of a Treasury Review Committeewhose chairman is the Chief FinancialOfficer, and whose policies and guidelinesare approved by the board. An overridingpolicy objective is that treasury activities areused solely for risk management purposes.Details of financial instruments and policiesin compliance with FRS 13 are in note 31 to the financial statements.

Interest rate riskFollowing the satellite finance leaserestructuring, all borrowings were made from the US$610.0 million medium termrevolving credit facility. Interest is fixed at thecommencement of each drawing at LIBORplus the margin under the facility.

At the end of 2001 we maintained cashbalances from operations. Funds aredeposited in short term money marketaccounts for varying periods, which rarelyexceed three months.

Foreign exchange riskThe group maintains its accounting records in US dollars and invoices its customers for services in US dollars, the recognisedcurrency for settlement of accounts betweencompanies in the internationaltelecommunications industry. However, asmost of the group’s operations are based in London, the majority of its operatingexpenses are denominated in Sterling.Capital expenditure is denominated in avariety of currencies depending on the termsof individual contracts but mainly in USdollars and Sterling. The group manages thecurrency exposure arising from obligationsdenominated in currencies other than the USdollar, through the use of forward purchasesof the foreign currencies.

Research and developmentIn 2001 research and development projectscontinued to focus on the development of


“In May 2001, the group arranged a US$610.0million medium term facility to finance itsinvestment in the B-GAN programme.”

our mobile communication services viasatellite including:• developing digital services and applying

advanced technologies to allow suchservices to be accessed by smaller, lighterand lower cost terminals;

• improving the efficiency of the use of thecapacity of our satellites, such as throughthe use of advanced digital signalprocessing techniques and spot beamtechnologies; and

• developing information services andapplications designed to increase the usage of our network.

In 2001 US$12.4 million was spent on research and development (2000:US$20.1 million).

New UK accounting standardsUnder a new UK accounting standard FRS 17 ‘Accounting for retirement benefits’,the method of accounting for defined benefitpensions will be substantially changed. We are required to adopt this new standardin full by our 2004 financial year. We expectthis standard to have the effect of increasingthe pension costs to be included withinoperating costs, thus reducing our operatingprofit. Pension fund actuarial gains andlosses, including investment returns varyingfrom the assumed returns, will be recordedin full in our statement of recognised gainsand losses annually. Pension fund deficits,calculated in accordance with prescribedrules in this standard, will be shown in our

balance sheet as will any surpluses to theextent we expect to obtain value from themin the foreseeable future. Initial transitionaldisclosures required have been made for the year ended December 31, 2001.

The group has reviewed its accountingpolicies in line with FRS 18 ‘AccountingPolicies’ and adopted accounting policiesmost appropriate to its business so as to givea true and fair view as well as to disclosesufficient information to enable users tounderstand the policies adopted and howthey have been applied in the consolidatedfinancial statements.

Prior year adjustmentsThe group changed its accounting policy withregard to the treatment of deferred satelliteperformance payments in 2001 and hasapplied the new policy retroactively throughretained earnings. The change in policy is torecognise future payments using a net presentvalue methodology rather than capitalising thegross costs as under the previous policy.

Additionally, an adjustment has been madeof US$7.2 million to prior year as detailed innote 22 to the financial statements.



Board of directors

01 Richard VosChairman

02 Michael StoreyPresident and Chief Executive Officer

05 Dick Hoefsloot 06 Britt Carina Horncastle03 Ramin Khadem 04 Henry Chasia

09 John Rennocks 10 Artur Schechtman07 Raymond Ch’ien 08 Philip Permut

13 Bo Ake Lerenius 14 Alison Horrocks11 Edward Berger 12 Raynald Leconte

“The 13 strong board comprises a majority of independent,non-executive directors.”


01 Richard Vos, age 56ChairmanJoined the board in April 1999. He isan independent, non-executive director.Mr Vos is also a director of Airia Ltd,our joint venture company. InSeptember 2000, he retired fromBritish Telecommunications plc, afterhaving served most recently as its headof satellite investments. Mr Vos is alsoa non-executive director of NSSCOperations Limited and the EuropeanSatellite Operators Association.

02 Michael Storey, age 60President and Chief Executive Officersince October 1999. Mr Storey is alsoa director of Rydex Corporation Ltd, oursubsidiary company. Prior to joining us,from 1997 he was executive vicepresident for Europe of MCI WorldCom.Prior to that, he was president andchief executive officer of MFS Europe,the business-to-businesstelecommunications carrier which wasacquired by MCI WorldCom in 1997.He was also previously a vice presidentof Booz Allen Hamilton InternationalManagement Consultants.

03 Ramin Khadem, age 57Joined the board as an executivedirector in October 2000 and hasbeen our Chief Financial Officer since 1993. He is also on the board of directors of Airia Ltd, InvsatLtd, and Rydex Corporation Ltd, our joint venture and subsidiarycompanies. Prior to joining us, Dr Khadem held various positions at BCE and Teleglobe Canada.

04 Henry Chasia, age 62Joined our board in April 1999. He isan independent, non-executive director.Since February 2000, he has beenchief executive officer of TelehouseSpace Limited. Dr Chasia was DeputySecretary General of the InternationalTelecommunications Union for 4 years.Dr Chasia is also Deputy Chairman ofthe e-Africa Commission and sits onthe Advisory Council on informationand communications technologymatters established by the President of South Africa.

05 Dick Hoefsloot, age 47Has been a member of our boardsince April 1999. He is anindependent, non-executive director.Between 1994 and 1996 he waschairman of the board of directors ofEUTELSAT, a global satellite operator.Since October 2000, Mr Hoefsloot hasbeen an independent consultant totelecommunications companies. Priorto this, between 1981 and October2000, Mr Hoefsloot held variouspositions with KPN.

06 Britt Carina Horncastle, age 45Has been a member of our boardsince April 1999. She is a non-executive director. Since August 2001,she has been chief executive officer ofTelenor Satellite Services HoldingsInc., a subsidiary of TelenorBroadband Services A.S, our largestshareholder. She also has previousfinancial experience in a variety ofdifferent industries.

07 Raymond Ch’ien, age 50Joined the board as an independent,non-executive director in September2001. Dr Ch’ien is executivechairman of chinadotcom corporationand is also a director of Inchcape plcand HSBC Holdings plc. He is amember of the Executive Council of the Hong Kong SAR, whilstundertaking other public and privatebusiness activities.

08 Philip Permut, age 58Was elected to our board in April1999. He is an independent, non-executive director. Mr Permut hasspent more than 30 years as atelecommunications attorney inWashington D.C., and has heldpositions in private practice and as a senior executive of the FederalCommunications Commission. He is currently special counsel to the law firm Kelley Drye & Warren.

09 John Rennocks, age 56Deputy ChairmanHas been a member of our boardsince November 1999. He is anindependent, non-executive director.Until January 2001, he wasexecutive director of finance for CorusGroup plc, formerly British Steel plc.Mr Rennocks also has significantexperience as a non-executivedirector of a number of publiccompanies in the UK. Mr Rennocksis a chartered accountant.

10 Artur Schechtman, age 57Joined our board in November 1999.He is a non-executive director.Between 1990 and 1996, he servedon the Inmarsat Council and waschairman for two years. Since March1996, he has served as regionaldirector of Europe and Asia forEmbratel, a Braziliantelecommunications company, which is also one of our shareholders.

11 Edward Berger, age 44Became a member of our board inOctober 2000. He is an independentnon-executive director. Mr Berger iscurrently Vice President and ChiefFinancial Officer of COMSAT International,a wholly-owned subsidiary of LockheedMartin. From 1998 to 2000, he servedas Treasurer of COMSAT Corporation andsubsequently of Lockheed Martin GlobalCommunications (LMGT) following themerger between COMSAT and LMGT.COMSAT is one of our shareholders. Mr Berger previously worked for SprintCorporation and the First National Bankof Chicago in various capacities.

12 Raynald Leconte, age 48Joined our board of directors inOctober 2000. He is a non-executive director. Since July 2000, he has been head of businessdevelopment and analysis at FranceTelecom Long Distance. Mr Leconte is also chairman of the Seamewe 3management committee representing the interests of over 90 telecommunications companiesacross 35 countries.

13 Bo Ake Lerenius, age 55Joined our board in November 2000.He is an independent, non-executivedirector. He has considerableexperience in the shipping, ports andtransport sectors and has been chiefexecutive officer of Associated BritishPorts Holdings plc since early 1999.Between 1993 and 1999, he heldvarious senior management positionswith Stena AB, including presidentand chief executive of Stena Line.

14 Alison Horrocks, age 39Has been Secretary to the board since its inception and also serves the boards of Inmarsat’s other main operating companies. She was previously group companysecretary of International PublicRelations plc, a worldwide publicrelations company. She is a Fellow ofthe Institute of Chartered Secretariesand Administrators.


Board CommitteesRemuneration CommitteePhilip Permut (Chairman)Edward BergerHenry ChasiaJohn Rennocks

Nominations CommitteeRichard Vos (Chairman)Henry ChasiaDick HoefslootBritt Carina HorncastleArtur Schechtman

Audit CommitteeJohn Rennocks (Chairman)Bo Ake LereniusPhilip Permut

Company SecretaryAlison Horrocks

Registered Office99 City RoadLondon EC1Y 1AXTel: +44 (0)20 7728 1000Fax: +44 (0)20 7728 1044www.inmarsatventures.com

Registered Number3674573 England and Wales

AuditorsPricewaterhouseCoopers1 Embankment PlaceLondon WC2N 6RH

SolicitorsFreshfields Bruckhaus Deringer65 Fleet StreetLondon EC4Y 1HS

Richard Vos*ChairmanJohn Rennocks*Deputy ChairmanEdward Berger*Henry Chasia*Raymond Ch’ien*(appointed September 14, 2001)Dick Hoefsloot*Britt Carina Horncastle

Ramin KhademChief Financial OfficerRaynald LeconteBo Ake Lerenius*Philip Permut*Artur SchechtmanMichael StoreyPresident and Chief Executive Officer

Management team

Directors and advisors

(All directors were in office on January 1, 2001 except where otherwise noted).

Mr Michael Storey and Dr Ramin Khadem are executive directors. The remaining directors are non-executive directors with those marked* being independent, non-executive directors.

The following directors will retire at the annual general meeting and offer themselves for election or re-election as appropriate: Dr Ch’ien, Messrs Leconte, Rennocks, Schechtman and Storey.

Perry MeltonVice President – Strategic DevelopmentInmarsat Ventures plc

Alison HorrocksCompany SecretaryInmarsat Ventures plc

Alan AuckenthalerGeneral CounselInmarsat Ventures plcVice President – The AmericasInmarsat Limited

Marian ParkerExecutive Assistant – Office of the Chief Executive OfficerInmarsat Ventures plc

Ramin KhademChief Financial OfficerInmarsat Ventures plc

Michael ButlerManaging DirectorInmarsat Limited

Michael StoreyPresident and Chief Executive OfficerInmarsat Ventures plc

Gene JilgChief Technical OfficerInmarsat Ventures plcVice President – Advanced SystemsInmarsat Limited

Richard DennyVice President – Satellite Network OperationsInmarsat Limited

Paul BranchVice President – Portfolio Development & MarketingInmarsat Limited

Camilla ShaughnessyVice President – Partner & Commercial RelationshipsInmarsat Limited

Debbie JonesVice President – Business InfrastructureInmarsat Limited

Board of directors at December 31, 2001

Perry Melton, Alison Horrocks, Alan Auckenthaler,Marian Parker.

Ramin Khadem, Michael Butler, Michael Storey,Gene Jilg.

Richard Denny, Paul Branch, Camilla Shaughnessy,Debbie Jones.


Directors’ reportFor the year ended December 31, 2001

The directors have pleasure in submitting their report and accounts for the year ended December 31, 2001.

Principal activitiesThe group provides a broad portfolio of global mobile and transportable broadband communication services and solutions across its main areasof maritime, aeronautical and land. The principal services include safety and control communications, instant communications (voice, fax andlow speed data, and instant information service) and high-speed data solutions (from remote LAN access to video conferencing). The principalfixed services include broadband VSAT point to point communication solutions in stabilised trading environments.

Review of businessThe results for the period are shown in the consolidated profit and loss account on page 35.

The highlights for the year have been the re-launch of Global Area Network (GAN) which was further enhanced by the launch of Inmarsat’sMobile Packet Data Service. During the year, Inmarsat also unveiled the Inmarsat Fleet portfolio, the next generation of maritimecommunications. Management continues to spend significant effort on preparations for a high-speed Regional B-GAN offering which is a pre-cursor to the full Broadband Global Area Network (B-GAN) service. Invsat continues to perform well and the communication betweenInvsat and Inmarsat regarding technological developments and opportunities for business continues to increase.

The significant events of September 11th have dramatically affected the whole airline industry. Against this backdrop there has been a criticalreview of the requirements for in-flight entertainment by the airlines and this will naturally affect the level of demand and timing for the Airia live TV service. Consequently, the company is reviewing carefully its investment in this joint venture.

The board decided in early September that no further funding would be made to support Setfair.com Ltd, the maritime e-procurement businessof Merasis Ltd, and these companies ceased trading in November. The Rydex business, which provides e-mail software services to the maritime market, continues as a wholly owned subsidiary of Inmarsat Ventures plc.

Preparations for the Initial Public Offering (IPO) in 2001 were postponed following advice from the company’s investment bankers.

Results and dividendsThe profit for the year after taxation and minority interests amounted to US$65.6 million (2000: US$62.6 million). No dividends were paid in the period and the directors do not recommend a dividend in respect of the year just ended.

Research and developmentThe group continues to invest in new services and technology through its research and development programmes. These include pure research into new products as well as developing those services which have been demonstrated to have a profitable business case.

Charitable and political donationsNo donations were made in the period.

Land and buildingsThere is no material difference between market value and net book amount of land and buildings for the company or its subsidiary undertakings.

Post balance sheet eventsThere have been no material post balance sheet events between the end of the financial year and the date of this report.

Directors and their interestsA list of the directors who served during the year and those in office as at December 31, 2001 and their interests in the share capital of thecompany are disclosed in the Report of the Board on Directors’ Remuneration.

Re-election of directorsDr Ch’ien was appointed as an independent, non-executive director of the company on September 14, 2001. In accordance with the company’sArticles of Association, he will retire at the annual general meeting and put himself forward for election.

In addition, the company’s Articles of Association require that one-third of the directors retire at each annual general meeting of the company.Therefore, the following directors, none of whom have been in office for more than three years, will retire and put themselves forward for re-election at the meeting: Messrs Leconte, Rennocks, Schechtman and Storey.

Mr Storey is an executive director and details of his service agreement are given on page 30. Dr Ch’ien and Messrs Leconte, Rennocks andSchechtman are non-executive directors and do not have service agreements but are engaged under letters of appointment.

Biographical information on each of the directors is contained on pages 22 and 23 of the annual report.

EmployeesThe group has ensured that employees are fully informed and involved in the business, through the use of various communications methodsincluding briefing sessions and discussions with groups of employees, circulation of newsletters, company announcements, information releasesand dissemination of information through normal management channels. In its main operating subsidiary, the company has an employeeshareholder forum to extend two-way communications between employee share option holders and management. Employees are activelyencouraged to attend internal training courses to learn about the company’s products and services.

The group has a positive attitude towards the development of all its employees and does not discriminate between employees or potentialemployees on grounds of race, ethnic or national origin, sex, marital status or religious beliefs.

The group gives full consideration to applications from disabled persons and to the continuing employment of staff that become disabled,including considering them for other positions.

Health and safetyThe group is committed to maintaining high standards of health and safety for its employees, customers, visitors, contractors and anyoneaffected by its business activities.

European Monetary UnionThe group has reviewed the implications of the European Monetary Union and the issues arising from the potential introduction of the Euro into the UK are being addressed.

Policy and practice on payment of creditorsThe group’s policy and practice on payment of creditors is:• To pay all suppliers within the time limit agreed with each at the start of business with that supplier;• To ensure that suppliers are aware of the terms of payment; and• To pay in accordance with the contractual and other legal obligations whenever it is satisfied that the supplier has provided goods and

services in accordance with the agreed terms and conditions.

At December 31, 2001, the group’s trade creditors represented 30 days equivalent of aggregate amounts invoiced by suppliers during the year.

Extraordinary general meetingAt the extraordinary general meeting held on March 15, 2001, shareholders approved the re-registration of the company as a public limitedcompany and a 10:1 share split of the company’s shares.

Substantial shareholdingsAs at March 1, 2002, there were 100,000,010 ordinary shares of 10 pence each in issue. This reflects the 10:1 share split that was approved by shareholders on March 15, 2001. In addition, one special rights non-voting redeemable preference share of £1.00 is held by theInternational Mobile Satellite Organization.

At December 31, 2001, the company’s register of substantial interests showed the following interests of 3 per cent or more in the company’s shares:

Number of ordinary shares %

Telenor Satellite Services AS, Norway 15,000,000 15.0%COMSAT Corporation, US 14,007,920 14.0%British Telecommunications plc, UK 7,857,950 7.9%KDDI Corporation, Japan 7,572,790 7.6%Xantic BV, The Netherlands 5,862,300 5.9%Atlas Telecommunications SA, France 5,096,570 5.1%Hellenic Telecommunications Organisation SA, Greece 4,672,690 4.7%Deutsche Telekom AG, Germany 4,280,620 4.3%Morsviazsputnik, Russia 3,695,060 3.7%


Directors’ report continuedFor the year ended December 31, 2001


None of the directors at any time during the year ended December 31, 2001 or subsequently had any interests in any shares of the company’s subsidiaries.

Significant contractsThe majority of the space segment revenue of the group is derived from sales to Land Earth Station Operators (LESOs) which are generallyowned by shareholders. LESOs operate in accordance with the terms and conditions of the Land Earth Station Operator Agreement, which was entered into when the transition of Inmarsat as a treaty organisation to a private company occurred in April 1999. Additionally, someservices required to run the space segment are purchased from companies who are also shareholders. Further details of these transactions can be found in note 29 to the financial statements.

There were no contracts with the company or any of its subsidiaries in which a director had a material interest.

Directors’ and officers’ liability insuranceThe group maintains insurance to cover directors’ and officers’ liability as referred to in Section 310(3)(a) of the Companies Act 1985.

AuditorsThe auditors PricewaterhouseCoopers have indicated their willingness to continue in office and a resolution to reappoint them will be proposed at the annual general meeting.

Directors’ responsibilitiesThe following statement, which should be read in conjunction with the auditors’ statement of auditors’ responsibilities set out on page 34, is made with a view to distinguishing the respective responsibilities of the directors and the auditors in relation to the financial statements.

Company law requires the directors to prepare financial statements for each financial period which give a true and fair view of the state of affairs of the company and the group and of the profit or loss of the group for that period. In preparing those financial statements, the directorsare required to:• select suitable accounting policies and then apply them consistently;• make judgements and estimates that are reasonable and prudent;• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the

financial statements; and • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the company and the group and which enable them to ensure that the financial statements comply with the Companies Act 1985. They arealso responsible for safeguarding the assets of the company and the group and hence for taking reasonable steps for the prevention anddetection of fraud and other irregularities.

The directors are responsible for the maintenance and integrity of the inmarsatventures.com website. Uncertainty regarding legal requirementsis compounded as information published on the Internet is accessible in many countries with different legal requirements relating to thepreparation and dissemination of financial statements.

Annual general meetingA number of resolutions will be proposed at the annual general meeting. An explanation of these resolutions, together with the Notice ofMeeting, is contained in the accompanying document.

By order of the board

Alison Horrocks FCISCompany SecretaryMarch 1, 2002

The UK Listing Authority requires publicly listed companies to adopt the Principles of Good Governance and Code of Best Practice (“The Combined Code”). Although the company is not currently required to comply with the Combined Code, it has been adopted whereverappropriate. The board has reviewed how the company complies with the Combined Code. An explanation of how the company has appliedthese principles is given below.

DirectorsThe board currently has 13 directors, comprising two executive directors and 11 non-executive directors, eight of whom are independent. Thethree non-independent, non-executive directors are employed directly or indirectly by distributors of Inmarsat services. The board meets regularlythroughout the year. Directors’ training is provided to new directors. The Deputy Chairman is identified as the senior independent non-executivedirector. Since the appointment of the first directors in April 1999, non-executive directors have been appointed initially for three years and all non-executive directors may not, unless exceptionally agreed by the board, remain in office for a period longer than six years, or two terms in office,whichever is the shorter. All directors are required by the company’s articles of association to be elected by shareholders at the first generalmeeting after their appointment. At least one third of the directors must seek re-election by the shareholders at each annual general meeting.

The Chairman is responsible for the running of the board and the Chief Executive Officer for implementing group strategy. The board has a formal schedule of matters reserved to it for decision but can also delegate specific responsibilities to the board committees listed below orto committees convened for special purposes.

Directors receive board and committee papers in advance of the relevant meetings and the Company Secretary is responsible to the board forensuring that board procedures are followed. The directors also have access to the advice and services of the Company Secretary. All directorsare able to take independent advice in the furtherance of their duties if necessary.

Board CommitteesAudit CommitteeThe members of the Audit Committee are independent non-executive directors and their details are disclosed on page 24. The Audit Committeemeets at least twice each year and has particular responsibility for monitoring the adequacy and effectiveness of the operation of internalcontrols and ensuring that the group’s financial statements present a true and fair reflection of the group’s financial position. The Committee alsopays particular attention to the implementation of the requirements of the Turnbull Report relating to risk management in the group. Its dutiesinclude keeping under review the scope and results of the audit and its cost effectiveness and the management process and the independenceand objectivity of the internal and external auditors. These meetings are attended by the Chief Financial Officer and the internal and externalauditors. The board considers that, through the Audit Committee, it has an objective and professional relationship with the auditors.

Remuneration and Nominations CommitteesThe composition of the Remuneration and Nominations Committees is disclosed on page 24. Both Committees comprise solely non-executivedirectors. The Remuneration Committee meets as and when necessary to review the salaries of the executive directors and major remunerationplans for the group as a whole. It is empowered to recommend the grant of share options under the existing Share Option Plans. TheNominations Committee, which also comprises non-executive directors, meets as and when necessary and has responsibility for nominating to the board, candidates for appointment as directors, bearing in mind the need for a balance of global representation within the board.

Initial Public Offering (IPO) CommitteeDuring the 2001 financial year, the board determined it appropriate to continue to run an IPO Committee to deal specifically with certainmatters and decisions relating to the company’s planned IPO. The membership of the Committee comprises executive and non-executivedirectors.

Directors’ RemunerationDetails of the company’s remuneration policy and directors’ remuneration are contained in the Report of the Board on Directors’ Remunerationon pages 30 to 33.


Statement of Corporate Governance


Relations with shareholdersThe company recognises the importance of communicating with its shareholders to ensure that its strategy and performance is understood. This is delivered by way of quarterly reports and the annual report and accounts. In addition to the annual general meeting held in the UK and any necessary extraordinary general meetings, the company also held two regional shareholder meetings in 2001. As many directors aspossible will attend the company’s annual general meeting and are available to answer shareholder questions. Voting may be by form of proxy,by poll, by show of hands or a combination of all three.

Internal ControlsThe board confirms that the procedures necessary to implement the guidance set out in the “Internal Control: Guidance for Directors on theCombined Code” produced by the Turnbull working party have been established. The board acknowledges its responsibility for establishing andmaintaining the group’s system of internal controls and it receives regular reports from management identifying, evaluating and managing therisks within the business. The system of internal controls is designed to manage rather than eliminate the risk of failure to achieve businessobjectives and can provide only reasonable and not absolute assurance against material misstatement or loss.

The board and the Audit Committee have carried out a review of the effectiveness of the group’s system of internal controls during the yearended December 31, 2001 and for the period up to the date of approval of the financial statements.

The key elements of the group’s system of internal controls include:

Risk management: the group’s management operates a risk management process to identify, evaluate and report significant risks within thebusiness and to report to the board on how those risks are being managed. Risks are highlighted through a number of different reviews andculminate in a risk register, monitored by the internal risk management team, which identifies the risk area, the probability of the risk occurring,the impact if it does occur and the actions being taken to manage the risk to the desired level. The risk register is provided to the seniormanagement team, to the board on a regular basis and to the Audit Committee.

Management structure: there is a clearly defined organisational structure throughout the group with established lines of reporting and delegationof authority based on job responsibilities and experience.

Financial reporting: monthly management accounts provide relevant, reliable, up-to-date financial and non-financial information to managementand the board. Annual plans, forecasts and performance targets allow management to monitor the key business and financial activities and theprogress towards achieving the financial objectives. The annual budget is approved by the board. The group reports quarterly to shareholdersbased on a standardised reporting process.

Monitoring of controls: the Audit Committee receives regular reports from the internal and external auditors and assures itself that the internalcontrol environment of the group is operating. There are formal policies and procedures in place to ensure the integrity and accuracy of theaccounting records and to safeguard the group’s assets. Significant capital projects and acquisitions and disposals require board approval.

Going ConcernAfter due consideration, the directors have a reasonable expectation that the company has adequate resources to continue in operationalexistence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the accounts.

In preparing this report, the board has followed the provisions of Schedule B of the Combined Code. The directors have an establishedRemuneration Committee.

Composition of the Remuneration CommitteeMembers of the Remuneration Committee are disclosed on page 24. All members are non-executive directors of the company.

Service contractsAt December 31, 2001 no director had a service contract with a notice period in excess of one year or a provision for pre-determinedcompensation or termination that exceeds one year’s salary.

The notice period to be given by the employer for both executive directors is 12 months.

Non-executive directors’ feesFees for non-executive directors are determined by the board, taking advice as appropriate. From January 1, 2001, non-executive directors’ fees have been revised to a base fee of £30,000 per annum plus £5,000 per annum per committee chairmanship and £2,500 per annum per active committee membership. The Chairman now receives an annual basic fee of £100,000 which includes any fees which might haveordinarily been payable for Committee/IPO work. The Deputy Chairman receives an inclusive fee of £60,000 per annum.

Policy on remuneration of executive directorsRemuneration packages are designed to be competitive and attract, retain and motivate executive directors of the highest calibre in the globaltelecommunications market in which we operate. There are two executive directors on the board; one is the President and Chief ExecutiveOfficer, the second is the Chief Financial Officer. The Remuneration Committee considers the remuneration of the executive directors against theneeds of the group for talent at board level at the particular time and the then prevailing market conditions. It ensures that the directors are fairlyrewarded for their personal contributions to the group’s overall performance in the short and longer term. The policy is aimed to align theinterests of the executive directors and shareholders. In determining their remuneration packages, the Remuneration Committee has had regardto packages provided by companies of a similar size and within similar industries and markets as there are no directly comparable companies.Due to the competitive remuneration of the telecommunication and satellite markets, overall compensation levels generally rank in the upperquartile of survey data.

The main elements of the remuneration package offered to the executive directors are:

Basic salary and benefitsBasic salary is structured by the Remuneration Committee by taking into account the responsibilities, individual performance and experience of the executive directors, as well as the market place for executives in a similar position. Salary reviews are generally determined annually and adjustments will occur if necessary in relation to market practice and after a formal appraisal process of performance. The executivedirectors’ salaries were not increased for the 2001 financial year and it has similarly been agreed that they will not be increased for the yearto December 31, 2002.

Benefits include private healthcare insurance, long term disability insurance, life assurance, and for one of the directors, cash payments in lieuof a company car. The benefits are non-pensionable.

Annual bonusThe executive directors are paid a bonus upon achievement of challenging objectives linked to group financial and operational performance. For the Chief Executive Officer, the target level of bonus is 73 per cent of basic salary. For the Chief Financial Officer, the target level of bonus is 32 per cent of basic salary, which may be increased subject to actual individual and corporate performance.

The Remuneration Committee approves the objectives for both the executive directors, which are set at the start of each financial year andreviewed thereafter.

PensionsThe executive directors are the only directors accruing benefits in the group’s defined contribution pension plans. Pensionable salary is limitedto basic salary, excluding all bonuses and other benefits, up to the UK earnings cap (currently £95,400). Mr Storey is a member of the pensionplan for employees who will draw a UK pension; Dr Khadem is a member of the pension plan for international employees.


Report of the Board on Directors’ Remuneration


Directors’ remunerationAudited information on the remuneration of each director during the year is detailed below:

Salaries/Fees Bonus Benefits Total Pension(US$000) 2001 2000 2001 2000 2001 2000 2001 2000 2001 2000

Executive directorsMichael Storey (1) 507 527 370 460 55 57 932 1,044 64 66Ramin Khadem (2) 343 59 196 26 34 3 573 88 85 15Non-executive directorsRichard Vos 156 165 – – – – 156 165 – –John Rennocks 81 41 – – – – 81 41 – –Edward Berger (2) 50 5 – – – – 50 5 – –Henry Chasia 55 39 – – – – 55 39 – –Raymond Ch’ien 14 – – – – 14 – – – (appointed September 14, 2001)Jean-Marie Culpin 10 32 – – – – 10 32 – – (resigned March 14, 2001)Vinoo Goyal 10 32 – – – – 10 32 – – (resigned March 14, 2001)Dick Hoefsloot 53 32 – – – – 53 32 – – Britt Carina Horncastle 50 32 – – – – 50 32 – – Rikuo Koike 10 32 – – – – 10 32 – – (resigned March 19, 2001)Raynald Leconte (2) 47 5 – – – – 47 5 – – Bo Ake Lerenius (2) 52 3 – – – – 52 3 – – Wee Seng Lim 10 22 – – – – 10 22 – – (resigned March 14, 2001)Phillip Permut (3) 92 42 – – – – 92 42 – – George Rorris(resigned March 14, 2001) 10 32 – – – – 10 32 – – Artur Schechtman 50 32 – – – – 50 32 – –

1,600 1,132 566 486 89 60 2,255 1,678 149 81

Note: £/US$ exchange rate used was 1.6 for 2000 and 1.5597 for 2001.

(1) Bonus payment for the year 2000 relates to the 15 month period from the date of Mr Storey’s appointment in October 1999 to December 31, 2000.

(2) Payments for the year 2000 reflect a part of the year only from date of appointment in October 2000 for Dr Khadem and Messrs Berger and Leconte and November 2000 for Mr Lerenius.

(3) Fee includes an additional payment in respect of a specific project successfully undertaken on behalf of the company.

Employee share option plansApprovals of grants of options are made by the Remuneration Committee under the company’s various share option plans to Inmarsat EmployeeShare Plan Trustees Ltd, which then grants the options to employees. The exercise of options is subject to the company achieving its InitialPublic Offering (IPO) and as appropriate, certain performance targets. Options granted to employees under the Approved Share Purchase Planare capable of exercise when the company achieves its IPO. Two types of options have been granted to employees under the Share Option Plan;the first type are capable of exercise in two tranches: 40 per cent upon IPO and 60 per cent one year later (although new employees andemployees of a group subsidiary must wait one year post IPO to be able to exercise their option); and the second type are capable of exerciseupon the achievement of certain share price increases over the grant price post IPO. Details of the outstanding options granted to employees areshown in note 21 to the financial statements.

The company has put in place scheme rules for employee share option plans which will become effective post IPO.

Directors’ share optionsInformation in respect of options held by the executive directors of the company during the year to December 31, 2001 is set out below:

Options Optionsheld at Granted Exercised held at

December 31, during during December 31, Exercise Date from ExpiryDirector 2000 the period the period 2001 (1) price (1) which exercisable Date

Michael Storey (a) 8,000 Nil Nil 80,000 £7.865 Upon certain increases in share October 2009prices occurring on and after IPO

Michael Storey (b) 2,666 Nil Nil 26,660 £1.00 per on IPO October 2009tranche

Michael Storey (b) 2,666 Nil Nil 26,660 £1.00 per on IPO October 2009tranche

Michael Storey (b) 2,668 Nil Nil 26,680 £1.00 per 1 year after IPO October 2009tranche

Ramin Khadem (c) 381 Nil Nil 3,810 £7.865 on IPO October 2009

Ramin Khadem (d) 1,716 Nil Nil 17,160 £7.865 40% on IPO November 200960% on first anniversary of IPO

Ramin Khadem (e) 2,797 Nil Nil 27,970 £7.865 Upon certain increases in share May 2010prices occurring on and after IPO

(1) Adjusted to reflect the 10:1 share split that was approved by shareholders on March 15, 2001.

(a) Unapproved Share Option Plan.33 per cent of the option vests and is exercisable if the share price between the date of grant and the IPO increases by 75 per cent; 33 percent of the option vests and is exercisable if the share price for a period of three continuous months within the first three years after the IPOincreases by 35 per cent; and 34 per cent of the option vests and is exercisable if the share price for a period of three continuous monthswithin the first three years after the IPO increases by 50 per cent.

(b) Long Term Incentive Plan.For each tranche, the option vests against business performance attained as determined by the Remuneration Committee. The first andsecond tranches of 26,660 shares each will vest and become exercisable after the IPO; these tranches were subject to achievement ofcertain performance targets for the years ended December 31, 2000 and December 31, 2001. These targets have been achieved. The thirdtranche of 26,680 shares will vest and become exercisable, subject to meeting the required performance condition in respect of groupfinancial performance for the year to December 31, 2002 at the first anniversary of the IPO.

(c) Approved Share Purchase PlanExercisable at the time of the IPO - no performance conditions are set.


Report of the Board on Directors’ Remuneration continued


(d) Unapproved Share Option PlanExercisable 40 per cent upon the IPO and 60 per cent one year later – no performance conditions are set.

(e) Unapproved Share Option Plan25 per cent of options will vest and become immediately exercisable if the share price at the time of the offering is 75 per cent higher thanthe exercise price; 25 per cent of options will vest and become exercisable if the share price increases by 50 per cent over an averaged threemonth period in the first three years after the IPO; and 50 per cent of options will vest and become exercisable if the share price increases by35 per cent over an averaged three month period in the first three years after the IPO.

Both executive directors will be restricted from selling any shares resulting from the exercise of an option for a certain period following the IPO.

No options were granted to, exercised or sold by the executive directors during the year ended December 31, 2001.

Directors’ interestsThe directors of the company in office at the end of the period and their interests in the share capital of the company as at March 1, 2002 all ofwhich are beneficial to the directors and their immediate families, which have been notified to the group pursuant to Sections 524 or 328 of theCompanies Act 1985 (the “Act”) or are required to be entered into the register required to be kept under Section 325 of the Act, and of thepersons connected (within the meaning of Section 346 of the Act) with the directors; were as follows:

a) apart from share options as described above, no directors have any ownership of shares as at December 31, 2001 nor at March 1, 2002; and

b) ordinary shares of 10 pence each for which the directors have beneficial options to subscribe are shown above. Apart from the executivedirectors, no other director has received share options. During the period no options were exercised or sold.

On behalf of the board

Philip PermutChairman, Remuneration CommitteeMarch 1, 2002

We have audited the financial statements, which comprise the profit and loss account, the balance sheet, the cash flow statement, the statementof total recognised gains and losses and the related notes including the additional directors’ remuneration disclosures included in the report ofthe board on directors’ remuneration.

Respective responsibilities of directors and auditorsThe directors’ responsibilities for preparing the annual report and the financial statements in accordance with applicable United Kingdom lawand accounting standards are set out in the statement of directors’ responsibilities.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and United KingdomAuditing Standards issued by the Auditing Practices Board.

We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with theCompanies Act 1985. We also report to you if, in our opinion, the directors’ report is not consistent with the financial statements, if the companyhas not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if informationspecified by law regarding directors’ remuneration and transactions is not disclosed.

We read the other information contained in the annual report and consider the implications for our report if we become aware of any apparentmisstatements or material inconsistencies with the financial statements. The other information comprises only the directors’ report, thechairman’s statement, chief executive’s review, the operating and financial review, report of the board on directors’ remuneration and thestatement of corporate governance.

We also, at the request of the directors (because the company applies the Financial Services Authority Listing Rules as if it were a listedcompany), review whether the corporate governance statement reflects the company’s compliance with the seven provisions of the CombinedCode specified by the Financial Services Authority for review by auditors of listed companies, and we report if it does not. We are not required toconsider whether the board’s statements on internal control cover all risks and controls, or to form an opinion on the effectiveness of thecompany’s or group’s corporate governance procedures or its risk and control procedures.

Basis of audit opinionWe conducted our audit in accordance with auditing standards issued by the Auditing Practices Board. An audit includes examination, on a testbasis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimatesand judgements made by the directors in the preparation of the financial statements, and of whether the accounting policies are appropriate tothe company’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide uswith sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused byfraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in thefinancial statements.

OpinionIn our opinion the financial statements give a true and fair view of the state of affairs of the company and the group at December 31, 2001 andof the profit and cash flows of the group for the year then ended and have been properly prepared in accordance with the Companies Act 1985.

PricewaterhouseCoopersChartered Accountants and Registered AuditorsLondonMarch 1, 2002


Independent auditors’ report to the members of Inmarsat Ventures plc


Consolidated profit and loss accounts

Year ended Year endedDecember 31 December 31

(US$000 except per share data) Notes 2001 2000 as restated

RevenuesContinuing operations 3 441,712 416,885Discontinued operations 103 –

Total revenues 441,815 416,885Depreciation and amortisation 4 (160,204) (179,747)Other net operating costs 4 (154,354) (127,153)

Total operating costs (314,558) (306,900)

Group operating profit/(loss)Continuing operations 144,053 125,660Discontinued operations (16,796) (15,675)

Total group operating profit 127,257 109,985Share of operating loss of joint venture(including goodwill write-off and impairment) 14 (20,496) (3,913)

Total operating profit: group and share of joint venture 106,761 106,072Losses on termination of subsidiary undertaking 14 (11,696) –

Group operating profit before interest and taxation 95,065 106,072Interest receivable and similar income 7 1,817 8,335Interest payable and similar charges 7 (33,559) (21,597)

(31,742) (13,262)Profit on ordinary activities before taxation 5 63,323 92,810Taxation 10 2,249 (30,947)

Profit on ordinary activities after taxation 65,572 61,863Equity minority interests – 704

Profit for the financial year 65,572 62,567Basic earnings per share 24 $0.66 $0.63Diluted earnings per share 24 $0.65 $0.62

The accompanying notes are an integral part of the consolidated financial statements

As at As atDecember 31 December 31

(US$000) Notes 2001 2000 as restated

Fixed assetsIntangible assets 12 701 1,546 Tangible assets 13 962,809 844,850 Investment in joint ventureShare of gross assets 10,012 18,709Goodwill – 2,861Share of gross liabilities (6,640) (7,023)

Total investment in joint venture 14 3,372 14,547

Total fixed assets 966,882 860,943

Current assetsStocks 15 1,467 1,898Debtors 16 143,930 129,558Short-term investments 7,356 178,451Cash at bank and in hand 3,986 14,932

Total current assets 156,739 324,839Creditors–amounts falling due within one year 17 (180,683) (260,692)

Net current (liabilities)/assets (23,944) 64,147

Total assets less current liabilities 942,938 925,090Creditors–amounts falling due after more than one year 18 (98,532) (197,157)Provisions for liabilities and charges 19 (78,089) (26,766)

Net assets 766,317 701,167

Capital and reservesCalled up share capital 21 16,200 16,200Other reserve 22 580,671 580,671Retained earnings 22 169,446 104,296

Total equity shareholders’ funds 766,317 701,167

The financial statements on pages 35 to 66 were approved by the board of directors on March 1, 2002 and were signed on its behalf by

Richard VosChairman



Consolidated balance sheets


Company balance sheets


(US$000) Notes 2001 2000

Fixed assetsInvestments 14 764,572 793,283Current assetsCash at bank and in hand 42 22,083Debtorsdue within one year 16 20,249 3,334due after one year 16 116,603 –

Total Debtors 136,852 3,334

Total current assets 136,894 25,417

Creditors–amounts falling due within one year 17 (76,787) (171,723)

Net current assets/(liabilities) 60,107 (146,306)

Total assets less current liabilities 824,679 646,977Creditors–amounts falling due after more than one year 18 (60,000) –

Net assets 764,679 646,977

Capital and reservesCalled up share capital 21 16,200 16,200Other reserve 22 580,671 580,671Retained earnings 22 167,808 50,106

Total equity shareholders’ funds 764,679 646,977

The financial statements on pages 35 to 66 were approved by the board of directors on March 1, 2002 and were signed on its behalf by

Richard VosChairman


OrdinaryRetained Other share

(US$000) Notes earnings reserves capital Total

Balance at January 1, 2000 as reported 49,808 580,671 16,200 646,679 Prior year adjustment 22 (8,079) – – (8,079)

Balance at January 1, 2000 as restated 41,729 580,671 16,200 638,600Prior year adjustment 22 (173) – – (173)Profit for the financial year as reported 62,740 – – 62,740

Balance at December 31, 2000 as restated 104,296 580,671 16,200 701,167

Balance at January 1, 2001 104,296 580,671 16,200 701,167Profit for the financial year 65,572 – – 65,572Exchange adjustments offset in reserves (422) – – (422)

Balance at December 31, 2001 169,446 580,671 16,200 766,317

Statement of group total recognised gains and lossesYear ended Year ended

December 31 December 31(US$000) Notes 2001 2000

as restated

Profit for the financial year 65,572 62,567Exchange adjustments offset in reserves 22 (422) –

Total recognised gains for the year 65,150 62,567Prior year adjustments 22 (8,252) –

Total gains recognised since last annual report 56,898 62,567



Reconciliation in movement in group shareholders’ funds



(US$000) Notes 2001 2000as restated

Net cash inflow from operating activities 23 255,890 295,822

Returns on investments and servicing of financeInterest received 1,888 8,638Interest paid (3,103) (59)Lease restructuring costs (6,192) – Interest element of finance lease rental payments (1,067) (16,528)

Net cash outflow for returns on investments and servicing of finance (8,474) (7,949)

TaxationUK corporation tax paid (32,523) (6,810)Overseas tax paid – (11)

Tax paid (32,523) (6,821)

Capital expenditure and financial investmentsPurchase of tangible fixed assets (253,280) (129,555)

Net cash outflow for capital expenditure and financial investment (253,280) (129,555)

Acquisitions and disposalsPayments for acquisitions of subsidiaries, net of cash acquired – (8,452)Purchase of investments in joint venture (10,000) (9,079)

Net cash outflow for acquisitions (10,000) (17,531)

Net cash (outflow)/ inflow before management of liquid resources and financing (48,387) 133,966

Management of liquid resourcesDecrease/(increase) in short-term deposits 171,095 (102,698)

Net cash inflow after management of liquid resources 122,708 31,268

Financing Bank borrowings 60,000 – Capital element of finance lease rental payments (202,964) (75,337)

Net cash outflow from financing (142,964) (75,337)(Decrease) in cash in the period 23 (20,256) (44,069)


Consolidated statement of cash flows

1. Background and basis of preparationThe principal activity of the group is the provision of global satellite communication services.

The preparation of the consolidated financial statements requires management to make certain estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the balance sheet dates and the reported amountsof revenue and expenses during the reported period. The more significant estimates include provisions, pension costs and asset lives. Actualresults could differ from those estimates.

2. Summary of significant accounting policies The consolidated financial statements are prepared under the historical cost convention and in accordance with applicable UK accountingstandards.

The group has reviewed its accounting policies in line with FRS 18 ‘Accounting Policies’ and adopted accounting policies most appropriate to itsbusiness so as to give a true and fair view as well as disclose sufficient information to enable users to understand the policies adopted and howthey have been applied in the consolidated financial statements.

Change in accounting policy and prior period adjustmentAs described in note 22, the group changed its accounting policy with regard to the treatment of deferred satellite performance payments in2001 and has applied the new policy retroactively through retained earnings.The change in policy is to recognise future payments using a netpresent value methodology rather than capitalising at gross costs as under the previous policy. This results in a reduction to profits of US$0.8million for the years prior to January 1, 2000 and thus a similar reduced figure applied to the opening retained earnings bought forward atJanuary 1, 2000. Profits were reduced by US$0.2 million in 2000 to account for this change in accounting policy, resulting from decreaseddepreciation of US$3.1 million, increased interest of US$3.4 million and decreased taxation of US$0.1 million.

Basis of consolidation The consolidated financial statements include the accounts of the company and its domestic and overseas subsidiary undertakings, togetherwith equity accounted undertakings to the extent of the group’s interest in those undertakings. All subsidiary and equity accounted undertakingswere acquired after April 1999. All inter-company transactions and balances with subsidiaries have been eliminated. The results of subsidiaryundertakings established or acquired during the period are included in the consolidated profit and loss account from the date of establishment or acquisition. The results of subsidiary undertakings disposed of during the period are included until date of disposal.

Currency of accounting and foreign currency The functional and reporting currency of the group is the US dollar as the majority of operational transactions are denominated in US dollars.Transactions not denominated in dollars during the accounting period have been translated into dollars at an average hedged rate of exchange.Fixed assets denominated in currencies other than the dollar have been translated at the hedged rates of exchange ruling at the dates ofacquisition. Monetary assets and liabilities denominated in currencies other than the dollar have been translated at the hedged rates of exchangeruling for the next year to the extent that they are covered forward. Differences on exchange are dealt with in the profit and loss account.

All exchange differences arising are dealt with in the profit and loss account. This treatment is required by Statement of Standard AccountingPractice (SSAP) number 20 in order to give a true and fair view of the group’s results. Compliance with SSAP 20 overrides Schedule 4Paragraph 12 of the Companies Act 1985 which states that only profits realised at the balance sheet date should be included in the profit and loss account.

Shares issued by the company and denominated in a currency other than US dollars are translated at the rates ruling at the date of the issue.

The group’s interest in the underlying net assets of subsidiary and associated undertakings, is translated into dollars at year-end rates. Theresults of subsidiary and equity accounted undertakings are translated into dollars at average rates of exchange. The adjustment to year-endrates is taken to reserves. Exchange differences that arise on the re-translation of subsidiary and associated undertakings’ balance sheets at the beginning of the year and equity additions and withdrawals during the financial year are dealt with as a movement in reserves.

Derivative financial instruments The group uses derivative financial instruments to hedge its exposure to foreign currency risk. To the extent that such instruments are matchedagainst an underlying asset or liability, they are accounted for using hedge accounting and therefore, gains and losses are deferred and onlyrecognised upon the maturity of the contract. Where instruments are not matched against an underlying asset or liability, losses are accrued inthe profit and loss account.

The group does not hold or issue derivative financial instruments for trading purposes.


Notes to the consolidated financial statements


2. Summary of significant accounting policies continuedRevenue Satellite revenue results from utilisation charges that are recognised as revenue over the period during which the satellite services are provided.Other satellite revenues not dependent upon utilisation charges and where the fee is fixed or determinable are recognised as deferred incomewhen a non-cancellable agreement is in force, and collectibility is reasonably assured. Deferred income attributable to other satellite revenuesrepresents the unearned balances remaining from amounts receivable from customers pursuant to lease prepayment options. These amountsare recorded as revenues on a straight-line basis over the respective lease terms.

Pensions and post-retirement benefitsThe group operates a defined benefit and a number of defined contribution pension schemes in its principal locations. The defined benefitscheme is funded and its assets are held in separate funds administered by a corporate trustee.

The group has adopted the transitional rules of FRS 17 ‘Accounting for retirement benefits’. FRS 17 substantially changes the method ofaccounting for defined benefit pensions. We are required to adopt fully this new standard by our 2004 financial year. We expect this standardmay have the effect of increasing the pension costs to be included within operating costs, thus reducing our operating profit. Pension fundactuarial gains and losses, including investment returns varying from the assumed returns, will be recorded in full in our statement of recognisedgains and losses annually. Pension fund deficits, calculated in accordance with prescribed rules in this standard, will be shown in our balancesheet as will any surpluses to the extent we expect to obtain value from them in the foreseeable future. We have made the transitionaldisclosures required as a minimum for the year ended December 31, 2001. See note 25.

Pension costs for the defined benefit scheme are assessed in accordance with the advice of independent qualified actuaries and are charged tothe profit and loss account so as to spread the cost on a straight-line basis over the average service lives of employees. Pension surpluses anddeficits are amortised over the expected average remaining service lives of current employees. Pension costs for the defined contributionschemes are charged to the profit and loss account as incurred.

The group recognises liabilities relating to post-retirement medical benefits in respect of employees in the UK and overseas. The basis of thevaluation of the liability is the projected unit method which requires that annual charges are made to the group’s profit and loss account so as to spread the cost of these benefits after retirement, on a systematic basis, over the employees’ working lives.

Stock compensation costs The group recognises a liability relating to share options granted to employees provided the grant is not contingent on a future event. Where thegrant is contingent, a liability is recognised when the contingency is realised. Share option costs represent the difference between the exerciseprice of these share options and the fair market value of the underlying ordinary shares on the date of grant. The difference is amortised over theperformance period or the vesting period where there is no performance criteria of the applicable options depending on the share option planunder which they were granted. See note 21 for a description of the company’s share option plans.

The group recognises a liability for National Insurance contributions on outstanding share options where the grant of options is not contingentupon a future event. The liability is calculated on the difference between the market value of the underlying shares at the end of the financialyear and the option exercise price as it is recognised over the period from the date of grant to the end of the performance period.

Advertising costs Advertising costs are expensed as incurred.

Taxation The group has adopted FRS 19, ‘Deferred taxation’ and recognises deferred tax assets and liabilities arising from timing differences under theincremental liability approach. See note 10.

Earnings per share Basic earnings per share is calculated based on the weighted average number of ordinary shares outstanding during the period. Diluted earningsper share is based upon the weighted average number of shares in issue throughout the year, adjusted for the dilutive effect of potential ordinaryshares. The only potential ordinary shares in issue are employee share options.

Research and development Research and development expenditure which does not meet the criteria for capitalisation is written off in the year in which it is incurred.

2. Summary of significant accounting policies continuedSoftware development costs Software development costs directly relating to the development of new services are capitalised with the tangible fixed assets to which theyrelate. Costs are capitalised once a business case has been demonstrated as to technical feasibility and commercial viability, and has beenapproved by the board of directors of the company. Such costs are depreciated over the estimated sales life of the services, which is generallythree years.

Investments Investments in joint ventures are accounted for using the gross equity method of accounting. A joint venture is a company in which the grouphas a participating interest and, in the opinion of the directors of the company, exercises joint control with at least one other party. The profit and loss account includes the group’s share of operating profit or loss, interest income or expense and attributable taxation of those companies.The balance sheets show the group’s share of the gross assets and liabilities of those companies, and attributed goodwill.

Other investments, held as fixed assets, comprise marketable securities and are recorded in the balance sheet at cost less provision forimpairment.

Acquisitions and goodwill On the acquisition of a company or business, fair values reflecting conditions at the date of acquisition are attributed to the identifiable separableassets and liabilities acquired.

Where the fair value of the consideration paid exceeds the fair value of the identifiable separable assets and liabilities acquired, the differenceis treated as purchased goodwill. Goodwill is amortised using the straight-line method over its estimated useful life, not exceeding twenty years.This is the period over which the directors of the company estimate that the value of the underlying business acquired is expected to exceed thevalue of the underlying assets.

Fees and similar incremental costs incurred directly in making an acquisition, but excluding finance costs, are included in the cost of theacquisition and capitalised. Internal costs, and other expenses that cannot be directly attributed to the acquisition, are charged to the profit and loss account.

Space segment capital expenditure Space segment assets comprise satellite construction, launch and other associated costs. Expenditure charged to space segment projectsincludes invoiced progress payments, external consultancy costs and internal costs. Internal costs, comprising primarily staff costs, are onlycapitalised when they are directly attributable to the construction of an asset. Progress payments are determined on milestones achieved to date together with agreed cost escalation indices. Deferred satellite performance payments represent the net present value of future paymentsdependent on the future performance of each satellite and recognised in space segment assets when the satellite becomes operational if it isprobable that performance criteria will be met. This accounting policy represents a change from the previous policy - see change in accountingpolicy above. The space segment assets are depreciated over the life of the satellites from the date they become operational.

Capitalised interest Interest and associated costs incurred on finance leases and bank debt raised to meet construction costs of satellites are capitalised until thesatellites become operational and are included in space segment tangible fixed assets.

Other fixed assetsOther fixed assets are stated at historic cost less accumulated depreciation.

Depreciation of fixed assets Depreciation is calculated to write off the historical cost of fixed assets, except land, on a straight-line basis over the expected useful lives of the assets concerned. The principal annual rates used for this purpose are:

Space Segment 10.0%Fixtures and fittings, and other building-related equipment 10.0%Buildings 4.0%Other fixed assets 20.0-33.3%


Notes to the consolidated financial statements continued


2. Summary of significant accounting policies continuedAsset impairment The group evaluates potential impairment loss related to long-lived assets, including goodwill, when a change in circumstances occurs, byassessing whether the carrying amount can be recovered over the remaining life. Impairment is recognised if the recoverable amount (the higherof net realisable value and value in use) falls below its carrying value.

Leasing commitments Assets acquired under finance leases, which transfer substantially all the rights and obligations of ownership, have been recorded in the balancesheet as fixed assets at their equivalent capital value and are depreciated over the useful life of the asset. The corresponding liability is analysedbetween its short term and long term components. The interest element of the finance lease is charged to the profit and loss account over thelease period at a constant rate. Rentals payable under operating leases are charged in the profit and loss account in equal annual amounts overthe term of the lease.

Stocks Stocks are stated at the lower of cost and net realisable value. Cost is determined by the average cost method.

Liquid resources The group defines liquid resources as short term deposits and current asset investments capable of being converted into cash.

Provisions Provisions, other than in respect of post-retirement benefits and stock compensation for which accounting policies are described above, arerecognised when the group has a legal or constructive obligation to transfer economic benefits arising from past events and the amount of thatobligation can be estimated reliably. Provisions are not recognised unless the transfer of economic benefits is probable.

3. Segmental information The group operates in one core class of business, the supply of global satellite communication services. Within this one business class, thegroup conducts its activities primarily in four business sectors, being maritime, land, aeronautical and leasing. The performance of all businesssectors is viewed as a single segment by the decision-makers of the group.

Other revenues includes revenues in 2001 from Invsat US$24.4 million (2000: US$14.6 million), Rydex US$1.5 million (2000: US$1.4 million)and any other trading revenue outside the group’s core communications and leasing services.

An analysis of revenue for continuing operations by business sector is set out below.


(US$000) 2001 2000

Maritime 270,752 266,203Land 95,150 89,798Aeronautical 12,295 12,467Leasing (including Navigation) 37,410 32,425Other 26,105 15,992

Total revenues 441,712 416,885

Inmarsat provides a range of satellite communications services. Because of the integrated nature of the underlying satellites and associatednetwork infrastructure, it is not feasible to show net assets and the profit for the periods by business sector.

3. Segmental information continuedFor the periods presented below, the following customers (land earth station operators), contributed more than 10% of consolidated continuingoperations revenues.

Year endedYear ended December 31 2000

December 31 2001 as restatedper cent US$000 per cent US$000

Customer A 20.6 90,922 22.3 93,015Customer B 16.6 73,220 11.1 46,238Customer C 12.8 56,403 10.8 45,034Customer D 11.3 49,783 11.7 48,629Customer E 11.1 49,015 11.6 48,184

In 2001, Customer B merged with another customer.

Revenues from continuing operations are allocated to countries based on the location of the billable customers. These customers sell services toend users who may be located elsewhere. There is no difference on this basis between the origin and destination of revenue.

Year ended Year ended December 31 December 31

(US$000) 2001 2000

Asia and Pacific 97,892 94,936Netherlands 57,649 59,120United Kingdom 68,360 59,732United States 50,556 49,176Norway 49,504 48,404France 56,403 45,040Other Europe 28,997 28,549Other Americas 23,896 24,580Other 8,455 7,348

Total revenues 441,712 416,885

Because of the integrated nature of the satellite infrastructure, it is not feasible to show net assets, long lived assets and the profit/(loss) for theperiods by geographic location.




4. Net operating costs Year ended December 31 As restated year ended December 31

2001 2001 2001 2000 2000 2000Continuing Discontinued Continuing Discontinued

(US$000) Operations Operations Total Operations Operations Total

Own work capitalised 21,594 – 21,594 13,264 – 13,264Other operating income 3,541 – 3,541 1,918 – 1,918Network and satellite operations (13,406) – (13,406) (18,485) (1,187) (19,672)Other external charges (78,275) (9,935) (88,210) (50,908) (11,479) (62,387)

Total external charges (91,681) (9,935) (101,616) (69,393) (12,666) (82,059)Staff costs (see below) (73,139) (4,734) (77,873) (57,489) (2,787) (60,276)

Total other net operating costs (139,685) (14,669) (154,354) (111,700) (15,453) (127,153)

Depreciation and amortisation (157,974) (2,230) (160,204) (179,525) (222) (179,747)

Wages and salaries (62,739) (4,467) (67,206) (49,225) (2,616) (51,841)Social security costs (5,989) (201) (6,190) (4,481) (133) (4,614)Pension costs (4,411) (66) (4,477) (3,783) (38) (3,821)

Total staff costs (73,139) (4,734) (77,873) (57,489) (2,787) (60,276)

5. Profit on ordinary activities before taxation Profit on ordinary activities before taxation is stated after charging:

As restatedYear ended at year ended

December 31 December 31(US$000) Notes 2001 2000

Write down of investment in joint venture 14 10,865 – Losses on termination of subsidiary undertaking 14 11,696 –Depreciation of tangible assets:leased 129 54,933owned 157,052 123,282

Depreciation on discontinued assets 2,230 222Amortisation of goodwill of subsidiaries 793 1,310Amortisation of goodwill of joint venture 1,588 718

Operating lease rentalsland and buildings 553 691services equipment, fixtures and fittings 1,032 169space segment 11,843 17,731

Auditors’ remuneration and expenses – audit services 334 295

Staff costs 4 77,873 60,276Advertising costs 14,546 8,801Research and development costs 12,439 20,145Foreign currency (gains) (4,923) (2,484)

Auditors’ remuneration and expenses payable by the company were US$10,000, and non audit remuneration was US$1.9 million. In 2001,the group incurred non audit fees of US$2.7 million (2000: US$1.7 million). Of these amounts, US$2.6 million (2000: US$1.3 million) werein relation to the IPO.

6. Profit of holding companyThe company has taken advantage of the exemption available under Section 230 of the Companies Act 1985 and has not presented a profitand loss account. The profit in the holding company, Inmarsat Ventures plc, for the year ended December 31, 2001 was US$117.7 million(2000: loss of US$9.0 million).

7. Interest


(US$000) 2001 2000 as restated

Net of interest payable on bank loans and overdrafts (3,103) (59)Realised loss on cross currency interest rate swaps (4,358) –Interest payable under finance lease contracts (1,067) (16,528)Lease restructuring costs (note 20) (21,087) (1,600)Unwinding of discount on deferred satellite payments (3,944) (3,410)

Total interest and similar charges payable (33,559) (21,597)Bank interest receivable 1,615 8,335Share of interest receivable of joint venture 202 –

Total interest and similar income receivable 1,817 8,335

Net interest payable (31,742) (13,262)

Interest has been capitalised in 2001 in relation to bank debt to finance capital investment in the Broadband Global Area Network (B-GAN) andRegional B-GAN projects. The amount capitalised in 2001 was US$7.1 million (2000: US$nil), of which US$4.5 million represented aprepayment relating to the arrangement fee.

8. Employee numbers The average monthly number of people (including the executive directors) employed during the period by category of employment:


2001 2000

Network and satellite operations 146 98Marketing and business development 143 109Product development and engineering 159 109Administration, legal, finance, advanced programmes and other 187 149

635 465

The above average number of employees includes employees of Invsat, Rydex and Setfair totalling 98, 18 and 105 respectively in 2001 (76 and 54 for Invsat and Rydex/Setfair in 2000).

9. Directors’ remunerationRefer to the report of the board on directors’ remuneration for directors’ salary, bonus, benefit and option disclosures on pages 30 to 33.




10. Taxation The tax (credit)/charge is based on the taxable profits for the year and comprises:



Corporation tax at 30%–current year 8,056 19,351Deferred tax–current year 31,417 12,477

39,473 31,828Adjustments in respect of previous periods (42,603) –Share of tax of joint venture 881 (881)

(2,249) 30,947

The UK Inland Revenue has agreed that the value of assets qualifying for capital allowances (tax depreciation) at Transition in April 1999 should be the open market value of the assets at that date. In 2001 the value for capital allowance (tax depreciation) purposes of satellite assets transferred on Transition was agreed with the Inland Revenue and as a result we have recognised a significant net tax credit arising fromthe adoption of these revised values for the year ended December 31, 2001. We have yet to agree the open market value of certain other assetsand discussions with the Inland Revenue are ongoing. The Directors have taken a prudent approach to the valuation in arriving at the tax chargefor the year. Agreement may result in a reduced tax charge in future years.

Deferred Taxation

The tax effect of timing differences is:



Liability recognised 73,575 22,324

The deferred tax balance arises from the difference between the rates of capital allowances (tax depreciation) and accounting depreciation andlosses not given tax effect in the current period.

The group’s effective tax rate reconciliation is as follows:



UK statutory tax rate 30% 30% Profit on ordinary activities 63,323 92,810

Corporation tax provision at UK statutory rate 18,997 27,843Non-deductible expenses 21,357 3,104Adjustments in respect of previous periods (42,603) –

Income tax provision (2,249) 30,947

11. Dividends No dividend was declared for the years ended December 31, 2000, or December 31, 2001.

12. Intangible fixed assets

(US$000) Goodwill

Cost at January 1, 2001 2,856Exchange revaluation (168)Additions –Disposals (22)

Cost at December 31, 2001 2,666Accumulated amortisation at January 1, 2001 (1,310)Exchange revaluation 138Charge for the period (793)

Accumulated amortisation at December 31, 2001 (1,965)

Net book amount at December 31, 2001 701

Net book amount at December 31, 2000 1,546

The goodwill arising on the acquisitions of Invsat Ltd and Rydex Corporation Ltd is being amortised on a straight line basis over three years fromthe date of acquisition.

13. Tangible fixed assetsFreehold and Services

long leasehold equipment,land and fixtures Space

(US$000) buildings and fittings segment Total

Cost at January 1, 2001 as restated 64,201 341,318 1,986,500 2,392,019Exchange revaluation – (269) – (269)Additions 3,745 36,386 242,767 282,898Disposals – (101) – (101)Disposals of discontinued assets – (7,709) – (7,709)

Cost at December 31, 2001 67,946 369,625 2,229,267 2,666,838Accumulated depreciation at January 1, 2001 as restated 17,156 253,601 1,276,412 1,547,169Exchange revaluation – (122) (122)Charge for the period 2,129 27,162 127,890 157,181Charge for the period on discontinued assets – 2,230 – 2,230Write down of subsidiary assets – 5,211 – 5,211Disposals – (45) – (45)Disposals of discontinued assets – (7,595) – (7,595)

Accumulated depreciation at December 31, 2001 19,285 280,442 1,404,302 1,704,029Net book amount at December 31, 2001 48,661 89,183 824,965 962,809

Net book amount at December 31, 2000 47,045 87,717 710,088 844,850

Included within the net book amount of space segment assets at December 31, 2000 and 2001 is capitalised interest amounting to US$19.2 million and US$23.0 million.

The net book amount of freehold land and buildings is US$1.1 million as at December 31, 2000 and 2001.

The net book amount of long leasehold land and buildings is US$45.9 million and US$47.6 million as at December 31, 2000 and 2001. Long leases are defined as leases with over 50 years remaining.

The net book amount of tangible fixed assets under finance leases is US$192.8 million and US$0.3 million as at December 31, 2000 and 2001.




13. Tangible fixed assets continuedAt December 31, 2000 and 2001, the net book amount of software development costs included within services equipment, fixtures and fittingswas US$7.7 million and US$2.7 million net of accumulated depreciation of US$9.8 million and US$9.9 million. Depreciation charges in eachof the year ended December 31, 2000 and the year ended December 31, 2001 were US$7.1 million and US$1.0 million.

14. Investments

GroupJoint

(US$000) ventures

At January 1, 2000 –Additions 9,079Additional capital contribution 8,500Share of loss (3,195)Amortisation of Goodwill (718)Deferred Taxation 881

At December 31, 2000 14,547

At January 1, 2001 14,547Additional capital contribution 10,000Share of loss (7,841)Amortisation of Goodwill (1,588)Write down of investment (10,865)Deferred Taxation (881)

At December 31, 2001 3,372

As a result of a board decision on November 7, 2001 the Setfair business of Merasis Ltd established to develop Internet-based business-to-business services and applications for the maritime industry ceased trading and is consequently in the process of being wound up. The companyreported an exceptional loss of US$11.7 million in addition to US$24.0 million of losses for the year ended December 31, 2001 to liquidate thecompany. This exceptional has no tax effect.

During the year ended December 31, 2001 the board decided to wind up the group’s investment in Merasis Ltd and Setfair.com Ltd. As a resultthe remaining goodwill on acquisition was written off. The remainder of the investment in Setfair in 2001 was accounted for using the equitymethod in accordance with FRS 2 since control had moved from the company to the liquidators. Following the decision to appoint liquidators,the directors have estimated that the fair value of this investment is US$Nil and have therefore fully written down this investment to this amount.

CompanyJoint Core operations Total

(US$000) ventures Subsidiaries investments investments

At January 1, 2000 – – 743,610 743,610Additions 9,079 32,094 – 41,173Additional capital contribution 8,500 – – 8,500

At December 31, 2000 17,579 32,094 743,610 793,283

At January 1, 2001 17,579 32,094 743,610 793,283Additional capital contribution 10,000 30,942 – 40,942Interest on loans – 1,310 – 1,310Repayment of loans – (8,781) – (8,781)Investment write down (24,207) (37,975) – (62,182)

At December 31, 2001 3,372 17,590 743,610 764,572

14. Investments continuedInvestment in joint ventures The investment in joint ventures represents an 80% interest in Airia Ltd. This interest is treated as a joint venture because control is exercisedthrough the board jointly with the other shareholders. Airia was established in May 2000 to provide live news and sports broadcasts tocommercial aircraft.

The significant events of September 11th have dramatically affected the whole airline industry. Against this backdrop there has been a criticalreview of the requirements for in-flight entertainment by the airlines and this will naturally affect the level of demand and timing for the Airia liveTV service. Consequently, the company is considering carefully how to manage its investment in the joint venture company. The companycarried out an impairment review in October 2001 and wrote down the investment in Airia by US$10.9 million.

An analysis of the company’s share of operating loss for Airia Ltd for the period ended December 31, 2001 is set out below:


US$000 2001 2000

Turnover – –Operating loss before taxation 7,841 3,195Write down of assets 10,865 –Taxation (note 10) 881 (881)

Share of Airia Ltd loss after taxation (80%) 19,587 2,314

Analysis of balance sheet after impairment of US$10.9 million:Intangible assets – 8,371Tangible fixed assets – 96Debtors 6,506 9,653Short term investments 6,010 5,266

Total assets 12,516 23,386Creditors less than one year (8,301) (8,779)

Total net assets 4,215 14,607Share of joint venture assets (80%) 3,372 11,686Goodwill – 2,861

Total investment in Airia joint venture 3,372 14,547

15. Stock As at As at

December 31 December 31(US$000) 2001 2000

Raw materials and consumables 1,467 1,898

The carrying value is not materially different from replacement cost.

The company held no stock.




16. DebtorsAmounts falling due within one year

Group Company Group Companyas at as at as at as at

December 31 December 31 December 31 December 31(US$000) 2001 2001 2000 2000

Trade debtors (land earth station operators) 107,126 – 111,568 – Trade debtors (other) 3,314 – 1,445 – Other debtors 4,889 18 4,807 48 Corporation tax 22,577 8,000 – –Amounts due from subsidiary companies – 11,684 – –Prepayments and accrued income 6,024 547 11,738 3,286

143,930 20,249 129,558 3,334

Revenues are derived primarily from sales to land earth station operators, the majority of whom are our shareholders.

Amounts falling due after one yearCompany Company

as at as atDecember 31 December 31

(US$000) 2001 2000

Amounts due from subsidiary companies 116,603 –

17. Creditors–amounts falling due within one year

Group Company Group Companyas at as at as restated at as at


Bank overdrafts 12,906 – 3,596 –Obligations under finance leases (note 20) 124 – 81,305 –Trade creditors 110,388 – 79,752 –Amounts due to subsidiary companies – 62,678 – 160,526Amounts due to shareholders 1,316 – 1,316 –Corporation tax – – 15,594 –Other taxation and social security 1,568 – 676 –Other creditors 8,196 – 9,667 –Deferred satellite payments 7,181 – 5,826 –Accruals and deferred income 39,004 14,109 62,960 11,197

180,683 76,787 260,692 171,723

18. Creditors–amounts falling due after more than one year

Group Company Group Companyas at as at as restated at as at


Deferred satellite payments 38,340 – 43,163 –Bank Borrowings 60,000 60,000 – –Obligations under finance leases (note 20) 192 – 153,994 –

98,532 60,000 197,157 –

18. Creditors–amounts falling due after more than one year continuedThe following is a summary of deferred satellite payments due after more than one year as at December 31, 2001.

DeferredSatellite

(US$000) Payments

2003 6,0432004 5,6482005 5,5412006 5,482

Due after five years 15,626

Total deferred satellite payments 38,340

On May 1, 2001, the company obtained a five year US$610.0 million unsecured medium term revolving credit facility from Barclays Capitaland ING Bank N.V. The amount drawn down under this facility at December 31, 2001 was US$60.0 million. Interest is fixed at thecommencement of each drawing at LIBOR plus the margin under the facility.

19. Provision for liabilities and charges

GroupPost Deferred

(US$000) retirement tax Total

As at December 31, 2000 4,442 22,751 27,193Prior year adjustment – (427) (427)

At January 1, 2001 restated 4,442 22,324 26,766

Charged 72 31,417 31,489Exchange revaluation – (606) (606)Acquisition of subsidiary lessor – 47,360 47,360Reduction following agreement of valuation of assets at transition with UK Inland Revenue – (26,920) (26,920)

As at December 31, 2001 4,514 73,575 78,089

There were no provisions for liabilities and charges for the company.




20. Obligations under finance leasesAs at As at


Due within one year 124 81,305Due in two to five years 192 111,700Due after five years – 42,294

316 235,299

Restructuring of finance leasesOn January 31, 2001, the company restructured its satellite finance leases. With regard to the group’s Inmarsat-2 satellites, the companyprepaid all outstanding primary rentals due under the lease, secondary rental payments of £0.2 million commence in 2002. With regard to the Inmarsat-3 satellites, the company acquired the lessor company (a special purpose company of a larger group) and, having assumed thelessor’s rights under the lease, now thereby own the satellites. This transaction has been treated as a financing transaction and not a businesscombination in order to reflect its substance.

Total costs of these transactions are approximately US$22.7 million. Of this amount, US$1.6 million was recognised in 2000 and US$21.1million was recognised in 2001. The amount expensed in 2001 includes a non cash charge of US$14.9 million due to the alignment ofdifferent accounting treatments adopted for the Inmarsat-3 satellites by the lessor company and Inmarsat.

Inmarsat-2 satellites On September 28, 1988, the group entered into a finance lease arrangement for three Inmarsat-2 satellites with North Sea Marine LeasingCompany for £140.4 million. The group also entered into a finance contract with the European Investment Bank (EIB) and the Club of LongTerm Credit Institutions in September 1988 which provided a letter of credit facility, secured on the revenues arising from the group’s spacesegment, of up to £245.0 million. Additionally the EIB provided a US dollar/sterling currency swap arrangement to provide sterling to the groupto meet its sterling repayments over the ten year primary lease period, which began on the date of operation of each satellite. Operationscommenced in respect of the first two satellites during 1991 with the third satellite entering service during 1992. The lease liability wasrepayable over the period to 2002.

In January 2001 the group’s finance lease liabilities were restructured. See above.

Inmarsat-3 satellites On December 20, 1991, the group entered into a further finance lease arrangement for three Inmarsat-3 satellites with Abbey NationalDecember Leasing (3) Limited, a subsidiary of a UK bank, up to a maximum amount of £197.0 million.

The group also entered into a finance contract with the EIB and the Club of Long Term Credit Institutions who, in December 1991, provided aletter of credit facility, secured on the revenues arising from the group’s space segment, of up to £100.0 million. Additionally, the EIB and theClub of Long Term Credit Institutions, amongst other lease credit support arrangements, entered into a US dollar/sterling currency swaparrangement to provide sterling to the group to meet its sterling repayments over a ten year primary lease period for each satellite which began in April 1996. The lease liability was repayable over the period to 2006.

In January 2001 the group’s finance lease liabilities were restructured. See above.

21. Called up share capital Non

(US$000) Equity Equity Total

Authorised:200,000,010 Ordinary shares of 10 pence each 32,400 – 32,4001 special rights non-voting redeemable preference share of £1.00 – – –

32,400 – 32,400

Allotted, issued and fully paid100,000,010 Ordinary shares of 10 pence each 16,200 – 16,2001 special rights non-voting redeemable preference share of £1.00 – – –

16,200 – 16,200

One share of £1.00 was allotted on incorporation in 1998 with the remaining 10,000,000 allotted in 1999 on Transition to a private company.Following the 10:1 share split on March 15, 2001, there are now 100,000,010 shares of 10 pence each.

The special share was issued to the International Mobile Satellite Organisation on April 15, 1999 and carries no voting rights. It is nottransferable and does not confer any right to participate in profits. The International Mobile Satellite Organisation may, at any time, afterconsulting the company and subject to the provisions of the Companies Act, require the company to redeem the special share at par by givingwritten notice and delivering the relevant share certificate.

The company has two Share Option Plans. The directors use these plans to award share options to employees of the group. The Approved SharePurchase Plan is approved by the UK Inland Revenue. The Share Option Plan (comprising tiers as below) is not Inland Revenue approved. Theseplans will cease in the event that the company completes an IPO and new share plans which have already been finalised will then be used foroption grants.

Some options under the Share Option Plan are subject to performance conditions, the aim of which is to link the exercise of options to companyshare price improvements. The Remuneration Committee of the group sets the performance conditions. Options are normally exercisablebetween the IPO date and up to ten years after the date of grant of the option.

The company had outstanding at December 31, 2001, the following options to subscribe for ordinary shares:

Name of plan Number of shares Exercise period Exercise price

Approved Share Purchase Plan–Tier 1 545,640 From IPO to 10/2009 £7.865 per shareShare Option Plan–Tier 2 539,030 40% on IPO; 60% first anniversary of IPO; £7.865 per share

expire between 10/2009 and 03/201190,740 100% first anniversary of IPO; £7.865 per share

expire between 12/2010 and 03/2011Share Option Plan (Executive) 80,000 Upon certain increases in share prices occurring after IPO; £7.865 per share

expire 10/2009Share Option Plan (Executive) 80,000 331/3% on IPO; 331/3% on IPO; £1 per tranche

331/3% first anniversary of IPO; expire 10/2009Share Option Plan–Tier 3 527,100 Upon certain increases in share prices occurring after IPO; £7.865 per share

expire between 05/2010 and 03/2011.Share options outstanding atDecember 31, 2001 1,862,510

The Remuneration Committee under the company’s various share option plans approves grants of options which are then made by InmarsatEmployee Share Plan Trustees Ltd.

The company has reserved 3,250,000 shares for issue under the plans.

As the exercise of options is conditional on the company completing an IPO, a charge has not been recognised in respect of the differencebetween the exercise price of the options and the market value of the date of grant. The value of this difference based on management’sexpectation of fair value, is US$1.7 million which would be recognised in the profit and loss account in the event of an IPO.




22. Reserves

GroupRetained Other

(US$000) earnings Reserve

At January 1, 2000 as previously reported 49,808 580,671Prior year adjustment (8,079) –

At January 1, 2000 as restated 41,729 580,671Prior year adjustment (173) –Profit for the financial year as reported 62,740 –

At December 31, 2000 as restated 104,296 580,671

Profit for the financial year 65,572 –Exchange adjustments offset in reserves (422) –

At December 31, 2001 169,446 580,671

The Transition of the international treaty organisation to a limited company which occurred on April 15, 1999 represented a transfer of assetsand liabilities under common control and was accounted for as a group reconstruction applying the principles of merger accounting.

The other reserve represents the difference between the nominal value of the shares issued and the net book value of the assets acquired onTransition.

Prior year adjustmentThe group changed its accounting policy with regard to the treatment of deferred satellite performance payments in 2001 and has applied thenew policy retroactively through retained earnings. The change in policy is to recognise future payments using a net present value methodologyrather than gross costs as was done previously. This results in a reduction to profits of US$0.8 million for the years prior to January 1, 2000 and thus a similar reduced figure applied to the opening retained earnings bought forward at January 1, 2000. Profits were reduced by US$0.2million in 2000 to account for this change in accounting policy, resulting from decreased depreciation of US$3.1 million, increased interest ofUS$3.4 million and decreased taxation of US$0.1 million.

In the preparation of the 2001 results, a non cash balance of US$7.2 million has been identified as set-off against the balance on the deferredlease revenues account. This balance arose in 1997 and should not have been carried forward to the current year. Accordingly, the group hasmade an adjustment of US$7.2 million to reduce the opening balance of retained earnings bought forward at January 1, 2000. The adjustmentdid not affect the consolidated profits in 2000 or 2001.

CompanyRetained Other

(US$000) earnings Reserve

At January 1, 2000 59,137 580,671Loss for the financial year (9,031) –

At December 31 2000 50,106 580,671

At January 1, 2001 50,106 580,671Profit for the financial year 117,702 –

At December 31, 2001 167,808 580,671

23. Notes to cash flow statement Reconciliation of operating profit to net cash inflow from operating activities:



Operating profit 127,257 109,985Depreciation 159,411 178,437Amortisation 793 1,310Decrease/(increase) in stocks 431 (1,103)Decrease/(increase) in debtors 5,569 (3,928)(Decrease)/increase in creditors (77,503) 12,102(Decrease) /increase in provisions 39,932 (981)

Net cash inflow from continuing operating activities 255,890 295,822

Reconciliation of net cash flow to movement in net debt:

Year ended Period ended December 31 December 31

(US$000) 2001 2000

Net debt transferred at beginning of period 45,512 179,169Decrease in cash in the period 20,256 44,069Decrease/(increase) in liquid resources 171,095 (102,698)Capital element of finance lease rental payments (202,964) (75,337)Non cash adjustment* (32,019) –New bank borrowings 60,000 –New finance leases acquired – 309

Net debt 61,880 45,512

Analysis of net debt:

Cash at bank Overdrafts Cash at bank Short-term Finance lease Bank(US$000) and in hand less overdrafts investments obligations borrowings Total

At December 31, 2000 (14,932) 3,596 (11,336) (178,451) 235,299 – 45,512Net cash flow 10,946 9,310 20,256 171,095 (202,964) 60,000 48,387Non cash adjustment* – – – – (32,019) – (32,019)

At December 31, 2001 (3,986) 12,906 8,920 (7,356) 316 60,000 61,880

*Non cash charges comprise the deferred tax liability assumed on the acquisition of the lessor as part of the lease restructuring exercise (note 19), offset by the non cash charge arising from the alignment of different accounting treatments adopted for the Inmarsat-3 satellites by the lessor company and Inmarsat (note 20).




24. Earnings per share Year ended Year ended

December 31 December 312001 2000 as restated

Numerator (US$000)Profit for the financial period 65,572 62,567

Denominator (thousands of shares)Weighted average number of ordinary shares 100,000 100,000Diluted weighted average number of shares including share options granted 100,507 100,560

Basic earnings per share (US dollars) $0.66 $0.63Diluted earnings per share (US dollars) $0.65 $0.62

For diluted earnings per share, the weighted averaged number of ordinary shares in issue as calculated above is adjusted to assume conversionof all dilutive potential ordinary shares, that is, those share options where the exercise price is less than an assumed average market valueduring the period.

The calculations for 2000 have been performed to reflect the 10:1 share split on March 15, 2001.

25. Pension arrangements and post retirement benefitsThe group’s pension plans, including defined benefit and defined contribution elements, commenced on April 15, 1999. Initial fundingrequirements were based on actuarial assumptions.

The group operates pension schemes in each of its principal locations. The UK scheme has 2 plans: a hybrid scheme with both defined benefitand defined contribution elements which is closed to new employees and a defined contribution plan. The defined benefit section of the schemeis funded and its assets are held in a separate fund administered by a corporate trustee.

The defined benefit section of the scheme is valued using the projected unit method with the first valuation carried out as at December 31,1999. The actuarial valuation of the assets of the scheme at that date, allowing for expected future increases in earnings, was US$2.9 millionwhich was sufficient to cover 120% of benefits that had accrued to members. The results of this valuation were updated as at December 31,2001, for the purposes of the additional disclosures required by FRS 17 set out below.

The assumptions, which have the most significant effect on the results of the actuarial valuations, are those relating to the rate of return oninvestments, the rates of increases in salaries and the rate of pension increases. For the calculation of the initial funding rates, the actuariesassumed that the rate of investment return, will, on average, exceed pay and pension increases by 2% and 4% per annum respectively.

The pension charge for the period ended December 31, 2000 and the year ended December 31, 2001 is disclosed in note 4.

The group provides post retirement benefits including healthcare to retired employees and their dependants that were employed with the groupbefore January 1, 1998. Employees who have 10 years of service at the age of 58 and retire from the group are eligible to participate in the postretirement benefit plans. The plan is self funded through a Medical Trust and there are no plan assets from which the costs are paid. The cost ofproviding retiree health care is actuarially determined and accrued over the service period of the active employee group. Membership to this planis multi-national, although most staff are currently employed in the UK.

The medical plan is not funded. The obligation under these plans was determined by the application of the terms of medical plans, together with relevant actuarial assumptions and health care cost trend rates. The long-term rate of medical expense inflation used in the actuarialcalculations is 2.5% per annum in excess of the rate of price inflation (5%). For purposes of this calculation, a 5% per annum price inflationassumption was used. The discount rate used in determining the accumulated post retirement benefit obligation was 6% at December 31, 2001.

25. Pension arrangements and post retirement benefits continuedThe following information is presented as at December 31, 2001 as required by the transitional rules of FRS 17.

The major actuarial assumptions used as at December 31, 2001 were:Rate of increase in salaries 4.5%Rate of increase in pensions in payment 2.5%Discount rate 5.75%Inflation assumption 2.5%Medical expense inflation assumption 5%

The assets held in respect of the defined benefit section of the UK Scheme and the expected rates of return were:

Long term rate of return

expected at December 31

Value US$000 2001

Equities 6,203 7.5%Bonds 405 5.75%Gilts 268 5.0%Cash 155 4.0%

Total market value of assets 7,031 7.25%

The following amounts in respect of all post retirement benefits, as at December 31, 2001, were measured in accordance with the requirementsof FRS 17.

Post retirement(US$000) healthcare Pension benefits Total

Total market value of assets – 7,031 7,031Present value of plan liabilities (4,514) (10,188) (14,702)

Deficit in the plan (4,514) (3,157) (7,671)Related deferred tax asset 1,354 947 2,301

Net liability (3,160) (2,210) (5,370)

If the above amounts had been recognised in the financial statements, the company’s net assets and retained earnings at December 31, 2001would be as follows:

Net assets excluding pensions asset 766,317Pensions liability (2,210)

Net assets including pension asset 764,107

Retained earnings excluding pension asset 169,446Pension reserve (2,210)

Retained earnings 167,236

The liability for post- retirement healthcare benefits is already recognised in the financial statements as a provision. See note 19.




26. Capital commitmentsThe group had authorised and contracted but not provided for capital commitments of US$579.0 million and US$649.9 million as atDecember 31, 2000 and 2001. The amounts in both 2000 and 2001 primarily represents commitments in respect of the construction of Inmarsat-4 satellites.

27. ContingenciesClaims have arisen in the ordinary course of business but management does not consider that these will result in a material loss to the group.

Various options and share award schemes have been granted to employees and directors, the exercise of which depends on the companyachieving its IPO. If this occurs, and the conditions of vesting are achieved, a charge to operating costs based on management assumptions of US$6.3 million will be recognised, of which US$1.7 million relates to employee stock option costs (note 21).

Airia Ltd has granted APR Ltd an option to acquire further shares so that the company’s interest is reduced to 75% and the interest of APR isincreased to 25%. This option may only be exercised if contracts have been entered into for at least 35 installations of new receivers in aircraftto support the reception of Airia’s broadcast services. APR may exercise this option at any time while the shareholders’ agreement is in force.

The company has granted APR options to require the company to purchase some or all of its interest in Airia, or put options, on the followingbasis. At various times after July 31, 2003, APR may require the company to purchase a specified percentage of its shares for a valuedetermined by an independent expert. The company may pay APR cash for those shares or issue it shares or other securities so long as thecompany has organised for those securities to be sold for an aggregate amount equal to the amount it would otherwise be required to pay incash. From July 2003 to November 2005, the company does not have to pay APR cash in excess of US$50 million in any calendar year. If thevaluation of the shares that APR wishes to sell is in excess of US$50 million, we may be required to issue APR with loan notes with a face valueequal to the amount by which that valuation exceeds US$50 million.

APR has granted the company an option, known as a call option, to acquire: • the whole of its interest in Airia if the company’s holding falls below 2.5%, and • up to 60% of its interest if, within three years of acquiring the company Airia shares, key employees of Airia (or its subsidiaries) who have

beneficial interest in the shares of APR resign or are dismissed for cause prior to the end of the term of their employment agreement.

The company may pay APR cash for those shares or issue it shares or other securities so long as the company has organised for those securitiesto be sold for an aggregate price equal to the amount it would otherwise be required to pay in cash.

28. Operating lease commitmentsThe group had the following annual commitments under non-cancellable operating leases:


(US$000) 2001 2000

Land and buildingswithin one year 9 – within two to five years 214 – after five years – 214

Otherwithin one year 875 1,450within two to five years 3,885 4,773

4,983 6,437

29. Transactions with shareholdersThe majority of space segment revenue is derived from the sale of satellite utilisation to land earth station operators, which are generally ownedby shareholders of the company. The maximum permitted shareholding in the company is 15% of the issued share capital. The terms andconditions of the sales of space segment are governed by the Land Earth Station Operators Agreement (‘‘the Agreement’’).

Some network and satellite control services, equipment and telephone services are procured from suppliers who also happen to beshareholders, the total of which amounts to US$13.6 million and US$9.5 million for the period ended December 31, 2000 and the year endedDecember 31, 2001.

30. Principal subsidiary undertakings and joint ventures (a) Subsidiary Undertakings The following subsidiaries are included in the consolidated financial statements:

Country of Effective interest inincorporation issued share capital at

Principal Activity and operation December 31, 2001

Inmarsat Limited Satellite telecommunications England and Wales 100%Inmarsat Employment Company Limited Employment company Jersey 100%Inmarsat Inc Service provider USA 100%Inmarsat Employee Share Plan Trustees Limited Corporate trustee England and Wales 100%Inmarsat Trustee Company Limited Corporate trustee England and Wales 100%Inmarsat Brasil Limitada Dormant Brazil 99%Invsat Limited VSAT Telecommunications England and Wales 100%Rydex Corporation Limited Maritime communications software England and Wales 100%Rydex Communications Limited Maritime communications software Canada 100%Inmarsat Leasing Limited Satellite leasing England and Wales 100%Inmarsat (IP) Company Limited Intellectual property holding company England and Wales 100%Inmarsat Finance Limited Dormant England and Wales 100%

Invsat provides integrated telecommunications network systems, including very small aperture terminals, or VSATs, and satellite solutions, tothe oil and gas, maritime, government and emergency services markets.

The Rydex business with offices in Vancouver, Canada and Liverpool, UK is a business that has developed software compatible with theterminals which use the Rydex solutions, continues as a wholly owned subsidiary of Inmarsat Ventures plc. This software enables ships to sendand receive e-mail and access the Internet.

On January 31, 2001, the company purchased Abbey National December Leasing (3) Limited which changed its name to Inmarsat LeasingLimited which owned three of the group’s third generation satellites. Having assumed the lessor’s rights under the lease, the group now therebyowns the satellites. This transaction is treated as a financing transaction and not a business combination in order to reflect its substance. Seenote 20 on lease restructuring.




30. Principal subsidiary undertakings and joint ventures continued(b) Acquisition of subsidiary undertakings The total cash consideration paid for the acquisition of subsidiary undertakings during the year ended December 31, 2000 was US$8.5 million.

The total value of net assets acquired was US$5.6 million and no significant fair value adjustments were made to the acquired balance sheets.The goodwill arising was US$2.9 million.

Net assets acquired consisted of the following:

(US$000) Invsat Rydex Merasis Total

Tangible assets 1,234 3,500 – 4,734 Stock 795 – – 795 WIP 17 – – 17 Debtors – 450 – 450Cash – – 60 60Lease creditor (309) – – (309)Other creditors (91) – – (91)

Total 1,646 3,950 60 5,656Goodwill 1,690 522 644 2,856

Total cash consideration 3,336 4,472 704 8,512

The acquisitions have been accounted for using the acquisition method of accounting whereby the total purchase price has been allocated to theassets and liabilities based on their estimated respective fair values. There is no material difference between fair values and net book values.

(c) Joint ventures The company has an 80% interest in Airia Ltd which is accounted for as a joint venture (see note 14). Additional consideration of US$10.0 million was paid in June 2001.

31. Financial instruments Treasury management and strategy The group’s treasury activities are managed by its treasury department under the direction of a Treasury Review Committee whose chairman is the Chief Financial Officer, and are consistent with board-approved treasury policies and guidelines. The overriding objective of treasuryactivities is to manage financial risk.

Key features of treasury management include: • ensuring that the group is in a position to fund its obligations in appropriate currencies as they fall due; • maintaining adequate undrawn borrowing facilities; • economically hedging both contracted and anticipated foreign currency cash flows on a minimum 12-month rolling basis with the option

of covering exposures up to a maximum of three years forward; and • maximising return on short-term investments.

Treasury activities are only transacted with counterparties who are approved relationship banks.

Treasury policy is implemented primarily through the use of forward purchases of foreign currencies. The treasury department is, however,authorised to use purchased options, futures and other derivative instruments, but only to the extent that such instruments form part of thehedging policy so as to establish a known rate of exchange.

Having arranged the purchase of foreign currency in line with the anticipated requirement for that currency over each financial year, an averagerate of exchange is calculated from the agreed currency deals. This average rate is applied for accounting purposes. The policy is designed tominimise the impact of currency gains and losses in the profit and loss account; gains and losses will arise to the extent that the level of actualpayments in the period is different from those that were forecast.

31. Financial instruments continuedCertain short term debtors and creditors Short term debtors and creditors have been excluded from the following disclosures, other than the currency risk disclosures.

Maturity analysis of financial liabilities The maturity analysis of the group’s financial liabilities is as follows:

As restatedYear ended Year ended


Within 1 year or on demand (20,211) (90,727)Between 1 and 2 years (6,120) (49,405)Between 2 and 5 years (16,786) (85,257)Over 5 years (75,626) (62,495)

(118,743) (287,884)

For this purpose, financial liabilities comprise: As restated


(US$000) 2001 2000

Overdrafts (12,906) (3,596)Deferred satellite payments (45,521) (48,989)Finance lease obligations (316) (235,299)Bank Borrowings (60,000) –

(118,743) (287,884)

A 5 year US$610.0 million medium term revolving credit facility has been arranged with Barclays Capital and ING Bank N.V. At December 31,2001 the amount drawn down under this facility was US$60.0 million. Interest is fixed at the commencement of each drawing at LIBOR plusthe margin under the facility.

Currency risk In accordance with the group’s treasury policy to hedge forecast currency exposures on a rolling minimum 12-month basis, all anticipatedexposures for 2002 and 2001 have already been hedged at rates of exchange similar to those of 2000. The entire net assets of the group aretherefore denominated in US dollars.

Interest rate risk profile of financial assets of the group Year ended Year ended


Floating rate financial assets 3,986 14,932Fixed rate financial assets 7,356 178,451

11,342 193,383

Financial assets consist of cash at bank and short and long-term investments. The fixed rate short term deposits in US dollars are placed withbanks for periods not exceeding 3 months and earn interest at 6.5% and 1.75% per annum in 2000 and 2001 respectively. In 2001, therewere also fixed rate short term deposits in sterling and danish kroners, placed with banks for periods not exceeding 3 months and earn interestat 4.0% and 3.0% respectively. The floating rate cash earns interest based on relevant national LIBID equivalents.




31. Financial instruments continuedInterest rate risk profile of financial liabilities of the group

As restatedYear ended Year ended


Floating rate financial liabilities (72,906) (3,596)Fixed rate financial liabilities (316) (235,299)Financial liabilities on which no interest is paid (45,521) (48,989)

(118,743) (287,884)

The fixed rate financial liabilities comprise finance lease obligations, details of which are given in note 20. The weighted average interest rate inrespect of these liabilities is 8.0% and 7.0% for the period ended December 31, 2000 and the year ended December 31, 2001.

The weighted average period to maturity as at December 31, 2000 and 2001 is 2.25 years and 2.26 years. Interest on floating rate financialliabilities is based on the relevant national equivalents.

Market Risk At December 31, 2000 and 2001 on the basis of past net cash balances, it is estimated that a 1% movement in interest rates would haveimpacted 2000 and 2001 profit before tax by approximately US$1.4 million and US$0.5 million, respectively. It is estimated that a generalmovement of the US$/sterling exchange rate of 1% would have impacted the 2000 and 2001 profit before tax by approximately US$1.1 millionand US$1.6 million.

Credit risk Financial instruments that potentially subject the group to a concentration of credit risk consist of cash at bank, short-term investments andtrade receivables. All cash and short term investments are with high credit quality financial institutions. The directors consider credit risk isminimal on trade receivables as these balances are primarily with related parties who are significant shareholders in the company. At December31, 2001, five land earth station operators comprised approximately 72.3% of group trade revenues. These same five customers comprisedapproximately 76.7% of the group trade debtor balance as at December 31, 2001.

31. Financial instruments continuedFair value of financial assets and financial liabilities

As at As restated as atDecember 31, 2001 December 31, 2000

Carrying Fair Carrying Fair(US$000) amount value amount value

AssetsInvestments 3,372 3,372 14,547 14,547Cash at bank 3,986 3,986 14,932 14,932Short term investments 7,356 7,356 178,451 178,451

LiabilitiesOverdrafts (12,906) (12,906) (3,596) (3,596)Finance leases (316) (316) (235,299) (235,299)Deferred satellite payments (45,521) (45,521) (48,989) (48,989)Bank loans (60,000) (60,000) – –

Other financial instrumentsInterest and cross currency swaps (4,358) (4,358) – 12,698Forward exchange contracts – 1,312 – (4,706)

The following methods and assumptions were used to determine the above fair values:

(a) the fair value of investments is based on quoted market prices where available and other estimates.

(b) the fair values of cash at bank, overdrafts, short-term investments and bank loans approximate their carrying values because of the short maturity of these instruments.

(c) the carrying value of finance lease obligations approximates to fair value based on the interest rates implicit in the leases.

(d) the fair value of deferred satellite payments represents the present value of future payments discounted at 7%.

(e) the fair value of interest and cross currency swaps is based upon valuations provided by the counter-party.

(f) the fair value of foreign exchange contracts and options is based upon the contract amount and the current forward rate at each period end.




31. Financial instruments continuedThe market value of the forward contracts the group has outstanding is:

As at December 31, 2001 As at December 31, 2000Contract Market Fair Contract Market Fair

(US$000) value value value value value value

Sell USD CurrencyForward ContractsUSD (Sterling) 159,303 160,637 1,334 184,966 180,351 (4,615)USD (Danish Kroner) 926 918 (8) – – – USD (Japanese Yen) – – – 1,148 1,057 (91)USD (Canadian Dollar) 1,342 1,315 (27) – – –

Buy USD CurrencyForward ContractsCAD (US Dollars) (576) (563) 13 – – –

160,995 162,307 1,312 186,114 181,408 (4,706)

Gains and losses on hedge instruments are deferred and only recognised in the profit and loss amount upon maturity of the contract. The book value of these instruments is nil.

The weighted average exchange rates for forward contracts was as follows:Year ended Year ended

December 31 December 312001 2000

Sterling 1.42 1.50Danish Kroner 0.12 –Japanese Yen – 0.01Canadian Dollar 0.64 –

There were no currency options outstanding at December 31, 2000 or 2001.

The average maturity date for options and forward contracts is between one and two years.

The group entered into certain interest and cross currency swap contracts to reduce its exposure to fluctuations in interest rates. These contractswere accounted for as hedges because they were applied to specific expenditure. The fair value of these swap instruments as at December 31,2000 and 2001 was US$12.7 million and US$(4.4) million, respectively.

During the year the cross currency interest rate swaps which had previously been accounted for as hedges were reclassified during the periodand no longer are accounted for as hedges. As a result, the loss arising of US$4.4 million has been recognised in the profit and loss account forthis financial year.

31. Financial instruments continuedHedges The group uses derivative financial instruments to hedge its exposure to interest rate and foreign currency risk. Unrecognised gains and losses onhedge instruments, and the movements therein, are as follows:

Unrecognised(US$000) Gains Losses Net total

Gains and losses on hedges at January 1, 2000 518 (737) (219)Gains and losses arising in previous years that were included in 2000 income (321) 699 378

Gains and losses arising before January 1, 2000 that were not included in 2000 income 197 (38) 159Gains and losses arising in 2000 but unrecognised 2,151 (7,016) (4,865)

Gains and losses on hedges at December 31, 2000 2,348 (7,054) (4,706)

Gains and losses on hedges at January 1, 2001 2,348 (7,054) (4,706)Gains and losses arising in previous years that were included in 2001 income – 7,054 7,054

Gains and losses arising before January 1, 2001 that were not included in 2001 income 2,348 – 2,348Gains and losses arising in 2001 but unrecognised (150) (886) (1,036)

Gains and losses on hedges at December 31, 2001 2,198 (886) 1,312

Of the unrecognised amounts above:


(US$000) 2001 2000

Expected to be recognised the following year 403 (2,357)Expected to be recognised in later years 909 (2,349)

1,312 (4,706)




Profit and Loss(US$millions) 1997 1998 1999 2000 2001

Revenues 378 399 401 417 442Profit before tax and provision for diminutionin value of investment 127 123 112 93 63Profit/(loss) for the financial year 127 123 (62) 63 66

Operating cash flow 317 405 338 296 256

Balance SheetNet funds/(debt) at the year end 35 61 131 190 (62)Tangible Fixed Assets 1,116 1,006 857 845 963Total assets less liabilities 977 848 639 701 766

The above figures have been restated for changes in accounting policies and prior year adjustments, as detailed in the financial statements.

Notes:1. Results for the year ended December 31, 1997 and 1998 are as recorded by Inmarsat, the treaty organisation, prior to privatisation.2. The 12 month results for 1999 include the period from January 1 to April 14 as recorded by Inmarsat, the treaty organisation prior

to privatisation.3. The comparative amounts provided for 1997 to 1998 relate to the period during which the business was managed within the

treaty organisation.

The Consolidated Financial Statements for these periods are not directly comparable with those for 1999 principally because the organisation’semployees were paid levels of remuneration that reflected their status as exempt from UK income taxes, and the entity itself was exempt fromUK taxation.

Five year summary

Inmarsat Ventures plcwww.inmarsatventures.comTel: +44 (0)20 7728 1000Fax: +44 (0)20 7728 1044

Inmarsat Ltdwww.inmarsat.comTel: +44 (0)20 7728 1000Fax: +44 (0)20 7728 1044E-mail: [email protected]

Inmarsat Ltd: Middle East & Africa OfficeTel: + 971 4 221 9200Fax: + 971 4 221 9500

Inmarsat Ltd: Far East & Asia OfficeTel: + 65 832 5665Fax: + 65 282 0781

Inmarsat Inc: Latin America OfficeTel: +1 305 913 7521Fax: +1 305 913 6435

Inmarsat Inc: North America OfficeTel: +1 202 772 3135Fax: +1 202 772 3101

Invsat Ltdwww.invsat.comTel: +44 (0)1224 428 400Fax: +44 (0)1224 428 401E-mail: [email protected]

Rydex Corporation Ltdwww.rydex.comTel: +44 (0)151 7099917Fax: +44 (0)151 7088820

Rydex Communications Ltd (Canada)Tel: +1 604 279 3400Fax: +1 604 821 4651

Airia Inc (US)www.airiaglobal.comTel: +1 410 571 8240Fax: +1 410 266 2538


Global contact details





























nnual Report &

Accounts 2

001

Documents

Inmarsat Ventures plc Our missionis to be the world’s … in Singapore the industry’s first high-speed global Mobile Packet Data service. Inmarsat Ltd Inmarsat Ltd owns and operates