<PAGE>   1





                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549




                                    FORM 6-K

                        REPORT OF FOREIGN PRIVATE ISSUER
                    PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
                      THE SECURITIES EXCHANGE ACT OF 1934


                          For the month of April 1997



                         APT SATELLITE HOLDINGS LIMITED
                               REGISTRANT'S NAME


      ROOM 3111-3112, 31/F, ONE PACIFIC PLACE, 88 QUEENSWAY, HONG KONG K3
                    (Address of principal executive offices)


Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.

                      Form 20-F   X    Form 40-F 
                                -----            -----

Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.

                               Yes       No   X
                                   -----    -----

If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b):  82-__________.
<PAGE>   2

                         APT SATELLITE HOLDINGS LIMITED
                (INCORPORATED IN BERMUDA WITH LIMITED LIABILITY)

                               ANNUAL REPORT 1996





<PAGE>   3
                                COMPANY PROFILE

APT Satellite Holdings Limited (together with its subsidiaries known as the
"Group"), is a listed company on both the Hong Kong and the New York stock
exchanges.  Its wholly-owned subsidiary, APT Satellite Company Limited was
established since 1992.  It primarily provided high quality satellite
transponder services for international and Asia-Pacific broadcasting and
telecommunication sectors and has achieved remarkable performance.

The Principal Shareholders of the Group are renowned China and South East Asia
corporations.  They directly and indirectly hold an aggregate of 75% of the
issued shares of APT Satellite Holdings Limited.  The relations between the
Group and its Principal Shareholders enable the Group to establish strong
competitive advantages in both international and Asia-Pacific markets including
China.

The Group is managed by a team of experts in the satellite-related industry.
Many of whom have about 20 to 30 years' experience in the development, launch,
telemetry and control, and telecommunication of satellites.  The Group
currently operates two in-orbit satellites, APSTAR- I and APSTAR-IA, through
its own satellite control center located in the Tai Po Industrial Estates, New
Territories.  The Group's third satellite, APSTAR-IIR, will be launched in
mid-1997.

THE SUPERIOR APSTAR SYSTEMS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
   SATELLITES         MODEL        ORBITAL SLOTS              TRANSPONDERS                FOOTPRINT
                                                         C-BAND          KU-BAND          COVERAGE
-------------------------------------------------------------------------------------------------------------
<S>                  <C>          <C>                      <C>              <C>        <C>
APSTAR-I              Hughes      138 degree East          24               __         China, Japan, South-
                      HS-376                                                           East Asia
-------------------------------------------------------------------------------------------------------------
APSTAR-IIA            Hughes      134 degree East          24               __         China, Japan, South-
                      HS-376                                                           East Asia & India
-------------------------------------------------------------------------------------------------------------
APSTAR-IIR           SS/Loral      77 degree East          28               16         Europe, Asia, Africa,
                     FS-1300                                                           Australia, about 75%
                                                                                       of World's population
-------------------------------------------------------------------------------------------------------------
</TABLE>

FUTURE SATELLITES PLANS

The Group intends to participate in the direct broadcasting satellite service
in the region and is also planning to launch a high-powered satellite to
satisfy the transponders demand by the year 2000.

Note:    The Principal Shareholders of the Group are:  (a) China
         Telecommunications Broadcast Satellite Corporation; (b) China
         Satellite Launch & Tracking Control General; (c) China Aerospace
         Corporation; (d) China Tai International Telecommunication Co., Ltd.;
         (e) China Travel Fok Tai (Macau) Ltd., a corporation with 50% equity
         owned by China Travel Service (Holdings) Hong Kong Ltd.; (f) SingaSat
         Pte., Ltd., a wholly-owned subsidiary of Singapore Telecommunications
         Limited; and (g) Kwang Hua Development and Investment Ltd., a Hong
         Kong corporation jointly owned by the Ruentex Group and China
         Development Corporation.





<PAGE>   4
                                    CONTENTS

<TABLE>
<CAPTION>
                                                                                                                    Page
                                                                                                                    ----
<S>                                                                                                                   <C>
Corporate Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  2
Financial Highlights  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4
Chairman's Statement  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5
Directors' and Senior Management's Profile  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  8
Report of the Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Report of the Auditors  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Consolidated Profit and Loss Account  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Consolidated Balance Sheet  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Consolidated Cash Flow Statement  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Supplementary Information on US GAAP Reconciliation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Notice of Annual General Meeting  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>





                                      -1-
<PAGE>   5
                             CORPORATE INFORMATION

<TABLE>
<S>                                                   <C>
DIRECTORS                                             AUTHORISED REPRESENTATIVES                         
                                                                                                         
EXECUTIVE DIRECTORS                                   Qin Shen                                           
                                                      Lo Kin Hang, Brian                                 
He Ke Rang (Vice Chairman and President)              
Chen Ji Bin (Vice President)                          PRINCIPAL BANKERS
Qin Shen (Vice President)
                                                      Hua Chiao Commercial Bank Limited
NON-EXECUTIVE DIRECTORS                               Sin Hua Bank Limited
                                                      The Hongkong and Shanghai Banking Corporation Limit
Xie Gao Jue (Chairman)                                Swiss Bank Corporation
Li Bao Ming (Vice Chairman)
Ngai Man (Vice Chairman)                              AUDITORS
Wong Hung Khim
Hsu Chih Chang                                        Ernst & Young
Hou Zheng
Chatchaval Jiaravanon                                 LEGAL ADVISORS
Zhu You Jun
Lim Toon                                              Baker & McKenzie
Lee Hsiang Wei                                        Preston Gates & Ellis LLP
Wong Kit Ming                                         Richards Butler
Ho Siaw Hong (Alternate Director to Lim
  Toon and Wong Hung Khim)                            PRINCIPAL, SHARE REGISTRAR AND TRANSFER OFFICE

INDEPENDENT NON-EXECUTIVE DIRECTORS                   The Bank of Bermuda Limited
                                                      Bank of Bermuda Building
Li Kwok Wing, Meocre                                  No. 6 Front Street
Yuen Pak Yiu, Philip                                  Hamilton, HM11
                                                      Bermuda
COMPANY SECRETARY

Lo Kin Hang, Brian
</TABLE>
                                                   
                                                   
                                                   
                                                   
                                                   
                                                   
                                                   
                                                   
                                                   
                                                   
                                                   
                                                   
                                                   
                                                   
                                                   
                                                   
                                                   
                                                   
                                                   
                                                   
                                                   
                                                   
                                                   
                                                   
                                                   
                                                   
                                                   





                                      -2-
<PAGE>   6
<TABLE>
<S>                                                   <C>
HONG KONG SHARE REGISTRAR AND TRANSFER OFFICE         REGISTERED OFFICE                                 
                                                                                                        
Tengis Limited                                        Clarendon House                                   
1601 Hutchison House                                  2 Church Street                                   
10 Harcourt Road                                      Hamilton HM11                                     
Hong Kong                                             Bermuda                                           
                                                                                                        
ADR DEPOSITARY                                        HEAD OFFICE AND PRINCIPAL PLACE OF BUSINESS       
                                                                                                        
The Bank of New York                                  Rooms 3111-3112, 31st Floor                       
American Depositary Receipts                          One Pacific Place                                 
101 Barclay Street                                    88 Queensway                                      
22nd Floor West                                       Hong Kong                                         
New York, NY 10286                                    Tel: (852) 2526 2281                              
USA                                                   Fax: (852) 2522 0419                              
</TABLE>
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  
                                                  





                                      -3-
<PAGE>   7
                              FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
                                                           1996              1995
 FOR THE YEAR ENDED 31 DECEMBER                          HK$'000           HK$'000        INCREASE
----------------------------------------------------------------------------------------------------
 <S>                                                     <C>               <C>               <C>
 Turnover                                               367,628           284,807            29%
 Operating profit before exceptional item                99,120            84,580            17%
 Net profit attributable to shareholders                 76,520            14,782           418%
 Earnings per share                                      23.99[cents]       4.69[cents]     412%
----------------------------------------------------------------------------------------------------
</TABLE>


              [Graph omitted illustrating Turnover of approximately
              HK$  85,000,000 in 1994,
              HK$ 280,000,000 in 1995, and
              HK$ 370,000,000 in 1996.]


              [Graph omitted illustrating Net profit 
              attributable to Shareholders of less than
              HK$  5,000,000 in 1994, approximately
              HK$ 15,000,000 in 1995, and approximately
              HK$ 77,000,000 in 1996.] 



                                      -4-
<PAGE>   8
                              CHAIRMAN'S STATEMENT

APT Satellite Holdings Limited (the "Company") completed the listing and
initial public offering of its shares in December 1996 (the "IPO"), with its
shares now listed in Hong Kong and New York.

On behalf of the Board of Directors, I am pleased to present the first audited
results of the Company and its subsidiaries (the "Group") since the listing in
respect of the financial year ended 31 December 1996.

RESULTS

On the whole, the Group performed satisfactorily.  Turnover of the Group for
the year ended 31 December 1996 was HK$367,628,000, an increase of 29% from
that in 1995.  The Group's turnover in 1996 also exceeded the forecast 1996
revenue of HK$366,100,000 stated in the Company's prospectus dated 10 December
1996 in connection with the IPO (the "Prospectus").

Net profit attributable to shareholders for the financial year 1996 was
HK$76,520,000, a substantial increase of 418% from that in 1995.  Such profit
also exceeded the forecast 1996 profit after taxation but before extraordinary
item of HK$74,900,000 stated in the Prospectus.

DIVIDEND

Prior to the Group reorganisation and listing of the Company's shares in
December 1996, a dividend in specie of HK$56,806,000 was paid by a subsidiary
of the Company to its then shareholders.

Owing to the fact that the shares of the Company have only been recently
listed, the Board of Directors does not recommend the payment of final dividend
in respect of the financial year 1996.  (Financial year 1995: Nil).

CLOSURE OF REGISTER OF MEMBERS

The register of members of the Company will be closed from Thursday, 15 May
1997 to Tuesday, 20 May 1997, both dates inclusive, in order to determine
entitlements of shareholders to attend and vote at the Annual General Meeting
of the Company (the "AGM") to be held on 20 May 1997.  During this closure
period, no transfers of shares can be registered.  In order to qualify for
entitlement to attend and vote at the AGM, transfers of shares accompanied by
the relevant share certificates and transfer forms should be lodged with the
Company's branch registrars in Hong Kong, Tengis Limited of 1601 Hutchison
House, 10 Harcourt Road, Central, Hong Kong, not later than 4 p.m. on
Wednesday, 14 May 1997.





                                      -5-
<PAGE>   9
PURCHASE, REDEMPTION OR SALE OF SHARES

Neither the Company nor any of its subsidiaries purchased, redeemed or sold any
of the Company's shares during the year ended 31 December 1996.

GLOBAL OFFERING

The shares of the Company were listed on The Stock Exchange of Hong Kong
Limited and (in the form of American depositary shares) the New York Stock
Exchange, Inc. in December 1996 in connection with the IPO, which comprised a
global offering of the shares in North America, Europe, Hong Kong and elsewhere
in Asia.

REVIEW OF OPERATIONS

APSTAR-I, the Group's first in-orbit satellite, was a Hughes HS-376 model, and
was launched in July 1994 on a Long March 3 launch vehicle from Xichang,
People's Republic of China.  Its transponders have been fully leased during the
whole of 1996, and have not experienced any anomalies that have affected its
operation.  APSTAR-I has been able to provide customers of the Group with
transponder services of high quality and reliability, and these services have
generated a substantial amount of revenue for the Group.

APSTAR-IA, the Group's second in-orbit satellite, was also a Hughes HS-376
model, and was launched in July 1996 on a Long March 3 launch vehicle from
Xichang.  It commenced commercial operations in September of the same year.  As
at the end of 1996, almost 80 per cent of its transponders were leased to
customers.  It is expected that more transponders will be leased to customers.
Over the next few years APSTAR-IA will be a steady and significant contributor
to the Group's revenue and profits.

APSTAR-IIR, the Group's proposed third satellite, will be an SS/Loral FS-1300
satellite.  Total investment for the project amounted to approximately US$216
million.  The manufacture of the satellite commenced in June 1995.  It is
expected to be launched from Xichang in mid- 1997.  The footprint of APSTAR-IIR
will stretch over more than 100 countries, serving approximately 75 per cent of
the world's population.  It is designed to provide satellite services on the
bases of high power output C-band and Ku-band frequency thereby further
strengthening the competitive advantage of the Group.  During the previous
year, the progress on the production of that satellite was smooth.  It is
expected that APSTAR-IIR will be launched as scheduled.  As at the end of March
1997, before its launch, more than 30 per cent of the transponders on
APSTAR-IIR were already pre-leased or committed by customers.

As described in the Prospectus, a substantial part of the proceeds of the IPO
was applied to repay bank loans for the financing of APSTAR-IA and APSTAR-IIR,
thereby reducing interest costs and improving the gearing of the Group.  The
Group is provided with a good foundation for its future course of development.





                                      -6-
<PAGE>   10
EXPANSION OF BUSINESS AND INVESTING IN FUTURE

The Group's three satellites will form an integrated satellite system.  The
Group is equipped with strong technical advantages.  Together with the advanced
satellite control centre solely owned by the Group and experienced and
well-trained technical experts, the Group is well conditioned for market
competition.

The Group has dedicated, and will continue to dedicate, itself to becoming the
best provider of transponder services in the international and the Asia-Pacific
telecommunication and broadcasting sectors; and to try its best to exploring
new service areas including services in relation to direct broadcasting
satellites.  At the same time, the Group plans to launch one more high power
output satellite that is equipped with C-band and Ku-band transponders, in
order to satisfy the expected market demand.

APPRECIATION

On behalf of all shareholders and the Board of Directors, I would like to thank
all of our customers for their continuous support of the Group, and to express
our sincere appreciation to the management and staff for their contribution to
the Group during the year and for their commitment for the future.



                                                                     XIE GAO JUE
                                                                        Chairman

12 April 1997





                                      -7-
<PAGE>   11
                  DIRECTORS' AND SENIOR MANAGEMENT'S PROFILE

EXECUTIVE DIRECTORS

Mr. HE Ke Rang, aged 61, appointed as the Vice Chairman and President of the
Company in October 1996 and has been the Vice Chairman and President of APT
Satellite Company Limited ("APT"), a wholly-owned subsidiary of the Company,
since June 1992.  Mr. He is responsible for the overall daily management and
operation of the Group.  He graduated with a Master's Degree in Engineering
from Kharkov Polytechnical Institute of the then USSR.  From 1959 to 1961 he
served in the Changchun Research Institute of Optics and Mechanics of the China
Academy of Science.  In 1961, he joined the PRC Ministry of Aerospace Industry
(presently known as China Aerospace Corporation ("China Aerospace")).  He later
headed the Ministry's Research Institute of Mechanics and Environment which was
responsible for the development of launch vehicle technology.  From 1984 to
1992, he was the Deputy Director of China Academy of Launch Vehicle Technology
of China Aerospace.  During this period, he participated in the development and
management of the Long March series of launch vehicles and other launch
vehicles.  The PRC government commended him in 1990 as a specialist who has
contributed to the PRC.  He currently serves as a Visiting Professor at the
Harbin Institute of Technology.

Mr. CHEN Ji Bin, aged 62, appointed as Director and Vice President of the
Company in October 1996 and has been a Director and Vice President of APT since
June 1992.  Mr. Chen is responsible for the management of the APSTAR System.
He graduated from the Radar Department of the PRC Institute of Military
Telecommunication Engineering.  From 1953 to 1970, he conducted radar research
as the Deputy Chief Designer and Chief Designer in the Ministry of
Communications and Ministry of Weapons.  From 1970 to 1985, he was the Head of
Design and Director of the Office of Satellite Communication System Engineering
in the PRC Ministry of Electronics Industry.  From 1985 to 1992, he was the
Chief Engineer and Vice President of China Telecommunications Broadcast
Satellite Corporation ("ChinaSat").  He has over 30 years' experience in
telecommunications and satellite applications and control.  He was accredited
as a Senior Engineer and Research Fellow in 1980 and 1986 respectively, and was
awarded the National Science and Technology Advancement Award (First Grade) in
1985.  He has co-edited several technological publications on topics such as
radar, microwave, satellite television receiving systems and satellite
telecommunications.

Mr. QIN Shen, aged 54, appointed as Director and Vice President of the Company
in October 1996 and has been a Director of APT since August 1996 and Vice
President since June 1992.  He graduated from Department of Electrical
Instrumentation Measurement Technology of the Harbin Institute of Technology in
1965.  Prior to joining the Group, he was the Co-Chief Designer of China
Xichang Satellite Launch Mission Command Control Centre, the Leader of the PRC
Ministerial Level Professional Planning Group of the Seventh Five-Year Economic
Plan of the PRC and the Deputy General Manager of the Development Department of
China Satellite Launch & Tracking Control General ("CLTC").  He has been
granted several State and Ministerial Level Research Awards.  He has over 25
years' experience in satellite telemetry, control and telecommunication system
design.  He is a Senior Engineer and currently a Visiting Professor at the
Harbin Institute of Technology.





                                      -8-
<PAGE>   12
NON-EXECUTIVE DIRECTORS

Mr. XIE Gao Jue, aged 64, appointed as the Chairman of the Company in October
1996 and has been the Chairman of APT since June 1992.  Mr. Xie graduated from
the Beijing Institute of Posts and Telecommunications in 1956 and further
obtained a postgraduate degree in 1958.  He has worked in the fields of
telecommunication and telemetry and control systems, serving as the Supervisor
of a research laboratory, and later the Senior Engineer, Chief Engineer, and
the Head of a PRC Ministry of Electronic Industry research institute.  In 1982
he was appointed as the Department Director of Science and Technology of the
PRC Ministry of Electronic Industry and subsequently was promoted to the
Vice-Minister of the same Ministry in 1984.  In 1988, he was appointed as the
Vice-Minister of the Ministry of Posts and Telecommunications of the PRC.  He
has also served as Chairman of the China Management Association of Posts and
Telecommunications Enterprises since 1991 and Vice President of the Chinese
Institute of Electronics since 1988.

Mr. LI Bao Ming; aged 57, appointed as the Vice Chairman of the Company in
October 1996 and has been the Vice Chairman of APT since June 1992.  He
graduated from the University of Aeronautics and Astronautics and the Harbin
Institute of Military Engineering.  He has many years of experience in launches
of various types of satellites. He was also the Division Manager of the
Technology Division and Planning Division of Jiuquan Satellite Launch Centre
and the Deputy Head of CLTC.

Mr. NGAI Man, (also known as Montree Navikapol) aged 51, appointed as the Vice
Chairman of the Company in October 1996 and has been the Vice Chairman of APT
since June 1992.  He is a Director of Orient Telecom & Technology Holdings Ltd.
and Orient Telecom & Technology (China) Ltd. He joined the Charoen Pokphand
Group in 1988 and has extensive experience in telecommunications projects and
other investments in southeast Asia.

Mr. WONG Hung Khim, aged 58, appointed as Director of the Company in October
1996 and has been a Director of APT since February 1993.  He graduated from the
University of Singapore with Honours in Physics and attended the Advanced
Management Programme at Harvard Business School.  He spent two years in
teaching before joining the Administrative Service of Singapore in 1966.  He
began his service in the then Ministry of Social Affairs ("MSA") and later
became the Deputy Secretary of the Ministry of Labour.  In 1974, he served
first as a General Manager and then Executive Director of Singapore Bus Service
Ltd.  In 1979, he became the General Manager of the Port of Singapore
Authority.  In 1984, he became the Permanent Secretary of the MSA, which
subsequently became the Ministry of Community Development.  In 1987, he became
head of the Telecommunication Authority of Singapore and oversaw its
privatisation into Singapore Telecommunications Limited ("Singapore Telecom")
in October 1993.  In recognition of his services, Mr. Wong was awarded a Public
Administration Meritorious Services Medal in 1992.  Mr. Wong is currently the
Group Chairman of Singapore Bus Service (1978) Ltd., Chairman of Jurong Town
Corporation and Deputy Chairman of Singapore Telecom.





                                      -9-
<PAGE>   13
Mr. HSU Chih Chang, aged 38, appointed as Director of the Company in October
1996 and has been a Director of APT since September 1996.  Mr. Hsu graduated
with a Master's degree in Business Administration from National Taiwan
University in 1983 and a Doctoral Degree in Managerial Economics and Decision
Sciences from Northwestern University in 1989.  Mr. Hsu was a part-time
Associate Professor in the Department of Financial Administration, National
Chengchi University, Taiwan in 1989.  From 1989 to 1991, Mr. Hsu served as a
Special Assistant to the President of the Ruentex Industries Ltd. From 1991 to
1995, he was the General Auditor of the Ruentex Industries Ltd.  Mr. Hsu is now
a Special Assistant to the Chief Executive Officer of the Ruentex Group
(Ruentex Construction & Development Company Limited and its affiliates), a
Managing Director of the China Development Corporation and an Associate
Director of the Yin Shu Tien Memorial Hospital Shu-Tien Urology & Ophthalmology
Clinic in Taiwan.

Mr. HOU Zheng, aged 59, appointed as Director of the Company in October 1996
and has been a Director of APT since June 1993.  From 1954 to 1956, he studied
at the Harbin Institute of Technology.  He graduated with a Master's Degree in
Engineering from Leningrad Engineering Institute in 1961.  During the years
between 1961 and 1985, he taught at Qinghua University after which he served as
a senior designer of the then Ministry of Aerospace Industry.  In 1992, he was
commended as an Overseas Fellow of the Russian Engineering Academy (St.
Petersburg).

Mr. Chatchaval JIARAVANON, aged 34, appointed as Director of the Company in
October 1996 and has been a Director of APT since July 1996.  He graduated from
the University of Southern California in 1984.  He is concurrently an Executive
Vice President of Telecom Holding Co. Ltd., a Director of TelecomAsia, Metro
Machinery Co. Ltd., the Thai Chamber of Commerce, the Federation of Thai
Industries, and of Thailand Management Association as well as Executive
Director of Radiophone Co. Ltd. and a Vice- President of Thai Kodama Co. Ltd.

Mr. ZHU You Jun, aged 61, appointed as Director of the Company in October 1996
and has been a Director of APT since February 1996.  He graduated from Fu Dan
University.  He was the Director of the USA Branch of the China News Service,
and has been a Deputy Director and Director of the China News Service.  He is
also Vice Chairman of both China Travel Service (Holdings) Hong Kong Ltd.,
Chinese Goods Centre Ltd., Chairman of China Travel Air Service Co., Ltd. and a
Director of Cathay Pacific Airways Ltd.

Mr. LIM Toon, aged 53, appointed as Director of the Company in October 1996 and
has been a Director of APT since February 1993.  Mr. Lim graduated in
Engineering from University of Canterbury in New Zealand in 1966 and obtained a
Postgraduate Diploma in Business Administration from the University of
Singapore in 1975.  He attended the Advanced Management Programme at Harvard
Business School in 1992.  He has been an Executive Vice-President for
International Service of Singapore Telecom since April 1994 and has worked for
Singapore Telecom since 1970, serving as a Vice-President of engineering, radio
services, traffic operations, personnel training and information systems
departments.  He became the Executive Vice President for Network Services in
1989.  Mr. Lira was awarded the Efficiency Medal in 1978 and the Public
Administration Medal (Gold) in 1991 by the Singapore government.  He is
presently a Director in a number of overseas companies.





                                      -10-
<PAGE>   14
Mr. LEE Hsiang Wei, aged 37, appointed as Director of the Company in October
1996 and has been a Director of APT since June 1993.  He is presently the
Chairman of Kwang Hua Securities Investment and Trust Co., Ltd.  Mr. Lee
graduated in 1982 with a Bachelor of Science Degree from the National Taiwan
University.  He later attained his Master's Degree in Business Administration
from Duke University.  He joined Ruentex Industries Ltd. as a marketing manager
in 1987 and was promoted to Vice-President in 1989.  Since 1991, Mr. Lee has
been a Director of Kwang Hua Securities Investment & Trust Co., Ltd. and is an
executive committee member of that company.  Mr. Lee is also a President in
Ruentex International Holdings Ltd. which sponsors the Ruentex Group's offshore
investment activities.  He also holds directorships of AETNA Life Insurance
Corporation of America and Shanghai International Asset Management (H.K.) Co.
Ltd.

Mr. WONG Kit Ming, aged 52, appointed as Director of the Company in April 1997.
He is presently the Chairman of Fine Source Investments Limited and In System
Investment Limited, and a Director of China Travel Fok Tai (Macau) Limited and
Safemerge Limited.

Mr. HO Siaw Hong, aged 47, appointed as the Alternate Director to Mr. T. Lim
and Mr. H. K. Wong in October 1996.  Mr. Ho graduated from the University of
Singapore with a Bachelor of Engineering (Electrical & Electronics) Degree in
1972.  He has been employed with Singapore Telecom since August 1972 and has
been the Senior Director in charge of the Satellite Business Development
Division since July 1996.  Prior to July 1996, he was the Division Manager of
the same division.  From July 1991 to August 1993, he served as the Project
Manager of the Satellite System II Unit at Singapore Telecom.  From March 1993
to March 1994, he was a Director of American Mobile Satellite Corporation of
the United States.

INDEPENDENT NON-EXECUTIVE DIRECTORS

Mr. LI Kwok Wing, Meocre, aged 42, appointed as an Independent Non-executive
Director of the Company in October 1996.  He is the Chief Executive of NatWest
Markets Corporate Finance Asia Limited, and prior to that was the managing
partner of Arthur Anderson & Co.'s Hong Kong and China operations. Mr. Li
received a Bachelor of Commerce Degree, with distinction, and the Financial
Executive Institute Silver Medal from the University of Alberta, Canada.  In
1988, Mr. Li completed the Program for Management Development offered by the
Harvard University Graduate School of Business Administration.  Mr. Li is a
member of the Hong Kong Society of Accountants and of the Chartered Association
of Certified Accountants, United Kingdom.

Mr. YUEN Pak Yiu, Philip, aged 61, appointed as an Independent Non-executive
Director of the Company in October 1996.  He graduated from Law School in
England in 1961 and commenced the practice of law in Hong Kong in 1962.  In
1965, he established his solicitors' firm, Yung, Yu, Yuen & Co. and now is the
principal partner in the firm.  Mr. Yuen has over 30 years' experience in the
legal field and has been a Director of a number of listed companies including
Henderson Investment Limited, Henderson China Holdings Limited, Melbourne
Enterprises Limited, Cheerful Holdings Limited, Tsingtao Brewery Company
Limited, Guangzhou Shipyard International Company Limited and Oriental Metals
(Holdings) Company Limited.  He is a Director of the China Appointed Attesting
Officers Association in Hong Kong, a Standing Committee Member of the China
Chamber of Commerce of Hong Kong, a Member of the





                                      -11-
<PAGE>   15
National Committee of Chinese Peoples' Political Consultative Conference, an
Arbitrator at the China International Economic & Trade Arbitration Commission
and an Adviser of Hong Kong Affairs to the PRC government.

Details of directorships of the Directors of the Company in the company which
has an interest in the share capital of the Company as disclosed pursuant to
the provisions of Part II of the Securities (Disclosure of Interests) Ordinance
are set out in the Report of the Directors under the section headed
"Substantial Shareholders' Interests in Share Capital".

SENIOR MANAGEMENT

Mr. LENG Yi Shun, aged 59, has been a Vice President for Finance of the Group
since July 1994.  Mr. Leng is responsible for the corporate finance division of
the Group.  He graduated from the Department of Electrical Engineering of the
Harbin Institute of Technology in 1960.  Upon graduation, he lectured in the
Harbin Institute of Technology for two years.  From 1962 to 1990, he served in
the China Academy of Launch Vehicle Technology ("CALT").  His research topics,
among others, included the power and reliability of guided missiles and
rockets, and terrain environmental tests.  He was accredited as an Engineering
Research Fellow in 1993.  From 1984 to 1990, he was the Supervisor of the
Beijing Centre of New Dynamic Equipment and Facilities for Reliability and
Environment Research of Rockets and Guided Missiles and the General Manager of
a corporation which was principally engaged in the production and operation of
dynamic equipment and facilities.  From 1990 to 1992, he was the Chief Engineer
of the Department of Civil Products.  CALT and the Deputy General Manager of
Beijing Wan Yuan Industry Corporation.  He has over 30 years' experience in
launch vehicles research and over 20 years' experience in corporation
management.

Professor BAO Miao Qin, aged 57, has been the Chief Engineer of the Group since
June 1992.  Professor Bao is responsible for the technical aspects of the
development and operation of the APSTAR System and the related insurance
programs.  He has over 30 years' experience in systems engineering and space
technology.  He graduated from the Beijing Aeronautical Institute in 1963.
Before joining the Group, he was the Director of Systems Engineering and
Research Division of the Chinese Academy of Space Technology ("CAST").  Upon
graduation, he spent his first three years in the space industry in the design
of sub-orbital sounding rockets.  Since 1968, he worked on several space
projects for CAST, which included an important feasibility study of manned
spacecraft, scientific satellite system engineering and research on the orbit
and attitude dynamics of communications satellites.  From 1974, he directed the
system engineering of China's first communications satellite.  In 1984, he
joined ChinaSat as a System Engineering Consultant for broadcasting satellites
and worked for two years.  Professor Bao also spent more than one year in the
United Kingdom and served as a Research Professor at the British National Space
Centre before he took the post of Director of System Engineering Division at
CAST in 1989.

Dr. Kung Yip CHEUNG, aged 45, has been a Vice President for Marketing and
External Affairs of the Group since June 1994.  Prior to joining the Group, Dr.
Cheung was the President of Longtime (USA) Co. Ltd., a New York firm
specialising in US-China investment and trade.  A native of Hong Kong, Dr.
Cheung received his undergraduate education at The Chinese





                                      -12-
<PAGE>   16
University of Hong Kong.  He continued his postgraduate training in London and
earned his M.Sc. in Electrochemical Technology and Ph.D. in Materials Science
from the City University and Imperial College of Science and Technology,
University of London, respectively. From 1979 to 1987, Dr. Cheung pursued his
technical career in the US; first as a research fellow at University of
Pennsylvania; then in the research and development department with Allied
Corporation (currently Allied-Signal Corporation); followed by Du Pont Company
where his main duties were research and development and marketing support in
the Electronic Materials Division.  Dr. Cheung has also taken management and
marketing courses given by companies and US educational institutions, and most
recently he completed the executive program in International Strategy at
Columbia University.

Mr. ANG Teck Leng, aged 41, has been the Financial Controller of the Group
since August 1994.  He holds a Master's Degree in International Management from
University of South Australia.  He is a certified public accountant of the
Institute of Certified Public Accountants of Singapore.  After graduating from
Nanyang University of Singapore with a degree of Commerce (Accountancy) in
1980, he practised accountancy by working in various companies in Singapore,
Indonesia and the PRC. Before joining the Group, he was an Assistant
Vice-President of Chia Tai International Telecommunication Co. Ltd., a
subsidiary of Telecom Holdings Co. Ltd. which is a member of the Charoen
Pokphand Group, which he joined in September 1989.  He has over 16 years of
financial and accounting experience in industry ranging from manufacturing,
shipping, construction and telecommunications.

Mr. LO Kin Hang, Brian, aged 40, is the Company Secretary of the Company.  Mr.
Lo joined the Group in September 1996.  He graduated with an Associateship in
Production and Industrial Engineering and an M.Sc. degree in Information
Technology from Hong Kong Polytechnic University, and a MBA Degree from the
University of Wales, UK.  He has attained several professional qualifications
including Chartered Engineer, Member of the Institute of Electrical Engineers,
and is a Fellow of the Institute of Chartered Secretaries and Administrators in
the United Kingdom and a Fellow of the Hong Kong Institute of Company
Secretaries.  Prior to joining the Group, he was a Director and senior
management executive responsible for financial and investment management and
the company secretary of a publicly listed company in Hong Kong.  He has over
13 years' experience in corporate and project management including
telecommunications projects.





                                      -13-
<PAGE>   17
                            REPORT OF THE DIRECTORS

The Directors herein present their report together with the audited financial
statements of the Company for the period from 17 October 1996 (date of
incorporation) to 31 December 1996 and the Group for the year ended 31 December
1996.

PRINCIPAL ACTIVITIES

The principal activity of the Company is that of an investment holding company,
and the principal activities of the subsidiaries consisted of the maintenance
and operation of satellite telecommunication systems.  There has been no
significant change in these activities during the year.

RESULTS AND DIVIDENDS

The results of the Group for the year ended 31 December 1996 and the state of
affairs of the Company and the Group at that date are set out in the financial
statements on pages 2 to 5.

A dividend of HK$56,806,000 was paid by a subsidiary of the Company to its then
shareholders by way of a distribution in specie of all of the Group's
shareholdings in another subsidiary during the year on 14 November 1996 as part
of the corporate restructuring of the Group, further details of which are
discussed in the following section headed "Management Discussion and Analysis".

The Directors do not recommend the payment of final dividend for the year ended
31 December 1996.

SEGMENTED INFORMATION

The Group's turnover and contribution to the operating profit wholly arose from
the maintenance and operation of satellite telecommunication systems.





                                      -14-
<PAGE>   18
The Group's turnover and contribution to the operating profit by geographical
location for the year ended 31 December 1996 is as follows:

<TABLE>
<CAPTION>
                                                                        TURNOVER           CONTRIBUTION
                                                                        HKT$'000             HKT$'000
 <S>                                                                     <C>                  <C>
 People's Republic of China                                              148,030               52,155
 United States                                                            79,477               35,267
 Hong Kong                                                                62,387               28,885
 Taiwan                                                                   34,413               15,940
 Cook Islands                                                             18,600                8,612
 Netherlands                                                              11,237                5,203
 British Virgin Islands                                                   10,075                4,665
 Philippines                                                               3,409                1,157
                                                                         -------              -------
                                                                         367,628              151,884
                                                                         =======                     
 Other Income                                                                                  23,257
 Corporate expenses                                                                           (76,021)
                                                                                              -------
                                                                                               99,120
                                                                                              =======
</TABLE>

MANAGEMENT DISCUSSION AND ANALYSIS

LIQUIDITY AND FINANCIAL RESOURCES

The principal source of funding for the Group's operating expenses comes from
the transponder leasing of APSTAR-I and APSTAR-IA.  For the year ended 31
December 1996, total lease rental amounted to HK$367.6 million (US$47.4
million).  This has not only adequately financed the cash operating expenses of
the Group, but also provided a vital source of funding for the Group's capital
expenditure.  In 1996, capital expenditures incurred by the two satellite
projects, namely, APSTAR-IA and APSTAR-IIR, was HK$998.1 million (US$128.8
million).  It is estimated that further payment of approximately HK$654.4
million (US$84.4 million) will have to be made for the construction and launch
of APSTAR-IIR for the period from the beginning of 1997 up to its scheduled
launch in mid-1997.  Funding will come from internally generated cash flow and
the proceeds from the initial public offering of the Company's shares in
December 1996 ("IPO").  Any shortfall would be financed by a term loan from the
banks.

The net proceeds from the dual listings of the shares of APT Satellite Holdings
Limited on the New York Stock Exchange, Inc. and The Stock Exchange of Hong
Kong Limited on 18 December 1996 were approximately HK$1,326.0 million
(US$171.1 million).  On 23 December 1996, the Group applied HK$1,162.5 million
(US$150 million) from the listing proceeds towards the repayment in full of the
amount outstanding under the syndicated bank loan obtained by the Group in
relation to the acquisition, launch and insurance and related costs of





                                      -15-
<PAGE>   19
APSTAR-IA and APSTAR-IIR and the balance of the net proceeds from IPO were
placed with banks at 31 December 1996 which will be used principally to finance
the construction launch of APSTAR-IIR and additionally to finance the
development, contribution and launch of the Group future satellite project in
accordance with the Company's prospectus dated 10 December 1996 in connection
with IPO.  As a result of the above repayment, the total indebtedness
outstanding at 31 December 1996 stood at HK$763.1 million (US$98.5 million)
which comprised mainly of a syndicated bank loan and shareholders' loan.  The
Group's strong cash position has enabled it to meet with ease all the debt
repayment schedules during the year ended 31 December 1996.  Further details of
the debt profile of the Group are set out in note 20 to the financial
statements.

FUNDING AND TREASURY POLICIES

The Group maintains a prudent funding policy and treasury policy towards its
overall business operations with an aim to minimise financial risks.  Satellite
projects require substantial cash outlay to embark upon.  As such, the Group
expects that it will need to make substantial capital expenditures on new
satellite projects over the next several years.  All future satellite projects
will be financed by cash flow from operations and bank loans or any viable
forms of financing.

Substantially all the incomes and expenditures of the Group are denominated in
United States Dollars.  The Group believes that this is likely to remain
unchanged in the future.  As such, the Group does not engage in or plan to
engage in hedging the risks of currency exchange rate fluctuations.  However,
since the current bank loans of the Group carry floating interest rates, the
Group is currently exposed to the risk of interest rate fluctuations.  It
intends to take appropriate measures in due course to hedge against interest
rate fluctuations.

DISPOSAL OF SUBSIDIARY

In the process of corporate restructuring in preparation for the listings of
the shares of APT Satellite Holdings Limited, a then wholly-owned subsidiary of
APT Satellite Company Limited ("APT"), Super Asia Telecommunications Company
Limited ("Super Asia"), was carved out of the Group.  This was accomplished by
APT transferring all the shares of Super Asia to the shareholders of APT prior
to the corporate restructuring by means of a dividend in specie amounting to
HK$56.8 million (US$7.3 million).

REMUNERATION POLICY

As at 31 December 1996, the Group employed 70 full-time employees, including
the Executive Directors and senior executives of the Group.

Remuneration packages are made in line with market terms and individual merits.
Salaries are reviewed annually by senior management, increment is made with
reference to current market conditions and based on the individual's
performance.  Special increments may be granted when warranted.  Bonus is paid
depending on the operational results of the Group.  In addition, the Group
offers other staff benefits including a provident fund scheme and medical
insurance.  Housing allowances are also offered to certain senior executives.





                                      -16-
<PAGE>   20
The Group has entered into service agreements with the three Executive
Directors namely, Mr. He Ke Rang, Mr. Chen Ji Bin and Mr. Qin Shen.  The
initial terms of the service agreements are, in the case of Mr. He Ke Rang,
three years, and in the case of Mr. Chen Ji Bin and Mr. Qin Shen two years, in
each case commencing from 1 December 1996.  Each contracted director will be
paid a basic salary and a discretionary bonus of such amount as shall be
determined by the Board of Directors.  Other benefits include housing
allowance, use of an automobile, the provision of club memberships, medical
insurance, and participation in the Group's staff provident fund and any
approved share option scheme.

SUMMARY FINANCIAL INFORMATION

The following table summaries the combined results of the Group for the last
five financial years as extracted from the audited financial statements of the
companies now comprising the Group, after appropriate adjustments and
reclassifications as if the current Group structure had been in existence
throughout these financial years.  As the Company was incorporated on 17
October 1996, the only audited consolidated balance sheet of the Group is as at
31 December 1996 which is, together with the comparative figures as at 31
December 1995, set out in the financial statements on pages 38 and 39.

<TABLE>
<CAPTION>                        
                                           1992         1993           1994         1995            1996
                                         HK$'000       HK$'000        HK$'000      HK$'000        HK$'000
 <S>                                      <C>          <C>             <C>          <C>           <C>
 Turnover
   Continuing operations                      --            --         69,078       284,807       367,628
   Discontinued operations                    --        89,475         17,925            --            --
                                          -------      -------         ------       -------       ------- 
                                              --        89,475         87,003       284,807       367,628
                                          =======      =======         ======       =======       =======
 Operating profit/(loss):
   Continuing operations before
     exceptional items                    (8,415)      (17,189)           175        84,580        99,120
   Exceptional item                           --        60,867             --       (69,792)           --
                                          -------      -------         ------       -------       ------- 
   Continuing operations                  (8,415)       43,678            175        14,788        99,120
   Discontinued operations                    --         2,822          1,203            --            --
                                          =======      =======         ======       =======       =======
 Profit/(loss) before taxation            (8,415)       46,500          1,378        14,788        99,120
 Taxation                                     --           (13)            (6)           (6)      (22,600)
                                          -------      -------         ------       -------       ------- 
 Net profit/(loss) attributable to
   shareholders                           (8,415)       46,487          1,372        14,782        76,520
                                          =======      =======         ======       =======       =======
</TABLE>





                                      -17-
<PAGE>   21
BASIS OF PRESENTATION OF FINANCIAL STATEMENTS AND ACCOUNTING POLICIES

The basis of presentation of the financial statements and the significant
accounting policies of the Group are set out in note 2 to the financial
statements.

FIXED ASSETS

Details of movements in fixed assets of the Group are set out in note 12 to the
financial statements.

SUBSIDIARIES

Particulars of the Company's subsidiaries are set out in note 16 to the
financial statements.

SHARE CAPITAL

Details of movements in the Company's share capital during the year and the
reasons for the issues of shares are set out in note 22 to the financial
statements.

SHARE PREMIUM

Details of the share premium are set out in note 23 to the financial
statements.

BORROWINGS

Details of bank borrowings of the Group at 31 December 1996 are set out in note
20 to the financial statements.

MAJOR CUSTOMERS AND SUPPLIERS

The turnover attributable to the single largest customer and the five largest
customers of the Group accounted for 26.6% and 52.2%, respectively, of the
Group's total turnover of the year.  Purchases attributable to the five largest
suppliers accounted for less than 30% of the Group's total purchases for the
year.

The above single largest customer, China Telecommunications Broadcast Satellite
Corporation, holds directly and indirectly more than 5% equity interest in the
Company.

Save as mentioned above, none of the Directors, their associates or any
shareholder of the Company (which to the knowledge of Directors owns more than
5% of the Company's issued share capital) has any interests in the customers or
suppliers mentioned above.





                                      -18-
<PAGE>   22
CHARITABLE CONTRIBUTIONS

During the year, the Group made charitable contributions totalling HK$10,000.

DIRECTORS

The Directors of the Company during the year and up to the date of this report
were:

EXECUTIVE DIRECTORS

He Ke Rang
Chen Ji Bin
Qin Shen

NON-EXECUTIVE DIRECTORS

Xie Gao Jue
Li Bao Ming
Ngai Man
Wong Hung Khim
Hsu Chih Chang
Hou Zheng
Chatchaval Jiaravanon
Zhu You Jun
Lim Toon
Lee Hsiang Wei
Wong Kit Ming
Ho Siaw Hong (Alternate Director to Lim Toon and Wong Hung Khim)
Li Kwok Wing, Meocre
Yuen Pak Yiu, Philip

On 12 April 1997, Mr. Wong Kit Ming was appointed as Director.  All the other
Directors were elected by member of the Company on 17 October 1996.

In accordance with By-laws 86(2) and 87 of the By-laws of the Company, Messrs.
Wong Kit Ming, Hsu Chih Chang, Chatchaval Jiaravanon, Hou Zheng and Chen Ji Bin
will retire at the forthcoming Annual General Meeting and, being eligible,
offer themselves for re-election.

The Non-executive Directors of the Company are subject to retirement in
accordance with the provisions of the By-laws of the Company.





                                      -19-
<PAGE>   23
DIRECTORS' SERVICE CONTRACTS

Mr. He Ke Rang has entered into a service contract with the Company for a term
of 3 years commencing 1 December 1996.  Messrs. Chen Ji Bin and Qin Shen have
entered into separate services contracts with the Company for a term of 2 years
commencing 1 December 1996.

Save as disclosed above, none of the Directors has a service contract with the
Company or its subsidiaries which is not determinable by the employing company
within one year without payment of compensation, other than statutory
compensation.

DIRECTORS' INTERESTS IN SHARE CAPITAL

As at 31 December 1996, according to the register required to be kept under
Section 29 of the Securities (Disclosure of Interests) Ordinance ("SDI
Ordinance"), none of the Directors or any of their associates had any personal,
family, corporate or other interests in the shares of the Company or any of its
associated corporations as defined under the SDI Ordinance.

DIRECTORS' RIGHTS TO ACQUIRE SHARES

Except for the share option scheme of the Company, details of which are set out
in note 22 to the financial statements, at no time during the year was the
Company or any of its subsidiaries a party to any arrangements whose objects
are to enable a Director of the Company to acquire benefits by means of the
acquisition of shares in or debentures of the Company or any other body
corporate and none of the Directors or their spouses or children under the age
of 18 has any right to subscribe for the shares of the Company, or had
exercised any such right during the year.

No options were granted to or exercised by any of the Directors of the Company
under the abovementioned scheme during the year and no options were outstanding
as at 31 December 1996.

DIRECTORS' INTERESTS IN CONTRACTS

None of the Directors were materially interested, whether direct or indirect,
in any contract of significance to the business of the Group which were
subsisting during or at the end of the financial year ended 31 December 1996
and to which the Company or any of its subsidiaries was a party.

SUBSTANTIAL SHAREHOLDERS' INTERESTS IN SHARE CAPITAL

As at 31 December 1996, the interest of those persons, other than a Director of
the Company, in the issued share capital of the Company as recorded in the
register required to be kept by the Company pursuant to Section 16 (1) of the
SDI Ordinance were as follow:





                                      -20-
<PAGE>   24
SHAREHOLDER                                                    NUMBER OF SHARES

APT Satellite International Company Limited                         256,200,000

Messrs. He Ke Rang, Chen Ji Bin, Qin Shen, Xie Gao Jue, Li Bao Ming, Ngai Man,
Wong Hung Khim, Hsu Chih Chang, Hou Zheng, Chatchaval Jiaravanon, Zhu You Jun,
Lim Toon, Lee Hsiang Wei and Wong Kit Ming, Directors of the Company, are also
Directors of APT Satellite International Company Limited.

Save as disclosed above, the Company has not been notified of any other
interests representing 10% or more of the Company's issued share capital as at
31 December 1996.

PRE-EMPTIVE RIGHTS

There are no provisions for pre-emptive rights under the Company's By-laws and
there are no restrictions against such rights under the laws of Bermuda, being
the jurisdiction in which the Company is incorporated.

CODE OF BEST PRACTICE

In the opinion of the Directors, the Company has complied with the Code of Best
Practice as set out in Appendix 14 of the Rules Governing the Listing of
Securities on The Stock Exchange of Hong Kong Limited except that Independent
Non-executive Directors are not appointed for a specific term but they are
subject to retirement by rotation and re-election at annual general meetings in
accordance with the By-laws of the Company.

DISTRIBUTABLE RESERVES

At 31 December 1996, the Company's reserves available for distribution amounted
to HK$584,982,000 as computed in accordance with the Companies Act 1981 of
Bermuda (as amended).  In addition, the Company's share premium account of
HK$1,315,522,000 is available for distribution by way of a bonus issue of
shares.

INTEREST CAPITALISED

Interest expenses in the amount of HK$65,527,000 were capitalised during the
year in respect of the Group's fixed assets and satellite project progress
payments.

SUBSEQUENT EVENT

In January 1997, the Group acquired the remaining interest in a partnership as
set out in details in note 17 to the financial statements.





                                      -21-
<PAGE>   25
AUDITORS

Ernst & Young will retire as Auditors of the Company at the forthcoming Annual
General Meeting of the Company and a resolution for their reappointment will be
proposed at such Annual General Meeting.


On behalf of the Board

HE KE RANG                                                             QIN SHEN
Vice Chairman and President                         Director and Vice President




Bangkok, Thailand

12 April 1997





                                      -22-
<PAGE>   26

                             REPORT OF THE AUDITORS

To the members

APT SATELLITE HOLDINGS LIMITED
(Incorporated in Bermuda with limited liability)

We have audited the financial statements on pages 37 to 68 which have been
prepared in accordance with accounting principles generally accepted in Hong
Kong.

RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS

The Company's Directors are responsible for the preparation of financial
statements which give a true and fair view.  In preparing financial statements
which give a true and fair view, it is fundamental that appropriate accounting
policies are selected and applied consistently.  It is our responsibility to
form an independent opinion, based on our audit, on those statements and to
report our opinion to you.

BASIS OF OPINION

We conducted our audit in accordance with Statements of Auditing Standards
issued by the Hong Kong Society of Accountants.  An audit includes an
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements.  It also includes an assessment of the
significant estimates and judgements made by the Directors in the preparation
of the financial statements, and of whether the accounting policies are
appropriate to the Company 's and the Group'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 us with
sufficient evidence to give reasonable assurance as to whether the financial
statements are free from material misstatement.  In forming our opinion we also
evaluated the overall adequacy of the presentation of information in the
financial statements.  We believe that our audit provides a reasonable basis
for our opinion.

OPINION

In our opinion the financial statements give a true and fair view, in all
material respects, of the state of affairs of the Company and of the Group as
at 31 December 1996 and of the profit and cash flows of the Group for the year
then ended and have been properly prepared in accordance with the disclosure
requirements of the Hong Kong Companies Ordinance.

                                                                  ERNST & YOUNG
                                                    Certified Public Accountants

Hong Kong
12 April 1997


                                      -23-

<PAGE>   27
                      CONSOLIDATED PROFIT AND LOSS ACCOUNT
                      For the year ended 31 December 1996

<TABLE>
<CAPTION>
                                                                     1996                1995  
                                                      Notes         HK$'000             HK$'000
<S>                                                   <C>           <C>                 <C>
TURNOVER                                                 3           367,628            284,807
OPERATING PROFIT BEFORE EXCEPTIONAL ITEM                 4            99,120             84,580
Exceptional item                                         5                --            (69,792)
                                                                    --------           --------
OPERATING PROFIT BEFORE TAXATION
Taxation                                                 6           (22,600)                (6)
                                                                    --------           --------
NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS                  9            76,520             14,782
Retained profits at beginning of year                                 54,225             39,443
Dividend in specie                                      10           (56,806)                --
                                                                    --------           --------
Retained profits at end of year                                       73,939             54,225
                                                                    ========           ========
Earnings per share                                      11             23.99               4.69
</TABLE>























                                      -24-
<PAGE>   28
                           CONSOLIDATED BALANCE SHEET
                                31 December 1996

<TABLE>
<CAPTION>
                                                                             1996                 1995   
                                                            Notes           HK$'000              HK$'000
<S>                                                       <C>              <C>                 <C>
FIXED ASSETS                                                  12           1,851,572              987,983
INVESTMENT PROPERTIES                                         13                  --               12,762
SATELLITE PROJECT PROGRESS PAYMENTS                           14             947,396              922,637
LONG TERM INVESTMENTS                                         15               5,537                1,667
INVESTMENTS IN A PARTNERSHIP                                  17                  14                   14
INTEREST IN AN ASSOCIATED COMPANY                             18                   5                    5
CURRENT ASSETS
    Cash and bank balances                                                   313,543              100,112
    Trade debtors                                                             14,365                6,218
    Prepayments, deposits and sundry debtors                                  61,140               50,802
                                                                          ----------           ----------
                                                                             389,048              157,132
                                                                          ==========           ==========
CURRENT LIABILITIES
    Sundry creditors and accrued expenses                                     16,806               59,640
    Trade deposits received                                   19              11,044               26,892
    Rentals received in advance                                               40,849               52,596
    Due to a related company                                                  56,561                   --
    Taxation                                                                  19,384                   --
    Bank loans, secured                                       20              70,130              114,424
                                                                          ----------           ----------
                                                                             214,774              253,552
                                                                          ----------           ----------
NET CURRENT ASSETS/(LIABILITIES)                                             174,274              (96,420)
                                                                          ----------           ----------
TOTAL ASSETS LESS CURRENT LIABILITIES                                      2,978,798            1,828,648
LONG TERM LIABILITIES
    Trade deposits received                                   19             250,916              176,501
    Bank loans, secured                                       20             400,127              696,108
    Deferred taxation                                         21              92,480               81,756
                                                                          ----------           ----------
                                                                             743,523              954,365
                                                                          ----------           ----------
                                                                           2,235,275              874,283
                                                                          ==========           ==========
SHAREHOLDERS' EQUITY
    Share Capital                                             22              42,000               31,500
    Share Premium                                             23           1,315,522                   --
    Contributed surplus                                       24             511,000              511,000
    Retained profits                                                          73,939               54,225
                                                                          ----------           ----------
                                                                           1,942,461              596,725
LOANS FROM SHAREHOLDERS                                       25             292,814              277,558
                                                                          ----------           ----------
                                                                           2,235,275              874,283
                                                                          ==========           ==========


HE KE RANG                                                          QIN SHEN
Vice Chairman and President                                         Director and Vice President
</TABLE>





                                      -25-
<PAGE>   29
                        CONSOLIDATED CASH FLOW STATEMENT
                      For the year ended 31 December 1996


<TABLE>
<CAPTION>
                                                                                           1996                1995  
                                                                     Notes                HK$'000             HK$'000
 <S>                                                               <C>                  <C>                  <C>
 NET CASH INFLOW FROM OPERATING ACTIVITIES                              26(a)              301,075              289,256
                                                                                        ----------           ----------
 RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
     Interest received                                                                      19,527               18,439
     Interest paid                                                                        (104,692)             (55,196)
                                                                                        ----------           ----------
Net cash outflow from returns on investments
     and servicing of finance                                                              (85,165)             (36,757)
TAXATION
     Overseas taxes paid                                                                        (6)                  (6)
                                                                                        ----------           ----------
INVESTING ACTIVITIES
     Purchase of fixed assets                                                               (9,655)             (85,529)
     Purchase of long term investments                                                      (3,870)              (1,200)
     Increase in satellite project progress payments                                      (974,697)          (1,114,830)
     Increase in interest in an associated company                                              --                   (5)
     Decrease in amounts due from related companies                                             --               58,810
     Proceeds from sale of fixed assets                                                          2                   12
     Insurance compensation received                                    26(c)                   --            1,241,530
                                                                                        ----------           ----------

 Net cash inflow/(outflow) from investing activities                                      (988,220)              98,788
                                                                                        ----------           ----------

 NET CASH INFLOW(OUTFLOW) BEFORE FINANCING ACTIVITIES                                     (722,316)             351,281
 FINANCING ACTIVITIES                                                   26(b)
     New bank loans                                                                        876,914              279,000
     Repayment of bank loans                                                            (1,217,189)            (906,033)
     Increase in loans from shareholders                                                        --              154,173
     Net proceeds from issue of shares                                                   1,326,022                   --
                                                                                        ----------           ----------

 Net cash inflow/(outflow) from financing activities                                       985,747             (472,860)
                                                                                        ----------           ----------

 INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS                                          213,431             (121,579)        
 Cash and cash equivalents at beginning of year                                            100,112              221,691
                                                                                        ----------           ----------

 CASH AND CASH EQUIVALENTS AT END OF YEAR                                                  313,543              100,112
                                                                                        ==========           ==========
 ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS
 Cash and bank balances                                                                    313,543              100,112
                                                                                        ==========           ==========
</TABLE>





                                      -26-
<PAGE>   30
                                 BALANCE SHEET
                                31 December 1996

<TABLE>
<CAPTION>
                                                                           1996
                                                          Notes         HK $'000
<S>                                                       <C>           <C>
INTERESTS IN SUBSIDIARIES                                   16          1,850,594
CURRENT ASSETS
   Cash and bank balances                                                  85,664
   Prepayments, deposits and sundry debtors                                12,897
                                                                        ---------
                                                                           98,561


CURRENT LIABILITIES
    Sundry creditors and accrued expenses                                   6,651
                                                                        ---------
NET CURRENT ASSETS                                                         91,910
                                                                        ---------
                                                                        1,942,504
                                                                        =========

SHAREHOLDERS' EQUITY
   Share capital                                            22             42,000
   Share premium                                            23          1,315,522
   Contributed surplus                                      24            584,358
   Retained profits                                                           624
                                                                        ---------
                                                                        1,942,504
                                                                        =========


HE KE RANG                                                   QIN SHEN
Vice Chairman and President                                  Director and Vice President
</TABLE>





                                      -27-
<PAGE>   31
                         NOTES TO FINANCIAL STATEMENTS
                                31 December 1996


1.       GROUP REORGANISATION

On 14 November 1996, 700 shares of APT Satellite Investment Company Limited
were allotted, issued and credited as fully paid to the then shareholders of
APT Satellite Company Limited or their affiliates as consideration for
converting the 542,500,000 ordinary shares of APT Satellite Company Limited
then in issue into non-voting deferred shares of HK$1.00 each.  These
non-voting deferred shares are of nominal value and have no voting rights
attached to them.

On 14 November 1996, the Company acquired all the outstanding shares of APT
Satellite Investment Company Limited, and as consideration the Company allotted
and issued, credited as fully paid, 280,000 shares of the Company to the then
shareholders of APT Satellite Investment Company Limited.  The Company also
applied a sum of HK$122,000 out of its contributed surplus account for the
1,220,000 shares of the Company which had been issued nil-paid to APT Satellite
International Company Limited, a company owned by the shareholders of APT
Satellite Company Limited, initially following the incorporation of the
Company.  On 3 December 1996, an additional 313,500,000 new shares of the
Company were issued, credited as fully paid, out of the contributed surplus
account, to the then shareholders of the Company.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         BASIS OF ACCOUNTING

The financial statements have been prepared in accordance with Hong Kong
Statements of Standard Accounting Practice, accounting principles generally
accepted in Hong Kong and the disclosure requirements of the Hong Kong
Companies Ordinance.  A summary of the significant accounting policies is set
out below.

         BASIS OF CONSOLIDATION AND PRESENTATION

The consolidated financial statements include the financial statements of the
Company for the period from 17 October 1996 (date of incorporation) to 31
December 1996 and its subsidiaries for the year ended 31 December 1996.

The consolidated financial statements have been prepared using the merger basis
of accounting.  Under this basis, the Company has been treated as the holding
company of its subsidiaries for both years presented rather than from the date
of acquisition.  Accordingly, the consolidated results of the Group for the
years ended 31 December 1996 and 1995 include the results of the Company and
the subsidiaries included in the reorganisation with effect from 1 January 1995
or since their respective dates of incorporation, where these are shorter
periods.  The comparative consolidated balance sheet at 31 December 1995 has
been prepared on the basis that the Group after the reorganisation was in place
at that date.  This basis has been consistently adopted for the preparation of
comparative amounts in the consolidated financial statements.





                                      -28-
<PAGE>   32
In the opinion of the Directors, the consolidated financial statements prepared
on the above basis present more fairly the results and state of affairs of the
Group as a whole.

All significant intercompany transactions and balances within the Group are
eliminated on consolidation.

         SUBSIDIARIES

A company is a subsidiary if more than 50% of the issued share capital is held
by the Group and the Group controls the management and Board of Directors of
such company.

Investments in subsidiaries are stated in the Company's balance sheet at cost
unless, in the opinion of the Directors, there has been a permanent diminution
in value, when they are written down to a value determined by the directors.

         ASSOCIATED COMPANIES

An associated company is a company, not being a subsidiary, in which the Group
has a long term interest of not less than 20% of the equity voting rights and
over which the Group is in a position to exercise significant influence.

The Group's share of the post-acquisition results and reserves of associated
companies is included in the consolidated profit and loss account and
consolidated reserves, respectively.  The Group's investments in associated
companies are stated in the consolidated balance sheet at the Group's share of
net assets under the equity method of accounting less any provisions for
permanent diminutions in values deemed necessary by the Directors.

         FIXED ASSETS AND DEPRECIATION

Fixed assets are stated at cost less accumulated depreciation.  The cost of an
asset comprises its purchase price and any directly attributable cost of
bringing the asset to its working condition and location for its intended use.
Expenditure incurred after the fixed assets have been put into operation, such
as repairs and maintenance, is normally charged to the profit and loss account
in the period in which it is incurred.  In the situations where it can be
clearly demonstrated that the expenditure has resulted in an increase in the
future economic benefits expected to be obtained from the use of the asset, the
expenditure is capitalised as an additional cost of the asset.





                                      -29-
<PAGE>   33
Depreciation is calculated on the straight-line basis to write off the cost of
each asset over its estimated useful life.  The principal annual rates used for
this purpose are as follows:

<TABLE>
   <S>                                        <C>
   Leasehold land                             Over the terms of the leases
   Buildings                                   2%
   Leasehold improvements                     Over the terms of the leases
   Furniture and equipment                    20%
   Motor vehicles                             20%
   Computer equipment                         20%
   Communication satellite                    10%
   Communication satellite equipment          6-2/3% - 20%
</TABLE>

The gain or loss on disposal or retirement of fixed assets recognised in the
profit and loss account is the difference between the sales proceeds and the
carrying amount of the relevant assets.

         INVESTMENT PROPERTIES

Investment properties are interests in land and buildings in respect of which
construction work and development have been completed and which are intended to
be held on a long term basis for their investment potential.  Such properties
are not depreciated and are stated at cost.

         OPERATING LEASES

Leases where substantially all the rewards and risks of ownership of assets
remain with the leasing company are accounted for as operating leases.  Rentals
applicable to such operating leases are charged to the profit and loss account
on the straight-line basis over the lease terms.

         LONG TERM INVESTMENTS

Investments held on a long term basis are stated at cost less provisions for
any permanent diminutions in values deemed necessary by the Directors, on an
individual investment basis.

         DEFERRED TAXATION

Deferred taxation is provided, using the liability method, on all significant
timing differences to the extent it is probable that the liability will
crystallise in the foreseeable future.  A deferred tax asset is not recognised
until its realisation is assured beyond reasonable doubt.

         STAFF PROVIDENT FUND

The Group operates a defined contribution staff provident fund.  Group
contributions under the scheme are charged to the profit and loss account as
incurred.  The amount of Group contributions is based on specified percentages
of the basic salary of employees and forfeited contributions in respect of
unvested benefits are used to reduce the Group's ongoing contributions
otherwise payable.  The assets of the scheme are held separately from those of
the Group.





                                      -30-
<PAGE>   34
         FOREIGN CURRENCIES

Foreign currency transactions are recorded at the appropriate rates of exchange
ruling at the transaction dates.  Monetary assets and liabilities denominated
in foreign currencies at the balance sheet data are translated at the
appropriate rates of exchange ruling at that date.  Exchange differences are
dealt with in the profit and loss account.

On consolidation, the financial statements of an overseas subsidiary are
translated into Hong Kong dollars at the appropriate rates of exchange ruling
at the balance sheet date.

         REVENUE

Revenue is recognised when it is probable that the economic benefits will flow
to the Group and when the revenue can be measured reliably, on the following
bases:

         (a)     for transponder leases under which customers have obtained the
right to use the transponder capacity for the life of the satellite, revenues
are recognised, along with the related costs, on a straight line basis, over
the warranty period provided to the customers;


         (b)     rental income from the leasing of satellite transponders, on
an accrual basis; and

         (c)     interest income, on a time proportion basis.

         RELATED COMPANIES

A related company is a company in which one or more of the Directors or
shareholders of the Company have a beneficial interest therein or in a position
to exercise significant influence over the company.

         CAPITALISATION OF BORROWING COSTS

Interest on loans, including the related costs of raising the loans, incurred
specifically to finance construction and launch of satellites is capitalised as
part of the satellite costs until the satellite commences commercial
operations.

3.       TURNOVER

Turnover represents the income on the renting of satellite transponders.





                                      -31-
<PAGE>   35
4.       OPERATING PROFIT BEFORE EXCEPTIONAL ITEM

The operating profit before exceptional item is arrived at after
charging/(crediting):

<TABLE>
<CAPTION>
                                                                        GROUP
                                                                  1996        1995
                                                                 HK$'000     HK$'000
 <S>                                                             <C>         <C>
 Depreciation                                                    148,065     113,220
 Rentals on land and buildings under operating leases              4,550       4,624
 Auditors' remuneration                                              310         240
 Management fees paid                                             22,298      20,461
 Foreign exchange loss/(gain) - net                                  237        (221)
 Interest income                                                 (16,998)    (22,531)
 Interest on:
     Bank loans not wholly repayable within five years           102,961      44,570
     Other loans wholly repayable after five years                15,256       6,308
     Other interest                                                   --       2,165
                                                                --------    --------
                                                                 118,217      53,043
     Less:   Amount capitalised in fixed assets and satellite
             project progress payments                            65,527       9,194
                                                                --------    --------
                                                                  52,690      43,849
                                                                --------    --------
</TABLE>

5.       EXCEPTIONAL ITEM

The prior year exceptional item represented the net loss of the Group's second
communication satellite, Apstar II, the launch of which was unsuccessful.

6.       TAXATION

<TABLE>
<CAPTION>
                                                                 GROUP
                                                         1996             1995
                                                        HK$'000          HK$'000
 <S>                                                    <C>               <C>
 Current year provision:
     Hong Kong                                           19,100               --
     Overseas                                               290                6
                                                         ------           ------
                                                         19,390                6
 Deferred taxation                                        3,210               --
                                                         ------           ------
                                                         22,600                6
                                                         ======           ======
</TABLE>

Hong Kong profits tax has been provided at the rate of 16.5% on the estimated
assessable profits arising in Hong Kong during the year.

Taxes on profits assessable in overseas jurisdictions have been calculated at
the rates of taxation prevailing in the countries in which the Group operates.





                                      -32-
<PAGE>   36
7.       DIRECTORS' REMUNERATION

<TABLE>
<CAPTION>
                                                                   GROUP
                                                             1996          1995
                                                            HK$'000       HK$'000
 <S>                                                           <C>           <C>
 Executive Directors:
     Fees                                                        121          --
     Basic salaries and allowances                               426          --
     Pensions                                                     18          --
                                                               -----       -----  
                                                                 565          --

 Non-executive Directors:
     Fees                                                        619          --
                                                               -----       -----  
                                                               1,184          --
                                                               =====       =====  
</TABLE>

The remuneration of the Directors fell within the following designated band:

<TABLE>
<CAPTION>
                                                                1996        1995
 <S>                                                           <C>          <C>
 Nil - HK$1,000,000                                             17           15
                                                               =====       =====  
</TABLE>

There was no arrangement under which a Director waived or agreed to waive any
remuneration for the year.

8.       HIGHEST-PAID EMPLOYEES

The five highest-paid employees during the year include three (1995: nil)
Directors, details of whose remuneration are disclosed in note 7 to the
financial statements.  The details of the remuneration of the other two (1995:
five) highest paid employees, who were not Directors, are set out below:

<TABLE>
<CAPTION>
                                                                  GROUP
                                                            1996           1995
                                                           HK$'000        HK$'000
 <S>                                                        <C>            <C>
 Basic salaries and allowances                                625          1,033
 Bonus                                                         --             45
 Pensions                                                      13             --
                                                            -----          -----
                                                              638          1,078
                                                            =====          =====
</TABLE>

The remuneration of the two (1995: five) highest paid employees fell within the
following designated band:

<TABLE>
<CAPTION>
                                                             1996          1995
<S>                                                         <C>            <C>
Nil - HK$1,000,000                                             2               5
                                                            =====          =====
</TABLE>





                                      -33-
<PAGE>   37
9.       NET PROFIT ATTRIBUTABLE TO SHAREHOLDERS

The net profit attributable to shareholders dealt with in the financial
statements of the Company is HK$624,000.

10.      DIVIDEND IN SPECIE

<TABLE>
<CAPTION>
                                                                 Group
                                                          1996             1995
                                                         HK$'000          HK$'000
<S>                                                       <C>                <C>
Dividend in specie                                        56,806              --
                                                          ======             ===
</TABLE>

The dividend in specie of HK$56,806,000 was paid by a subsidiary of the Company
to its then shareholders prior to the Group reorganisation.  This dividend in
specie was satisfied by the distribution of all of the Group 's shareholdings
in a subsidiary, Super Asia Telecommunications Company Limited.

11.      EARNINGS PER SHARE

The calculation of earnings per share is based on the net profit attributable
to shareholders for the year of HK$76,520,000 (1995: HK$14,782,000) and the
weighted average number of shares of 319,027,397 shares in issue during the
year.  The comparative earnings per share has been calculated based on the
315,000,000 shares issued by the Company pursuant to the Group reorganisation
prior to the initial public offering in December 1996.

12.      FIXED ASSETS

<TABLE>
<CAPTION>
 GROUP
                                                                                        Communication
                        Land and     Leasehold    Furniture and    Motor       Computer   Satellite   Communication
                        Buildings   Improvements   Equipment      Vehicles     equipment  equipment    satellite      Total
 <S>                    <C>          <C>           <C>            <C>          <C>        <C>          <C>          <C>

 Cost:
 At beginning of           31,940        2,045       16,731         4,317        1,060       59,931    1,025,076    1,141,100
    year
 Transferred from          12,762           --           --            --           --           --           --       12,762
    investment
    properties
 Transferred from              --           --           --            --           --           --      989,247      989,247
    deposits
 Additions                  7,625           31          125           185          203        1,486           --        9,655
 Disposal                      --           --          (19)           --           --           --           --          (19)
                       ----------   ----------   ----------    ----------   ----------   ----------   ----------   ----------
 AT 31 DECEMBER 1996       53,327        2,076       16,837         4,502        1,263       61,417    2,014,323    2,152,745
                       ----------   ----------   ----------    ----------   ----------   ----------   ----------   ----------
 Accumulated
 depreciation:
 At beginning of              620        1,519        5,947         1,485          305        6,564      136,677      153,117
    year
 Provided during the          515          155        3,348           866          231        6,093      136,857      148,065
    year
 Disposal                      --           --           (9)           --           --           --           --           (9)
                       ----------   ----------   ----------    ----------   ----------   ----------   ----------   ----------
 AT 31 DECEMBER 1996        1,135        1,674        9,286         2,351          536       12,657      273,534      301,173
                       ----------   ----------   ----------    ----------   ----------   ----------   ----------   ----------
 Net book value
 AT 31 DECEMBER 1996       51,192          402        7,551         2,151          727       48,760    1,740,789    1,851,572
                       ==========   ==========   ==========    ==========   ==========   ==========   ==========   ==========
 At 31 December 1995       31,320          526       10,784         2,832          755       53,367      888,399      987,983
                       ==========   ==========   ==========    ==========   ==========   ==========   ==========   ==========
</TABLE>





                                      -34-
<PAGE>   38
The Group's land and buildings are held on the following lease term:

<TABLE>
<CAPTION>
                                         HONG KONG       ELSEWHERE         TOTAL
                                           HK$'000         HK$'000        HK$'000
 <S>                                        <C>             <C>           <C>
Long term leases                            40,989          3,713         44,702
Medium term leases                              --          7,625          7,625
                                            ------         ------         ------
                                            40,989         11,338         52,327
                                            ======         ======         ======
</TABLE>

13.      INVESTMENT PROPERTIES

The investment properties brought forward from prior year were transferred to
leasehold land and buildings during the year.

14.      SATELLITE PROJECT PROGRESS PAYMENTS

<TABLE>
<CAPTION>
                                                                GROUP
                                                      1996                1995
                                                     HK$'000            HK$'000
 <S>                                               <C>                 <C>
 At beginning of year                                 922,637          1,158,701
 Additions                                          1,014,006          1,099,988
 Transferred to fixed assets                         (989,247)        (1,336,052)
                                                   ----------         ----------

 At end of year                                       947,396            922,637
                                                   ==========         ==========
</TABLE>

Satellite project progress payments include progress payments for communication
satellites under construction, launching and related services, together with
insurance and finance costs on loans borrowed to finance the above payments.

15.      LONG TERM INVESTMENTS


<TABLE>
<CAPTION>
                                                                   GROUP
                                                             1996           1995
                                                           HK$'000        HK$'000
<S>                                                         <C>            <C>
Unlisted investments, at cost                               5,537          1,667
                                                            =====          =====
</TABLE>

16.      INTERESTS IN SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                       COMPANY
                                                                         1996
                                                                       HK$'000
<S>                                                                   <C>
Unlisted shares, at cost                                                615,862
Due from subsidiaries                                                 1,240,000
Due to subsidiaries                                                      (5,268)
                                                                     ----------
                                                                      1,850,594
                                                                     ==========
</TABLE>





                                      -35-
<PAGE>   39
All the subsidiaries are wholly owned and the particulars of which are as
follow:

<TABLE>
<CAPTION>
                                    PLACE OF INCORPORATION    ISSUED AND FULLY PAID          PRINCIPAL
               NAME                                              SHARE CAPITAL*              ACTIVITIES
 <S>                               <C>                       <C>                      <C>
 APT Satellite Investment          British Virgin Islands    US$1,400                 Investment holding
 Company Limited
 APT Satellite Company Limited     Hong Kong                 -Ordinary                Satellite transponder
                                                             Class "A"                leasing
                                                             HK$100
                                                             -Non-voting Deferred
                                                             Class "B"
                                                             HK$542,500,000
 APT Satellite (USA), Limited      United States of          US$200,000               Provision of
                                   America                                            management services
 Haslett Investments Limited       British Virgin Islands    US$1                     Investment
 Acme Star Investment Limited      Hong Kong                 HK$2                     Investment holding
 Telewell Investment Limited       Hong Kong                 HK$2                     Investment holding
 APT Satellite Vision Limited      Hong Kong                 HK$2                     Not yet commenced
 (formerly named as Norris                                                            business
 Enterprise Limited)
 APT Satellite Global Limited      Cayman Islands            US$2                     Investment holding
 Ying Fai Realty (China) Limited   Hong Kong                 HK$20                    Property holding
 APT Satellite Enterprise          Cayman Islands            US$2                     Not yet commenced
 Limited                                                                              business
 APT Satellite Link Limited        Cayman Islands            US$2                     Not yet commenced
                                                                                      business
</TABLE>

*  All ordinary shares unless otherwise stated.
*  All subsidiaries are indirectly held by the Company with the exception of
APT Satellite Investment Company Limited.

17.      INVESTMENT IN A PARTNERSHIP

The Company, through two wholly-owned subsidiaries, entered into The 138
Leasing Partnership (the "Partnership") for the sale and leaseback transaction
for APSTAR-I on 29 December 1994.  In January 1997, the Group assumed the
obligation of a bank loan of HK$269,887,000 which was then wholly repaid by the
Group out of a deposit placed with a financial institution under defeasance and
other arrangement (not 29) and the Partnership became a wholly-owned subsidiary
of the Group.





                                      -36-
<PAGE>   40
18.      INTEREST IN AN ASSOCIATED COMPANY

<TABLE>
<CAPTION>
                                                                     GROUP
                                                              1996          1995
                                                             HK$'000      HK$'000
 <S>                                                           <C>          <C>
 Unlisted shares, at cost                                        5             5
                                                               ===           === 
</TABLE>

Particulars of the associated company are as follows:

<TABLE>
<CAPTION>
                                                                   PERCENTAGE OF EQUITY
                                     PLACE OF INCORPORATION        ATTRIBUTABLE TO THE           PRINCIPAL
NAME                                                                    COMPANY                  ACTIVITIES
 <S>                                 <C>                                 <C>                      <C>
CEAPT Limited                                Hong Kong                    50%                     Dormant
</TABLE>

19.      TRADE DEPOSITS RECEIVED

These amounts represent reservation fees and deposits received from lessees for
satellite transponders booked.

20.      BANK LOANS, SECURED

<TABLE>
<CAPTION>
                                                                    GROUP
                                                                1996       1995
                                                              HK$'000    HK$'000
 <S>                                                          <C>        <C>
 Syndicated bank loans                                        463,739    803,423
 Mortgage loans                                                 6,518      7,109
                                                              -------    -------
                                                              470,257    810,532
 Less:  Portion classified as current liabilities              70,130    114,424
                                                              -------    -------
 Long term portion                                            400,127    696,108
                                                              =======    =======
 The bank loans are repayables:
   Within one year                                             70,130    114,424
   In the second year                                          80,269    126,651
   In the third to fifth years                                317,339    446,615
   Beyond five years                                            2,519    122,842
                                                              -------    -------
                                                              470,257    810,532
                                                              =======    =======
</TABLE>

The Group has assigned by way of legal charge, in favour of the syndicated
loans lenders, a portion of the transponder receipts of APSTAR-I.  The amount
of cash from transponder receipts withheld by the banks at 31 December 1996 was
HK$8,237,000.

The Group has pledged certain properties in respect of the mortgage loans.





                                      -37-
<PAGE>   41
21.      DEFERRED TAXATION

<TABLE>
<CAPTION>
                                                                   GROUP
                                                            1996           1995
                                                           HK$'000       HK$'000
 <S>                                                        <C>           <C>
 At the beginning of year                                   81,756        78,750
 Charge to profit and loss account
 --operating expenses                                        7,514         3,006
 --taxation                                                  3,210            --
                                                            ------        ------
 At end of year                                             92,480        81,756
                                                            ======        ======
</TABLE>

The principal component of the provision for deferred taxation liability are as
follows:

<TABLE>
<CAPTION>
                                                                   GROUP
                                                              1996         1995
                                                            HK$'000      HK$'000
 <S>                                                        <C>           <C>
 Timing differences arising from:
   Certain leasing arrangements                             89,270        81,756
   Accelerated depreciation, net                             3,210            --
                                                            ------        ------
                                                            92,480        81,756
                                                            ======        ======
</TABLE>

There are no significant potential deferred tax liabilities for which provision
has not been made.

Certain lease arrangements provide the Group with an initial cash inflow in
return for being responsible for the future obligations to make payments of
taxation on behalf of the lessor under the lease arrangements.  Any differences
between the initial benefit and the eventual tax liability are provided for
over the lives of the relevant leases and charged to operating expenses.

22.      SHARE CAPITAL

<TABLE>
<CAPTION>
                                                                         COMPANY
                                                                          1996
                                                                         HK$'000
 <S>                                                                     <C>
 Authorised:
   1,000,000,000 shares of HK$0.10 each                                  100,000
                                                                         =======
 Authorised, issued and fully paid:
   420,000,000 shares of HK$0.10 each                                     42,000
                                                                         =======
</TABLE>

On incorporation, the Company's authorised share capital was HK$122,000 divided
into 1,220,000 shares of HK$0.10 each.  On 14 November 1996 and 3 December
1996, the authorised share capital of the Company was increased to HK$150,000
and HK$100,000,000, respectively.

The movements in the share capital during the year were as follows:

         (a)     On 17 October 1996, 1,220,000 shares of the Company were
issued nil-paid.





                                      -38-
<PAGE>   42

         (b)     On 14 November 1996, the Company issued 280,000 shares of
HK$0.10 each credited as fully paid in exchange for all of the issued shares of
APT Satellite Investment Company Limited.  On the same date, the 1,220,000
shares in (a) above were credited as fully paid out of the contributed surplus
account arising from the above issue of shares.

         (c)     On 3 December 1996, the Company issued 313,500,000 shares of
HK$0.10 each to the then shareholders of the Company credited as fully paid out
of the contributed surplus account.

         (d)     On 14 December 1996, the Company issued 105,000,000 shares of
HK$0.10 at a premium for a total cash consideration of HK$1,423,296,000 for
repaying in full the syndicated bank loans under the APSTAR-IA/APSTAR-IIR loan
agreement, and to finance the construction and launch of APSTAR-IIR.

The comparative share capital amount at 31 December 1995 represents the pro
forma issued share capital of the Company after the issue of 1,220,000 shares
on incorporation, 280,000 shares for the acquisition of the entire share
capital in APT Satellite Investment Company Limited and 313,500,000 shares
issued on capitalisation of part of the contributed surplus accounts as if the
Group reorganisation had been effective at 31 December 1995.

Pursuant to the share option scheme (the "Scheme") of the Company adopted on 3
December 1996, the Directors of the Company may at any time and from time to
time within ten years after the date on which the Scheme was adopted as
aforesaid, invite any full-time employee, including any Executive Director or
officer, of the Company and its subsidiaries to apply for options to subscribe
for shares of the Company at a price determined by the Directors on a
case-by-case basis and will not be less than the nominal value of the share nor
at a discount of more than 20% below the average of the closing price of the
shares on The Stock Exchange of Hong Kong Limited (the "Stock Exchange") as
stated in the Stock Exchange 's daily quotation sheets on the five dealing days
immediately preceding the date on which the invitation to apply for an option
under the Scheme is resolved by the Directors to be given.  The maximum number
of shares in respect of which options may be granted under the Scheme may not
exceed 10% of the issued capital of the Company, excluding any shares issued
pursuant to the Scheme from time to time.  An option may be exercised in
accordance with the terms of the Scheme at any time or times as determined by
the Directors, being not later than 10 years after the date on which the option
is granted or the tenth anniversary of the date of adoption of the Scheme,
whichever is the earlier.

There were no share option granted during the period.

23.      SHARE PREMIUM

The share premium arose from the initial public offering of 105,000,000 shares
on 18 December 1996 and is stated net of the related share issuing expenses of
HK$97,274,000.





                                      -39-
<PAGE>   43
24.      CONTRIBUTED SURPLUS

The contributed surplus of the Company arose as a result of the Group
reorganisation and represented the excess value of the subsidiaries acquired
over the par value of the Company 's shares issued for their acquisition.
Under the Companies Act (1981) of Bermuda (as amended), the Company may make
distributions to its members out of the contributed surplus under certain
circumstances.

The contributed surplus of the Group arose as a result of the Group
reorganisation and represented the excess of the par value of the shares of the
subsidiaries which the Company acquired over that of the Company 's shares
issued in consideration thereof.

25.      LOANS FROM SHAREHOLDERS

The loans are unsecured, and up to 23 December 1996 bore interest at LIBID and
were subordinated to the syndicated bank loans for the construction of
satellite, APSTAR-IA and APSTAR-IIR.  After the repayment in full of the above
syndicated bank loans on 23 December 1996, the interest rate was changed to
LIBOR.

26.      NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT

         (A)     RECONCILIATION OF PROFIT BEFORE TAXATION TO NET CASH INFLOW
FROM OPERATING ACTIVITIES

<TABLE>
<CAPTION>
                                                               1996       1995
                                                              HK$'000   HK$'000
 <S>                                                          <C>        <C>
 Profit before taxation                                       99,120     14,788
 Exceptional item                                                 --     69,792
 Interest income                                             (16,998)   (22,531)
 Interest expenses                                            52,690     43,849
 Depreciation                                                148,065    113,220
 Amortisation of deferred liabilities                          7,514      3,006
 Loss on disposal of fixed assets                                  8          2
 Increase in trade debtors                                    (8,147)   (25,057)
  Increase in prepayments, deposits and sundry debtors       (15,634)    (5,265)
 Decrease in amount due to a related company                    (245)        --
  Increase/(decrease) in sundry creditors and accrued        (12,118)    14,255
 expenses
 Increase in trade deposits received                          58,567     39,418
 Increase/(decrease) in rental received in advance           (11,747)    43,779
                                                            --------   --------

 Net cash inflow from operating activities                   301,075    289,256
                                                            ========   ========
</TABLE>





                                      -40-
<PAGE>   44
         (B)     ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR:

<TABLE>
<CAPTION>
                                           SHARE CAPITAL   SHARE                  LOANS FROM
                                                          PREMIUM     BANK LOAN  SHAREHOLDERS
                                               HK$'000    HK$'000      HK$'000      HK$'000
 <S>                                           <C>        <C>         <C>          <C>
 Balance at 1 January 1995                       31,500          --   1,437,565           --
 Net cash inflow/(outflow) from financing            --          --    (627,033)     154,173
   activities
 Accrued interest expenses                           --          --          --        6,308
 Reclassification from current liabilities           --          --          --      117,077
                                             ----------  ----------  ----------   ----------
 Balance at 31 December 1995 and 1 January       31,500          --     810,532      277,558
   1996
 Net cash inflow/(outflow) from financing        10,500   1,315,522    (340,275)          --
   activities
 Accrued interest expenses                           --          --          --       15,256
                                             ----------  ----------  ----------   ----------
 BALANCE AT 31 DECEMBER 1996                     42,000   1,315,522     470,257      292,814
                                             ==========  ==========  ==========   ==========
</TABLE>

         (C)     EXCEPTIONAL ITEM

In 1995, there was a cash inflow in respect of the insurance compensation
received amounting to HK$1,241,530,362 relating to the loss of the Group 's
second communication satellite APSTAR-II, the launch of which was unsuccessful.

27.      RELATED PARTY TRANSACTIONS

During the year, the following (income)/expenses arose from related party
transactions:

<TABLE>
<CAPTION>
                                                             1996        1995
                                                            HK$'000     HK$'000
 <S>                                                        <C>         <C>
 Continuing transaction
 Income:
   Leasing of transponders to two shareholders of the      (108,064)   (80,908)
     Company                                         
   Leasing of transponders to companies in which a          (10,075)    (6,745)
     shareholder of the Company has an indirect interest
   Interest income received from a shareholder of the        (2,816)    (2,111)
     Company                                            
 Expenses:
   Launch service provided to the Group by a company which  244,900    386,338
     is a fellow subsidiary of a shareholder of the Company
 Interest payable to shareholders                            15,256      6,308
 Non-continuing transactions:
 Income:
   Interest income received from related companies               --     (2,274)
 Expenses:
   Management services provided to the Group by companies    22,298     20,461
   in which the shareholders of the Company have direct    ========   ========
   interests                                           
   
</TABLE>





                                      -41-
<PAGE>   45
28.      PROVIDENT FUND

<TABLE>
<CAPTION>
                                                                  1996      1995
                                                                HK$'000    HK$'000
 <S>                                                               <C>       <C>
 Contributions to provident fund                                    463       --
  Forfeited unvested provident fund contributions in               
    respect of former employees                                     (26)      --
                                                                   ----      ---
                                                                    437       --
                                                                   ====      ===
</TABLE>

At the balance sheet date, there were no forfeited contributions available to
offset employer's future contributions to the scheme (1995: Nil).


29.      LEASING ARRANGEMENT

On 29 December 1994, the Company 's subsidiaries entered into an arrangement
for the leasing of a communication satellite with total lease obligation
amounting to HK$951,593,000.  As at 31 December 1996, the outstanding lease
obligation on the above lease amounting to HK$740,128,000 and this together
with the bank loan to be assumed by the Group in January 1997 on the
acquisition of the remaining equity interest in The 138 Leasing Partnership,
are covered by funds amounting to HK$870,917,000 placed with a financial
institution under defeasance and other arrangement which have not been included
in these financial statements.

The Group continues to remain the primary obligor under the leas arrangement
and as such, there is a contingent liability (secured) of HK$740,128,000 in
respect of the unpaid lease commitment.

The Company had no contingent liability at the balance sheet date.

30.      CONTINGENCIES

The right of the Group's APSTAR-IA to utilise certain designated C-band
frequencies in the orbital slot at 134 degrees East has been licensed to the
Group by the Kingdom of Tonga ("Tonga"), which has responsibility for the
International Telecommunication Union ("ITU") coordination process with respect
to such orbital slots and the frequencies covered by the Group's licence.
Another country has made filings with the ITU with respect to the orbital slot
at 134 degrees East.  Tonga has confirmed to the Group that it has not granted
rights to any third party that would affect the Group's licence.  Accordingly,
the Group believes it is entitled to use the frequencies at the orbital slot at
134 degrees East covered by the Group's licence.  However, the Group cannot
determine that the country that has made ITU filings with respect to the
orbital slot at 134 degrees East or other parties will not dispute Tonga's
priority to the orbital slot at 134 degrees East and the Group's entitlement to
use such orbital slot.  In addition, other disputes may arise with respect to
these and other orbital slots used by or contemplated for the Group's
satellites.  Any such disputes may have a material adverse effect on the
Group's business.





                                      -42-
<PAGE>   46
31.      COMMITMENTS

         (A)     CAPITAL COMMITMENTS:

<TABLE>
<CAPTION>
                                                                GROUP
                                                          1996           1995
                                                         HK$'000        HK$'000
 <S>                                                    <C>            <C>
 Authorised and contracted for                            380,704      1,118,949
  Authorised but not contracted for                        44,700         44,700
                                                        ---------      ---------
                                                          425,404      1,163,649
                                                        =========      =========
</TABLE>

The capital commitments authorised and contracted for represent unpaid contract
sums in relation to the acquisition of communication satellites, their
launching fees and related equipment.

The capital commitments authorised but not contracted for represent the
construction of a building and installation of antennae and other
satellite-related equipment in the currently undeveloped area adjacent to the
Group's satellite control centre in Tai Po, as required by the terms of the
Group's lease agreements for the land in Tai Po.

         (B)     ANNUAL COMMITMENTS UNDER NON-CANCELLABLE OPERATING LEASES ON
LAND AND BUILDINGS:

<TABLE>
<CAPTION>
                                                                    GROUP
                                                              1996         1995
                                                             HK$'000      HK$'000
 <S>                                                           <C>         <C>
 Leases expiring:
  Within one year                                                318       2,624
   In the second to fifth years, inclusive                     3,648          --
                                                               -----       -----
                                                               3,966       2,624
                                                               =====       =====
</TABLE>

32.      ULTIMATE HOLDING COMPANY

In the opinion of the Directors, the ultimate holding company is APT Satellite
International Company Limited which is incorporated in the British Virgin
Islands.

33.      COMPARATIVE AMOUNTS

Certain comparative amounts have been reclassified to conform with the current
year presentation.

34.      APPROVAL OF THE FINANCIAL STATEMENTS

The financial statements were approved by the Board of Directors on 12 April
1997.





                                      -43-
<PAGE>   47
              SUPPLEMENTARY INFORMATION ON US GAAP RECONCILIATION

SUMMARY OF SIGNIFICANT DIFFERENCES BETWEEN HONG KONG AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

The Company's consolidated financial statements are prepared in accordance with
Hong Kong Generally Accepted Accounting Principles ("HK GAAP") which differ in
certain significant respects from United States Generally Accepted Accounting
Principles ("US GAAP").  Differences which have a significant effect on the
consolidated net income and shareholders' equity are set out below.

         (A)     RECOGNITION OF REVENUE

Certain of the Group 's transponder lease agreements for transponder capacity
contain pre-determined escalations over the term of the agreement.  Under HK
GAAP, the Group recognises revenue on an accrual basis under the contract
terms.  Under US GAAP, revenue under these agreements are recognised on a
straight-line basis over the term of the agreement.

         (B)     CAPITALISATION OF FINANCE COSTS

Under HK GAAP, interest on loans, including the related costs of raising the
loans, incurred specifically to finance construction of satellites is
capitalised as part of the satellite costs until the satellite commences
commercial operations.  Under US GAAP, the interest capitalised is computed by
applying an average borrowing rate to the total amount of qualifying assets
under construction, not to exceed total interest costs incurred, and the
related costs of raising the loans are deferred and amortised over the life of
the loans.  the application of US GAAP would not have a significant effect for
the years presented.

         (C)     INVESTMENT PROPERTIES

Under HK GAAP, investment properties are stated at cost and are not
depreciated.  Under US GAAP, such investment properties would be stated at cost
and depreciated over the lease term of 50 years.

         (D)     DEFERRED TAXATION

Under HK GAAP, deferred taxation is provided, using the liability method, on
all significant timing differences to the extent it is probable that the
liability will crystallise in the foreseeable future.  A deferred tax asset is
not recognised until its realisation is assured beyond reasonable doubt.

Under US GAAP, the tax effects of both taxable and deductible temporary
differences are recognised as deferred tax liabilities and assets,
respectively.  A valuation allowance is recorded to the extent it is considered
more likely than not that the deferred tax assets will not be realised.





                                      -44-
<PAGE>   48
Effect on net income of significant differences between HK GAAP and US GAAP is
as follows:

<TABLE>
<CAPTION>
                                                             1996        1995
                                                            HK$'000     HK$'000
 <S>                                                        <C>         <C>
 Net income as reported under HK GAAP                        76,520      14,782
 Adjustments:
   Recognition of revenue                                    12,205       6,021
   Investment properties                                       (120)       (241)
   Tax effect of reconciling items                           (2,014)       (993)
   Deferred taxation                                          2,667      (2,620)
                                                            -------     -------
  Approximate net income as reported under US GAAP           89,258      16,949
                                                            =======     =======
  Earnings per share under US GAAP                          27.98c.      5.38c.
                                                            =======     =======
</TABLE>


Under US GAAP, the exceptional items for 1995 would be classified as operating
costs.  In addition, compensation received from cancellation of transponder
lease agreements would be classified as revenues.

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

<TABLE>
<CAPTION>
                                                          1996           1995
                                                         HK$'000       HK$'000
 <S>                                                    <C>            <C>
 Shareholders' equity as reported under HK GAAP         1,942,461       596,725
 Adjustments:
   Recognition of revenue                                  25,964        13,759
   Investment properties                                     (602)         (482)
   Tax effect of reconciling items                         (4,284)       (2,270)
   Deferred taxation                                           --        (2,667)
                                                       ----------    ----------

 Shareholders' equity as reported under US GAAP         1,963,539       605,065
                                                       ==========    ==========
</TABLE>


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

<TABLE>
<CAPTION>
                                            CAPITAL STOCK          SHARE PREMIUM AND           RETAINED
                                                                  CONTRIBUTED SURPLUS          EARNINGS
                                                HK$'000                 HK$'000                 HK$'000
 <S>                                              <C>                   <C>                      <C>
 Balance at December 31, 1994                     31,500                  511,000                 45,616
 Net income                                          ---                      ---                 16,949
                                              ----------             ------------             ----------
 Balance at December 31, 1995                     31,500                  511,000                 62,565
 Dividend in specie                                  ---                      ---                (56,806)
 Net proceeds from issue of shares                10,500                1,315,522                    ---
 Net income                                          ---                      ---                 89,258
                                              ----------             ------------             ----------
 Balance at December 31, 1996                     42,000                1,826,522                 95,017
                                              ==========             ============             ==========
</TABLE>





                                      -45-
<PAGE>   49
A reconciliation of the expected tax with the actual tax expense under US GAAP
is presented below:

<TABLE>
<CAPTION>
                                                              1996       1995
                                                            HK$'000     HK$'000
 <S>                                                        <C>         <C>
 Hong Kong statutory income tax 16.5%                          16.5%      16.5%
                                                            =======    =======

 Statutory rate applied to income before income taxes        18,349      3,392
   under US GAAP
 Expenses not deductible                                      3,198          2
 Offshore interest income not taxable                          (142)       (67)
 Overseas representative office's and subsidiaries'             352        271
 losses not deductible
 Others                                                         190         21
                                                            -------    -------
 Actual taxation under US GAAP                               21,947      3,619
                                                            =======    =======
</TABLE>

Overseas representative office's losses not deductible represent losses
incurred by a representative office of a subsidiary which operates in the
People's Republic of China.  Such losses are not deductible against future
profits.  Subsidiaries' losses not deductible represent losses incurred by
several subsidiaries which do not carry out active business operations.  These
subsidiaries also do not intend to carry out any active business operations in
the foreseeable future.  As a result, full valuation allowance is provided for
the deferred tax assets derived from these losses.

An analysis of the actual tax expense under US GAAP is presented below:

<TABLE>
<CAPTION>
                                                         1996              1995
                                                        HK$'000           HK$'000
 <S>                                                     <C>              <C>
 Current tax provision                                   19,390                6
 Deferred tax                                             2,557            3,613
                                                         ------           ------
                                                         21,947            3,619
                                                         ======           ======
</TABLE>

Additionally, under US GAAP, the outstanding lease obligations to the
Partnership would not be offset with the matching offshore deposit held by a
wholly-owned subsidiary company.  As a result, current assets and liabilities
would increase by HK$30,621,000 and HK$34,626,000 at December 31, 1995 and
1996, respectively, and long-term assets and liabilities would increase by
HK$901,830,000 and HK$870,917,000 at December 31, 1995 and 1996, respectively.
Similarly, the interest expense on the loan and the matching interest income on
the deposit would not be offset resulting in increases in interest expense and
interest income of HK$872,000, HK$105,246,000, HK$105,696,000 in the year ended
December 31, 1994, 1995 and 1996, respectively.

Under HK GAAP, the prepaid launching fee of HK$31,000,000 and HK$28,233,000 at
December 31, 1995 and 1996, respectively, are included in prepayments, deposits
and other receivables.  Under US GAAP such amounts would be classified as
non-current assets.





                                      -46-
<PAGE>   50
Under US GAAP, the Group 's consolidated total assets would have been
HK$3,027,927,000 and HK$4,124,477,000 at December 31, 1995 and 1996
respectively.  Consolidated total liabilities would have been HK$2,422,862,000
and HK$2,160,938,000 at December 31, 1995 and 1996 respectively.



























                                      -47-
<PAGE>   51
                        NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Annual General Meeting of APT Satellite
Holdings Limited (the "Company") will be held at APT Satellite Company Limited,
Satellite Control Centre, 22 Dai Kwai Street, Tai Po Industrial Estate, Tai Po,
New Territories, Hong Kong on 20 May 1997 at 10:00 a.m.  for the following
purposes:

ORDINARY BUSINESS

1.       To receive and consider the audited consolidated financial statements
and the reports of the Directors and the auditors for the year ended 31
December 1996.

2.       To re-elect Directors and to authorise the Board of Directors to fix
the Directors ' fees.

3.       To re-appoint the auditors of the Company and to authorise the Board
of Directors to fix their remuneration.

SPECIAL BUSINESS

4.       To consider and, if thought fit, pass the following resolution as an
ordinary resolution:

"THAT

         (a)     subject to paragraph (b) of this resolution, the exercise by
the directors of the Company (the "Directors") during the Relevant Period (as
defined in paragraph (c) of this resolution) of all the powers of the Company
to allot, issue and deal with additional shares in the capital of the Company
and to make or grant offers, agreements or options which might require the
exercise of such powers either during or after the Relevant Period, be and is
hereby generally and unconditionally approved;

         (b)     the aggregate nominal amount of the share capital allotted or
agreed conditionally or unconditionally to be allotted (whether pursuant to an
option or otherwise) by the Directors pursuant to the approval in paragraph (a)
of this resolution, otherwise than pursuant to:

                 (i)      a Rights Issue (as defined in paragraph (d) of this
resolution);

                 (ii)     any exercise of subscription or conversion rights
under any warrants of the Company, or any securities which are convertible into
shares of the Company, or any share option scheme or similar arrangement for
the time being adopted by the Company for the grant or issue to officers and/or
employees of the Company and/or any of its subsidiaries of shares or rights to
acquire shares in the Company; or

                 (iii)    any scrip dividend or similar arrangement providing
for the allotment of shares in lieu of the whole or part of a dividend on
shares of the Company in accordance with the Bye-laws of the Company,





                                      -48-
<PAGE>   52

shall not exceed 20% of the aggregate nominal amount of the share capital of
the Company in issue at the date of the passing of this resolution and the said
approval shall be limited accordingly;

         (c)     for the purposes of this resolution, "Relevant Period" means
the period from the date of the passing of this resolution until whichever is
the earliest of:

                 (i)      the conclusion of the next annual general meeting of
the Company;

                 (ii)     the expiration of the period within which the next
annual general meeting is required by the Bye-laws of the Company or the
Companies Act 1981 of Bermuda or any other applicable law to be held; and

                 (iii)    the revocation or variation of the authority given
under this resolution by an ordinary resolution of the shareholders of the
Company in general meeting; and

         (d)     for the purposes of this resolution, "Rights Issue" means an
offer of shares for a period fixed by the Directors to shareholders on the
register of members of the Company on a fixed record date in proportion to
their then holdings of shares (subject to such exclusions or other arrangements
as the Directors may deem necessary or expedient in relation to fractional
entitlements or having regard to any restrictions or obligations under the laws
of any relevant jurisdiction, or the requirements of any recognised regulatory
body or any stock exchange)."

5.       To consider and, if thought fit, pass the following resolution as an
         ordinary resolution:

"THAT

         (a)     subject to paragraph (b) of this resolution, the exercise by
the directors of the Company (the "Directors") during the Relevant Period (as
defined in paragraph (c) of this resolution) of all the powers of the Company
to purchase issued shares in the capital of the Company, subject to and in
accordance with all applicable laws and the requirements of the Rules Governing
the Listing of Securities on the Stock Exchange of Hong Kong Limited (as
amended from time to time) or any other stock exchange recognised for this
purpose by the Securities and Futures Commission of Hong Kong, be and is hereby
generally and unconditionally approved;

         (b)     the aggregate nominal amount of shares in the capital of the
Company which may be purchased by the Company pursuant to the authority
contained in paragraph (a) of this resolution, shall not exceed 10% of the
aggregate nominal amount of the share capital of the Company in issue at the
date of the passing of this resolution, and the said approval shall be limited
accordingly; and





                                      -49-
<PAGE>   53
         (c)     for the purposes of this resolution, "Relevant Period" means
the period from the date of the passing of this resolution until whichever is
the earliest of:

                 (i)      the conclusion of the next annual general meeting of
the Company;

                 (ii)     the expiration of the period within which the next
annual general meeting is required by the Bye-laws of the Company or the
Companies Act 1981 of Bermuda or any other applicable law to be held; and

                 (iii)    the revocation or variation of the authority given
under this resolution by an ordinary resolution of the shareholders of the
Company in general meeting."

6.       To consider and, if thought fit, pass the following resolution as an
         ordinary resolution:

"THAT subject to the passing of resolution number 4 (the "General Mandate
Resolution") and resolution number 5 (the "Repurchase Mandate Resolution"),
each as set out in the notice convening this Meeting, the general mandate to
allot and issue shares granted to the directors of the Company (the
"Directors") under the General Mandate Resolution shall be and is hereby
extended by the addition to the aggregate nominal amount of shares in the
capital of the Company which may be allotted or agreed conditionally or
unconditionally to be allotted by the Directors pursuant to the General Mandate
Resolution of an amount representing the aggregate nominal amount of shares in
the capital of the Company purchased by the Company pursuant to the authority
granted to the Directors under the Repurchase Mandate Resolution provided that
such amount so added shall not exceed 10% of the aggregate nominal amount of
the share capital of the Company in issue at the date of the passing of this
resolution."

By Order of the Board

LO KIN HANG, BRIAN
Company Secretary

Hong Kong, 12 April 1997

Notes:

1.       A member entitled to attend and vote at the Annual General Meeting is
entitled to appoint a proxy to attend and vote in his stead.  A proxy need not
be a member of the Company.

2.       In order to be valid, the form of proxy must be deposited with the
Company's branch share registrars in Hong Kong, Tengis Limited of 1601 Hutchison
House, 10 Harcourt Road, Hong Kong, together with the power of attorney or other
authority, if any, under which it is signed or a notarially certified copy of
that power of attorney or other authority, not less than 48 hours before the
time appointed for the meeting or adjourned meeting (as the case may be).





                                      -50-
<PAGE>   54
3.       The registers of members of the Company will be closed from Thursday,
15 May 1997 to Tuesday, 20 May 1997, both dates inclusive, during which period
no transfers of shares can be registered.

4.       A circular containing an explanatory statement which provides further
details as regards resolution number 5 above will be sent to shareholders
shortly together with the 1996 Annual Report.


























                                      -51-
<PAGE>   55
                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on behalf by the
undersigned, thereunto duly authorized.




                                        APT SATELLITE HOLDINGS LIMITED



Date:  May 7, 1997                     By   /s/ QIN SHEN
                                          -------------------------------------
                                                        (Signature)
                                       Name:    Qin Shen
                                       Title:   Director and Vice President